THERMO INSTRUMENT SYSTEMS INC, DEF 14A, 1999-04-20

THERMO INSTRUMENT SYSTEMS INC
DEF 14A, 1999-04-20
MEASURING & CONTROLLING DEVICES, NEC

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<PAGE>

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

Thermo Instrument Systems Inc.
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(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>

[LOGO]
860 West Airport Freeway, Suite 301
Hurst, TX 76054

April 16, 1999

Dear Stockholder:

The enclosed Notice calls the 1999 Annual Meeting of the Stockholders of
Thermo Instrument Systems Inc. I respectfully request that all Stockholders
attend this meeting, if possible.

Our Annual Report for the year ended January 2, 1999 is enclosed. I hope
you will read it carefully. Feel free to forward any questions you may have
if you are unable to be present at the meeting.

Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete
your proxy and return it to our transfer agent, American Stock Transfer &
Trust Company, in the enclosed addressed, postage-paid envelope, as a quorum
of the Stockholders must be present at the meeting, either in person or by
proxy.

I would appreciate your immediate attention to the mailing of this proxy.

Yours very truly,

/S/ Earl R. Lewis
EARL R. LEWIS
President and Chief Executive
Officer

<PAGE>

[LOGO]
860 West Airport Freeway, Suite 301
Hurst, TX 76054

April 16, 1999

To the Holders of the Common Stock of
THERMO INSTRUMENT SYSTEMS INC.

NOTICE OF ANNUAL MEETING

The 1999 Annual Meeting of the Stockholders of Thermo Instrument Systems
Inc. (the "Corporation") will be held on Thursday, May 27, 1999 at 11:00 a.m.
at The Westin Hotel, 70 Third Avenue, Waltham, Massachusetts. The purpose of
the meeting is to consider and take action upon the following matters:

1. Election of six directors.

2. Such other business as may properly be brought before the meeting and
any adjournment thereof.

The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive
notice of and to vote at the meeting is March 30, 1999.

The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your shares be represented at the meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.

This Notice, the proxy and proxy statement enclosed herewith are sent to you
by order of the board of directors.

SANDRA L. LAMBERT
Secretary

<PAGE>

PROXY STATEMENT

The enclosed proxy is solicited by the board of directors of Thermo
Instrument Systems Inc. (the "Corporation") for use at the 1999 Annual Meeting
of the Stockholders to be held on Thursday, May 27, 1999 at 11:00 a.m. at The
Westin Hotel, 70 Third Avenue, Waltham, Massachusetts, and any adjournment
thereof. The mailing address of the executive office of the Corporation is 860
West Airport Freeway, Suite 301, Hurst, TX 76054. This proxy statement and the
enclosed proxy were first furnished to Stockholders of the Corporation on or
about April 19, 1999.

VOTING PROCEDURES

The board of directors intends to present to the meeting the election of six
directors, constituting the entire board of directors.

The representation in person or by proxy of a majority of the outstanding
shares of the common stock of the Corporation, $.10 par value ("Common
Stock"), entitled to vote at the meeting is necessary to provide a quorum for
the transaction of business at the meeting. Shares can be voted only if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you
plan to attend the meeting in person, please sign and promptly return the
enclosed proxy card, which requires no postage if mailed in the United States.
Votes of Stockholders of record who are present at the meeting in person or by
proxy, abstentions, and broker non-votes (as defined below) are counted as
present or represented at the meeting for purposes of determining whether a
quorum exists.

Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on
the proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors
and as the individuals named as proxy holders on the proxy deem advisable on
all other matters as may properly come before the meeting.

In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present or represented by
proxy and entitled to vote on the election. Withholding authority to vote for
a nominee for director will be treated as shares present and entitled to vote
and, for purposes of determining the outcome of the vote, will have the same
effect as a vote against the nominee. If you hold your shares of Common Stock
through a broker, bank or other nominee, generally the nominee may only vote
the Common Stock that it holds for you in accordance with your instructions.
However, if it has not timely received your instructions, the nominee may vote
on certain matters for which it has discretionary voting authority. If a
nominee cannot vote on a particular matter because it does not have
discretionary voting authority, this is a "broker non-vote" on that matter.
With regard to the election of directors, broker non-votes and withholdings of
authority to vote will have no effect on the outcome of the vote.

A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the meeting by written notice to the
Secretary of the Corporation received prior to the meeting, by executing and
returning a later dated proxy or by voting by ballot at the meeting.

The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of March 30, 1999 consisted of
119,321,984 shares of Common Stock. Only Stockholders of record at the close
of business on March 30, 1999, are entitled to vote at the meeting. Each share
is entitled to one vote.

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<PAGE>

PROPOSAL 1

ELECTION OF DIRECTORS

Six directors are to be elected at the meeting, constituting the entire
board of directors, each to hold office until his successor is elected and
qualified or until his earlier resignation, death or removal.

Nominees For Directors

Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors
and the names of other public companies in which such persons hold
directorships. Information regarding their beneficial ownership of the
Corporation's Common Stock, and the common stock of its subsidiaries and its
parent company, Thermo Electron Corporation ("Thermo Electron"), a provider of
products and services in measurement instrumentation, biomedical devices,
energy, resource recovery and emerging technologies, is reported under the
caption "Stock Ownership." All of the nominees are currently directors of the
Corporation.

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Frank Borman Col. Borman, 71, has been a director of the
Corporation since 1986. Col. Borman has been
chairman and chief executive officer of Patlex
Corporation, a patent licensing company for over
six years. He also serves as an advisor to
Norwest Bank of El Paso and National Geographic.
Col Borman is also a director of American
Superconductor Corporation, The Home Depot, Inc.,
Patlex Corporation and Thermo Power Corporation.

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George N. Hatsopoulos Dr. Hatsopoulos, 72, has been a director of the
Corporation since 1986. Dr. Hatsopoulos has been
the chairman and chief executive officer of
Thermo Electron since he founded the company in
1956 and president of Thermo Electron from 1956
until January 1997. Effective June 1, 1999, Dr.
Hatsopoulos will step down as the chief executive
officer of Thermo Electron and remain as non-
executive chairman of the board. He was also
chairman of the board of the Corporation from
1986 to March 1997. Dr. Hatsopoulos is also a
director of Photoelectron Corporation, Thermedics
Inc., Thermo Ecotek Corporation, Thermo Electron,
Thermo Fibertek Inc., Thermo Optek Corporation,
ThermoQuest Corporation and ThermoTrex
Corporation. Dr. Hatsopoulos is the brother of
Mr. John N. Hatsopoulos, a director of the
Corporation.

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John N. Hatsopoulos Mr. Hatsopoulos, 64, has been a director of the
Corporation since 1986. He was its chief
financial officer from 1988 until his retirement
in December 1998. He was also vice president of
the Corporation from 1988 until 1997, and senior
vice president from 1997 until 1998. Mr.
Hatsopoulos is the vice chairman of the board of
Thermo Electron and was the president of Thermo
Electron from 1997 until 1998 and its chief
financial officer from 1988 until 1998. Prior to
his appointment as president of Thermo Electron,
he served as executive vice president from 1986
until 1997. Mr. Hatsopoulos is also a director of
LOIS/USA Inc., Thermedics Inc., Thermo Ecotek
Corporation, Thermo Electron, Thermo Fibertek
Inc., Thermo Power Corporation, Thermo TerraTech
Inc. and US Liquids Inc. Mr. Hatsopoulos is the
brother of Dr. George N. Hatsopoulos, a director
of the Corporation.

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Earl R. Lewis Mr. Lewis, 55, has been a director and the chief
executive officer of the Corporation since
January 1998, and has been president of the
Corporation since March 1997. He was chief
operating officer of the Corporation from January
1996 to January 1998. Prior to that time, he was
executive vice president of the Corporation from
January 1996 to March 1997, senior vice president
from January 1994 to January 1996, and vice
president from March 1992 to January 1994. Mr.
Lewis has been the chief operating officer,
measurement and detection, of Thermo Electron
since September 1998. Prior to his appointment as
chief operating officer, Mr. Lewis served as
senior vice president of Thermo Electron from
June 1998 to September 1998 and vice president
from September 1996 to June 1998. Mr. Lewis
served as chief executive officer of Thermo Optek
Corporation, a majority-owned subsidiary of the
Corporation that manufactures analytical
instruments that measure energy and light for
purposes of materials analysis, characterization
and preparation, from its inception in August
1995 to January 1998 and was the president of its
predecessor, Thermo Jarrell Ash Corporation for
more than five years prior to 1995. Mr. Lewis is
also director of Metrika Systems Corporation,
ONIX Systems Inc., SpectRx Inc., Thermo
BioAnalysis Corporation, Thermo Optek
Corporation, ThermoQuest Corporation,
ThermoSpectra Corporation and Thermo Vision
Corporation.

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Arvin H. Smith Mr. Smith, 69, has been a director of the
Corporation since 1986, and chairman of the board
since March 1997. He was also president and chief
executive officer of the Corporation from 1986 to
March 1997 and January 1998, respectively. Mr.
Smith has been the president of Thermo Electron
since September 1998. He was executive vice
president of Thermo Electron from 1991 until
September 1998 and senior vice president from
1986 to 1991. Mr. Smith is also a director of
ONIX Systems Inc.

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Polyvios C. Vintiadis Mr. Vintiadis, 63, has been a director of the
Corporation since July 1993. Mr. Vintiadis has
been the chairman and chief executive officer of
Towermarc Corporation, a real estate development
company, since 1984. Prior to joining Towermarc,
Mr. Vintiadis was a principal of Morgens,
Waterfall & Vintiadis, Inc., a financial services
firm, with whom he remains associated. For more
than 20 years prior to that time, Mr. Vintiadis
was employed by Arthur D. Little & Company, Inc.
Mr. Vintiadis is also a director of The Randers
Killam Group Inc. and Thermo TerraTech Inc.

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Committees of the Board of Directors and Meetings

The board of directors has established an audit committee and a human
resources committee, each consisting solely of directors who are not employees
of the Corporation, of Thermo Electron or of any other companies affiliated
with Thermo Electron ("outside directors"). The present members of the audit
committee are Mr. Vintiadis (Chairman), and Col. Borman. The audit committee
reviews the scope of the audit with the Corporation's independent public
accountants and meets with them for the purpose of reviewing the results of
the audit subsequent to its completion. The present members of the human
resources committee are Col. Borman (Chairman) and Mr. Vintiadis. The human
resources committee reviews the performance of senior

3
<PAGE>

members of management, approves executive compensation and administers the
Corporation's stock option and other stock-based compensation plans. The
Corporation does not have a nominating committee of the board of directors.
The board of directors met ten times, the audit committee met twice and the
human resources committee met six times during fiscal 1998. Each director
attended at least 75% of all meetings of the board of directors and committees
on which he served that were held during fiscal 1998.

Compensation of Directors

Cash Compensation

Outside directors receive an annual retainer of $8,000 and a fee of $1,000
per meeting for attending regular meetings of the board of directors and $500
per meeting for participating in meetings of the board of directors held by
means of conference telephone and for participating in certain meetings of
committees of the board of directors. Payment of directors' fees is made
quarterly. Dr. G. Hatsopoulos, Mr. Lewis and Mr. Smith are all employees of
Thermo Electron or its subsidiaries and do not receive any cash compensation
from the Corporation for their services as directors. Mr. J. Hatsopoulos, who
is a consultant to Thermo Electron, does not receive any cash compensation
from the Corporation for his service as a director during the term of his
consulting contract that terminates December 2003. Directors are also
reimbursed for out-of-pocket expenses incurred in attending such meetings.

