SCHEDULE 14A
                                 (Rule 14a-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
    14a-6(e)(2))

                           THERMO ELECTRON CORPORATION
                (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)(1) 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):

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        (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:



[THERMO LOGO]
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454-9046



                                                                  April 9, 2003




Dear Stockholder:

     You are cordially invited to attend the 2003 Annual Meeting of Stockholders
of Thermo Electron Corporation,  which will be held on Wednesday,  May 14, 2003,
at 2:00 p.m. at the InterContinental The Barclay New York, 111 East 48th Street,
New York, New York.

     The notice of meeting,  proxy  statement  and proxy card enclosed with this
letter  describe  the  specific  business to be acted upon at the  meeting.  The
Company's 2002 Annual Report to Stockholders is also enclosed with this letter.

     It is  important  that  your  shares  of  the  Company's  common  stock  be
represented and voted at the meeting  regardless of the number of shares you may
hold.  Whether or not you plan to attend the  meeting in person,  you can ensure
your shares of the Company's common stock are voted at the meeting by submitting
your  instructions  by telephone,  the Internet,  or in writing by returning the
enclosed  proxy card.  Please  review the  instructions  in the  enclosed  proxy
statement and proxy card regarding each of these voting options.

     Thank you for your continued support of the Company.



                                Yours very truly,



                                /s/ Marijn E. Dekkers
                                MARIJN E. DEKKERS
                                President and Chief Executive Officer









[THERMO LOGO]
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454-9046


                            NOTICE OF ANNUAL MEETING
                             TO BE HELD MAY 14, 2003


                                                                  April 9, 2003


To the Holders of the Common Stock of
THERMO ELECTRON CORPORATION


     Notice is hereby given that the 2003 Annual Meeting of the  Stockholders of
Thermo Electron Corporation ("Thermo Electron" or the "Company") will be held on
Wednesday,  May 14, 2003, at 2:00 p.m. at the  InterContinental  The Barclay New
York, 111 East 48th Street, New York, New York. The purpose of the meeting is to
consider and take action upon the following matters:


     1.   Election of two directors,  constituting  the class of directors to be
          elected for a three-year term expiring in the year 2006.

     2.   Approval of the Company's annual incentive award plan.

     3.   A stockholder proposal, if presented by its proponent at the meeting.

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

     Stockholders  of record at the close of  business on March 28, 2003 are the
only  stockholders  entitled to notice of and to vote at the 2003 Annual Meeting
of Stockholders.

     This notice,  the proxy statement and proxy card enclosed herewith are sent
to you by order of the Board of Directors of the Company.


                                By Order of the Board of Directors,


                                /s/ Seth H. Hoogasian
                                SETH H. HOOGASIAN
                                Vice President, General Counsel and
                                Secretary





                                    IMPORTANT

Whether  you intend to attend the  meeting in person,  please  ensure  that your
shares of the  Company's  common  stock are  present and voted at the meeting by
submitting  your  instructions  by  telephone,  the  Internet,  or in writing by
completing,  signing,  dating  and  returning  the  enclosed  proxy  card to our
transfer  agent in the  enclosed  self-addressed  envelope,  which  requires  no
postage if mailed in the United States.








[THERMO LOGO]
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454-9046


                                 PROXY STATEMENT


     This proxy  statement is furnished in connection  with the  solicitation of
proxies by Thermo Electron  Corporation  ("Thermo Electron" or the "Company") on
behalf of the Board of Directors of the Company (the "Board of  Directors")  for
use at the 2003 Annual Meeting of the Stockholders to be held on Wednesday,  May
14, 2003, at 2:00 p.m. at the  InterContinental  The Barclay New York,  111 East
48th  Street,  New York,  New York and any  adjournments  thereof.  The  mailing
address of the  principal  executive  office of the Company is 81 Wyman  Street,
P.O. Box 9046,  Waltham,  Massachusetts  02454-9046.  This proxy  statement  and
enclosed proxy card are being first  furnished to stockholders of the Company on
or about April 9, 2003.



                                VOTING PROCEDURES

Purpose of Annual Meeting

     At the 2003 Annual Meeting of Stockholders,  stockholders  entitled to vote
at the meeting will consider and act upon the matters  outlined in the notice of
meeting  accompanying  this  proxy  statement,  including  the  election  of two
directors  constituting  the class of  directors  to be elected for a three-year
term expiring in 2006,  approval of the Company's  annual  incentive award plan,
and one stockholder proposal, if presented by its proponent at the meeting.

Voting Securities and Record Date

     Only stockholders of record at the close of business on March 28, 2003, the
record  date  for the  meeting,  are  entitled  to vote  at the  meeting  or any
adjournments  thereof.  On March 28, 2003, the outstanding  voting securities of
the Company  consisted of 162,053,959  shares of the Company's common stock, par
value $1.00 per share ("Common  Stock").  Each share of Common Stock outstanding
on the record date is entitled to one vote.

Quorum

     The  presence at the meeting,  in person or by proxy,  of a majority of the
outstanding  shares of the Common  Stock  entitled to vote at the  meeting  will
constitute a quorum for the  transaction  of business at the  meeting.  Votes of
stockholders   of  record  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 purpose of determining whether a quorum exists.

Manner of Voting

     Stockholders of Record

     Shares  entitled  to be  voted  at the  meeting  can  only be  voted if the
stockholder of record of such shares either: is present at the meeting;  returns
a  signed  proxy  card;  or  authorizes  proxies  to vote his or her  shares  by
telephone or over the Internet.  Shares represented by valid proxy will be voted
in  accordance  with your  instructions.  If you  choose to vote your  shares by
telephone or over the Internet,  you should follow the instructions  provided on
the proxy card. The voting  instructions  for telephone and Internet  voting are
designed to verify  stockholders  through the use of a specific  Control  Number
that is printed on each proxy card. In voting by telephone or over the Internet,
you will be  allowed  to  confirm  that your  instructions  have  been  properly
recorded.

     Participants in the Thermo Electron Choice Plan

     If you hold your  shares  through  the  Thermo  Electron  Choice  Plan (the
"Plan"),  your proxy  represents the number of shares in your Plan account.  For
those  shares  in your Plan  account,  the  proxy  card  will  serve as a voting
instruction  for  the  trustee  of  the  Plan.  If you  do  not  provide  voting
instructions  to the  trustee,  your  shares will not be voted by the trustee on
your behalf.







     Beneficial Stockholders

     If you hold your  shares  through a  broker,  bank or other  representative
("broker  or  representative"),  you can only  vote your  shares  in the  manner
prescribed by the broker or representative. Detailed instructions of a broker or
representative  will  generally  be  included  with your proxy  material.  These
instructions may also include information on whether your shares can be voted by
telephone or over the  Internet.  If you choose to vote your shares by telephone
or over the Internet,  you should follow the instructions provided by the broker
or representative.

Voting and Revocability of Proxies

     If you sign and return  your proxy  card or vote by  telephone  or over the
Internet without indicating specific choices,  your shares will be voted FOR the
nominees for  directors,  FOR approval of the annual  incentive  award plan, and
AGAINST the stockholder proposal.  Should any other matter be properly presented
at the meeting,  the persons named in the proxy card will vote on such matter in
accordance with their judgment.

     If you sign and return your proxy card marked  "abstain" or  "withhold"  on
any  proposal or choose the same  options  when voting by  telephone or over the
Internet, your shares will not be voted on that proposal and will not be counted
as votes cast in the final tally of votes with regard to that proposal. However,
your  shares will be counted for  purposes  of  determining  whether a quorum is
present.

     If you hold your shares as a beneficial  owner rather than a stockholder of
record, your broker or representative may only vote the shares that it holds for
you in accordance with your instructions. However, if it has not timely received
your  instructions,  that  broker or  representative  may only  vote on  certain
matters  for which it has  discretionary  voting  authority.  If that  broker or
representative  cannot  vote on a  particular  matter  because  it does not have
discretionary  voting  authority,  this is  called a "broker  non-vote"  on that
matter.

     If there is a broker  non-vote  on any  proposal,  your  shares will not be
voted on that  proposal and will not be counted as votes cast in the final tally
of votes with regard to that proposal.  However, your shares will be counted for
purposes of determining whether a quorum is present.

     A stockholder who votes his or her shares by telephone or Internet,  or who
returns a proxy card, may revoke the proxy at any time before the  stockholder's
shares are voted at the meeting by entering  new votes by  telephone or over the
Internet,  by written  notice to the Secretary of the Company  received prior to
the meeting,  by executing  and  returning a later dated proxy card prior to the
meeting, or by voting by ballot at the meeting.

Vote Required for Approval

     The nominees for  directors  will be elected by a plurality of the votes of
shares  cast in  person  or by  proxy  and  entitled  to  vote  at the  meeting.
Withholding a vote for nominees and broker  non-votes will not have an effect on
the election of nominees for directors.

     The proposal to approve the Company's  annual incentive award plan requires
an  affirmative  majority  of the  votes  cast  at  the  meeting  for  approval.
Abstentions and broker  non-votes will not be counted as votes cast with respect
to this proposal and therefore will not have an effect on the  determination  of
whether stockholder approval of the matter has been obtained.

     The stockholder proposal requires the affirmative vote of a majority of the
shares  present  or  represented  and  entitled  to  vote at the  meeting  to be
approved.  Abstentions will have the same effect as a vote against the proposal,
and broker  non-votes  will not have an effect on the  determination  of whether
stockholder approval of the matter has been obtained.

                                       2






                                  - PROPOSAL 1-

                              ELECTION OF DIRECTORS

     Effective  at the 2003  Annual  Meeting  of  Stockholders,  the  number  of
directors constituting the full Board of Directors of the Company (the "Board of
Directors") is fixed at eight, divided into three classes, one of which consists
of two directors and the other two consist of three  directors  each. Each class
is elected for a three-year term at successive  Annual Meetings of Stockholders.
In all cases, directors hold office until their successors have been elected and
qualified,  or until their  earlier  resignation,  death or removal.  Mr. Jim P.
Manzi and Ms.  Elaine S. Ullian are listed below as nominees for the  three-year
term expiring at the 2006 Annual Meeting of  Stockholders.  Each of the nominees
is currently a director of the Company. If any of the nominees is unavailable to
serve as  director,  an event  that is not  anticipated,  the  persons  named as
proxies have full discretion to vote for any other persons who may be nominated.

     In 2001, the Board of Directors  adopted a mandatory  retirement policy for
members of the Board of  Directors.  The policy  states that no director will be
renominated for election after reaching the age of 70. Directors who are already
over 70  years of age will  serve  out  their  term of  office,  but will not be
nominated for election  when their term of office  expires.  In accordance  with
this  policy,  Mr.  Peter O. Crisp,  who has served as a director of the Company
since 1974, is retiring  from the Board of Directors at the 2003 Annual  Meeting
of  Stockholders.  The Company  recognizes with gratitude and  appreciation  the
leadership, service and dedication of Mr. Crisp.

Nominees and Incumbent Directors

     Set forth below are the names of the persons  nominated  as  directors  and
directors whose terms do not expire this year,  their ages, their offices in the
Company,  if any,  their  principal  occupations or employment for the past five
years,  the length of their  tenure as  directors  and the names of other public
companies  in  which  they  hold  directorships.   Information  regarding  their
beneficial  ownership  of Common  Stock is  reported  under the  caption  "Stock
Ownership".

         Nominees for Directors Whose Term of Office Will Expire in 2006

     Jim P. Manzi Mr.  Manzi,  51, has been a director of the Company  since May
2000.  He has served as the chairman of Stonegate  Capital,  a firm he formed to
manage his  personal  investment  activities  in  technology  startup  ventures,
primarily related to the Internet,  since 1995. From 1984 until 1995, he was the
chairman,   president  and  chief   executive   officer  of  Lotus   Development
Corporation,  a software  manufacturer  that was acquired by IBM  Corporation in
1995.

     Elaine S. Ullian Ms.  Ullian,  55, has been a director  of Thermo  Electron
since July 2001.  Ms. Ullian has been president and chief  executive  officer of
Boston Medical Center, a 550-bed academic medical center  affiliated with Boston
University,  since July 1996. Ms. Ullian is also a director of Hologic, Inc. and
Vertex Pharmaceuticals, Inc.

          Incumbent Directors Whose Term of Office Will Expire in 2005

     John L.  LaMattina  Dr.  LaMattina,  53, has been a director of the Company
since January  2002. He has served since April 2000 as vice  president of Pfizer
Inc., a pharmaceutical company, executive vice president, Pfizer Global Research
and  Development,  and  president,  Pfizer  Worldwide  Research  and  Technology
Alliances.  From September  1998 until April 2000, Dr.  LaMattina was the senior
vice president of Worldwide Discovery,  Pfizer Central Research.  Previously, he
served as vice president of Pfizer's U.S. Discovery unit.

     Michael E. Porter Dr.  Porter,  55, has been a director of Thermo  Electron
since July 2001. Dr. Porter is the Bishop William Lawrence University  Professor
at the Harvard Business School, and a leading authority on competitive  strategy
and  international  competitiveness.  Dr.  Porter is also a director  of Inforte
Corp. and Parametric Technology Corporation.

     Richard F. Syron Mr.  Syron,  59, has been a director of the Company  since
1997 and chairman of the Board of Directors since January 2000. He was appointed
executive  chairman of the Company in November 2002.  From June 1999 to November
2002, Mr. Syron served as chief executive officer of the Company. He also served
as president of the Company from June 1999 to July 2000.  From April 1994 to May
1999,  Mr.  Syron  served as the  chairman  and chief  executive  officer of the
American  Stock  Exchange,  Inc.  Mr.  Syron is also a director of John  Hancock
Financial Services, Inc., McKesson Corporation and Nabors Industries Ltd.


                                       3




          Incumbent Directors Whose Term of Office Will Expire in 2004

     Marijn E. Dekkers Mr. Dekkers, 45, has been a director and the president of
the Company since July 2000. In November 2002 he was appointed  chief  executive
officer of the Company.  From July 2000 to November  2002, he also served as the
chief operating  officer of the Company.  From June 1999 to July 2000, he served
as the president of Honeywell  International Inc.'s (formerly AlliedSignal Inc.)
electronic  materials division;  from August 1997 to May 1999, he served as vice
president and general manager of its fluorine products  division;  and from July
1995 to July  1997,  he served as vice  president  and  general  manager  of its
specialty films division.

     Robert A. McCabe Mr.  McCabe,  68, has been a director of the Company since
1962. He has been the chairman of Pilot Capital Corporation, which is engaged in
private  investments,  since  1998,  and also served as the  president  of Pilot
Capital Corporation from 1987 to 1998. Mr. McCabe is also a director of Church &
Dwight Co., Inc.

     Robert W. O'Leary Mr. O'Leary, 59, has been a director of the Company since
June 1998.  He has served as the chief  executive  officer  and  chairman of the
board of ICN  Pharmaceuticals,  Inc.,  a  research-based  global  pharmaceutical
company, since June 2002. From January 2001 to June 2002, he served the chairman
and chief executive officer of The Sagamore Group, a firm specializing in change
management  situations with a focus on the service sector.  He was the president
and chief executive officer of PacificCare Health Systems Inc., a managed health
services  company,  from July 2000 to October 2000. From January 1996 until June
2000,  Mr.  O'Leary was the chairman of Premier  Inc.,  a strategic  alliance of
not-for-profit  health  care and  hospital  systems.  From  January  1996  until
September  1998 he also served as chief  executive  officer of Premier  Inc. Mr.
O'Leary is also a director of Smiths Group PLC and Viasys Healthcare Inc.

Committees of the Board of Directors and Meetings

     The  Board  of  Directors  has  established  an  audit  committee   ("Audit
Committee"),  a human resources  committee ("Human  Resources  Committee") and a
nominating  and  corporate  governance  committee   ("Nominating  and  Corporate
Governance Committee").  The Board of Directors met 8 times, the Audit Committee
met 12 times,  the Human Resources  Committee met 5 times and the Nominating and
Corporate  Governance  Committee  met 5 times  during  fiscal  year  2002.  Each
director  attended at least 75% of the aggregate of all meetings of the Board of
Directors and all meetings of the committees on which he or she served that were
held during fiscal year 2002.

     Audit Committee

     The Audit Committee  consists solely of directors who meet the independence
guidelines set forth in the listing  requirements of the New York Stock Exchange
("NYSE") and its present  members are Mr. McCabe  (Chairman),  Mr. Manzi and Ms.
Ullian. The Audit Committee,  among other things, reviews the scope of the audit
with the Company's  independent  accountants and meets with them for the purpose
of reviewing the results of the audit  subsequent to its  completion.  The Audit
Committee  acts  pursuant  to the  charter  attached as Appendix A to this proxy
statement.

