Exhibit (i)

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                          THERMO ELECTRON CORPORATION,

                           TP ACQUISITION CORPORATION

                                       AND

                            THERMO POWER CORPORATION




                             DATED AS OF MAY 5, 1999



<PAGE>


ARTICLE I   THE MERGER.......................................................1
      1.1.  The Merger.......................................................1
      1.2.  Effective Time; Closing..........................................2
      1.3.  Effect of the Merger.............................................3
      1.4.  Articles of Organization; By-laws................................3
      1.5.  Directors and Officers...........................................3
      1.6.  Effect on Capital Stock..........................................3
      1.7.  Surrender of Certificates........................................4
      1.8.  No Further Ownership Rights in Thermo Power Common Stock.........5
      1.9.  Lost, Stolen or Destroyed Certificates...........................5
      1.10. Dissenting Shares................................................6
      1.11. Taking of Necessary Action; Further Action.......................6

ARTICLE II  ....................REPRESENTATIONS AND WARRANTIES OF THERMO POWER
      6
      2.1.  Organization of Thermo Power.....................................6
      2.2.  Thermo Power Capital Structure...................................7
      2.3.  Authority........................................................7
      2.4.  Board Approval...................................................8
      2.5.  Fairness Opinion.................................................8

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THERMO ELECTRON AND MERGER SUB.8
      3.1.  Organization.....................................................8
      3.2.  Merger Sub Capitalization........................................9
      3.3.  Authority........................................................9
      3.4.  Financial Resources.............................................10

ARTICLE IV  CONDUCT PRIOR TO THE EFFECTIVE TIME.............................10
      4.1.  Conduct of Business by Thermo Power.............................10
      4.2.  Certain Actions by Thermo Power.................................10

ARTICLE V  ADDITIONAL AGREEMENTS............................................11
      5.1.  Schedule 13E-3; Proxy Statement; Other Filings..................11
      5.2.  Meeting of Thermo Power Stockholders............................12
      5.3.  Access to Information...........................................13
      5.4.  Public Disclosure...............................................13
      5.5.  Legal Requirements..............................................13
      5.6.  Notification of Certain Matters.................................13
      5.7.  Best Efforts and Further Assurances.............................14
      5.8.  Stock Option and Employee Stock Purchase Plans..................14
      5.9.  Thermo Electron Form S-8........................................15
      5.10. Indemnification; Insurance......................................15
      5.11. Deferred Compensation Plan......................................16
      5.12. Competing Offers................................................16
<PAGE>

ARTICLE VI  CONDITIONS TO THE MERGER........................................16
      6.1.  Conditions to Obligations of Each Party to Effect the Merger....16
      6.2.  Additional Conditions to Obligations of Thermo Power............17
      6.3.  Additional Conditions to the Obligations of Thermo Electron and
            Merger Sub......................................................17

ARTICLE VII  TERMINATION, AMENDMENT AND WAIVER..............................18
      7.1.  Termination.....................................................18
      7.2.  Notice of Termination; Effect of Termination....................19
      7.3   Fees and Expenses...............................................19
      7.4.  Amendment.......................................................19
      7.5.  Extension; Waiver...............................................19

ARTICLE VIII  GENERAL PROVISIONS............................................19
      8.1.  Non-Survival of Representations and Warranties..................19
      8.2.  Notices.........................................................19
      8.3.  Counterparts....................................................21
      8.4.  Entire Agreement................................................21
      8.5.  Severability....................................................21
      8.6.  Other Remedies; Specific Performance............................21
      8.7.  Governing Law...................................................21
      8.8.  Assignment......................................................21



<PAGE>


                          AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of May 5, 1999
is by and among Thermo  Electron  Corporation  ("Thermo  Electron"),  a Delaware
corporation,   TP  Acquisition   Corporation  ("Merger  Sub"),  a  Massachusetts
corporation and a wholly-owned  subsidiary of Thermo Electron,  and Thermo Power
Corporation ("Thermo Power"), a Massachusetts corporation.

                                    RECITALS

      A. Thermo Electron owns  approximately  78% of the  outstanding  shares of
common stock,  par value $0.10 per share,  of Thermo Power ("Thermo Power Common
Stock"), and Thermo Electron desires to acquire the remaining outstanding shares
of Thermo Power Common Stock.

      B. On January 13, 1999, the Board of Directors of Thermo Power appointed a
Special  Committee  of  the  Board  (the  "Special  Committee"),  consisting  of
independent  directors,  to act on  behalf  of,  and in the  interests  of,  the
stockholders  of Thermo  Power  other than Thermo  Electron,  the  officers  and
directors of Thermo Power and the officers and directors of Thermo Electron (the
"Minority  Stockholders"),  for the  purpose  of  evaluating  the merits of, and
negotiating  the terms of, any  proposed  transaction  between  Thermo Power and
Thermo Electron,  considering such  alternatives as the Special Committee deemed
appropriate and making a recommendation to the full Board of Directors of Thermo
Power on whether to approve any such transaction.

      C. On May 4, 1999, the Special Committee  recommended to the full Board of
Directors  of  Thermo  Power  approval  of a  business  combination  transaction
pursuant to which Merger Sub will merge with and into Thermo Power in accordance
with the Business Corporation Law of the Commonwealth of Massachusetts  ("MBCL")
and upon the terms and  subject to the  conditions  set forth in this  Agreement
(the "Merger").

      D. The respective Boards of Directors of Thermo Electron, Thermo Power and
Merger Sub have approved the Merger.

      E. Thermo  Electron,  Thermo  Power and Merger Sub desire to make  certain
representations  and  warranties  and other  agreements in  connection  with the
Merger.

      NOW,   THEREFORE,   in  consideration  of  the  covenants,   promises  and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,  the parties agree
as follows:


                                    ARTICLE I
                                   THE MERGER

     1.1 THE  MERGER.  At the  Effective  Time (as  defined in Section  1.2) and
subject  to and  upon  the  terms  and  conditions  of  this  Agreement  and the

<PAGE>

applicable  provisions  of the MBCL,  Merger  Sub shall be merged  with and into
Thermo  Power,  the separate  corporate  existence of Merger Sub shall cease and
Thermo Power shall  continue as the surviving  corporation.  Thermo Power as the
surviving  corporation after the Merger is hereinafter  sometimes referred to as
the "Surviving  Corporation."  The Surviving  Corporation  will be authorized to
issue 1,000 shares of common stock, par value $.01 per share.  The purposes of 
the  Surviving  Corporation are:

            (a) To manufacture,  market, and service intelligent traffic-control
systems and related products,  industrial  refrigeration  equipment,  commercial
cooling systems,  cogeneration  units,  propane-powered  lighting products,  and
lighting products for the automotive,  sporting goods, and marine markets and to
conduct   research  and   development   in  the  areas  of  advanced  power  and
pollution-control technologies;

            (b) To  carry on any  business,  operation  or  activity  through  a
wholly-owned or partly-owned subsidiary;

            (c) To carry on any business,  operation or activity  referred to in
the foregoing  paragraphs to the same extent as might an individual,  whether as
principal,  agent,  contractor or  otherwise,  and either alone or as a partner,
trustee,  participant,  member or stockholder of or in any form of  partnership,
joint venture, corporation,  association,  trust or other form of entity or with
any individual,  and, without limiting the generality of the foregoing,  to be a
limited  and/or  general  partner of any  partnership  organized to carry on any
business or activity of the type described herein;

            (d) To engage in research and development activities,  construction,
manufacturing,  mercantile,  selling,  management,  service or any other  lawful
business  act,  operation  or activity for which  corporations  may be organized
under the MBCL (as  amended  and in effect  from time to time),  whether  or not
related or similar to the activities described in the preceding paragraphs; and

            (e) To have as additional  purposes all powers granted and conferred
by the laws of The  Commonwealth  of  Massachusetts  upon business  corporations
organized  under Chapter 156B of the General Laws of  Massachusetts  (as amended
and in effect from time to time),  including,  without limitation,  the power to
make contracts of guarantee and suretyship.