Deferred Compensation Plan

Under the Corporation's deferred compensation plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer receipt of
his cash fees until he ceases to serve as a director, dies or retires from his
principal occupation. In the event of a change in control or proposed change
in control of the Corporation that is not approved by the board of directors,
deferred amounts become payable immediately. Either of the following is deemed
to be a change in control: (a) the acquisition, without the prior approval of
the board of directors, directly or indirectly, by any person of 50% or more
of the outstanding Common Stock or 25% or more of the outstanding common stock
of Thermo Electron; or (b) the failure of the persons serving on the board of
directors immediately prior to any contested election of directors or any
exchange offer or tender offer for the Common Stock or the common stock of
Thermo Electron to constitute a majority of the board of directors at any time
within two years following any such event. Amounts deferred pursuant to the
Deferred Compensation Plan are valued at the end of each quarter as units of
Common Stock. When payable, amounts deferred may be disbursed solely in shares
of Common Stock accumulated under the Deferred Compensation Plan. A total of
154,377 shares of Common Stock has been reserved for issuance under the
Deferred Compensation Plan. As of January 2, 1999, deferred units equal to
approximately 41,166 shares of Common Stock were accumulated under the
Deferred Compensation Plan.

Directors Stock Option Plan

The Corporation's directors stock option plan (the "Directors Plan"),
provides for the grant of stock options to purchase shares of Common Stock and
common stock of its majority-owned subsidiaries to outside directors as
additional compensation for their service as directors. Under the Directors
Plan, outside directors are automatically granted options to purchase 1,000
shares of the Common Stock annually. In addition, the Directors Plan provides
for the automatic grant every five years of options to purchase 1,500 shares
of the common stock of a majority-owned subsidiary of the Corporation that is
"spun out" to outside investors.

Pursuant to the Directors Plan, outside directors receive an annual grant of
options to purchase 1,000 shares of Common Stock at the close of business on
the date of each Annual Meeting of the Stockholders of the Corporation.
Options evidencing annual grants may be exercised at any time from and after
the six-month anniversary of the grant date of the option and prior to the
expiration of the option on the third anniversary of the grant date. Shares
acquired upon exercise of the options are subject to repurchase by the
Corporation at the exercise price if the recipient ceases to serve as a
director of the Corporation or any other Thermo Electron company prior to the
first anniversary of the grant date.

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In addition, under the Directors Plan, outside directors are automatically
granted every five years options to purchase 1,500 shares of common stock of
each majority-owned subsidiary of the Corporation that is "spun out" to
outside investors. The grant occurs on the close of business on the date of
the first Annual Meeting of the Stockholders next following the subsidiary's
spinout, which is the first to occur of either an initial public offering of
the subsidiary's common stock or a sale of such stock to third parties in an
arms-length transaction, and also as of the close of business on the date of
every fifth Annual Meeting of the Stockholders of the Corporation that occurs
thereafter during the duration of the Directors Plan. The options granted vest
and become exercisable on the fourth anniversary of the date of grant, unless
prior to such date the subsidiary's common stock is registered under Section
12 ("Section 12 Registration") of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). In the event that the effective date of Section
12 Registration occurs before the fourth anniversary of the grant date, the
options will become immediately exercisable and the shares acquired upon
exercise will be subject to restrictions on transfer and the right of the
Corporation to repurchase such shares at the exercise price in the event the
director ceases to serve as a director of the Corporation or any other Thermo
Electron company. In the event of Section 12 Registration, the restrictions
and repurchase rights shall lapse or be deemed to lapse at the rate of 25% per
year, starting with the first anniversary of the grant date. These options
expire after five years.

The exercise price for options granted under the Directors Plan is the
average of the closing prices of the Common Stock or the common stock of the
Corporation's majority-owned subsidiary, as the case may be, as reported on
the American Stock Exchange (or other principal market on which the Common
Stock or such subsidiary's common stock is then traded) for the five trading
days immediately preceding and including the date of grant, or, if the shares
are not then traded, at the last price per share paid by third parties in an
arms-length transaction prior to the option grant. As of January 31, 1999
options to purchase 63,120 shares of Common Stock were outstanding under the
Directors Plan, options to purchase 24,321 shares had been exercised, options
to purchase 3,512 shares had lapsed, and options to purchase 88,250 shares of
Common Stock were reserved for future grant.

Stock Ownership Policies for Directors

The human resources committee of the board of directors (the "Committee")
has established a stock holding policy for directors. The stock holding policy
requires each director to hold a minimum of 1,000 shares of Common Stock.
Directors are requested to achieve this ownership level within a three-year
period. The chief executive officer of the Corporation is required to comply
with a separate stock holding policy established by the Committee, which is
described in "Committee Report on Executive Compensation--Stock Ownership
Policies."

In addition, the Committee has a policy requiring directors to hold shares
of Common Stock equal to one-half of their net option exercises over a period
of five years. The net option exercise is determined by calculating the number
of shares acquired upon exercise of a stock option, after deducting the number
of shares that could have been traded to exercise the option and the number of
shares that could have been surrendered to satisfy tax withholding obligations
attributable to the exercise of the option. This policy is also applicable to
executive officers and is described in "Committee Report on Executive
Compensation--Stock Ownership Policies."

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<PAGE>

STOCK OWNERSHIP

The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Electron and each majority-owned subsidiary
of the Corporation, as of January 31, 1999, with respect to (i) each director,
(ii) each executive officer named in the summary compensation table under the
heading "Executive Compensation" (the "named executive officers") and (iii)
all directors and current executive officers as a group. In addition, the
following table sets forth the beneficial ownership of Common Stock as of
January 31, 1999, with respect to each person who was known by the Corporation
to own beneficially more than 5% of the outstanding shares of Common Stock.

While certain directors and executive officers of the Corporation are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Electron.

<TABLE>
<CAPTION>
Thermo Thermo Thermo Thermo
Instrument Electron BioAnalysis Optek
Systems Inc. Corporation Corporation Corporation
Name(1) (2) (3) (4) (5)
- ------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Thermo Electron
Corporation(11)............. 112,677,612 N/A N/A N/A
Frank Borman................. 33,566 0 1,500 1,500
Richard W. K. Chapman........ 189,905 90,357 40,500 15,500
George N. Hatsopoulos........ 179,141 3,600,811 37,300 113,100
John N. Hatsopoulos.......... 94,226 873,854 62,200 132,800
Denis A. Helm................ 212,644 174,948 15,000 15,200
Barry S. Howe................ 138,389 75,570 64,900 15,000
Earl R. Lewis................ 338,250 204,878 72,500 253,000
Robert J. Rosenthal.......... 96,790 48,650 2,000 368,500
Arvin H. Smith............... 539,583 931,378 39,000 98,000
Polyvios C. Vintiadis........ 13,507 2,500 1,500 1,500
All directors and current
executive officers as a
group (12 persons).......... 1,800,922 6,481,346 344,400 666,600
</TABLE>

<TABLE>
<CAPTION>
Metrika Thermo
ThermoQuest ThermoSpectra Systems Vision ONIX
Corporation Corporation Corporation Corporation Systems Inc.
Name(1) (6) (7) (8) (9) (10)
- ------- ----------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Thermo Electron
Corporation(11)........ N/A N/A N/A N/A N/A
Frank Borman............ 1,500 1,500 1,500 1,500 1,500
Richard W. K. Chapman... 342,350 4,000 7,500 7,570 7,500
George N. Hatsopoulos... 92,600 24,750 30,000 23,800 20,000
John N. Hatsopoulos..... 109,500 24,400 25,000 36,100 20,000
Denis A. Helm........... 10,000 4,000 26,000 7,528 7,500
Barry S. Howe........... 90,000 119,010 7,500 7,500 7,500
Earl R. Lewis........... 135,000 55,000 20,000 42,720 35,666
Robert J. Rosenthal..... 10,000 2,500 7,500 7,640 7,500
Arvin H. Smith.......... 90,000 20,000 10,000 16,120 24,000
Polyvios C. Vintiadis... 1,500 1,500 1,500 1,500 1,500
All directors and
current executive
officers as a group (12
persons)............... 888,450 336,960 131,500 150,938 128,499
</TABLE>
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(1) Except as reflected in the footnotes to this table, shares of the common
stock beneficially owned consist of shares owned by the indicated person
or by that person for the benefit of minor children, and all share
ownership includes sole voting and investment power.

(2) Shares of the Common Stock beneficially owned by Col. Borman, Dr. Chapman,
Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howe, Mr. Lewis, Dr.
Rosenthal, Mr. Smith, Mr. Vintiadis and all

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<PAGE>

directors and current executive officers as a group include 15,210,
160,624, 117,187, 70,312, 155,625, 113,750, 322,085, 96,112, 292,968,
8,886 and 1,407,835 shares, respectively, that such person or group had
the right to acquire within 60 days of January 31, 1999, through the
exercise of stock options. Shares beneficially owned by Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Smith and all directors and current
executive officers as a group include 598, 661, 663 and 2,885 shares,
respectively, allocated through January 31, 1999, to their respective
accounts maintained pursuant to Thermo Electron's employee stock ownership
plan, of which the trustees, who have investment power over its assets,
are executive officers of Thermo Electron (the "ESOP"). Shares
beneficially owned by Col. Borman, Mr. Vintiadis and all directors and
current executive officers as a group include 14,335, 4,359 and 18,694
shares, respectively, allocated through January 2, 1999, to their
respective accounts maintained under the Deferred Compensation Plan.
Shares beneficially owned by Dr. G. Hatsopoulos include 26,710 shares held
by his spouse and 63 shares allocated through January 31, 1999 to his
spouse's account maintained pursuant to the ESOP. Shares beneficially
owned by Mr. Helm include a total of 5,264 shares held in custodial
accounts for the benefit of four minor children. Shares beneficially owned
by Mr. Howe include 374 shares held in custodial accounts for the benefit
of his minor children. Shares beneficially owned by Mr. Lewis include
2,987 shares held by his spouse. No director or named executive officer
beneficially owned more than 1% of the Common Stock outstanding as of
January 31, 1999; all directors and current executive officers as a group
beneficially owned 1.59% of the Common Stock outstanding as of such date.

(3) Shares of the common stock of Thermo Electron beneficially owned by Dr.
Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howe, Mr.
Lewis, Dr. Rosenthal, Mr. Smith and all directors and current executive
officers as a group include 88,034, 1,899,500, 812,735, 111,872, 69,787,
202,350, 48,300, 622,249 and 4,317,599 shares, respectively, that such
person or group had the right to acquire within 60 days of January 31,
1999, through the exercise of stock options. Shares beneficially owned by
Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Smith and all directors and
current executive officers as a group include 2,266, 2,036, 1,717 and
8,516 shares, respectively, allocated through January 31, 1999, to their
respective accounts maintained pursuant to the ESOP. Shares beneficially
owned by Dr. G. Hatsopoulos include 158,351 shares held by his spouse,
408,664 shares held by a family trust of which his spouse is trustee,
500,000 shares held by a trust of which Dr. G. Hatsopoulos is the trustee,
and 153 shares allocated through January 31, 1999 to his spouse's account
maintained pursuant to the ESOP. Shares beneficially owned by Dr. G.
Hatsopoulos also include 50,000 shares that a family trust, of which Dr.
G. Hatsopoulos' spouse is the trustee, has the right to acquire within 60
days of January 31, 1999, through the exercise of stock options. Shares
beneficially owned by Mr. Helm include 8,100 shares held in custodial
accounts for the benefit of his minor children. Except for Dr. G.
Hatsopoulos, who beneficially owned 2.26% of the Thermo Electron common
stock outstanding as of January 31, 1999, no director or named executive
officer beneficially owned more than 1% of such common stock outstanding
as of January 31, 1999; all directors and current executive officers as a
group beneficially owned 4.10% of the Thermo Electron common stock
outstanding as of such date.

(4) Shares of the common stock of Thermo BioAnalysis Corporation, a majority-
owned subsidiary of the Corporation ("Thermo BioAnalysis"), beneficially
owned by Col. Borman, Dr. Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos,
Mr. Helm, Mr. Howe, Mr. Lewis, Dr. Rosenthal, Mr. Smith, Mr. Vintiadis and
all directors and current executive officers as a group include 1,500,
30,000, 17,300, 17,200, 15,000, 50,000, 50,000, 2,000, 20,000, 1,500 and
211,500 shares, respectively, that such person or group had the right to
acquire within 60 days of January 31, 1999, through the exercise of stock
options. Shares beneficially owned by Mr. Howe include 600 shares held by
Mr. Howe in custodial accounts for the benefit of his minor children.
Shares beneficially owned by Mr. Lewis include 1000 shares held by his
spouse. No director or named executive officer beneficially owned more
than 1% of the common stock of Thermo BioAnalysis outstanding as of
January 31, 1999; all directors and current executive officers as a group
beneficially owned 1.97% of such common stock outstanding as of such date.

