Edgar Filing: GREATBATCH, INC.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

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GREATBATCH, INC.
9645 WEHRLE DRIVE
CLARENCE, NEW YORK 14031

April 20, 2007

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
Greatbatch, Inc. which will be held on Tuesday, May 22, 2007, at 10:00 a.m. at
the Buffalo Niagara Marriott, 1340 Millersport Highway, Amherst, New York 14221.
A map containing directions to the Buffalo Niagara Marriott is included on the
enclosed proxy card for your convenience.

Details of the business to be conducted at the Annual Meeting are given in
the enclosed Notice of Annual Meeting and Proxy Statement. Included with the
Proxy Statement is a copy of the company's 2006 Annual Report and 2006 Form
10-K. We encourage you to read these documents. They include information on the
company's operations, markets and products, as well as the company's audited
financial statements.

Whether or not you attend the Annual Meeting, it is important that your
shares be represented and voted. To make it easier for you to vote, we are
offering Internet and telephone voting. The instructions included on your proxy
card describe how to vote using these services. Of course, if you prefer, you
can vote by mail by completing and signing your proxy card, and returning it in
the enclosed postage-paid envelope provided.

We look forward to seeing you at the Annual Meeting.

Sincerely,

/s/ Edward F. Voboril

Edward F. Voboril
Chairman of the Board

/s/ Thomas J. Hook

Thomas J. Hook
President & Chief Executive Officer

GREATBATCH, INC.
9645 WEHRLE DRIVE
CLARENCE, NEW YORK 14031

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 2007

To the Stockholders of Greatbatch, Inc.:

The Annual Meeting of the Stockholders of Greatbatch, Inc. will be held at
the Buffalo Niagara Marriott, 1340 Millersport Highway, Amherst, New York 14221,
on Tuesday, May 22, 2007, at 10:00 a.m. for the following purposes, to:

1. Elect nine directors;

2. Approve the adoption of the Greatbatch, Inc. Executive Short-Term Incentive
Compensation Plan;

3. Approve an amendment to the Greatbatch, Inc. 2005 Stock Incentive Plan to
increase the number of shares available for issuance;

4. Ratify the appointment of Deloitte & Touche LLP as the independent registered
public accounting firm for Greatbatch, Inc. for fiscal year 2007; and

5. Consider and act upon other matters that may properly come before the Annual
Meeting.

The Board of Directors has fixed the close of business on April 5, 2007,
as the record date for determining the stockholders having the right to notice
of and to vote at the Annual Meeting.

By Order of the Board of Directors,

/s/ Timothy G. McEvoy

Timothy G. McEvoy
Vice President, General Counsel & Secretary

Clarence, New York
April 20, 2007

WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE VOTE YOUR
SHARES BY TELEPHONE OR INTERNET AS DESCRIBED ON YOUR PROXY CARD OR BY COMPLETING
AND SIGNING YOUR PROXY CARD AND PROMPTLY RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE
THEIR PROXIES AND VOTE IN PERSON IF THEY DESIRE.

GREATBATCH, INC.
9645 WEHRLE DRIVE
CLARENCE, NEW YORK 14031

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PROXY STATEMENT
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TABLE OF CONTENTS

Contents Page
-------- ----

Information About Voting and the Meeting 2
Security Ownership 3

Company Proposals 5
Proposal 1 - Election of Directors 5
Proposal 2 - Adoption of the Greatbatch, Inc.
Executive Short-Term Incentive Compensation Plan 7
Proposal 3 - Amendment to the Greatbatch, Inc.
2005 Stock Incentive Plan 8
Proposal 4 - Ratification of the Appointment of
Independent Registered Public Accounting Firm 10

Executive Officers 11

Executive Compensation 11
Compensation Discussion and Analysis 11
Compensation Tables 22

Corporate Governance and Board Matters 28

Stockholder Proposals 33

Other Matters 33

INFORMATION ABOUT VOTING AND THE MEETING

This proxy statement and the accompanying form of proxy are being mailed
on or about April 20, 2007 in connection with the solicitation by the Board of
Directors (the "Board") of Greatbatch, Inc. (the "Company") of proxies to be
voted at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at
10:00 a.m. on May 22, 2007, at the Buffalo Niagara Marriott, 1340 Millersport
Highway, Amherst, New York 14221, and any adjournments thereof.

The Company will bear the expense of preparing, printing and mailing this
proxy statement and the proxies solicited hereby. Proxies are being solicited
principally by mail, by telephone and through the Internet. The Company has
retained Mellon Investor Services LLC, a proxy solicitation firm, to assist in
the solicitation of proxies for the Annual Meeting, for a fee of $7,500, plus
out-of-pocket expenses.

You may change your vote and revoke your proxy at any time prior to
exercise by filing an instrument with the Secretary of the Company revoking it,
by submitting a duly executed proxy bearing a later date or by request in person
at the Annual Meeting. If your proxy is not revoked, the shares represented by
your proxy will be voted according to your directions. If your proxy card is
signed and returned without specifying voting directions, the shares represented
by that proxy will be voted according to the recommendation of the Board on each
proposal.

On April 5, 2007, the record date fixed by the Board for the Annual
Meeting, the Company had outstanding 22,326,335 shares of common stock. Each
outstanding share of common stock is entitled to one vote on all matters to be
voted on by the stockholders at the Annual Meeting.

The presence, in person or by proxy, of a majority of the shares
outstanding on the record date will constitute a quorum at the Annual Meeting.
Abstentions, directions to withhold authority and broker non-votes (which occur
when brokers or nominees notify the Company they have not received instructions
from the beneficial owners or other persons entitled to vote shares as to a
matter with respect to which brokers or nominees do not have discretionary power
to vote) will be treated as present for purposes of determining a quorum.

Directors are elected by a plurality and the nine nominees who receive the
most votes will be elected. Abstentions, directions to withhold authority and
broker non-votes will be disregarded and will have no effect on the election of
directors.

The affirmative vote of a majority of the shares cast is required to
approve the Greatbatch, Inc. Executive Short-Term Incentive Compensation Plan.
In determining whether the proposal has received the requisite number of
affirmative votes, abstentions will be counted and will have the same effect as
a negative vote. Broker non-votes will have no effect on the adoption of the
Greatbatch, Inc. Executive Short-Term Incentive Compensation Plan.

The affirmative vote of a majority of the shares cast is required to
approve the amendment to the Greatbatch, Inc. 2005 Stock Incentive Plan,
provided that a majority of the outstanding shares are voted on the proposal. In
determining whether the proposal has received the requisite number of
affirmative votes, abstentions will be counted and will have the same effect as
a negative vote. Broker non-votes will have no effect on the adoption of the
amendment to the 2005 Stock Incentive Plan.

The ratification of the appointment of Deloitte & Touche LLP ("Deloitte &
Touche") as the independent registered public accounting firm for Greatbatch,
Inc. for fiscal year 2007 requires the affirmative vote of a majority of the
votes cast. Abstentions and broker non-votes will not be treated as votes cast
and will have no effect on the ratification of the appointment of Deloitte &
Touche.

An individual who has a beneficial interest in shares allocated to the
Company stock fund account under the Greatbatch, Inc. 401(k) Retirement Plan
(the "401(k) Plan") is being sent a proxy statement and a proxy card to vote the
common stock allocated to that account. An individual with a beneficial interest
in the 401(k) Plan may give directions to the trustee of the 401(k) Plan as to
how the allocated shares should be voted by returning the proxy card or using
the telephone or Internet voting methods.

Security Ownership

The following table sets forth information, as of April 5, 2007, regarding
the beneficial ownership of the outstanding shares of the Company's common stock
by (i) each person known to the Company to be the beneficial owner of more than
5% of the Company's outstanding common stock, (ii) each director of the Company,
(iii) each executive officer named in the Summary Compensation Table ("Named
Executive Officers") in this proxy statement and (iv) all directors and such
Named Executive Officers as a group.

Number of Shares Percent
Name and Address of Beneficially of
Beneficial Owner(1) Owned Class
------------------- ---------------- -------
FMR Corp., Fidelity Management & Research
Company and Edward C. Johnson 3d(2) ............ 2,485,900 10.8%
82 Devonshire Street
Boston, MA 02109
Capital Research and Management Company and
SMALLCAP World Fund, Inc.(3) ................... 2,149,600 9.4%
333 South Hope Street
Los Angeles, CA 90071
Dimensional Fund Advisors LP(4) ................... 1,691,372 7.4%
1299 Ocean Avenue
Santa Monica, CA 90401
Primecap Management Company(5) .................... 1,467,250 6.4%
225 South Lake Avenue #400
Pasadena, CA 91101
T. Rowe Price Associates, Inc.(6) ................. 1,448,450 6.3%
100 E. Pratt Street
Baltimore, MD 21202
Barclays Global Investors Japan Limited(7) ........ 1,150,100 5.0%
Ebisu Prime Square Tower 8th Floor
1-1-39 Hiroo Shibuya-Ku
Tokyo 150-8402 Japan

Directors and Named Executive Officers
--------------------------------------
Thomas J. Hook(8).................................. 132,707 *
Edward F. Voboril(9)............................... 537,767 2.3%
Pamela G. Bailey(10)............................... 23,011 *
Joseph A. Miller, Jr.(11).......................... 15,895 *
Bill R. Sanford(12)................................ 50,031 *
Peter H. Soderberg(13)............................. 21,975 *
Thomas S. Summer(14)............................... 16,031 *
William B. Summers, Jr.(15)........................ 32,553 *
John P. Wareham(16)................................ 15,132 *
Thomas J. Mazza(17)................................ 23,166 *
Mauricio Arellano(18).............................. 19,911 *
Susan M. Bratton(19)............................... 95,431 *
Susan H. Campbell(20).............................. 26,060 *
Larry T. DeAngelo(21).............................. 125,063 *
All Directors and Named Executive
Officers as a group (14 persons)................ 1,134,733 4.9%

* Less than one percent

(1) Unless otherwise indicated, the address for all persons listed above is
Greatbatch, Inc., 9645 Wehrle Drive, Clarence, New York 14031.

(2) FMR Corp., or FMR, Fidelity Management & Research Company, ("Fidelity"),
and Edward C. Johnson 3d, filed a Schedule 13G/A dated February 14, 2007.
The beneficial ownership information presented and the remainder of the
information contained in this footnote is based solely on the Schedule
13G/A. Fidelity, a wholly-owned subsidiary of FMR and an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940 (the Advisers Act"), is the beneficial owner of 2,485,900 shares of
the Company's common stock as a result of acting as investment adviser to
various investment companies registered under Section 8 of the Investment
Company Act of 1940 ("ICA"). Edward C. Johnson, FMR, through its control
of Fidelity, and the Fidelity funds each has sole power to dispose of
2,438,500 of these shares. Neither FMR nor Edward C. Johnson has the sole
power to vote or direct the voting of the shares owned directly by the
Fidelity funds. Through their ownership of voting common stock and the
execution of a shareholders' voting agreement, members of the Johnson
family may be deemed, under the ICA, to form a controlling group with
respect to FMR.

(3) Capital Research and Management Company ("CRMC") and SMALLCAP World Fund,
Inc. ("SCWF") jointly filed a Schedule 13G on February 12, 2007. The
beneficial ownership information presented and the remainder of the
information contained in this footnote is based solely on the Schedule
13G. CRMC is an investment adviser registered under Section 203 of the
Advisers Act and is the beneficial owner of 2,149,600 shares of the
Company's common stock as a result of acting as investment adviser to
various investment companies registered under Section 8 of the ICA. SCWF
is an investment company registered under the ICA, which is advised by
CRMC and is the beneficial owner of 1,744,400 shares of the Company's
Common Stock.

(4) Dimensional Fund Advisors LP ("Dimensional") filed a Schedule 13G/A dated
February 9, 2007. The beneficial ownership information presented and the
remainder of the information contained in this footnote is based solely on
the Schedule 13G/A. Dimensional is an investment advisor registered under
Section 203 of the Advisers Act, furnishes investment advice to four
investment companies registered under the ICA, and serves as investment
manager to certain other commingled group trusts and separate accounts
(the "Funds"). In its role as investment advisor or manager, Dimensional
possesses investment and/or voting power over the securities of the
Company that are owned by the Funds, and may be deemed to be the
beneficial owner of the shares of the Company held by the Funds. However,
all securities reported are owned by the Funds.

(5) Primecap Management Company filed a Schedule 13G/A dated February 14,
2007. The beneficial ownership information presented is based solely on
the Schedule 13G/A.

(6) T. Rowe Price Associates, Inc. ("Price Associates") filed a Schedule 13G
dated February 13, 2007. The beneficial ownership information presented
and the remainder of the information contained in this footnote is based
solely on the Schedule 13G. These securities are owned by various
individuals and institutional investors for which Price Associates serves
as an investment adviser with the power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements
of the Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.

(7) Barclays Global Investors Japan Limited filed a Schedule 13G dated January
23, 2007. The beneficial ownership information presented is based solely
on the Schedule 13G.

(8) Includes (i) 47,476 shares Mr. Hook has the right to acquire pursuant to
options exercisable currently or within 60 days after April 5, 2007; (ii)
81,864 shares awarded to Mr. Hook under the Company's 2002 Restricted
Stock Plan and 2005 Stock Incentive Plan; (iii) 1,140 shares allocated to
Mr. Hook's account under the 401(k) Plan; and (iv) 2,227 shares directly
held by Mr. Hook.

(9) Includes (i) 333,971 shares Mr. Voboril has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007;
(ii) 30,191 shares awarded to Mr. Voboril under the Company's 2002
Restricted Stock Plan and 2005 Stock Incentive Plan; (iii) 5,107 shares
allocated to Mr. Voboril's account under the 401(k) Plan; and iv) 168,498
shares directly held by Mr. Voboril.

(10) Includes (i) 18,003 shares Ms. Bailey has the right to acquire pursuant to
options exercisable currently or within 60 days after April 5, 2007 and
(ii) 5,008 shares directly held by Ms. Bailey.

(11) Includes (i) 12,753 shares Dr. Miller has the right to acquire pursuant to
options exercisable currently or within 60 days after April 5, 2007 and
(ii) 3,142 shares directly held by Dr. Miller.

(12) Includes (i) 18,003 shares Mr. Sanford has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007
(ii) 32,028 shares directly held by Mr. Sanford.

(13) Includes (i) 18,003 shares Mr. Soderberg has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007
(ii) 3,972 shares directly held by Mr. Soderberg.

(14) Includes (i) 13,003 shares Mr. Summer has the right to acquire pursuant to
options exercisable currently or within 60 days after April 5, 2007 (ii)
3,028 shares directly held by Mr. Summer.

(15) Includes (i) 18,003 shares Mr. Summers has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007
(ii) 14,550 shares directly held by Mr. Summers.

(16) Includes (i) 12,503 shares Mr. Wareham has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007
(ii) 2,629 shares directly held by Mr. Wareham.

(17) Includes (i) 15,148 shares Mr. Mazza has the right to acquire pursuant to
options exercisable currently or within 60 days after April 5, 2007; (ii)
6,114 shares awarded to Mr. Mazza under the Company's 2002 Restricted
Stock Plan and 2005 Stock Incentive Plan; (iii) 1,347 shares allocated to
Mr. Mazza's account under the 401(k) Plan; and (iv) 557 shares directly
held by Mr. Mazza.

(18) Includes (i) 11,927 shares Mr. Arellano has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007;
(ii) 6,261 shares awarded to Mr. Arellano under the Company's 2002
Restricted Stock Plan and 2005 Stock Incentive Plan; (iii) 1,224 shares
allocated to Mr. Arellano's account under the 401(k) Plan; and (iv) 499
shares directly held by Mr. Arellano.

(19) Includes (i) 39,044 shares Ms. Bratton has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007;
(ii) 5,973 shares awarded to Ms. Bratton under the Company's 2002
Restricted Stock Plan and 2005 Stock Incentive Plan; (iii) 3,503 shares
allocated to Ms. Bratton's account under the 401(k) Plan; and (iv) 46,911
shares directly held by Ms. Bratton.

(20) Includes (i) 17,571 shares Ms. Campbell has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007;
(ii) 6,250 shares awarded to Ms. Campbell under the Company's 2002
Restricted Stock Plan and 2005 Stock Incentive Plan; (iii) 1,417 shares
allocated to Ms. Campbell's account under the 401(k) Plan; and (iv) 822
shares directly held by Ms. Campbell.

(21) Includes (i) 76,337 shares Mr. DeAngelo has the right to acquire pursuant
to options exercisable currently or within 60 days after April 5, 2007;
(ii) 11,037 shares awarded to Mr. DeAngelo under the Company's 2002
Restricted Stock Plan and 2005 Stock Incentive Plan; (iii) 4,336 shares
allocated to Mr. DeAngelo's account under the 401(k) Plan; and (iv) 33,353
shares directly held by Mr. DeAngelo.

Requirements for Reporting Securities Ownership - Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's executive officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Executive officers, directors and greater than
ten-percent stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely upon its review of copies of such forms furnished to it, or written
representations from reporting persons that no such forms were required for
those persons, the Company believes that during fiscal year 2006 all filing
requirements applicable to executive officers, directors and greater than
ten-percent beneficial owners were complied with.

COMPANY PROPOSALS

Proposal 1 - Election of Directors

The Company's directors are elected annually to serve until the next
annual meeting of stockholders or until their successors are duly elected and
qualified. When your proxy is submitted, the shares it represents will be voted
in accordance with the direction indicated, or, if no direction is indicated,
the shares will be voted in favor of the election of the nominees identified
below. The Company expects each nominee to be able to serve, if elected, but if
any nominee notifies the Company before the Annual Meeting that he or she is
unable to do so, then the proxies will be voted for such other person as the
Board shall designate. Information regarding the nominees standing for election
as directors is set forth below:

Director
Name Age Position and Office with the Company Since
---------------------------- --- ----------------------------------------------- --------

Thomas J. Hook 44 Director, President and Chief Executive Officer 2006
Edward F. Voboril 64 Chairman of the Board 1997
Pamela G. Bailey 58 Director 2002
Joseph A. Miller, Jr. 65 Director 2003
Bill R. Sanford 63 Director 2000
Peter H. Soderberg 60 Director 2002
Thomas S. Summer 53 Director 2003
William B. Summers, Jr. 56 Director 2001
John P. Wareham 65 Director 2004

Thomas J. Hook has served as the Company's Chief Executive Officer since
August 2006, as director since May 2006 and President since June 2005. Prior to
August 2006, Mr. Hook served as Chief Operating Officer, a position he held
since September 2004. Beginning in 2002, Mr. Hook was employed by CTI Molecular
Imaging where he had served most recently as President, CTI Solutions Group.
From March 2000 to July 2002, Mr. Hook was General Manager, Functional and
Molecular Imaging for General Electric Medical Systems. From 1997 to 2000, He
worked for the Van Owen Group Acquisition Company and earlier, Duracell, Inc.
Mr. Hook serves as a director of Central Radiopharmaceuticals, Inc., where he
also serves on the audit committee of that board, and the Buffalo-Niagara
Partnership. He is a member of the board of trustees of St Bonaventure
University.

Edward F. Voboril has served as Chairman of the Board since July 1997.
Prior to August 2006, Mr. Voboril also served as Chief Executive Officer, a
position he held since December 1990. Prior to June 2005, Mr. Voboril served as
President of the Company, a position he also held since December 1990. Mr.
Voboril currently serves on the board of directors of Analogic Corporation and
on the audit, governance and compensation committees of that board. He also
serves on the manufacturing council of the United States Department of Commerce.

Pamela G. Bailey has served as a director since July 2002. Ms. Bailey
currently serves as President and Chief Executive Officer of the Cosmetic,
Toiletry, and Fragrance Association, a Washington, DC based trade association
that represents the personal care products industry globally. Ms. Bailey served
as President and Chief Executive Officer of AdvaMed, the world's largest
association representing the medical technology industry, from June 1999 to
April 2005. From 1970 to 1999 she served in the White House, the Department of
Health and Human Services, and other public and private organizations with
responsibilities for health care public policy.

Joseph A. Miller, Jr. has served as a director since December 2003. Dr.
Miller has been Executive Vice President and Chief Technology Officer for
Corning, Inc. since 2001. Before joining Corning, he served as Senior Vice
President of E.I. DuPont de Nemours from 1999 to 2001 and held various executive
positions with that company prior to that time. Dr. Miller also serves on the
board of directors of Dow Corning Corporation and the corporate responsibility
committee of that board.

Bill R. Sanford has served as a director since October 2000. Mr. Sanford
is the Founder and Chairman of Symark LLC, a technology commercialization and
business development company. He is Executive Founder, and from April 1987 to
August 2000, was Chairman of the Board and Chief Executive Officer of STERIS
Corporation, a global provider of infection and contamination prevention
systems, products, services and technologies. Mr. Sanford serves on the board of
directors of KeyCorp and on the risk management and nominating and corporate
governance committees of that board. He is also a director of several early
stage private technology companies and not for profit organizations.