     Human Resources Committee

     The Human  Resources  Committee  consists  solely of directors  who are not
employees of the Company  ("outside  directors") and its present members are Mr.
Manzi  (Chairman),  Mr. Crisp and Mr. O'Leary.  The Human  Resources  Committee,
among other  things,  reviews the  performance  of senior  management,  approves
senior  management  compensation,  and  administers  the  Company's  stock-based
compensation plans.

     Nominating and Corporate Governance Committee

     The  Nominating  and  Corporate  Governance  Committee  consists  solely of
outside directors and its present members are Mr. O'Leary (Chairman), Dr. Porter
and Dr.  LaMattina.  The Nominating and Corporate  Governance  Committee,  among
other  things,  reviews the  credentials  of proposed  nominees  for  directors,
recommends to the Board of Directors  nominees to fill vacancies or nominees for
election at the Annual  Meeting of  Stockholders,  and reviews Board of Director
and  committee   organization  and  structure.   The  Nominating  and  Corporate
Governance Committee will consider stockholder recommendations for nominees sent
to the  committee  to the  attention  of the  secretary  of the  Company  at the
principal  executive  office of the Company.  In addition,  the  Nominating  and
Corporate Governance Committee reviews and monitors the Company's principles and
policies  of  corporate  governance,   business  code  of  conduct  and  ethical
responsibilities.



                                       4



Compensation of Directors

     Cash Compensation

     Outside directors receive an annual retainer of $28,000 and a fee of $1,000
per meeting for  attending in person  meetings of the Board of Directors and its
committees  and $500 per meeting for  participating  in meetings of the Board of
Directors  and its  committees  held by means of conference  telephone.  Outside
directors  resident on the west coast receive an  additional  $1,000 per meeting
attended in person for travel time incurred in attending  such meeting.  Payment
of directors'  fees is made quarterly.  Messrs.  Dekkers and Syron are full-time
employees  of the  Company and do not  receive  any cash  compensation  from the
Company for their service as a director or committee member.  Directors are also
reimbursed for out-of-pocket expenses incurred in attending these meetings.

     Deferred Compensation Plan for Directors

     Under  the  Company's   deferred   compensation  plan  for  directors  (the
"Directors  Deferred  Compensation  Plan"),  a  director  has the right to defer
receipt of his or her cash fees  until he or she ceases to serve as a  director,
dies or retires from his or her principal  occupation.  In the event of a change
in control or proposed  change in control of the Company that is not approved by
the Board of Directors,  deferred amounts become payable immediately. Any of the
following  are  deemed to be a change of  control:  (i) the  acquisition  by any
person of 40% or more of the  outstanding  common stock or voting  securities of
the Company; (ii) the failure of the Board of Directors to include a majority of
directors  who are  "continuing  directors",  which  term is  defined to include
directors  who were  members  of the Board of  Directors  on July 1, 1999 or who
subsequent to that date 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 the Company or the sale or other disposition
of all or  substantially  all of the assets of the  Company  unless  immediately
after such transaction (a) all holders of the 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 the Company. Amounts deferred pursuant to
the Directors  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 Directors Deferred  Compensation
Plan.  As of December 28,  2002, a total of 582,663  shares of Common Stock were
reserved  for  issuance  under  the  Directors  Deferred  Compensation  Plan and
deferred  units  equal to  approximately  281,575  shares of Common  Stock  were
accumulated under the Directors Deferred Compensation Plan.

     Stock-Based Compensation

     Outside directors of the Company are eligible for the  discretionary  grant
of  stock  options  under  the  Company's   equity   incentive  plan,  which  is
administered by the Human Resources Committee.  In June 2002 the Company granted
each  outside  director of the Company an option to  purchase  10,000  shares of
Common Stock. The Company's  current policy is to also award options to purchase
15,000 shares to any new director of the Company upon his or her  appointment as
a director.  These options vest in three equal annual installments and expire on
the seventh  anniversary of the grant date. The exercise price for these options
is the average of the closing prices of the Common Stock as reported on the NYSE
for the five trading days immediately preceding and including the grant date.

     In addition,  the  Company's  directors  stock option plan (the  "Directors
Stock  Option  Plan")  provides  for the  automatic  grant of stock  options  to
purchase shares of Common Stock to outside directors as additional  compensation
for their  service as directors.  Pursuant to the  Directors  Stock Option 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
Stockholders of the Company.  Options  evidencing  annual grants are immediately
exercisable  at any time from and after the grant date and expire on the seventh
anniversary  of the grant date,  except that options  granted  prior to February
2002 expire on the third  anniversary  of the grant date. The exercise price for
options  granted  under the  Directors  Stock  Option Plan is the average of the
closing  prices of the Common Stock as reported on the NYSE for the five trading
days immediately preceding and including the grant date. As of February 7, 2003,
options to purchase  19,782  shares of Common Stock were  outstanding  under the
Directors Stock Option Plan,  options to purchase 106,787 shares of Common Stock
had been  exercised  since  inception of the  Directors  Stock Option Plan,  and
options to purchase  658,425  shares of Common Stock were  available  for future
grant.

                                       5


Stock Ownership Policy for Directors

     The Human  Resources  Committee has  established a stock holding policy for
directors of the Company.  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  Company is  required  to comply  with a separate  stock  holding
policy  established  by the Human  Resources  Committee,  which is  described in
"Committee Report on Executive Compensation--Stock Ownership Policy".



                                 STOCK OWNERSHIP

     The  following  table sets forth,  as of February 7, 2003,  the  beneficial
ownership of Common Stock by (a) each  director  and nominee for  director,  (b)
each of the Company's executive officers named in the summary compensation table
set forth below under the heading "Executive Compensation" (the "named executive
officers"),  and (c) all directors and current executive officers as a group. In
addition,  the  following  table sets forth the  beneficial  ownership of Common
Stock,  as of February 7, 2003, with respect to each person who was known by the
Company to own  beneficially  more than 5% of the  outstanding  shares of Common
Stock.  Directors of the Company also have interests in stock-based  units under
the Directors Deferred  Compensation Plan. While these units may not be voted or
transferred,  they are  listed in the table  below as they  represent  the total
economic interest of the directors in the Common Stock.


                                                                                                             


                                                                      Options                           Percent of
                                                                    Exercisable                           Shares           Deferred
                 Name(1)                           Shares (2)     within 60 Days(3)       Total      Beneficially Owned  Stock Units
                 -------                           ----------     -----------------       -----      ------------------  -----------
Dodge & Cox(4).................................    18,665,624                  -       18,665,624           11.44%              -
FMR Corp.(5)...................................    15,828,191                  -       15,828,191            9.70%              -
Wellington Management Company, LLP(6)..........    11,046,767                  -       11,046,767            6.77%              -
Iridian Asset Management LLC(7)................     9,640,457                  -        9,640,457            5.91%              -
Guy Broadbent..................................         4,850            150,208          155,058                *              -
Marc N. Casper.................................         4,247             91,666           95,913                *              -
Peter O. Crisp.................................        88,257              4,205           92,462                *         57,306
Marijn E. Dekkers..............................        56,448            930,182          986,630                *              -
Seth H. Hoogasian..............................        16,465            265,926          282,391                *              -
Barry S. Howe..................................        40,166            467,766          507,932                *              -
John L. LaMattina..............................         2,000              6,000            8,000                *              -
Jim P. Manzi...................................             -             19,606           19,606                *          5,562
Robert A. McCabe...............................        48,840              4,036           52,876                *         40,384
Theo Melas-Kyriazi.............................        80,900            740,728          821,628                *              -
Robert W. O'Leary..............................        31,606             15,833           47,439                *         10,201
Michael E. Porter..............................         4,585              6,814           11,399                *              -
Richard F. Syron...............................        87,768          1,811,714        1,899,482            1.15%          2,914
Elaine S. Ullian...............................             -              6,814            6,814                *          3,544
All directors and current executive officers as
a group (15 persons)...........................       478,544          4,604,775        5,083,319            3.03%        119,911



* Less than one percent.

(1) Except as reflected in the  footnotes to this table,  shares of 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 Common Stock beneficially owned by Mr. Broadbent, Mr. Dekkers, and
Mr. Syron, and all directors and current executive officers as a group, include:
2,000,  20,000,  37,177, and 59,177 shares,  respectively,  of restricted Common
Stock that may not be sold or transferred until future vesting dates.  Shares of
Common  Stock   beneficially   owned  by  Mr.  Hoogasian,   Mr.  Howe,  and  Mr.
Melas-Kyriazi,  and all  directors  and current  executive  officers as a group,
include:  429,  2,769,  1,740,  and  5,500  shares,  respectively,  held  in the
Company's  401(k)  Plan.  Shares  of  Common  Stock  beneficially  owned  by Mr.
Melas-Kyriazi  include  1,621 shares  issuable  upon  conversion  of $100,000 in
principal  amount of the Company's 0%  convertible  subordinated  debentures due
2003.  Shares of Common Stock  beneficially  owned by



                                       6


Mr.  O'Leary  include  13,000 shares held in a family trust of which Mr. O'Leary
and his spouse are the  trustees,  each of whom as trustee  has sole  voting and
dispositive power.

(3) Options  exercisable  within 60 days  include  options to  purchase  54,056,
197,531,  150,715, 6,977, and 5,814 shares of Common Stock granted prior to July
2000  for   Messrs.   Hoogasian,   Howe,   Melas-Kyriazi,   O'Leary  and  Syron,
respectively,  which are currently  exercisable but subject to certain  transfer
restrictions,  including the right of the Company to repurchase, at the exercise
price,  the shares  issued upon  exercise of the options,  upon certain  events,
primarily  cessation of employment with the Company.  These  restrictions  lapse
over time, assuming continued service.

(4)  This  information  was  obtained  from  the  Schedule  13G  filed  with the
Securities  and  Exchange  Commission  on February  13, 2003 by Dodge & Cox, One
Sansome  Street,  35th Floor,  San  Francisco,  CA 94104,  which  reported  such
ownership as of December 31, 2002.  These shares are owned by clients of Dodge &
Cox, an  investment  advisor.  Dodge & Cox has sole voting power with respect to
17,329,224 shares,  shared voting power with respect to 341,800 shares, and sole
dispositive power with respect to all shares.

(5)  This  information  was  obtained  from  the  Schedule  13G  filed  with the
Securities and Exchange  Commission on February 14, 2003 by FMR Corp., Edward C.
Johnson 3rd,  Abigail P. Johnson,  and Fidelity  Management & Research  Company,
which  reported  such  ownership as of December  31, 2002.  The address of these
persons is 82 Devonshire  Street,  Boston,  Massachusetts  02109. The shares are
beneficially  owned as  follows:  by  Fidelity  Management  &  Research  Company
("FM&RC"),  a wholly-owned  subsidiary of FMR Corp.  and  registered  investment
advisor to various investment companies  ("Fidelity Funds"),  14,503,270 shares;
Fidelity  Management Trust Company  ("FMTC"),  a wholly-owned  subsidiary of FMR
Corp.,  950,170  shares as a result of its  serving  as  investment  manager  of
various  institutional  accounts;   Strategic  Advisers,  Inc.,  a  wholly-owned
subsidiary of FMR Corp., 225 shares; Geode Capital Management, LLC ("Geode"), an
entity  indirectly owned by certain employees and shareholders of FMR Corp., 625
shares;  and  Fidelity   International  Limited  ("FIL"),  an  entity  of  which
approximately  40% of the voting power is owned by a  partnership  controlled by
Mr. Johnson and members of his family,  373,901 shares. Mr. Johnson,  FMR Corp.,
and the  Fidelity  Funds  each  has  sole  dispositive  power  with  respect  to
14,503,270 shares owned by the Fidelity Funds. Neither Mr. Johnson nor FMR Corp.
has sole voting power with  respect to the shares  owned by the Fidelity  Funds,
which  power rests with the Boards of Trustees  of the  Fidelity  Funds.  Of the
950,170 shares owned by institutional  accounts managed by FMTC, Mr. Johnson and
FMR Corp. each has sole dispositive  power with respect to 950,170 shares,  sole
voting power with respect to 887,450 shares, and no voting power with respect to
62,720 shares. FIL has sole voting and dispositive power with respect to 373,901
shares.  Members of Mr.  Johnson's  family  may be deemed to form a  controlling
group with respect to FMR Corp.

(6)  This  information  was  obtained  from  the  Schedule  13G  filed  with the
Securities and Exchange Commission on February 12, 2003 by Wellington Management
Company, LLP ("Wellington"), 75 State Street, Boston, Massachusetts 02109, which
reported such ownership as of December 31, 2002. These shares are held of record
by clients of Wellington,  an investment  advisor.  Wellington has shared voting
power with respect to  6,585,067  shares and no voting power with respect to the
balance of the shares,  and shared  dispositive power with respect to all of the
shares.

(7)  This  information  was  obtained  from  the  Schedule  13G  filed  with the
Securities  and  Exchange  Commission  on February  11, 2003 by The Governor and
Company of the Bank of Ireland ("Bank of Ireland"),  IBI  Interfunding  ("IBI"),
BancIreland/First Financial, Inc. ("BancIreland"), BIAM (US) Inc., Iridian Asset
Management LLC ("Iridian"),  COLE Partners LLC ("COLE"),  Iridian Partners Fund,
L.P.  ("Iridian  Partners"),  Iridian  Investors,  L.P.  ("Iridian  Investors"),
Iridian Private Business Value Equity Fund, L.P.  ("Iridian Private  Business"),
David L. Cohen and Harold J. Levy,  which reported such ownership as of December
31, 2002. The address of Bank of Ireland and IBI is Lower Baggot Street,  Dublin
2, Ireland. The address of BancIreland is Junction Marketplace #27, 1011 N. Main
Street,  White River Junction,  Vermont 05501.  The address of BIAM (US) Inc. is
Liberty Park #15, 282 Route 101,  Amherst,  New Hampshire  03110. The address of
Iridian,  COLE, Iridian Partners,  Iridian Investors,  Iridian Private Business,
Mr. Cohen and Mr. Levy is c/o Iridian Asset  Management LLC, 276 Post Road West,
Westport, Connecticut 06880-4704. Iridian has direct beneficial ownership of the
8,937,057 shares of Common Stock in the accounts that it manages,  including the
power to vote or dispose of such shares. Messrs. Cohen and Levy may be deemed to
share such power with Iridian.  In addition,  Iridian is the investment  adviser
for Iridian Partners (which owns 31,800 shares),  Iridian  Investors (which owns
26,800 shares) and Iridian Private Business (which owns 242,800 shares). In such
capacity,  Iridian  has the right to vote and direct the  disposition  of shares
held by such  entities  and,  consequently,  has  beneficial  ownership  of such
shares. COLE (in addition to Messrs. Cohen and Levy) may be deemed to share such
power with Iridian. BIAM (US) Inc., as the controlling member of Iridian, may be
deemed  to  possess   beneficial   ownership  of  the  shares  of  Common  Stock
beneficially owned by Iridian. BancIreland, as the sole shareholder of BIAM (US)
Inc.,  may be deemed to  possess

                                       7


beneficial  ownership of the shares of Common Stock  beneficially  owned by BIAM
(US) Inc. IBI, as the sole shareholder of BancIreland,  may be deemed to possess
beneficial  ownership  of the  shares  of  Common  Stock  beneficially  owned by
BancIreland.  Bank of Ireland,  as the sole shareholder of IBI, may be deemed to
possess beneficial ownership of the shares of Common Stock beneficially owned by
IBI. Messrs. Cohen and Levy may be deemed to possess beneficial ownership of the
shares of Common  Stock  beneficially  owned by  Iridian by virtue of having the
power to vote and  direct  the  disposition  of shares of Common  Stock as joint
chief investment officers of Iridian. Messrs. Cohen and Levy disclaim beneficial
ownership of such shares. COLE, as the sole general partner of Iridian Partners,
Iridian  Investors  and  Iridian  Private   Business,   may  be  deemed  to  own
beneficially  shares  of  Common  Stock  for  which  Iridian  Partners,  Iridian
Investors  and  Iridian  Private  Business  may  be  deemed  to  possess  direct
beneficial  ownership.  Iridian,  as the sole  member of COLE,  may be deemed to
possess beneficial ownership of the shares of Common Stock that are beneficially
owned by COLE.  Messrs.  Cohen and Levy,  by virtue of their ability to exercise
shared voting and dispositive power over the shares of Common Stock beneficially
owned by First Eagle Fund of America  (which owns  402,000  shares)  pursuant to
their  employment  arrangements  with Arnold & S.  Bleichroeder  Advisers,  Inc.
("A&SB Advisers"), may be deemed to possess beneficial ownership of such shares.
Messrs.  Cohen and Levy  disclaim  beneficial  ownership  of such shares for all
other purposes.  Effective January 1, 2003, the employment  relationship between
each of Messrs.  Cohen and Levy terminated,  and Iridian became a sub-advisor to
A&SB Advisors for the provision of investment management services to First Eagle
Fund of America.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange  Act") requires the Company's  directors and executive  officers,  and
beneficial  owners  of more  than  10% of the  Common  Stock,  to file  with the
Securities  and Exchange  Commission  initial  reports of ownership and periodic
reports of changes in ownership of the Company's securities. Based upon a review
of such  filings,  all Section  16(a)  filing  requirements  applicable  to such
persons  were  complied  with  during 2002  except  that Mr. Guy  Broadbent,  an
executive  officer  of the  Company,  filed a late  Form 4 with  respect  to the
withholding  for taxes of shares of Common Stock in connection  with the vesting
of a restricted stock award.