(5) Shares of the common stock of Thermo Optek Corporation, a majority-owned
subsidiary of the Corporation ("Thermo Optek"), beneficially owned by Col.
Borman, Dr. Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr.
Howe, Mr. Lewis, Dr. Rosenthal, Mr. Smith, Mr. Vintiadis and all

7
<PAGE>

directors and current executive officers as a group include 1,500, 15,500,
93,100, 92,800, 15,000, 15,000, 225,000, 352,500, 90,000, 1,500 and
922,400 shares, respectively, that such person or group had the right to
acquire within 60 days of January 31, 1999, through the exercise of stock
options. Shares beneficially owned by Mr. Lewis include 2,500 shares held
by his spouse and 1,000 shares held by his son. No director or named
executive officer beneficially owned more than 1% of the common stock of
Thermo Optek outstanding as of January 31, 1999; and directors and current
executive officers as a group beneficially owned 2.03% of such common
stock outstanding as of such date.

(6) Shares of the common stock of ThermoQuest Corporation, a majority-owned
subsidiary of the Corporation ("ThermoQuest"), beneficially owned by Col.
Borman, Dr. Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr.
Howe, Mr. Lewis, Dr. Rosenthal, Mr. Smith, Mr. Vintiadis and all directors
and current executive officers as a group include 1,500, 325,000, 92,600,
92,400, 10,000, 90,000, 125,000, 10,000, 90,000, 1,500 and 854,000 shares,
respectively, that such person or group had the right to acquire within 60
days of January 31, 1999, through the exercise of stock options. No
director or named executive officer beneficially owned more than 1% of the
common stock of ThermoQuest outstanding as of January 31, 1999; all
directors and current executive officers as a group beneficially owned
1.76% of such common stock outstanding as of such date.

(7) Shares of the common stock of ThermoSpectra Corporation, a majority-owned
subsidiary of the Corporation ("ThermoSpectra"), beneficially owned by
Col. Borman, Dr. Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Helm, Mr. Howe, Mr. Lewis, Dr. Rosenthal, Mr. Smith, Mr. Vintiadis and all
directors and current executive officers as a group include 1,500, 4,000,
24,750, 24,400, 4,000, 104,000, 50,000, 2,500, 20,000, 1,500 and 305,850
shares, respectively, that such person or group had the right to acquire
within 60 days of January 31, 1999, through the exercise of stock options.
No director or named executive officer beneficially owned more than 1% of
the common stock of ThermoSpectra outstanding as of January 31, 1999; all
directors and current executive officers as a group beneficially owned
2.21% of such common stock outstanding as of such date.

(8) Shares of the common stock of Metrika Systems Corporation, a majority-
owned subsidiary of the Corporation ("Metrika Systems"), beneficially
owned by Col. Borman, Dr. Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos,
Mr. Helm, Mr. Howe, Mr. Lewis, Dr. Rosenthal, Mr. Smith, Mr. Vintiadis and
all directors and current executive officers as a group include 1,500,
7,500, 30,000, 10,000, 25,000, 7,500, 20,000, 7,500, 10,000, 1,500 and
123,000 shares, respectively, that such person or group had the right to
acquire within 60 days of January 31, 1999, through the exercise of stock
options. No director or named executive officer beneficially owned more
than 1% of the common stock of Metrika Systems outstanding as of January
31, 1999; all directors and current executive officers as a group
beneficially owned 1.80% of such common stock outstanding as of such date.

(9) Shares of the common stock of Thermo Vision Corporation, a majority-owned
subsidiary of the Corporation ("Thermo Vision"), beneficially owned by
Col. Borman, Dr. Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Howe, Mr. Helm, Mr. Lewis, Dr. Rosenthal, Mr. Smith, Mr. Vintiadis and all
directors and current executive officers as a group include 1,500, 7,500,
15,000, 15,000, 7,500, 7,500, 25,000, 7,500, 15,000, 1,500 and 105,500
shares, respectively, that such person or group had the right to acquire
within 60 days of January 31, 1999, through the exercise of stock options.
Shares beneficially owned by Mr. J. Hatsopoulos include 3,000 shares held
by his spouse. Shares beneficially owned by Mr. Lewis include 350 shares
held by his spouse and 1,140 shares held by his son. No director or named
executive officer beneficially owned more than 1% of the common stock of
Thermo Vision outstanding as of January 31, 1999; all directors and
current executive officers as a group beneficially owned 1.97% of such
common stock outstanding as of such date.

(10) Shares of the common stock of ONIX Systems Inc., a majority-owned
subsidiary of the Corporation ("ONIX Systems"), beneficially owned by
Col. Borman, Dr. Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Helm, Mr. Howe, Mr. Lewis, Dr. Rosenthal, Mr. Smith, Mr. Vintiadis and
all directors and executive officers as a group include 1,500, 7,500,
20,000, 20,000, 7,500, 7,500, 33,333, 7,500, 20,000, 1,500 and 129,666
shares, respectively, that each person or group had the right to acquire
within

8
<PAGE>

60 days of January 31, 1999, through the exercise of stock options. Shares
beneficially owned by Mr. Lewis include 333 shares held by his son. Shares
beneficially owned by Mr. Smith include 4,000 shares held by his spouse.
No director or named executive officer owned more than 1% of the common
stock of ONIX Systems outstanding as of January 31, 1999; all directors
and current executive officers as a group beneficially owned less than 1%
of such common stock outstanding as of such date.

(11) Shares beneficially owned by Thermo Electron include 10,334,620 shares of
Common Stock issuable upon the conversion of a 3 3/4% convertible
debenture due in 2000. Thermo Electron beneficially owned approximately
86.93% of the Common Stock outstanding as of January 31, 1999. Thermo
Electron's address is 81 Wyman Street, Waltham, Massachusetts 02454-9046.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Corporation's directors and
executive officers, and beneficial owners of more than 10% of the Common
Stock, such as Thermo Electron, to file with the Securities and Exchange
Commission initial reports of ownership and periodic reports of changes in
ownership of the Corporation's securities. Based upon a review of such
filings, all Section 16(a) filing requirements applicable to such persons were
complied with during 1998, except in the following instances. Thermo Electron
filed six Form 4s late, reporting a total of 66 transactions including 62 open
market purchases of Common Stock and four transactions associated with the
grant, exercise and lapse of options to purchase Common Stock granted to
employees under its stock option program.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes compensation for services to the Corporation
in all capacities awarded to, earned by or paid to the Corporation's chief
executive officer and its four other most highly compensated executive
officers for the last three fiscal years. These executive officers are
collectively referred to herein as the "named executive officers."

The Corporation is required to appoint certain executive officers and full-
time employees of Thermo Electron as executive officers of the Corporation, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron.
The time and effort devoted by these individuals to the Corporation's affairs
is provided to the Corporation under a corporate services agreement between
the Corporation and Thermo Electron. See "Relationship with Affiliates."
Accordingly, the compensation for these individuals is not reported in the
following table.

9
<PAGE>

Summary Compensation Table
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
Long Term
Compensation
Annual ------------------------
Compensation Securities Underlying All Other
Name and Fiscal ----------------- Options (No. of Shares Compensation
Principal Position Year Salary Bonus and Company) (1) (2)
- ------------------ ------ -------- -------- ------------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Earl R. Lewis (3) ...... 1998 $224,000 $160,000 33,333 (ONX) $15,939 (4)
President and 1997 $198,000 $225,000 62,500 (THI) $16,710 (4)
Chief Executive Officer 20,000 (MKA)
75,000 (TMQ)
25,000 (VIZ)
1996 $180,000 $160,000 42,500 (TBA) $11,550 (4)
2,000 (TFG)
2,000 (TLT)
225,000 (TOC)
2,000 (TSR)
50,000 (TMQ)
40,000 (TXM)
- ---------------------------------------------------------------------------------------
Richard W. K. Chapman
(5) ................... 1998 $190,000 $110,000 20,000 (THI) $26,873 (6)
Senior Vice President 7,600 (TMO)
7,500 (MKA)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
1,000 (TISI)
100,000 (TMQ)
2,000 (TRIL)
2,000 (TRCC)
7,500 (VIZ)
1997 $180,000 $153,000 300 (TMO) $22,309 (6)
1996 $170,000 $125,000 150 (TMO) $ 7,021 (6)
30,000 (TBA)
2,000 (TFG)
2,000 (TLT)
15,000 (TOC)
225,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
- ---------------------------------------------------------------------------------------
Denis A. Helm (5) ...... 1998 $162,000 $ 85,000 15,000 (THI) $ 7,200
Executive Vice
President 10,900 (TMO)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
1,000 (TISI)
2,000 (TRIL)
2,000 (TRCC)
7,500 (VIZ)
1997 $150,000 $110,000 1,100 (TMO)
1996 $145,000 $ 70,000 1,500 (TMO)
50,000 (TBA)
2,000 (TFG)
15,000 (TOC)
99,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
</TABLE>

10
<PAGE>

Summary Compensation Table (Continued)
<TABLE>
- ----------------------------------------------------------------------------------------
<CAPTION>
Long Term
Compensation
Annual ------------------------
Compensation Securities Underlying All Other
Name and Fiscal ------------------ Options (No. of Shares Compensation
Principal Position Year Salary Bonus and Company) (1) (2)
- ------------------ ------ -------- --------- ------------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Barry S. Howe (5) ...... 1998 $157,500 $ 75,000 20,000 (THI) $12,683 (8)
Vice President 1,100 (TMO)
7,500 (MKA)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
1,000 (TISI)
100,000 (THS)
2,000 (TRIL)
7,500 (VIZ)
2,000 (TRCC)
1997 $150,000 $ 110,000 1,100 (TMO) $14,923 (8)
1996 $145,000 $ 70,000 1,500 (TMO) $ 8,076 (8)
50,000 (TBA)
2,000 (TFG)
2,000 (TLT)
15,000 (TOC)
90,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
- ----------------------------------------------------------------------------------------
Robert J. Rosenthal
(5)(9) ................ 1998 $175,000 $110,000 20,000 (THI) $17,927 (7)
Vice President 7,300 (TMO)
7,500 (MKA)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
1,000 (TISI)
240,000 (TOC)
2,000 (TRIL)
2,000 (TRCC)
7,500 (VIZ)
</TABLE>

(1) Options granted by the Corporation are designated as "THI." In addition,
the named executive officers have also been granted options to purchase
common stock of the following Thermo Electron companies during the last
three fiscal years as part of Thermo Electron's stock option program:
Thermo Electron Corporation (designated in the table as TMO), Metrika
Systems Corporation (designated in the table as MKA), ONIX Systems Inc.
(designated in the table as ONX), The Randers Killam Group Inc.
(designated in the table as RGI), Thermedics Detection Inc. (designated in
the table as TDX), Thermo BioAnalysis Corporation (designated in the table
as TBA) Thermo Fibergen Inc. (designated in the table as TFG), Thermo
Information Solutions Inc. (designated in the table as TISI), ThermoLyte
Corporation (designated in the table as TLT), Thermo Optek Corporation
(designated in the table as TOC), ThermoQuest Corporation (designated in
the table as TMQ), Thermo Sentron Inc. (designated in the table as TSR),
ThermoSpectra Corporation (designated in the table as THS), Thermo Trilogy
Corporation (designated in the table as TRIL), Thermo Vision Corporation
(designated in the table as VIZ), Trex Communications Corporation
(designated in the table as TRCC) and Trex Medical Corporation (designated
in the table as TXM).