Peter H. Soderberg has served as a director since March 2002. Mr.
Soderberg has served as the President and Chief Executive Officer of Hillenbrand
Industries, Inc. and Hill-Rom Company, Inc., since March 2006. Mr. Soderberg
previously served as President and Chief Executive Officer of Welch Allyn, Inc.
from January 2000 to March 2006. Before that, he was Chief Operating Officer of
Welch Allyn's medical products business. Prior to joining Welch Allyn in 1993,
Mr. Soderberg was employed by Johnson & Johnson. Mr. Soderberg serves on the
board of directors of AdvaMed, Constellation Brands, Inc. and Hillenbrand
Industries, Inc.

Thomas S. Summer has served as a director since November 2003. Mr. Summer
has been Executive Vice President and Chief Financial Officer of Constellation
Brands, Inc. since April 1997. In October 2006, Mr. Summers announced his
intention to retire from his position at Constellation Brands, Inc. on or about
May 15, 2007. He serves on the board of directors of Home Properties, Inc. and
on the audit committee of that board.

William B. Summers, Jr. has served as a director since July 2001. Mr.
Summers served as President and Chief Executive Officer of McDonald Investments
Inc, at the time of its sale to KeyCorp in 1998. Subsequent to the sale he
served as Chairman and Chief Executive Officer of the investment company and
Executive Vice President of Key Corp through November 2000, remaining as
Chairman of McDonald Investments through his retirement in June 2006. He serves
on the board of directors of RPM, Inc. and Developers Diversified Realty, Inc.
Mr. Summers is a member of the audit committee of RPM, Inc. and the audit,
compensation and pricing committees of Developers Diversified Realty, Inc. Mr.
Summers also serves on the advisory boards of Molded Fiberglass Companies, Dix &
Eaton and MAI Wealth Advisors LLC.

John P. Wareham has served as a director since 2004. On April 7, 2005, Mr.
Wareham retired as Beckman Coulter, Inc.'s Chairman and Chief Executive Officer.
Mr. Wareham joined Beckman Coulter as its Vice President-Diagnostics Systems
Group in 1984. Mr. Wareham is the non-executive chairman of the board of
directors of STERIS Corporation and serves on the compensation committee of that
board. He also serves on the board of ResMed Corporation and serves on the audit
and governance committees of that board. He is on the advisory board of the
University of California Medical Center. He is a former member of the board of
directors and chairman of the board of AdvaMed, former member of the board of
directors of the Manufacturers Alliance/MAPI, the board of directors of the
National Association of Manufacturers, the board of governors of the Bowers
Museum and the Advisory Council of the Keck Graduate Institute of Applied Life
Sciences.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.

Proposal 2 - Adoption of the Greatbatch, Inc. Executive Short-Term Incentive
Compensation Plan

The Company is seeking your approval of the Greatbatch, Inc. Executive
Short-Term Incentive Compensation Plan (the "STIC Plan"). While an incentive
compensation plan does not require stockholder approval, stockholder approval of
the STIC Plan and the performance criteria set out in the STIC Plan would
provide the Company the benefit of tax deductibility of amounts paid under the
STIC Plan.

Under Internal Revenue Code ("IRC") ss.162(m), the Company may not deduct
compensation of more than $1 million that is paid to an individual who, on the
last day of the taxable year, is either its chief executive officer or is among
one of the four other most high-compensated officers for that taxable year. The
limitation on deductions does not apply to certain types of compensation,
including qualified performance-based compensation. Performance-based
compensation is excluded from this $1 million limitation if paid pursuant to a
plan that has received stockholder approval.

The Company maintains other annual incentive compensation plans. However,
the existing plans do not meet the requirements for qualified performance-based
compensation under IRC ss.162(m). The Chief Executive Officer and other officers
who are "covered employees" within the meaning of IRC ss.162(m) will participate
in this STIC Plan for 2007 and there after.

Purpose - The primary purpose of the STIC Plan is to pay covered employees
appropriate bonuses for their achievement of specified performance goals.
Another purpose of the STIC Plan is also to obtain, for federal income tax
purposes, the deductibility of bonus awards made under the STIC Plan. The STIC
Plan rewards individuals whose decisions and actions affect the operation,
growth, and profitability of the Company. Accordingly, the amounts payable under
the STIC Plan are intended to constitute "qualified performance-based
compensation" under IRC ss.162(m).

Performance-based compensation can be deductible if these four criteria
are met:

o the compensation is payable on the attainment of one or more
pre-established objective performance criteria;
o the performance criteria are established by a committee consisting
solely of two or more outside directors;
o the material terms of the compensation and performance criteria are
disclosed to and approved by the stockholders prior to payment; and
o the committee that establishes the performance criteria certifies
that the performance criteria have been satisfied before payment.

We are requesting stockholder approval in order to meet the third
requirement listed above.

Administration - The Compensation and Organization Committee (the
"Compensation Committee") of the Board is responsible for administering the STIC
Plan. Each member of the Compensation Committee is an "outside director" as
defined for purposes of IRC ss.162(m).

Eligibility and Participation - The Chief Executive Officer and others who
are officers for purposes of Section 16 of the Securities Exchange Act of 1934
are eligible to participate in the STIC Plan. Participants will be the Chief
Executive Officer and other officers who the Compensation Committee determines
are "covered employees" within the meaning of IRC ss.162(m) for the fiscal year.

Performance-Based Compensation Under IRC ss.162(m) - The objective
performance goal(s) for each Participant will be set by the Compensation
Committee within the first 90 days of each fiscal year. The performance goals
will relate to one or more business criteria within the meaning of IRC
ss.162(m), but limited to: earnings or diluted earnings per share, pro-forma
earnings or diluted earnings per share, net earnings (either before or after
interest, taxes, depreciation and amortization), economic value-added (as
determined by the Compensation Committee), sales or revenue, net income (either
before or after taxes), operating earnings or income, cash flow (including, but
not limited to, operating cash flow and free cash flow), cash flow return on
capital, return on investment, return on stockholders' equity, return on assets
or net assets, return on capital, stockholder returns, return on sales, gross or
net profit margin, productivity, expense, margins, operating efficiency, cost
reduction or savings, customer satisfaction, working capital, price per share of
the Company's Stock, and market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or as compared to
results of a peer group. After the end of each fiscal year, the Compensation
Committee will determine and certify in writing the amount of bonus to be
awarded to each Participant in accordance with the limitations established by
the STIC Plan.

The maximum bonus award that a covered employee may be paid under the STIC
Plan for the fiscal year is set at 250% of base salary (determined as of the
first day of the fiscal year or, if greater, as of the date the performance
criteria are established). The Compensation Committee may determine it is
appropriate to pay less than the maximum bonus award amount to a Participant,
but not more.

Subject to the maximum bonus award described above, actual award amounts
will be based on Company and individual performance and competitive pay levels
as determined by the Compensation Committee.

Payment of Bonus Awards - All bonus awards will be paid in cash.
Participants will be permitted to defer payment of all or a portion of their
bonus awards in accordance with the terms of any deferred compensation plan that
we may adopt.

The above summary is qualified by reference to the full text of the STIC
Plan set forth as Exhibit A.

THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY A VOTE "FOR"
THE ADOPTION OF THE GREATBATCH, INC.
EXECUTIVE SHORT-TERM INCENTIVE COMPENSATION PLAN.

Proposal 3 - Amendment to the Greatbatch, Inc. 2005 Stock Incentive Plan

The Board has determined to amend the Greatbatch, Inc. 2005 Stock
Incentive Plan (the "2005 Plan"), which was approved by stockholders at the
Company's 2005 Annual Meeting. The 2005 Plan provides a long-term incentive for
employees and directors to contribute to the growth of the Company and attain
specified performance goals. The purpose of amending the 2005 Plan is to
increase the number of shares available for issuance from 1,000,000 shares to
2,450,000 shares. As of March 31, 2007, 90,171 shares were available for awards
under the 2005 Plan. If the amendment to the 2005 Plan is approved, no new
awards will be made under the Company's 1997 and 1998 Stock Option Plans, 2002
Restricted Stock Plan or the Non-Employee Director Stock Incentive Plan. As of
March 31, 2007, 217,143 shares were available for future awards under the 1997
and 1998 Stock Option Plans, 2,885 shares under the Non-Employee Director Stock
Incentive Plan and 89,381 shares under the 2002 Restricted Stock Plan. The
following is a summary of the material features of the 2005 Plan, which is
qualified by reference to the full text of the 2005 Plan, as amended, set forth
as Exhibit B.

Purpose - Amending the 2005 Plan will allow the Company, under the
direction of the Compensation Committee, to continue to award grants of stock
options, restricted stock, restricted stock units, stock appreciation rights and
stock bonuses, any of which may or may not require the satisfaction of
performance objectives, to employees and to non-employee directors and service
providers. The purpose of these stock awards is to attract and retain talented
employees and the services of select non-employees, further align employee and
stockholder interests and closely link employee compensation with Company
performance. If approved, the amendment to the 2005 Plan will provide an
essential component of the total compensation package offered to employees,
reflecting the importance that the Company places on motivating superior results
with long-term, performance-based incentives.

Key Terms - The following is a summary of the key provisions of the 2005
Plan, as amended:

Plan Term: February 21, 2005 to February 20, 2015.

Eligible Participants: Employees of the Company (including employees who are
also directors and prospective employees conditioned on
their becoming employees), non-employee consultants or
service providers and non-employee directors of the
Company as the Compensation Committee designates from
time to time.

Shares Authorized: 2,450,000, subject to adjustment only to reflect stock
splits and similar events (This represents an increase of
1,450,000 shares). Awards that are forfeited, expire,
cancelled or lapse become available for future grants.
Shares which are used to pay the exercise price of a
stock option and shares withheld to satisfy tax
withholding obligations will not be available for future
grants.

Additional Shares
Authorized as a Percent
of Outstanding
Common Stock: 6.5%

Award Types:

(1) Non-qualified and incentive stock options - the
right to purchase a certain number of shares of
stock, at a certain exercise price, in the future.

(2) Restricted stock - share award conditioned upon
continued employment, the passage of time or the
achievement of performance objectives.

(3) Restricted stock units - the right to receive the
market price of a share of stock in stock or cash
in the future.

(4) Stock appreciation rights - the right to receive
the net of the market price of a share of stock and
the exercise price of the right, in stock, in the
future.

(5) Stock bonuses - a bonus payable in shares of stock.

Award Terms: Stock options and stock appreciation rights will have a
term no longer than ten years. All awards made under the
2005 Plan may be subject to vesting and other
contingencies as determined by the Compensation Committee
and will be evidenced by agreements which set forth the
terms and conditions of each award. The Compensation
Committee, in its discretion, may accelerate or extend
the period for the exercise or vesting of any awards.

Shares Authorized for
Stock Options or Stock
Appreciation Rights: Maximum of 2,450,000 shares issued as either
non-qualified or incentive stock options or stock
appreciation rights (This represents an increase of
1,450,000 shares).

Shares Authorized for
Restricted Stock or
Restricted Stock Units
or Stock Bonuses: Maximum of 850,000 shares issued as either restricted
stock of restricted stock units (This represents an
increase of 450,000 shares).

Vesting: Determined by the Compensation Committee, subject to
exceptions in the event of a change of control. Upon the
occurrence of an event constituting a change in control
of the Company as defined in the 2005 Plan, all awards
outstanding will become immediately vested.

Not Permitted:

(1) Granting stock options or stock appreciation rights
at a price below market price on the date of grant.
As of April 5, 2007, the closing price per share of
the Company's stock was $25.70 per share.

(2) Repricing of a stock option or stock appreciation
right without stockholder approval.

(3) Granting more than 150,000 shares of restricted
stock or restricted stock units in any fiscal year.

(4) Granting stock options or stock appreciation rights
to any one employee during any fiscal year in
excess of 100,000 shares.

Tax Consequences - Stock option grants under the 2005 Plan may be intended
to qualify as incentive stock options under IRC ss.422 or may be non-qualified
stock options governed by IRC ss.83. Generally, no federal income tax is payable
by a participant upon the grant of a stock option and no deduction is taken by
the Company. Under current tax laws, if a participant exercises a non-qualified
stock option, he or she will have taxable income equal to the difference between
the market price of the stock on the exercise date and the stock option grant
price. The Company will be entitled to a corresponding deduction on its income
tax return. A participant will have no taxable income upon exercising an
incentive stock option if the shares received are held for the applicable
holding periods (except that alternative minimum tax may apply), and the Company
will receive no deduction when an incentive stock option is exercised. The
treatment for a participant of a disposition of shares acquired through the
exercise of an option depends on how long the shares were held and on whether
the shares were acquired by exercising an incentive stock option or a
non-qualified stock option. The Company may be entitled to a deduction in the
case of a disposition of shares acquired under an incentive stock option before
the applicable holding periods have been satisfied.

Restricted stock and restricted stock units are also governed by IRC
ss.83. Generally, no taxes are due when the award is made, but the award becomes
taxable when it is no longer subject to a "substantial risk of forfeiture"
(i.e., becomes vested or transferable). Income tax is paid on the value of the
stock or units at ordinary rates when the restrictions lapse, and then at
capital gains rates when the shares are sold.

The grant of a stock appreciation right will not result in income for the
participant or in a tax deduction for the Company. Upon the settlement of such a
right, the participant will recognize ordinary income equal to the aggregate
value of the payment received, and the Company generally will be entitled to a
tax deduction in the same amount.

In general, participants will recognize ordinary income upon the receipt
of shares or cash with respect to other awards granted under the 2005 Plan and
the Company will become entitled to a deduction at such time equal to the amount
of income recognized by the participant.

Awards granted under the 2005 Plan may qualify as "performance-based
compensation" under IRC ss.162(m) in order to preserve federal income tax
deductions by the Company with respect to annual compensation required to be
taken into account under ss.162(m) that is in excess of $1 million and paid to
one of the Company's most highly compensated executive officers. To qualify,
options and other awards must be granted under the 2005 Plan by a committee
consisting of two or more "outside directors" (as defined under ss.162(m)) and
satisfy the 2005 Plan's limit on the total number of shares that may be awarded
to any one participant during any calendar year. In addition, for awards other
than options to qualify, the grant, issuance, vesting or retention of the award
must be contingent upon satisfying one or more of the performance criteria, as
established and certified by a committee consisting solely of two or more
"outside directors."

The foregoing is only a summary of the effect of federal income taxation
on the participant and the Company under the 2005 Plan. It does not purport to
be complete and does not discuss the tax consequences arising in the context of
a participant's death or the income tax laws of any municipality, state or
foreign country in which the participant's income may be taxable.

Transferability - Awards granted under the 2005 Plan generally are not
transferable except by will or the laws of descent and distribution.

Administration - The Compensation Committee, which is made up entirely of
independent directors, will administer the 2005 Plan. The Compensation Committee
will select the employees and non-employees who receive awards, determine the
number of shares covered thereby, and, subject to the terms and limitations
expressly set forth in the 2005 Plan, establish the terms, conditions and other
provisions of the grants. The Compensation Committee may interpret the 2005 Plan
and establish, amend and rescind any of its rules relating to the 2005 Plan.

Amendments - The Board may, at any time, suspend or terminate the 2005
Plan or revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent required by Rule
16b-3 or by any comparable or successor exemption under which the Board believes
it is appropriate for the 2005 Plan to qualify, or if and to the extent the
Board determines that such approval is appropriate for purposes of satisfying
IRC ss.162(m), ss.422 or ss.409A or any applicable rule or listing standard of
any stock exchange, automated quotation system or similar organization. Nothing
in the 2005 Plan restricts the Compensation Committee's ability to exercise its
discretionary authority to administer the plan as provided in the 2005 Plan,
which discretion may be exercised without amendment to the 2005 Plan. No action
may, without the consent of a participant, reduce the participant's rights under
any outstanding grant.

Plan Awards - On March 6, 2007, the Compensation Committee awarded 50,193
shares of restricted stock to executives of the Company, which included some of
the Named Executive Officers. These awards had a value of $1.3 million as of the
grant date, and are subject to approval of this amendment to the 2005 Plan by
the Company's stockholders. Restrictions on these shares will lapse 25% at the
end of each year over four years. The following table sets forth the number and
grant date value of the shares awarded to the Company's Named Executive Officers
and other executives:

Restricted Stock Awards
-----------------------------------------------
Name Number of Shares (#) Grant Date Value ($)
---- -------------------- --------------------
Thomas J. Mazza 9,607 $ 244,979
Mauricio Arellano 8,823 224,987
Susan M. Bratton 8,823 224,987
Susan H. Campbell 8,823 224,987
Other Executives 14,117 359,984

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE AMENDMENT TO THE GREATBATCH, INC. 2005 STOCK INCENTIVE PLAN

PROPOSAL 4 - Ratification of the Appointment of Independent Registered Public
Accounting Firm

On recommendation of the Audit Committee, the accounting firm of Deloitte
& Touche has been appointed by the Board as the Company's independent registered
public accounting firm for fiscal year 2007. Although stockholder approval is
not required, the Board requests stockholder ratification of Deloitte & Touche's
appointment. Representatives of that firm are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.

Audit Fees - The following table sets forth the aggregate fees billed by
the Company's independent registered public accounting firm, Deloitte & Touche,
for services provided to the Company during fiscal years 2006 and 2005:

2006 2005
----------- -----------

Audit Fees((1)) $ 626,600 $ 624,500
Audit-Related Fees((2)) 3,500 2,800
----------- -----------
Total Audit and Audit-Related Fees 630,100 627,300
Tax Fees((3)) 95,900 17,300
All Other Fees -- --
----------- -----------
Total Fees $ 726,000 $ 644,600
=========== ===========

(1) The amounts indicated represent fees billed by Deloitte & Touche for
services rendered for the audit of the Company's annual consolidated
financial statements and for its review of the Company's quarterly
condensed consolidated financial statements.
(2) The amounts indicated represent fees billed by Deloitte & Touche for
audit-related services, including services related to review of Securities
and Exchange Commission comment letters and the Company's employee benefit
plans.
(3) The amounts indicated represent fees billed by Deloitte & Touche for tax
compliance, planning and consulting. None of the services provided by
Deloitte & Touche were approved by the Audit Committee under the de
minimis exception provided under Securities and Exchange Commission
Regulation S-X, Rule 2-01(c)(7)(i)(c).

Audit Committee Pre-Approval Policy on Audit and Non-Audit Services - As
described in the Charter of the Audit Committee (Section III.10), the Audit
Committee must review and pre-approve both audit and non-audit services to be
provided by the Company's independent registered public accounting firm (other
than with respect to de minimis exceptions permitted by Regulation S-X, Rule
2-01(c)(7)(i)(c)). This duty may be delegated to one or more designated members
of the Audit Committee with any such pre-approval reported to the Audit
Committee at its next regularly scheduled meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2007

EXECUTIVE OFFICERS

The Company's principal executive officers, and their respective ages and
positions as of April 20, 2007, are as follows:

Name Age Position
----------------- --- -----------------------------------------------
Thomas J. Hook* 44 President & Chief Executive Officer
Thomas J. Mazza 53 Senior Vice President & Chief Financial Officer
Mauricio Arellano 40 Senior Vice President, Medical Solutions Group
Susan M. Bratton 50 Senior Vice President, Commercial Power Group
Susan H. Campbell 42 Senior Vice President, Medical Power Group

* The biographical information for Mr. Hook is provided above under
"Proposal 1 - Election of Directors."

Thomas J. Mazza has served as the Company's Senior Vice President and
Chief Financial Officer since August 2005. He joined the Company in November
2003 as Vice President and Corporate Controller. Mr. Mazza served in a variety
of financial roles since 1978 with Foster Wheeler Ltd. which culminated with him
holding the positions of Vice President and Corporate Controller; Principal
Accounting Officer; Vice President, Financial Systems; and Vice President,
Financial Planning and Analysis.

Mauricio Arellano has served as the Business Unit Leader for the Company's
newly created Medical Solutions Group since November 2006. He was Promoted to
Senior Vice President in March 2007. Mr. Arellano served as the Vice President
of Greatbatch Mexico from January 2005 to November 2006. Mr. Arellano joined the
Company in October 2003 as the Plant Manager for the Company's Carson City,
Nevada facility. Prior to joining the Company, Mr. Arellano served in a variety
of human resources and operational roles since 1998 with Tyco Healthcare -
Especialidades Medicas Kenmex and from 1995 to 1998 with Sony de Tijuana Este.

Susan M. Bratton has served as the Business Unit Leader for the Company's
Commercial Power Group since January 2005. She was Promoted to Senior Vice
President in March 2007. Ms. Bratton served as the Vice President of Corporate
Quality from March 2001 to January 2005, as the General Manager of the Company's
Electrochem Division from July 1998 to March 2001 and as the Director of
Procurement from June 1991 to July 1998. Ms. Bratton has held various other
positions with the Company since joining the Company in 1976.

Susan H. Campbell has served as the Business Unit Leader for the Company's
Medical Power Group since January 2005. She was Promoted to Senior Vice
President in March 2007. Ms. Campbell joined the Company in April 2003 as the
Plant Manger for the Company's Clarence, New York facility. Prior to that time,
she was a plant manager for Delphi Corporation and General Motors Corporation.

EXECUTIVE COMPENSATION
Compensation Discussion and Analysis

Overview

Our executive compensation programs are designed to be consistent with our
compensation philosophy. Our philosophy is to provide senior management with a
compensation package that is both competitive and encourages those executives to
act in the best interest of our stockholders. To achieve this, we design our
compensation programs to provide fixed compensation at the competitive market
median rate and variable compensation at above competitive market median rates
if above competitive market median performance is achieved. By following this
philosophy we believe we can attract and retain executives who have the
appropriate skill set to carry out our strategic plans and attain both our short
and long term financial goals.