The  enumeration of these specific  purposes or powers shall not be construed to
limit other statements of purposes or powers which the Surviving Corporation may
otherwise  have  under  applicable  law,  all of the  same  being  separate  and
cumulative,  and all of the  same  may be  carried  on,  promoted  and  pursued,
transacted or exercised in any place in the world whatsoever.

     1.2 EFFECTIVE TIME;  CLOSING.  Subject to the provisions of this Agreement,
the parties  hereto shall cause the Merger to be  consummated  by submitting the
Articles of Merger (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Massachusetts in accordance with the relevant  provisions of the
MBCL (the time of such filing, or such later time as may be agreed in writing by
the parties and specified in the Articles of Merger,  being the "Effective Time"
and the date on which the Effective Time occurs being the  "Effective  Date") as
soon as practicable on the Closing Date (as herein defined).  Unless the context
otherwise  requires,  the term "Agreement" as used herein refers collectively to


                                       2
<PAGE>


this  Agreement  and the  Articles  of Merger.  The  closing of the Merger  (the
"Closing")  shall take place at the  executive  offices of Thermo  Electron at a
time and date to be specified  by the parties,  which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time,  date and  location as the parties  hereto
agree in writing (the "Closing  Date").  At the Closing,  (i) Thermo Power shall
deliver to Thermo Electron the various  certificates  and  instruments  required
under  Article VI, (ii) Thermo  Electron and Merger Sub shall  deliver to Thermo
Power the various  certificates  and  instruments  required under Article VI and
(iii)  Thermo  Power and Merger Sub shall  execute  and submit the  Articles  of
Merger with the Secretary of State of the Commonwealth of Massachusetts.

     1.3 EFFECT OF THE MERGER.  At the Effective  Time, the effect of the Merger
shall be as provided in this  Agreement  and the  applicable  provisions  of the
MBCL. Without limiting the generality of the foregoing,  and subject thereto, at
the Effective Time all the property, rights,  privileges,  powers and franchises
of Thermo Power and Merger Sub shall be transferred to and vest in the Surviving
Corporation,  and all liabilities and obligations of Thermo Power and Merger Sub
shall become the liabilities and obligations of the Surviving Corporation.

     1.4 ARTICLES OF ORGANIZATION;BY-LAWS

            (a) The  Articles  of Merger  shall  provide  that the  Articles  of
Organization  of the Surviving  Corporation  shall be amended to be identical to
the Articles of Organization of Merger Sub as in effect immediately prior to the
Effective  Time  except  that the  name of the  Surviving  Corporation  shall be
"Thermo Power Corporation."

            (b) The by-laws of Merger Sub, as in effect immediately prior to the
Effective  Time,  shall be, at the Effective  Time, the by-laws of the Surviving
Corporation until thereafter amended, except that the by-laws shall identify the
name of the Surviving Corporation as "Thermo Power Corporation."

     1.5 DIRECTORS AND OFFICERS. The directors of Thermo Power immediately prior
to  the  Effective  Time  shall  be  the  initial  directors  of  the  Surviving
Corporation,  to serve until their  respective  successors  are duly  elected or
appointed and qualified.  The officers of Thermo Power  immediately prior to the
Effective  Time shall be the  officers of the  Surviving  Corporation,  to serve
until their successors are duly elected or appointed or qualified.

     1.6 EFFECT ON CAPITALSTOCK.  At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, Thermo Power or the holders of
any of the following securities:

            (a)  Conversion of Thermo Power Common  Stock.  Each share of Thermo
Power Common Stock issued and  outstanding  immediately  prior to the  Effective
Time (other than any shares of Thermo Power Common Stock held in the treasury of
Thermo Power,  by Thermo  Electron or Dissenting  Shares,  as defined in Section
1.10) will be  automatically  converted into the right to receive Twelve Dollars
($12.00)  in cash (the  "Exchange  Price")  upon  surrender  of the  certificate
representing  such share of Thermo Power Common Stock in the manner  provided in


                                       3
<PAGE>


Section 1.7 (or in the case of a lost,  stolen or  destroyed  certificate,  upon
delivery of an  affidavit  (and bond,  if  required)  in the manner  provided in
Section 1.9).

            (b) Stock Options. All options to purchase Thermo Power Common Stock
then  outstanding  under Thermo  Power's  Directors  Stock  Option Plan,  Equity
Incentive Plan,  Employee's  Equity Incentive Plan,  Incentive Stock Option Plan
and  Nonqualified  Stock Option Plan,  each as amended,  (together,  the "Thermo
Power Stock Option  Plans") shall be converted  into options to purchase  Thermo
Electron  common  stock,  par value  $1.00 per share  ("Thermo  Electron  Common
Stock"), in accordance with Section 5.8 hereof.

            (c) Capital  Stock of Merger Sub.  Each share of Common  Stock,  par
value $.01 per share, of Merger Sub issued and outstanding  immediately prior to
the Effective  Time shall be converted into one validly  issued,  fully paid and
nonassessable   share  of  common  stock,  par  value  $.01,  of  the  Surviving
Corporation.

            (d)  Affiliate  Stock;  Treasury  Stock.  Each share of Thermo Power
Common Stock issued and  outstanding and owned by Thermo Electron and each share
of Thermo Power Common Stock held in treasury by Thermo Power  immediately prior
to the  Effective  Time shall cease to be  outstanding,  be canceled and retired
without payment of any consideration therefor and cease to exist.

            (e)  Adjustments  to Exchange  Price.  The  Exchange  Price shall be
adjusted to reflect  fully the effect of any stock split,  reverse  stock split,
stock dividend (including any dividend or distribution of securities convertible
into Thermo Power Common Stock),  recapitalization  or other like change without
receipt of consideration  with respect to Thermo Power Common Stock occurring on
or after the date hereof and prior to the Effective Time.

      1.7 SURRENDER OF CERITIFICATES.

            (a) Payment  Agent.  Thermo  Electron  shall  authorize  one or more
persons to act as the payment agent (the "Payment Agent") in the Merger.
            
            (b) Thermo  Electron  to Provide  Exchange  Consideration.  Promptly
after the Effective  Time,  Thermo Electron shall deposit with the Payment Agent
in trust for the benefit of the  holders of  certificates  (the  "Certificates")
representing  shares of Thermo Power Common Stock converted  pursuant to Section
1.6(a) for payment in accordance  with this Article I cash in an amount equal to
the product of the Exchange  Price  multiplied by the number of shares of Thermo
Power Common Stock entitled to payment pursuant to Section 1.6(a).

            (c) Exchange  Procedures.  Promptly after the Effective Time, Thermo
Electron  shall cause the Payment  Agent to mail to each holder of record (as of
the Effective  Time) of a Certificate  (i) a letter of transmittal  (which shall
specify  that  delivery  shall be  effected,  and risk of loss and  title to the
Certificates  shall pass, only upon delivery of the  Certificates to the Payment
Agent  and  shall be in such  form and have  such  other  provisions  as  Thermo
Electron  may  reasonably  specify)  and (ii)  instructions  for  effecting  the


                                       4
<PAGE>


exchange  of the  Certificates  for the  Exchange  Price.  Upon  surrender  of a
Certificate  for  cancellation  to the  Payment  Agent or to such other agent or
agents as may be  appointed  by Thermo  Electron,  together  with such letter of
transmittal   duly  completed  and  validly  executed  in  accordance  with  the
instructions  thereto,  the  holder of such  Certificate  shall be  entitled  to
receive in exchange  therefor  payment of the Exchange  Price  multiplied by the
number of shares of Thermo Power Common Stock  represented by such  Certificate,
without  interest,  and  the  Certificate  so  surrendered  shall  forthwith  be
canceled. Until so surrendered, each outstanding Certificate will be deemed from
and after the Effective Time, for all corporate  purposes,  to evidence only the
right to receive  payment of the  Exchange  Price for each share of Thermo Power
Common Stock represented on such Certificate.