(2) Represents the amount of matching contributions made on behalf of the
executive officers participating in the Thermo Electron 401(k) plan or, in
the case of Dr. Chapman, the 401(k) plan maintained by Finnigan
Corporation, a subsidiary of the Corporation.

11
<PAGE>

(3) Mr. Lewis has served in various management capacities for the Corporation
and has served as an officer of Thermo Electron during the three-year
period reported. A portion of Mr. Lewis's annual cash compensation (salary
and bonus) has been paid by Thermo Electron in each of the fiscal years
reported as compensation for services provided to Thermo Electron. The
annual cash compensation (salary and bonus) reported in the table for Mr.
Lewis represents the amount paid by the Corporation and its subsidiaries
solely for Mr. Lewis's services as an officer of the Corporation or its
subsidiaries. For 1998 and 1997, approximately 80% and 90% respectively,
of Mr. Lewis's annual cash compensation (salary and bonus) earned in all
capacities throughout the Thermo Electron organization was paid by the
Corporation and its subsidiaries for his services to the Corporation and
its subsidiaries. From time to time, Mr. Lewis has been, and in the future
may be, granted options to purchase common stock of Thermo Electron and
certain of its subsidiaries other than the Corporation and its majority-
owned subsidiaries. These options are not reported in this table as they
were granted as compensation for services to other Thermo Electron
companies in capacities other than in his capacity as an executive officer
of the Corporation.

(4) In addition to the matching contribution referred to in footnote (2), such
amount includes $8,739, $9,585 and $4,800, respectively, which represents
the amount of compensation in fiscal 1998, 1997 and 1996, respectively,
attributable to an interest-free loan provided to Mr. Lewis pursuant to
the stock holding assistance plan of Thermo Optek. See "Relationship with
Affiliates--Stock Holding Assistance Plans."

(5) In fiscal 1998 and 1997, of the annual cash compensation reported in the
table, 90% of Mr. Helm's annual cash compensation (salary and bonus) was
paid by the Corporation and 10% of his cash compensation was paid by
Metrika Systems. All of Dr. Chapman's annual cash compensation was paid by
ThermoQuest, where he serves as president and chief executive officer. All
of Dr. Rosenthal's annual cash compensation was paid by Thermo Optek,
where he served as an officer, most recently as president and chief
executive officer until March 1999. In 1998, 21% of Mr. Howe's annual cash
compensation was paid by Thermo BioAnalysis, where he served as president
and chief executive officer until March 1998, and 79% was paid by
ThermoSpectra, where he serves as president and chief executive officer.
In 1997 and 1996, all of Mr. Howe's compensation was paid by Thermo
BioAnalysis, where he served as president and chief executive officer.

(6) In addition to the matching contribution referred to in footnote (2), such
amount includes $16, 873, $18,154 and $4,334, respectively, which
represents the amount of compensation in fiscal 1998, 1997 and 1996,
respectively, attributable to interest-free loans provided to Dr. Chapman
pursuant to the stock holding assistance plans of Thermo BioAnalysis and
ThermoQuest. See "Relationship with Affiliates--Stock Holding Assistance
Plans."

(7) In addition to the matching contribution referred to in footnote (2), such
amount includes $12,927, which represents the amount of compensation in
fiscal 1998 attributable to an interest-free loan provided to
Dr. Rosenthal pursuant to the stock holding assistance plan of Thermo
Optek. See "Relationship with Affiliates--Stock Holding Assistance Plans."

(8) In addition to the matching contribution referred to in footnote (2), such
amount includes $12,886, $8,173 and $1,444, respectively, which represents
the amount of compensation in fiscal 1998, 1997 and 1996, respectively,
attributable to interest-free loans provided to Mr. Howe pursuant to the
stock holding assistance plans of ThermoSpectra and Thermo BioAnalysis.
See "Relationship with Affiliates--Stock Holding Assistance Plans."

(9) Dr. Rosenthal resigned as a vice president of the Corporation and as
president and chief executive officer of Thermo Optek in March 1999.

12
<PAGE>

Stock Options Granted During Fiscal 1998

The following table sets forth information concerning individual grants of
stock options made during fiscal 1998 to the named executive officers. It has
not been the Corporation's policy in the past to grant stock appreciation
rights, and no such rights were granted during fiscal 1998.

Option Grants in Fiscal 1998
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Price Appreciation for
Number of Securities Granted to Exercise Option Term (2)
Underlying Options Employees in Price Per Expiration -----------------------
Name Granted and Company (1) Fiscal Year Share Date 5% 10%
---- ----------------------- ------------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Earl R. Lewis (3)....... 33,333(ONX) 3.84% $14.25 01/21/05 $ 193,331 $ 450,662
- -----------------------------------------------------------------------------------------------------------
Richard W. K. Chapman... 20,000(THI) 2.90% $13.54 09/25/03 $ 74,800 $ 165,400
400(TMO) 0.01%(4) $34.50 06/02/03 $ 3,812 $ 8,424
7,200(TMO) 0.22%(4) $16.20 09/23/03 $ 32,256 $ 71,208
7,500(MKA) 3.56% $15.86 03/10/10 $ 94,650 $ 254,400
7,500(ONX) 0.86% $14.25 03/10/10 $ 85,050 $ 228,525
4,000(RGI) 0.15%(4) $ 4.00 01/21/05 $ 6,520 $ 15,160
2,000(TDX) 0.22%(4) $ 9.56 01/21/05 $ 7,780 $ 18,140
1,000(TISI) 1.67%(4) $10.00 01/21/08 $ 6,290 $ 15,940
100,000(TMQ) 10.18% $ 9.44 09/25/03 $ 261,000 $ 576,000
2,000(TRIL) 1.11%(4) $ 8.25 01/21/08 $ 10,380 $ 26,300
7,500(VIZ) 2.19% $ 7.15 03/10/10 $ 42,675 $ 114,675
2,000(TRCC) 0.16%(4) $ 4.00 01/21/08 $ 5,040 $ 12,740
- -----------------------------------------------------------------------------------------------------------
Denis A. Helm........... 15,000(THI) 2.18% $13.54 09/25/03 $ 56,100 $ 124,050
3,700(TMO) 0.11%(4) $34.50 06/02/03 $ 35,261 $ 77,922
7,200(TMO) 0.22%(4) $16.20 09/23/03 $ 32,256 $ 71,208
7,500(ONX) 0.86% $14.25 03/10/10 $ 85,050 $ 228,525
4,000(RGI) 0.75%(4) $ 4.00 01/21/05 $ 6,520 $ 15,160
2,000(TDX) 0.22%(4) $ 9.56 01/21/05 $ 7,780 $ 18,140
1,000(TISI) 1.67%(4) $10.00 01/21/08 $ 6,290 $ 15,940
2,000(TRIL) 1.11%(4) $ 8.25 01/21/08 $ 10,380 $ 26,300
7,500(VIZ) 2.19% $ 7.15 03/10/10 $ 42,675 $ 114,675
2,000(TRCC) 0.16%(4) $ 4.00 01/21/08 $ 5,040 $ 12,740
- -----------------------------------------------------------------------------------------------------------
Barry S. Howe........... 20,000(THI) 2.90% $13.54 09/25/03 $ 74,800 $ 165,400
1,100(TMO) 0.03%(4) $34.50 06/02/03 $ 10,483 $ 23,166
7,500(MKA) 3.56% $15.86 03/10/10 $ 94,650 $ 254,400
7,500(ONX) 0.86% $14.25 03/10/10 $ 85,050 $ 228,525
4,000(RGI) 0.75%(4) $ 4.00 01/21/05 $ 6,520 $ 15,160
2,000(TDX) 0.22%(4) $ 9.56 01/21/05 $ 7,780 $ 18,140
1,000(TISI) 1.67%(4) $10.00 01/21/08 $ 6,290 $ 15,940
100,000(THS) 27.17% $10.68 05/20/10 $ 850,000 $ 2,284,000
2,000(TRIL) 1.11%(4) $ 8.25 01/21/08 $ 10,380 $ 26,300
7,500(VIZ) 2.19% $ 7.15 03/10/10 $ 42,675 $ 114,675
2,000(TRCC) 0.16%(4) $ 4.00 01/21/08 $ 5,040 $ 12,740
- -----------------------------------------------------------------------------------------------------------
</TABLE>

13
<PAGE>

Option Grants in Fiscal 1998 (Continued)
<TABLE>
- --------------------------------------------------------------------------------------------------------
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Number of Securities Total Options Price Appreciation for
Underlying Options Granted to Exercise Option Term (2)
Granted and Employees in Price Per Expiration -----------------------
Name Company (1) Fiscal Year Share Date 5% 10%
---- -------------------- ------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Rosenthal..... 20,000(THI) 2.90% $13.54 09/25/03 $ 74,800 $ 165,400
100(TMO) 0.00%(4) $34.50 06/02/03 $ 953 $ 2,106
7,200(TMO) 0.22%(4) $16.20 09/23/03 $ 32,256 $ 71,208
7,500(MKA) 3.56% $15.86 03/10/05 $ 48,450 $ 112,875
7,500(ONX) 0.86% $14.25 03/10/05 $ 43,500 $ 101,400
4,000(RGI) 0.75%(4) $ 4.00 01/21/05 $ 6,520 $ 15,160
2,000(TDX) 0.22%(4) $ 9.56 01/21/05 $ 7,780 $ 18,140
1,000(TISI) 1.67%(4) $10.00 01/21/08 $ 6,290 $ 15,940
100,000(TOC) 10.59% $16.65 05/20/10 $ 1,325,000 $ 3,560,000
140,000(TOC) 14.82% $ 8.00 09/25/03 $ 309,400 $ 683,200
2,000(TRIL) 1.11%(4) $ 8.25 01/21/08 $ 10,380 $ 26,300
7,500(VIZ) 2.19% $ 7.15 03/10/05 $ 21,825 $ 50,850
2,000(TRCC) 0.16%(4) $ 4.00 01/21/08 $ 5,040 $ 12,740
</TABLE>
- --------
(1) All of the options granted during the fiscal year are immediately
exercisable as of the end of the fiscal year, except options to purchase
shares of the common stock of Thermo Information Solutions Inc., Thermo
Trilogy Corporation and Trex Communications Corporation, which are not
exercisable until the earlier of (i) 90 days after the effective date of
the registration of that company's common stock under Section 12 of the
Exchange Act or (ii) nine years after the grant date. In all cases, the
shares acquired upon exercise are subject to repurchase by the granting
company at the exercise price if the optionee ceases to be employed by, or
ceases to be a director of, such company or any other Thermo Electron
company. The granting company may exercise its repurchase rights within
six months after the termination of the optionee's employment or the
cessation of directorship, as the case may be. For publicly-traded
companies, the repurchase rights generally lapse ratably over a one- to
ten-year period, depending on the option term, which may vary from five to
twelve years, provided that the optionee continues to be employed by or
serve as a director of the granting company or another Thermo Electron
company. Certain options have three-year terms and the repurchase rights
lapse in their entirety on the second anniversary of the grant date. For
companies whose shares are not publicly-traded, the repurchase rights
lapse in their entirety on the ninth anniversary of the grant date. The
granting company may permit the holders of options to exercise options and
to satisfy tax withholding obligations by surrendering shares equal in
fair market value to the exercise price or withholding obligation. Please
see footnote (1) on page 11 for the company abbreviations used in this
table.

(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the common stock of the
granting company, the optionee's continued employment or service as a
director through the option period and the date on which the options are
exercised.

(3) Since September 1996, Mr. Lewis has served as an officer of Thermo
Electron, most recently as chief operating officer, measurement and
detection. From time to time since September 1996, he has been, and in the
future he may be, granted options to purchase common stock of Thermo
Electron and its other subsidiaries for service in his capacity as an
officer of Thermo Electron. These options are not reported in the table as
they were granted as compensation for service to these companies in a
capacity other than in his capacity as an executive officer of the
Corporation.

(4) These options were granted under stock option plans maintained by Thermo
Electron companies other than the Corporation and, accordingly, are
reported as a percentage of total options granted to employees of such
companies.