                                       8



                             EXECUTIVE COMPENSATION

Summary Compensation Table

     The following  table  summarizes  compensation  for services to the Company
received during the last three fiscal years by the two persons who served as the
Company's  chief  executive  officer  during fiscal year 2002 and the five other
most highly  compensated  executive officers who were employed by the Company as
of the end of fiscal year 2002. On November 21, 2002,  Mr.  Dekkers,  previously
president and chief operating officer, was appointed chief executive officer and
Mr. Syron,  formerly chief executive officer,  was appointed executive chairman.
The executive  officers listed below are collectively  referred to in this proxy
statement as the "named executive officers".



                                                    
                                              Summary Compensation Table
------------------------------------------------------------------------------------------------------------------------
                                                                     Long Term Compensation
                                                                     Restricted  Securities
        Name and         Fiscal         Annual Compensation           Stock      Underlying             All Other
   Principal Position     Year          Salary        Bonus           Award      Options (1)         Compensation (2)
   -----------------     ------         ------        -----          ----------  -----------         ----------------
Marijn E. Dekkers         2002    $533,333 (3)     $430,000 (3)  $2,008,000 (4)       980,000           $31,985 (5)
 President and Chief      2001    $500,000         $425,000              --           237,090 (6)       $28,619 (5)
 Executive Officer        2000    $238,095 (7)     $500,000 (7)  $1,410,000 (8)     1,060,156 (6)      $290,633 (5)(9)

------------------------------------------------------------------------------------------------------------------------
Richard F. Syron          2002    $800,000         $741,600      $4,445,219 (10)(11)  780,000        $1,841,213 (12)
 Executive Chairman       2001    $800,000         $800,000        $199,716 (10)      302,368           $38,942 (13)
                          2000    $800,000       $1,120,000      $1,558,805 (10)      348,886          $152,277 (14)

------------------------------------------------------------------------------------------------------------------------
Marc N. Casper (15)       2002    $300,000         $225,000              --           100,000           $17,500
 President, Life and      2001     $26,136               $0              --           275,000          $201,458 (16)
 Laboratory Sciences

------------------------------------------------------------------------------------------------------------------------
Seth H. Hoogasian (17)    2002    $316,200         $162,850              --           142,500           $31,295
 General Counsel          2001    $307,000         $185,000              -- (18)       44,191           $29,959

------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi        2002    $305,900         $157,540              --           150,000           $29,380
 Chief Financial Officer  2001    $297,000         $185,000              --            34,306           $28,038
                          2000    $280,000         $240,000        $577,500 (19)           --           $25,150

------------------------------------------------------------------------------------------------------------------------
Guy Broadbent (20)        2002    $300,000         $154,500              --           100,000           $27,630
 President, Optical       2001    $270,000         $150,000              -- (21)      171,518           $18,161
 Technologies

------------------------------------------------------------------------------------------------------------------------
Barry S. Howe (22)        2002    $300,000         $154,500              --           150,000           $29,491
 President, Measurement   2001    $270,000         $150,000              --            46,518           $28,226
 and Control
------------------------------------------------------------------------------------------------------------------------


(1) As part of the  Company's  spinout  strategy,  certain  subsidiaries  of the
Company   sold   minority   interests   to   investors   resulting   in  several
majority-owned,  private and  publicly-held  subsidiaries and granted options to
purchase  shares of these  subsidiaries  to  employees  and  directors of Thermo
Electron  companies as part of its compensation  program.  During 1999 and 2000,
the Company effected a major reorganization  that, among other things,  resulted
in  the  acquisition  of  the  minority  interest  of  substantially  all of its
subsidiaries  that had minority  investors and the  assumption by the Company of
the  outstanding  options to purchase shares of the  subsidiaries.  In 2001, the
Company spun off to its shareholders all of the shares of Kadant Inc.  (formerly
known as Thermo  Fibertek  Inc.) and, as a result,  all of the  options  held by
employees  of the  Company in Kadant  Inc.  and its  publicly-owned  subsidiary,
Thermo  Fibergen Inc.,  were  converted  into options to purchase  shares of the
Company. In addition,  in 2002, the Company took private its last publicly owned
subsidiary  Spectra-Physics,  Inc.  and,  as a  result,  all of the  options  to
purchase  shares of  Spectra-Physics  became  options to purchase  shares of the
Company.  Options  granted in fiscal years 2000 and 2001 in the table above have
also been restated to reflect adjustments made to the number and exercise prices
of the options as a result of the spin-off to shareholders by the Company of its
Kadant Inc. and Viasys Healthcare Inc.  subsidiaries in August 2001 and November
2001, respectively.


                                       9





(2) This amount includes (a) matching  contributions made on behalf of the named
executive  officers by the Company pursuant to the Company's 401(k) plan, except
for Mr. Dekkers in 2000, Mr. Broadbent in 2001, and Mr. Casper in 2001 and 2002,
(b) a car allowance, (c) an allowance for medical related expenses, and (d) with
respect to fiscal  years 2001 and 2002 only,  premiums  paid by the Company with
respect to long-term disability insurance for the benefit of the named executive
officers,  except for Mr. Casper in 2001 and 2002. For 2002, the dollar value of
each such benefit was $12,500 each for the car  allowance,  $9,000 each,  except
for $8,500 for Mr. Howe, for matching 401(k) contributions,  $5,000 each for the
medical expense  allowance,  and $3,185,  $4,822,  $4,795,  $2,880,  $1,130, and
$3,491 for Messrs. Dekkers, Syron, Hoogasian, Melas-Kyriazi, Broadbent and Howe,
respectively, for long-term disability insurance premiums.

(3) The salary and bonus  reported for 2002  represents  the amount paid for the
portion  of the year  during  which  Mr.  Dekkers  performed  services  as chief
executive officer and for the portion of the year in which Mr. Dekkers performed
services  for the  Company in his  capacity  as  president  and chief  operating
officer.  See  "Executive  Compensation  -  Employment  Agreements  with Messrs.
Dekkers and Syron".

(4) In November 2002, Mr. Dekkers was awarded  100,000  restricted  Common Stock
units  valued at  $2,008,000  on the grant  date,  pursuant  to the terms of his
employment agreement, that vest in equal annual installments over the three-year
period  commencing  on the grant date and,  provided  further,  the units do not
become shares of Common Stock nor do the  restrictions  on transfer  lapse until
Mr. Dekkers ceases to be an employee of the Company.

(5) In addition to the items  referred to in footnote (2), this amount  includes
$2,300  paid in each of fiscal  years  2002,  2001,  and 2000 by the  Company as
premiums for a term life insurance policy for the benefit of Mr. Dekkers.

(6) Options  granted in 2000 and 2001 to Mr. Dekkers include options to purchase
13,496 and 4,499 shares of Common Stock, respectively,  which had been converted
from options to purchase shares of a subsidiary of the Company. See footnote (1)
above.

(7) Mr.  Dekkers was  appointed  president  and chief  operating  officer of the
Company on July 11, 2000.  The salary  reported for fiscal 2000  represents  the
amount  paid for the  portion of the year  during  which Mr.  Dekkers  performed
services for the Company.  Mr. Dekkers'  employment  agreement provided that his
bonus for fiscal 2000 was not subject to proration.

(8) Upon Mr. Dekkers'  appointment as president and chief  operating  officer in
July 2000, he was awarded 60,000 shares of restricted  Common Stock with a value
of $1,410,000 on the grant date that vest in equal annual  installments over the
three-year  period  commencing on the grant date. Any cash dividends paid on the
restricted  shares are entitled to be retained by Mr. Dekkers  without regard to
vesting,  however,  any  non-cash  dividends  are  subject  to the same  vesting
restrictions as the original  restricted  shares. At the end of fiscal 2002, Mr.
Dekkers held 120,000  shares of restricted  Common Stock and  restricted  Common
Stock  units  with  an  aggregate  value  of  $2,461,924  (including  the  value
attributable  to restricted  shares of Kadant and Viasys  received in connection
with the spin-off of such companies in August and November 2001, respectively).

(9) This amount includes the payment by the Company of a $280,000  signing bonus
in fiscal  2000 in lieu of the  reimbursement  of expenses  associated  with Mr.
Dekkers' relocation to Massachusetts.

(10) In June 2002,  Mr. Syron was awarded  10,923  shares of  restricted  Common
Stock  valued  at  $191,371  on the  grant  date,  pursuant  to the terms of his
employment agreement, that vest 100% on the third anniversary of the grant date.
In June 2001,  Mr.  Syron was awarded  7,120 shares of  restricted  Common Stock
valued at $199,716 on the grant  date,  pursuant to the terms of his  employment
agreement, that vest 100% on the third anniversary of the grant date. In January
2000, in connection with the adoption of the Company's  reorganization plan, the
Human Resources  Committee  approved a retention  arrangement for Mr. Syron that
awarded him 50,000 shares of  restricted  Common Stock valued at $825,000 on the
grant date. The  restricted  shares vest in equal annual  installments  over the
three-year  period  commencing  on the grant date.  In June 2000,  Mr. Syron was
awarded 10,800 shares of restricted Common Stock valued at $207,230 on the grant
date, pursuant to the terms of his employment  agreement,  that vest 100% on the
third anniversary of the grant date. Upon the appointment of the Company's chief
operating  officer  in June  2000,  Mr.  Syron  was  awarded  25,000  shares  of
restricted  Common  Stock,  valued at $526,575  on the grant date,  that vest in
equal annual  installments  over the three-year  period  commencing on the grant
date.  Any cash  dividends  paid on the  restricted  shares are  retained by the
recipient  without regard to vesting,  however,  any non-cash  dividends paid on
restricted shares are subject to the same vesting restrictions as the underlying
shares.

                                       10


(11) In November 2002,  Mr. Syron was awarded  111,845  restricted  Common Stock
units  valued at  $2,245,848  on the grant  date,  pursuant  to the terms of his
employment  agreement,  provided,  however,  the units do not  become  shares of
Common  Stock  until Mr.  Syron  ceases to be an employee of the Company for any
reason.  In November 2002, Mr. Syron was also awarded 100,000  restricted Common
Stock units valued at $2,008,000 on the grant date, pursuant to the terms of his
employment agreement, that vest in equal annual installments over the three-year
period  commencing  on the grant date and,  provided  further,  the units do not
become shares of Common Stock nor do the  restrictions  on transfer  lapse until
Mr. Syron  ceases to be an employee of the  Company.  At the end of fiscal 2002,
Mr. Syron held 265,689 shares of restricted  Common Stock and restricted  Common
Stock  units  with  an  aggregate  value  of  $5,446,679  (including  the  value
attributable  to restricted  shares of Kadant and Viasys  received in connection
with the spin-off of such companies in August and November 2001, respectively).

(12) In addition to the items referred to in footnote (2), this amount  includes
(a) a  retention  payment in the amount of  $1,800,000  awarded to Mr.  Syron in
November 2002 in connection with the transition from chief executive  officer to
executive  chairman  of the  Company,  and (b)  $9,891  paid by the  Company  as
premiums for a term life insurance policy for the benefit of Mr. Syron.

(13) In addition to the items referred to in footnote (2), this amount  includes
$8,970 paid by the Company as premiums for a term life insurance  policy for the
benefit of Mr. Syron.

(14) In addition to the items referred to in footnote (2), this amount  includes
the  reimbursement  by the  Company  of  $127,127  in fiscal  2000 for  expenses
associated with Mr. Syron's relocation to Massachusetts.

(15) Mr. Casper was appointed vice president of the Company and president,  Life
and Laboratory  Sciences  sector on November 30, 2001.  The salary  reported for
fiscal year 2001  represents  the amount paid for the portion of the year during
which Mr. Casper performed services for the Company.

(16) In addition to the items referred to in footnote (2), this amount  includes
a sign-on bonus of $200,000 awarded to Mr. Casper in November 2001 in connection
with his commencement of employment with the Company.

(17) Mr.  Hoogasian  became an  executive  officer of the Company on January 18,
2001. The salary and bonus  reported for fiscal 2001  represent  amounts paid to
Mr. Hoogasian for the entire year.

(18) At the end of fiscal 2002,  Mr.  Hoogasian held 11,667 shares of restricted
Common  Stock  with  an  aggregate  value  of  $269,485   (including  the  value
attributable  to restricted  shares of Kadant and Viasys  received in connection
with the spin-off of such companies in August and November 2001,  respectively).
These  restricted  shares  were  awarded  to Mr.  Hoogasian  before he became an
executive officer.

(19)  In  January  2000,  in  connection  with  the  adoption  of the  Company's
reorganization   plan,  the  Human  Resources  Committee  approved  a  retention
arrangement  for Mr.  Melas-Kyriazi  that awarded him 35,000  shares  restricted
Common Stock valued at $577,500 on the grant date. The restricted shares vest in
equal annual  installments  over the three-year  period  commencing on the grant
date.  Any cash  dividends  paid on the  restricted  shares are  entitled  to be
retained by Mr. Melas-Kyriazi  without regard to vesting,  however, any non-cash
dividends  are  subject  to  the  same  vesting  restrictions  as  the  original
restricted  shares.  At the end of fiscal 2002,  Mr.  Melas-Kyriazi  held 11,667
shares of restricted Common Stock with an aggregate value of $269,470 (including
the value  attributable  to restricted  shares of Kadant and Viasys  received in
connection  with the spin-off of such  companies  in August and  November  2001,
respectively).

(20) Mr.  Broadbent  became an  executive  officer of the Company on January 18,
2001. The salary and bonus  reported for fiscal 2001  represent  amounts paid to
Mr. Broadbent for the entire year.

(21) At the end of fiscal 2002,  Mr.  Broadbent  held 2,000 shares of restricted
Common  Stock  with  an  aggregate   value  of  $46,184   (including  the  value
attributable  to restricted  shares of Kadant and Viasys  received in connection
with the spin-off of such companies in August and November 2001,  respectively).
These  restricted  shares  were  awarded  to Mr.  Broadbent  before he became an
executive officer.

(22) Mr. Howe became an  executive  officer of the Company on January 18,  2001.
The salary and bonus reported for fiscal 2001 represent amounts paid to Mr. Howe
for the entire year.


                                       11


Stock Options Granted During Fiscal 2002

     The following table sets forth information  concerning individual grants of
stock  options made during  fiscal year 2002 to the  Company's  named  executive
officers.  It has not  been the  Company's  policy  in the  past to grant  stock
appreciation rights, and no such rights were granted during fiscal year 2002.