Our compensation programs are designed by management in collaboration with
our Compensation Committee and approved by our Board. Our performance-driven
compensation programs consist of the following cash and non-cash components:

o Base Salary
o Annual Cash Incentives
o Long-Term Equity Awards
o Retirement and Change in Control Agreements
o Other Personal Benefits

During 2006, we facilitated a change in senior management as a result of
retirement notices received from Edward F. Voboril, former Chief Executive
Officer, and Larry T. DeAngelo, former Senior Vice President of Administration &
Secretary. We managed this change by following our previously adopted succession
plan. Accordingly, Thomas J. Hook was appointed Chief Executive Officer in
August 2006 and the responsibilities of Larry DeAngelo were assigned to various
other senior managers. In order to help facilitate this management transition,
we entered into employment agreements with both Edward Voboril and Larry
DeAngelo, which extend through January 31, 2008. Prior to signing their current
employment agreements, Edward Voboril and Larry DeAngelo were compensated based
upon the overall compensation programs of the Company as described in this
section. Edward Voboril's and Larry DeAngelo's compensation is now being paid in
accordance with their employment agreements. See the "Employment Agreements"
section for further discussion.

Other than as discussed within this section, we do not believe the
compensation for our Named Executive Officers in 2007 will change materially
from 2006.

Compensation Committee Practices and Procedures

Management, in collaboration with the Compensation Committee, is
responsible for the design and administration of our compensation programs with
appropriate approval and general oversight from the Board. This responsibility
includes the determination of compensation levels and awards provided. The
Compensation Committee historically has directly engaged Ernst & Young LLP, to
assist with the development of these programs. Ernst & Young provides the
Committee with relevant market and peer group data and alternatives to consider
when making compensation decisions. For 2006, a representative of Ernst & Young
was present in person or by telephone for five out of the six meetings held by
the Compensation Committee.

The Compensation Committee is also responsible for recommending to the
Board for approval the performance and merit adjustments for our President &
Chief Executive Officer. For the remaining Named Executive Officers, our
President & Chief Executive Officer makes recommendations regarding performance
and merit adjustments to the Compensation Committee for approval. Grants of
equity-based compensation are determined by management in collaboration with the
Compensation Committee and approved by the Board in accordance with approved
equity grant guidelines previously established by the Compensation Committee
with market data assistance from Ernst & Young.

During 2006, both Edward F. Voboril, Chairman of the Board and former
Chief Executive Officer and Larry T. DeAngelo, former Senior Vice President of
Administration & Secretary attended all Compensation Committee meetings as
representatives of the employees and to provide counsel and assistance to the
Compensation Committee as needed. Both Edward Voboril and Larry DeAngelo were
excused from meetings when items pertaining to their individual compensation
were discussed.

Competitive Market Review

As one factor in considering approval of elements of our compensation
programs, the Compensation Committee compares our compensation programs and
performance against an approved peer group of companies. The peer group, which
is periodically reviewed and updated by the Compensation Committee, consists of
eleven publicly traded companies that are similar in size and in similar
industries as Greatbatch and with whom the Company may compete for executive
talent. The companies comprising our compensation peer group, which was last
changed in 2004, are:

Arrow International, Inc. Ultralife Batteries, Inc.
CONMED Corporation Viasys Healthcare, Inc.
Cyberonics, Inc. Vital Signs, Inc.
Datascope Corporation Wright Medical Group, Inc.
Haemonetics Corporation ZOLL Medical Corporation
Thoratec Corporation

For 2007, the following changes were made to our peer group:

Additions Deletions
--------- ---------
DJO, Inc. Haemonetics Corporation
Ev3, Inc. Ultralife Batteries, Inc.
Integra LifeSciences Holdings Corp.
Merit Medical Systems, Inc.
SonoSite, Inc.
Symmetry Medical, Inc.

These changes were made as we believe the six new companies (1) have
relevant overlap with our key operating segments and products, (2) are similar
in size, and (3) have key metrics that are consistent with our high growth
strategy. The key metrics considered included revenue growth rate, EPS growth,
average gross margins, enterprise value, EBITDA/enterprise value and
revenue/enterprise value. We also believe the two companies removed no longer
exhibit the above characteristics.

Our total cash and direct compensation targets are based upon a 2004
market study performed by Ernst & Young LLP utilizing compensation peer group
data supplemented with public survey data. We then adjusted the 2004 study base
salary amounts by approximately 3-4% each year which reflects our analysis of
market merit increases. This study has bee updated for 2007 taking into
consideration the revised Peer Group.

The 2004 market study provided total cash and direct compensation data
based upon our peer group and appropriate publicly available survey sources as
follows:

Title Publisher Year
----- --------- ----
Report on Executive Compensation Mercer 2003
Information Technology Positions Survey Report Mercer 2003
Financial, Accounting and Legal Personnel
Compensation Mercer 2003
Industry Report on Middle Management Watson Wyatt 2003/2004
Industry Report on Top Management Watson Wyatt 2003/2004
Industry Report on Information Technology
Positions Watson Wyatt 2003/2004
Executive Total Direct Compensation Survey Mellon 2003
Total Salary Increase Budget Survey World at Work 2003/2004

When setting performance goals for our annual cash incentive and long-term
equity programs, the Compensation Committee, with input from management,
considers the performance of our three largest customers supplemented by
performance information for our peer group as well as relevant market indices.
We believe the performance of our three largest customers should be considered
since they account for nearly 67% of our sales. Additionally, we believe broader
market indices are appropriate for consideration in establishing future
performance metrics given that the peer group companies above do not have
businesses that are perfectly comparable to ours. The Market indices considered
include:

o S&P 600 index, (Greatbatch is included in this index);
o High and low revenue growth rates as published by Morgan Stanley,
Lehman Brothers, Bank of America, Bear Sterns and Merrill Lynch;
o Neuromodulation Forecast; and
o Oil & Gas Market Growth (as a proxy for our Commercial Power
Segment).

Base Salary

We want to provide senior management with a fixed level of cash
compensation in the form of base salary that is consistent with their skill
level, experience, knowledge, length of service with the Company and the level
of responsibility and complexity of their position. The target salary for our
senior management is based in part on the competitive market median of our
compensation peer group, supplemented by published survey data (the "competitive
market"). Actual base salaries may differ from the competitive market median
target as a result of various factors including length of service, the level of
responsibility and complexity of their position, individual performance,
internal equity within our Company and the degree of difficulty in replacing the
individual. The base salaries of senior management are reviewed by the
Compensation Committee on an annual basis, as well as at the time of promotion
or significant changes in responsibility. We expect the base salaries of our
Named Executive Officers to increase in-line with any increases to the median
competitive market rates.

Annual Cash Incentives

Overview - The payment of annual cash incentives is formula-based, with
adjustments for achievement of individual performance goals, and is governed by
our Short-Term Incentive Compensation Program ("STIC Program"). The objective of
the STIC Program is to provide a level of cash compensation that is based upon
the achievement of internal Company performance objectives which takes into
consideration the competitive market median performance.

Employees at the manager level or above are eligible to participate in our
STIC Program. For senior level managers, STIC Program awards are primarily based
upon Company-wide performance goals. For all other levels, STIC Program awards
are primarily based upon the achievement of specific individual operational
goals, although Company-wide performance is also a factor. As a result, this
component of compensation can be highly variable from year to year.

STIC Program awards are calculated based upon the following formulas:

Total Available Award (TAA) = (Base Salary x Individual STIC %) x STIC
Funding %
Actual Award = ((TAA x 75%) x Individual Performance %) + (TAA x
25%)

STIC Funding % - Overall funding of the STIC Program is based upon a
Company-wide performance measure as recommended by the Compensation Committee
and approved by the Board at the first meeting of every year. This measure is
subject to adjustment based upon Compensation Committee approved unusual or
extraordinary items that were not contemplated when the performance measure was
set and may not be within the control of management. Funding of the STIC Program
is calculated in accordance with the following scale:

Achievement of Performance Measure Funding %
---------------------------------- ---------------------
0% - 75% 0%
75% 50%
76% - 99% 50% - 100%
100% 100%
101% - 132% 100% - 200%
133% 200% (Maximum)

This funding model was generally designed to provide stockholders with a
three-to-one payout ratio compared to management (i.e. for every four dollars
earned above the target, one dollar is paid in additional incentive compensation
to fund the STIC Program, up to the maximum threshold. Thus, three dollars are
returned to the stockholders in the form of reinvestment in the business).

For 2006, the STIC Program funding performance measure was adjusted
earnings per share ("Adjusted EPS") of $1.05 per share. We selected Adjusted EPS
because of its direct correlation with the interests of our stockholders. In
establishing this measure, the Compensation Committee considered both the 2006
budget, as well as the three-year compound annual growth rate the 2006 measure
would provide (15%) and how that growth rate compared to our competitive market.
Achievement at the 100% target level was deemed to be a "realistic" goal for
management and any amount greater than the target was believed to be a "stretch"
goal. As a result of stronger than expected financial performance, for 2006 the
STIC Program was funded at 190% of the target, based upon the Company achieving
Adjusted EPS that was 131% of the target.

Individual STIC % - Individual cash incentives are calculated by
multiplying the funding percentage by the individuals target payout. The
individual target payout was determined by the Compensation Committee in order
to provide total cash compensation (base salary + cash incentive) at the median
of our competitive market and between the 65th and 75th percentile of our
competitive market for above competitive market median performance.

The target payout as a percentage of base salary for our Named Executive
Officers is as follows:

2006 2007(1)
---- -------

o President & CEO 80% 80%
o CFO 70% 65%
o Business Unit Leaders 65% 65%(2)
o Former CEO 90% 85%(3)
o Former SVP Administration & Secretary 75% 70%(3)

(1) During 2006, consistent with the decision made in late 2004, the
Compensation Committee continued to reduce the annual cash incentive
target payout percentages for senior level management and increase the
level of equity based compensation. This was done to better align the mix
between cash and equity based and between short-term and long-term
compensation with our competitive market.

(2) Includes a promotional increase in 2007.
(3) Former executive is eligible to receive 2007 STIC Program award. See the
discussion regarding the respective executive's employment agreement later
in this section.

Actual annual cash incentive awards may differ from the target payout as a
result of the achievement of individual business unit and functional goals
(Individual Performance %), which impact 75% of the actual award and cannot
exceed 100%. The remaining 25% of the award is determined by the achievement of
the Company performance target (same as funding target). Senior level
management's business unit and functional goals are primarily based on overall
Company performance. The individual performance percentage for the President &
Chief Executive Officer is determined by the Compensation Committee and approved
by the Board. For the remaining Named Executive Officers, the individual
performance percentage is determined by the President & Chief Executive Officer
and approved by the Compensation Committee and the Board.

The STIC Program for our Named Executive Officers is included in this
proxy statement for consideration by our stockholders in order to meet the
requirements for an income tax deduction under IRC ss.162(m). Under IRC
ss.162(m), a limitation is placed on the tax deductibility of compensation to
certain executives of a publicly-held corporation that exceeds $1,000,000 in any
taxable year, unless the compensation meets certain requirements. Currently the
STIC Program does not meet these requirements. Historically, our deductions for
executive compensation were not limited by IRC ss.162(m), except in isolated
circumstances.

Long-Term Equity Awards

Overview - In addition to cash incentives, we also compensate management
with long-term equity awards. These awards are designed to align management's
performance with the interest of our stockholders. Additionally, they are used
as a recruiting and retention tool for key managers. We currently grant equity
awards under various existing equity compensation plans, including the
following: (1) The 1997 Stock Option Plan; (2) The 1998 Stock Option Plan; (3)
The 1999 Non-Employee Director Stock Option Plan; (4) The 2002 Restricted Stock
Plan; and (5) The 2005 Stock Incentive Plan. A proposal is included in this
proxy statement to freeze all of the outstanding equity plans except the 2005
Stock Incentive Plan, and to increase the shares available for issuance under
the 2005 Stock Incentive Plan.

The award of equity based compensation is both discretionary and
formula-based as described in our Long-Term Incentive Award Program ("LTIP
Program") and Supplemental Annual Long-Term Incentive Award Program ("SALT
Program"). The objective of the LTIP and SALT Programs is to provide total
direct compensation (total cash compensation + equity based compensation) at the
median of our competitive market and up to the 75th percentile of our
competitive market for above competitive market median performance.

In addition to LTIP and SALT Program awards, all managers and above are
eligible for equity awards at the time of hire, upon promotion, for special
recognition or significant changes in responsibility.

Our equity-based compensation plans and awards are designed and
administered by management in collaboration with the Compensation Committee and
subject to the approval of our Board. Historically, we have granted employees
equity-based compensation in the form of non-qualified and incentive stock
options and restricted stock. The LTIP and SALT Program awards are generally
issued before April of every year once financial results from the prior year and
performance targets for the current and future years are determined. Equity
awards issued for recognition or newly hired or newly promoted employees are
typically granted at the next scheduled Board meeting following the event date.
The Board typically meets five times per year based on a schedule determined
several months in advance. Accordingly, the proximity of any awards to earnings
announcements or the release of material non-public information would be
coincidental. All stock options are issued with strike prices that are equal to
the value of our closing stock price on the grant date, which is the Board
meeting date. As a result of this practice and an internal review performed in
2006, we have determined that there were no accounting issues with regards to
the backdating of stock options or market timing.

Except as described in the "Employment Agreement" and "Executive
Retirement Guidelines" sections, all unvested stock-based awards expire upon
death, disability, termination by employee and termination by the Company, other
than for cause. Upon termination for cause, all outstanding stock-based awards
expire. Upon death, disability, termination by employee and termination by the
Company, other than for cause, all vested stock-based awards expire at various
times, up to one year, based upon the termination reason and the equity plan
they were awarded from. In the event of a change in control, all unvested
stock-based awards immediately vest. See further discussion regarding change of
control in the "Change in Control Agreements" section.

We believe that compensation from our stock options granted under the 2005
Stock Incentive Plan are deductible and not limited by IRC ss.162(m). Our
deductions for restricted stock grants may be limited in the future under
ss.162(m).

LTIP Program - The objective of the LTIP Program is to provide a fixed
level of equity-based compensation at the median of our competitive market and
adjusted for individual performance. The 2006 LTIP Program awards were
determined based upon the following formula:

Total Available Shares (TAS) = (Base Salary x Individual LTIP %) / Black
Scholes Value
Actual Share Payout = TAS x Individual Performance %

Non-Qualified Stock Option Grant = Actual Share Payout x 2/3
Restricted Stock Grant = (Actual Share Payout x 1/3) / 2.5

Individual LTIP % - The target grant of LTIP Program equity awards as a
percentage of base salary for our Named Executive Officers is as follows. The
target number of shares is calculated using the Black Scholes value of our stock
on the date of grant:

2006 2007
---- ----

o President & CEO 125% 150%
o CFO 60% 70%
o Business Unit Leaders 50% 70%(1)
o Former CEO 150% N/A
o Former SVP Administration & Secretary 75% 80%

(1) Includes a promotional increase in 2007.

N/A Former executive is not eligible for LTIP Program grants in accordance
with his respective employment agreement, discussed later in this section.

The actual amount of awards granted may differ from the target percentage
as a result of the consideration by the Compensation Committee of individual
business unit and functional goals (Individual Performance %). The individual
performance percentage that may be taken into account by the Compensation
Committee is the same individual performance percentage used to calculate annual
cash incentive awards under the STIC Program.

The 2006 LTIP Program awards were granted in the form of non-qualified
stock options (2/3 payout target) and restricted stock (1/3 payout target) with
the restricted stock being converted on a 2.5 to 1 ratio. This ratio was used as
restricted stock was valued at approximately 2.5x the Black Scholes value of our
stock options and was intended to reflect the difference in value between
restricted stock and stock options. The mix between stock options and restricted
stock was determined by management in collaboration with the Compensation
Committee in their desire to balance between share ownership and potential
future dilution to stockholders. The mix between stock options and restricted
stock is reviewed annually by the Compensation Committee and was changed to
50/50 for 2007.

For 2006, the LTIP Program stock option awards vest 25% at the end of each
year, including the year of grant. The LTIP Program restricted stock awards vest
50% at the end of the second year, including the year of grant and 25% at the
end of the third and fourth year.

SALT Program - The objective of the SALT Program is to provide total
direct compensation up to the 75th percentile of our competitive market if
certain performance goals are met. This is consistent with our philosophy of
providing above competitive market median compensation for above competitive
market median performance. The use of SALT Program awards puts a larger
percentage of our Named Executive Officers pay in equity and at risk, which we
believe is appropriate and consistent with our compensation philosophy. SALT
Program awards are determined based upon the following formula:

Actual Share Payout = (Base Salary x Individual LTIP %) / Black Scholes
Value

Individual SALT % - The SALT Program equity awards expressed as a
percentage of base salary for our Named Executive Officers is as follows:

2006 2007
---- ----

o President & CEO 100% 125%
o CFO 40% 50%
o Business Unit Leaders 40% 50%(1)
o Former CEO N/A N/A
o Former SVP Administration & Secretary 45% N/A

(1) Includes a promotional increase in 2007.

N/A Former executives are no longer eligible for SALT Program grants in
accordance with their respective employment agreement, discussed later in
this section.

The target number of shares is calculated using the Black Scholes value of
our stock on the date of grant. SALT Program awards are granted in the form of
non-qualified stock options and are both time and performance based. Stock
options vest either at 100% or 0% depending on whether or not the Company
achieves certain three-year performance measures. If the performance measures
are achieved, the awards are still subject to an additional one year service
period. The form of the SALT Program awards is reviewed annually by the
Compensation Committee. The 2006 SALT Program awards performance measures were
as follows:

o 2006 - 2008 cumulative revenue;
o 2006 - 2008 cumulative operating income; and
o 2006 - 2008 cumulative cash provided by operations.

These performance measures reflect our confidential strategic plan and we
do not disclose the amount of these measures publicly for competitive reasons.
These measures were chosen based upon the importance of these objectives in the
achievement of our strategic plan, providing quality earnings and creating value
for our stockholders. In setting these performance targets we also considered
the performance of our peer group, market indices and customer base with the
intent that these goals be set to represent stretch goals that would result in
superior upper quartile performance relative to our customers and peers.
Achievement of these targets is believed to be a "challenging" goal for our
senior management. If all three performance goals are met, the SALT awards will
fully vest at the end of 2009. These performance measures are subject to
adjustment based upon unusual or extraordinary items that were not contemplated
when the performance measures were set and may be out of the control of
management. The Compensation Committee approves all adjustments.

Other Equity Based Compensation - In addition to the LTIP and SALT
Programs, senior management may receive additional equity based compensation at
the date of hire, upon promotion, for special recognition or upon a significant
change in responsibility. These awards are used as a recruiting and retention
tool. These grants are typically in the form of incentive stock options or
restricted stock and are typically granted as a percentage of the respective
employee's base salary. The amount of incentive stock options granted that
become exercisable in any one year by an individual employee is subject to the
$100,000 limit imposed by IRC ss.422(d).

Share Ownership Guidelines - In order to better align the interests of our
executives with the interests of our stockholders and to promote our commitment
to sound corporate governance, in 2006 the Compensation Committee designed and
the Board approved stock ownership guidelines for senior level management and
non-employee directors. These guidelines require non-employee directors to own
at least $90,000 in shares of the Company. This multiple was chosen as it
equated to 3x the directors annual retainer. The ownership requirement for our
current Named Executive Officers is calculated as a percentage of base salary as
follows:

Multiple of Base Salary
-----------------------
o President & CEO 5.0x
o CFO 3.0x
o Business Unit Leaders 3.0x

The directors and executives are required to be in compliance with these
guidelines within 5 years of becoming subject to the policy and "meaningful"
progress must be made and is monitored throughout that time period.

The ownership guidelines also contain a holding period requirement for
equity based awards. Non-employee directors are expected to hold all equity
based awards, net of applicable taxes, until their tenure as a Board member has
ended. Senior level managers are required to hold exercised stock options and
vested restricted stock, net of applicable taxes, for one year following the
exercise or vesting. For purposes of these guidelines, a 50% tax rate is
assumed.

Retirement and Change in Control Agreements

Overview - We believe that it is in the best interest of our Company and
stockholders to have the unbiased dedication of our executives, without the
distraction of personal uncertainties such as retirement or a change in control.
We have designed our senior management retirement and other post-employment
benefit programs to reduce such distraction. We believe that our programs allow
for a "smooth" transition in the event of retirement or a change in control
without providing "windfall" benefits to management. We also believe that these
benefits are competitive with those of other comparable companies.

The components of our retirement benefits program are as follows:

o Executive Retirement Guidelines
o 401(k) Plan
o Change in Control Agreements

We do not offer our employees or senior management defined benefit
pension, post-retirement or deferred compensation benefits. This decision was
made as we believe that such plans are both undervalued by employees and more
expensive to administer in comparison to the programs that we do offer. When
designing our retirement and other post-employment benefit programs we consider
IRC ss.409A and continue to evaluate our programs in light of the new guidance
continuously being issued.