14
<PAGE>

Stock Options Exercised During Fiscal 1998 and Fiscal Year-End Option Values

The following table reports certain information regarding stock option
exercises during fiscal 1998 and outstanding stock options held at the end of
fiscal 1998 by the named executive officers. No stock appreciation rights were
exercised or were outstanding during fiscal 1998.

Aggregated Option Exercises In Fiscal 1998 And Fiscal 1998 Year-End Option
Values
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options
Options at Fiscal At Fiscal
Shares Value Year-End Year-End
Acquired on Realized (Exercisable/ (Exercisable/
Name Company (1) Exercise (2) Unexercisable) (1) Unexercisable)
---- ----------- ----------- -------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Earl R. Lewis (3)....... (THI) 31,040 $614,126 172,085/0(4) $175,117/--
(MKA) -- -- 20,000/0 $ 0/--
(ONX) -- -- 33,333/0 $ 0/--
(TBA) -- -- 50,000/0 $ 49,400/--
(TOC) -- -- 225,000/0(5) $ 0/--
(TMQ) -- -- 125,000/0 $ 15,650/--
(THS) -- -- 50,000/0 $ 68,750/--
(VIZ) -- -- 25,000/0 $ 0/--
- --------------------------------------------------------------------------------------------
Richard W. K. Chapman... (THI) 10,983 $278,474 160,624/0 $285,020/--
(TMO) 150 $ 2,423 88,034/0(6) $ 55,531/--
(MKA) -- -- 7,500/0(7) $ 0/--
(ONX) -- -- 7,500/0(7) $ 0/--
(RGI) -- -- 4,000/0 $ 0/--
(TDX) -- -- 2,000/0 $ 0/--
(TBA) -- -- 30,000/0 $ 80,640/--
(TFG) -- -- 2,000/0 $ 0/--
(TFT) -- -- 6,750/0 $ 27,425/--
(TISI) -- -- 0/1,000 --/$0(8)
(TLZ) -- -- 5,000/0 $ 0/--
(TLT) -- -- 0/2,000 --/$0(8)
(TOC) -- -- 15,000/0 $ 0/--
(TMQ) -- -- 325,000/0 $457,725/--
(TSR) -- -- 2,000/0 $ 0/--
(THS) -- -- 4,000/0 $ 5,500/--
(TKN) 270 $ 4,975 --/-- --/--
(TRIL) -- -- 0/2,000 --/$0(8)
(VIZ) -- -- 7,500/0(7) $ 0/--
(TRCC) -- -- 0/2,000 --/$0(8)
(TXM) -- -- 4,000/0 $ 0/--
- --------------------------------------------------------------------------------------------
</TABLE>

15
<PAGE>

16
<PAGE>

<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options
Options at Fiscal At Fiscal
Shares Value Year-End Year-End
Acquired on Realized (Exercisable/ (Exercisable/
Name Company (1) Exercise (2) Unexercisable) (1) Unexercisable)
---- ----------- ----------- -------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Barry S. Howe........... (THI) 17,577 $126,294 113,750/0 $177,773/--
(TMO) -- -- 69,787/0(6) $ 36,160/--
(MKA) -- -- 7,500/0(7) $ 0/--
(ONX) -- -- 7,500/0(7) $ 0/--
(RGI) -- -- 4,000/0 $ 0/--
(TMD) -- -- 4,000/0 $ 0/--
(TDX) -- -- 2,000/0 $ 0/--
(TBA) -- -- 50,000/0 $134,400/--
(TCK) -- -- 6,000/0 $ 30,750/--
(TFG) -- -- 2,000/0 $ 0/--
(TFT) -- -- 15,750/0 $ 34,382/--
(TISI) -- -- 0/1,000 --/$0(5)
(TLZ) -- -- 5,000/0 $ 0/--
(TLT) -- -- 0/2,000 --/$0(5)
(TOC) -- -- 15,000/0 $ 0/--
(THP) -- -- 4,000/0 $ 0/--
(TMQ) -- -- 90,000/0(9) $ 28,170/--
(TSR) -- -- 2,000/0 $ 0/--
(THS) -- -- 104,000/0 $ 75,000/--
(TTT) -- -- 4,000/0 $ 0/--
(TKN) -- -- 4,000/0 $ 0/--
(TRIL) -- -- 0/2,000 --/$0(5)
(VIZ) -- -- 7,500/0(7) $ 0/--
(TRCC) -- -- 0/2,000 --/$0(5)
(TXM) -- -- 4,000/0 $ 0/--
</TABLE>
- --------
(1) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable as of fiscal year-end, except options to purchase
shares of the common stock of Thermo Information Solutions Inc.,
ThermoLyte Corporation, Thermo Trilogy Corporation and Trex Communications
Corporation, which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of that company's common
stock under Section 12 of the Exchange Act or (ii) nine years after the
grant date. In all cases, the shares acquired upon exercise of the options
reported in the table are subject to repurchase by the granting company at
the exercise price if the optionee ceases to be employed by, or ceases to
be a director of, such company or any other Thermo Electron company. The
granting company may exercise its repurchase rights within six months
after the termination of the optionee's employment or cessation of
directorship, as the case may be. For publicly-traded companies, the
repurchase rights generally lapse ratably over a one- to ten-year period,
depending on the option term, which may vary from five to twelve years,
provided that the optionee continues to be employed by or serve as a
director of the granting company or another Thermo Electron company.
Certain options have three-year terms and the repurchase rights lapse in
their entirety on the second anniversary of the grant date. For companies
whose shares are not publicly-traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date. The granting company
may permit the holders of options to exercise options and to satisfy tax
withholding obligations by surrendering shares equal in fair market value
to the exercise price or withholding obligation. Please see footnote (1)
on page 11 for the company abbreviations used in this table as well as the
following additional company abbreviations: Thermedics Inc (designated in
the table as TMD), Thermo Fibertek Corporation (designated in the table as
TFT), ThermoLase Corporation (designated in the table as TLZ), Thermo
Power Corporation (designated

17
<PAGE>

in the table as THP), Thermo TerraTech Corporation (designated in the table
as TTT), ThermoTrex Corporation (designated in the table as TKN) and
ThermoSpectra Corporation (designated in the table as THS).

(2) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.

(3) Since September 1996, Mr. Lewis has served as an officer of Thermo
Electron, most recently as chief operating officer, measurement and
detection. From time to time since September 1996, he has been, and in the
future he may be, granted options to purchase common stock of Thermo
Electron and its other subsidiaries for services in his capacity as an
officer of Thermo Electron. These options are not reported in the table as
they were granted as compensation for service to Thermo Electron in a
capacity other than in his capacity as an executive officer of the
Corporation.

(4) Options to purchase 62,500 shares of Common Stock granted to Mr. Lewis are
subject to the same terms as described in footnote (2) above, except that
the repurchase rights of the granting company generally do not lapse until
the tenth anniversary of the grant date. In the event of the employee's
death or involuntary termination prior to the tenth anniversary of the
grant date, the repurchase rights of the granting company shall be deemed
to have lapsed ratably over a five year period commencing with the fifth
anniversary of the grant date.

(5) Options to purchase 100,000 shares of the common stock of Thermo Optek
granted to Mr. Lewis are subject to the same terms as described in
footnote (2) above, except that the repurchase rights are deemed to lapse
20% per year commencing on the sixth anniversary of the grant date.

(6) Options to purchase 15,750, 45,000, 45,000 and 22,500 shares of the common
stock of Thermo Electron granted to Mr. Helm, Dr. Chapman, Dr. Rosenthal
and Mr. Howe, respectively, are subject to the same terms as described in
footnote (2) above, except that the repurchase rights of the granting
company generally do not lapse until the tenth anniversary of the grant
date. In the event of the employee's death or involuntary termination
prior to the tenth anniversary of the grant date, the repurchase rights of
the granting company shall be deemed to have lapsed ratably over a five-
year period commencing with the fifth anniversary of the grant date.

(7) Options to purchase 7,500 shares of common stock of Metrika Systems, 7,500
shares of common stock of ONIX Systems and 7,500 shares of common stock of
Thermo Vision granted to Dr. Chapman and to Mr. Howe are subject to the
same terms as described in footnote (2) above, except that the repurchase
rights are deemed to lapse 20% per year commencing on the fifth
anniversary of the grant date. Options to purchase 7,500 shares of common
stock of ONIX Systems and 7,500 shares of common stock of Thermo Vision
granted to Mr. Helm are subject to the same terms as described in footnote
(2) above, except that the repurchase rights are deemed to lapse 20% per
year commencing on the fifth anniversary of the grant date.

(8) No public market existed for the shares underlying these options as of
January 31, 1999. Accordingly, no value in excess of the exercise price
has been attributed to these options.

(9) Mr. Howe has two ThermoQuest options granted on January 10, 1996 that have
a 12-year term. The repurchase rights are deemed to lapse 100% on the
tenth anniversary for the first option for 40,000 shares. The repurchase
rights are deemed to lapse 18% on the first and second anniversaries of
the grant date and 8% annually starting the third anniversary of the grant
date for the second option for 50,000 shares.

Executive Retention Agreements

Thermo Electron has entered into agreements with certain executive officers
and key employees of Thermo Electron and its subsidiaries that provide
severance benefits if there is a change in control of Thermo Electron and
their employment is terminated by Thermo Electron "without cause" or by the
individual for "good reason," as these terms are defined therein, within 18
months thereafter. For purposes of these agreements, a change in control
exists upon (i) the acquisition by any person of 40% or more of the
outstanding common stock

18
<PAGE>

or voting securities of Thermo Electron; (ii) the failure of the Thermo
Electron board of directors to include a majority of directors who are
"continuing directors", which term is defined to include directors who were
members of Thermo Electron's board on the date of the agreement or who
subsequent to the date of the agreement were nominated or elected by a
majority of directors who were "continuing directors" at the time of such
nomination or election; (iii) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving Thermo
Electron or the sale or other disposition of all or substantially all of the
assets of Thermo Electron unless immediately after such transaction (a) all
holders of Thermo Electron common stock immediately prior to such transaction
own more than 60% of the outstanding voting securities of the resulting or
acquiring corporation in substantially the same proportions as their ownership
immediately prior to such transaction and (b) no person after the transaction
owns 40% or more of the outstanding voting securities of the resulting or
acquiring corporation; or (iv) approval by stockholders of a complete
liquidation or dissolution of Thermo Electron.

In 1998, Thermo Electron authorized an executive retention agreement with
each of Mr. Earl R. Lewis, Dr. Richard W. K. Chapman, Mr. Denis A. Helm, Mr.
Barry S. Howe and Dr. Robert J. Rosenthal. These agreements provide that in
the event the individual's employment is terminated under the circumstances
described above, the individual would be entitled to a lump sum payment equal
to the sum of (a) in the case of Mr. Lewis, two times, and in the case of
Messrs. Chapman, Helm, Howe and Rosenthal, one times, the individual's highest
annual base salary in any 12 month period during the prior five-year period,
plus (b) in the case of Mr. Lewis, two times, and in the case of Messrs.
Chapman, Helm, Howe and Rosenthal, one times, the individual's highest annual
bonus in any 12 month period during the prior five-year period. In addition,
the individual would be provided benefits for a period of, in the case of Mr.
Lewis, two years, and in the case of Messrs. Chapman, Helm, Howe and Rosenthal
one year, after such termination, substantially equivalent to the benefits
package the individual would have been otherwise entitled to receive if the
individual was not terminated. Further, all repurchase rights of Thermo
Electron and its subsidiaries shall lapse in their entirety with respect to
all options that the individual holds in Thermo Electron and its subsidiaries,
including the Corporation, as of the date of the change in control. Finally,
the individual would be entitled to a cash payment equal to, in the case of
Mr. Lewis, $20,000, and in the case of Messrs. Chapman, Helm, Howe and
Rosenthal $15,000, to be used toward outplacement services. These executive
retention agreements supersede and replace any and all prior severance
arrangements that these individuals had with Thermo Electron.