                                                                                      

                                            Option Grants in Fiscal 2002
----------------------------------------------------------------------------------------------------------------------
                                                                                                    Potential Realizable
                                                Percent of                                             Value at Assumed
                                               Total Options                                        Annual Rates of Stock
                          Number of Securities   Granted to        Exercise                        Price Appreciation for
                          Underlying Options    Employees in      Price Per    Expiration               Option Term (1)
        Name                  Granted            Fiscal Year        Share         Date              5%            10%
        ----                  -------           -----------         -----         ----             --            ---
Marijn E. Dekkers             200,000 (2)           3.8%            $20.27      3/15/09         $1,650,380     $3,846,100
                              780,000 (3)          14.7%            $19.67      11/21/12        $9,648,910    $24,452,142
-------------------------------------------------------------------------------------------------------------------------
Richard F. Syron              260,000 (2)           4.9%            $20.27      3/15/09         $2,145,490     $4,999,930
                              520,000 (3)           9.8%            $19.67      11/21/12        $6,432,610    $16,301,428
-------------------------------------------------------------------------------------------------------------------------
Seth H. Hoogasian              42,500 (2)           0.8%            $20.27      3/15/09           $350,710       $817,296
                              100,000 (3)           1.9%            $19.67      11/21/12        $1,237,040     $3,134,890
-------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi             50,000 (2)           0.9%            $20.27      3/15/09           $412,600       $961,525
                              100,000 (3)           1.9%            $19.67      11/21/12        $1,237,040     $3,134,890
-------------------------------------------------------------------------------------------------------------------------
Marc N. Casper                100,000 (3)           1.9%            $19.67      11/21/12        $1,237,040     $3,134,890
-------------------------------------------------------------------------------------------------------------------------
Guy Broadbent                 100,000 (3)           1.9%            $19.67      11/21/12        $1,237,040     $3,134,890
-------------------------------------------------------------------------------------------------------------------------
Barry S. Howe                  50,000 (2)           0.9%            $20.27      3/15/09           $412,600       $961,525
                              100,000 (3)           1.9%            $19.67      11/21/12        $1,237,040     $3,134,890
-------------------------------------------------------------------------------------------------------------------------


(1) The amounts shown in 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, the optionee's continued employment through the
option period and the date on which the options are exercised.

(2) All of the options reported vest in three equal annual  installments  over a
three-year period from the date of grant,  provided that the optionee  continues
to be  employed  by the  Company,  except  that  Messrs.  Dekkers  and Syron are
entitled to accelerated vesting in certain  circumstances in connection with the
termination of their employment with the Company. See "Executive  Compensation -
Employment Agreements with Messrs.  Dekkers and Syron". Upon a change of control
of the Company, all options become immediately exercisable.


(3) All of the options reported vest in three equal annual  installments  over a
three-year  period  commencing  on the third  anniversary  of the date of grant,
provided that the optionee continues to be employed by the Company,  except that
Messrs.  Dekkers  and Syron are  entitled  to  accelerated  vesting  in  certain
circumstances  in connection with the  termination of their  employment with the
Company.  See  "Executive  Compensation  -  Employment  Agreements  with Messrs.
Dekkers and Syron". Upon a change of control of the Company,  all options become
immediately exercisable.


                                       12

Stock Options Exercised During Fiscal 2002 and Fiscal Year-End Option Values

     The following table reports  information  regarding stock option  exercises
during fiscal 2002 and outstanding  stock options held at the end of fiscal year
2002 by the Company's named executive  officers.  No stock  appreciation  rights
were exercised or were outstanding during fiscal year 2002.


                                                                                
                   Aggregated Option Exercises In Fiscal 2002 and Fiscal 2002 Year-End Option Values
                   ----------------------------------------------------------------------------------
                                                                                                   Value of
                                                                 Number of                        Unexercised
                                                           Securities Underlying                 In-the-Money
                                                                Unexercised                    Options at Fiscal
                             Shares                          Options at Fiscal                     Year-End
                          Acquired on      Value          Year-End (Exercisable/                 (Exercisable/
          Name              Exercise   Realized (1)        Unexercisable) (2)(3)               Unexercisable)(3)
          ----              --------   ------------        ---------------------               -----------------
Marijn E. Dekkers              -             -                784,864/ 1,492,382               $348,887/ $431,843
-------------------------------------------------------------------------------------------------------------------------
Richard F. Syron               -             -              1,624,258/ 981,579               $4,755,322/ $171,600
-------------------------------------------------------------------------------------------------------------------------
Seth H. Hoogasian          1,195           $3,262             237,029/ 171,961               $1,044,136/ $33,000
-------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi        36,729         $199,476             720,475/ 172,871               $5,184,285/ $33,000
-------------------------------------------------------------------------------------------------------------------------
Marc N. Casper                 -             -                 91,666/ 283,334                       $0/ $33,000
-------------------------------------------------------------------------------------------------------------------------
Guy Broadbent                  -             -                134,702/ 253,111                       $0/ $33,000
-------------------------------------------------------------------------------------------------------------------------
Barry S. Howe                  -             -                435,593/ 181,012               $3,572,898/ $33,000
-------------------------------------------------------------------------------------------------------------------------


(1) The amounts shown in this column 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.   Amounts  shown  in  this  column  do  not  represent   actual  sales
transactions.

(2) As part of the  Company's  spinout  strategy,  certain  subsidiaries  of the
Company   sold   minority   interests   to   investors   resulting   in  several
majority-owned,  private and  publicly-held  subsidiaries and granted options to
purchase  shares of these  subsidiaries  to  employees  and  directors of Thermo
Electron  companies as part of its compensation  program.  During 1999 and 2000,
the Company effected a major reorganization  that, among other things,  resulted
in  the  acquisition  of  the  minority  interest  of  substantially  all of its
subsidiaries  that had minority  investors and the  assumption by the Company of
the outstanding options to purchase shares of the subsidiaries.  In addition, in
2001, the Company spun off to its  shareholders all of the shares of Kadant Inc.
(formerly known as Thermo Fibertek Inc.) and, as a result, all of the options in
Kadant Inc.  and its  publicly-owned  subsidiary,  Thermo  Fibergen  Inc.,  were
converted into options to purchase shares of the Company. In addition,  in 2002,
the Company took private its last  publicly  owned  subsidiary  Spectra-Physics,
Inc. and, as a result,  all of the options to purchase shares of Spectra-Physics
became  options  to  purchase  shares of the  Company.  Outstanding  options  at
year-end  granted by these  subsidiaries  which were assumed by the Company have
been restated in the table as options to purchase shares of the Company.

(3)  Generally,  options  outstanding  at the end of the  fiscal  year that were
granted prior to July 2000 are exercisable  immediately.  However, these options
are  subject to certain  transfer  restrictions  and the right of the Company to
repurchase,  at the  exercise  price,  the shares  issued  upon  exercise of the
options,  upon  certain  events,  primarily  cessation  of  employment  with the
Company.  The restrictions and repurchase rights lapse over periods ranging from
0 to 10 years, depending on the term of the option, which may range from 3 to 12
years. The amounts reported for the number of securities underlying  exercisable
options at fiscal year end include options to purchase 5,814,  92,338,  215,239,
and 199,895 shares of Common Stock granted prior to July 2000 for Messrs. Syron,
Hoogasian,  Howe, and  Melas-Kyriazi,  respectively,  which are subject to these
transfer  restrictions.  The  amounts  reported  for  the  value  of  securities
underlying  exercisable  options  at  fiscal  year  end  include  $0,  $503,696,
$2,210,409 and $1,405,929 for options to purchase  Common Stock granted prior to
July 2000, for Messrs. Syron, Hoogasian, Howe, and Melas-Kyriazi,  respectively,
which are subject to these  restrictions.  Options outstanding at the end of the
fiscal year that were granted on or after July 2000  generally vest ratably over
three  years  after  the  grant  date,  provided  that  the  optionee  continues
employment with the Company,  except (i) for the options described in footnote 3
to the table entitled "Option Grants in Fiscal 2002" above and (ii) that Messrs.
Dekkers and Syron are entitled to accelerated  vesting in certain  circumstances
in connection  with the termination of their  employment  with the Company.  See
"Executive Compensation - Employment Agreements with Messrs. Dekkers and Syron".
Upon a change of control of the Company,  all options,  regardless  of the grant
date,  become  immediately  exercisable  and  cease to be  subject  to  transfer
restrictions and the Company's repurchase rights.


                                       13




Change in Control and Severance Agreements

     Thermo  Electron has entered into executive  retention  agreements with its
executive  officers  and  certain key  employees  of the  Company  that  provide
severance  benefits if there is a change in control of Thermo Electron and their
employment is terminated by the Company  without cause or by the  individual for
good reason,  as those 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 or
voting securities of Thermo Electron; (ii) the failure of the 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.

     Thermo Electron has entered into these executive retention  agreements with
each of Messrs. Dekkers, Syron, Hoogasian, Melas-Kyriazi, Casper, Broadbent, and
Howe.  These agreements  provide that, upon a change in control,  all options to
purchase  Common  Stock held by the  individual  as of the date of the change in
control  shall become fully vested and  immediately  exercisable,  and shares of
Common  Stock  issued  upon  exercise  of such stock  options  and all shares of
restricted  Common Stock held by the  individual as of the date of the change in
control will no longer be subject to the right of repurchase by the Company.

     These   agreements  also  provide  that,  in  the  event  the  individual's
employment is terminated in connection with a change in control,  the individual
would be entitled  to a lump sum payment  equal to the sum of (a) in the case of
Messrs.  Dekkers  and Syron,  three  times,  in the case of  Messrs.  Hoogasian,
Melas-Kyriazi,  Broadbent,  and Howe, two times,  and in the case of Mr. Casper,
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 Messrs.  Dekkers and
Syron, three times, in the case of Messrs. Hoogasian, Melas-Kyriazi,  Broadbent,
and Howe, two times, and in the case of Mr. Casper,  one times, the individual's
highest annual bonus in any 12-month period during the prior  five-year  period.
Assuming that the severance  benefits would have been payable as of December 28,
2002,  the lump sum salary and bonus  payment  under such  agreements to Messrs.
Dekkers, Syron, Hoogasian, Melas-Kyriazi, Casper, Broadbent, and Howe would have
been approximately $3,099,999,  $5,760,000,  $1,212,400,  $1,091,800,  $525,000,
$908,000,  and $908,000,  respectively.  In addition,  the  individual  would be
provided employee benefits substantially  equivalent to the benefits package the
individual  would have  otherwise been entitled to receive if the individual was
not terminated for a period of, in the case of Messrs.  Dekkers and Syron, three
years, in the case of Messrs. Hoogasian, Melas-Kyriazi, Broadbent, and Howe, two
years, and in the case of Mr. Casper, one year, after such termination. Finally,
the  individual  would be  entitled to a cash  payment  equal to, in the case of
Messrs.  Dekkers  and  Syron,  $25,000,  in  the  case  of  Messrs.   Hoogasian,
Melas-Kyriazi,  Broadbent,  and Howe,  $20,000,  and in the case of Mr.  Casper,
$15,000, to be used toward outplacement services.

     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.

     Mr.  Casper has an  agreement  with the Company that if his  employment  is
terminated by the Company  without  "cause" or by Mr. Casper with "good reason",
he will be entitled to a lump sum severance  payment equal to 18 months  salary,
except  that if the  termination  entitles  him to  greater  benefits  under the
executive  retention  agreement  described  above,  he will be  entitled  to the
benefits under the executive  retention  agreement,  but not both. Mr. Broadbent
has an agreement  with the Company that if his  employment  is terminated by the
Company for other than "cause", he will be entitled to be paid one year's salary
and bonus as  severance  pay,  and the  transfer  restrictions  on his shares of
restricted Common Stock will lapse, except that if the termination also entitles
him to benefits under the executive retention agreement described above, he will
be  entitled to the  benefits  under the  executive  retention  agreement  only.
Messrs.  Dekkers and Syron also have  severance  provisions in their  employment
agreements.  See "Executive  Compensation -- Employment  Agreements with Messrs.
Dekkers and Syron".

                                       14


Deferred Compensation Plan

     The Company  maintains a deferred  compensation  plan for a select group of
management and highly compensated employees (the "Deferred  Compensation Plan"),
including  executive  officers of the Company.  Under the Deferred  Compensation
Plan, a participant has the right to defer,  on a pre-tax basis,  receipt of his
or her annual base salary (up to 90%) and/or  bonus (up to 100%) until he or she
ceases to serve as an employee of the Company as a result of death,  disability,
retirement or  termination of employment  for any other reason.  In addition,  a
participant  may defer  payment of his or her  compensation  until a future date
even while the participant  continues to be an employee of the Company.  Amounts
that are  deferred  are credited  with  investment  gains or losses based on the
performance of one or more of three funds selected by the participant: an equity
index fund, a bond index fund and a money market fund. The participant  does not
have any  actual  ownership  in these  funds.  Any gains or  losses  on  amounts
deferred are not taxable until deferred amounts are paid to the participant. All
amounts in the participant's deferred account represent unsecured obligations of
the Company.

Employment Agreements with Messrs. Dekkers and Syron

     On November 21, 2002, Mr. Dekkers, previously president and chief operating
officer, was appointed chief executive officer, and Mr. Syron,  previously chief
executive  officer,  was  appointed  executive  chairman.   At  that  time,  the
employment  agreements in effect for Messrs.  Dekkers and Syron were amended and
restated to reflect their new  responsibilities  and compensation.  Each amended
and restated  employment  agreement is for a five-year term ending  December 31,
2007. The agreements  provide that each executive will have the duties  assigned
to him from  time to time by the  Board of  Directors.  Initially,  Mr.  Syron's
duties  include  responsibility  for the review and  approval  of the  Company's
financing and  acquisition  strategies,  supervision  of the internal  audit and
investor relations  functions,  supervision of disclosure policies and practices
and  related  filings,  compliance  with the NYSE and  Securities  Exchange  and
Commission rules, and the Company's Business Conduct Policy. Mr. Dekker's duties
include responsibility for all aspects of the Company's business and operations,
including formulating,  implementing and monitoring the Company's strategic plan
together with Mr. Syron and the Board of Directors.

     Employment Agreement with Mr. Dekkers

     The amended and restated  employment  agreement with Mr. Dekkers  increased
his annual base  salary to $800,000  and his annual  incentive  bonus  target to
$720,000. The actual amount paid as a bonus in any given year will be a multiple
of zero to two times the target amount.

     Pursuant to the amended and restated employment agreement,  on November 21,
2002 the Company awarded Mr. Dekkers (i) 100,000  restricted  Common Stock units
that vest in equal annual  installments over the three-year period commencing on
the grant date so long as Mr.  Dekkers is employed with the Company on each such
date and,  provided  further,  that such units shall not become shares of Common
Stock until Mr.  Dekkers ceases to be an employee of the Company for any reason;
and (ii) options to purchase  780,000 shares of Common Stock  expiring  November
21,  2012 that vest in equal  annual  installments  over the  three-year  period
commencing on the third  anniversary of the grant date so long as Mr. Dekkers is
employed with the Company on each such date,  at an exercise  price equal to the
average of the  closing  prices of the Common  Stock as reported on the NYSE for
the five business days preceding and including the grant date. In addition,  the
agreement provides that in each of the years 2005, 2006 and 2007, subject to Mr.
Dekkers' continued employment with the Company and shareholder approval of a new
stock option plan if the then  existing  plans have been  depleted at such time,
Mr. Dekkers will be granted an option to purchase 260,000 shares of Common Stock
expiring  ten years from the grant date that vest in equal  annual  installments
over the three-year  period commencing on the grant date, so long as Mr. Dekkers
is employed  with the Company on each such date,  at an exercise  price equal to
the  average of the closing  prices of the Common  Stock as reported on the NYSE
for the five business days  preceding and including the grant date.  Pursuant to
his original employment agreement, in March 2002, Mr. Dekkers received an option
to purchase  200,000  shares of Common Stock expiring seven years from the grant
date at an exercise  price  equal to the  average of the  closing  prices of the
Common Stock as reported on the NYSE for the five  business  days  preceding and
including the grant date.

     If Mr. Dekkers' employment is terminated (i) by the Company without "cause"
or by Mr.  Dekkers  with "good  reason",  he will be entitled  to: (A) an amount
equal to: (1) his then current base salary for the 36-month period following the
termination  date,  (2) a pro-rata  bonus for the year in which the  termination
date occurs, and (3) $2,160,000  (representing  three times his annual incentive
bonus  target);  and (B) medical and dental  insurance  benefits for a period of
three years after the termination  date; (ii) due to his disability,  he will be
entitled to: (A) disability benefits in accordance with the long-term disability
("LTD")  program then in effect for senior  executives  of the Company;  (B) his
then current



                                       15


base salary through the end of the LTD elimination  period; (C) a pro-rata bonus
for the year in which the  termination  date occurs;  and (D) medical and dental
insurance  benefits for a period of 24 months after the termination  date; (iii)
due to his death, his estate or his beneficiaries will be entitled to a pro-rata
bonus for the year in which the  termination  date  occurs;  and (iv) due to the
expiration of the  then-current  term of the agreement,  he will be entitled to:
(A) an  amount  equal to the sum of (1) his then  current  base  salary  for the
24-month period following the termination date, and (2) $1,440,000 (representing
two times his  annual  incentive  bonus  target);  and (B)  medical  and  dental
insurance benefits for a period of 24 months after the termination date.