            (d) Transfers of Ownership.  If payment of the Exchange  Price is to
be made to any  person  other  than the  person  in whose  name the  Certificate
surrendered in exchange  therefor is registered,  it will be a condition of such
payment  that the  Certificate  so  surrendered  will be properly  endorsed  and
otherwise  in proper  form for  transfer  and that the  person  requesting  such
payment  will have paid to Thermo  Electron  or any agent  designated  by it any
transfer or other taxes required by reason of payment to a person other than the
registered  holder  of  the  Certificate  surrendered,  or  established  to  the
satisfaction of Thermo Electron or any agent  designated by it that such tax has
been paid or is not payable.

            (e) No Liability.  Notwithstanding  anything to the contrary in this
Section  1.7,  neither  the  Payment  Agent,  Thermo  Electron,   the  Surviving
Corporation nor any party hereto shall be liable to a holder of shares of Thermo
Power Common Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.

            (f) Responsibility;  Term. The Payment Agent shall make the payments
referred  to in Section  1.6(a) out of the funds  supplied  by Thermo  Electron.
Promptly  following  the date that is six months after the Effective  Date,  the
Payment Agent shall, upon request by Thermo Electron, deliver to Thermo Electron
all cash,  Certificates  and other  documents in its possession  relating to the
transactions  described in this Agreement,  and the Payment Agent's duties shall
terminate. Thereafter, each holder of a Certificate formerly representing shares
of Thermo Power Common Stock may surrender such  Certificate to Thermo  Electron
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange  therefor the Exchange  Price  multiplied by the number of shares of
Thermo Power Common Stock represented by such Certificate,  without any interest
thereon, but shall have no greater rights against Thermo Electron than as may be
accorded to general creditors of Thermo Electron under applicable law.

     1.8 NO FURTHER  OWNERSHIP  RIGHTS IN THERMO POWER COMMON STOCK. All amounts
paid upon the  surrender of shares of Thermo  Power  Common Stock in  accordance
with the terms hereof shall be deemed to have been paid in full  satisfaction of
all rights  pertaining  to such shares of Thermo Power Common  Stock,  and there
shall be no further  registration  of transfers on the records of the  Surviving
Corporation  of  shares of  Thermo  Power  Common  Stock  that were  outstanding
immediately   prior  to  the  Effective  Time.  If  after  the  Effective  Time,
Certificates  are presented to the Surviving  Corporation  for any reason,  they
shall be canceled and exchanged as provided in this Article I.


                                       5
<PAGE>


     1.9 LOST,STOLEN OR DESTROYED  CERTIFICATES.  In the event any  Certificates
shall have been lost,  stolen or  destroyed,  the  Payment  Agent  shall pay the
aggregate   Exchange  Price  in  respect  of  such  lost,  stolen  or  destroyed
Certificates,  upon  the  making  of an  affidavit  of that  fact by the  holder
thereof;  provided,  however,  that,  as a  condition  precedent  to the payment
thereof, the owner of such lost, stolen or destroyed  Certificates shall deliver
a bond in such sum as Thermo Electron or the Payment Agent may reasonably direct
as indemnity  against any claim that may be made against Thermo  Electron or the
Payment Agent with respect to the Certificates alleged to have been lost, stolen
or destroyed, unless Thermo Electron waives such requirement in writing.

     1.10  DISSENTING  SHARES.  Notwithstanding  any  other  provision  of  this
Agreement, pursuant to Sections 85 through 98, inclusive, of the MBCL, shares of
Thermo  Power  Common  Stock  that  are  outstanding  immediately  prior  to the
Effective  Time and  which are held by  stockholders  who  shall  have  demanded
properly in writing appraisal of such shares in accordance with the MBCL and who
shall not have withdrawn  such demand or otherwise  forfeited  appraisal  rights
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Exchange  Price.  Such  stockholders  shall,  as of the
Effective  Time,  cease to retain any rights  with  respect to the Thermo  Power
Common Stock,  except as provided in Sections 85 through 98,  inclusive,  of the
MBCL including the right to receive payment of the appraised value of the shares
held by them,  provided that all Dissenting  Shares held by stockholders (i) who
shall have failed to perfect or lost their  rights to  appraisal of such shares,
or (ii) who  have  effectively  withdrawn  their  demand  for  appraisal,  shall
thereupon  be, or be  deemed to have  been,  converted  into and to have  become
exchangeable,  as of the Effective  Time, for the right to receive,  without any
interest thereon, the Exchange Price, upon surrender,  in the manner provided in
Section 1.7, of the Certificates that formerly evidenced such shares without the
prior consent of Thermo Electron.

     1.11 TAKING OF NECESSARY ACTION;  FURTHER ACTION. If, at any time after the
Effective  Time,  any further  action is necessary or desirable to carry out the
purposes  of this  Agreement  and to vest the  Surviving  Corporation  with full
right,  title and  possession to all property,  rights,  privileges,  powers and
franchises  of Thermo Power and Merger Sub, the officers and directors of Thermo
Power  and  Merger  Sub are  fully  authorized  in the name of their  respective
corporations  or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.


                                   ARTICLE II
                REPRESENTATIONS AND WARRANTIES OF THERMO POWER

      Thermo Power  represents and warrants to Thermo Electron and Merger Sub as
follows:

     2.1 ORGANIZATION OF THERMO POWER. Thermo Power and each of its subsidiaries
is a corporation or other legal entity duly organized,  validly  existing and in
good  standing  under  the  laws of the  jurisdiction  of its  incorporation  or
organization,  has the corporate or similar power to own,  lease and operate its
property and to carry on its business as now being  conducted and as proposed by


                                       6
<PAGE>


Thermo Power to be conducted,  and is duly  qualified to do business and in good
standing as a foreign  corporation or other legal entity in each jurisdiction in
which the failure to be so  qualified  would have a material  adverse  effect on
Thermo Power.

      2.2  THERMO POWER CAPITAL STRUCTURE.

      The authorized capital stock of Thermo Power consists of 30,000,000 shares
of Common  Stock,  par value  $0.10 per share,  of which  there were  11,870,520
shares issued and outstanding as of April 3, 1999 and 622,851 shares in treasury
as of April 3, 1999.  All  outstanding  shares of Thermo  Power Common Stock are
duly  authorized,  validly  issued,  fully paid and  non-assessable  and are not
subject to preemptive rights created by statute, the Articles of Organization or
by-laws of Thermo Power or any  agreement or document to which Thermo Power is a
party or by which it is bound.  As of April 27, 1999,  an aggregate of 1,906,626
shares of Thermo  Power  Common  Stock,  net of  exercises,  were  reserved  for
issuance to employees,  consultants and non-employee  directors  pursuant to the
Thermo Power Stock Option  Plans,  under which  options are  outstanding  for an
aggregate of 1,246,637  shares.  All shares of Thermo Power Common Stock subject
to issuance  pursuant to the Thermo Power Stock Option  Plans,  upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable,   would  be  duly   authorized,   validly   issued,   fully  paid  and
nonassessable.

      2.3  AUTHORITY.

            (a) Thermo Power has all requisite  corporate power and authority to
enter  into this  Agreement  and to  consummate  the  transactions  contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action on the part of Thermo  Power,  subject only to the approval of
this Agreement by Thermo Power's stockholders and the submission of the Articles
of Merger pursuant to the MBCL. Under the MBCL, Thermo Power's  stockholders may
approve this  Agreement by vote of two-thirds of the holders of the  outstanding
shares of Thermo Power Common Stock.  This  Agreement has been duly executed and
delivered by Thermo  Power,  and assuming the due  authorization,  execution and
delivery by Thermo  Electron and Merger Sub,  constitutes  the valid and binding
obligation  of Thermo  Power,  enforceable  in  accordance  with its terms.  The
execution  and  delivery  of this  Agreement  by  Thermo  Power do not,  and the
performance  of this  Agreement by Thermo  Power will not, (i) conflict  with or
violate the Articles of Organization or by-laws of Thermo Power, (ii) subject to
obtaining  the  approval by Thermo  Power's  stockholders  of this  Agreement as
contemplated  in Section 5.2 and compliance with the  requirements  set forth in
Section  2.3(b),  conflict  with or violate any law,  rule,  regulation,  order,
judgment  or  decree   applicable  to  Thermo  Power  or  any  of  its  material
subsidiaries or by which its or their  respective  properties is bound, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both  would  become a default)  under,  or impair the rights of
Thermo Power or alter the rights or  obligations  of any third party  under,  or
give  to  others  any  rights  of   termination,   amendment,   acceleration  or
cancellation  of, or result in the creation of a lien or  encumbrance  on any of
the  properties  or assets of Thermo Power or any of its  material  subsidiaries
pursuant to, any note, bond, mortgage,  indenture,  contract,  agreement, lease,
license,  permit,  franchise or other  instrument  or obligation to which Thermo
Power or any of its material subsidiaries is a party or by which Thermo Power or


                                       7
<PAGE>


any of its material  subsidiaries or its or any of their properties are bound or
affected,  except,  with  respect  to  clauses  (ii)  and  (iii),  for any  such
conflicts,  violations,  defaults  or other  occurrences  that  would not have a
material adverse effect on Thermo Power and its subsidiaries, taken as a whole.