Assuming that the severance benefits would have been payable as of January
1, 1999, the lump sum salary and bonus payment under such agreement to Messrs.
Lewis, Chapman, Helm, Howe and Rosenthal would have been approximately
$1,140,000, $373,000, $280,000, $304,500 and $345,000, respectively. In the
event that payments under these agreements are deemed to be so called "excess
parachute payments" under the applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), the individuals would
be entitled to receive a gross-up payment equal to the amount of any excise
tax payable by such individual with respect to such payment, plus the amount
of all other additional taxes imposed on such individual attributable to the
receipt of such gross-up payment.

COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Compensation Philosophy

Decisions on compensation for the Corporation's executive officers are made
by the human resources committee of the board of directors (the "Committee").
The Committee follows guidelines established by the human resources committee
of the board of directors of its parent company, Thermo Electron. The
compensation policies followed by the Committee are designed to reward and
motivate executives in achieving long-term value for Stockholders and other
business objectives, to attract and retain dedicated, talented individuals to
accomplish the Corporation's objectives, to recognize individual contributions
as well as the performance of the Corporation and its subsidiaries, and to
encourage stock ownership by executives through stock-based compensation and
stock retention programs in order to link executive and Stockholder interests.

The Committee evaluates the competitiveness of its compensation practices
through the use of market surveys and competitive analyses prepared by its
outside compensation consultants and by participating in annual compensation
surveys, primarily "Project 777", an executive compensation survey prepared by
Management

19
<PAGE>

Compensation Services, a division of Hewitt Associates. The majority of firms
represented in the Project 777 survey are included in the Standard & Poor's
500 Index but do not necessarily correspond to the companies included in the
Corporation's peer group. Internal fairness of compensation within the
organization is also an important element of the Committee's compensation
philosophy. Compensation of executives is evaluated by comparing it to the
compensation of other executives within the Thermo Electron organization who
have responsibility to manage businesses of comparable size and complexity.

The compensation program of the Corporation consists of annual cash
compensation and long-term incentive compensation. Annual cash compensation is
composed of base salary and performance-based incentive compensation, which is
reviewed and determined annually. Long-term incentive compensation is in the
form of stock-based compensation such as stock options and restricted stock
awards. The process for determining the components of executive compensation
for the executive officers is described below.

Components of Executive Compensation

Annual Cash Compensation

Annual cash compensation consists of base salary and performance-based
incentive compensation. The cash incentive compensation paid to an executive
varies from year to year based on the performance of the Corporation and the
executive.

The Committee assesses the competitiveness of annual cash compensation by
establishing for each executive position at the beginning of each fiscal year
a salary and reference incentive compensation for the position that together
are intended to approximate the mid-point of competitive total annual cash
compensation for organizations that are of comparable size and complexity as
the Corporation.

Base Salary. Generally, executive salaries are adjusted gradually over time
to reflect competitive salary levels or other considerations, such as
geographic or regional market data, industry trends or internal fairness
within the Corporation. The Committee may also adjust individual salaries to
reflect the assumption of increased responsibilities. The salary increases in
fiscal 1998 for the chief executive officer and the other named executive
officers generally reflect this practice of gradual adjustment and moderation.

Performance-based Incentive Compensation. The amount of incentive
compensation actually earned by an executive from year to year varies with the
performance of the Corporation and the executive. The Committee evaluates
performance (1) by formulae using financial measures of profitability and
contribution to Stockholder value and (2) by subjectively evaluating the
executive's contribution to the achievement of the Corporation's long-term
objectives. In fiscal 1998, the formulae used by the Committee measured return
on net assets, return on sales, earnings improvement over a three-year period
for the Corporation and, to a lesser extent, the Corporation's parent company,
and three-year growth in earnings per share for the same companies. The
financial measures are not financial targets that are met, not met or
exceeded, but assess the financial performance relative to the financial
performance of comparable companies and are designed to penalize below-average
performance and reward above-average performance. The relative weighting of
the financial measures and subjective evaluation varies depending on the
executive's role and responsibilities within the organization.

The incentive compensation awarded to the named executive officers (other
than the chief executive officer, which is discussed below under the caption
"1998 CEO Compensation") for fiscal 1998 was lower in each case than the
incentive compensation awarded the previous year and reflected the financial
performance in fiscal 1998 of the businesses of the Corporation for which the
executives were responsible, as well as the Corporation as a whole.

Long-term Incentive Compensation

The primary goal of the Corporation and its parent company is to excel in
the creation of long-term value for the Stockholders. The principal incentive
tool used to achieve this goal is the periodic award to key employees of
stock-based compensation in shares of Common Stock and common stock of other
Thermo Electron companies.

20
<PAGE>

The Committee and management believe that awards of stock-based compensation
of both the Corporation and other companies within the Thermo Electron group
of companies accomplish many objectives. The award of stock-based compensation
to key employees encourages equity ownership in the Corporation, and closely
aligns management's interests to the interests of all the Stockholders. The
emphasis on stock-based compensation also results in management's compensation
being closely linked to stock performance. In addition, because the employee's
rights in the stock-based compensation vest over periods of varying durations
and are subject to forfeiture if the employee leaves the Corporation
prematurely, stock-based compensation is an incentive for key employees to
remain with the Corporation long-term. The Committee believes stock-based
compensation awards in the Corporation's majority-owned subsidiaries, and in
its parent company, Thermo Electron, and the other majority-owned subsidiaries
of Thermo Electron, are an important tool in providing incentives for
performance within the entire organization.

In determining awards, the Committee considers for each executive officer
the annual value of stock-based compensation in the Corporation and other
companies within the Thermo Electron organization that vest in the next year
and compares the individual's total compensation using this value to
competitive data. The Committee uses a modified Black-Scholes option pricing
model to determine the value of an award. In addition, the Committee considers
the aggregate amount of outstanding awards of stock-based compensation granted
to all employees to monitor the number of outstanding awards under the
Corporation's stock-based compensation programs. In determining the
appropriate number of outstanding awards, the Committee considers such factors
as the size of the company, its stage of development, and its growth strategy,
as well as the aggregate awards and compensation practices of comparable
companies.

The Committee periodically awards stock-based compensation in the form of
stock options and restricted stock based on its assessment of the total
compensation of the executive, the actual and anticipated contributions of the
executive (which includes a subjective assessment by the Committee of the
executive's future potential within the organization), as well as the value of
previously awarded stock-based compensation as described above. Such stock-
based compensation awards were made to the named executive officers in 1998.
In addition, the stock option awards made to the named executive officers in
1998 with respect to the common stock of Thermo Electron and certain majority-
owned subsidiaries of the Corporation and Thermo Electron were determined by
the human resources committees of the board of directors of the granting
company using a similar analysis. In addition, certain options awarded in 1998
to the named executive officers with respect to the common stock of Thermo
Electron were made by the Thermo Electron human resources committee under a
program that awards options to certain eligible employees annually based on
the number of shares of common stock of Thermo Electron held by the employee,
as an incentive to buy and hold shares of Thermo Electron common stock.

Stock Ownership Policies

The Committee's compensation program is also designed to encourage
executives to own shares of the Corporation's Common Stock. The Committee
believes in encouraging executives to own and retain stock acquired through
its stock-based compensation program or otherwise provides additional
incentive for executive officers to follow strategies designed to maximize
long-term value to Stockholders.

The Committee established a stock holding policy for executive officers of
the Corporation that required executive officers to own a multiple of their
compensation in shares of the Corporation's Common Stock. For the chief
executive officer, the multiple is one times his base salary and reference
incentive compensation for the calendar year. For all other officers, the
multiple was one times the officer's base salary. The Committee deemed it
appropriate to permit officers to achieve these ownership levels over a three-
year period. The policy has been amended to apply only to the chief executive
officer.

In order to assist officers in complying with the policy, the Committee also
adopted a stock holding assistance plan under which the Corporation was
authorized to make interest-free loans to executive officers to enable them to
purchase shares of Common Stock in the open market. This plan was also amended
to apply only to the chief executive officer. The loans are required to be
repaid upon the earlier of demand or the fifth anniversary of the date of the
loan, unless otherwise determined by the Committee. No loans were outstanding
under this plan in 1998.

21
<PAGE>

The Committee also has adopted a policy requiring its executive officers to
hold shares of Common Stock equal to one-half of their net option exercises
over a period of five years. The net option exercise is determined by
calculating the number of shares acquired upon exercise of a stock option,
after deducting the number of shares that could have been traded to exercise
the option and the number of shares that could have been surrendered to
satisfy tax withholding obligations attributable to the exercise of the
options.

Similar stock holding policies and stock holding assistance plans have been
adopted by each of the Corporation's publicly-traded, majority-owned
subsidiaries. Certain executive officers of the Corporation who are chief
executive officers of these subsidiaries are required to comply with these
stock holding policies in lieu of the Corporation's stock holding policy and
have outstanding loans under such subsidiaries' stock holding assistance
plans. See "Relationship with Affiliates--Stock Holding Assistance Plans."

Policy on Deductibility of Compensation

Section 162(m) of the Internal Revenue Code limits the tax deduction
available to public companies for annual compensation paid to senior
executives in excess of $1 million unless the compensation qualifies as
"performance based" or is otherwise exempt under Section 162(m). The Committee
considers the potential effect of Section 162(m) in designing its compensation
program, but reserves the right to use its independent judgment to approve
nondeductible compensation, while taking into account the financial effects
such action may have on the Corporation. From time to time, the Committee
reexamines the Corporation's compensation practices and the effect of Section
162(m).

1998 CEO Compensation

Annual cash compensation for Mr. Lewis is reviewed by both the Committee and
the human resources committee of the board of directors of Thermo Electron,
due to his responsibilities as both the Corporation's chief executive officer
and as the chief operating officer, measurement and detection, of Thermo
Electron, the Corporation's parent company. Each committee evaluates Mr.
Lewis' performance and proposed compensation using the same process as that
described above for the other executive officers of the Corporation. At the
Thermo Electron level, Mr. Lewis was evaluated on his performance related to
the Corporation, as well as other operating units of Thermo Electron for which
he was responsible, weighted in accordance with the amount of time and effort
devoted to each operation. The Corporation's Committee then reviews the
analysis and determinations of the Thermo Electron committee and determines an
appropriate allocation of Mr. Lewis's compensation to be paid by the
Corporation, based on his relative responsibilities at the Corporation and
Thermo Electron.

In December 1997, the Committee reviewed and approved a salary increase for
Mr. Lewis for fiscal 1998, which reflected his assumption of increased
responsibilities within the Thermo Electron organization as a whole and his
promotion to chief executive officer of the Corporation. In March 1999, the
Committee conducted its review of Mr. Lewis' proposed cash incentive
compensation based on fiscal 1998 performance. Mr. Lewis' performance-based
incentive compensation was weighted 80% upon the financial performance of the
Corporation and its parent company, Thermo Electron, using the measures
described above for all executive officers under "Components of Executive
Compensation--Annual Cash Compensation--Performance-based Incentive
Compensation," and 20% upon a subjective evaluation of his performance. The
incentive compensation paid to Mr. Lewis for fiscal 1998 was substantially
lower than incentive compensation paid in the prior year and reflected the
financial performance of the Corporation and Thermo Electron in fiscal 1998.
The Committee concurred in the recommendations made by the Thermo Electron
committee and agreed to an allocation of 80% of Mr. Lewis' annual cash
compensation for 1998 to the Corporation.

Awards to Mr. Lewis of stock-based compensation in Common Stock are reviewed
and determined periodically by the Committee using the criteria described
above under the caption "Components of Executive Compensation--Long-term
Incentive Compensation." No awards of stock-based compensation in Common Stock
were made to Mr. Lewis in fiscal 1998.

Due to Mr. Lewis' position as a director of the Corporation's majority-owned
subsidiaries and as chief executive officer of the Corporation, from time to
time he may receive awards to purchase shares of the common

22
<PAGE>

stock of such subsidiaries. These awards are determined using the same
analysis as that described above under the caption "Components of Executive
Compensation--Long-term Incentive Compensation." In 1998, Mr. Lewis was
awarded stock options to purchase shares of the common stock of ONIX Systems
under this program.