     In addition,  if Mr. Dekkers'  employment is terminated due to his death or
disability,  by the Company without "cause",  by Mr. Dekkers with "good reason",
or due to the  expiration of the  then-current  term of the  agreement,  (i) all
stock  options will become fully vested and all stock  options  granted prior to
November 21, 2002 will remain  exercisable  until two years from the termination
date (but in no event beyond the  expiration  date of the options) and all stock
options  granted on or after  November 21, 2002 shall remain  exercisable  until
three years from the  termination  date (but in no event  beyond the  expiration
date of the  options);  and (ii) the  transfer  restrictions  on all  shares  of
restricted Common Stock and/or restricted Common Stock units granted to him will
lapse. If Mr. Dekkers' employment is terminated by the Company for "cause" or by
Mr. Dekkers without "good reason", (A) no further vesting of stock options shall
occur and he shall have 90 days to  exercise  all vested and  outstanding  stock
options (but in no event beyond the expiration date of the options); and (B) all
shares of restricted  Common Stock and/or  restricted Common Stock units granted
to him as to which transfer restrictions have not lapsed shall be forfeited.

     The amended and restated  employment  agreement  provides that  immediately
prior to the consummation of a change in control, all options to purchase Common
Stock held by Mr.  Dekkers as of the date of the change in control  will  become
fully vested and immediately exercisable, and shares of Common Stock issued upon
exercise of such stock options and all shares of restricted Common Stock held by
Mr. Dekkers as of the date of the change in control will no longer be subject to
the  right  of  repurchase  by the  Company.  In the  event  his  employment  is
terminated  after a change in control,  he will be entitled to receive  benefits
under either the  employment  agreement  or the  executive  retention  agreement
described above under the caption "Change in Control and Severance  Agreements",
but not both.

     Employment Agreement with Mr. Syron

     The amended and restated employment agreement with Mr. Syron provides for a
continued  annual base salary of $800,000 and annual  incentive  bonus target of
$720,000. The actual amount paid as a bonus in any given year will be a multiple
of zero to two times the target amount.

     Pursuant to the amended and restated employment agreement,  on November 21,
2002 the Company  awarded Mr. Syron (i) 111,845  restricted  Common Stock units,
provided,  however, that the units do not become shares of Common Stock until he
ceases to be an employee of the Company for any reason,  (ii) 100,000 restricted
Common Stock units that vest in equal annual  installments  over the  three-year
period  commencing  on the grant date so long as Mr. Syron is employed  with the
Company  on each such date and,  provided  further,  that such  units  shall not
become  shares of Common  Stock until Mr.  Syron ceases to be an employee of the
Company for any reason;  and (iii) options to purchase  520,000 shares of Common
Stock expiring November 21, 2012 that vest in equal annual installments over the
three-year  period commencing on the third anniversary of the grant date so long
as Mr.  Syron is  employed  with the  Company on each such date,  at an exercise
price equal to the average of the closing prices of the Common Stock as reported
on the NYSE for the five business  days  preceding and including the grant date.
In  addition,  pursuant  to the  agreement,  Mr.  Syron was also  entitled  to a
$1,800,000  retention bonus,  which was paid in January 2003. The agreement also
provides that in each of the years 2005,  2006 and 2007,  subject to Mr. Syron's
continued  employment with the Company and  shareholder  approval of a new stock
option plan if the then  existing  plans have been  depleted  at such time,  Mr.
Syron will be  granted  an option to  purchase  260,000  shares of Common  Stock
expiring  ten years from the grant date that vest in equal  annual  installments
over the three-year period commencing on the grant date, so long as Mr. Syron is
employed with the Company on each such date,  at an exercise  price equal to the
average of the  closing  prices of the Common  Stock as reported on the NYSE for
the five business days  preceding and including the grant date.  Pursuant to his
original  employment  agreement,  in June 2002 Mr.  Syron  received  an award of
10,923 shares of restricted Common Stock that vest 100% on the third anniversary
of the grant date and in March 2002 he received  an option to  purchase  260,000
shares of Common Stock  expiring  seven years from the grant date at an exercise
price equal to the average of the closing prices of the Common Stock as reported
on the NYSE for the five business days preceding and including the grant date.

     If Mr. Syron's  employment is terminated (i) by the Company without "cause"
or by Mr. Syron with "good reason",  he will be entitled to: (A) an amount equal
to: (1) his then current  base salary for the  remaining  term of the  agreement
following the  termination  date, (2) a pro-rata bonus for the year in which the
termination  date occurs,  and (3)



                                       16


$720,000 (his annual incentive bonus target) for each year remaining in the term
of the agreement  following  the  termination  date;  and (B) medical and dental
insurance  benefits for a period of three years after the termination date; (ii)
due to his  disability,  he will be  entitled  to: (A)  disability  benefits  in
accordance  with the  long-term  disability  ("LTD")  program then in effect for
senior  executives of the Company;  (B) his then current base salary through the
end of the LTD  elimination  period;  (C) a pro-rata bonus for the year in which
the termination date occurs; and (D) medical and dental insurance benefits for a
period of 24 months  after the  termination  date;  (iii) due to his death,  his
estate or his beneficiaries will be entitled to a pro-rata bonus for the year in
which  the  termination  date  occurs;  and  (iv) due to the  expiration  of the
then-current  term, he will be entitled to medical and dental insurance benefits
for a period of 12 months after the termination date.

     In addition,  if Mr.  Syron's  employment is terminated due to his death or
disability,  by the Company without "cause", by Mr. Syron with "good reason", or
due to the expiration of the then-current term of this agreement,  (i) all stock
options will become fully vested and all stock options granted prior to November
21, 2002 will remain  exercisable until two years from the termination date (but
in no event beyond the  expiration  date of the  options) and all stock  options
granted on or after November 21, 2002 shall remain exercisable until three years
from the  termination  date (but in no event beyond the  expiration  date of the
options);  and (ii) the transfer restrictions on all shares of restricted Common
Stock and/or  restricted  Common Stock units  granted to him will lapse.  If Mr.
Syron's  employment  is  terminated  by the Company for "cause" or by Mr.  Syron
without "good reason",  (A) no further  vesting of stock options shall occur and
he shall have 90 days to exercise all vested and outstanding  stock options (but
in no event beyond the  expiration  date of the options);  and (B) all shares of
restricted  Common Stock and/or  restricted Common Stock units granted to him as
to which transfer restrictions have not lapsed shall be forfeited.

     Under the  following  conditions,  additional  vesting rules apply to stock
options and restricted  stock awards granted by the Company to Mr. Syron. If Mr.
Syron's  employment  continues  after July 10, 2003,  but is  terminated  by him
without good reason prior to July 10, 2004, then the outstanding  unvested stock
options  held by Mr.  Syron that were  granted  after  March 14, 2001 and before
November 21, 2002 shall be 50% vested and the transfer restrictions with respect
to 50% of the restricted Common Stock held by Mr. Syron shall lapse. Further, if
Mr. Syron's employment continues to July 10, 2004, then the outstanding unvested
stock  options  held by Mr.  Syron that were  granted  after  March 14, 2001 and
before November 21, 2002 shall be fully vested and the transfer  restrictions on
restricted Common Stock held by Mr. Syron shall lapse.

     The amended and restated  employment  agreement  provides that  immediately
prior to the consummation of a change in control, all options to purchase Common
Stock held by Mr.  Syron as of the date of the change in  control  shall  become
fully vested and immediately exercisable, and shares of Common Stock issued upon
exercise of such stock options and all shares of restricted Common Stock held by
Mr.  Syron as of the date of the change in control  will no longer be subject to
the  right  of  repurchase  by the  Company.  In the  event  his  employment  is
terminated  after a change in control,  he will be entitled to receive  benefits
under either the  employment  agreement  or the  executive  retention  agreement
described above under the caption "Change in Control and Severance  Agreements",
but not both.

                                       17





                      EQUITY COMPENSATION PLAN INFORMATION

     The  following  table  provides  information  as of December  28, 2002 with
respect  to the  Common  Stock  that may be  issued  under its  existing  equity
compensation  plans.  Reference  is  made  to the  footnotes  to the  table  for
additional detail with respect to the compensation plans.


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

                                           (a)                         (b)                            (c)
                                                                                        Number of securities remaining
                                 Number of securities to        Weighted average        available for future issuance
                                 be issued upon exercise       exercise price of       under equity compensation plans
                                 of outstanding options,      outstanding options,          (excluding securities
        Plan Category              warrants and rights        warrants and rights          reflected in column (a))
        -------------              -------------------        -------------------          ------------------------
------------------------------- --------------------------- ------------------------- -----------------------------------
Equity Compensation Plans
  Approved By Security Holders
                                     11,778,860(1)(2)                $19.42                      4,747,429(3)
------------------------------- --------------------------- ------------------------- -----------------------------------
Equity Compensation Plans Not
  Approved By Security
  Holders(4)(5)                         3,281,627                    $19.82                       297,000(3)
------------------------------- --------------------------- ------------------------- -----------------------------------

Total                                   15,060,487                                               5,044,429(3)
------------------------------- --------------------------- ------------------------- -----------------------------------


(1)  Includes  311,845  restricted  stock units  granted to Messrs.  Dekkers and
Syron,  the terms of which are described in "Employment  Agreements with Messrs.
Dekkers and Syron." Also includes  281,575  shares  issuable under the Directors
Deferred  Compensation Plan for deferred directors fees accrued through December
28, 2002. An additional 582,663 shares are reserved under the Directors Deferred
Compensation  Plan  and  are  included  in  column  (c).  Please  see  "Deferred
Compensation Plan for Directors" for additional information regarding this plan.

(2) Column  (a) does not  include  shares  issuable  under the  Thermo  Electron
Corporation  Employees  Stock Purchase Plan (the "ESPP"),  which has a remaining
shareholder  approved  reserve of 816,542 shares.  Under the ESPP, each eligible
employee  may  purchase a limited  number of shares of the  Common  Stock on the
first trading day of each year at a purchase  price equal to 85% of the lower of
the fair market value of the Common Stock as of either the first  trading day of
the previous  calendar  year or the last  trading day of the  previous  calendar
year. The remaining shareholder approved reserve is included in column (c).

(3)  These  securities  may be  issued  as  restricted  stock  as well as  being
available for issuance upon the exercise of options,  restricted  stock units or
other rights.

(4) Equity  compensation  plans not approved by the Company's  stockholders are:
(i) the Thermo Electron Corporation  Employees Equity Incentive Plan under which
297,000  shares are available for future  issuance;  and (ii) the 2000 Employees
Equity  Incentive Plan under which no shares are available for future  issuance.
The material terms of the Thermo Electron Corporation Employees Equity Incentive
Plan are described below.

(5) The information  relating to equity  compensation  plans not approved by the
Company's  stockholders  does not  include  options  to  purchase  shares of the
Company's formerly majority-owned  subsidiaries which became options to purchase
shares of the Company when the minority  interests  in those  subsidiaries  were
repurchased  by the Company  during 1999 and 2000.  All of the plans pursuant to
which these options were granted have been frozen and no additional  grants will
be made.  Options to purchase an  aggregate  of  7,812,448  shares at a weighted
average exercise price of $19.52 per share are outstanding under these plans.


                                       18



Thermo Electron Corporation Employees Equity Incentive Plan

     The  Thermo  Electron  Corporation  Employees  Equity  Incentive  Plan (the
"Employees  Equity  Plan")  was  adopted  to  secure  for  the  Company  and its
stockholders  the benefits  arising from capital stock ownership by employees of
and  consultants  to  the  Company.  The  Employees  Equity  Incentive  Plan  is
administered by the Company's Board of Directors or a committee  thereof,  which
has the full  authority,  among other things,  to (i) select the persons to whom
awards will be granted,  (ii)  determine the terms and conditions of the awards,
and  (iii)  amend or  terminate  the  plan.  Under the  Employees  Equity  Plan,
3,488,867 shares were originally reserved for issuance. Participants may receive
non-statutory  stock  options,  restricted  stock awards,  deferred stock awards
(also known as restricted stock units) and performance awards (which may consist
of stock and/or cash).  The exercise  price of stock options  granted may not be
less than 85% of the fair market  value of the  Company's  shares on the date of
the grant. The plan also provides for acceleration of the vesting  provisions of
an award in the event of a "Change  in  Control"  as the term is  defined in the
plan.


                   COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Compensation Philosophy

     The Human  Resources  Committee,  which is  composed  entirely  of  outside
directors,  has overall  responsibility  for establishing and  administering the
Company's policies and programs that govern annual cash, long-term incentive and
other executive compensation.  The compensation program established by the Human
Resources  Committee for its officers,  including  its  executive  officers,  is
designed to reward and motivate  officers in achieving  long-term  value for the
Company's stockholders and other business objectives,  to attract,  motivate and
retain dedicated,  talented individuals to accomplish the Company's  objectives,
to  recognize  individual,  business  unit and  Company  performance,  to reward
behavior  consistent with the Company's values, and to encourage stock ownership
by officers in order to link financial  interests of the Company's officers with
its stockholders.

     The Committee  evaluates the  competitiveness of its compensation  policies
and programs through the use of market surveys and competitive analyses prepared
by its outside  compensation  consultants.  Internal  fairness  of  compensation
within  the  Company  is  also  an  important  element  of the  Human  Resources
Committee's compensation philosophy. As such, the Committee evaluates individual
executive  compensation  through the use of compensation  comparisons with other
officers of the Company who have similar levels of responsibility.

Components of Executive Compensation

     The compensation program of the Company for its officers consists of annual
cash and long-term incentive compensation.  Annual cash compensation is composed
of  base  salary  and  annual,  performance-based  incentive  awards.  Long-term
incentive  compensation consists of stock-based awards such as stock options and
restricted  stock.  The  process  for  determining  the  components  of  officer
compensation is described below.  After  considering the applicable  factors for
each component of officer  compensation with respect to each officer (other than
himself  and  the  executive  chairman),   the  chief  executive  officer  makes
recommendations  to the  Human  Resources  Committee  regarding  such  officer's
compensation   package.  The  Human  Resources  Committee  then  evaluates  such
recommendations  and makes a  determination  of each component of such officer's
compensation.

Annual Cash Compensation

     Base Salary

     Generally, officer base salaries are adjusted to reflect competitive salary
levels or other  considerations,  such as industry  trends or internal  fairness
within the Company.  The base salary is intended to be competitive  with that of
similar positions at organizations that are of comparable size and complexity as
the Company.

     Annual, Performance-Based, Incentive Cash Awards

     The target  incentive cash award amount,  which is a percentage of the base
salary, is determined by the Committee based on the salary level and position of
the  officer  within  the  Company.  The  amount of  annual,  performance-based,
incentive cash  compensation  actually  awarded to an officer from  year-to-year
varies with the  performance of the officer and the Company as a whole.  Officer
performance   is  evaluated  by  using  (1)  financial   measures  of  corporate
performance  and  (2) a  subjective  evaluation  of  the  officer's  qualitative
contribution to the  achievement of the Company's  objectives and values as well
as  the  officer's   achievement   of  individual   objectives   and  leadership
performance.

                                       19


     For fiscal 2002, the financial measures  established by the Human Resources
Committee  were  revenues,  earnings  before  interest,  taxes and  amortization
("EBITA"),  free cash  flow and  productivity.  The  financial  measures  assess
financial  performance of the Company relative to the internal operating plan of
the Company for the fiscal year. For each of the financial measures,  a range of
amounts set forth in the operating plan  corresponds  with a multiplier  ranging
from 0 to 2.  The  actual  incentive  cash  award  amount  attributable  to that
financial measure is a designated portion of the target amount multiplied by the
multiplier  corresponding to the actual financial performance.  The sum of these
actual  amounts  for all  officers  is  pooled  with an  amount  representing  a
subjective  evaluation of the officer group as a whole.  This bonus pool is then
allocated by the Human Resources Committee among the officers.

     The Company paid annual  incentive  awards to each officer  (including  its
chief  executive  officer,  whose annual  performance-based  incentive  award is
discussed below under the caption "2002 CEO Compensation"), for fiscal 2002. The
Human Resources  Committee  considered the following with respect to fiscal 2002
financial  performance:  (1) the  improvement in earnings per share in 2002, (2)
the Company's  stock price  outperformed  many of its peers in 2002, and (3) the
impact the weakened  economy had on the  financial  performance  of the Company,
which  contributed  to its falling short of the financial  measures for reaching
the target amount of incentive cash awards. In light of the foregoing, the Human
Resources Committee gave an approximately equal weight to the financial measures
and its subjective  evaluation of the officer's  contribution to the achievement
of the Company's  objectives and values as well as the officer's  achievement of
individual annual objectives and leadership performance for fiscal 2002.