            (b)  No   consent,   approval,   order  or   authorization   of,  or
registration,  declaration or filing with, any court,  administrative  agency or
commission  or  other   governmental   or   regulatory   body  or  authority  or
instrumentality ("Governmental Entity") is required by or with respect to Thermo
Power in connection  with the  execution  and delivery of this  Agreement or the
consummation of the transactions contemplated,  except for (i) the submission of
the  Articles  of Merger  with the  Secretary  of State of the  Commonwealth  of
Massachusetts,  (ii) the filing of the Proxy  Statement  (as  defined in Section
5.1) with the U.S. Securities and Exchange Commission ("SEC") in accordance with
the Securities  Exchange Act of 1934, as amended (the "Exchange Act"), (iii) the
filing  of the  Schedule  13E-3  (as  defined  in  Section  5.1) with the SEC in
accordance  with the Exchange Act, and (iv) such  consents,  approvals,  orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws.
      
     2.4 BOARD  APPROVAL.  The  Special  Committee  has,  as of the date of this
Agreement,  recommended approval of the Merger to the full Board of Directors of
Thermo Power. The Board of Directors of Thermo Power has, as of the date of this
Agreement,  determined  unanimously  (i) that the  Merger is fair to, and in the
best  interests  of,  Thermo Power and its  stockholders  including the Minority
Stockholders,  (ii) that the Merger is consistent with and in furtherance of the
business  interests of Thermo Power and (iii) to recommend that the stockholders
of Thermo Power approve this Agreement.

     2.5 FAIRNESS  OPINION.  The Special  Committee has received an opinion from
Invemed  Associates  LLC,  dated  May  5,  1999,  that,  as of such  date,  the
consideration  to be received by Thermo  Power's  Minority  Stockholders  in the
Merger is fair from a financial point of view to such Thermo Power  stockholders
(the "Fairness Opinion").


                                   ARTICLE III
            REPRESENTATIONS AND WARRANTIES OF THERMO ELECTRON AND
                                   MERGER SUB


      Thermo  Electron and Merger Sub  represent  and warrant to Thermo Power as
follows:

     3.1 ORGANIZATION.  Thermo Electron is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of  Massachusetts,  each has the corporate power to
own,  lease and operate its  property  and to carry on its business as now being
conducted and as proposed to be conducted,  and is duly qualified to do business
and in good standing as a foreign  corporation in each jurisdiction in which the
failure  to be so  qualified  would  have a  material  adverse  effect on Thermo
Electron or Merger Sub.


                                       8
<PAGE>



     3.2  MERGER  SUB  CAPITALIZATION.  As of the  date of this  Agreement,  the
authorized capital stock of Merger Sub consists of 1,000 shares of common stock,
par value $.01 per share, of which 100 shares are issued and outstanding. All of
the issued and  outstanding  shares of capital  stock of Merger Sub are  validly
issued,  fully paid and  nonassessable  and are not subject to preemptive rights
created by statute, the Articles of Organization or by-laws of Merger Sub or any
agreement or document to which Merger Sub is a party or by which it is bound.

      3.3  AUTHORITY.

            (a)  Each of  Thermo  Electron  and  Merger  Sub  has all  requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions  contemplated  hereby. The execution and delivery of this Agreement
and the  consummation  of the  transactions  contemplated  hereby have been duly
authorized by all necessary  corporate action on the part of Thermo Electron and
Merger Sub, subject only to the submission of the Articles of Merger pursuant to
the MBCL.  This Agreement has been duly executed and delivered by each of Thermo
Electron  and Merger Sub and,  assuming  the due  authorization,  execution  and
delivery of this Agreement by Thermo Power, this Agreement constitutes the valid
and binding obligation of each of Thermo Electron and Merger Sub, enforceable in
accordance with its terms.  The execution and delivery of this Agreement by each
of Thermo  Electron and Merger Sub do not, and the performance of this Agreement
by each of Thermo Electron and Merger Sub will not, (i) conflict with or violate
the Certificate of Incorporation or Bylaws of Thermo Electron or the Articles of
Organization  or by-laws of Merger  Sub,  (ii)  subject to  compliance  with the
requirements  set forth in Section  3.2(b)  below,  conflict with or violate any
law, rule,  regulation,  order, judgment or decree applicable to Thermo Electron
or any of its material subsidiaries  (including Merger Sub, but excluding Thermo
Power  and  its  subsidiaries)  or by  which  its  or any  of  their  respective
properties is bound or affected,  or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would  become a
default)  under,  or impair  Thermo  Electron's  rights  or alter the  rights or
obligations  of any  third  party  under,  or  give  to  others  any  rights  of
termination,  amendment,  acceleration  or  cancellation  of,  or  result in the
creation of a lien or  encumbrance  on any of the properties or assets of Thermo
Electron  or  any  of its  material  subsidiaries  (including  Merger  Sub,  but
excluding  Thermo  Power and its  subsidiaries)  pursuant  to,  any note,  bond,
mortgage,  indenture,  contract, agreement, lease, license, permit, franchise or
other  instrument or obligation to which Thermo  Electron or any of its material
subsidiaries   (including  Merger  Sub,  but  excluding  Thermo  Power  and  its
subsidiaries)  is a party or by which  Thermo  Electron  or any of its  material
subsidiaries   (including  Merger  Sub,  but  excluding  Thermo  Power  and  its
subsidiaries)  or its or  any  of  their  respective  properties  are  bound  or
affected,  except,  with  respect  to  clauses  (ii)  and  (iii),  for any  such
conflicts,  violations,  defaults  or other  occurrences  that  would not have a
material adverse effect on Thermo Electron or Merger Sub.

            (b)  No   consent,   approval,   order  or   authorization   of,  or
registration, declaration or filing with, any Governmental Entity is required by
or with  respect  to  Thermo  Electron  or  Merger  Sub in  connection  with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated  hereby,  except for (i) the  submission  of the Articles of Merger
with the  Secretary  of State of the  Commonwealth  of  Massachusetts,  (ii) the
filing  of the  Schedule  13E-3  (as  defined  in  Section  5.1) with the SEC in
accordance  with the Exchange Act, and (iii) such consents,  approvals,  orders,


                                       9
<PAGE>


authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws.

     3.4 FINANCE  RESOURCES.  Thermo  Electron  has the  financial  resources to
consummate  the  transactions  contemplated  by  this  Agreement  and to pay the
consideration in the Merger provided for in Section 1.6(a).



                                   ARTICLE IV
                       CONDUCT PRIOR TO THE EFFECTIVE TIME

     4.1 CONDUCT OF BUSINESS BY THERMO POWER. During the period from the date of
this  Agreement  and  continuing  until the earlier of the  termination  of this
Agreement  pursuant to its terms or the  Effective  Time,  Thermo  Power  shall,
except as  otherwise  contemplated  by this  Agreement or consented to by Thermo
Electron,  carry on its business in the usual,  regular and ordinary course,  in
substantially the same manner as heretofore  conducted,  pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent  with past  practices  and  policies to  preserve  intact its present
business  organization,  keep available the services of its present officers and
employees   and   preserve  its   relationships   with   customers,   suppliers,
distributors,  licensors,  licensees,  and  others  with  which it has  business
dealings.

