THERMO CARDIOSYSTEMS INC, DEF 14A, 1995-04-25

THERMO CARDIOSYSTEMS INC
DEF 14A, 1995-04-25
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS

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<PAGE>

SCHEDULE 14A INFORMATION

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 BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))

[_] Definitive Additional Materials

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

Thermo Cardiosystems Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).

[_] 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:

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

(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):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_] 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:

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

(3) Filing Party:

(4) Date Filed:

Notes:

<PAGE>

Thermo Cardiosystems Inc.
470 Wildwood Street
P.O. Box 2697
Woburn, Massachusetts 01888-2697

April 25, 1995

Dear Stockholder:

The enclosed Notice calls the 1995 Annual Meeting of the Stockholders of
Thermo Cardiosystems Inc. I respectfully request all Stockholders attend this
meeting, if possible.

Our Annual Report for the year ended December 31, 1994, 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 and 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,

Victor L. Poirier
President and Chief
Executive Officer
<PAGE>

Thermo Cardiosystems Inc.
470 Wildwood Street
P.O. Box 2697
Woburn, Massachusetts 01888-2697

April 25, 1995

To the Holders of the Common Stock of
Thermo Cardiosystems Inc.

NOTICE OF ANNUAL MEETING

The 1995 Annual Meeting of the Stockholders of Thermo Cardiosystems Inc. (the
"Corporation") will be held on Tuesday, May 23, 1995, at 4:00 p.m., at the
Hyatt Regency Hotel, Hilton Head, South Carolina. The purposes of the Meeting
are to consider and take action upon the following matters:

1.Election of eight Directors.

2. A proposal recommended by the Board of Directors to amend the Directors
Stock Option Plan to change the formula for the award of stock options to
purchase common stock of the Corporation to its outside Directors.

3. 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 notice of and
vote at the Meeting is April 6, 1995.

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 stock 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
Clerk
<PAGE>

PROXY STATEMENT

The enclosed Proxy is solicited by the Board of Directors of Thermo
Cardiosystems Inc. (the "Corporation") for use at the 1995 Annual Meeting of
the Stockholders (the "Meeting") to be held on Tuesday, May 23, 1995, at 4:00
p.m. at the Hyatt Regency Hotel, Hilton Head, South Carolina, and any
adjournment thereof. The mailing address of the executive office of the
Corporation is 470 Wildwood Street, P.O. Box 2697, Woburn, Massachusetts 01888-
2697. This Proxy Statement and the enclosed Proxy were first furnished to
Stockholders of the Corporation on or about April 24, 1995.

VOTING PROCEDURES

The Board of Directors intends to present to the Meeting the election of
eight Directors, constituting the entire Board of Directors, as well as one
other matter: a proposal to amend the Directors Stock Option Plan to change the
formula for the award of stock options to purchase common stock of the
Corporation to its outside Directors.

The representation in person or by proxy of a majority of the outstanding
shares of 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 only be voted 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.
All signed and returned proxies will be counted towards establishing a quorum
for the Meeting, regardless of how the shares are voted.

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,
for the management proposal, 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 and entitled to vote
on the election. For all other matters to be voted upon at the Meeting the
affirmative vote of a majority of shares present in person or represented by
proxy, and entitled to vote on the matter, is necessary for approval.
Withholding authority to vote for a nominee for Director or an instruction to
abstain from voting on a proposal 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 or a proposal. Broker "non-
votes" will not be treated as shares present and entitled to vote on a voting
matter and will have no effect on the outcome of the vote. A broker "non-vote"
occurs when a nominee holding shares for a beneficial holder does not have
discretionary voting power and does not receive voting instructions from the
beneficial owner.

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 April 6, 1995, consisted of
22,920,462 shares of Common Stock. Only Stockholders of record at the close of
business on April 6, 1995, are entitled to vote at the Meeting. Each share is
entitled to one vote.

1
<PAGE>

-- PROPOSAL 1 --

ELECTION OF DIRECTORS

Eight Directors are to be elected at the Meeting, each to hold office until
his successor is chosen 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 of the common stock of its parent corporation, Thermedics Inc.
("Thermedics") and Thermedics' parent corporation, Thermo Electron Corporation
("Thermo Electron"), is reported under the caption "Stock Ownership." All of
the nominees are currently Directors of the Corporation.

- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
WALTER J. BORNHORST Dr. Bornhorst, 54, has been a Director of the
Corporation since 1988. Since 1994, Dr. Bornhorst has
been the Chairman of Z Corporation, a developer of
computer peripheral equipment. From 1985 to 1992, Dr.
Bornhorst was Senior Vice President of Thermo Electron.
He is also a director of Thermo Fibertek Inc.
- -------------------------------------------------------------------------------
RICHARD W. K. CHAPMAN Dr. Chapman, 50, was appointed a Director of the
Corporation in March 1995. He has been Chairman of the
Board of Directors of Thermo BioAnalysis Corporation
since its inception in February 1995, and President of
Finnigan Corporation, a subsidiary of Thermo Instrument
Systems Inc., since 1992. In addition, he has been a
Vice President of Thermo Instrument Systems Inc. since
1994.
- -------------------------------------------------------------------------------
ELIAS P. GYFTOPOULOS Dr. Gyftopoulos, 67, was appointed a Director of the
Corporation in September 1994. He has been the Ford
Professor of Mechanical Engineering and of Nuclear
Engineering at the Massachusetts Institute of Technology
for more than five years. Dr. Gyftopoulos is also a
Director of Thermo Electron, Thermo Instrument Systems
Inc., ThermoLase Corporation, Thermo Remediation Inc.,
and Thermo Voltek Corp.
- -------------------------------------------------------------------------------
ROBERT C. HOWARD Mr. Howard, 64, has been a Director of the Corporation
since 1988. Mr. Howard has been an Executive Vice
President of Thermo Electron since 1986. He is also a
Director of Thermedics, Thermo Ecotek Corporaion, Thermo
Instruments Systems Inc., ThermoLase Corporation, Thermo
Power Corporation and ThermoTrex Corporation.
- -------------------------------------------------------------------------------
LEONARD LASTER Dr. Laster, 66, has been a Director of the Corporation
since 1988. Dr. Laster has been the Distinguished
University Professor of Medicine & Health Policy and
Chancellor Emeritus of the University of Massachusetts
Medical Center since 1990. From 1987 to 1990 Dr. Laster
was Chancellor of, and a Professor at, the University of
Massachusetts Medical Center. Since 1992, Dr. Laster has
also been a consultant to the Biomedical Research
Foundation of Northwest Louisiana. From 1978 to 1987 he
was President of Oregon Health Sciences University.
- -------------------------------------------------------------------------------
VICTOR L. POIRIER Mr. Poirier, 53, has been a Director of the Corporation
since 1991. Mr. Poirier has been President of the
Corporation since 1990 and Chief Executive Officer of
the Corporation since 1991. Mr. Poirier was Executive
Vice President and Chief Operating Officer of the
Corporation from August 1988 until 1990. Mr. Poirier has
been a senior vice president of Thermedics since 1985.
- -------------------------------------------------------------------------------
JOHN W. WOOD JR. Mr. Wood, 51, has been a Director of the Corporation
since 1988. Mr. Wood has been a vice president of Thermo
Electron since September 1994 and President and Chief
Executive Officer of Thermedics since 1984. Mr. Wood is
also a director of Thermedics and Thermo Voltek
Corporation.
- -------------------------------------------------------------------------------
NICHOLAS T. ZERVAS Dr. Zervas, 65, has been a Director of the Corporation
since 1989. Dr. Zervas has been chief of Neurological
Service, Massachusetts General Hospital, since 1977. Dr.
Zervas is also a director of Thermedics, Thermo Ecotek
Corporaion, ThermoLase Corporation and ThermoTrex
Corporation.
- -------------------------------------------------------------------------------
</TABLE>