We currently do not have a formal severance plan for our employees. In the
past we have provided post-employment severance benefits to our employees who
are terminated in connection with a reduction-in-force or corporate
reorganization. Generally these benefit amounts are based upon length of service
and position level with the Company. Future severance payments are at the
discretion of management.

Executive Retirement Guidelines - Higher-level senior managers who are at
least 59 1/2 with a combination of age and length of service equal to at least
69 1/2 are eligible to receive certain benefits under our Executive Retirement
Guidelines. These guidelines have been approved by our Board and allow for the
following:

a. accelerated vesting of all outstanding time-based stock incentive
awards;
b. discretionary vesting of all outstanding performance-based stock
incentive awards; and
c. a discretionary extension of the time eligible to exercise
outstanding stock options.

In exchange for these benefits, the executives are required to sign a
two-year non-compete agreement. In order to be considered for these benefits,
the executive must submit a voluntary retirement request form at least one year
prior to their anticipated retirement date and facilitate the transition of
their responsibilities to their chosen successor. All requests for retirement
and benefits under our Executive Retirement Guidelines by Named Executive
Officers are reviewed and approved by our Board.

401(k) Plan - Nearly all of our employees are eligible to participate in
our defined contribution 401(k) plan. This plan provides for the deferral of
employee compensation up to the maximum Internal Revenue Code limit and a
discretionary Company match. In 2006, this match was $0.35 per dollar of
participant deferral, up to 6% of the base salary for each participant.

In addition to the discretionary contributions described above, employees
are eligible to receive an additional discretionary contribution equal to 5% of
their base salary to the 401(k) Plan. This discretionary contribution is made in
the form of Company stock and is subject to certain Internal Revenue Service
limits.

Each year we perform standard year-end coverage, nondiscrimination and
compliance testing on our 401k Plan to ensure compliance with applicable
Internal Revenue Service rules and regulations. In the event the plan does not
meet the nondiscrimination requirements, a prorated portion of the contributions
made by "Highly Compensated" employees will be returned to the respective
employee in order to ensure compliance.

Participants immediately vest in their own contributions and earnings, as
well as the matching and stock contributions made by the Company.

Change in Control Agreements - We have entered into change in control
agreements with 14 of our senior level managers, including our Named Executive
Officers. These agreements provide for continued employment with the same base
salary, annual cash incentive and benefits for two years following a change of
control. If the employee is terminated after the change of control, other than
for death, disability, cause, or the executive terminates the agreement for good
reason, then the executive will be entitled to certain benefits. The most
significant components of those benefits are as follows:

a. two times annual salary;
b. two times average bonus for the three year period prior to the date
of termination;
c. two times the Company's 5% discretionary contributions to the
Company's 401(k) Plan;
d. $25,000 for outplacement services;
e. continued coverage under the Company's medical and other benefit
plans for a period of two years; and
f. all unvested stock-based awards immediately vest.

Based upon the hypothetical termination date of December 29, 2006, the
change in control termination benefits for our Named Executive Officers would be
as follows (in thousands):

Acceleration Continuance
of Stock- of Health & Outplace-
Salary & Based Welfare 401(k) ment Tax
Bonus Awards Benefits Plan Servic Gross-Up(1) Total
----- ------ -------- ---- ------ ----------- -----

o President & CEO $1,572,500 $2,613,792 $42,784 $29,950 $25,000 $1,458,996 $5,743,022
o SVP, CFO 748,000 223,736 14,253 31,024 25,000 380,832 1,422,845
o SVP, Medical
Solutions Group 679,800 177,501 19,912 28,809 25,000 365,463 1,296,485
o SVP, Commercial
Power Group 731,067 173,713 14,253 29,265 25,000 340,210 1,313,508
o SVP, Medical
Power Group 734,067 179,570 14,253 29,219 25,000 355,513 1,337,622
o Former CEO 1,801,333 2,597,493 24,582 31,240 25,000 1,529,412 6,009,060
o Former SVP
Administration &
Secretary -- 343,761 -- -- -- -- 343,761

(1) Computed based upon the assumption that equity awards are paid out in cash
and does not consider the value that could be assigned to the non-compete
agreements signed by Thomas J. Hook and Edward F. Voboril.

In exchange for the above, the terminated executive is required to sign a
36-month confidentiality agreement. In designing these agreements, we considered
IRC ss.280G. IRC ss.280G denies a tax deduction for any and all excess parachute
payments for corporations undergoing a change in control. In addition, the
individual recipient of such payment must pay an extra 20% excise tax on the
amount of the payment. IRC ss.280G provides a safe harbor from this excise tax
if the present value of any parachute payments under a change in control does
not exceed certain thresholds as defined in the code. Our change in control
agreements provide that an executive is not entitled to a gross-up if the
present value of payments does not exceed 110% of the safe harbor threshold.
Instead the payments due to these executives would be reduced to the maximum
that could be paid so that the value of the payment would not exceed the safe
harbor threshold. To the extent the change in control parachute payment exceeds
110% of the safe harbor threshold, then the participant would be entitled to an
excise tax gross-up payment, which is included in the amounts shown above.

Other Personal Benefits

In addition to the elements of compensation discussed above, we also
provide senior level management with various other benefits as follows:

o Education Assistance
o Executive Financial Planning
o Executive Physical
o Car Allowance
o Other Benefits

We provide these benefits in order to remain competitive with the market
and believe that these benefits help us to attract and retain qualified
executives. These benefits also reduce the amount of time and attention that
senior management must spend on personal matters and allows them to dedicate
more time to the Company. We believe that these benefits are in-line with the
market, are reasonable in nature, are not excessive and are in the best interest
of the Company and its stockholders.

Education Assistance Program - All employees and their dependents are
eligible to participate in our Education Assistance Program. This program is
provided to support our innovation and commitment to improving our abilities. We
believe that education will support the development of our employees for new
positions and enhance their contributions to the achievement of our strategic
goals. This program was pioneered by our founder, Wilson Greatbatch, who
believed as we do that "education is always worth more than it costs in time,
money and effort."

Under our Education Assistance Program we reimburse tuition, textbooks and
laboratory fees for all of our employees and their dependents. All fulltime
employees are eligible for 100% reimbursement upon the successful completion of
a job related degree program. The dependent children benefit vests on a
straight-line basis over ten years. For employees hired after January 1, 2003,
the maximum amount of dependent children reimbursable tuition is the cost of
tuition at the recognized local State University which for 2006 was
approximately $5,000. For employees hired prior to January 1, 2003 and for the
Named Executive Officers effective January 1, 2007, there is no maximum limit
for dependent children reimbursement. Minimum academic achievement is required
in order to receive reimbursement under all Education Assistance Programs.

Executive Financial Planning Program - Senior level managers are eligible
for reimbursement of financial planning services. Reimbursement is approved for
dollar amounts up to $5,000 in the first year of the program and up to $2,500 in
all other years. Qualified expenses include income tax preparation, estate
planning and investment planning, among others.

Executive Physical - We have partnered with regional hospitals to provide
senior level managers with annual physicals. We cover 100% of the cost of this
program. This program was developed to promote the physical well being and
health of our senior level managers. We believe this program is in the best
long-term interest of our stockholders.

Car Allowance - Certain senior level managers are eligible to receive an
auto allowance. The 2006 and 2007 auto allowance for our Named Executive
Officers follows:

2006 2007
---- ----
o President & CEO $14,400 $14,400
o CFO 14,400 14,400
o Business Unit Leaders 9,600 14,400
o Former CEO 14,400 14,400
o Former SVP Administration & Secretary 14,400 14,400

We believe this benefit is consistent with market practices.

Other Benefits - Senior management also participates in other benefit
plans that we fully or partially subsidize. Their participation is on the same
terms as other employees of the Company. Some of the more significant of these
benefits include medical, dental, life, and vision insurance, as well as
relocation reimbursement and vacation.

Employment Agreements

We currently have entered into employment agreements with the following
executives of the Company:

o Thomas J. Hook
o Edward F. Voboril
o Larry T. DeAngelo

Except for the change in control agreements discussed earlier, no other
senior level executives have employment agreements.

Thomas J. Hook - We entered into an employment agreement with Thomas J.
Hook in order to secure his services upon his appointment as President & Chief
Executive Officer. This agreement provides certain benefits in addition to the
other benefits discussed elsewhere in this section as follows:

a. Term extends through December 31, 2009 with automatic 1 year
renewals after that;
b. Grant of 25,000 shares of non-qualified options and 50,000 shares of
restricted stock that vest 25% on December 31, 2008, 25% on December
31, 2009 and 50% on December 31, 2010;
c. Company financed term life insurance policy of at least $5 million
in face value;
d. In the event of death or disability - i) salary and fringe benefit
continuation through the term of the contract, or 1 year whichever
is longer; and ii) immediate vesting of all non-vested equity based
awards, except SALT awards;
e. In the event of termination without cause or with good reason - i) 1
years salary and STIC incentive payment; and ii) immediate vesting
of all non-vested equity based awards, except SALT awards. Right to
exercise vested options upon termination is extended to twelve
months; and
f. Non-compete agreement during the term of the contract and 24 months
from the date of last payment under the contract.

The following table presents the benefits that would be received by Thomas
J. Hook in the event of a hypothetical termination as of December 29, 2006 as
follows (in thousands):

Acceleration Continuance of
of Stock- Health &
Salary & Based Welfare 401(k) Financial
Bonus Awards Benefits Plan Planning Auto Total
----- ------ -------- ---- -------- ---- -----

Permanent Disability $1,275,000 $2,447,698 $ 58,032 $ 44,925 $ 9,000 $ 43,200 $3,877,855
Death 1,275,000 2,447,698 58,032 -- -- -- 3,780,730
Termination Without Cause 765,000 2,447,698 -- -- -- -- 3,212,698
Termination With Good Reason 765,000 2,447,698 -- -- -- -- 3,212,698
Termination for Cause -- -- -- -- -- -- --
Termination Without Good
Reason -- -- -- -- -- -- --
Retirement -- 2,447,698 -- -- -- -- 2,447,698

Edward F. Voboril - In order to ensure the successful implementation of
his succession plan, in June 2006 we entered into an employment agreement with
Edward F. Voboril, Chairman of the Board and former Chief Executive Officer.
This agreement provides certain benefits in addition to the other benefits
discussed elsewhere in this section as follows:

a. Term extends through January 31, 2008;
b. From January 1, 2007 to January 31, 2008 executive agrees to devote
1/2 of business time to his duties as Chairman of the Board;
c. Base Salary of $225,000 from January 1, 2007 to January 31, 2008;
d. In lieu of his 2007 LTIP Program award and 2006 and 2007 SALT
Program awards will receive 50,879 shares of stock on December 31,
2007 upon meeting two strategic performance goals as determined and
measured by the Board; 1) the successful implementation of his
succession plan; and 2) successful implementation of an acquisition
plan. In the event an acquisition does not close, a suitable
alternative development objective as determined by the Board;
e. Company financed term life insurance policy of at least $2 million
in face value;
f. Reimbursement for financial planning not to exceed $5,000 per year
plus a gross-up payment to cover the taxes imposed on the
reimbursement;
g. Company financed health insurance for the term of the contract;
g. In the event of death or disability - i) salary and fringe benefit
continuation through the term of the contract; and ii) immediate
vesting of all non-vested equity based awards.
h. In the event of termination without cause or with good reason - i) 1
years salary and STIC incentive payment (without cause only); and
ii) immediate vesting of all non-vested equity based awards, except
SALT awards;
i. Right to exercise vested options upon termination is extended to
twelve months; and
j. Non-compete agreement during the term of the contract and 24 months
from the date of last payment under the contract.

The following table presents the benefits that would be received by Edward
F. Voboril in the event of a hypothetical termination as of December 29, 2006 as
follows (in thousands):

Acceleration Continuance of
of Stock- Health &
Salary & Based Welfare Financial
Bonus Awards Benefits Planning Auto Total
----- ------ -------- -------- ---- -----

Permanent Disability $243,750 $2,597,493 $12,040 $10,000 $15,600 $2,878,883
Death 243,750 2,597,493 12,040 -- -- 2,853,283
Termination Without Cause 817,000 2,597,493 -- -- -- 3,414,493
Termination With Good Reason 817,000 2,597,493 -- -- -- 3,414,493
Termination for Cause -- -- -- -- -- --
Termination Without Good Reason -- -- -- -- -- --
Retirement -- 2,597,493 -- -- -- 2,597,493

Larry T. DeAngelo - In order to ensure the successful implementation of
his succession plan, in November 2006 we entered into an employment agreement
with Larry T. DeAngelo, former Senior Vice President of Administration &
Secretary, following the notice of his retirement. This agreement provides
certain benefits in addition to the other benefits discussed elsewhere in this
section as follows:

a. Term extends through January 31, 2008;
b. As of December 19, 2006 became Senior Advisor to the Chairman and to
the President & Chief Executive Officer;
c. Eligible for 2007 STIC Program incentive payment plus $100,000
severance payment in 2008; and
d. Will be considered for equity awards in 2007.

Compensation Tables

Summary Compensation Table

The following table summarizes the total compensation paid or earned by
each of the Named Executive Officers for the fiscal year ended December 29,
2006. We have entered into employment agreements with Thomas J. Hook, Edward F.
Voboril and Larry T. DeAngelo - see the "Employment Agreements" section of the
Compensation Discussion and Analysis for further discussion. The Named Executive
Officers were not entitled to receive payments which would be characterized as
"Bonus" payments for the fiscal year ended December 29, 2006.

Total cash compensation, which includes salary and non-equity incentive
plan compensation, is based on individual performance as well as the overall
performance of the Company as described in the "Base Salary" and "Annual Cash
Incentives" sections of the Compensation Discussion and Analysis. Total cash
compensation as a percentage of total compensation was as follows: Thomas J.
Hook - 64.1%; Thomas J. Mazza - 74.7%; Mauricio Arellano - 76.4%; Susan M.
Bratton - 71.5%; Susan H. Campbell - 76.2%; Edward F. Voboril - 31.8%; and Larry
T. DeAngelo - 47.3%. Generally, the emphasis that is placed on stock-based
compensation increases as the level of responsibility of the individual employee
increases.

Non-Equity
Incentive All
Name and Principal Stock Option Plan Other
Position(1) Year Salary(2) Bonus Awards(3) Awards(4) Comp.(5) Comp.(6) Total
----------- ---- --------- ----- --------- --------- -------- -------- -----

Thomas J. Hook 2006 $378,558 $ -- $168,377 $356,264 $646,000 $49,494 $1,598,693
President & Chief Executive
Officer
Thomas J. Mazza 2006 215,654 -- 20,041 112,028 292,600 40,077 680,400
Senior Vice President &
Chief Financial Officer
Mauricio Arellano 2006 201,808 -- 19,570 94,480 254,410 27,109 597,377
Senior Vice President,
Medical Solutions Group
Susan M. Bratton 2006 205,769 -- 22,105 90,602 254,410 70,693 643,579
Senior Vice President,
Commercial Power Group
Susan H. Campbell 2006 205,769 -- 21,373 98,526 254,410 23,474 603,552
Senior Vice President,
Medical Power Group
Edward F. Voboril 2006 430,000 -- 950,630 1,507,369 735,300 38,095 3,661,394
Chairman of the Board &
Chief Executive Officer
Larry T. DeAngelo 2006 245,654 -- 156,734 473,312 356,250 40,673 1,272,623
Senior Vice President,
Administration & Secretary

(1) Effective August 8, 2006, Thomas J. Hook was appointed to the position of
Chief Executive Officer succeeding Edward F. Voboril, who continued on as
Chairman of our Board. Effective December 19, 2006, Larry T. DeAngelo
retired as Senior Vice President, Administration & Secretary.
(2) The amounts indicated represent the dollar value of base salary earned
during fiscal year 2006.
(3) The amounts indicated represent the aggregate dollar amount of
compensation expense related to restricted stock and restricted stock unit
awards granted that was recognized in our financial statements during 2006
and includes amounts from awards granted prior to 2006. The determination
of this expense is based on the methodology set forth in notes 2 and 10 to
our financial statements included in our Annual Report on Form 10-K, which
was filed with the SEC on February 27, 2007.

(4) The amounts indicated represent the aggregate dollar amount of
compensation expense related to stock option awards granted that was
recognized in our financial statements during 2006 and includes amounts
from awards granted prior to 2006. The determination of this expense is
based on the methodology set forth in notes 2 and 10 to our financial
statements included in our Annual Report on Form 10-K, which was filed
with the SEC on February 27, 2007.
(5) The amounts indicated represent cash awards earned in fiscal year 2006 and
paid in fiscal year 2007 under our STIC Program. See "Annual Cash
Incentives" section of the Compensation Discussion and Analysis.
(6) The amounts indicated include cash and stock we contributed for fiscal
year 2006 to the respective employees' 401(k) plan account, term life
insurance premiums paid by the Company for the benefit of the Named
Executive Officers, tax gross-ups related to certain perquisites as well
as other perquisites. The dollar value of cash and stock contributed to
the 401(k) plan, term life insurance premiums paid and perquisites is as
follows. No other item exceeded $10,000 in value:

Thomas J. Thomas J. Mauricio Susan M. Susan H. Edward F. Larry T.
Hook Mazza Arellano Bratton Campbell Voboril DeAngelo
---- ----- -------- ------- -------- ------- --------

401(k) contribution $14,975 $15,512 $14,404 $14,633 $14,610 $15,620 $15,620
Term life insurance
premiums 12,900 4,670
Perquisites 21,492 24,459 12,473 54,949 8,707 17,631 23,719

Perquisites for the Named Executive Officers were comprised of the
following. No perquisite exceeded the greater of $25,000 or 10% of the total
perquisites provided to the respective executive, except as noted:

Personal use
Dependent Service of Company
Car Financial Executive Education Vacation Award Personal Provided
Allowance Planning Physical Assistance Payout Gifts Travel Cell- Phone
--------- -------- -------- ---------- ------ ----- ------ -----------

Thomas J. Hook X X X X X X
Thomas J. Mazza X X X X X X
Mauricio Arellano X X X X
Susan M. Bratton X $43,271 X X X
Susan H. Campbell X X
Edward F. Voboril X X X X X
Larry T. DeAngelo X X X X X X

Grants of Plan-Based Awards

The following table summarizes the grants of plan-based awards to each of
the Named Executive Officers for the fiscal year ended December 29, 2006. All
stock-based awards in 2006 were granted under our 2005 Stock Incentive Plan.
Under the 2005 Stock Incentive Plan all stock options expire 10 years from the
date of grant and acceleration of vesting occurs upon a change in control.
Acceleration of vesting does not automatically occur upon death, disability or
retirement.

Prior to vesting, employees who receive a grant of restricted stock are
eligible to participate in the rights or privileges of a stockholder of the
Company in respect to those shares, including the right to receive dividends and
vote. We did not pay any cash dividends in 2006 and currently intend to retain
any earnings to further develop and grow our business.

All Other All Other
Estimated Future Payouts Under Estimated Future Payouts Stock Option Grant
Non-Equity Incentive Plan Under Equity Incentive Awards: Awards: Date Fair
Awards(1) Plan Awards(2) Number Number of Exercise Value of
------------------------------------------------------------ of Shares Securities Price of Stock and
Grant Maxi- Maxi- of Stock Underlying Option Option
Name Date Threshold Target mum Threshold Target mum or Units Options Awards Awards(4)
---- ----- --------- ------ ----- --------- ------ ----- --------- ---------- -------- -----------
(#) (#) (#) (#)(3) (#)(3) ($/Sh)

Thomas J.
Hook $ -- $ 340,000 $ 680,000 -- -- -- -- -- $ -- $ N/A
2/12/06 -- -- -- -- -- -- 5,045 25,225 25.22 393,863
8/8/06 -- -- -- -- 41,996 -- 50,000 25,000 22.38 1,885,575
Thomas J.
Mazza -- 154,000 308,000 -- -- -- -- -- -- N/A
2/12/06 -- -- -- -- -- -- 1,816 9,081 25.22 141,786
8/8/06 -- -- -- -- 8,695 -- -- -- 22.38 98,775
Mauricio
Arellano -- 133,900 267,800 -- -- -- -- -- -- N/A
2/12/06 -- -- -- -- -- -- 1,493 7,467 25.22 116,579
8/8/06 -- -- -- -- 8,142 -- -- -- 22.38 92,493
Susan M.
Bratton -- 133,900 267,800 -- -- -- -- -- -- N/A
2/12/06 -- -- -- -- -- -- 1,537 7,686 25.22 120,004
8/8/06 -- -- -- -- 8,142 -- -- -- 22.38 92,493
Susan H.
Campbell -- 133,900 267,800 -- -- -- -- -- -- N/A
2/12/06 -- -- -- -- -- -- 1,537 7,686 25.22 120,004
8/8/06 -- -- -- -- 8,142 -- -- -- 22.38 92,493
Edward F.
Voboril -- 387,000 774,000 -- -- -- -- -- -- N/A
2/12/06 -- -- -- -- -- -- 9,297 46,486 25.22 725,827
8/8/06 -- -- -- -- 50,879 -- -- -- -- 1,138,672
8/8/06 -- -- -- -- -- -- -- 439,384 N/A 468,707(5)
Larry T.
DeAngelo -- 187,500 375,000 -- -- -- -- -- -- N/A
2/12/06 -- -- -- -- -- -- 2,594 12,972 25.22 202,535
8/8/06 -- -- -- -- 11,116 -- -- -- 22.38 126,278

(1) The amounts indicated represent potential cash awards that could be paid
under our STIC Program. Awards can range from 0% to 200% of the target
amount. See "Annual Cash Incentives" section of the Compensation
Discussion and Analysis for discussion of this program. See the
"Non-Equity Incentive Plan Comp." column of the Summary Compensation Table
above for the actual amounts earned, which were paid in 2007.
(2) The amounts indicated represent performance-based non-qualified stock
options that were awarded under our SALT Program. The 2006 SALT Program
awards vest either at 100% or 0% on December 31, 2009 depending on whether
or not the Company achieves certain three-year performance measures. See
the "Long-Term Equity Awards" section of the Compensation Discussion and
Analysis for discussion of this program. In lieu of a 2007 LTIP Program
award and 2006 and 2007 SALT Program award, on August 8, 2006 Edward F.
Voboril received a grant of 50,879 shares of restricted stock units that
will vest on December 31, 2007 if certain Board determined performance
goals are attained. See the "Employment Agreements" section of the
Compensation Discussion and Analysis for further discussion.
(3) The amounts indicated represent non-qualified stock option and restricted
stock awards that were granted under our LTIP program. The LTIP Program
stock option awards vest 25% at the end of each year, including the year
of grant. The LTIP Program restricted stock awards vest 50% at the end of
the second year, including the year of grant and 25% at the end of the
third and fourth year. See the "Long-Term Equity Awards" section of the
Compensation Discussion and Analysis for discussion of this program.