     4.2 CERTAIN ACTIONS BY THERMO POWER. In addition,  notwithstanding  Section
4.1 above, without the prior consent of Thermo Electron,  Thermo Power shall not
do any of the following:

            (a) Waive any stock repurchase rights,  accelerate,  amend or change
the period of  exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;

            (b)  Enter  into  any  material  partnership   arrangements,   joint
development agreements or strategic alliances;

            (c)  Grant  any  severance  or  termination  pay to any  officer  or
employee except payments in amounts  consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof, or adopt any new severance plan;

            (d) Declare or pay any dividends on or make any other  distributions
(whether in cash,  stock or property) in respect of any capital  stock or split,
combine or  reclassify  any capital  stock or issue or authorize the issuance of
any  other  securities  in  respect  of, in lieu of or in  substitution  for any
capital stock;

            (e)  Issue,  deliver,  sell,  authorize  or  propose  the  issuance,
delivery or sale of, any shares of capital stock or any  securities  convertible
into shares of capital stock, or subscriptions,  rights,  warrants or options to


                                       10
<PAGE>


acquire any shares of capital stock or any securities convertible into shares of
capital  stock,  or enter into other  agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than the
issuance of shares of Thermo  Power  Common  Stock  pursuant to the  exercise of
stock options therefor;

            (f) Cause,  permit or propose  any  amendments  to its  Articles  of
Organization or by-laws;

            (g) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material  portion of the assets of, or
by any other  manner,  any business or any  corporation,  partnership  interest,
association or other business  organization  or division  thereof,  or otherwise
acquire  or agree to  acquire  any  assets  or enter  into any  joint  ventures,
strategic partnerships or alliances;

            (h) Sell,  lease,  license,  encumber  or  otherwise  dispose of any
properties or assets that are material, individually or in the aggregate, to the
business of Thermo Power;

            (i) Incur any  indebtedness  for borrowed money (other than ordinary
course trade payables or pursuant to existing credit  facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or guarantee any debt securities of others;

            (j) Adopt or amend any employee  benefit or stock purchase or option
plan, or enter into any  employment  contract,  pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its  officers or  employees,  except  increases  in amounts  consistent  with
policies and past practices;

            (k) Pay,  discharge or satisfy any claim,  liability  or  obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business;

            (l) Make any grant of exclusive rights to any third party; or

            (m)  Agree  in  writing  or  otherwise  to take  any of the  actions
described in this Section 4.2.


                                    ARTICLE V
                              ADDITIONAL AGREEMENTS


      5.1   SCHEDULE 13E-3; PROXY STATEMENT; OTHER FILINGS.

            (a) Thermo  Power  agrees  that the  information  supplied by Thermo
Power for inclusion or incorporation by reference in the Rule 13e-3  Transaction
Statement  on  Schedule  13E-3  (such  Schedule  as amended or  supplemented  is
referred to herein as the "Schedule 13E-3") or the proxy statement to be sent to


                                       11
<PAGE>


the  stockholders  of Thermo  Power in  connection  with the  meeting  of Thermo
Power's  stockholders to consider  approval of this Agreement (the "Thermo Power
Stockholders'  Meeting")  (such proxy  statement as amended or  supplemented  is
referred  to herein as the "Proxy  Statement")  shall not, on the date the Proxy
Statement is first mailed to Thermo Power's  stockholders and at the time of the
Thermo Power Stockholders'  Meeting,  contain any untrue statement of a material
fact or omit to state  any  material  fact  required  to be  stated  therein  or
necessary in order to make the statements therein, in light of the circumstances
under  which  they are  made,  not  false or  misleading;  or omit to state  any
material  fact  necessary  to  correct  any  statement  in any  earlier  written
communication  with respect to the  solicitation of proxies for the Thermo Power
Stockholders'   Meeting  or  the  Schedule  13E-3  which  has  become  false  or
misleading.

            (b) Thermo Electron  agrees that the information  supplied by Thermo
Electron  and Merger Sub for  inclusion  or  incorporation  by  reference in the
Schedule  13E-3  and the  Proxy  Statement  shall  not,  on the date  the  Proxy
Statement is first mailed to Thermo Power's stockholders, and at the time of the
Thermo Power Stockholders'  Meeting,  contain any untrue statement of a material
fact or omit to state  any  material  fact  required  to be  stated  therein  or
necessary in order to make the statements therein, in light of the circumstances
under  which  they are  made,  not  false or  misleading;  or omit to state  any
material  fact  necessary  to  correct  any  statement  in any  earlier  written
communication  with respect to the  solicitation of proxies for the Thermo Power
Stockholders'   Meeting  or  the  Schedule  13E-3  which  has  become  false  or
misleading.

            (c)  As  promptly  as  practicable   after  the  execution  of  this
Agreement,  Thermo  Electron and Thermo Power jointly will prepare and file with
the SEC the Schedule 13E-3 and the Proxy  Statement.  Thermo Electron and Thermo
Power  will cause the  Schedule  13E-3 and the Proxy  Statement  to be mailed to
stockholders of Thermo Power at the earliest  practicable  time. Each party will
notify the other  promptly  upon the receipt of any comments from the SEC or its
staff  and of any  request  by the  SEC or its  staff  or any  other  government
officials  for  amendments  or  supplements  to the Schedule  13E-3 or the Proxy
Statement or any other filing or for additional  information and will supply the
other party with copies of all  correspondence  between such party or any of its
representatives,  on the one  hand,  and the  SEC,  or its  staff  or any  other
government  officials,  on the other hand, with respect to the Proxy  Statement,
the Schedule 13E-3 or the Merger.  Whenever any event occurs that is required to
be set forth in an amendment or  supplement  to the Schedule  13E-3 or the Proxy
Statement,  the  relevant  party will  promptly  inform the other  party of such
occurrence  and  cooperate  in  filing  with the SEC or its  staff or any  other
government  officials,  and/or  mailing to  stockholders  of Thermo Power,  such
amendment or supplement.

            (d) The Proxy Statement will include the recommendation of the Board
of Directors of Thermo Power in favor of approval of this Agreement (except that
the Board of  Directors  of Thermo  Power may  withdraw,  modify or refrain from
making such recommendation to the extent that the Board determines in good faith
after  consultation with outside legal counsel that the Board's fiduciary duties
under applicable law require it to do so).

     5.2 MEETING OF THERMO POWER  STOCKHOLDERS.  Promptly after the date hereof,
Thermo Power will take all action  necessary in accordance with the MBCL and its
Articles of Organization  and by-laws to convene the Thermo Power  Stockholders'
Meeting to be held as  promptly  as  practicable  for the purpose of voting upon


                                       12
<PAGE>


this Agreement.  Unless otherwise required by the fiduciary duties of the Thermo
Power Board of Directors, Thermo Power will use its best efforts to solicit from
its  stockholders  proxies in favor of the approval of this Agreement,  and will
take all other  action  necessary  or advisable to secure the vote or consent of
its stockholders required by the MBCL to obtain such approvals.  Thermo Electron
shall vote,  or cause to be voted,  all of the Thermo  Power  Common  Stock then
owned  by it and  any of its  subsidiaries  in  favor  of the  approval  of this
Agreement.

     5.3 ACCESS TO INFORMATION. Thermo Power will afford Thermo Electron and its
accountants,  counsel and other representatives  reasonable access during normal
business hours to the properties,  books,  records and personnel of Thermo Power
during  the  period  prior  to the  Effective  Time to  obtain  all  information
concerning the business,  including the status of product  development  efforts,
properties,  results of  operations  and  personnel of Thermo  Power,  as Thermo
Electron may reasonably  request.  Thermo Electron agrees that it will, and will
cause its representatives and agents to, keep all such information  confidential
and will not,  and will  cause its  representatives  or agents  not to,  use any
information  obtained  pursuant to this Section 5.3 for any purpose unrelated to
the   consummation   of  the   transactions   contemplated  by  this  Agreement.
Notwithstanding  the  foregoing,  Thermo  Electron shall not be required to keep
confidential any information (i) which is or becomes generally  available to the
public,  other than by wrongful  disclosure by Thermo  Electron or Merger Sub in
violation of this  Agreement,  (ii) which was available to Thermo  Electron on a
nonconfidential  basis prior to  disclosure to Thermo  Electron,  or (iii) which
becomes  available to Thermo Electron on a  nonconfidential  basis from a source
other than Thermo Power.