2
<PAGE>

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 outside Directors. The present
members of the Audit Committee are Dr. Laster (Chairman) and Dr. Zervas. 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 Dr. Zervas (Chairman), Dr. Gyftopoulos and
Dr. Laster. The Human Resources Committee reviews the performance of senior
members of management, recommends executive compensation and administers the
Corporation's stock option and other stock plans. The Corporation does not have
a nominating committee of the Board of Directors. The Board of Directors met
three times, the Audit Committee met twice and the Human Resources Committee
met once during fiscal 1994. Each Director attended at least 75% of all
meetings of the Board of Directors and Committees on which he served held
during his tenure.

COMPENSATION OF DIRECTORS

Directors who are not employees of the Corporation, of Thermo Electron or any
other companies affiliated with Thermo Electron (also referred to as "outside
directors"), receive an annual retainer of $2,000 and a fee of $1,000 per day
for attending regular meetings of the Board of Directors and $500 per day 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. Directors are also reimbursed for out-of-pocket expenses incurred
in attending such meetings. Payment of Directors' fees is made quarterly. Dr.
Chapman, Mr. Howard, Mr. Poirier and Mr. Wood are all employees of Thermo
Electron or its subsidiaries and do not receive any cash compensation from the
Corporation for their services as Directors.

Under the 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 of control: (a) the occurrence, without the prior approval of the Board
of Directors, of the acquisition, directly or indirectly, by any person of 50%
or more of the outstanding Common Stock or the outstanding common stock of
Thermedics or 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
Thermedics or 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 on the date of
deferral as units of the Corporation's Common Stock. When payable, amounts
deferred may be disbursed solely in shares of Common Stock accumulated under
the Deferred Compensation Plan. A total of 50,000 shares of Common Stock have
been reserved for issuance under the Deferred Compensation Plan. As of January
28, 1995, deferred units equal to 5,248.89 shares of Common Stock were
accumulated under the Deferred Compensation Plan.

In 1991, the Corporation adopted a directors stock option plan (the
"Directors Plan"). The Directors Plan provides for the grant of stock options
to purchase shares of Common Stock to outside Directors as additional
compensation for their service as Directors. In December 1994, the Board of
Directors approved amendments to the Directors Plan that are subject to
Stockholder approval at this meeting. The amendments are described under
Proposal 2 to this Proxy Statement. Prior to the amendment of the Plan,
eligible Directors were granted options to purchase Common Stock on a quarterly
basis according to the following formula: 200 shares for each meeting of the
Board of Directors held during the quarter and attended in person by the
recipient and 100 shares for each telephone meeting or committee meeting of the
Board of Directors held during the quarter in which the recipient participated.
The amendments to the plan would eliminate the grant of stock options based on
meeting attendance and substitute an annual grant of options to purchase 1,000
shares of Common Stock to each eligible Director.

The exercise price for options that have been granted to date under the
Directors Plan is determined by the average of the closing prices of the Common
Stock as reported on the American Stock Exchange for the

3
<PAGE>

five trading days preceding and including the date of grant. Outstanding
options are exercisable six months after the date of grant and if granted prior
to 1995, generally expire seven years from the date of grant. An aggregate of
50,000 shares of Common Stock has been reserved for issuance under the
Directors Plan. As of January 28, 1995, options to purchase 15,700 shares of
Common Stock were outstanding under the Directors Plan at an average exercise
price of $11.67 per share, no shares of Common Stock had been issued pursuant
to the exercise of options and no options to purchase shares of Common Stock
had lapsed. Options to purchase 34,300 shares of Common Stock were reserved and
available for grant under the Directors Plan as of January 28, 1995.

STOCK OWNERSHIP

The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermedics, the Corporation's parent company, and
of Thermo Electron, Thermedics' parent company, as of January 28, 1995, with
respect to (i) each person who was known by the Corporation to own beneficially
more than 5% of the outstanding shares of common stock, (ii) each Director,
(iii) each executive officer named in the summary compensation table under the
heading "Executive Compensation" and (iv) all Directors and executive officers
as a group.

<TABLE>
<CAPTION>
THERMO THERMO
CARDIOSYSTEMS THERMEDICS ELECTRON
NAME(1) INC. (2) INC.(3) CORPORATION(4)
------- ------------- ---------- -------------
<S> <C> <C> <C>
Thermedics Inc. (5).................... 12,547,610 N/A N/A
Walter J. Bornhorst.................... 46,100 0 9,228
Richard W. K. Chapman.................. 0 0 35,869
Kurt A. Dasse.......................... 78,984 12,064 2,126
Elias P. Gyftopoulos................... 7,500 4,500 29,920
Robert C. Howard....................... 22,500 11,459 91,598
Leonard Laster......................... 29,790 0 0
Victor L. Poirier...................... 138,284 89,337 14,475
Betty A. Silverstein-Russell........... 87,779 13,455 1,870
John W. Wood, Jr....................... 62,399 187,578 84,877
Nicholas T. Zervas..................... 48,058 29,046 0
All Directors and current executive
officers as a group (12 persons)....... 543,310 450,745 629,137
</TABLE>
- --------
(1) Shares beneficially owned include shares owned by the indicated person, by
that person's spouse, by that person and his or her spouse, and by that
person and his or her spouse (or either of them) for the benefit of minor
children. Except as reflected in the footnotes to this table, all share
ownership includes sole voting and investment power.

(2) Shares of the common stock beneficially owned by Dr. Bornhorst, Dr. Dasse,
Dr. Gyftopoulos, Dr. Laster, Mr. Poirier, Ms. Silverstein-Russell, Mr.
Wood, Dr. Zervas and all Directors and executive officers as a group
include 46,000, 77,700, 7,500, 28,800, 110,959, 86,450, 57,183, 43,800 and
478,781 shares, respectively, that such person or group has the right to
acquire within 60 days of January 28, 1995 through the exercise of stock
options. Shares beneficially owned by Dr. Laster, Dr. Zervas and all
Directors and executive officers as a group include 990, 4,258 and 5,248
full shares, respectively, that had been allocated through January 28,
1995, to their respective accounts maintained under the Corporation's
Deferred Compensation Plan for Directors. No Director or executive officer
beneficially owned more than 1% of the Common Stock outstanding as of
January 28, 1995; all Directors and executive officers as a group
beneficially owned 2.38% of the Common Stock outstanding as of such date.