Upon his appointment to Chief Executive Officer on August 8, 2006, Thomas
J. Hook was awarded an additional grant of non-qualified stock options and
restricted stock that vest 25% on December 31, 2008, 25% on December 31,
2009 and 50% on December 31, 2010. See the "Employment Agreements" section
of the Compensation Discussion and Analysis for further discussion.
(4) The valuation of stock options, restricted stock and restricted stock
units are based on the methodology set forth in notes 2 and 10 to our
financial statements included in our Annual Report on Form 10-K, which was
filed with the SEC on February 27, 2007.
(5) Edward F. Voboril's employment agreement dated June 30, 2006 extended the
right to exercise his vested stock options after termination to twelve
months. The amount indicated represents the total incremental increase in
fair value, calculated as of the modification date, which will be
recognized in our financial statements.

Outstanding Equity Awards at Fiscal Year-End

The following table summarizes the number and terms of stock option,
restricted stock and restricted stock unit awards outstanding for each of the
Named Executive Officers as of December 29, 2006.

Option Awards
-------------------------------------------------------------------------------------------------------------
Number of Equity Incentive
Securities Plan Awards:
Underlying Number of Securities Number of
Unexercised Underlying Unexercised Securities
Options Options Underlying Option
Option Grant Unexercised Option Expiration
Name Date Exercisable Unexercisable Unearned Options Exercise Price Date
---- ---- ----------- ------------- ---------------- -------------- ----
(#)(1) (#)(1) (#)(2)

Thomas J. Hook
9/1/04 31,558 18,442 - $16.70 8/31/14
3/31/05 9,370 9,372 - 18.24 3/30/15
5/24/05 242 258 - 24.62 5/23/15
6/8/05 - 25,431 - 23.60 6/7/15
2/12/06 6,306 18,919 - 25.22 2/11/16
8/8/06 - 25,000 41,996 22.38 8/7/16

Thomas J. Mazza
11/10/03 4,122 543 - $37.51 11/9/13
7/1/04 2,800 - - 27.50 6/30/14
2/11/05 2,420 2,580 - 16.99 2/10/15
3/31/05 3,536 3,538 - 18.24 3/30/15
6/8/05 - 6,684 - 23.60 6/7/15
2/12/06 2,270 6,811 - 25.22 2/11/16
8/8/06 - - 8,695 22.38 8/7/16

Mauricio Arellano
11/10/03 1,719 227 - $37.51 11/9/13
5/25/04 3,200 1,800 - 26.65 5/24/14
7/1/04 1,875 - - 27.50 6/30/14
3/31/05 3,267 3,268 - 18.24 3/30/15
6/8/05 - 6,176 - 23.60 6/7/15
2/12/06 1,866 5,601 - 25.22 2/11/16
8/8/06 - - 8,142 22.38 8/7/16

Susan M. Bratton
9/16/97 4,500 - - $ 5.00 9/15/07
12/31/98 1,620 - - 15.00 12/30/08
9/24/99 402 - - 15.00 9/23/09
1/1/00 1,880 - - 15.00 12/31/09
2/16/00 1,000 - - 15.00 2/15/10
1/1/01 1,178 - - 28.25 12/31/10
2/5/01 1,350 - - 20.64 2/4/11
5/18/01 4,000 - - 32.48 5/17/11
1/1/02 2,037 - - 25.82 12/31/11
7/26/02 5,000 - - 25.36 7/25/12
7/1/03 5,000 - - 35.70 6/30/13
7/1/04 5,600 - - 27.50 6/30/14
3/31/05 3,556 3,556 - 18.24 3/30/15
6/8/05 - 6,721 - 23.60 6/7/15
2/12/06 1,921 5,765 - 25.22 2/11/16
8/8/06 - - 8,142 22.38 8/7/16

Stock Awards
------------------------------------------------------------------------------------
Equity Incentive Equity Incentive
Number of Plan Awards: Plan Awards: Market
Shares or Market Value of Number of or Payout Value of
Units of Shares or Units Unearned Shares, Unearned Shares,
Stock That of Stock That Units or Other Units or Other
Stock Award Have Not Have Not Rights That Have Rights That Have
Name Grant Date Vested Vested(4) Not Vested Not Vested(4)
---- ---------- ------ --------- ---------- -------------
(#)(3) (#)(5)

Thomas J. Hook
10/5/04 5,000 $134,600 - -
2/11/05 7,000 188,440 - -
3/31/05 2,227 59,951 - -
2/12/06 5,045 135,811 - -
8/8/06 50,000 1,346,000 - -
- - - - -

Thomas J. Mazza
10/1/04 200 $ 5,384 - -
3/31/05 841 22,640 - -
2/12/06 1,816 48,887 - -
- - - - -
- - - - -
- - - - -
- - - - -

Mauricio Arellano
10/1/04 1,000 $ 26,920 - -
3/31/05 777 20,917 - -
2/12/06 1,493 40,192 - -
- - - - -
- - - - -
- - - - -
- - - - -

Susan M. Bratton
11/15/02 200 $ 5,384 - -
11/1/03 200 5,384 - -
10/1/04 200 5,384 - -
3/31/05 845 22,747 - -
2/12/06 1,537 41,376 - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -

Susan H. Campbell
5/9/03 3,140 412 - $33.78 5/8/2013
7/1/03 3,750 - - 35.70 6/30/13
7/1/04 2,800 - - 27.50 6/30/14
10/5/04 2,500 - - 17.77 10/4/14
3/31/05 3,460 3,460 - 18.24 3/30/15
6/8/05 - 6,539 - 23.60 6/7/15
2/12/06 1,921 5,765 - 25.22 2/11/16
8/8/06 - - 8,142 22.38 8/7/16

Edward F. Voboril
9/16/97 10,880 - - $ 5.00 9/15/07
12/31/98 18,260 - - 15.00 12/30/08
3/11/99 18,000 - - 15.00 3/10/09
9/24/99 1,900 - - 15.00 9/23/09
1/1/00 21,040 - - 15.00 12/31/09
1/1/01 11,074 - - 28.25 12/31/10
2/5/01 4,335 - - 20.64 2/4/11
1/1/02 15,563 - - 25.82 12/31/11
7/26/02 67,500 - - 25.36 7/25/12
7/1/03 67,500 - - 35.70 6/30/13
7/1/04 61,500 - - 27.50 6/30/14
3/31/05 24,798 24,798 - 18.24 3/30/15
6/8/05 - 56,630 - 23.60 6/7/15
2/12/06 11,621 34,865 - 25.22 2/11/16

Larry T. DeAngelo
9/16/97 4,580 - - $ 5.00 9/15/07
12/31/98 4,960 - - 15.00 12/30/08
9/24/99 906 - - 15.00 9/23/09
1/1/00 5,580 - - 15.00 12/31/09
1/1/01 2,936 - - 28.25 12/31/10
2/5/01 2,075 - - 20.64 2/4/11
1/1/02 5,837 - - 25.82 12/31/11
7/26/02 13,500 - - 25.36 7/25/12
7/1/03 13,500 - - 35.70 6/30/13
7/1/04 12,300 - - 27.50 6/30/14
3/31/05 6,920 6,920 - 18.24 3/30/15
6/8/05 - 9,809 - 23.60 6/7/15
2/12/06 3,243 9,729 - 25.22 2/11/16
8/8/06 - - 11,116 22.38 8/7/16

Susan H. Campbell
11/1/03 200 $ 5,384 - -
10/1/04 700 18,844 - -
3/31/05 822 22,128 - -
2/12/06 1,537 41,376 - -
- - - - -
- - - - -
- - - - -
- - - - -

Edward F. Voboril
11/15/02 5,000 $134,600 - -
11/1/03 5,000 134,600 - -
10/1/04 5,000 134,600 - -
3/31/05 5,894 158,666 - -
2/12/06 9,297 250,275 - -
8/8/06 - - 50,879 $1,369,663
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -

Larry T. DeAngelo
11/15/02 1,000 $ 26,920 - -
11/1/03 1,000 26,920 - -
10/1/04 1,000 26,920 - -
3/31/05 1,645 44,283 - -
2/12/06 2,594 69,830 - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -
- - - - -

(1) Stock option awards become exercisable as follows:

Option Grant Date Vesting Schedule
----------------- ----------------

9/16/97, 5/18/01, 5/9/03, 11/10/03, The amount of stock options exercisable is determined each year by the Compensation
5/25/04, 9/1/04, 2/11/05, 5/24/05 Committee and is based upon the financial performance of the Company for the
preceding year. Notwithstanding the foregoing, the option becomes exercisable in
full on the seventh anniversary of the grant date if employment with the Company has
not terminated. The historical vesting of these awards is as follows: 1997 - 20.0%;
1998 - 21.95%; 1999 - 0.0%; 2000 - 20.0%; 2001 - 26.9%; 2002 - 15.1%; 2003 - 24.4%;
2004 - 15.6%; 2005 - 24.4%; and 2006 24.0%.

12/31/98, 3/11/99, 1/1/00, 1/1/01, 1/1/02 Stock options become exercisable 33 1/3% on the anniversary of the grant date each
year for three years following the date of grant.

9/24/99, 2/16/00, 2/5/01, 7/26/02, 7/1/03, Stock options become exercisable 33 1/3% on December 31st of each year for three
7/1/04, 10/5/04 years following the date of grant, including the year of grant.

3/31/05, 2/12/06 Stock options become exercisable 25% on December 31st of each year for four years
following the date of grant, including the year of grant.

6/8/05 Stock options become exercisable on December 31, 2008 if certain performance goals
are met. Notwithstanding the foregoing, the option becomes exercisable in full on
the seventh anniversary of the grant date if employment with the Company has not
terminated.

8/8/06 Stock option becomes exercisable 25% on December 31, 2008, 25% on December 31, 2009
and 50% on December 31, 2010.

(2) Stock options become exercisable on December 31, 2009 if certain
performance goals are met.
(3) Stock awards vest as follows:

Stock Award Grant Date Vesting Schedule
---------------------- ----------------

11/15/02, 11/1/03, 10/1/04, 10/5/04, 2/11/05 Stock awards vest upon the achievement of certain earnings per share targets.
Notwithstanding the foregoing, the awards vest in full on the seventh anniversary of
the grant date if employment with the Company has not terminated. The earnings per
share targets are as follows: 2002 grant - $2.00; 2003 grant - $2.40; and 2004 &
2005 grants - $2.88.

3/31/05, 2/12/06 Stock awards vest 50% at the end of the second year following the year of grant,
including the year of grant and 25% at the end of the third and fourth year.

8/8/06 Stock award vests 25% on December 31, 2008, 25% on December 31, 2009 and 50% on
December 31, 2010.

(4) Market value of shares or units of stock that have not vested is
calculated as the product of the closing price of our stock on December
29, 2006 of $26.92 and the number of unvested shares or units.
(5) Stock award becomes exercisable on December 31, 2007 if certain
performance goals are met.

Option Exercises and Stock Vested

The following table summarizes the number of stock option awards exercised
and the value realized upon exercise during 2006 for the Named Executive
Officers, as well as the number of stock awards vested and the value realized
upon vesting.

Option Awards Stock Awards
----------------------------- --------------------------
Number of Number of
Shares Value Shares Value
Acquired on Realized on Acquired on Realized on
Name Exercise (#) Exercise(1) Vesting (#) Vesting(2)
---- ------------ ----------- ----------- ----------

Thomas J. Hook -- $ -- 2,227 $ 59,951

Thomas J. Mazza -- -- 840 22,613

Mauricio Arellano -- -- 776 20,890

Susan M. Bratton -- -- 845 22,747

Susan H. Campbell -- -- 822 22,128

Edward F. Voboril 27,000 540,740 5,893 158,640

Larry T. DeAngelo -- -- 1,644 44,256

(1) Based upon the difference between the price of our common stock on the New
York Stock Exchange at the time of exercise and the exercise price for the
stock options exercised.
(2) Based upon the closing price of our common stock on the New York Stock
Exchange on the date the stock awards vested.

Pension Benefits and Nonqualified Deferred Compensation Tables

These tables are not required as we do not offer our Named Executive
Officers the pension or nonqualified deferred compensation benefits required to
be reported in these tables. See the "Change in Control Agreements" and
"Employment Agreements" section of the Compensation Discussion and Analysis for
a description of potential post-employment payments.

CORPORATE GOVERNANCE AND BOARD MATTERS

The business of the Company is managed under the direction of the Board.
In June 2003, the Board adopted Corporate Governance Guidelines for the Company.
These Guidelines reflect the Company's commitment to good corporate governance.
The full text of the Guidelines is posted in the Investor Resource Center
section of the Company's website at www.greatbatch.com under "Governance."

The Board has also adopted a Code of Business Conduct and Ethics for all
directors, executive officers and employees of the Company. The full text of the
code is posted on the Investor Resource Center section of the Company's website.
The Company intends to post on its website any amendment to or waiver from any
provision in the Code of Business Conduct and Ethics that relates to any element
of the standards enumerated in the rules of the Securities and Exchange
Commission.

Board Independence

Except for Mr. Hook, the Company's President & Chief Executive Officer and
Mr. Voboril, the Company's Chairman of the Board and former Chief Executive
Officer, all of the Company's current directors are independent consistent with
the standards set by the New York Stock Exchange Corporate Governance Listing
Standards, as amended, and consistent with the Company's Corporate Governance
Guidelines (the "Guidelines"). The Guidelines specify the criteria by which the
independence of the Company's directors will be determined. The Guidelines
provide that a director is independent if the director is neither a current or
former employee or officer of the Company, the director does not receive any
remuneration from the Company, either directly or indirectly, in any capacity
other than as a director, and the director is not a partner or controlling
stockholder or executive officer of any organization that has a business
relationship with the Company. When making an independence determination, the
Board endeavors to consider all relevant facts and circumstances.

In making determinations of independence, the Board also uses categorical
standards set forth by the New York Stock Exchange to assist it in making
independence determinations. Under these standards, absent other material
relationships with the Company that the Board believes to jeopardize a
director's independence from management, a director will be independent unless
the director or any of his or her immediate family members had any of the
following relationships with the Company: employment during any of the past
three years (as an executive officer in the case of family members); the receipt
of more than $100,000 per year in direct compensation (other than director fees)
during any of the past three years; affiliation or employment with a present or
former internal or external auditor during any of the past three years;
employment with another company where any executive officers of the Company
serve on that company's compensation committee during any of the past three
years; being an executive officer of a charitable organization to which the
Company contributed the greater of $1 million or 2% of such charitable
organization's consolidated gross revenues in any single fiscal year during the
preceding three years; or being an executive officer of a company that makes
payments to, or receives payments from, the Company for property or services in
a fiscal year in an amount in excess of the greater of $1 million or two percent
(2%) of such other company's consolidated gross revenues.

In accordance with the Guidelines, the Board undertook its annual review
of director independence. During this review, the Board considered the
materiality of any relationships with the Company from the director's
perspective and the perspective of any persons or organizations with which the
director is affiliated. Material relationships may include commercial,
industrial, banking, consulting, legal, accounting, charitable or familial
relationships and can also be indirect, such that serving as a partner or
officer, or holding shares, of an organization that has a relationship with the
Company that may cause the director not to be independent. As provided in the
Guidelines, the purpose of this review was to determine whether any such
relationships or transactions existed that were inconsistent with a
determination that the director is independent. In connection with this review,
the Board considered that the Company was an investor in and was in negotiations
to acquire substantially all of the assets of BIOMEC, Inc. a researcher,
developer and manufacturer of advanced medical devices for $11.4 million and
potential future consideration. The transaction was completed on April 3, 2007.
Mr. Sanford is a less than 5% shareholder, director and non-executive vice
chairman of BIOMEC, Inc. The Board determined that this relationship did not and
would not impair Mr. Sanford's independence.

Pursuant to the Guidelines and following the review described above, the
Board has affirmatively determined that no current director has a material
relationship with the Company that is inconsistent with a determination of
independence except Mr. Hook and Mr. Voboril. Therefore, the Board affirmatively
determined that all the current directors, with the exception of Mr. Hook and
Mr. Voboril, are independent.

Meetings and Committees of the Board

The Board has a standing Audit, Compensation and Organization, Corporate
Governance and Nominating and Science and Technology Development Committees.
Each committee has a written charter posted on the Investor Resource Center
section of the Company's website under "Governance".

The Board held seven meetings in 2006. Each director attended at least 75%
of the meetings of the Board and meetings of the committees of the Board on
which each director served. All of the Company's directors attended the 2006
annual meeting of stockholders. The Company requests, but has no formal policy
regarding director's attendance at its annual meeting of stockholders.

Audit Committee - The Audit Committee consists of Messrs. Summer (Chair),
Summers and Wareham. The Audit Committee's primary purpose is assisting the
Board in overseeing the (i) integrity of the Company's financial statements,
(ii) Company's compliance with legal and regulatory requirements, (iii)
Company's independent auditor's qualifications and independence, (iv)
performance of the Company's internal audit function and independent auditor and
(v) Company's system of disclosure controls and system of internal controls
regarding finance, accounting, legal compliance, related person transactions and
ethics that management and the Board have established. The Audit Committee had
eight meetings in 2006.

Compensation and Organization Committee - The Compensation and
Organization Committee consists of Messrs. Summers (Chair), Soderberg and
Summer. The Compensation and Organization Committee's primary purpose is
establishing the Company's executive compensation philosophy that will attract,
retain and motivate superior executives and ensure that senior executives of the
Company and its wholly owned subsidiaries are compensated appropriately in a
manner consistent with the compensation philosophy, internal equity
considerations, competitive practice and the requirements of the appropriate
regulatory bodies. The Compensation and Organization Committee also administers
the Company's 1997 and 1998 Stock Option Plans, the Company's Non-Employee
Director Stock Incentive Plan, the Company's 2002 Restricted Stock Plan and the
Company's 2005 Stock Incentive Plan. The Compensation and Organization Committee
had six meetings in 2006.

Corporate Governance and Nominating Committee - The Corporate Governance
and Nominating Committee consists of Mrs. Bailey (Chair), Messrs. Sanford and
Soderberg, and Dr. Miller. The Corporate Governance and Nominating Committee
identifies qualified individuals to become members of the Board, recommends to
the Board the selection of director nominees, develops and recommends to the
Board a set of corporate governance principles applicable to the Company and
evaluates the effectiveness of the Board. The Corporate Governance and
Nominating Committee reviews with the Board, on an annual basis, the composition
of the Board and whether the Company is being well served by the directors
taking into account their independence, age, skills, experience and availability
for service. The Corporate Governance and Nominating Committee recommends
director nominees to the Board considering the factors discussed above, provided
that no director may sit on the board of, or beneficially own stock in (other
than through mutual funds or similar non-discretionary, undirected arrangement),
any of the Company's competitors in its principal lines of business. The
Corporate Governance and Nominating Committee may, and has sole authority to,
retain a search firm to assist in identifying qualified director candidates. The
Corporate Governance and Nominating Committee's policy is to consider director
candidates recommended from all sources, including stockholder recommendations,
to the extent those candidates will improve the Board's composition based on the
factors discussed above. The Corporate Governance and Nominating Committee uses
the same process for evaluating candidates for director regardless of the source
of the recommendation. Stockholders wishing to submit recommendations for
candidates to the Board must supply information in writing regarding the
candidate to the Corporate Governance and Nominating Committee at the Company's
executive offices at 9645 Wehrle Drive, Clarence, New York 14031. The
information should include, at a minimum, the candidate's name, biographical
information, qualifications and availability for service. The Corporate
Governance and Nominating Committee had six meetings in 2006.