     5.4 PUBLIC  DISCLOSURE.  Thermo Electron and Thermo Power will consult with
each other  before  issuing  any press  release or  otherwise  making any public
statement  with respect to the Merger or this  Agreement  and will not issue any
such press release or make any such public statement prior to such consultation,
except  as may be  required  by law or any  listing  agreement  with a  national
securities exchange.

     5.5 LEGAL  REQUIREMENTS.  Each of Thermo  Electron,  Merger  Sub and Thermo
Power will take all reasonable actions necessary or desirable to comply promptly
with all legal  requirements  that may be  imposed  on them with  respect to the
consummation  of the  transactions  contemplated  by this  Agreement  (including
furnishing all  information  required in connection with approvals of or filings
with any Governmental Entity, and including using its reasonable best efforts to
defend any  litigation  prompted  hereby) and will promptly  cooperate  with and
furnish  information to any party hereto  necessary in connection  with any such
requirements  imposed  upon  any of them or  their  respective  subsidiaries  in
connection  with  the  consummation  of the  transactions  contemplated  by this
Agreement.

     5.6  NOTIFICATION OF CERTAIN  MATTERS.  Thermo Electron and Merger Sub will
give prompt notice to Thermo Power,  and Thermo Power will give prompt notice to
Thermo  Electron,  of the occurrence,  or failure to occur, of any event,  which
occurrence  or  failure  to occur  would be  reasonably  likely to cause (a) any
representation  or  warranty  contained  in  this  Agreement  to  be  untrue  or
inaccurate in any material  respect at any time from the date of this  Agreement


                                       13
<PAGE>


to the Effective Time, or (b) any material failure of Thermo Electron and Merger
Sub or Thermo Power, as the case may be, or of any officer,  director,  employee
or agent thereof, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement. Notwithstanding the
above,  the  delivery of any notice  pursuant to this  section will not limit or
otherwise  affect the remedies  available  hereunder to the party receiving such
notice or the conditions to such party's obligation to consummate the Merger.

     5.7 BEST EFFORTS AND FURTHER  ASSURANCES.  Subject to the respective rights
and obligations of Thermo  Electron and Thermo Power under this Agreement,  each
of the  parties  to this  Agreement  will use its  reasonable  best  efforts  to
effectuate  the Merger  and the other  transactions  contemplated  hereby and to
fulfill  and  cause  to be  fulfilled  the  conditions  to  closing  under  this
Agreement,  it  being  understood  that  such  efforts  shall  not  include  any
obligation to settle any litigation  prompted hereby.  Each party hereto, at the
reasonable request of another party hereto,  will execute and deliver such other
instruments  and do and perform such other acts and things as may be  reasonably
necessary  or  desirable  for  effecting  completely  the  consummation  of  the
transactions contemplated hereby.

      5.8  STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS.

      (a) At the Effective Time, each  outstanding  option to purchase shares of
Thermo Power Common Stock (each a "Thermo Power Stock  Option") under the Thermo
Power Stock Option Plans, whether or not exercisable,  will be assumed by Thermo
Electron.  Each Thermo  Power Stock Option so assumed by Thermo  Electron  under
this  Agreement  will  continue  to have,  and be subject to, the same terms and
conditions  set  forth  in  the  applicable   Thermo  Power  Stock  Option  Plan
immediately  prior to the Effective Time  (including,  without  limitation,  any
repurchase  rights),  except  that (i) each Thermo  Power  Stock  Option will be
exercisable  (or will become  exercisable in accordance with its terms) for that
number of whole shares of Thermo  Electron  Common Stock equal to the product of
the  number of shares of Thermo  Power  Common  Stock  that were  issuable  upon
exercise of such Thermo Power Stock Option  immediately  prior to the  Effective
Time multiplied by a fraction (the "Exchange Ratio"),  the numerator of which is
the  Exchange  Price and the  denominator  of which is the closing  price of the
Thermo Electron Common Stock on the day immediately preceding the Effective Date
as reported by the New York Stock  Exchange,  rounded down to the nearest  whole
number  of  shares  of  Thermo  Electron  Common  Stock,  and (ii) the per share
exercise  price for the shares of Thermo  Electron  Common Stock  issuable  upon
exercise of such assumed Thermo Power Stock Option will be equal to the quotient
determined by dividing the exercise price per share of Thermo Power Common Stock
at which such Thermo Power Stock Option was exercisable immediately prior to the
Effective  Time by the  Exchange  Ratio,  rounded up to the nearest  whole cent.
After the  Effective  Time,  Thermo  Electron  will  issue to each  holder of an
outstanding  Thermo  Power  Stock  Option  a  notice  describing  the  foregoing
assumption of such Thermo Power Stock Option by Thermo Electron.

      (b) At the Effective Time, each  outstanding  option to purchase shares of
Thermo Power Common Stock (each a "Thermo  Power ESPP Stock  Option")  under the
Thermo  Power  Employees'  Stock  Purchase  Plan  ("Thermo  Power ESPP") will be
assumed by Thermo  Electron.  Each Thermo  Power ESPP Stock Option so assumed by
Thermo  Electron  will  continue to have,  and be subject to, the same terms and


                                       14
<PAGE>


conditions  as are set forth in the Thermo Power ESPP  immediately  prior to the
Effective  Time except  that (i) the assumed  option  shall be  exercisable  for
shares of Thermo  Electron  Common Stock;  (ii) the purchase  price per share of
Thermo Electron Common Stock shall be the lower of (A) eighty-five percent (85%)
of (x) the per-share Market Value of Thermo Power Common Stock on the Grant Date
divided by (y) the Exchange  Ratio,  with the resulting  price rounded up to the
nearest  whole cent,  and (B)  eighty-five  percent (85%) of the Market Value of
Thermo  Electron  Common  Stock as of the Exercise  Date;  and (iii) the $25,000
limit under  Section  9.2(i) of the Thermo Power ESPP shall be applied by taking
into account Thermo Electron's assumption of the Thermo Power ESPP Stock Options
in accordance  with Section  423(b)(8) of the Internal  Revenue Code of 1986, as
amended, and applicable  regulations.  For purposes of this subsection,  "Market
Value,"  "Grant Date," and "Exercise  Date" shall have the meaning given them in
the Thermo Power ESPP.

      (c) Thermo  Electron  will reserve  sufficient  shares of Thermo  Electron
Common Stock for issuance under this Section 5.8.

     5.9 THERMO ELECTRON FORM S-8. Thermo Electron agrees to file a registration
statement on Form S-8 or, if required,  an amendment to Thermo  Electron's  then
effective  registration  statement  on Form  S-8 (i) for the  shares  of  Thermo
Electron  Common Stock  issuable with respect to the assumed  Thermo Power Stock
Options  no later  than the  Closing  Date and  (ii) for the  shares  of  Thermo
Electron  Common Stock  issuable  with respect to the assumed  Thermo Power ESPP
Stock Options no later than October 31,1999,  and shall, in each case, keep such
registration  statement  effective  for so  long  as  any  such  options  remain
outstanding.

     5.10 INDEMNIFICATION;  INSURANCE.  Each of the current and former directors
and officers of Thermo Power is a third party  beneficiary of this Section 5.10,
and shall be entitled to the benefit  (and to enforce) all  covenants  set forth
herein.

            (a) From and for a period of six years  after  the  Effective  Time,
Thermo  Electron  will and will cause the Surviving  Corporation  to fulfill and
honor in all respects the  indemnification  obligations of Thermo Power pursuant
to the  provisions  of the  Articles of  Organization  and the by-laws of Thermo
Power as in effect  immediately  prior to the  Effective  Time.  The Articles of
Organization  and  by-laws  of  the  Surviving   Corporation  will  contain  the
provisions  with respect to  indemnification  and  elimination  of liability for
monetary damages set forth in the Articles of Organization and by-laws of Thermo
Power, which provisions will not be amended,  repealed or otherwise modified for
a period of six years from the Effective Time in any manner that would adversely
affect the rights  thereunder of individuals  who, at the Effective  Time,  were
directors or officers of Thermo Power,  unless such  modification is required by
law.