Long-Term Incentive Compensation

     The Human Resources  Committee and management believe that the inclusion of
long-term incentive  compensation,  which consists of stock-based awards such as
stock  options and  restricted  stock,  in the  Company's  compensation  program
accomplishes  many  objectives.  The award of  stock-based  compensation  to its
executives and other key employees  encourages  equity ownership in the Company,
which  aligns  their  interests to the  interests  of all the  stockholders  and
results in executive  compensation  being closely linked to the Company's  stock
performance.

     In determining the appropriate award of stock compensation,  the prevailing
compensation  practices of competitive companies and competitive market data for
the  position  and  salary  level of each  officer  are  considered.  Awards are
reviewed  annually  and  additional  awards may be made  periodically  as deemed
appropriate by the Human Resources Committee. The Human Resources Committee uses
a modified  Black-Scholes  option  pricing  model to  determine  the value of an
option award.

     Stock  options  granted to  officers  in  November  2002  include a vesting
schedule that does not commence  until the third  anniversary of the grant date.
This  vesting  schedule  was selected as a long-term  retention  measure.  These
grants  were  intended to be made in lieu of annual  grants to such  officers in
fiscal years 2003 and 2004.

Stock Ownership Policy

     The Human  Resources  Committee has  established a stock holding policy for
the chief  executive  officer of the Company that requires him to own a multiple
of his compensation in shares of the Company's Common Stock. The multiple is one
times his annual base salary and target annual  incentive  compensation  for the
fiscal year in which he achieves  compliance.  The chief  executive  officer has
three years from the date of his appointment to achieve this ownership level.

Policy on Deductibility of Compensation

     The Human  Resources  Committee  has also  considered  the  application  of
Section 162(m) of the U.S.  Internal  Revenue Code (the "Code") to the Company's
compensation  practices.  Section  162(m) limits the tax deduction  available to
public  companies  for  annual  compensation  that is paid  to  named  executive
officers  in  excess  of  $1,000,000,   unless  the  compensation  qualified  as
"performance-based" or is otherwise exempt from Section 162(m).

     The Human  Resources  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 Company. The Company's
compensation  plans in which its named  executive  officers  may  receive  stock
options qualify for the deduction.  The Human  Resources  Committee has recently
adopted  modifications  to its cash  compensation  program  that would avail the
Company of the  deduction for annual  bonuses,  if these changes are approved by
the  stockholders  at this  meeting.  See  "Proposal 2.  Proposal to Approve the
Company's Annual Incentive Award Plan".

                                       20


2002 CEO Compensation

     The Human Resources Committee determines the compensation for the Company's
chief  executive  officer based on the same  considerations  described above for
other officers.  The  determinations of the Human Resources  Committee as to the
compensation of the chief executive  officer are subject to review by the entire
Board of  Directors.  The Board of Directors  concurred in the  decisions of the
Human  Resources   Committee  with  respect  to  2002  chief  executive  officer
compensation.

     On November 21, 2002,  Marijn E.  Dekkers,  previously  president and chief
operating officer,  was appointed chief executive officer, and Richard F. Syron,
previously  chief executive  officer,  was appointed  executive  chairman.  Both
individuals had employment agreements prior to this transition that provided for
minimum  cash  compensation  and the annual  award of stock  options and, in Mr.
Syron's case,  restricted  stock.  Such  employment  agreements were amended and
restated  as of  November  21,  2002.  Pursuant  to the  terms  of the  original
employment  agreements and the amended and restated  employment  agreements,  as
applicable, in fiscal 2002 (i) Mr. Dekkers was awarded 100,000 restricted Common
Stock units and options to purchase 980,000 shares of Common Stock; and (ii) Mr.
Syron was awarded  222,768  shares of  restricted  Common  Stock and  restricted
Common Stock units and options to purchase  780,000 shares of Common Stock.  See
"Executive  Compensation - Employment Agreements with Messrs. Dekkers and Syron"
for descriptions of those agreements.

     The annual,  performance-based,  incentive cash bonuses of Messrs.  Dekkers
and Syron for fiscal 2002 were determined by the Human Resources Committee based
on the same considerations  described above for other officers. A portion of Mr.
Dekkers'  bonus was based on his  service  as chief  operating  officer  and the
balance on his role as the new chief executive officer.

                           Mr. Jim P. Manzi (Chairman)
                               Mr. Peter O. Crisp
                              Mr. Robert W. O'Leary


                             AUDIT COMMITTEE REPORT

     The role of the Audit  Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process.

     As set forth in the Audit  Committee's  charter,  attached as Appendix A to
this  proxy  statement,  management  of  the  Company  is  responsible  for  the
preparation,  presentation and integrity of the Company's financial  statements,
the  Company's  accounting  and  financial  reporting  principles  and  internal
controls and procedures designed to assure compliance with accounting  standards
and applicable laws and regulations. The independent accountants are responsible
for auditing the Company's financial  statements and expressing an opinion as to
their conformity with generally accepted accounting  principles.  The members of
the Audit Committee are not  professionally  engaged in the practice of auditing
or accounting and the  responsibilities  of the Audit Committee are not designed
to supersede or alter those  responsibilities  of management or the  independent
accountants.

     The Audit  Committee's  oversight does not provide an independent  basis to
determine that  management has maintained  appropriate  accounting and financial
reporting  principles or appropriate internal control and procedures designed to
assure compliance with accounting standards and applicable laws and regulations.
Furthermore,  the Audit Committee's  considerations and discussions  referred to
above do not assure that the audit of the  Company's  financial  statements  has
been carried out in accordance with generally accepted auditing standards,  that
the financial  statements are presented in accordance  with  generally  accepted
accounting principles or that the Company's auditors are in fact "independent".

     In the  performance  of its  oversight  function,  the Audit  Committee has
reviewed and discussed the audited  financial  statements of the Company for the
fiscal  year  ended  December  28,  2002,  with  management  and  the  Company's
independent accountants, PricewaterhouseCoopers LLP ("PwC"). The Audit Committee
has also discussed with PwC the matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with Audit Committees,  as currently in
effect.  The Audit  Committee  has  received  from PwC the  letter  and  written
disclosures   required  by   Independence   Standards   Board  Standard  No.  1,
Independence Discussions with Audit Committees,  as currently in effect, and has
discussed  with  PwC  the  auditors'  independence.   The  Audit  Committee  has
considered  whether the provision of tax and other non-audit  services by PwC is
compatible with maintaining the auditors' independence.

                                       21


     Based upon the review and discussions described in this report, and subject
to the  limitations  on the role and  responsibilities  of the  Audit  Committee
referred  to above and in the Audit  Committee's  charter,  the Audit  Committee
recommended to the Board of Directors that the audited  financial  statements be
included in the Company's Annual Report on Form 10-K for the year ended December
28, 2002 filed with the Securities and Exchange Commission.

                         Mr. Robert A. McCabe (Chairman)
                                Mr. Jim P. Manzi
                              Ms. Elaine S. Ullian


                          COMPARATIVE PERFORMANCE GRAPH

     The Securities and Exchange Commission requires that the Company include in
this proxy statement a line-graph  presentation comparing cumulative,  five-year
stockholder  returns for the Company'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 Company. The Company has compared its performance with
the  Standard  & Poor's  500  Index and the  Standard  & Poor's  500  Electronic
Equipment & Instruments Index.

     Standard & Poor's  discontinued  its High Technology Index that the Company
used for a comparison  index in its proxy  statement for fiscal year 2001.  That
index consisted of ADC  Telecommunications,  Inc.,  Adobe Systems  Incorporated,
Advanced Micro Devices,  Inc., Agilent  Technologies  Inc., Altera  Corporation,
Analog  Devices,  Inc.,  Andrew  Corporation,   Apple  Computer,  Inc.,  Applied
Materials,  Inc., Applied Micro Circuits Corporation,  Autodesk, Inc., Automatic
Data Processing  Inc.,  Avaya Inc., BMC Software,  Inc.,  Broadcom  Corporation,
CIENA Corporation,  Cisco Systems,  Inc., Citrix Systems,  Inc., Compaq Computer
Corporation,   Computer  Associates   International,   Inc.,  Computer  Sciences
Corporation,  Compuware  Corporation,  Comverse  Technology,  Inc., Concord EFS,
Inc., Conexant Systems,  Inc., Corning Incorporated,  Dell Computer Corporation,
Eastman Kodak Company,  Electronic Data Systems  Corporation,  EMC  Corporation,
Equifax  Incorporated,  First Data Corporation,  Fiserv,  Inc.,  Gateway,  Inc.,
Hewlett-Packard  Company,  Intel  Corporation,  International  Business Machines
Corporation,  Intuit Inc.,  JDS Uniphase  Corporation,  KLA-Tencor  Corporation,
Lexmark   International,   Inc.,  Linear  Technology   Corporation,   LSI  Logic
Corporation,  Lucent Technologies Inc., Maxim Integrated Products, Inc., Mercury
Interactive  Corporation,   Micron  Technology,   Inc.,  Microsoft  Corporation,
Motorola,  Inc., National Semiconductor  Corporation,  NCR Corporation,  Network
Appliance,  Inc., Nortel Networks  Corporation,  Novell, Inc., Novellus Systems,
Inc., NVIDIA Corporation,  Oracle Corporation, Palm, Inc., Parametric Technology
Corporation,  Paychex, Inc., PeopleSoft,  Inc.,  PerkinElmer,  Inc., PMC-Sierra,
Inc., QLogic  Corporation,  QUALCOMM,  Inc.,  Raytheon  Company,  Sabre Holdings
Corp., Sapient Corporation,  Scientific-Atlanta, Inc., Siebel Systems, Inc., Sun
Microsystems,  Inc.,  Tektronix,  Inc.,  Tellabs,  Inc.,  Teradyne,  Inc., Texas
Instruments  Inc., Unisys  Corporation,  Veritas Software  Corporation,  Vitesse
Semiconductor Corporation, W.W. Grainger, Inc., Xerox Corporation, Xilinx, Inc.,
and Yahoo! Inc.

     The Standard & Poor's 500 Electronic Equipment & Instruments Index consists
of Agilent Technologies Inc., Jabil Circuit, Inc., Millipore Corporation, Molex,
Inc., PerkinElmer, Inc., Sanmina-SCI Corporation,  Solectron Corporation, Symbol
Technologies,  Inc., Tektronix,  Inc., Thermo Electron  Corporation,  and Waters
Corporation.


                                       22




       Comparison of Total Return Among Thermo Electron Corporation (TMO),
                  the Standard & Poor's 500 Index (S&P 500) and
       the Standard & Poor's 500 Electronic Equipment & Instruments Index
                  (S&P 500 Electronic Equipment & Instruments)


                                    [GRAPH]




                                                                                        
----------------------------------------------------------------------------------------------------------------------
                                       01/02/98      12/31/98     12/31/99     12/29/00      12/28/01     12/28/02

----------------------------------------------------------------------------------------------------------------------
TMO                                       100         39.22        34.73         68.89        63.48         53.64
----------------------------------------------------------------------------------------------------------------------
S&P 500                                   100         127.97       154.90       140.79        126.52        96.97
----------------------------------------------------------------------------------------------------------------------
S&P 500 Electronic Equipment &            100         115.82       239.39       198.32        102.71        48.21
Instruments
----------------------------------------------------------------------------------------------------------------------



     The total return for the Company's  Common Stock, the Standard & Poor's 500
and the Standard & Poor's 500  Electronic  Equipment &  Instruments  assumes the
reinvestment  of  dividends.  The  Company's  Common Stock is traded on the NYSE
under the ticker symbol "TMO". In August and November 2001, the Company spun off
to its  shareholders  its Kadant Inc. and Viasys  Healthcare Inc.  subsidiaries,
respectively.  For  purposes of the above  table,  the Kadant and Viasys  shares
distributed  to the  Company's  stockholders  are  treated  as  nontaxable  cash
dividends that would have been  reinvested in additional  shares of Common Stock
of the Company in August and November 2001, respectively.


                         INDEPENDENT PUBLIC ACCOUNTANTS

     The Company retained  PricewaterhouseCoopers LLP ("PwC") as its independent
accountants for the audit of the Company's  financial  statements for the fiscal
year ended  December  28,  2002 and  intends  to retain PwC for the fiscal  year
ending December 31, 2003.  Representatives  of PwC 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.

Change in Independent Public Accountants

     On June 21, 2002,  the Audit  Committee  decided to no longer engage Arthur
Andersen LLP ("Arthur  Andersen") as the Company's  independent  accountants and
engaged  PricewaterhouseCoopers  LLP  to  serve  as  the  Company's  independent
accountants for the audit of the fiscal year ended December 28, 2002.

     Arthur  Andersen's   reports  on  the  Company's   consolidated   financial
statements for fiscal years 2000 and 2001 did not contain an adverse  opinion or
disclaimer of opinion,  nor were they  qualified or modified as to  uncertainty,
audit  scope or  accounting  principles,  except  for an  explanatory  paragraph
concerning  the  adoption  of  Staff  Accounting



                                       23


Bulletin No. 101, "Revenue Recognition in Financial  Statements",  and Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments  and  Hedging  Activities".  During  fiscal  years 2000 and 2001 and
through June 21, 2002, there were no  disagreements  with Arthur Andersen on any
matter of accounting principle or practice,  financial statement disclosure,  or
auditing  scope  or  procedure  which,  if not  resolved  to  Arthur  Anderson's
satisfaction,  would have caused them to make reference to the subject matter in
connection with their report on the Company's  consolidated financial statements
for  such  years;  and  there  were no  reportable  events  as  defined  in Item
304(a)(1)(v) of Regulation S-K.

     During fiscal years 2000 and 2001 and through June 21 2002, the Company did
not consult PwC with respect to the  application  of accounting  principles to a
specified  transaction,  either  completed  or  proposed,  or the  type of audit
opinion  that  might  be  rendered  on  the  Company's   consolidated  financial
statements,  or any other  matters  or  reportable  events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.

Audit and Other Fees

     During  fiscal 2002,  the Company  retained PwC to provide  services in the
following categories and amounts:

     Audit Fees

     PwC billed the Company an aggregate of $1,574,180 in fees for  professional
services  rendered in connection  with the audit of the financial  statements of
the  Company  for the most  recent  fiscal  year and  reviews  of the  financial
statements included in each of the Quarterly Reports on Form 10-Q of the Company
during the fiscal year ended December 28, 2002.

     Financial Information Systems Design and Implementation Fees

     PwC did not provide any professional services to the Company for the fiscal
year ended December 28, 2002 in connection with the design and implementation of
financial information systems.

     All Other Fees

     PwC billed the Company an aggregate of $354,764 in fees for other  services
rendered to the Company for the fiscal year ended  December 28, 2002,  primarily
in connection with tax consulting related to the reorganization of international
subsidiaries, advice on technical accounting matters and statutory audits.


                                  -PROPOSAL 2-

          PROPOSAL TO APPROVE THE COMPANY'S ANNUAL INCENTIVE AWARD PLAN

     Effective  January 1, 2003, the Human  Resources  Committee of the Board of
Directors has established,  subject to stockholder approval, the Thermo Electron
Corporation  2003  Annual  Incentive  Award Plan (the  "Plan").  Under the Plan,
executive  officers  designated  by the Human  Resources  Committee  may receive
annual cash incentive  compensation  determined by  pre-established  performance
goals. The Plan was adopted to ensure the tax  deductibility of the annual bonus
that may be earned by  executive  officers  of the  Company.  The U.S.  Internal
Revenue  Code  generally  does not allow  publicly-held  companies to obtain tax
deductions for  compensation  of more than $1,000,000 paid in any year to any of
their five most highly paid  executive  officers  unless such  payments are made
under qualifying  "performance-based"  compensation  plans as defined in the tax
laws. One of the requirements for  compensation to be  performance-based  within
the meaning of those laws is that the Company must obtain  stockholder  approval
every  five  years  of  the  material  terms  of  performance   goals  for  such
compensation.  The material terms that the stockholders  approve  constitute the
framework   within  which  the  Human  Resources   Committee  would  set  actual
performance  goals.  The Company  believes  that, if the Plan is approved by the
stockholders,  compensation  paid in  accordance  with the Plan will  qualify as
performance-based compensation under the Internal Revenue Code.