(footnotes continued on following page)

4
<PAGE>

(3) Shares of the common stock of Thermedics beneficially owned by Dr. Dasse,
Dr. Gyftopoulos, Mr. Howard, Mr. Poirier, Ms. Silverstein-Russell, Mr.
Wood, Dr. Zervas and all Directors and executive officers as a group
include 12,000, 4,500, 10,000, 45,000, 12,000, 115,200, 6,250 and 279,950
shares, respectively, that such person or group had the right to acquire
within 60 days after January 28, 1995, through the exercise of stock
options. Shares of the common stock of Thermedics beneficially owned by Dr.
Dasse, Mr. Howard, Mr. Poirier, Mr. Wood and all Directors and executive
officers as a group include 64, 1,459, 278, 1,090 and 5,143 shares,
respectively, allocated through January 28, 1995, to their respective
accounts maintained pursuant to Thermo Electron's employee stock ownership
plan (the "ESOP"). Shares beneficially owned by Dr. Zervas and all
Directors and executive officers as a group include 6,296 shares allocated
through January 28, 1995, to Dr. Zervas' account maintained pursuant to
that corporation's Deferred Compensation Plan for Directors. No Director or
executive officer beneficially owned more that 1% of the common stock of
Thermedics outstanding as of January 28, 1995; all Directors and executive
officers as a group beneficially owned approximately 1.35% of such common
stock outstanding as of such date.

(4) The shares of the common stock of Thermo Electron shown in the table do not
reflect a three-for-two split of such stock to be effected on May 24, 1995
to shareholders of record on April 26, 1995. Shares of the common stock of
Thermo Electron beneficially owned by Dr. Chapman, Dr. Dasse, Dr.
Gyftopoulos, Mr. Howard, Mr. Poirier, Ms. Silverstein-Russell, Mr. Wood and
all Directors and executive officers as a group include 35,550, 750, 2,500,
32,190, 12,800, 750, 71,400 and 430,565 shares, respectively, that such
person or group has the right to acquire within 60 days of January 28, 1995
through the exercise of stock options. Shares of the common stock of Thermo
Electron beneficially owned by Dr. Dasse, Mr. Howard, Mr. Poirier, Mr. Wood
and all Directors and executive officers as a group include 32, 1,245, 225,
697, 638 and 3,590 full shares, respectively, allocated to accounts
maintained pursuant to Thermo Electron's ESOP. No Director or executive
officer beneficially owned more than 1% of the common stock of Thermo
Electron outstanding as of January 28, 1995; all Directors and executive
officers as a group beneficially owned approximately 1.23% of the Thermo
Electron common stock outstanding as of such date.

(5) Thermedics beneficially owned 54.94% of the Common Stock outstanding as of
January 28, 1995. Thermedics' address is 470 Wildwood Street, P.O. Box
2999, Woburn, Massachusetts 01888-2999. As of January 28, 1995, Thermo
Electron had the power to elect all of the members of the Thermedics' Board
of Directors, and through Thermedics, had the power to elect all of the
members of the Corporation's Board of Directors. See "Relationship with
Affiliates" below.

DISCLOSURE OF CERTAIN LATE FILINGS

Section 16(a) of the Securities Exchange Act of 1934 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 1994, except in the following instances.
The annual reports of ownership on Form 5 filed in February 1994 for one of the
Corporation's executive officers, Dr. Kurt Dasse, failed to report the
acquisition of shares of the Common Stock under the Corporation's employee
stock purchase plan in October 1993. The failure was detected and corrected on
Dr. Dasse's Form 5 filing in February 1995. In addition, Thermedics failed to
report the grant of an option to purchase shares of the Common Stock on its
Form 4 for the month of July 1994. This failure was corrected on Thermedics'
Form 5 filing in February 1995.

5
<PAGE>

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 two other most highly compensated executive officers
for the last three fiscal years. No other executive officer of the Corporation
met the definition of "highly compensated" within the meaning of the Securities
and Exchange Commission's executive compensation disclosure rules.

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 the Corporate Services Agreement between
the Corporation and Thermo Electron. Accordingly, the compensation for these
individuals is not reported in the following table.

SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
----------------
SECURITIES
UNDERLYING
AWARDS OF
ANNUAL COMPENSATION OPTIONS
NAME AND PRINCIPAL FISCAL -------------------- (NO. OF SHARES ALL OTHER
POSITION YEAR SALARY BONUS AND COMPANY)(1) COMPENSATION(2)
------------------ ------ ---------- --------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Victor L. Poirier....... 1994 $ 135,000 $ 66,000 10,300 (TMO) $6,322
President and Chief Ex-
ecutive Officer 500 (TSC)
1993 $ 115,500 $ 55,000 50,000 (TCA) $6,745
15,000 (TMD)
1,000 (TMO)
1992 $ 112,115 $ 40,000 24,000 (TCA) $8,590(3)
7,500 (TMD)
1,500 (TMO)
2,000 (TFT)
- -------------------------------------------------------------------------------------
Kurt A. Dasse........... 1994 $ 97,000 $ 25,000 -- $4,459
Senior Vice President 1993 $ 94,000 $ 21,000 20,000 (TCA) $5,268
7,500 (TMD)
1992 $ 93,260 $ 16,700 20,000 (TCA) $5,214
4,500 (TMD)
750 (TMO)
- -------------------------------------------------------------------------------------
Betty A. Silverstein-
Russell................ 1994 $ 97,000 $ 24,000 -- $4,473
Vice President 1993 $ 94,000 $ 24,000 25,000 (TCA) $5,436
7,500 (TMD)
1992 $ 91,731 $ 20,800 20,000 (TCA) $5,572
4,500 (TMD)
750 (TMO)
</TABLE>
- --------
(1) In addition to grants of options to purchase Common Stock of the
Corporation (designated in the table as TCA), executive officers of the
Corporation have been granted options to purchase common stock of Thermo
Electron and certain of its other subsidiaries as part of Thermo Electron's
stock option program. Options have been granted during the last three
fiscal years to the chief executive officer and the other named executive
officers in the following Thermo Electron companies: Thermedics (designated
in the table as TMD), Thermo Electron (designated in the table as TMO),
Thermo Fibertek Inc. (designated in the table as TFT) and ThermoSpectra
Corporation (designated in the table as TSC).

(footnotes continued on following page)

6
<PAGE>

(2) Represents the amount of matching contributions made by the individual's
employer on behalf of executive officers participating in the Thermo
Electron 401(k) plan.

(3) In addition to a matching contribution of $6,546 referred to in footnote
(2), this amount includes $2,044 representing the market value of 75 shares
of Thermo Electron common stock received by Mr. Poirier in May 1992, in
recognition of his managerial achievements, voted by managers of Thermo
Electron at its annual management conference.