Col. Frank Borman (Chairman)
Mr. Polyvios C. Vintiadis

COMPARATIVE PERFORMANCE GRAPH

The Securities and Exchange Commission requires that the Corporation include
in this proxy statement a line-graph presentation comparing cumulative, five-
year shareholder returns for the Common Stock with a broad-based market index
and either a nationally recognized industry standard or an index of peer
companies selected by the Corporation. The Corporation has compared its
performance with the American Stock Exchange Market Value Index and a peer
group of instrument companies comprised of Beckman Instruments Inc., Dionex
Inc., Emerson Electric Corp., Perkin-Elmer Corp. and Varian Associates Inc.
(the "Peer Group") as of the last trading day of the Corporation's fiscal
year.

Comparison of Total Return Among Thermo Instrument Systems Inc., the American
Stock Exchange Market Value Index and
the Peer Group from December 31, 1993 to December 31, 1998

[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THI 100 92 145 177 228 101
- --------------------------------------------------------------------------------------------------
AMEX 100 91 115 122 148 151
- --------------------------------------------------------------------------------------------------
Peer Group 100 103 140 174 203 228
- --------------------------------------------------------------------------------------------------

</TABLE>

The total return for the Common Stock (THI), the American Stock Exchange
Market Value Index (AMEX), and the Peer Group assumes the reinvestment of
dividends, although dividends have not been declared on the Common Stock. The
American Stock Exchange Market Value Index tracks the aggregate performance of
equity securities of companies listed on the American Stock Exchange. The
Common Stock is traded on the American Stock Exchange under the ticker symbol
"THI."

23
<PAGE>

RELATIONSHIP WITH AFFILIATES

Thermo Electron has, from time to time, caused its subsidiaries to sell
minority interests to investors, resulting in several majority-owned, private
and publicly-held subsidiaries. Thermo Electron has created the Corporation as
a majority-owned, publicly-held subsidiary. The Corporation and such other
majority-owned Thermo Electron subsidiaries are hereinafter referred to as the
"Thermo Subsidiaries."

Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries, including the Corporation, have, adopted the Thermo
Electron Corporate Charter (the "Charter") to define the relationships and
delineate the nature of such cooperation among themselves. The purpose of the
Charter is to ensure that (1) all of the companies and their stockholders are
treated consistently and fairly, (2) the scope and nature of the cooperation
among the companies, and each company's responsibilities, are adequately
defined, (3) each company has access to the combined resources and financial,
managerial and technological strengths of the others, and (4) Thermo Electron
and the Thermo Subsidiaries, in the aggregate, are able to obtain the most
favorable terms from outside parties.

To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members,
coordinating the access of Thermo Electron and the Thermo Subsidiaries (the
"Thermo Group") to external financing sources, ensuring compliance with
external financial covenants and internal financial policies, assisting in the
formulation of long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also provide guarantees
of debt or other obligations of the Thermo Subsidiaries or may obtain external
financing at the parent level for the benefit of the Thermo Subsidiaries. In
certain instances, the Thermo Subsidiaries may provide credit support to, or
on behalf of, the consolidated entity or may obtain financing directly from
external financing sources. Under the Charter, Thermo Electron is responsible
for determining that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo Group, and for
apportioning such constraints within the Thermo Group. In addition, Thermo
Electron establishes certain internal policies and procedures applicable to
members of the Thermo Group. The cost of the services provided by Thermo
Electron to the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and the Thermo Subsidiaries.

The Charter currently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter
may be amended at any time by agreement of the participants. Any Thermo
Subsidiary, including the Corporation, can withdraw from participation in the
Charter upon 30 days' prior notice. In addition, Thermo Electron may terminate
a subsidiary's participation in the Charter in the event the subsidiary ceases
to be controlled by Thermo Electron or ceases to comply with the Charter or
the policies and procedures applicable to the Thermo Group. A withdrawal from
the Charter automatically terminates the corporate services agreement and tax
allocation agreement (if any) in effect between the withdrawing company and
Thermo Electron. The withdrawal from participation does not terminate
outstanding commitments to third parties made by the withdrawing company, or
by Thermo Electron or other members of the Thermo Group, prior to the
withdrawal. In addition, a withdrawing company is required to continue to
comply with all policies and procedures applicable to the Thermo Group and to
provide certain administrative functions mandated by Thermo Electron so long
as the withdrawing company is controlled by or affiliated with Thermo
Electron.

As provided in the Charter, the Corporation and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and financial and other services to the Corporation. The
Corporation was assessed an annual fee equal to 0.8% of the Corporation's

24
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revenues for these services in fiscal 1998. The annual fee will remain at 0.8%
of the Corporation's revenues for fiscal 1999. The fee is reviewed annually
and may be changed by mutual agreement of the Corporation and Thermo Electron.
During fiscal 1998, Thermo Electron assessed the Corporation $13,300,000 in
fees under the Services Agreement. Management believes that the charges under
the Services Agreement are reasonable and that the terms of the Services
Agreement are fair to the Corporation. In fiscal 1998, the Corporation was
billed an additional $178,000 by Thermo Electron for certain administrative
services required by the Corporation that were not covered by the Services
Agreement. The Services Agreement automatically renews for successive one-year
terms, unless canceled by the Corporation upon 30 days' prior notice. In
addition, the Services Agreement terminates automatically in the event the
Corporation ceases to be a member of the Thermo Group or ceases to be a
participant in the Charter. In the event of a termination of the Services
Agreement, the Corporation will be required to pay a termination fee equal to
the fee that was paid by the Corporation for services under the Services
Agreement for the nine-month period prior to termination. Following
termination, Thermo Electron may provide certain administrative services on an
as-requested basis by the Corporation or as required in order to meet the
Corporation's obligations under Thermo Electron's policies and procedures.
Thermo Electron will charge the Corporation a fee equal to the market rate for
comparable services if such services are provided to the Corporation following
termination.

The Corporation has entered into a Tax Allocation Agreement with Thermo
Electron that outlines the terms under which the Corporation will be included
in Thermo Electron's consolidated Federal and state income tax returns. Under
current law, the Corporation will be included in such tax returns so long as
Thermo Electron owns at least 80% of the Corporation's outstanding Common
Stock. In years in which the Corporation has taxable income, it will pay to
Thermo Electron amounts comparable to the taxes the Corporation would have
paid if it had filed its own separate company tax returns. If Thermo
Electron's equity ownership of the Corporation were to drop below 80%, the
Company would file its own tax returns. In 1998, the Corporation paid Thermo
Electron $28,200,000 under the Tax Allocation Agreement.

From time to time the Corporation may transact business with other companies
in the Thermo Group.

The Corporation purchases and sells products and/or services in the ordinary
course of business to Thermo Electron and Thermo Electron's other
subsidiaries. In 1998, the Corporation sold a total of $1,083,000 of products
to Thermo Electron and its other subsidiaries and purchased a total of
$1,826,000 of products and/or services from such companies.

Thermo Optek leases office and manufacturing space to Nicolet Biomedical
Inc. ("Nicolet Biomedical"), a wholly owned subsidiary of Thermo Electron,
pursuant to an arrangement whereby Thermo Optek charges Nicolet Biomedical its
allocated share of the occupancy expenses of Thermo Optek's principal
Wisconsin facility, based on the space Nicolet Biomedical utilizes. Thermo
Optek recorded operating lease income of $768,000 in 1998 from Nicolet
Biomedical. This lease is effective until December 31, 2001 but may be
terminated by Nicolet Biomedical upon 30 days' prior notice to Thermo Optek.

As of January 2, 1999, the Corporation had outstanding $140,000,000 of
indebtedness to Thermo Electron, represented by a 3 3/4% Senior Convertible
Note due 2000.

In connection with the 1997 acquisition of Spectronic Instruments Inc. and
VG Systems Limited from the Corporation, Thermo Optek borrowed $40,000,000
from Thermo Electron pursuant to a promissory note that was paid in August
1998. This note bore interest at the 90-day Commercial Paper Composite Rate
plus 25 basis points, set at the beginning of each quarter. The interest rate
for this note as of the payment date was 5.73%.

In March 1997, the Corporation borrowed $210,000,000 from Thermo Electron to
fund its acquisition of shares of Life Sciences International plc ("Life
Sciences") pursuant to the Corporation's tender offer for all of the
outstanding shares of Life Sciences. This obligation was evidenced by a
promissory note due March 26, 1999 bearing interest at a rate equal to the 90-
day Commercial Paper Composite Rate plus 25 basis points. $105,000,000 of this
note was paid off in September 1997 and the remaining outstanding balance was
paid off in January 1998.

25
<PAGE>

On November 6, 1997, Thermo Power Corporation, a majority-owned subsidiary
of Thermo Electron ("Thermo Power"), acquired Peek plc In January 1998, the
Corporation's ONIX Systems subsidiary acquired the Peek Measurement business
from Thermo Power for approximately $19,100,000, effective November 1997. The
purchase price represents the sum of (i) the net tangible book value of the
Peek Measurement Business as of the date of the acquisition by Thermo Power of
Peek plc in November 1997, plus (ii) the total goodwill associated with Thermo
Power's acquisition of Peek plc equal to the total fiscal 1997 revenue of the
Peek Measurement Business relative to the total revenues of Peek plc for such
period, plus (iii) $1,000,000, which represents an estimate of the amount of
tax incurred by Thermo Power as a result of the transfer of the Peek
Measurement Business to ONIX Systems. In addition, ONIX Systems paid $256,000
in interest, representing interest on the purchase price from November 6, 1997
through January 29, 1998 at an interest rate equal to the 90-day Commercial
Paper Composite Rate plus 25 basis points, set at the beginning of each
quarter. The methodology used to determine the purchase price was approved by
the boards of directors of ONIX Systems and Thermo Power.

In March 1999, the Corporation borrowed $200,000,000 from Thermo Electron to
partially fund its acquisition of Spectra-Physics AB ("SPAB") pursuant to the
Corporation's tender offer for all of the outstanding shares of SPAB. This
obligation is evidenced by a promissory note due August 27, 1999 and bears
interest at a rate of 5.03% from March 3, 1999 through April 3, 1999.
Thereafter the note bears interest at a rate equal to the Dealer Commercial
Paper Rate for 30-day maturities as reported in the Wall Street Journal ("DCP
Rate") plus 25 basis points unless the Corporation's cash equivalents invested
with Thermo Electron are less than the total outstanding principal amount of
the note. In that event, the portion of the outstanding principal amount of
the note that is in excess of the Corporation's cash balance invested with
Thermo Electron would bear interest at a rate equal to the DCP Rate plus 125
basis points and the remaining principal balance would bear interest at a rate
equal to the DCP Rate plus 25 basis points.

ONIX Systems leases approximately 24,000 square feet of office and
manufacturing space in Winchester, England on a month-to-month basis from
Thermo Power. ONIX Systems pays Thermo Power rent in an amount that is
approximately equal to the pro rata share of Thermo Power's occupancy costs,
including utilities and taxes, which payments in 1998 were approximately
$220,000.

In August 1998, Thermo Electron announced a proposed reorganization
involving certain of Thermo Electron's subsidiaries, including the
Corporation. As part of this reorganization, Thermo Electron announced that
ThermoSpectra may be taken private. It is currently contemplated that
ThermoSpectra's public shareholders would receive cash in exchange for their
shares of common stock of ThermoSpectra. The completion of this transaction is
subject to numerous conditions, including the establishment of the price; the
approval of the board of directors of the Corporation; the negotiation and
execution of a definitive purchase and sale or merger agreement; the receipt
of a fairness opinion from an investment banking firm that the transaction is
fair to ThermoSpectra's shareholders (other than Thermo Instrument and Thermo
Electron) from a financial point of view; the approval of ThermoSpectra's
independent directors who are serving on a special committee for the purpose
of evaluating and negotiating the proposed transaction, as well as approval by
ThermoSpectra's entire Board of Directors; and clearance by the Securities and
Exchange Commission of any necessary documents regarding the proposed
transaction.