Science and Technology Development Committee - The Science and Technology
Development Committee consists of Dr. Miller (Chair), Mrs. Bailey, and Messrs.
Hook and Wareham. The Science and Technology Development Committee periodically
examines management's direction and investment in the Company's research and
development, as well as in its technology initiatives and advises the Board on
scientific matters that include major internal projects, interaction with
academic and other outside research organizations and the acquisition of
technologies and products. The Science and Technology Development Committee had
four meetings in 2006.

Executive Sessions of the Board

The independent non-management directors, consisting of all current
directors except for Mr. Hook and Mr. Voboril, meet without management at
regularly scheduled executive sessions at the conclusion of each regular
quarterly Board meeting and at such other times as they deem appropriate. Mr.
Sanford acts as lead independent director at all executive sessions.

Communications with the Board

Any stockholder or interested party who wishes to communicate with Board
members or with the lead independent director may do so electronically by
sending an e-mail to Messrs. Sanford or Summer via the Whistleblower Information
page of the Investor Resource Center section of the Company's website
(www.greatbatch.com) under "Governance", by leaving a confidential voicemail
message for either Mr. Sanford (716-759-5501) or Mr. Summer (716-759-5508), or
by writing to the following address: Board of Directors, Greatbatch, Inc., 9645
Wehrle Drive, Clarence, NY 14031.

Compensation and Organization Committee Interlocks and Insider Participation

In fiscal year 2006, Messrs. Summer, Summers and Soderberg served on the
Compensation and Organization Committee. No person who served as a member of the
Compensation and Organization Committee during fiscal year 2006 was (i) an
officer or employee of the Company or any of its subsidiaries during such fiscal
year (ii) formerly an officer of the Company or any of its subsidiaries or (iii)
had any relationship requiring disclosure by the Company under Item 404 of
Regulation S-K under the Securities Act of 1933.

Director Compensation

The Company uses a combination of cash and stock-based incentive
compensation to attract and retain qualified candidates to serve on our Board.
In setting director compensation, the Company considers the significant amount
of time that directors expend in fulfilling their duties to the Company as well
as the skill-level required for members of the Board. Directors who are also
employees of the Company receive no additional remuneration for services as a
director.

Cash Compensation - For 2006, each non-employee director received an
annual retainer of $30,000. At the election of the individual director, any
portion of the annual retained may be received in shares of Greatbatch stock as
computed by its closing market price on the last day of the year.

In addition to their annual retainer, directors receive cash payments as
follows:

Lead Independent Director $ 20,000
Audit Committee Chair $ 20,000
Compensation & Organization Committee Chair $ 7,500
Corporate Governance & Nominating Committee Chair $ 5,000
Science & Technology Committee Chair $ 5,000
Committee Meeting Fees $ 1,000 per meeting attended
$ 500 per telephonic meeting

Equity Compensation - Equity-based compensation awarded to non-employee
directors is based upon the guidelines of the LTIP Program. For 2006, each
non-employee director received $60,000 of equity based compensation, which is
equivalent to 2x their annual retainer. The amount of shares awarded is
calculated using the Black-Scholes value of our stock on the date of grant. The
shares awarded were comprised of 2/3 non-qualified stock options and 1/3
restricted stock with the restricted stock being converted on a 2.5 to 1 ratio.
All awards vest immediately. For 2007, the mix between stock options and
restricted stock was changed to 50/50 similar to the LTIP program.

Retirement -- Upon Board approved retirement, each outstanding director receives

o immediate vesting of any unvested equity-based awards; and
o the right to exercise all outstanding stock options for a period of
3 years.

All awards and changes to director's compensation are approved by the
Board.

The following table contains information concerning the total compensation
earned by each individual who served as a director of Greatbatch during 2006
other than directors who are also Named Executive Officers:

Change in
Fees Pension Value
Earned or Non-Equity and
Paid in Stock Option Incentive Non-Qualified All Other
Cash Awards Awards Plan Comp. Deferred Comp. Comp.
Name ($)(1) ($)(2) ($)(2) ($)(3) Earnings(3) ($)(3) Total ($)
---- ------ ------ ------ ------ ----------- ------ ---------

Pamela G. Bailey $45,500 $17,150 $49,306 -- -- -- $111,956
Dr. Joseph A. Miller, Jr. 45,000 17,150 33,134 -- -- -- 95,284
Bill R. Sanford 54,500 17,150 49,306 -- -- -- 120,956
Peter H. Soderberg 42,750 17,150 49,306 -- -- -- 109,206
Thomas S. Summer 64,500 17,150 34,779 -- -- -- 116,429
William B. Summers, Jr. 52,000 17,150 49,306 -- -- -- 118,456
John P. Wareham 47,500 17,150 60,939 -- -- -- 125,589

(1) The amounts indicated represent the amount earned or paid in cash for
retainers and committee meeting fees. Each director may elect to receive
all or a portion of his or her annual retainer in the form of Greatbatch
common stock in lieu of cash. For 2006, Pamela G. Bailey, Dr. Joseph A.
Miller, Jr., Peter H. Soderberg and William B. Summers, Jr. elected to
receive 100% of their retainer in stock and John P. Wareham elected to
receive 1/3 of his retainer in stock.
(2) The amounts indicated represent the aggregate dollar amount of
compensation expense related to restricted stock and stock option awards
granted that was recognized in our financial statements during 2006 and
includes amounts from awards granted prior to 2006. The determination of
this expense is based on the methodology set forth in notes 2 and 10 to
our financial statements included in our Annual Report on Form 10-K, which
was filed with the SEC on February 27, 2007. In 2006 each non-employee
director received restricted stock awards and stock options with an
aggregate grant date fair value of $17,150 and $28,380, respectively. No
director stock or option awards were repriced or materially modified
during 2006. The aggregate number of options held by each director at
December 29, 2006 was as follows: Pamela G. Bailey - 18,420; Dr. Joseph A.
Miller - 13,170; Bill R. Sanford Jr. - 18,420; Peter H. Soderberg -
18,420; Thomas S. Summer - 13,420; William B. Summers, Jr. - 18,420; and
John P. Wareham - 12,920.
(3) The Company does not offer its non-employee directors non-equity incentive
compensation, pension benefits or deferred compensation programs. The
aggregate amount of perquisites and other personal benefits provided to
any non-employee director did not exceed $10,000 in 2006.

Compensation and Organization Committee Report

The Compensation and Organization Committee has reviewed and discussed the
Compensation Discussion and Analysis appearing in this document with management
and based upon this review and discussion recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy statement for
filing with the SEC.

Respectively submitted,

/s/ William B. Summers, Jr. (Chair)
/s/ Peter H. Soderberg
/s/ Thomas S. Summer

Members of the Compensation and Organization Committee

Audit Committee Report

The Audit Committee currently consists of Messrs. Summer, Summers and
Wareham, each of whom the Board has determined is "independent" in accordance
with applicable laws and the listing standards of the New York Stock Exchange
and qualifies as an "audit committee financial expert" under applicable rules of
the Securities and Exchange Commission. The Audit Committee functions pursuant
to a written charter, a copy of which is posted on the Company's website at
www.greatbatch.com under "Governance."

The Audit Committee reviewed and discussed the information contained in
the 2006 first, second, third and fourth quarter earnings announcements with
management of the Company and independent auditors prior to public release. They
also reviewed and discussed the information contained in the 2006 first, second
and third quarters' Forms 10-Q and full year Form 10-K with management of the
Company and independent auditors prior to filing with the Securities and
Exchange Commission. In addition, the Audit Committee met regularly with
management, internal auditors and independent auditors on various financial and
operational matters, including to review plans and scope of audits and audit
reports and to discuss necessary action.

In connection with the Company's fiscal 2006 consolidated financial
statements, the Audit Committee has:

o reviewed and discussed with management the Company's audited
consolidated financial statements as of and for fiscal 2006;
o discussed with the Company's independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with the Audit Committees, as amended, by the Auditing
Standards Board of the American Institute of Certified Public
Accountants and SEC rule 2-07; and
o received and reviewed the written disclosures and the letter from
the Company's independent auditors required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as amended, by the Independence Standards Board, and
have discussed with the auditors the auditors' independence.

Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board, and the Board approved, that the audited
consolidated financial statements referred to above be included in the Company's
Annual Report on Form 10-K for fiscal 2006.

Respectfully submitted,

/s/ Thomas S. Summer (Chair)
/s/ William B. Summers, Jr.
/s/ John P. Wareham

Members of the Audit Committee

Related Person Transactions

The Board has adopted a policy setting forth procedures for the review,
approval and monitoring of transactions involving the Company and related
persons (directors and executive officers or their immediate family members). A
copy of the Company's policy on related person transactions is available in the
Investor Resource Center section of the Company's website at www.greatbatch.com
under "Governance." Under this policy, every proposed transaction between the
Company and a director, executive officer, a nominee director, stockholder
owning in excess of 5% of the Company or any immediate family member or entity
of the foregoing persons involving an amount in excess of $100,000 must be
approved or ratified by the Audit Committee. If the transaction involves a
related person who is a director or an immediate family member of a director,
such director may not participate in the deliberations or vote regarding such
approval. In the event management determines it is impractical or undesirable to
wait until an Audit Committee meeting to consummate a related person
transaction, the Chairperson of the Audit Committee may review and approve the
related person transaction. The Chairperson of the Audit Committee will report
any such approval to the Audit Committee at the next regularly scheduled
meeting. All related person transactions are reported by the Audit Committee to
the Board. In the event the Company becomes aware of a related person
transaction that has not been approved, the matter shall be reviewed by the
Audit Committee who shall evaluate all options available to the Company,
including ratification, revision or termination of such transaction. The Audit
Committee will also examine the facts and circumstances pertaining to the
failure of such transaction to have been presented to the Audit Committee and
shall take any such action as deemed appropriate under the circumstances. The
Board has determined that there were no related person transactions as defined
above that occurred in 2006.

STOCKHOLDER PROPOSALS

Any stockholder who intends to present a proposal intended to be
considered for inclusion in the proxy statement for presentation at the
Company's 2008 Annual Meeting of Stockholders must submit such proposal so that
the Company receives it by December 22, 2007. The proposal should be submitted
to the Company's offices in Clarence, New York by certified mail, return receipt
requested, and should be directed to the Secretary of the Company. In addition,
the Company's by-laws require that notice of any business proposed by a
stockholder to be brought before an annual meeting, whether or not proposed for
inclusion in the Company's proxy statement, must be received by the Secretary of
the Company not later than 90 days in advance of the anniversary date of the
prior year's annual meeting, which for business proposed for the 2008 Annual
Meeting is February 21, 2008.

OTHER MATTERS

Management does not know of any matters to be presented at this Annual
Meeting other than those set forth in this proxy statement and in the notice
accompanying this proxy statement. If other matters should properly come before
the Annual Meeting, it is intended that the proxy holders will vote on such
matters in accordance with their best judgment.

A copy of the Company's Annual Report on Form 10-K for fiscal year 2006
may be obtained without charge by any stockholder of record by written request
made to Anthony Borowicz, Treasurer and Director of Investor Relations,
Greatbatch, Inc., 9645 Wehrle Drive, Clarence, New York 14031. Additionally, the
Company's Annual Report on Form 10-K for fiscal year 2006 may be obtained
through the Investor Resource Center section of the Company's website under "SEC
Filings".

By Order of the Board of Directors,

/s/ Timothy G. McEvoy

Timothy G. McEvoy
Vice President, General Counsel & Secretary

Clarence, New York
April 20, 2007

GREATBATCH, INC.
EXECUTIVE SHORT TERM INCENTIVE COMPENSATION PLAN

PURPOSE

This Executive Short Term Incentive Compensation Plan (the "Plan")
is intended to enable Greatbatch, Inc. (the "Company") to attract, motivate and
retain highly qualified executives on a competitive basis and to provide
financial incentives to those executives in order to promote the success of the
Company. The Plan is for the benefit of Participants. The Plan is designed to
ensure that the short term incentive compensation paid under the Plan to
Participants are deductible without limit under Section 162(m) of the Internal
Revenue Code of 1986, as amended, and the regulations and interpretations
promulgated thereunder.

SECTION 1. DEFINITIONS.

The following terms have the meanings indicated unless a different
meaning is clearly required by the context:

(a) "Base Salary" means the greater of the Participant's annualized
salary as of the first day of the Company's fiscal year or as of the date the
performance goal is established under Section 4. Base Salary shall be before
both (i) deductions for taxes or benefits; and (ii) deferrals of compensation
pursuant to Company-sponsored plans.

(b) "Board of Directors" means the Board of Directors of the
Company.

(c) "Chief Executive Officer" has the meaning set forth in Rule 3b-7
promulgated under the Securities Exchange Act of 1934, as amended.

(d) "Code" means the Internal Revenue Code of 1986, as amended.

(e) "Committee" means the Compensation and Organization Committee of
the Board of Directors or a subcommittee thereof. The Committee at all times
shall be composed of at least two directors of Greatbatch, Inc each of whom
shall be "outside directors" within the meaning of Section 162(m) of the Code.

(f) "Company" means Greatbatch, Inc. and its affiliated group of
corporations as defined in Section 1504 of the Code (determined without regard
to Section 1504(b) of the Code).

(g) "Participant" means an individual who participates in the Plan
pursuant to Section 2.

SECTION 2. ELIGIBLE EXECUTIVES AND PARTICIPANTS

"Eligible Executives" for a fiscal year are defined as (i) the Chief
Executive Officer of the Company on the first day of such year or a person who
becomes the Chief Executive Officer during such year by virtue of being hired or
promoted and (ii) any other officer of the Company designated by the Committee.
Within the first ninety (90) days of each fiscal year (or such other period as
may be permitted by Section 162(m) of the Code), the Committee will designate
those Eligible Executives who are to be "Participants" in the Plan for that
fiscal year.

SECTION 3. ADMINISTRATION

The Committee shall have the sole discretion and authority to
administer the Plan, interpret the terms and provisions of the Plan and to
establish, adjust, pay or decline to pay bonuses under the Plan.

SECTION 4. PERFORMANCE GOALS

Within the first ninety (90) days of each fiscal year of the
Company, the Committee shall set one or more objective performance goals for
each Participant for such year. Such goals shall be expressed in terms of:
earnings or diluted earnings per share, pro-forma earnings or diluted earnings
per share, net earnings (either before or after interest, taxes, depreciation
and amortization), economic value-added (as determined by the Committee), sales
or revenue, net income (either before or after taxes), operating earnings or
income, cash flow (including, but not limited to, operating cash flow and free
cash flow), cash flow return on capital, return on investment, return on
stockholders' equity, return on assets or net assets, return on capital,
stockholder returns, return on sales, gross or net profit margin, productivity,
expense, margins, operating efficiency, cost reduction or savings, customer
satisfaction, working capital, price per share of Company Stock, and market
share, any of which may be measured either in absolute terms or as compared to
any incremental increase or as compared to results of a peer group. The

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Committee, in its discretion, may, within the time prescribed by Section 162(m)
of the Code, adjust or modify the calculation of performance goals for such
period in order to prevent the dilution or enlargement of the rights of
Participants (a) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event, or development, or (b) in
recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company (determined consistent with U.S. Generally Accepted
Accounting Principles), or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.

SECTION 5. BONUS DETERMINATIONS

(a) Within the first ninety (90) days of each fiscal year of the
Company, the Committee will specify the objective terms and conditions for the
determination and payment of a bonus for each Participant. At the time that
annual performance goals are set for Participants, the Committee shall establish
a maximum award opportunity for each Participant for the year. The maximum award
opportunity shall be related to the Participant's Base Salary at the start of
the year by a formula that takes account of the degree of achievement of the
goals set for the Participant; provided, however, that the Committee shall have
absolute discretion to reduce the actual bonus payment that would otherwise be
payable to any Participant on the basis of achievement of performance goals. The
maximum award paid to a Participant in respect of a particular fiscal year shall
in no event exceed an amount equal to 250% of a Participant's Base Salary. In
the event of a change in the Company's fiscal year, the Plan shall apply, with
appropriate pro-rata adjustments, to any fiscal period not consisting of twelve
months.

(b) No bonuses shall be paid to a Participant unless and until the
Committee makes a certification in writing with respect to the attainment of the
performance goals as required by Section 162(m) of the Code. Although the
Committee may in its sole discretion reduce a bonus payable to a Participant
based on such objective and/or subjective factors as it may determine, the
Committee shall have no discretion to increase the amount of a Participant's
bonus as determined under the applicable objective terms and conditions
established for such bonus amount.

(c) Following the Committee's determination and certification of the
amount of any bonus payable, such amount will be paid in cash (subject to any
election made by a Participant with respect to the deferral of all or a portion
of his or her bonus or the payment of all or a portion of his or her bonus in
some form other than cash). Payment of the bonus amount will be made as soon as
feasible after the Committee's certification of the amount payable but not later
than two and one-half months following the end of the fiscal year to which the
bonus relates.

(d) In the event of the death of a Participant after the end of a
fiscal year and prior to any payment otherwise required pursuant to Section 5.3,
such payment shall be made to the representative of the Participant's estate.

(e) In the event of the death, disability, retirement or other
termination of employment of a Participant during a fiscal year, the Committee
shall, in its discretion, have the power to award to such Participant (or the
representative of the Participant's estate) an equitably prorated portion of the
bonus which otherwise would have been earned by such Participant based on actual
achievement of the performance goal for the entire fiscal year.

(f) The right of a Participant or of any other person to any payment
under the Plan shall not be assigned, transferred, pledged or encumbered in any
manner and any attempted assignment, transfer, pledge or encumbrance shall be
null and void and of no force or effect.

SECTION 6. AMENDMENT AND TERMINATION

The Board of Directors may at any time amend the Plan in any fashion
or terminate or suspend the Plan; provided that no amendment shall be made which
would cause bonuses payable under the Plan to fail to qualify for the exemption
from the limitations of Section 162(m) of the Code provided in Section
162(m)(4)(C) of the Code. Upon any such termination, all rights of a Participant
with respect to any fiscal year that has not ended on or prior to the effective
date of such termination shall become null and void. Any amendments to the Plan
shall require shareholder approval only to the extent required by Section 162(m)
of the Code.

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SECTION 7. SHAREHOLDER APPROVAL

No bonuses shall be paid under the Plan unless and until the
Company's shareholders shall have approved the Plan and the performance goals as
required by Section 162(m) of the Code. If the Plan is amended in any way that
changes the material terms of the Plan's performance goals, including by
materially modifying the performance goals, increasing the maximum bonus payable
under the Plan or changing the Plan's eligibility requirements, the Plan shall
be resubmitted to the Company's shareholders for approval as required by Section
162(m) of the Code.

SECTION 8. MISCELLANEOUS

(a) The Plan shall be governed by and construed in accordance with
the internal laws of the State of New York applicable to contracts made, and to
be wholly performed, within such State, without regard to principles of choice
of laws.

(b) All amounts required to be paid under the Plan shall be subject
to any required Federal, state, local and other applicable withholdings or
deductions.

(c) Nothing contained in the Plan shall confer upon any Participant
or any other person any right with respect to the continuation of employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation payable to
the Participant from the rate in effect at the commencement of a fiscal year or
to otherwise modify the terms of such Participant's employment. No person shall
have any claim or right to participate in or receive any award under the Plan
for any particular fiscal year.

A-3

GREATBATCH, INC.
2005 STOCK INCENTIVE PLAN

1 PREAMBLE

This Greatbatch, Inc. 2005 Stock Incentive Plan, as it may be amended from
time to time (the "Plan"), is intended to promote the interests of Greatbatch,
Inc., a Delaware corporation ("GB" and, together with its Subsidiaries, the
"Company"), and its stockholders by providing officers and other employees and
non-employee directors of the Company with appropriate incentives and rewards to
encourage them to enter into and continue in service to the Company and to
acquire a proprietary interest in the long-term success of the Company, while
aligning the interests of key employees and management with those of the
stockholders.

This Plan is intended to provide a flexible framework that will permit the
development and implementation of a variety of stock-based programs based on
changing needs of the Company, its competitive market and the regulatory
climate.

2 DEFINITIONS

As used in the Plan, the following definitions apply to the terms
indicated below:

(a) "Award Agreement" shall mean the written agreement between the Company
and a Participant or other document approved by the Committee evidencing an
Incentive Award.

(b) "Board of Directors" shall mean the Board of Directors of GB.

(1) with respect to a Participant who is a party to a written
employment agreement with the Company, which agreement contains a definition of
"for cause" or "cause" (or words of like import) for purposes of termination of
employment thereunder by the Company, "for cause" or "cause" as defined in the
most recent of such agreements, or

(2) in all other cases, as determined by the Committee, in its sole
discretion, that one or more of the following has occurred: (A) any intentional
or willful failure, or failure due to bad faith, by such Participant to
substantially perform his or her duties to the Company which shall not have been
corrected within 30 days following written notice thereof, (B) any misconduct by
such Participant which is significantly injurious to the Company, (C) any breach
by such Participant of any covenant contained in the instrument pursuant to
which an Incentive Award is granted, (D) such Participant's conviction of, or
entry of a plea of nolo contendere in respect of, any felony which results in,
or is reasonably expected to result in, economic or reputational injury to the
Company.