STOCK OPTIONS GRANTED DURING FISCAL 1994

The following table sets forth information concerning individual grants of
stock options made during fiscal 1994 to the Corporation's chief executive
officer. No grants were made to the other executive officers named in the
Summary Compensation Table. It has not been the Corporation's policy in the
past to grant stock appreciation rights, and no such rights were granted during
fiscal 1994.

OPTION GRANTS IN FISCAL 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER PERCENT OF AT ASSUMED ANNUAL RATES
OF SECURITIES TOTAL OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM
OPTIONS EMPLOYEES PER EXPIRATION ----------------------------
NAME GRANTED (1) IN FISCAL YEAR SHARE DATE 5% 10%
---- --------------- -------------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Victor L. Poirier....... 300 (TMO) 0.0%(2) $40.25 7/19/01 $ 4,916 $ 11,456
10,000 (TMO)(3) 1.4%(2) $45.10 11/28/06 $ 358,931 $ 964,431
500 (TSC) 0.1%(2) $10.00 10/25/01 $ 2,036 $ 4,744
</TABLE>
- --------
(1) All of the options granted during the fiscal year are immediately
exercisable at the date of grant, except those options granted to purchase
the common stock of ThermoSpectra Corporation (designated in the table as
TSC), which generally are not exercisable until that company's stock is
publicly traded. However, the shares acquired upon exercise are subject to
repurchase by the granting corporation at the exercise price if the
optionee ceases to be employed by such corporation or any other Thermo
Electron company. The granting corporation may exercise its repurchase
rights within six months after the termination of the optionee's
employment. For publicly traded companies, the repurchase rights lapse
ratably over a five to ten year period, depending on the option term, which
may vary from seven to twelve years, provided that the optionee continues
to be employed by the Corporation or another Thermo Electron company. 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
corporation may permit the holders of such 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.

(2) These options were granted under stock option plans maintained by Thermo
Electron or its subsidiaries other than the Corporation and accordingly are
reported as a percentage of total options granted to employees of those
companies.

(3) Options to purchase 10,000 shares of the common stock of Thermo Electron
granted to Mr. Poirier are subject to the same terms as described in
footnote (1), except that the repurchase rights of the granting corporation
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
corporation shall be deemed to have lapsed ratably over a five-year period
commencing with the fifth anniversary of the grant date.

7
<PAGE>

STOCK OPTIONS EXERCISED DURING FISCAL 1994

The following table reports certain information regarding stock option
exercises during fiscal 1994 and outstanding stock options held at the end of
fiscal 1994 by the Corporation's chief executive officer and the executive
officers named in the Summary Compensation Table. No stock appreciation rights
were exercised or were outstanding during fiscal 1994.

AGGREGATED OPTION EXERCISES IN FISCAL 1994 AND FISCAL 1994 YEAR-END OPTION

<TABLE>
<CAPTION>
NO. OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT FISCAL YEAR-END(1) IN-THE-MONEY OPTIONS
--------------------------- -------------------------
SHARES
ACQUIRED
ON VALUE
NAME COMPANY EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------------- -------- -------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Victor L. Poirier....... Thermo Cardiosystems 38,241 $626,961 110,959 0 $747,755 0
Thermedics -- -- 45,000 0 $220,200 0
Thermedics Detection -- -- 0 5,000 0 0(3)
Thermo Ecotek -- -- 2,500 0 0 0(3)
Thermo Electron -- -- 12,800(2) 0 $ 29,866 0
Thermo Fibertek -- -- 2,000 0 $ 18,250 0
ThermoSpectra -- -- 0 500 0 0(3)
ThermoTrex -- -- 1,800 0 $ 16,290 0
- ---------------------------------------------------------------------------------------------------------------------
Kurt A. Dasse........... Thermo Cardiosystems -- -- 77,700 0 $721,409 0
Thermedics -- -- 12,000 0 $ 66,975 0
Thermo Electron -- -- 750 0 $ 12,491 0
ThermoTrex -- -- 900 0 $ 8,145 0
- ---------------------------------------------------------------------------------------------------------------------
Betty A. Silverstein-
Russell................ Thermo Cardiosystems -- -- 86,450 0 $720,997 0
Thermedics -- -- 12,000 0 $ 66,975 0
Thermo Electron -- -- 750 0 $ 12,491 0
</TABLE>

VALUES
- -------------------------------------------------------------------------------
- --------
(1) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable, except for Thermedics Detection Inc., and
ThermoSpectra Corporation, which generally are not exercisable until such
company's stock is publicly traded. The shares acquired upon exercise of
the options reported in the table are subject to repurchase by the
granting corporation at the exercise price if the optionee ceases to be
employed by such corporation or any other Thermo Electron company. The
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. For companies whose
shares are not publicly traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date. For publicly traded
companies, the repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term, which may vary from seven
to twelve years, provided that the optionee continues to be employed by
the Corporation or another Thermo Electron company.

(2) Options to purchase 10,000 shares of the common stock of Thermo Electron
granted to Mr. Poirier are subject to the same terms as described in
footnote (1), except that the repurchase rights of the granting
corporation 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 corporation shall be deemed to have
lapsed ratably over a five-year period, commencing with the fifth
anniversary of the grant date.

(3) No public market existed for the shares underlying these options as of
December 31, 1994. Accordingly, no value in excess of exercise price has
been attributed to these options.

8
<PAGE>

COMMITTEE REPORT ON EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

All decisions on compensation for the Corporation's executive officers are
made by the Human Resources Committee of the Board of Directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines established
by the Human Resources Committee of the Board of Directors of its parent
corporation, Thermo Electron. The executive compensation program presently
consists of annual base salary ("salary"), short-term incentives in the form of
annual cash bonuses, and long-term incentives in the form of stock options.

The Committee believes that the compensation of executive officers should
reflect the scope of their responsibilities, the success of the Corporation,
and the contributions of each executive to that success. In addition, the
Committee believes that base salaries should approximate the mid-point of
competitive salaries derived from market surveys and that short-term and long-
term incentive compensation should reflect the performance of the Corporation
and the contributions of each executive.

External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's compensation for
its executives is assessed by comparing it to market data provided by its
compensation consultant and by participating in annual executive compensation
surveys, primarily "Project 777", an executive compensation survey prepared by
Management Compensation Services, a division of Hewitt Associates. The majority
of firms represented in the Project 777 survey are included in the Standard &
Poor's Index, but do not necessarily correspond to the companies included in
the Corporation's peer group.

Principles of internal equity are also central to the Committee's
compensation policies. Compensation considered for the Corporation's officers,
whether cash or stock-based incentives, is also evaluated by comparing it to
compensation of other executives within the Thermo Electron organization with
comparable levels of responsibility for comparably sized business units.

The process for determining each of these elements for the Corporation's
executive officers is outlined below.

BASE SALARY

Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for the chief
executive officer and the other named executive officers will approach the mid-
point of competitive data. The salary increases in 1994 for the chief executive
officer and the other named executive officers generally reflect this practice
of gradual increases and moderation.