The Corporation, along with certain other Thermo Subsidiaries, participates
in a notional pool arrangement with Barclays Bank, which includes a
$71,017,000 credit facility. The Corporation has access to $45,162,000 under
this credit facility. Only U.K.-based Thermo Subsidiaries participate in this
arrangement. Under this
arrangement the Bank notionally combines the positive and negative cash
balances held by the participants to calculate the net interest yield/expense
for the group. The benefit derived from this arrangement is then allocated
based on balances attributable to the respective participants. Thermo Electron
guarantees all of the obligations of each participant in this arrangement. As
of January 2, 1999, the Corporation had a positive cash balance of
approximately $26,726,000, based on an exchange rate of $1.6708/GBP 1.00. For
1998, the average annual interest rate earned on GBP deposits by participants
in this credit arrangement was approximately 7.7225% and the average annual
interest rate paid on overdrafts was approximately 7.485%.

26
<PAGE>

Until mid-December 1998, the Corporation, along with certain other Thermo
Subsidiaries, participated in a notional pool arrangement with ABN AMRO, which
included a $29,719,000 credit facility. The Corporation had access to
$10,880,000 under this credit facility. Only European-based Thermo
Subsidiaries participated in this arrangement. Under this arrangement the Bank
notionally combined the positive and negative cash balances held by the
participants to calculate the net interest yield/expense for the group. The
benefit derived from this arrangement was then allocated based on balances
attributable to the respective participants. Thermo Electron guaranteed all of
the obligations of each participant in this arrangement. For 1998, the average
annual interest rate earned on NLG deposits by participants in this credit
arrangement was approximately 5.00% and the average annual interest rate paid
on overdrafts was approximately 5.00%.

As of mid-December 1998, the Corporation, along with certain other Thermo
Subsidiaries, has entered into a modification of the above-described
arrangement with ABN AMRO. Only European-based Thermo Subsidiaries participate
in this arrangement. The new arrangement with ABN AMRO consists of a zero
balance arrangement, which includes a $29,719,000 credit facility. The
Corporation has access to $10,880,000 under this credit facility. Funds
borrowed by the Corporation under this arrangement pay interest at a rate set
by Thermo Finance B.V., a wholly-owned subsidiary of Thermo Electron, at the
beginning of each month, based on Netherlands market rates. Funds invested by
the Corporation under the arrangement earn a rate set by Thermo Finance B.V.
at the beginning of each month, based on Netherlands market rates. Such
invested funds are collateralized with investments principally consisting of
corporate notes, U.S. government-agency securities, commercial paper, money
market funds, and other marketable securities, in the amount of at least 103%
of such obligation. Thermo Electron guarantees all of the obligations of each
participant in this arrangement. As of January 2, 1999, the Corporation had a
positive cash balance of approximately $10,355,000 based on an exchange rate
of $0.5307/NLG 1.00. As of January 2, 1999, the average annual interest rate
earned on NLG deposits by participants in this credit arrangement was
approximately 3.63% and the average annual interest rate paid on overdrafts
was approximately 4.50%.

In connection with the 1996 acquisition of Kevex Instruments and Kevex X-
ray, ThermoSpectra borrowed $15,000,000 from Thermo Electron pursuant to a
promissory note that was paid in August 1998. In connection with the
acquisition of Park Scientific Instruments Corporation in March 1997,
ThermoSpectra borrowed $10,000,000 from Thermo Electron pursuant to a
promissory note that was paid in March 1999. In connection with the
acquisition of NESLAB Instruments, Inc. and its related sales and service
entity NESLAB Instruments Europa BV in the Netherlands, from the Corporation
in July 1997, ThermoSpectra borrowed $45,000,000 from Thermo Electron,
pursuant to a promissory note due July 1999. To partially finance the
acquisition of Sierra Research and Technology Inc. in July 1997, ThermoSpectra
borrowed $5,000,000 from Thermo Electron pursuant to a promissory note due
July 1999. These notes bear interest at the 90-day Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter. The interest
rate for the notes outstanding in 1997 was 5.76%.

At January 2, 1999, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $14,199,000 for amounts due under the Services
Agreement and related administrative charges, for other products and services,
and for miscellaneous items, excluding loans described above and $12,500,000
due to Thermo Electron under the Tax Allocation Agreement, net of amounts owed
to the Corporation by Thermo Electron and its other subsidiaries for products,
services and other miscellaneous items. The largest amount of such net
indebtedness owed by the Corporation to Thermo Electron and its other
subsidiaries since January 4, 1998 was $22,590,000. These amounts do not bear
interest and are expected to be paid in the normal course of business.

Thermo Electron beneficially owned approximately 86.93% of the Common Stock
as of January 31, 1999. Thermo Electron intends for the foreseeable future to
maintain at least 80% ownership of the Corporation. This may require the
purchase by Thermo Electron of additional shares of Common Stock from time to
time as the number of outstanding shares issued by the Corporation increases.
These purchases may be made either in the open market or directly from the
Corporation or through conversion of convertible debentures owned by Thermo
Electron. The Corporation adopted a plan for the sale of its shares to Thermo
Electron at the request of Thermo

27
<PAGE>

Electron to allow Thermo Electron to maintain 80% ownership of the
Corporation. The sale of shares pursuant to such plan would be made at fair
market value and would be subject to approval of a committee of the board of
directors formed for that purpose.

As of January 2, 1999, approximately $392,000,000 of the Corporation's cash
equivalents were invested in a repurchase agreement with Thermo Electron.
Under this agreement, the Corporation in effect lends excess cash to Thermo
Electron, which Thermo Electron collateralizes with investments principally
consisting of corporate notes, U.S. government agency securities, money market
funds, commercial paper and other marketable securities, in the amount of at
least 103% of such obligation. The Corporation's funds subject to the
repurchase agreement are readily convertible into cash by the Corporation. The
repurchase agreement earns a rate based on the 90-day Commercial Paper
Composite Rate plus 25 basis points, set at the beginning of each quarter.

Stock Holding Assistance Plans

The human resources committee of the Corporation (the "Committee") has
established a stock holding policy that requires executive officers of the
Corporation to acquire and hold a minimum number of shares of Common Stock. In
order to assist the executive officers in complying with the policy, the
Committee also established a stock holding assistance plan under which the
Corporation may make interest-free loans to executive officers to enable them
to purchase Common Stock in the open market. This policy and plan were
subsequently amended to apply only to the chief executive officer of the
Corporation. No such loans are currently outstanding under the plan.

Each of the Corporation's publicly-traded, majority-owned subsidiaries have
adopted similar stock holding policies and stock holding assistance plans,
which were applicable to their executive officers prior to their amendment to
make them applicable only to their chief executive officers. Certain executive
officers of the Corporation are also the chief executive officers of these
subsidiaries and are required to comply with the subsidiary's stock holding
policies. Mr. Earl R. Lewis, the Corporation's president and chief executive
officer, was also the chief executive officer of Thermo Optek until January 4,
1998. Dr. Richard W. K. Chapman, a senior vice president of the Corporation,
is also the chief executive officer of ThermoQuest and was chairman of the
board of Thermo BioAnalysis until June 26, 1997. Mr. Barry S. Howe, a vice
president of the Corporation, was also the chief executive officer of Thermo
BioAnalysis until March 11, 1998 and is currently the chief executive officer
of ThermoSpectra. Mr. Rosenthal, a vice president of the Corporation, was also
the chief executive officer of Thermo Optek in fiscal 1998. In 1996, Mr. Lewis
received a loan in the principal amount of $194,029 under the Thermo Optek
stock holding assistance plan to purchase 15,000 shares of the common stock of
Thermo Optek, of which amount $155,224 is still outstanding. Dr. Chapman
received loans in 1996 in the principal amounts of $210,653 and $131,176,
under the stock holding assistance plans of ThermoQuest and Thermo
BioAnalysis, respectively, to purchase 15,000 shares of the common stock of
ThermoQuest and 10,000 shares of the common stock of Thermo BioAnalysis, of
which amounts $168,523 and $131,176, respectively, are still outstanding. In
1996, Mr. Howe received loans in the principal amount of $164,375 under the
stock holding assistance plan of Thermo BioAnalysis to purchase 12,000 shares
of Thermo BioAnalysis, of which amount $131,500 is still outstanding. In 1998,
Mr. Howe received a loan in the principal amount of $141,991.78 to purchase
15,000 shares of Thermo BioAnalysis, of which the entire amount is still
outstanding. In 1997, Mr. Rosenthal received a loan in the principal amount of
$229,616 under the Thermo Optek stock holding assistance plan, to purchase
15,000 shares of Thermo Optek, of which the entire amount is still
outstanding. Each of these loans is repayable upon the earlier of demand or
the fifth anniversary of the date of the loan, unless otherwise determined by
the human resources committee of the board of directors of the applicable
company.

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<PAGE>

APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1999. Arthur Andersen LLP has acted as
independent public accountants for the Corporation since 1986. Representatives
of that firm are expected to be present at the meeting, will have the
opportunity to make a statement if they desire to do so and will be available
to respond to questions.

OTHER ACTION

Management is not aware at this time of any other matters that will be
presented for action at the meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.

STOCKHOLDER PROPOSALS

Proposals of Stockholders intended to be included in the proxy statement and
form of proxy relating to the 2000 Annual Meeting of the Stockholders of the
Corporation and to be presented at such meeting must be received by the
Corporation for inclusion in the proxy statement and form of proxy no later
than December 17, 1999. Notices of Stockholder proposals submitted outside the
processes of Rule 14a-8 of the Exchange Act (relating to proposals to be
presented at the meeting but not included in the Corporation's proxy statement
and form of proxy), will be considered untimely, and thus the Corporation's
proxy may confer discretionary voting authority on the persons named in the
proxy with regard to such proposals, if received after March 5, 2000.

SOLICITATION STATEMENT

The cost of solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit proxies personally or by telephone, facsimile
transmission or telegram. Brokers, nominees, custodians and fiduciaries are
requested to forward solicitation materials to obtain voting instructions from
beneficial owners of stock registered in their names, and the Corporation will
reimburse such parties for their reasonable charges and expenses in connection
therewith.

Hurst, Texas
April 16, 1999

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FORM OF PROXY

THERMO INSTRUMENT SYSTEMS INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 27, 1999

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints Earl R. Lewis, Theo Melas-Kyriazi and Arvin
H. Smith, or any one of them in the absence of the others, as attorneys and
proxies of the undersigned, with full power of substitution, for and in the name
of the undersigned, to represent the undersigned at the Annual Meeting of the
Stockholders of Thermo Instrument Systems Inc., a Delaware corporation (the
"Company"), to be held on Thursday, May 27, 1999 at 11:00 a.m. at the Westin
Hotel, 70 Third Avenue, Waltham, Massachusetts, and at any adjournment or
postponement thereof, and to vote all shares of common stock of the Company
standing in the name of the undersigned on March 30, 1999, with all of the
powers the undersigned would possess if personally present at such meeting:

(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)

<PAGE>
Please mark your
[ X ] votes as in this
example.

1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).

FOR [ ] WITHHELD [ ]

FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any):
-----------------------------------

Nominees: Frank Borman, George N. Hatsopoulos, John N. Hatsopoulos, Earl R.
Lewis, Arvin H. Smith and Polyvios C. Vintiadis.

2. In their discretion on such other matters as may properly come before the
Meeting.

The shares represented by this Proxy will be voted "FOR" the proposals set forth
above if no instruction to the contrary is indicated or if no instruction is
given.

Copies of the Notice of Meeting and of the Proxy Statement have been received by
the undersigned.

PLEASE DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.

SIGNATURE(S) DATE
-------------------------------------------- -------------------
Note: This proxy should be dated, signed by the shareholder(s) exactly as his or
her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are
held by joint tenants or as community property, both should sign.