(d) "Change in Control", unless otherwise defined in an Award Agreement,
occurs if

(1) any "Person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act of 1934), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 50% of the total combined voting power of all classes of capital stock of
GB normally entitled to vote for the election of directors of GB; or

(2) the Board of Directors shall approve a sale of all or
substantially all of the assets of the Company, in one transaction or a series
of related transactions, or

(3) the Board of Directors shall approve any merger or consolidation
of GB in which the shareholders of GB immediately prior to such transaction own,
in the aggregate, less than 50% of the total combined voting power of all
classes of capital stock of the surviving entity normally entitled to vote for
the election of directors of the surviving entity.

For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange
Act.

(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(f) "Committee" shall mean the Compensation and Organization Committee of
the Board of Directors or such other committee as the Board of Directors shall
appoint from time to time to administer the Plan; provided, that the Committee
shall at all times consist of two or more persons, each of whom shall be a
member of the Board of Directors. To the extent required for transactions under
the Plan to qualify for the exemptions available under Rule 16b-3 (as defined
herein), members of the Committee (or any subcommittee thereof) shall be
"non-employee directors" within the meaning of Rule 16b-3. To the extent
required for compensation realized from Incentive Awards (as defined herein)
under the Plan to be deductible by the Company pursuant to Section 162(m) of the
Code, members of the Committee (or any subcommittee thereof) shall be "outside
directors" within the meaning of such section.

B-1

(g) "Company Stock" shall mean the common stock, par value $.01 per share,
of GB.

(h) "Covered Employee" means a Participant who is, or could be, a "covered
employee" within the meaning of Section 162(m) of the Code.

(i) "Disability," unless otherwise provided in an Award Agreement, shall
mean

(1) with respect to a Participant who is a party to a written
employment agreement with the Company, which agreement contains a definition of
"disability" or "permanent disability" (or words of like import) for purposes of
termination of employment thereunder by the Company, "disability" or "permanent
disability" as defined in the most recent of such agreements, or

(2) in all other cases, means such Participant's inability to
perform substantially his or her duties to the Company by reason of physical or
mental illness, injury, infirmity or condition: (A) for a continuous period for
180 days or one or more periods aggregating 180 days in any twelve-month period;
(B) at such time as such Participant is eligible to receive disability income
payments under any long-term disability insurance plan maintained by the
Company; or (C) at such earlier time as such Participant or the Company submits
medical evidence, in the form of a physician's certification, that such
Participant has a physical or mental illness, injury, infirmity or condition
that will likely prevent such Participant from substantially performing his
duties for 180 days or longer.

(j) "Dividend Equivalents" means a right granted to a Participant pursuant
to Section 10 to receive the equivalent value (in cash or Stock) of dividends
paid on Stock.

(k) "Effective Date" shall mean February 21, 2005, the date the Plan was
adopted by the Board of Directors, subject to approval by GB's stockholders. The
Plan will be deemed to be approved by the stockholders if it receives the
affirmative vote of the holders of a majority of the shares of stock of GB
present or represented and entitled to vote at a meeting at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting and duly held in accordance with the applicable
provisions of GB's Bylaws. Incentive Awards may be granted under the Plan at any
time prior to the receipt of stockholder approval; provided, however, that each
such grant shall automatically terminate in the vent such approval is not
obtained. Without limiting the foregoing, no Option or SAR may be exercised
prior to the receipt of such approval, and no share certificate will be issued
pursuant to a grant of Restricted Stock or Stock Bonus prior to the receipt of
such approval.

(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

(m) "Fair Market Value" means, for any particular date, (i) for any period
during which the Company Stock shall be listed for trading on a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the closing price per share of Company Stock on
such exchange or the NASDAQ closing bid price as of the close of such trading
day, or (ii) the market price per share of Company Stock as determined in good
faith by the Board of Directors in the event (i) above shall not be applicable.
If the Fair Market Value is to be determined as of a day when the securities
markets are not open, the Fair Market Value on that day shall be the Fair Market
Value on the next preceding day when the markets were open.

(n) "Incentive Award" shall mean an Option, SAR, share of Restricted
Stock, Restricted Stock Unit or Stock Bonus (each as defined herein) granted
pursuant to the terms of the Plan.

(o) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code.

(p) "Issue Date" shall mean the date established by the Committee on which
Certificates representing shares of Restricted Stock shall be issued by the
Company pursuant to the terms of Section 9(e).

(q) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.

(r) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 7.

(s) "Participant" shall mean an employee, a non-employee consultant or
service provider, or non-employee director of the Company to whom an Incentive
Award is granted pursuant to the Plan and, upon his or her death, his or her
successors, heirs, executors and administrators, as the case may be.

B-2

(t) "Performance-Based Award" means an Award granted to selected Covered
Employees pursuant to Sections 9 and 10, but which is subject to the terms and
conditions set forth in Section 12. All Performance-Based Awards are intended to
qualify as Qualified Performance-Based Compensation.

(u) "Performance Criteria" means the criteria that the Committee selects
for purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria that will be used
to establish Performance Goals are limited to the following: net earnings
(either before or after interest, taxes, depreciation and amortization),
economic value-added (as determined by the Committee), sales or revenue, net
income (either before or after taxes), operating earnings or income, cash flow
(including, but not limited to, operating cash flow and free cash flow), cash
flow return on capital, return on investment, return on stockholders' equity,
return on assets or net assets, return on capital, stockholder returns, return
on sales, gross or net profit margin, productivity, expense, margins, operating
efficiency, cost reduction or savings, customer satisfaction, working capital,
earnings or diluted earnings per share, price per share of Company Stock, and
market share, any of which may be measured either in absolute terms or as
compared to any incremental increase or as compared to results of a peer group.
The Committee shall, within the time prescribed by Section 162(m) of the Code,
define in an objective fashion the manner of calculating the Performance
Criteria it selects to use for such Performance Period for such Participant.

(v) "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based upon
the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, within the time
prescribed by Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution
or enlargement of the rights of Participants (a) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (b) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company (determined
consistent with U.S. Generally Accepted Accounting Principles), or the financial
statements of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business conditions.

(w) "Performance Period" means the one or more periods of time, which may
be of varying and overlapping durations, as the Committee may select, over which
the attainment of one or more Performance Goals will be measured for the purpose
of determining a Participant's right to, and the payment of, a Performance-Based
Award.

(x) "Qualified Performance-Based Compensation" means any compensation that
is intended to qualify as "qualified performance-based compensation" as
described in Section 162(m)(4)(C) of the Code.

(y) A share of "Restricted Stock" shall mean a share of Company Stock that
is granted pursuant to the terms of Section 9 hereof and that is subject to the
restrictions set forth in Section 9(c).

(z) "Restricted Stock Unit" means the right to receive a share of Company
Stock that is granted pursuant to the terms of Section 10.

(aa) "Rule 16b-3" shall mean the rule thus designated as promulgated under
the Exchange Act.

(bb) "SAR" shall mean a stock appreciation right granted pursuant to
Section 8.

(cc) "Stock Bonus" shall mean a bonus payable in shares of Company Stock
or a payment made in shares of Company Stock pursuant to a deferred compensation
plan of the Company.

(dd) "Subsidiary" shall mean any corporation or other entity in which, at
the time of reference, the Company owns, directly or indirectly, stock or
similar interests comprising more than 50 percent of the combined voting power
of all outstanding securities of such entity.

(ee) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Restricted Stock Unit may vest.

3 STOCK SUBJECT TO THE PLAN

(a) Shares Available for Awards

The total number of shares of Company Stock with respect to which
Incentive Awards may be granted shall not exceed 2,450,000 shares. Such shares
may be authorized but unissued Company Stock or authorized and issued Company
Stock held in the Company's treasury or acquired by the Company for the purposes
of the Plan. The Committee may direct that any stock certificate evidencing
shares issued pursuant to the Plan shall bear a legend setting forth such
restrictions on transferability as may apply to such shares pursuant to the
Plan.

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(b) Total Grants by Award Type

The total number of shares of Company Stock to be awarded under the Plan
as Options or SARs shall not exceed 2,450,000 shares. The total number of shares
of Company Stock to be awarded under the Plan as Incentive Stock Options shall
not exceed 2,450,000 shares. The total number of shares of Company Stock to be
awarded under the Plan as Restricted Stock, Restricted Stock Units or as Stock
Bonuses shall, in the aggregate, not exceed 850,000 shares and no more than
150,000 shares of Restricted Stock or Restricted Stock Units shall be issued in
any fiscal year of the Company.

The total number of shares of Company Stock subject to Options and SARs
awarded to any one employee during any fiscal year of the Company, shall not
exceed 100,000 shares. Determinations under the preceding sentence shall be made
in a manner that is consistent with Section 162(m) of the Code and regulations
promulgated thereunder. The provisions of this Section 3(c) shall not apply in
any circumstance with respect to which the Committee determines that compliance
with Section 162(m) of the Code is not necessary.

(d) Adjustment for Change in Capitalization

If there is any change in the outstanding shares of Company Stock by
reason of a stock dividend or distribution, stock split-up, recapitalization,
combination or exchange of shares, or by reason of any merger, consolidation,
spinoff or other corporate reorganization in which the Company is the surviving
corporation, the number of shares available for issuance both in the aggregate
and with respect to each outstanding Incentive Award, the price per share under
each outstanding Incentive Award, and the limitations set forth in Section 3(b)
and (c), shall be proportionately adjusted by the Committee, whose determination
shall be final and binding. After any adjustment made pursuant to this Section
3(d), the number of shares subject to each outstanding Incentive Award shall be
rounded to the nearest whole number.

(e) Other Adjustments

In the event of any transaction or event described in Section 3(d) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate (including without limitation any Change in Control), or of changes in
applicable laws, regulations or accounting principles, and whenever the
Committee determines that action is appropriate in order to prevent the dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to any Incentive Award under the Plan,
to facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles, the Committee, in its sole discretion and on
such terms and conditions as it deems appropriate, including, if the Committee
deems appropriate, the principles of Treasury Regulation Section 1.424-1(a)(5)
except to the extent necessary to ensure that the action does not violate
Section 409A of the Code, either by amendment of the terms of any outstanding
Incentive Awards or by action taken prior to the occurrence of such transaction
or event and either automatically or upon the Participant's request, is hereby
authorized to take any one or more of the following actions:

(i) To provide for either (A) termination of any such Incentive
Award in exchange for an amount of cash and/or other property, if any,
equal to the amount that would have been attained upon the exercise of
such Incentive Award or realization of the Participant's rights (and, for
the avoidance of doubt, if as of the date of the occurrence of the
transaction or event described in this Section 3(e) the Committee
determines in good faith that no amount would have been attained upon the
exercise of such Incentive Award or realization of the Participant's
rights, then such Incentive Award may be terminated by the Company without
payment) or (B) the replacement of such Incentive Award with other rights
or property selected by the Committee in its sole discretion;

(ii) To provide that such Incentive Award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices; and

(iii) To make adjustments in the number and type of shares of
Company Stock (or other securities or property) subject to outstanding
Incentive Awards, and in the number and kind of outstanding Restricted
Stock and/or in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding options, rights
and awards and options, rights and awards which may be granted in the
future;

B-4

(iv) To provide that such Incentive Award shall be exercisable or
payable or fully vested with respect to all shares covered thereby,
notwithstanding anything to the contrary in the Plan or the applicable
Award Agreement; and

(v) To provide that the Incentive Award cannot vest, be exercised or
become payable after such event.

(f) Re-use of Shares

To the extent that an Incentive Award terminates, expires, is cancelled,
forfeited, or lapses for any reason, or if an Incentive Award is settled by
payment of cash, any shares of Company Stock subject to the Incentive Award
shall again be available for the grant of an Incentive Award pursuant to the
Plan. Shares which are used to pay the exercise price of an Option and shares
withheld to satisfy tax withholding obligations will not be available for
further grants of Incentive Awards pursuant to the Plan. To the extent permitted
by applicable law or any exchange rule, shares of Company Stock issued in
assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary shall not
be counted against shares of Company Stock available for grant pursuant to this
Plan. Dividend Equivalents payable in cash shall not be counted against the
shares available for issuance under the Plan.

(g) No Repricing

Absent stockholder approval, neither the Committee nor the Board of
Directors shall have any authority, with or without the consent of the affected
holders of Incentive Awards, to "reprice" an Incentive Award after the date of
its initial grant with a lower exercise price in substitution for the original
exercise price. This paragraph may not be amended, altered or repealed by the
Board of Directors or the Committee without approval of the stockholders of the
Company.

4 ADMINISTRATION OF THE PLAN

The Plan shall be administered by the Committee. The Committee shall from
time to time designate the persons who shall be granted Incentive Awards and the
amount, type and other features of each Incentive Award.

The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. The Committee
shall determine whether an authorized leave of absence or absence due to
military or government service shall constitute termination of employment.
Decisions of the Committee shall be final and binding on all parties.
Determinations made by the Committee under the Plan need not be uniform but may
be made on a Participant-by-Participant basis. Notwithstanding anything to the
contrary contained herein, the Board of Directors may, in its sole discretion,
at any time and from time to time, resolve to administer the Plan, in which case
the term "Committee" as used herein shall be deemed to mean the Board of
Directors.

The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option or SAR granted under the Plan
becomes exercisable, (ii) waive or amend the operation of Plan provisions
respecting exercise after termination of service or otherwise adjust any of the
terms of such Option or SAR and (iii) accelerate the Vesting Date or Issue Date,
or waive any condition imposed hereunder, with respect to any share of
Restricted Stock or Restricted Stock Unit or otherwise adjust any of the terms
applicable to such share.

No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.

B-5

5 ELIGIBILITY

The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be such employees of the Company (including employees who are
also directors and prospective employees conditioned on their becoming
employees), non-employee consultants or service providers, and non-employee
directors of the Company as the Committee shall designate from time to time.

6 AWARDS UNDER THE PLAN; AWARD AGREEMENTS

The Committee may grant Options, SARs, shares of Restricted Stock,
Restricted Stock Units and Stock Bonuses, in such amounts and with such terms
and conditions as the Committee shall determine, subject to the provisions of
the Plan.

Each Incentive Award granted under the Plan (except an unconditional Stock
Bonus) shall be evidenced by an Award Agreement which shall contain such
provisions as the Committee may in its sole discretion deem necessary or
desirable. By accepting an Incentive Award, a Participant thereby agrees that
the Incentive Award shall be subject to all of the terms and provisions of the
Plan and the applicable Award Agreement.

7 OPTIONS

(a) Identification of Options

Each Option shall be clearly identified in the applicable Award Agreement
as either an Incentive Stock Option or a Non-Qualified Stock Option. In the
absence of such identification, an Option will be deemed to be a Non-Qualified
Stock Option.

(b) Exercise Price

Each Award Agreement with respect to an Option shall set forth the amount
(the "exercise price") payable by the holder to the Company upon exercise of the
Option. The exercise price per share shall be determined by the Committee but
shall in no event be less than the Fair Market Value of a share of Company Stock
on the date the Option is granted.

(1) The applicable Award Agreement will provide the date or dates on
which an Option shall become exercisable. The Committee shall determine the
expiration date of each Option; provided, however, that no Incentive Stock
Option shall be exercisable more than ten years after the date of grant. Unless
the applicable Award Agreement provides otherwise, no Option shall be
exercisable prior to the first anniversary of the date of grant.

(2) An Option may be exercised for all or any portion of the shares
as to which it is exercisable; provided, that no partial exercise of an Option
shall be for an aggregate exercise price of less than $1,000. The partial
exercise of an Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof.

(3) Unless the Committee determines otherwise, an Option shall be
exercised by delivering notice to the Company's principal office, to the
attention of its Secretary (or the Secretary's designee), no less than one nor
more than ten business days in advance of the effective date of the proposed
exercise. Such notice shall specify the number of shares of Company Stock with
respect to which the Option is being exercised and the effective date of the
proposed exercise and shall be signed by the Participant or other person then
having the right to exercise the Option. Payment for shares of Company Stock
purchased upon the exercise of an Option shall be made on the effective date of
such exercise by one or a combination of the following means: (i) in cash, by
certified check, bank cashier's check or wire transfer; (ii) subject to the
approval of the Committee, in shares of Company Stock owned by the Participant
for at least six months prior to the date of exercise and valued at their Fair
Market Value on the effective date of such exercise; or (iii) by means of a
broker assisted cashless exercise procedure complying with applicable law, and
(iv) by such other provision as the Committee may from time to time authorize.
Any payment in shares of Company Stock shall be effected by the delivery of such
shares to the Secretary (or the Secretary's designee) of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the Secretary (or the
Secretary's designee) of the Company shall require.

(4) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant or other
person entitled to receive such shares, and delivered to the Participant or such
other person as soon as practicable following the effective date on which the
Option is exercised.

B-6

(d) Limitations on Incentive Stock Options

(1) Incentive Stock Options may be granted only to employees of the
Company or any "subsidiary corporation" thereof (within the meaning of Section
424(f) of the Code and the applicable regulations thereunder).

(2) To the extent that the aggregate Fair Market Value of shares of
Company Stock with respect to which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year under the Plan and any
other stock option plan of the Company (or any "subsidiary corporation" of the
Company within the meaning of Section 424 of the Code) shall exceed $100,000, or
such higher value as may be permitted under Section 422 of the Code, such
Options shall be treated as Non-Qualified Stock Options. Such Fair Market Value
shall be determined as of the date on which each such Incentive Stock Option is
granted.

(3) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or any "subsidiary corporation" of the Company within the meaning of Section
424 of the Code), unless (i) the exercise price of such Incentive Stock Option
is at least 110% of the Fair Market Value of a share of Company Stock at the
time such Incentive Stock Option is granted and (ii) such Incentive Stock Option
is not exercisable after the expiration of five years from the date such
Incentive Stock Option is granted.

(e) Effect of Termination of Employment

(1) Unless the applicable Award Agreement provides or the Committee
shall determine otherwise, in the event that the employment of a Participant
with the Company shall terminate for any reason other than Cause, Disability or
death : (i) Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until the
date that is three months after such termination, on which date they shall
expire; and (ii) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination. The three-month period described in
this Section 7(e)(1) shall be extended to one year in the event of the
Participant's death during such three-month period. Notwithstanding the
foregoing, no Option shall be exercisable after the expiration of its term.

(2) Unless the applicable Award Agreement provides or the Committee
shall determine otherwise, in the event that the employment of a Participant
with the Company shall terminate on account of the Disability or death of the
Participant: (i) Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall remain exercisable until
the first anniversary of such termination, on which date they shall expire; and
(ii) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its term.

(3) In the event of the termination of a Participant's employment
for Cause, all outstanding Options granted to such Participant shall expire at
the commencement of business on the date of such termination.

(f) Acceleration of Exercise Date Upon Change in Control

Unless the Award Agreement provides or the Committee determines otherwise,
upon the occurrence of a Change in Control, each Option granted under the Plan
and outstanding at such time shall become fully and immediately exercisable and
shall remain exercisable until its expiration, termination or cancellation
pursuant to the terms of the Plan. In addition, in the event of a potential
Change in Control, the Committee may in its discretion, cancel any outstanding
Options and pay to the holders thereof, in cash or stock, or any combination
thereof, the value of such Options based upon the price per share of Company
Stock to be received by other shareholders of the Company in the Change in
Control less the exercise price of each Option.

(g) Except as otherwise provided in an applicable Award Agreement, during
the lifetime of a Participant each Option granted to a Participant shall be
exercisable only by the Participant and no Option shall be assignable or
transferable otherwise than by will or by the laws of descent and distribution.
The Committee may in its sole discretion on a case by case basis, in any
applicable agreement evidencing an Option (other than, to the extent
inconsistent with the requirements of Section 422 of the Code applicable to
Incentive Stock Options), permit a Participant to transfer all or some of the
Options to (i) the Participant's Immediate Family Members, or (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members. Following any
such transfer, any transferred Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to the transfer.
"Immediate Family Members" shall mean a Participant's spouse, child(ren) and
grandchild(ren). Notwithstanding the foregoing, Non-Qualified Stock Options may
be transferred to a Participant's former spouse pursuant to a property
settlement made part of an agreement or court order incident to the divorce.

B-7

8 SARS

(a) Exercise Price

The exercise price per share of a SAR shall be determined by the Committee
at the time of grant, but shall in no event be less than the Fair Market Value
of a share of Company Stock on the date of grant.

(b) Benefit Upon Exercise

The exercise of SARs with respect to any number of shares of Company Stock
shall entitle the Participant to receive unrestricted, fully transferable shares
of Company Stock, payable within 2 1/2 months of the date on which the SARs are
exercised, equal in value to the number of SARs exercised multiplied by (i) the
Fair Market Value of a share of Company Stock on the exercise date over (ii) the
exercise price of the SAR. Fractional share amounts shall be settled in cash.

(1) The applicable Award Agreement will provide the dates or dates
on which a SAR shall become exercisable. The Committee shall determine the
expiration date of each SAR. Unless the applicable Award Agreement provides
otherwise, no SAR shall be exercisable prior to the first anniversary of the
date of grant.

(2) A SAR may be exercised for all or any portion of the shares as
to which it is exercisable; provided, that no partial exercise of a SAR shall be
for an aggregate exercise price of less than $1,000. The partial exercise of a
SAR shall not cause the expiration, termination or cancellation of the remaining
portion thereof.