CASH BONUS

The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically, the median
potential bonus plus the salary of an executive officer is approximately equal
to the mid-point of competitive total cash compensation for a similar position
and level of responsibility in businesses having comparable sales and
complexity to the Corporation. The actual bonus awarded to an executive officer
may range from minus one to three times the median potential bonus. The value
within the range (the bonus multiplier) is determined at the end of each year
by the Committee in its discretion. The

9
<PAGE>

Committee exercises its discretion by evaluating each executive's performance
using a methodology developed by its parent corporation, Thermo Electron, and
applied throughout the Thermo Electron organization. The methodology
incorporates measures of operating returns, designed to measure profitability,
contributions to shareholder value, and earnings growth, and includes an
evaluation of the contributions of each executive that are not captured by
operating measures but are considered important to the creation of long-term
value for the stockholders. These measures of achievements are not financial
targets that are met, not met or exceeded, but are measures of corporate and
divisional performance that are evaluated using graphs developed by Thermo
Electron designed to reward performance that is perceived as above average and
to penalize performance that is perceived as below average. The relative
weighting of these achievements varies depending on the executive's role and
responsibilities within the organization.

The bonuses for named executive officers approved by the Committee with
respect to 1994 performance in each instance exceeded the median potential
bonus.

STOCK OPTION PROGRAM

The primary goal of the Corporation 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 options to purchase common stock
of the Corporation and other Thermo Electron companies.

The Committee and management believe that awards of stock options to purchase
the shares of both the Corporation and other companies within the Thermo
Electron group of companies accomplish many objectives. The grant of options 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 options also results in management's compensation being
closely linked to stock performance. In addition, because they are subject to
vesting periods of varying durations and to forfeiture if the employee leaves
the Corporation prematurely, stock options are an incentive for key employees
to remain with the Corporation long-term. The Committee believes stock option
awards in the parent corporation, 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 the average annual value of
all options to purchase shares of the Corporation and other companies within
the Thermo Electron organization that vest in the next five years. (Values are
established using a modified Black-Scholes option pricing model.) As a
guideline, the Committee strives to maintain the aggregate amount of awards to
all employees over a five-year period below 10% of the Corporation's
outstanding common stock, although other factors such as unusual transactions
and acquisitions and standards for awards of comparably situated companies may
affect the number of awards granted.

Awards are not made annually in conjunction with the annual review of cash
compensation, but are made periodically. No awards were made to executive
officers by the Corporation in 1994. In determining awards from time to time,
the Committee considers total compensation of executives, actual and
anticipated contributions of each executive, as well as the value of previously
awarded options, as described above.

POLICY ON DEDUCTIBILITY OF COMPENSATION

The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Corporation's compensation practices. Section
162(m) 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". The annual cash compensation
paid to individual executives does not approach the $1 million threshhold, and
it is believed that stock incentive plans of the Corporation qualify as
"performance based". Therefore, the Committee does not believe any further
action is necessary in order to comply with Section 162(m). From time to time,
the Committee will reexamine the Corporation's compensation practices and the
effect of Section 162(m).

10
<PAGE>

CEO COMPENSATION

The salary and bonus of Mr. Poirier are established using the same criteria
as for the salaries and bonuses for the Corporation's other named executive
officers. The Committee determined Mr. Poirier's compensation as reported, and
among other factors, considered his achievement in obtaining commercial
approval in 1994 from the U.S. Food and Drug Administration for the
Corporation's heart assist device. The Committee believes, nonetheless, that
while the total cash compensation for Mr. Poirier in 1994 tends to be below the
competitive norm for a similarly sized company in the medical devices industry,
his total compensation exceeds the competitive norm since a significant portion
of his total compensation has been awarded as long-term incentive compensation
in the form of stock options.

In 1994, Mr. Poirier was awarded stock options to purchase common stock of
Thermo Electron by the human resources committee of the board of directors of
Thermo Electron. This committee uses an analysis similar to that described for
the Corporation's Committee in considering stock option awards to the
Corporation's officers.

Dr. Nicholas T. Zervas (Chairman)
Dr. Elias P. Gyftopoulos
Dr. Leonard Laster

11
<PAGE>

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 Corporation's 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 companies consisting of Abiomed Inc., Datascope Corp., Boston
Scientific Corp., Thoratec Labs Corp., Baxter International, Inc., Medtronic,
Inc. and St. Jude Medical, Inc.

COMPARISON OF 1989-1994 TOTAL RETURN AMONG THERMO CARDIOSYSTEMS INC.,
THE AMERICAN STOCK EXCHANGE MARKET VALUE INDEX AND PEER GROUP.
- --------------------------------------------------------------------------------

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

12
<PAGE>

RELATIONSHIP WITH AFFILIATES

Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created several privately and publicly held subsidiaries, and
Thermedics Inc. has created the Corporation as a publicly held, majority-owned
subsidiary and has acquired the majority interest in a previously unaffiliated
public company, Thermo Voltek Corp. From time to time, Thermo Electron and its
subsidiaries will create other majority-owned subsidiaries as part of its
spinout strategy. (The Corporation and the other 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 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 financial 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 is also responsible for ensuring that members comply with
internal policies and procedures. The cost of the services provided by Thermo
Electron to the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and each of the Thermo
Subsidiaries.

The Charter presently 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. A subsidiary's participation in the Charter will
terminate 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. However, 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.

13
<PAGE>

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. Prior to
January 1, 1995, the Corporation was assessed an annual fee equal to 1.25% of
the Corporation's revenues for these services. Effective January 1, 1995, the
fee has been reduced to 1.2% of the Corporation's revenues. The fee is reviewed
annually and may be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1994, Thermo Electron assessed the Corporation $368,000
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 representative of the expenses the Corporation would have
incurred on a stand-alone basis. For items such as employee benefit plans,
insurance coverage and other identifiable costs, Thermo Electron charges the
Corporation based on charges attributable to the Corporation. 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 subleases office and research facilities from Thermedics and
pays to Thermedics a pro rata amount based on the actual square footage
occupied by the Corporation, at a rate approximately equal to Thermedics' rent
per square foot under its prime lease. This sublease expires in 1999. The
Corporation paid approximately $140,000 to Thermedics in sublease payments
during 1994.

In January 1994, the Corporation issued and sold $33,000,000 principal amount
of noninterest-bearing subordinated convertible debentures due 1997. The
debentures are convertible into shares of the Company's common stock at a
conversion price of $21.74 per share. These debentures are guaranteed on a
subordinated basis by Thermo Electron. Thermedics has agreed to reimburse
Thermo Electron in the event Thermo Electron is required to make a payment
under such guarantee.

From time to time, the Corporation may transact business in the ordinary
course with other companies in the Thermo Group. All such transactions are on
terms comparable to those the Corporation would receive from unaffiliated
parties.

As of December 31, 1994, $1,732,000 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 and have a
maturity of three months or less. The repurchase agreement earns a rate based
on the Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.

Thermedics beneficially owned approximately 55% of the Corporation's
outstanding Common Stock on January 28, 1995, and intends for the foreseeable
future to maintain at least 50% ownership of the Corporation. This may require
the purchase by Thermedics of additional shares of the Corporation's 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.