     The following is a summary of the proposed  features of the Plan,  which is
qualified  in its  entirety by reference to the Plan, a copy of which is annexed
to this proxy statement as Appendix B.

General Description of the Plan

     The  Human  Resources  Committee  shall no later  than the 90th day of each
year: (i) select executive officers eligible to participate in the Plan for that
year  ("Eligible  Employees");  (ii)  determine the  Performance  Goals (defined
below) that must be achieved in order for awards to be paid under the Plan;  and
(iii)  determine  the total amount which may be available for payout to Eligible
Employees   based  upon  the  relative  level  of  attainment  of  the  selected




                                       24


Performance  Goals.  Following  the  close of each  year,  the  Human  Resources
Committee will determine  whether the Performance Goals were achieved and, based
on the level of achievement,  the total amount available for payout. In its sole
discretion,  the Human Resources  Committee may reduce the size or eliminate the
total  amount  available  for payment and  determine  the share,  if any, of the
available  amount to be paid to each Eligible  Employee.  The maximum payment to
any  Eligible  Employee  under  the Plan for any  year  will in no event  exceed
$3,000,000.

     For  purposes  of the Plan,  "Performance  Goals"  means one or more of the
following:  (i) earnings per share, (ii) return on average equity in relation to
a peer group of companies  designated by the Company (the "Peer  Group"),  (iii)
return on  average  assets in  relation  to the Peer  Group,  or (iv) such other
performance  goals as may be established by the Human Resources  Committee which
may be based on earnings,  earnings growth, earnings before interest,  taxes and
amortization (EBITA), operating income, operating margins,  revenues,  expenses,
stock price,  market share,  charge-offs,  reductions in non-performing  assets,
return on assets,  equity or  investment,  regulatory  compliance,  satisfactory
internal or external audits,  improvement of financial  ratings,  achievement of
balance sheet or income statement objectives,  net cash provided from continuing
operations,  stock price  appreciation,  total stockholder return, cost control,
strategic  initiatives,  market share,  pre- or after-tax  income,  or any other
objective  goals  established  by the  Human  Resources  Committee,  and  may be
absolute  in  their  terms  or  measured  against  or in  relationship  to other
companies  comparably,  similarly or otherwise situated.  Such Performance Goals
may be (i)  particular  to a line of business,  division or other unit or may be
based on the  performance of the Company  generally or (ii) applied by excluding
the impact of charges for restructuring,  discontinued operations, extraordinary
items, and other unusual or non-recurring  items, and the cumulative  effects of
accounting changes, each as defined by generally accepted accounting principles.

     The group of  employees  whose bonus  compensation  would be subject to the
Performance Goals selected by the Human Resources Committee would consist of all
of the  Company's  executive  officers,  as defined in  Securities  Exchange and
Commission ("SEC") rules.  Currently,  the Company has eight executive officers.
The executive officers are listed annually in the Company's Form 10-K filed with
the SEC.  Although  the  Internal  Revenue  Code only limits  deductibility  for
compensation paid to the five most highly paid executive officers,  the selected
Performance Goals may be applied to all executive officers in the event that one
or more of them should become one of the five most highly compensated during the
five-year period covered by this proposal.

     The amounts of any awards that may be payable to Eligible  Employees  under
the Plan in future years  cannot  currently be  determined.  In addition,  since
awards are based upon Performance  Goals, which are tied to a specific year, the
amounts that the Eligible Employees would have received for 2002 if the Plan had
been in effect are also not determinable. If approved by the stockholders,  this
proposal  would  not limit the  Company's  right to award or pay other  forms of
compensation  (including,  but not limited to, salary or stock-based  awards) to
the Company's executive  officers,  regardless of whether or not the Performance
Goals for annual bonuses are achieved in any year, and whether or not payment of
such other forms of compensation would be tax deductible.

Amendment and Termination

         The Human Resources Committee may at any time terminate, in whole or in
part, or from time to time amend, the Plan; provided, however, that neither
termination nor amendment of the Plan after the end of a year may adversely
affect the rights of Eligible Employees with respect to their bonus awards for
that year. Any amendment to the Plan shall be approved by the Company's
stockholders if required by Section 162(m) of the Internal Revenue Code.

Administration

     The Plan shall be  administered  by a committee  designated by the Board of
Directors  consisting  solely of two or more  members of the Board of  Directors
each of whom is an "outside  director"  within the meaning of Section  162(m) of
the Code.  The Human  Resources  Committee has been  designated by the Board for
this purpose.  The Human  Resources  Committee shall have authority to interpret
the Plan, to prescribe,  amend and rescind rules and regulations  relating to it
and to make all other  determinations  deemed  necessary  or  advisable  for the
administration of the Plan. The determinations of the Human Resources  Committee
pursuant to its authority under the Plan shall be conclusive and binding.

Certain Federal Income Tax Consequences

     The following  summarizes  the operation of Section  162(m) of the Internal
Revenue Code but does not purport to describe all tax  consequences of the Plan.
Section  162(m)  of the  Internal  Revenue  Code  denies a  federal  income  tax
deduction for certain  compensation in excess of $1,000,000 per year paid to the
chief executive  officer and the four other most highly paid executive  officers
of a publicly  traded  corporation.  Certain  types of  compensation,  including
compensation based on performance goals, are excluded from this deduction limit.
In order for  compensation  to qualify




                                       25


for this  exception:  (i) it must be paid solely on account of the attainment of
one or more performance goals; (ii) the performance goals must be established by
a  committee  consisting  solely  of two or more  outside  directors;  (iii) the
material  terms  under  which  the  compensation  is to be paid,  including  the
performance  goals,  must be  disclosed  to and  approved by  stockholders  in a
separate vote prior to payment;  and (iv) prior to payment,  the committee  must
certify that the  performance  goals and any other  material  terms were in fact
satisfied.   The  Company  believes  that,  if  the  Plan  is  approved  by  the
stockholders,  any compensation paid in accordance with the Plan will qualify as
performance-based compensation under the Internal Revenue Code.

       The Board of Directors recommends a vote FOR approval of the Plan.



                                  -PROPOSAL 3-

                              STOCKHOLDER PROPOSAL

     The Sheet Metal Workers'  National Pension Fund,  Edward F. Carlough Plaza,
601 North Fairfax  Street,  Suite 500,  Alexandria,  VA 22314-2705,  a holder of
3,600  shares of Common  Stock,  has  submitted  the  following  resolution  for
adoption at the 2003 Annual Meeting of Stockholders:

     "RESOLVED,  that the  shareholders  of Thermo Electron  ("Company")  hereby
request that the Company's Board of Directors establish a policy of expensing in
the  Company's  annual  income  statement  the costs of all future stock options
issued by the Company."

Supporting Statement for Stockholder Proposal

     Current  accounting  rules give  companies  the choice of  reporting  stock
option expenses annually in the company income statement or as a footnote in the
annual report (See:  Financial  Accounting  Standards Board Statement 123). Most
companies, including ours, report the cost of stock options as a footnote in the
annual  report,  rather than include the option costs in  determining  operating
income. We believe that expensing stock options would more accurately  reflect a
company's operational earnings.

     Stock  options  are  an  important  component  of our  Company's  executive
compensation  program.  Options  have  replaced  salary and  bonuses as the most
significant element of executive pay packages at numerous companies. The lack of
options   expensing  can  promote  excessive  use  of  options  in  a  company's
compensation  plans,  obscure and understate the cost of executive  compensation
and promote the pursuit of corporate  strategies  designed to promote short-term
stock price rather than long-term corporate value.

     A recent report issued by Standard & Poor's indicated that the expensing of
stock option grant costs would have lowered operational earnings at companies by
as much as 10%.  "The failure to expense  stock option  grants has  introduced a
significant  distortion  in reported  earnings,"  stated  Federal  Reserve Board
Chairman Alan Greenspan.  "Reporting stock options as expenses is a sensible and
positive  step  toward a clearer  and more  precise  accounting  of a  company's
worth." Globe and Mail,  "Expensing  Options Is a Bandwagon Worth Joining," Aug.
16, 2002.

     Warren Buffett wrote in a New York Times Op-Ed piece on July 24, 2002:

          There is a crisis of confidence today about corporate earnings reports
          and the credibility of chief executives. And it's justified.

          For many years,  I've had little  confidence  in the earnings  numbers
          reported  by  most  corporations.  I'm not  talking  about  Enron  and
          WorldCom - examples of outright crookedness. Rather, I am referring to
          the legal, but improper,  accounting  methods used by chief executives
          to inflate reported earnings . . .

          Options are a huge cost for many  corporations  and a huge  benefit to
          executives.  No wonder,  then,  that they have fought  ferociously  to
          avoid making a charge against their earnings. Without blushing, almost
          all C.E.O.'s have told their shareholders that options are cost-free .
          . .

          When a company gives something of value to its employees in return for
          their services,  it is clearly a compensation expense. And if expenses
          don't  belong in the  earnings  statement,  where in the world do they
          belong?

     Many companies have responded to investors' concerns about their failure to
expense stock options. In recent months, more than 100 companies, including such
prominent ones as Coca Cola, Washington Post, and General Electric,



                                       26


have  decided  to expense  stock  options to  provide  their  shareholders  more
accurate financial statements. Our Company has yet to act. We urge your support.

Statement in Opposition to Stockholder Proposal

     Thermo  Electron  views the use of stock  options  as a  valuable  tool for
recruiting and retaining top management talent, and we believe that we have used
this  tool  with  prudence  and  moderation.  We  acknowledge  the  view of some
shareholders that financial statements should reflect a cost associated with the
issuance of stock options.  While we understand  this view, we believe that such
an  important  accounting  principle  should be applied  consistently  among all
companies to ensure equitable comparability. Currently, we disclose in the Notes
to the Company's  Consolidated  Financial  Statements contained in our Form 10-K
our results on a pro forma basis as if we had recorded the cost of stock options
as an expense.  Such disclosure is required by Statement of Financial Accounting
Standard No. 123 ("SFAS No. 123"). This cost,  calculated in accordance with the
fair value method  prescribed by SFAS No. 123, is  determined  based on the fair
value of the option at the date of grant.

     Although the issue of expensing  stock  options has  attracted  significant
interest from accounting and investment communities,  there is no rule requiring
all companies to expense stock options,  no standard applicable to all companies
by which stock  options are required to be valued,  and no consensus has emerged
on the  appropriate  method for  measuring the true cost of stock options to the
Company.  Our  experience  using  the  Black-Scholes  option  valuation  formula
suggests that it is an imprecise tool for these purposes.

     At  this  time,  we  believe  the  Company  may  be  placed  at a  relative
disadvantage if we were required to expense the cost of stock options while this
accounting treatment has not been standardized,  widely adopted, and required of
our peers.  Thermo  Electron  does and will  continue to comply with all SEC and
Financial  Accounting  Standards Board (FASB) requirements and apply appropriate
option  valuation   methods   consistent  with  sound  accounting  and  industry
practices.  While several major U.S.  companies have  announced  plans to change
their method of accounting  for employee  stock options to the fair value method
and  reflect an  estimated  value of such  stock  options as an expense on their
income statements, it is still unclear if this practice will become standard and
whether it will become widely  adopted,  including by our peers. We believe that
bearing the cost of options in our financial  statements today would depress our
earnings relative to those of our peer group companies who have not expensed the
cost of stock options and result in Thermo Electron  indirectly  being penalized
for  continuing  to use  stock  options  as  part of our  compensation  package.
Alternatively, it could cause the Company to reduce our use of stock options due
to such  potential  inequitable  comparisons,  which  would  likely make it more
difficult to attract and retain key employees.  Ultimately,  either result could
make the Company a less attractive investment and harm our shareholders.

     Thermo Electron  believes the proper method for accounting for options is a
matter  best left to the SEC and  FASB,  and those  organizations  should  adopt
standards applicable to all companies.  We do not believe our shareholders would
benefit by having the Company adopt a practice that is not  standardized and may
not become widely used, that will depress our earnings  relative to those of our
peer group companies, and that will place us at a disadvantage in recruiting and
retaining key executives.

     The Board of Directors recommends a vote AGAINST the stockholder  proposal.
Proxies  solicited by the Board of Directors  will be voted AGAINST the proposal
unless stockholders otherwise specify to the contrary on their proxy.

                                  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 proxy card relating to the 2004 Annual  Meeting of the  Stockholders  of the
Company and to be  presented at such meeting must be received by the Company for
inclusion in the proxy statement and proxy card no later than December 11, 2003.
In addition,  the Company's  Bylaws  include an advance  notice  provision  that
requires  stockholders  desiring  to bring  proposals  before an annual  meeting
(which  proposals  are not to be included in the Company's  proxy  statement and
thus are  submitted  outside the processes of Rule 14a-8 under the Exchange Act)
to do so in  accordance  with the terms of such advance  notice

                                       27


provision.  The advance  notice  provision  requires  that,  among other things,
stockholders  give  timely  written  notice  to the  Secretary  of  the  Company
regarding  their  proposals.  To be timely,  notices  must be  delivered  to the
Secretary at the  principal  executive  offices of the Company not less than 60,
nor more than 75, days prior to the first  anniversary  of the date on which the
Company  mailed its proxy  materials for the preceding  year's annual meeting of
stockholders.  Accordingly,  a stockholder  who intends to present a proposal at
the 2004 Annual Meeting of Stockholders without inclusion of the proposal in the
Company's  proxy  materials must provide  written notice of such proposal to the
Secretary no earlier  than January 26, 2004 and no later than  February 9, 2004.
Proposals  received at any other time will not be voted on at the meeting.  If a
stockholder makes a timely  notification,  the proxies that management  solicits
for the meeting may still exercise  discretionary  voting authority with respect
to the  stockholder's  proposal under  circumstances  consistent  with the proxy
rules of the Securities and Exchange Commission.


                             SOLICITATION STATEMENT

     The cost of this  solicitation  of  proxies  will be borne by the  Company.
Solicitation  will be made  primarily  by mail,  but  regular  employees  of the
Company 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 Company will reimburse such
parties for their reasonable charges and expenses in connection therewith.

Waltham, Massachusetts
April 9, 2003


                                       28



                                                                      APPENDIX A




                           Thermo Electron Corporation

                             Audit Committee Charter

Organization

The  Committee  shall  consist of only  independent  Directors as defined by the
relevant stock exchange listing  authority for the Company's equity  securities.
The  Chairman  of the  Committee  shall be chosen from among the  members.  Each
member of the Committee shall be financially literate or must become financially
literate within a reasonable  period of time after his or her appointment to the
Committee,  and at least one member of the  Committee  must have  accounting  or
related  financial  management  expertise as the  foregoing  qualifications  are
interpreted by the Board of Directors  ("Board") in its business  judgment.  The
number of Directors serving on the Committee shall be determined by the Board of
Directors,  and from and after June 14, 2001, the Committee  shall consist of at
least three Directors.

Statement of Policy

The Committee shall,  through regular or special  meetings with management,  the
Company's  internal  auditor  and the  Company's  independent  auditor,  provide
oversight  on matters  relating to  accounting,  financial  reporting,  internal
control, auditing and other matters as the Board or the Committee Chairman deems
appropriate.

Responsibilities

The Company's  management is responsible  for preparing the Company's  financial
statements  and the  independent  auditors are  responsible  for auditing  those
financial statements. The Committee is responsible for overseeing the conduct of
these activities by the Company's management and the independent  auditors.  The
financial management and the independent auditors of the Company have more time,
knowledge  and  more  detailed  information  on the  Company  than do  Committee
members.  Consequently,  in carrying  out its  oversight  responsibilities,  the
Committee is not providing  any expert or special  assurance as to the Company's
financial  statements or any  professional  certification  as to the independent
auditor's work.

In carrying out its oversight responsibilities,  the Committee shall perform the
following functions:

Oversight of Independent Auditors.

In the course of its  oversight of the  independent  auditors as provided  under
this Charter,  the Committee will be guided by the premise that the  independent
auditor is ultimately accountable to the Board and the Committee.

1.   The  Committee,  subject to any action that may be taken by the full Board,
     shall have the ultimate  authority and  responsibility to select,  evaluate
     and, where appropriate, replace the independent auditor.

2.   The Committee shall:

     (i)  receive  from the  independent  auditors  annually,  a formal  written
          statement  delineating the relationships  between the auditors and the
          Company  consistent with Independence  Standards Board Standard Number
          1;

     (ii) discuss with the independent  auditors the scope of any such disclosed
          relationships  and their impact or potential impact on the independent
          auditor's independence and objectivity; and

     (iii)recommend  that the Board take  appropriate  action in response to the
          independent  auditor's  report  to  satisfy  itself  of the  auditor's
          independence.