(3) Unless the Committee determines otherwise, a SAR shall be
exercised by delivering notice to the Company's principal office, to the
attention of its Secretary (or the Secretary's designee), no less than one nor
more than ten business days in advance of the effective date of the proposed
exercise. Such notice shall specify the number of shares of Company Stock with
respect to which the SAR is being exercised, and the effective date of the
proposed exercise, and shall be signed by the Participant.

(d) Effect of Termination of Employment

The provisions set forth in Section 7(e) with respect to the exercise of
Options following termination of employment shall apply as well to such exercise
of SARs.

(e) Acceleration of Exercise Date Upon Change in Control

Unless the Award Agreement provides or the Committee determines otherwise,
upon the occurrence of a Change in Control, any SAR granted under the Plan and
outstanding at such time shall become fully and immediately exercisable and
shall remain exercisable until its expiration, termination or cancellation
pursuant to the terms of the Plan. In addition, in the event of a potential
Change in Control, the Committee may in its discretion, cancel any outstanding
SARs and pay to the holders thereof, in stock, the value of such SARs based upon
the price per share of Company Stock to be received by other shareholders of the
Company in the Change in Control less the exercise price of each SAR.

9 RESTRICTED STOCK

(a) Issue Date and Vesting Date

At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates
with respect to such shares. The Committee may divide such shares into classes
and assign a different Issue Date and/or Vesting Date for each class. If the
grantee is employed by the Company on an Issue Date (which may be the date of
grant), the specified number of shares of Restricted Stock shall be issued in
accordance with the provisions of Section 9(e). Provided that all conditions to
the vesting of a share of Restricted Stock imposed pursuant to Section 9(b) are
satisfied, and except as provided in Section 9(g), upon the occurrence of the
Vesting Date with respect to a share of Restricted Stock, such share shall vest
and the restrictions of Section 9(c) shall cease to apply to such share.

(b) Conditions to Vesting

At the time of the grant of shares of Restricted Stock, the Committee may
impose such restrictions or conditions to the vesting of such shares as it, in
its absolute discretion, deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting of any
class or classes of shares of Restricted Stock, that the Participant or the
Company achieves such performance goals as the Committee may specify under
Section 12.

B-8

Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall be permitted. Immediately
upon any attempt to transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant.

(d) Dividends on Restricted Stock

The Committee in its discretion may require that any dividends paid on
shares of Restricted Stock shall be held in escrow until all restrictions on
such shares have lapsed.

(e) Issuance of Certificates

(1) Reasonably promptly after the Issue Date with respect to shares
of Restricted Stock, the Company shall cause to be issued a stock certificate,
registered in the name of the Participant to whom such shares were granted,
evidencing such shares; provided, that the Company shall not cause such a stock
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear any
such legend as the Company may determine.

Such legend shall not be removed until such shares vest pursuant to the
terms hereof.

(2) Each certificate issued pursuant to this Section 9(e), together
with the stock powers relating to the shares of Restricted Stock evidenced by
such certificate, shall be held by the Company in such manner as the Company may
determine unless the Committee determines otherwise.

(f) Consequences of Vesting

Upon the vesting of a share of Restricted Stock pursuant to the terms of
the Plan and the applicable Award Agreement, the restrictions of Section 9(c)
shall cease to apply to such share. Reasonably promptly after a share of
Restricted Stock vests, the Company shall cause to be delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Section 9(e). Notwithstanding the
foregoing, such share still may be subject to restrictions on transfer as a
result of applicable securities laws or pursuant to Section 15.

(g) Effect of Termination of Employment

(1) Unless the applicable Award Agreement or the Committee
determines otherwise, in the event of the termination of a Participant's service
to the Company for any reason other than Cause, all shares of Restricted Stock
granted to such Participant which have not vested as of the date of such
termination shall immediately be forfeited and returned to the Company. The
Company also shall have the right to require the return of all dividends paid on
such shares, whether by termination of any escrow arrangement under which such
dividends are held or otherwise.

(2) In the event of the termination of a Participant's employment
for Cause, all shares of Restricted Stock granted to such Participant which have
not vested prior to the date of such termination shall immediately be forfeited
and returned to the Company, together with any dividends credited on such shares
by termination of any escrow arrangement under which such dividends are held or
otherwise.

(h) Effect of Change in Control

Unless the Award Agreement provides or the Committee determines otherwise,
upon the occurrence of a Change in Control, all outstanding shares of Restricted
Stock which have not previously vested shall immediately vest. In addition, in
the event of a potential Change in Control, the Committee may in its discretion,
cancel any outstanding shares of Restricted Stock and pay to the holders
thereof, in cash or stock, or any combination thereof, the value of such shares
of Restricted Stock based upon the price per share of Company Stock to be
received by other shareholders of the Company in the Change in Control.

B-9

10 RESTRICTED STOCK UNITS

(a) Vesting Date

At the time of the grant of Restricted Stock Units, the Committee shall
establish a Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a different Vesting
Date for each class. Provided that all conditions to the vesting of a Restricted
Stock Unit imposed pursuant to Section 10(c) are satisfied, and except as
provided in Section 10(d), upon the occurrence of the Vesting Date with respect
to a Restricted Stock Unit, such Restricted Stock Unit shall vest and shares of
Stock will be delivered pursuant to Section 10(c).

(b) Dividend Equivalents

Any Participant selected by the Committee may be granted Dividend
Equivalents based on the dividends declared on the shares of Company Stock that
are subject to any award of Restricted Stock Units, to be credited as of
dividend payment dates, during the period between the date the award is granted
and the date the award is exercised, vests or expires, as determined by the
Committee. Such Dividend Equivalents shall be converted to cash or additional
Restricted Stock Units by such formula and at such time and subject to such
limitations as may be determined by the Committee.

Upon the vesting of a Restricted Stock Unit, the Participant shall be
entitled to receive one unrestricted, fully transferable share of Stock for each
Restricted Stock Unit scheduled to be paid out on such date and not previously
forfeited, or, in the sole discretion of the Committee, an amount, payable
within 2 1/2 months of the date on which such Restricted Stock Units vests,
equal to the Fair Market Value of a share of Company Stock on the date on which
such Restricted Stock Unit vests. Notwithstanding the foregoing, shares of
Company Stock issued may be subject to restrictions on transfer as a result of
applicable securities laws or pursuant to Section 15.

(d) Conditions to Vesting

At the time of the grant of Restricted Stock Units, the Committee may
impose such restrictions or conditions to the vesting of such Restricted Stock
Units as it, in its absolute discretion, deems appropriate. By way of example
and not by way of limitation, the Committee may require, as a condition to the
vesting of any class or classes of Restricted Stock Units, that the Participant
or the Company achieves such performance goals as the Committee may specify
under Section 12.

(e) Effect of Termination of Employment

(1) Unless the applicable Award Agreement or the Committee
determines otherwise, Restricted Stock Units that have not vested, together with
any dividends credited on such Restricted Stock Units, shall be forfeited upon
the Participant's termination of employment for any reason other than Cause.

(2) In the event of the termination of a Participant's employment
for Cause, all Restricted Stock Units granted to such Participant which have not
vested as of the date of such termination shall immediately be forfeited,
together with any dividends credited on such shares.

(f) Effect of Change in Control

Unless the Award Agreement provides or the Committee determines otherwise,
upon the occurrence of a Change in Control all outstanding Restricted Stock
Units which have not theretofore vested shall immediately vest. In addition, in
the event of a potential Change in Control, the Committee may in its discretion,
cancel any outstanding Restricted Stock Units and pay to the holders thereof, in
cash or stock, or any combination thereof, the value of such Restricted Stock
Units based upon the price per share of Company Stock to be received by other
shareholders of the Company in the Change in Control.

B-10

11 STOCK BONUSES

In the event that the Committee grants a Stock Bonus, a certificate for
the shares of Company Stock comprising such Stock Bonus shall be issued in the
name of the Participant to whom such grant was made and delivered to such
Participant as soon as practicable after the date on which such Stock Bonus is
payable.

12 PERFORMANCE-BASED AWARDS

(a) Purpose.

The purpose of this Section 12 is to provide the Committee the ability to
qualify Incentive Awards other than Options and SARs that are granted pursuant
to Sections 9 and 10 as Qualified Performance-Based Compensation. If the
Committee, in its discretion, decides to grant a Performance-Based Award to a
Covered Employee, the provisions of this Section 12 shall control over any
contrary provision contained in Sections 9 and 10; provided, however, that the
Committee may in its discretion grant Incentive Awards to Covered Employees and
to other Participants that are based on Performance Criteria or Performance
Goals but that do not satisfy the requirements of this Section 12.

(b) Applicability.

This Section 12 shall apply only to those Covered Employees selected by
the Committee to receive Performance-Based Awards. The designation of a Covered
Employee as a Participant for a Performance Period shall not in any manner
entitle the Participant to receive an Incentive Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant
in any subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.

To the extent necessary to comply with the Qualified Performance-Based
Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
any Incentive Award granted under Sections 9 and 10 which may be granted to one
or more Covered Employees, no later than ninety (90) days following the
commencement of any fiscal year in question or any other designated fiscal
period or period of service (or such other time as may be required or permitted
by Section 162(m) of the Code), the Committee shall, in writing, (a) designate
one or more Covered Employees, (b) select the Performance Criteria applicable to
the Performance Period, (c) establish the Performance Goals, and amounts of such
Awards, as applicable, which may be earned for such Performance Period, and (d)
specify the relationship between Performance Criteria and the Performance Goals
and the amounts of such Awards, as applicable, to be earned by each Covered
Employee for such Performance Period. Following the completion of each
Performance Period, the Committee shall certify in writing whether the
applicable Performance Goals have been achieved for such Performance Period. In
determining the amount earned by a Covered Employee, the Committee shall have
the right to reduce or eliminate (but not to increase) the amount payable at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the Performance Period.

(d) Payment of Performance-Based Awards.

Unless otherwise provided in the applicable Award Agreement, a Participant
must be employed by the Company or a Subsidiary on the day a Performance-Based
Award for such Performance Period is paid to the Participant. Furthermore, a
Participant shall be eligible to receive payment pursuant to a Performance-Based
Award for a Performance Period only if, and to the extent, the Performance Goals
for such period are achieved.

(e) Additional Limitations.

Notwithstanding any other provision of the Plan, any Incentive Award which
is granted to a Covered Employee and is intended to constitute Qualified
Performance-Based Compensation shall be subject to any additional limitations
set forth in Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as qualified performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
amended to the extent necessary to conform to such requirements.

B-11

13 RIGHTS AS A STOCKHOLDER

No person shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Incentive Award until the
date of issuance of a stock certificate with respect to such shares.

Except as otherwise expressly provided in Section 3(d), no adjustment to
any Incentive Award shall be made for dividends or other rights for which the
record date occurs prior to the date such stock certificate is issued.

14 DEFERRAL OF AWARDS

The Committee may permit or require the deferral of payment or settlement
of any Restricted Stock Unit or Stock Bonus subject to such rules and procedures
as it may establish. Payment or settlement of Options or SARs may not be
deferred unless such deferral would not cause the provisions of Section 409A of
the Code to be violated.

15 RESTRICTION ON TRANSFER OF SHARES

The Committee may impose, either in the Award Agreement or at the time
shares of Company Stock are issued in settlement of an Incentive Award,
restrictions on the ability of the Participant to sell or transfer such shares
of Company Stock.

16 NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD

Nothing contained in the Plan or any Award Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant.

No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant any other Incentive Award
to such Participant or other person at any time nor preclude the Committee from
making subsequent grants to such Participant or any other person.

17 SECURITIES MATTERS

(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933 of any interests in the Plan or any
shares of Company Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the contrary, the
Company shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan unless and
until the Company is advised by its counsel that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of the New York Stock Exchange or
any other securities exchange or automated quotation system on which shares of
Company Stock are listed. Certificates evidencing shares of Company Stock issued
pursuant to the terms hereof, may bear such legends, as the Committee or the
Company, in its sole discretion, deems necessary or desirable to insure
compliance with applicable securities laws.

(b) The transfer of any shares of Company Stock hereunder shall be
effective only at such time as counsel to the Company shall have determined that
the issuance and delivery of such shares is in compliance with all applicable
laws, regulations of governmental authority and the requirements of the New York
Stock Exchange or any other securities exchange or automated quotation system on
which shares of Company Stock are listed. The Committee may, in its sole
discretion, defer the effectiveness of any transfer of shares of Company stock
hereunder in order to allow the issuance of such shares to be made pursuant to
registration or an exemption from registration or other methods for compliance
available under federal or state securities laws. The Company shall inform the
Participant in writing of the Committee's decision to defer the effectiveness of
a transfer. During the period of such a deferral in connection with the exercise
of an Option, the Participant may, by written notice, withdraw such exercise and
obtain the refund of any amount paid with respect thereto.

(c) It is intended that the Plan be applied and administered in compliance
with Rule 16b-3. If any provision of the Plan would be in violation of Rule
16b-3 if applied as written, such provision shall not have effect as written and
shall be given effect so as to comply with Rule 16b-3, as determined by the
Committee. The Committee is authorized to amend the Plan and to make any such
modifications to Award Agreements to comply with Rule 16b-3, as it may be
amended from time to time, and to make any other such amendments or
modifications deemed necessary or appropriate to better accomplish the purposes
of the Plan in light of any amendments made to Rule 16b-3.

B-12

18 WITHHOLDING TAXES

Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.

Whenever shares of Company Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, which it shall have sole discretion to grant and which approval may
be evidenced by the presence in the Award Agreement of an appropriate reference
to such right, a Participant may satisfy the foregoing requirement by electing
to have the Company withhold from delivery shares of Company Stock having a
value equal to the minimum amount of tax required to be withheld. Such shares
shall be valued at their Fair Market Value on the date as of which the amount of
tax to be withheld is determined. Fractional share amounts shall be settled in
cash. Such a withholding election may be made with respect to all or any portion
of the shares to be delivered pursuant to an Incentive Award. Any tax
withholding above the minimum amount of tax required to be withheld must be
deducted from other amounts payable to the Participant or must be paid in cash
by the Participant.

19 NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE

If any Participant shall, in connection with the acquisition of shares of
Company Stock under the Plan, make the election permitted under Section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in Section 83(b)) and permitted under the terms of the
Award Agreement, such Participant shall notify the Company of such election
within ten days of filing notice of the election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Code Section 83(b).

20 NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(b) OF THE
CODE

Each Award Agreement with respect to an Incentive Stock Option shall
require the Participant to notify the Company of any disposition of shares of
Company Stock issued pursuant to the exercise of such Option under the
circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions) within ten days of such disposition.

21 AMENDMENT OR TERMINATION OF THE PLAN

The Board of Directors may, at any time, suspend or terminate the Plan or
revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent required by Rule
16b-3 or by any comparable or successor exemption under which the Board of
Directors believes it is appropriate for the Plan to qualify, or if and to the
extent the Board of Directors determines that such approval is appropriate for
purposes of satisfying Section 162(m), Section 422 or Section 409A of the Code
or any applicable rule or listing standard of any stock exchange, automated
quotation system or similar organization. Nothing herein shall restrict the
Committee's ability to exercise its discretionary authority pursuant to Section
4, which discretion may be exercised without amendment to the Plan. No action
hereunder may, without the consent of a Participant, reduce the Participant's
rights under any outstanding Incentive Award.

22 NO OBLIGATION TO EXERCISE

The grant to a Participant of an Option or SAR shall impose no obligation
upon such Participant to exercise such Option or SAR.

23 TRANSFERS UPON DEATH; NONASSIGNABILITY

Upon the death of a Participant outstanding Incentive Awards granted to
such Participant may be exercised only by the executor or administrator of the
Participant's estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Company shall have been furnished with
(a) written notice thereof and with a copy of the Will and/or such evidence as
the Committee may deem necessary to establish the validity of the transfer and
(b) an agreement by the transferee to comply with all the terms and conditions
of the Incentive Award that are or would have been applicable to the Participant
and to be bound by the acknowledgments made by the Participant in connection
with the grant of the Incentive Award.

Except as otherwise provided, no Incentive Award or interest in it may be
transferred, assigned, pledged or hypothecated by the Participant, whether by
operation of law or otherwise, or be made subject to execution, attachment or
similar process.

B-13

24 EXPENSES AND RECEIPTS

The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.

25 FAILURE TO COMPLY

In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the applicable Award Agreement, unless such failure is
remedied by such Participant (or beneficiary) within ten days after notice of
such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its sole discretion, may determine.

26 EFFECTIVE DATE AND TERM OF PLAN

The Plan shall be effective as of the Effective Date. Unless earlier
terminated by the Board of Directors, the right to grant Incentive Awards under
the Plan will terminate on the tenth anniversary of the Effective Date.
Incentive Awards outstanding at Plan termination will remain in effect according
to their terms and the provisions of the Plan.

27 APPLICABLE LAW

Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
Delaware, without reference to the principles of conflicts of laws thereunder.

B-14

THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS Please
INDICATED, WILL BE VOTED "FOR" THE PROPOSALS. Mark Here
for Address |_|
Change or
Comments
SEE REVERSE SIDE

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 AND 4.

1. ELECTION OF DIRECTORS

FOR WITHHOLD
Nominees: the nominees listed AUTHORITY
01 Thomas J. Hook 06 Peter H. Soderberg at left (except as to vote for the
02 Edward F. Voboril 07 Thomas S. Summer marked to the nominee(s)
03 Pamela G. Bailey 08 William B. Summers, Jr. contrary) listed at left
04 Joseph A. Miller, Jr. 09. John P. Wareham |_| |_|
05 Bil l R. Sanford

(To withhold authority to vote for any individual nominee write his or her name
in the space below):

________________________________________________________________________________

FOR AGAINST ABSTAIN
2. APPROVE THE ADOPTION OF THE GREATBATCH, INC.
EXECUTIVE SHORT-TERM INCENTIVE COMPENSATION PLAN. |_| |_| |_|

3. APPROVE AN AMENDMENT TO THE
GREATBATCH, INC. 2005 STOCK INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES |_| |_| |_|
AVAILABLE FOR ISSUANCE.

4. RATIFY THE APPOINTMENT OF DELOITTE
& TOUCHE LLP AS THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR |_| |_| |_|
GREATBATCH, INC. FOR FISCAL YEAR 2007.

5. In their discretion, upon such other business as may properly come before the
Annual Meeting or any adjournments.

I PLAN TO ATTEND THE
ANNUAL MEETING |_|

Signature____________________Signature____________________Date__________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
--------------------------------------------------------------------------------
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WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING, BOTH ARE
AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.

Internet and telephone voting is available through 11:59 PM Eastern Time the
day prior to annual meeting day.

Your Internet or telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy card.

------------------------------------- ------------------------------------
INTERNET TELEPHONE
http://www.proxyvoting.com/gb 1-866-540-5760

Use the internet to vote your proxy. OR Use any touch-tone telephone to vote
Have your proxy card in hand when you your proxy. Have your proxy card in
access the web site. hand when you call.
------------------------------------- ------------------------------------

If you vote your proxy by Internet or by telephone, you do NOT need to mail
back your proxy card. To vote by mail, mark, sign and date your proxy card and
return it in the enclosed postage-paid envelope.

PROXY GREATBATCH, INC. PROXY
9645 WEHRLE DRIVE
CLARENCE, NEW YORK 14031
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON MAY 22, 2007

The undersigned hereby appoints Thomas J. Mazza and Timothy G. McEvoy, and
each of them, proxies with the powers the undersigned would possess if
personally present and with full power of substitution, to vote all shares of
common stock of the undersigned at the Annual Meeting of Stockholders of
Greatbatch, Inc. to be held at the Buffalo Niagara Marriott, 1340 Millersport
Highway, Amherst, New York 14221, on May 22, 2007, and at any adjournment, upon
matters described in the Proxy Statement furnished with this proxy card and all
other subjects that may properly come before the meeting.

IF NO DIRECTIONS ARE GIVEN, THE INDIVIDUALS DESIGNATED ABOVE WILL VOTE FOR
THE NOMINEES FOR DIRECTOR LISTED IN THE PROXY STATEMENT FURNISHED WITH THIS
PROXY CARD, FOR THE APPROVAL OF THE EXECUTIVE SHORT-TERM INCENTIVE COMPENSATION
PLAN, FOR THE APPROVAL OF AN AMENDMENT TO THE 2005 STOCK INCENTIVE PLAN, FOR THE
RATIFICATION OF DELOITTE & TOUCHE LLP AND AT THEIR DISCRETION ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.

If you have a beneficial interest in shares allocated to your account
under the Greatbatch, Inc. 401(k) Retirement Plan, then this card also
constitutes your voting instructions to the trustee of this plan. If you do not
submit a proxy or otherwise provide voting instructions, or if you do not attend
the annual meeting and vote by ballot, the trustee of this plan will vote the
shares in the same manner and in the same proportion as the shares for which
voting instructions are received, except that the trustee, in the exercise of
the trustee's fiduciary duties, may determine that the trustee must vote the
shares in some other manner. If you plan to attend the meeting, please check the
appropriate box on your proxy card, return the proxy card and refer to the map
included below containing directions to the Buffalo Niagara Marriott.

(Continued and to be marked, dated and signed, on the other side)
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________

________________________________________________________________________________

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[MAP OF BUFFALO MARRIOTT NIAGARA]