14
<PAGE>

-- PROPOSAL 2 --

PROPOSAL TO AMEND THE DIRECTORS STOCK OPTION PLAN

The Board of Directors has approved amendments to the Corporation's Directors
Stock Option Plan (the "Directors Plan") that would change the formula for
granting stock options to purchase Common Stock to its outside Directors.

In December 1994, as part of a review of director compensation, the Board of
Directors adopted amendments to the Directors Plan, subject to Stockholder
approval. The amendments would change the formula by which stock options to
purchase Common Stock are automatically granted to outside Directors. The
formula, as amended, would substitute the annual grant of stock options to
purchase 1,000 shares of Common Stock to each eligible outside Director as of
the close of business on the date of the Annual Meeting of Stockholders for the
meeting attendance grants previously awarded quarterly to outside Directors
under the Directors Plan.

The review of director compensation was conducted in conjunction with an
overall review of director compensation for Thermo Electron and its majority-
owned subsidiaries. The purpose of the review was to evaluate compensation
practices for the entire Thermo Electron family of companies, compare total
cash compensation to comparable market data and ensure consistent and
internally equitable compensation practices among the companies within the
Thermo Electron family. For administrative simplicity, the Directors determined
that an annual award of stock options would best serve the interests of the
Corporation, in lieu of the quarterly determination and award of stock options
based on attendance at meetings of the Board of Directors and its committees.

SUMMARY OF THE AMENDMENTS TO THE DIRECTORS PLAN

The full text of the Directors Plan as amended and restated is set forth in
Appendix A, to which reference is made. A brief description of the amendments
to the Directors Plan follows (the "Amendments"), but is qualified in its
entirety by reference to the full text of the plan. Except as amended, the
Directors Plan will continue in full force and effect. A brief description of
the material terms of the Directors Plan that are not affected by the
Amendments are summarized under the heading "Other Terms of the Directors
Plan." The closing price of the Common Stock on April 6, 1995, was $29.25 per
share.

ANNUAL GRANT OF CORPORATION OPTIONS

The Amendments will discontinue, as of January 1, 1995, the quarterly grant
of stock options to purchase Common Stock of the Corporation based on
attendance by outside Directors at meetings of the Board of Directors or its
committees. In lieu of such options, options to purchase 1,000 shares of Common
Stock will be granted annually to each eligible Director as of the close of
business on the date of the Corporation's Annual Meeting of Stockholders,
beginning with the Annual Meeting to which this proxy statement relates.
Options 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. Options will be subject to
restrictions on resale and to the repurchase by the Corporation of the shares
subject to option at the exercise price if the Director ceases to serve as a
director of the Corporation, Thermo Electron or any subsidiary of Thermo
Electron, for any reason other than death, within one year from the date of
grant. The option exercise price shall be determined by the average closing
price of the Common Stock on the American Stock Exchange for the five trading
days preceding and including the date of the Annual Meeting of Stockholders.

OTHER TERMS OF THE DIRECTORS PLAN

A brief description of the other principal features of the Directors Plan
that are not affected by the Amendments follows, but it is qualified in its
entirety by reference to the full text set forth in Appendix A.

15
<PAGE>

ELIGIBILITY; ADMINISTRATION

Directors of the Corporation who are not employees of the Corporation or any
subsidiary or parent corporation of the Corporation are eligible to participate
in the Directors Plan. The Directors Plan is administered by the Board of
Directors of the Corporation (the "Board"). All questions of interpretation of
the Directors Plan or of any options granted pursuant to the Plan are
determined by the Board.

TERMS AND CONDITIONS OF OPTIONS

The exercise price for options is determined by the average of the closing
prices reported by the American Stock Exchange (or other principal exchange in
which the Common Stock is then traded) for the five trading days immediately
preceding and including the date the option is granted. The exercise price of
options granted under the Directors Plan must be paid in full by check or by
the delivery of shares of Common Stock that have a fair market value on the
exercise date equal to the exercise price of the option. Stock options granted
under the plan are intended to be non-statutory stock options. If a Director
dies or otherwise ceases to serve as a Director of the Corporation, Thermo
Electron or any subsidiary of Thermo Electron, or the Corporation is
liquidated, the options will terminate. Options are evidenced by a written
agreement and are subject to transfer restrictions that lapse as to all of the
shares on the first anniversary of the grant date. Option holders will be
permitted to tender shares of Common Stock to satisfy withholding tax
obligations, if any.

CHANGE IN CONTROL PROVISIONS

If there is a "Change in Control" of the Corporation or either of its parent
corporations, Thermedics and Thermo Electron, as defined in the Directors Plan,
any stock options that are not then exercisable and fully vested will become
fully exercisable and vested; and the restrictions applicable to shares
purchased upon exercise of options will lapse and such shares will be free of
restrictions and fully vested. Generally, a "Change in Control" occurs if (1)
any person other than Thermo Electron becomes the beneficial owner of 50% or
more of the outstanding Common Stock of the Corporation or its parent
corporation, Thermedics, or any person becomes the beneficial owner of 25% or
more of the outstanding common stock of Thermo Electron, without the prior
approval of the Board of Directors, or the board of directors of Thermedics or
Thermo Electron, as the case may be, (2) during any two-year period the
individuals who constituted the Board of Directors or the board of directors of
Thermedics or Thermo Electron at the beginning of such period no longer
represent a majority of such board, or (3) the Board of Directors or the board
of directors of Thermedics or Thermo Electron determines that any other event
constitutes an effective change in control of the Corporation, Thermedics or
Thermo Electron.

AMENDMENT AND TERMINATION

The Directors Plan remains in full force and effect until suspended or
discontinued by the Board. The Board may at any time or times amend or review
the Directors Plan, provided that no amendment that is not approved by the
Stockholders of the Corporation shall be effective if it would cause the
Directors Plan to fail to satisfy the requirements of Rule 16b-3 (or any
successor rule) of the Securities Exchange Act of 1934, as amended. No
amendment of the Directors Plan or any agreement evidencing options granted
under the Directors Plan may adversely affect the rights of any recipient of
any option previously granted without such recipient's consent.

SHARES SUBJECT TO THE DIRECTORS PLAN

The number of shares of the Common Stock that has been reserved for issuance
under the Directors Plan is 50,000 shares. Options and shares that are
forfeited or otherwise reacquired by the Corporation will again be available
for the grant of options under the Directors Plan. If the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities through merger, consolidation, stock split,
stock dividend, reverse stock split or other distribution, an appropriate
proportionate adjustment may be made in the maximum number or kind of shares
reserved for issuance under the Directors Plan.

16
<PAGE>

The proceeds received by the Corporation from exercises under the Directors
Plan will be used for the general purposes of the Corporation. Shares issued
under the Directors Plan may be authorized but unissued shares, or shares
reacquired by the Corporation and held in its treasury.

EFFECTIVE DATE

The Amendments will be effective as of January 1, 1995, if approved by the
Stockholders of the Corporation at this meeting.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the principal current Federal income tax
consequences of stock options granted under the Directors Plan. It does not
describe all Federal tax consequences under the Directors Plan, nor does it
describe state, local or foreign tax consequences.