            (b) For a period  of six  years  after the  Effective  Time,  Thermo
Electron shall cause the Surviving  Corporation  to, either  directly or through
participation  in  Thermo  Electron's  umbrella  policy,  maintain  in  effect a
directors' and officers'  liability insurance policy covering those Thermo Power
directors  and  officers  currently  covered  by  Thermo  Electron's   liability
insurance  policy  with  coverage in amount and scope at least as  favorable  as
existing  coverage for such Thermo Power  directors and officers (which coverage


                                       15
<PAGE>


may be an  endorsement  extending  the period in which  claims may be made under
such existing policy);  provided,  however, that in no event shall the Surviving
Corporation  be required to expend to  maintain  or procure  insurance  coverage
pursuant  to this  Section  5.10,  directly or through  participation  in Thermo
Electron's  policy,  an amount per annum in excess of 175% of the current annual
premiums  allocable  and payable by Thermo Power (the  "Maximum  Premium")  with
respect to such insurance, or, if the cost of such insurance exceeds the Maximum
Premium,  the maximum amount of coverage that can be purchased or maintained for
the Maximum Premium.

     5.11 DEFERRED  COMPENSATION  PLAN. At the Effective  Time, the Thermo Power
directors'  deferred  compensation plan (the "Deferred  Compensation Plan") will
terminate,  and Thermo Power will distribute to each participant the sum in cash
equal to the balance of stock units credited to his or her deferred compensation
account under the Deferred Compensation Plan as of the Effective Time multiplied
by the Exchange Price.

     5.12  COMPETING  OFFERS.  In  the  event  that  Thermo  Power  receives  an
unsolicited  proposal  relating  to the  possible  acquisition  of Thermo  Power
(whether  by way of merger,  purchase  of capital  stock,  purchase of assets or
otherwise) or any material  portion of its capital stock or assets by any person
other than Thermo Electron,  which proposal is or may be, in the reasonable good
faith  judgment of the Special  Committee,  financially  more  favorable  to the
Minority  Stockholders of Thermo Power than the terms of the Merger (a "Superior
Proposal"),  nothing  contained  in this  Agreement  shall  prevent the Board of
Directors of Thermo  Power from  providing  information  to the party making the
Superior  Proposal,  communicating  the Superior Proposal to the stockholders of
Thermo Power,  making a  recommendation  in favor of the Superior  Proposal,  or
terminating this Agreement to accept the Superior Proposal,  if the Thermo Power
Board of Directors,  acting upon the  recommendation  of the Special  Committee,
determines in good faith, after consultation with outside legal counsel that the
Board's fiduciary duties under applicable law requires it to do so.


                                   ARTICLE VI
                            CONDITIONS TO THE MERGER

     6.1  CONDITIONS  TO  OBLIGATIONS  OF EACH PARTY TO EFFECT THE  MERGER.  The
respective  obligations  of each  party to this  Agreement  to effect the Merger
shall be subject to the  satisfaction  at or prior to the Effective  Time of the
following conditions:

            (a) Stockholder Approval. This Agreement shall have been approved by
the requisite vote under the MBCL by the stockholders of Thermo Power.

            (b) No Order.  No  Governmental  Entity shall have enacted,  issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary,  preliminary or permanent)
which is in effect  and which has the  effect of making  the  Merger  illegal or
otherwise prohibiting consummation of the Merger.

            (c)  Fairness  Opinion.   Invemed  Associates  LLC  shall  not  have
withdrawn or materially modified the Fairness Opinion.


                                       16
<PAGE>


     6.2 ADDITIONAL  CONDITIONS TO OBLIGATIONS OF THERMO POWER.  The obligations
of Thermo  Power to  consummate  and effect  the Merger  shall be subject to the
satisfaction  at or  prior  to the  Effective  Time  of  each  of the  following
conditions, any of which may be waived, in writing, exclusively by Thermo Power:

            (a)   Representations   and  Warranties.   The  representations  and
warranties of Thermo  Electron and Merger Sub contained in this Agreement  shall
be  true  and  correct  on and as of the  Effective  Time,  except  for  changes
contemplated  by  this  Agreement  and  except  for  those  representations  and
warranties that address matters only as of a particular date (which shall remain
true and correct as of such particular  date), with the same force and effect as
if made on and as of the Effective Time,  except,  in all such cases,  where the
failure to be so true and correct  would not have a material  adverse  effect on
Thermo  Electron;  and Thermo Power shall have  received a  certificate  to such
effect  signed  on behalf of Thermo  Electron  by the Chief  Executive  Officer,
President or Chief Operating Officer of Thermo Electron; and

            (b) Agreements and Covenants.  Thermo  Electron and Merger Sub shall
have  performed or complied in all material  respects  with all  agreements  and
covenants required by this Agreement to be performed or complied with by them on
or prior  to the  Effective  Time,  and  Thermo  Power  shall  have  received  a
certificate  to such  effect  signed on behalf of Thermo  Electron  by the Chief
Executive Officer, President or Chief Operating Officer of Thermo Electron.

     6.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THERMO ELECTRON AND MERGER
SUB. The  obligations of Thermo Electron and Merger Sub to consummate and effect
the Merger  shall be subject to the  satisfaction  at or prior to the  Effective
Time of  each of the  following  conditions,  any of  which  may be  waived,  in
writing, exclusively by Thermo Electron:

            (a)   Representations   and  Warranties.   The  representations  and
warranties of Thermo Power contained in this Agreement shall be true and correct
on and as of the  Effective  Time,  except  for  changes  contemplated  by  this
Agreement  and except for those  representations  and  warranties  that  address
matters only as of a particular  date (which shall remain true and correct as of
such  particular  date),  with the same force and effect as if made on and as of
the Effective Time,  except, in all such cases,  where the failure to be so true
and correct would not have a material adverse effect on Thermo Power; and Thermo
Electron and Merger Sub shall have received a certificate  to such effect signed
on behalf of Thermo  Power by the Chief  Executive  Officer,  President  or Vice
President of Thermo Power; and

            (b) Agreements  and Covenants.  Thermo Power shall have performed or
complied in all material respects with all agreements and covenants  required by
this  Agreement  to be  performed  or  complied  with by it on or  prior  to the
Effective  Time,  and Thermo  Electron shall have received a certificate to such
effect  signed  on  behalf  of  Thermo  Power by the  Chief  Executive  Officer,
President or Vice President of Thermo Power.


                                       17
<PAGE>


                                   ARTICLE VII
                        TERMINATION, AMENDMENT AND WAIVER

     7.1 TERMINATION.  This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of this Agreement
by the stockholders of Thermo Power:

            (a) by mutual  written  consent  duly  authorized  by the  Boards of
Directors  of Thermo  Electron  and Thermo  Power (upon  approval of the Special
Committee);

            (b) by either Thermo Power (upon approval of the Special  Committee)
or Thermo Electron if the Merger shall not have been  consummated by October 31,
1999; provided,  however,  that the right to terminate this Agreement under this
Section  7.1(b)  shall not be  available to any party whose action or failure to
act has been a  principal  cause of or  resulted in the failure of the Merger to
occur on or before  such date if such  action or  failure to act  constitutes  a
breach of this Agreement;

            (c) by either Thermo Power (upon approval of the Special  Committee)
or  Thermo  Electron  if  a  Government  Agency  shall  have  enacted,   issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary,  preliminary or permanent)
which is in effect  and which has the  effect of making  the  Merger  illegal or
otherwise prohibiting consummation of the Merger; provided, however, that in the
case of an  executive  order,  decree,  ruling or other  order,  it is final and
nonappealable;