3.   The  Committee  shall  review  the  original  proposed  scope of the annual
     independent audit of the Company's financial  statements and the associated
     fees,  as well as any  significant  variations  in the actual  scope of the
     independent audit and the associated fees.

4.   The Committee  shall review the  independent  auditors'  report relating to
     reportable  conditions  in the internal  control  structure  and  financial
     reporting practices.


                                      A-1


Oversight of Internal Auditors.

The  Committee  shall review and discuss  with  management  and the  independent
auditors:

     1.   The  quality  and  adequacy  of  the  Company's  internal   accounting
          controls.

     2.   Organization  of the internal  audit  department,  the adequacy of its
          resources and the competence of the internal audit staff.

     3.   The  audit  risk  assessment  process  and the  proposed  scope of the
          internal audit  department for the upcoming year and the  coordination
          of that scope with independent auditors.

     4.   Results of the  internal  auditors  examination  of internal  controls
          including  summaries of inadequate  reports  issued and/or  management
          improprieties together with management's response thereto.

Oversight of Management's Conduct of the Company's Financial Reporting Process.

     1.   Audited Financial  Statements.  The Committee shall review and discuss
          with  management and the  independent  auditors the audited  financial
          statements to be included in the Company's  Annual Report on Form 10-K
          (or the  Annual  Report to  Shareowners  if  distributed  prior to the
          filing of Form  10-K) and  review and  consider  with the  independent
          auditors  the  matters  required  to be  discussed  by the  applicable
          Statement of Auditing Standards  ("SAS").  Based on these discussions,
          the Committee will advise the board of directors whether it recommends
          that the audited financial statements be included in the Annual Report
          on Form 10-K (or the Annual Report to Shareholders).

     2.   Interim Financial Statements.  The Committee,  through its Chairman or
          the  Committee  as a  whole,  will  review  with  management  and  the
          independent  auditors,  prior to the  filing  thereof,  the  Company's
          interim  financial  results to be included in the Company's  quarterly
          reports on Form 10-Q and the matters  required to be  discussed by the
          applicable SAS.

     3.   Financial Reporting Practices. The Committee shall review:

          (i)  Significant  changes in the  Company's  accounting  policies  and
               practices and significant judgments that may affect the financial
               results.

          (ii) The  nature  of  any  unusual  or   significant   commitments  or
               contingent  liabilities together with the underlying  assumptions
               and estimates of management.

          (iii)The  effect  of  changes  on   accounting   standards   that  may
               materially affect the Company's financial reporting practices.

          (iv) Litigation  or other legal  matters that could have a significant
               impact on the Company's financial results.

Oversight and Review of Charter.

The Committee  shall review and monitor,  as  appropriate,  the adequacy of this
Charter,  which shall be  reviewed  by the  Committee  on an annual  basis.  The
Committee will recommend to the Board any  modifications to this Charter,  which
the Committee deems appropriate, for approval by the Board.


                                      A-2

                                                                      APPENDIX B

                           THERMO ELECTRON CORPORATION
                        2003 ANNUAL INCENTIVE AWARD PLAN


I.   General Purpose of Plan

The Thermo Electron  Corporation 2003 Annual Incentive Award Plan is designed to
assist  the  Corporation  and its  Subsidiaries  in  attracting,  retaining  and
providing  incentives to Eligible Employees and to promote the identification of
their  interests with those of the  Corporation's  shareholders by providing for
the  payment  of  Incentive  Awards  subject  to the  achievement  of  specified
Performance Goals.

II.  Definitions

     Terms not otherwise defined herein shall have the following meanings:

     A.  "Award  Period"  means the  calendar  year,  except to the  extent  the
Committee determines otherwise.

     B. "Board" means the Board of Directors of the Corporation.

     C. "Code" means the Internal Revenue Code of 1986, as amended.

     D.  "Committee"  means the Human  Resources  Committee of the Board, or any
other committee appointed by the Board to administer the Plan.

     E. "Corporation" means Thermo Electron Corporation, a Delaware corporation.
and  its  successors  and  assigns  and  any  corporation  which  shall  acquire
substantially all of its assets.

     F.  "Covered  Employee"  means a "covered  employee"  within the meaning of
Section 162(m) of the Code.

     G. "Eligible Employee" means an employee described in Section IV hereof.

     H. "Incentive  Award" means a contingent award made to a Participant  that,
subject to Section V hereof, entitles the Participant to cash payment to reflect
the  relative  level of  attainment  of  Performance  Goals  established  by the
Committee  for an Award  Period and such  other  factors  as the  Committee  may
determine.

     I.  "Participant"  means any  Eligible  Employee  who receives an Incentive
Award under the Plan for an Award Period.

     J. "Performance  Goals" means (a) earnings per share, (b) return on average
equity in relation to a peer group of companies  designated  by the  Corporation
(the "Peer Group"),  (c) return on average assets in relation to the Peer Group,
or (d) such other performance goals as may be established by the Committee which
may be based on earnings,  earnings growth, earnings before interest, taxes, and
amortization (EBITA), operating income, operating margins,  revenues,  expenses,
stock price,  market share,  charge-offs,  reductions in non-performing  assets,
return on assets,  equity or  investment,  regulatory  compliance,  satisfactory
internal or external audits,  improvement of financial  ratings,  achievement of
balance sheet or income statement objectives,  net cash provided from continuing
operations,  stock price  appreciation,  total shareholder return, cost control,
strategic  initiatives,  market share,  pre- or after-tax  income,  or any other
objective goals established by the Committee, and may be absolute in their terms
or measured against or in relationship to other companies comparably,  similarly
or otherwise situated. Such performance goals may be particular to a Participant
or the division,  department, branch, line of business, Subsidiary or other unit
in which  the  Participant  works,  or may be based  on the  performance  of the
Corporation  generally,  and

                                      B-1


may cover such period as may be specified  by the  Committee.  Such  Performance
Goals may be applied by  excluding  the  impact of charges  for  restructurings,
discontinued operations, extraordinary items, and other unusual or non-recurring
items,  and the  cumulative  effects of accounting  changes,  each as defined by
generally accepted accounting principles.

     K. "Plan" means the Thermo Electron Corporation 2003 Annual Incentive Award
Plan.

     L.  "Subsidiary"  means a  corporation  of which at least  50% of the total
combined  voting  power of all  classes  of  stock is owned by the  Corporation,
either directly or through one or more other Subsidiaries.

III. Administration

The Plan  shall be  administered  by the  Committee.  The  Committee  shall have
plenary  authority,  in its discretion,  to determine the terms of all Incentive
Awards, including,  without limitation,  the Eligible Employees to whom, and the
time or times at which,  Incentive  Awards are made,  the Award  Period to which
each Incentive Award shall relate,  the actual dollar amount to be paid pursuant
to an  Incentive  Award,  the  Performance  Goals to which  payment of Incentive
Awards will be subject,  and when payments pursuant to Incentive Awards shall be
made (which payments may, without  limitation,  be made during or after an Award
Period on a deferred basis or in installments).  In making such  determinations,
the Committee  may take into account the nature of the services  rendered by the
respective Eligible Employees,  their present and potential contributions to the
success of the Corporation and its  Subsidiaries,  and such other factors as the
Committee  in its  discretion  shall  deem  relevant.  Subject  to  the  express
provisions of the Plan, the Committee shall have plenary  authority to interpret
the Plan, to prescribe,  amend and rescind rules and regulations  relating to it
and to make all other  determinations  deemed  necessary  or  advisable  for the
administration of the Plan. The  determinations of the Committee pursuant to its
authority under the Plan shall be conclusive and binding.

IV. Eligibility

Incentive Awards may be granted only to executive officers of the Corporation or
a Subsidiary.


V. Incentive Awards; Terms of Awards; Payment

     A. The Committee  shall, in its sole  discretion,  determine which Eligible
Employees shall receive Incentive Awards.  For each Award Period with respect to
which the Committee  determines to make Incentive Awards, the Committee shall by
resolution  establish one or more Performance Goals applicable to such Incentive
Awards  and the  other  terms  and  conditions  of the  Incentive  Awards.  Such
Performance  Goals and other terms and  conditions  shall be  established by the
Committee in its sole  discretion as it shall deem  appropriate  and in the best
interests of the  Corporation  and shall be established (1) within 90 days after
the first day of the Award  Period and (2)  before  25% of the Award  Period has
elapsed.

     B. After the end of each Award Period for which the  Committee  has granted
Incentive  Awards,  the  Committee  shall  determine  the  extent  to which  the
Performance  Goals  established  by the Committee for the Award Period have been
achieved and shall authorize the Corporation to make Incentive Award payments to
Participants in accordance with the terms of the Incentive  Awards.  In no event
shall  the  amount  paid to a  Participant  in  accordance  with the terms of an
Incentive Award by reason of Performance Goal achievement  exceed  $3,000,000 in
any calendar year.  Unless otherwise  determined by the Committee,  no Incentive
Award payments shall be made to a Participant unless the Participant is employed
by the Corporation or a Subsidiary as of the date of payment.

     C. The  Committee  may at any  time,  in its  sole  discretion,  cancel  an
Incentive  Award or eliminate or reduce (but not  increase)  the amount  payable
pursuant  to  the  terms  of  an  Incentive  Award  without  the  consent  of  a
Participant.

                                      B-2


     D. Incentive Award payments shall be subject to applicable  federal,  state
and local withholding taxes and other applicable  withholding in accordance with
the Corporation's payroll practices as from time-to-time in effect.

     E. The Committee shall have the power to impose such other  restrictions on
Incentive  Awards as it may deem  necessary or  appropriate  to ensure that such
Incentive Awards satisfy all requirements for  "performance-based  compensation"
within  the  meaning  of  Section  162(m)(4)(C)  of the Code,  or any  successor
provision thereto.

VI. Transferability

Incentive Awards shall not be subject to the claims of creditors and may not be
assigned, alienated, transferred or encumbered in any way other than by will or
pursuant to the laws of descent and distribution.

VII. Termination or Amendment

The Committee may amend, modify or terminate the Plan in any respect at any time
without  the  consent  of  Participants,  provided  that  (a)  no  amendment  or
termination  of the Plan after the end of an Award Period may  adversely  affect
the rights of Participants with respect to their Incentive Awards for that Award
Period,  and (b) no amendment  which would require  shareholder  approval  under
Section 162(m) of the Code may be effected without such shareholder approval.

VIII. Effectiveness of Plan and Awards

The Plan and Incentive  Awards granted  hereunder shall be void ab initio unless
the Plan is approved by a vote of the  Corporation's  shareholders  at the first
shareholders'  meeting of the Corporation  following adoption of the Plan by the
Committee.

IX. Effective Date; Term of the Plan

The Plan shall be effective as of January 1, 2003.  Unless sooner  terminated by
the  Committee  pursuant  to Section 7, to the extent  necessary  to ensure that
Incentive Award payments made to Covered Employees may be deductible for federal
income  tax  purposes,  the Plan  shall  terminate  as of the date of the  first
meeting of the Corporation's shareholders occurring during 2008, unless the term
of the  Plan is  extended  and  reapproved  at such  shareholders'  meeting.  No
Incentive   Awards  may  be  awarded  under  the  Plan  after  its  termination.
Termination of the Plan shall not affect any Incentive Awards outstanding on the
date of termination and such awards shall continue to be subject to the terms of
the Plan notwithstanding its termination.

X. General Provisions

     A. The  establishment  of the  Plan  shall  not  confer  upon any  Eligible
Employee any legal or equitable right against the Corporation or any Subsidiary,
except as expressly provided in the Plan.

     B. The Plan does not  constitute  an inducement  or  consideration  for the
employment  of  any  Eligible  Employee,  nor  is  it  a  contract  between  the
Corporation,  or any Subsidiary and any Eligible Employee.  Participation in the
Plan shall not give an Eligible  Employee any right to be retained in the employ
of the Corporation or any Subsidiary.

     C. Nothing contained in this Plan shall prevent the Committee from adopting
other or additional compensation  arrangements,  subject to shareholder approval
if such  approval is required,  and such  arrangements  may be either  generally
applicable or applicable only in specific cases.

     D. The Plan shall be governed,  construed  and  administered  in accordance
with the laws of the State of Delaware.


                                      B-3

                           THERMO ELECTRON CORPORATION
         PROXY FOR ANNUAL MEETNG OF STOCKHOLDERS TO BE HELD MAY 14,2003
           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

     The undersigned  hereby appoints Marijn E. Dekkers,  Richard F. Syron,  and
Theo  Melas-Kyriazi,  and each of them,  proxies of the  undersigned,  each with
power to appoint his substitute,  and hereby authorizes them to represent and to
vote,  as  designated  on the reverse  side,  all the shares of common  stock of
Thermo Electron Corporation held of record by the undersigned on March 28, 2003,
at the Annual Meeting of the Stockholders to be held at the InterContinental The
Barclay New York, 111 East 48th Street,  New York,  New York, on Wednesday,  May
14, 2003, at 2:00 p.m.,  and at any  adjournments  thereof,  as set forth on the
reverse side hereof,  and in their  discretion  upon any other business that may
properly come before the meeting.

     The Proxy will be voted as specified, or if no choice is specified, FOR the
election of the nominees for  director,  FOR proposal 2, AGAINST  proposal 3, if
presented  at the  meeting,  and as said  proxies  deem  advisable on such other
matters as may properly come before the meeting.

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




                        ANNUAL MEETING OF STOCKHOLDERS OF
                           THERMO ELECTRON CORPORATION

                                  May 14, 2003

                            PROXY VOTING INSTRUCTIONS

MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
                -OR-
TELEPHONE - Call toll-free 1-800-PROXIES from      COMPANY NUMBER
any touch-tone telephone and follow the instruc-   ----------------- -----------
tions. Have your control number and proxy card     ACCOUNT NUMBER
available when you call.                           ----------------- -----------
                -OR-                               CONTROL NUMBER
INTERNET - Access "www.voteproxy.com" and          ----------------- -----------
follow the on-screen instructions. Have your control
number available when you access the web page.

           INTERNET AND TELEPHONE VOTING ARE AVAILABLE 24 HOURS A DAY,
           7 DAYS A WEEK UNTIL 5:00 P.M. NEW YORK TIME ON MAY 13, 2003

      Please detach and mail in the envelope provided If you are not voting
                         via telephone or the Internet.
             -------------------------------------------------------

      THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2, AND
                    RECOMMENDS A VOTE "AGAINST" PROPOSAL 3.
         PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
              PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]


1.  ELECTION OF DIRECTORS OF THE COMPANY.
                                            NOMINEES
[   ]    FOR ALL NOMINEES                   [   ] (01) Jim P. Manzi
                                            [   ] (02) Elaine S. Ullian
[   ]    WITHHOLD AUTHORITY
         FOR ALL NOMINEES

[   ]    FOR ALL EXCEPT (See Instructions below)

INSTRUCTION: To withhold authority to vote for any individual  nominee(s),  mark
             "FOR ALL EXCEPT"  and fill in the circle  next to each  nominee you
              wish to withhold, as shown here: [X]
     ---------------------------------------------------------------------------

                                                            FOR  AGAINST ABSTAIN
2.  Approve a management proposal to approve the Company's  [  ]  [  ]    [  ]
    Annual Incentive Award Plan.

3.  Approve a stockholder proposal to request the Board of   [  ]  [  ]    [  ]
    Directors to establish a policy of expensing in the Company's
    annual income statement the costs of all future stock options
    issued by the Company.

4.  In their discretion on such other matters as may properly come before
    the meeting.

If no instruction to the contrary is indicated or if no instruction is given,
the shares represented by this Proxy will be voted "FOR" Proposals 1 and 2 and
"AGAINST" Proposal 3, if presented at the meeting.

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

-------------------------------------------------------------------------------
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note
that changes to the registered name(s) on the account may not be submitted
via this method.                                                          [    ]
--------------------------------------------------------------------------------

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

Signature of Stockholder __________________________Date:__________________
Signature of Stockholder __________________________Date:__________________

Note:This proxy must be signed exactly as the name appears  hereon.  When shares
     are held  jointly,  each holder  should  sign.  When  signing as  executor,
     administrator,  attorney,  trustee or  guardian,  please  give full tile as
     such. If the signer is a  corporation,  please sign full  corporate name by
     duly  authorized  officer,  giving  full  title as  such.  If  signer  is a
     partnership, please sign in partnership name by authorized person.