The stock options granted under the Directors Plan are non-statutory stock
options and therefore no income will be realized by the optionee at the time
the option is granted. Generally, at exercise, ordinary income will be realized
by the optionee in an amount equal to the difference between the option price
and the fair market value of the shares on the date of exercise. The
Corporation receives a tax deduction for the same amount, and, upon disposition
of the shares, appreciation or depreciation after the date of exercise will be
treated as either short-term or long-term capital gain depending on how long
the shares have been held.

NEW PLAN BENEFITS

Only the outside Directors of the Corporation are eligible to participate in
the Directors Plan. The following table sets forth, to the extent determinable,
the number of shares of the common stock of the Corporation that will be
granted annually under the Directors Plan to the "non-executive Director Group"
if the Amendments are approved by the Stockholders. Named executive officers
and other employee groups are not set forth in the table as such persons and
groups are not eligible to receive options under the Directors Plan.

<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF SHARES
- ----------------- ---------------- ----------------
<S> <C> <C>
Non-Executive Director Group (4 persons)...... (1) 4,000
</TABLE>
- --------
(1) Because the exercise price of options to be granted under the Directors
Plan will reflect the market value of the underlying stock at the time of
the grant, the dollar value of such options is not currently determinable.

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RECOMMENDATION

The Board of Directors believes that the Amendments to the Directors Plan
will enable the Corporation to ensure the continued services and contributions
of its outside Directors and to attract and retain other highly qualified
individuals to serve as outside Directors from time to time. Accordingly, the
Board of Directors believes that the proposal is in the best interest of the
Corporation and its Stockholders and recommends that the Stockholders vote
"FOR" the approval of the Amendments to the Directors Plan to change the
formula for the grant of stock options to outside Directors. If not otherwise
specified, Proxies will be voted FOR approval of this proposal. Thermedics,
which beneficially owned approximately 55% of the outstanding Common Stock as
of April 6, 1995, has sufficient votes to approve the proposal and has
indicated its intention to vote for the proposal.

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APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1995. Arthur Andersen LLP has acted as
independent public accountants for the Corporation since its inception in 1988.
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. The Board of Directors has established an
Audit Committee, presently consisting of two outside Directors, the purpose of
which is to review the scope and results of the audit.

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 presented at the 1996 Annual Meeting
of the Stockholders of the Corporation must be received by the Corporation for
inclusion in the Proxy Statement and form of Proxy relating to that meeting no
later than December 26, 1995.

SOLICITATION STATEMENT

The cost of this 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, by telephone 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.

Woburn, Massachusetts
April 25, 1995

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APPENDIX A

THERMO CARDIOSYSTEMS INC.

DIRECTORS STOCK OPTION PLAN

AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1995

1. PURPOSE

The purpose of this Directors Stock Option Plan (the "Plan") of Thermo
Cardiosystems Inc. (the "Company") is to encourage ownership in the Company by
outside directors of the Company whose services are considered essential to the
Company's growth and progress and to provide them with a further incentive to
become directors and to continue as directors of the Company. The Plan is
intended to be a nonstatutory stock option plan.

2. ADMINISTRATION

The Board of Directors, or a Committee (the "Committee") consisting of two or
more directors of the Company appointed by the Board of Directors, shall
supervise and administer the Plan. Grants of stock options under the Plan and
the amount and nature of the options to be granted shall be automatic in
accordance with Section 5. However, all questions of interpretation of the Plan
or of any stock options granted under it shall be determined by the Board of
Directors or the Committee and such determination shall be final and binding
upon all persons having an interest in the Plan.

3. PARTICIPATION IN THE PLAN

Directors of the Company who are not employees of the Company or any
subsidiary or parent of the Company shall be eligible to participate in the
Plan. Directors who receive grants of stock options in accordance with this
Plan are sometimes referred to herein as "Optionees."

4. STOCK SUBJECT TO THE PLAN

The maximum number of shares that may be issued under the Plan shall be fifty
thousand (50,000) shares of the Company's $.10 par value Common Stock (the
"Common Stock"), subject to adjustment as provided in Section 9. Shares to be
issued upon the exercise of options granted under the Plan may be either
authorized but unissued shares or shares held by the Company in its treasury.
If any option expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject thereto shall again be
available for options thereafter to be granted.

5. TERMS AND CONDITIONS

A. Annual Stock Option Grants

Each Director of the Company who meets the requirements of Section 3 and who
is holding office immediately following the Annual Meeting of Stockholders,
commencing with the Annual Meeting of Stockholders held in calendar year 1995,
shall be granted an option to purchase 1,000 shares of Company common stock at
the close of business on the date of such Annual Meeting. Options granted under
this Subsection A shall be exercisable as to 100% of the shares subject to the
option as set forth in Section 5(B)(1), but shares acquired upon exercise are
subject to repurchase by the Company at the exercise price in the event that
the Optionee ceases to serve as a director of the Company, Thermo Electron
Corporation ("Thermo Electron") or any subsidiary of Thermo Electron, prior to
the first anniversary of the grant date, for any reason other than death.

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B. General Terms and Conditions Applicable to All Grants.

1. Options shall be exercisable at any time from and after the six-month
anniversary of the grant date and prior to the date which is the earliest
of:

(a) three years after the grant date for options granted under
Section 5(A), (b) three months after the later of the date (i) the
Optionee either ceases to meet the requirements of Section 3 or (ii)
otherwise ceases to serve as a director of the Company, Thermo Electron
or any subsidiary of Thermo Electron (six months in the event the
Optionee ceases to meet the requirements of this Subsection by reason
of his death), or (c) the date of dissolution or liquidation of the
Company.

2. The exercise price at which Options are granted hereunder shall be the
average of the closing prices reported by the national securities exchange
on which the common stock is principally traded for the five trading days
immediately preceding and including the date the option is granted or, if
such security is not traded on an exchange, the average last reported sale
price for the five-day period on the NASDAQ National Market List, or the
average of the closing bid prices for the five-day period last quoted by an
established quotation service for over-the-counter securities, or if none
of the above shall apply, the last price paid for shares of the Common
Stock by independent investors in a private placement; provided, however,
that such exercise price per share shall not be lower than the par value
per share or less than 50% of the fair market value of the Common Stock
until such time as the Company elects to be subject to Rule 16b-3 as
amended by SEC Rel. No. 33-28869.

3. All options shall be evidenced by a written agreement substantially in
such form as shall be approved by the Board of Directors or Committee,
containing terms and conditions consistent with the provisions of this
Plan.