            (d) by either Thermo Power (upon approval of the Special  Committee)
or Thermo Electron if the required  approval of the stockholders of Thermo Power
contemplated  by this  Agreement  shall not have been  obtained by reason of the
failure  to  obtain  the  required  vote  upon  a vote  taken  at a  meeting  of
stockholders duly convened therefor or at any adjournment thereof (provided that
the right to terminate  this  Agreement  under this Section  7.1(d) shall not be
available  to Thermo Power where the failure to obtain  stockholder  approval of
Thermo  Power  shall have been  caused by the action or failure to act of Thermo
Power in breach of this  Agreement  and the right to  terminate  this  Agreement
under this Section  7.1(d) shall not be available to Thermo  Electron  where the
failure to obtain the requisite vote by the  stockholders  of Thermo Power shall
have been caused by the failure of Thermo  Electron to vote its shares of Thermo
Power Common Stock in favor of this Agreement);

            (e) by Thermo  Power if the Thermo  Power Board of  Directors  (upon
approval of the Special  Committee)  determines in good faith after consultation
with outside legal counsel that the Board's  fiduciary  duties under  applicable
law  requires it to do so  (including  without  limitation  to accept a Superior
Proposal);

            (f) by Thermo Power (upon approval of the Special Committee), upon a
breach of any  representation,  warranty,  covenant or  agreement on the part of
Thermo Electron set forth in this  Agreement,  if (i) as a result of such breach
the  conditions  set forth in  Section  6.2(a) or  Section  6.2(b)  would not be
satisfied as of the time of such breach and (ii) such breach shall not have been


                                       18
<PAGE>


cured by Thermo  Electron  within ten business days following  receipt by Thermo
Electron of written notice of such breach from Thermo Power; or

            (g) by  Thermo  Electron,  upon  a  breach  of  any  representation,
warranty,  covenant or  agreement  on the part of Thermo Power set forth in this
Agreement, if (i) as a result of such breach the conditions set forth in Section
6.3(a) or Section  6.3(b)  would not be  satisfied as of the time of such breach
and (ii) such  breach  shall not have been  cured by  Thermo  Power  within  ten
business days following receipt by Thermo Power of written notice of such breach
from Thermo Electron.

     7.2 NOTICE OF TERMINATION;  EFFECT OF TERMINATION.  Any termination of this
Agreement  under  Section  7.1  above  will be  effective  immediately  upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the  termination  of this  Agreement as provided in Section 7.1,
this  Agreement  shall be of no further  force or effect,  except  that  nothing
herein shall  relieve any party from  liability  for any willful  breach of this
Agreement.

     7.3 FEES AND EXPENSES.  All fees and expenses  incurred in connection  with
this  Agreement and the  transactions  contemplated  hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.

     7.4 AMENDMENT.  Subject to applicable law, this Agreement may be amended by
the parties  hereto at any time by execution of an instrument in writing  signed
on behalf of each of the parties hereto;  provided,  however,  that Thermo Power
may not amend (or agree to any  Thermo  Electron  amendment  of) this  Agreement
without the approval of the Special Committee.

     7.5  EXTENSION;WAIVER.  At any time prior to the  Effective  Time any party
hereto  may,  to the  extent  legally  allowed,  (i)  extend  the  time  for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the  representations  and warranties made to such
party contained  herein or in any document  delivered  pursuant hereto and (iii)
waive  compliance  with any of the  agreements or conditions  for the benefit of
such party contained herein;  provided,  however, that Thermo Power may not take
any such actions without the approval of the Special Committee. Any agreement on
the part of a party  hereto to any such  extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.


                                  ARTICLE VIII
                               GENERAL PROVISIONS

     8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties  of Thermo  Power,  Thermo  Electron and Merger Sub contained in this
Agreement  shall terminate at the Effective Time, and only the covenants that by
their terms survive the Effective Time shall survive the Effective Time.

     8.2 NOTICES.  All notices and other  communications  hereunder  shall be in
writing  and shall be deemed  given if  delivered  personally  or by  commercial


                                       19
<PAGE>


delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following  addresses or telecopy  numbers (or at such other  address or telecopy
numbers for a party as shall be specified by like notice):

            (a)   if to Thermo Electron or Merger Sub, to:

            Thermo Electron Corporation
            81 Wyman Street
            Waltham, MA 02454
                  Attention:  President
                  Telephone: (781) 622-1000
                  Facsimile: (781) 622-1207

            with a copy to:

            Thermo Electron Corporation
            81 Wyman Street
            Waltham, MA 02454
                  Attention:  General Counsel
                  Telephone: (781) 622-1000
                  Facsimile: (781) 622-1283

            (b) if to Thermo Power, to:

            Thermo Power Corporation
            44 First Avenue
            Waltham, MA  02454
                  Attention: President
                  Telephone: (781) 622-1000
            Facsimile: (781) 622-1025

            with a required copy to the Special Committee:

            Patlex Corporation
            250 Cotorro Court, Suite 4
            Las Cruces, NM  88005
            Attention:  Col. Frank Borman, Chairman
            Telephone:  (505) 524-4050
            Facsimile:  (505) 523-8081

            and the Special Committee's counsel:


                                       20
<PAGE>


                  Morgan, Lewis & Bockius LLP
                  1701 Market Street
                  Philadelphia, PA  19103
                  Attention: Alan Singer
                  Telephone: (215) 963-5000
                  Facsimile: (215) 963-5299


     8.3   COUNTERPARTS.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  all of which shall be considered  one and the same  agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and  delivered  to the other  party,  it being  understood  that all
parties need not sign the same counterpart.

     8.4 ENTIRE AGREEMENT.  This Agreement and the documents and instruments and
other  agreements  among the parties  hereto as  contemplated  by or referred to
herein (a) constitute the entire agreement among the parties with respect to the
subject  matter hereof and supersede all prior  agreements  and  understandings,
both  written and oral,  among the parties  with  respect to the subject  matter
hereof;  and (b) are not  intended to confer upon any other person any rights or
remedies hereunder, except as set forth herein.

     8.5 SEVERABILITY.  In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal,  void or  unenforceable,  the  remainder of this  Agreement  will
continue in full force and effect and the application of such provision to other
persons or  circumstances  will be  interpreted  so as  reasonably to effect the
intent of the parties hereto.  The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve,  to the extent  possible,  the  economic,  business and other
purposes of such void or unenforceable provision.

     8.6  OTHER  REMEDIES.  Except as  otherwise  provided  herein,  any and all
remedies herein expressly  conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party,  and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.  The parties hereto agree that irreparable  damage
would occur in the event that any of the  provisions of this  Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is  accordingly  agreed that the parties  shall be entitled to an  injunction or
injunctions to prevent  breaches of this  Agreement and to enforce  specifically
the terms and  provisions  hereof in any court of the United States or any state
having  jurisdiction,  this being in addition to any other  remedy to which they
are entitled at law or in equity.

     8.7  GOVERNING  LAW. This  Agreement  shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof.

     8.8  ASSIGNMENT.  No party may assign  either this  Agreement or any of its
rights,  interests,  or obligations hereunder without the prior written approval
of the other parties.


                                       21
<PAGE>









      IN WITNESS  WHEREOF,  Thermo  Electron,  Merger Sub, and Thermo Power have
caused  this  Agreement  to be signed by  themselves  or their  duly  authorized
respective officers, all as of the date first written above.



(Seal)                              THERMO ELECTRON CORPORATION


                                    By: /s/ Theo Melas-Kyriazi
                                        -----------------------
                                        Name: Theo Melas-Kyriazi
                                        Title: Vice President


                                    By: /s/ Kenneth J.Apicerno
                                        ------------------------
                                        Name: Kenneth J.Apicerno
                                        Title: Treasurer


(Seal)                              THERMO POWER CORPORATION


                                    By: /s/ J. Timothy Corcoran
                                        -----------------------
                                        Name:J. Timothy Corcoran
                                        Title: President


                                    By: /s/ Kenneth J.Apicerno
                                        ----------------------
                                        Name: Kenneth J.Apicerno
                                        Title: Treasurer


(Seal)                              TP ACQUISITION CORPORATION



                                    By: /s/ Brian D. Holt
                                        -------------------
                                        Name: Brian D.Holt
                                        Title: President


                                    By: /s/ Kenneth J. Apicerno
                                        ------------------------
                                        Name: Kenneth J. Apicerno
                                        Title: Treasurer