6. EXERCISE OF OPTIONS

A. Exercise/Consideration

An option may be exercised in accordance with its terms by written notice of
intent to exercise the option, specifying the number of shares of stock with
respect to which the option is then being exercised. The notice shall be
accompanied by payment in the form of cash or shares of common stock of the
Company (the shares so tendered referred to herein as "Tendered Shares") with a
then current market value equal to the exercise price of the shares to be
purchased; provided, however, that such Tendered Shares shall have been
acquired by the Optionee more than six months prior to the date of exercise
(unless such requirement is waived in writing by the Company). Against such
payment the Company shall deliver or cause to be delivered to the Optionee a
certificate for the number of shares then being purchased, registered in the
name of the Optionee or other person exercising the option. If any law or
applicable regulation of the Securities and Exchange Commission or other body
having jurisdiction in the premises shall require the Company or the Director
to take any action in connection with shares being purchased upon exercise of
the option, exercise of the option and delivery of the certificate or
certificates for such shares shall be postponed until completion of the
necessary action, which shall be taken at the Company's expense.

B. Tax Withholding

The Company shall have the right to deduct from payments of any kind
otherwise due to the Optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the Optionee may elect
to satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the Optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. Notwithstanding

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the foregoing, no election to use shares for the payment of withholding taxes
shall be effective unless made in compliance with any applicable requirements
of Rule 16b-3.

7. TRANSFERABILITY

Options shall not be transferable, otherwise than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined in the Internal Revenue Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder (a "Qualified Domestic Relations
Order"). Options may be exercised during the life of the Optionee only by the
Optionee or a transferee pursuant to a Qualified Domestic Relations Order.

8. LIMITATION OF RIGHTS TO CONTINUE AS A DIRECTOR

Neither the Plan, nor the quantity of shares subject to options granted under
the Plan, nor any other action taken pursuant to the Plan, shall constitute or
be evidence of any agreement or understanding, express or implied, that the
Company will retain a Director for any period of time, or at any particular
rate of compensation.

9. CHANGES IN COMMON STOCK

If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are
distributed with respect to such shares of Common Stock or other securities,
through merger, consolidation, sale of all or substantially all of the assets
of the Company, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other distribution with respect
to such shares of Common Stock, or other securities, an appropriate
proportionate adjustment may be made in the maximum number or kind of shares
reserved for issuance under the Plan. No fractional shares will be issued under
the Plan on account of any such adjustments.

10. LIMITATION OF RIGHTS IN OPTION STOCK

The Optionees shall have no rights as stockholders in respect of shares as to
which their options shall not have been exercised, certificates issued and
delivered and payment as herein provided made in full, and shall have no rights
with respect to such shares not expressly conferred by this Plan or the written
agreement evidencing options granted hereunder.

11. STOCK RESERVED

The Company shall at all times during the term of the options reserve and
keep available such number of shares of the Common Stock as will be sufficient
to permit the exercise in full of all options granted under this Plan and shall
pay all other fees and expenses necessarily incurred by the Company in
connection therewith.

12. SECURITIES LAWS RESTRICTIONS

A. Investment Representations.

The Company may require any person to whom an option is granted, as a
condition of exercising such option, to give written assurances in substance
and form satisfactory to the Company to the effect that such person is
acquiring the Common Stock subject to the option for his or her own account for
investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary
or appropriate in order to comply with federal and applicable state securities
laws.

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B. Compliance with Securities Laws.

Each option shall be subject to the requirement that if, at any time, counsel
to the Company shall determine that the listing, registration or qualification
of the shares subject to such option upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, or that the disclosure of non-public information or the
satisfaction of any other condition is necessary as a condition of, or in
connection with, the issuance or purchase of shares thereunder, such option may
not be exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such condition shall
have been effected or obtained on conditions acceptable to the Board of
Directors. Nothing herein shall be deemed to require the Company to apply for
or to obtain such listing, registration or qualification, or to satisfy such
condition.

13. CHANGE IN CONTROL

13.1 IMPACT OF EVENT

In the event of a "Change in Control" as defined in Section 13.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:

(a) Any stock options awarded under the Plan that were not previously
exercisable and vested shall become fully exercisable and vested.

(b) Shares purchased upon the exercise of options subject to restrictions
and to the extent not fully vested, shall become fully vested and all such
restrictions shall lapse so that shares issued pursuant to such options
shall be free of restrictions.

13.2 DEFINITION OF "CHANGE IN CONTROL"

"Change in Control" means any one of the following events: (i) when any
Person other than Thermo Electron Corporation ("Thermo Electron") is or becomes
the beneficial owner (as defined in Section 13(d) of the Exchange Act and the
Rules and Regulations thereunder), together with all Affiliates and Associates
(as such terms are used in Rule 12b-2 of the General Rules and Regulations of
the Exchange Act) of such Person, directly or indirectly, of 50% or more of the
outstanding Common Stock of the Company or its parent corporation, Thermedics
Inc. ("Thermedics"), or the beneficial owner of 25% or more of the outstanding
common stock of Thermo Electron, without the prior approval of the Prior
Directors of the Company, Thermedics or Thermo Electron, as the case may be,
(ii) the failure of the Prior Directors to constitute a majority of the Board
of Directors of the Company, Thermedics or Thermo Electron, as the case may be,
at any time within two years following any Electoral Event, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company, Thermedics or Thermo Electron. As used in the
preceding sentence, the following capitalized terms shall have the respective
meanings set forth below:

(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in
Rule 405 under the Securities Act of 1933 and any "group" (within the
meaning of such term in Rule 13d-5 under the Exchange Act);

(b) "Prior Directors" shall mean the persons sitting on the Company's,
Thermedics' or Thermo Electron's Board of Directors, as the case may be,
immediately prior to any Electoral Event (or, if there has been no
Electoral Event, those persons sitting on the applicable Board of Directors
on the date of this Agreement) and any future director of the Company,
Thermedics or Thermo Electron who has been nominated or elected by a
majority of the Prior Directors who are then members of the Board of
Directors of the Company, Thermedics or Thermo Electron, as the case may
be; and

(c) "Electoral Event" shall mean any contested election of Directors, or
any tender or exchange offer for the Company's, Thermedics' or Thermo
Electron's Common Stock, not approved by the Prior Directors, by any Person
other than the Company, Thermedics, Thermo Electron or a subsidiary of
Thermo Electron.

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14. AMENDMENT OF THE PLAN

The provisions of Sections 3 and 5 of the Plan shall not be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder.
Subject to the foregoing, the Board of Directors may at any time, and from time
to time, modify or amend the Plan in any respect, except that if at any time
the approval of the Stockholders of the Company is required as to such
modification or amendment under Rule 16b-3, the Board of Directors may not
effect such modification or amendment without such approval.

The termination or any modification or amendment of the Plan shall not,
without the consent of an Optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the Optionees affected,
the Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to
amend or modify the terms and provisions of the Plan and of any outstanding
option to the extent necessary to ensure the qualification of the Plan under
Rule 16b-3.

15. EFFECTIVE DATE OF THE PLAN

The Plan shall become effective when adopted by the Board of Directors, but
no option granted under the Plan shall become exercisable until six months
after the Plan is approved by the Stockholders of the Company.

16. NOTICE

Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.

17. GOVERNING LAW

The Plan and all determinations made and actions taken pursuant hereto shall
be governed by the laws of the Commonwealth of Massachusetts.

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