SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                   ___________________________________________
                                    FORM 10-K
    (mark one)

    [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the fiscal year ended December 28, 1996

    [   ]Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

                         Commission file number 1-11406 

                              THERMO FIBERTEK INC.
             (Exact name of Registrant as specified in its charter)

    Delaware                                                       52-1762325
    (State or other jurisdiction of                         (I.R.S. Employer 
    incorporation or organization)                        Identification No.)

    81 Wyman Street
    Waltham, Massachusetts                                         02254-9046
    (Address of principal executive offices)                       (Zip Code)
       Registrant's telephone number, including area code: (617) 622-1000

           Securities registered pursuant to Section 12(b) of the Act:

        Title of each class        Name of each exchange on which registered
    ----------------------------   -----------------------------------------
    Common Stock, $.01 par value             American Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:
                                      None

    Indicate by check mark whether the Registrant (1) has filed all reports
    required to be filed by Section 13 or 15(d) of the Securities Exchange
    Act of 1934 during the preceding 12 months, and (2) has been subject to
    the filing requirements for at least the past 90 days. Yes [ X ] No [  ]

    Indicate by check mark if disclosure of delinquent filers pursuant to
    Item 405 of Regulation S-K is not contained herein, and will not be
    contained to the best of the Registrant's knowledge, in definitive proxy
    or information statements incorporated by reference into Part III of this
    Form 10-K or any amendment to this Form 10-K. [  ]

    The aggregate market value of the voting stock held by nonaffiliates of
    the Registrant as of January 24, 1997, was approximately $100,854,000.

    As of January 24, 1996, the Registrant had 61,138,880 shares of Common
    Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Registrant's Annual Report to Shareholders for the year
    ended December 28, 1996, are incorporated by reference into Parts I and
    II.

    Portions of the Registrant's definitive Proxy Statement for the Annual
    Meeting of Shareholders to be held on June 2, 1997, are incorporated by
    reference into Part III.
PAGE

                                     PART I

    Item 1.  Business

    (a) General Development of Business

        Thermo Fibertek Inc. (the Company or the Registrant) designs and
    manufactures processing machinery and accessories for the paper and
    paper-recycling industries. The Company's principal products include
    custom-engineered systems and equipment for the preparation of wastepaper
    for conversion into recycled paper, accessory equipment and related
    consumables important to the efficient operation of papermaking machines,
    and water-management systems essential for draining, purifying, and
    recycling process water. 

        The Company's predecessors have been in operation for more than 80
    years, and the Company has a large, stable customer base that includes
    most papermakers worldwide. The Company seeks to expand its business
    through the introduction of new products and technologies to these
    customers. The Company currently manufactures its products in several
    countries in Europe and North America, and licenses certain of its
    products for manufacture in South America and the Pacific Rim.

        In February 1996, Thermo Fibergen Inc. (Thermo Fibergen) was
    incorporated as a wholly owned subsidiary of the Company. In connection
    with the capitalization of Thermo Fibergen, the Company transferred to
    Thermo Fibergen a license to use certain technology and its business
    relating to the development of equipment and systems to recover materials
    from papermaking sludge generated by plants that produce virgin and
    recycled pulp and paper, together with $12,500,000 in cash, in exchange
    for 10,000,000 shares of Thermo Fibergen's common stock.

        In July 1996, GranTek Inc. (GranTek) a wholly owned subsidiary of
    Thermo Fibergen, acquired substantially all of the assets, subject to
    certain liabilities, of Granulation Technology, Inc. (Granulation
    Technology) and Biodac, a division of Edward Lowe Industries, Inc., for
    approximately $12.1 million in cash. GranTek employs patented technology
    to produce absorbing granules from papermaking sludge. These granules,
    marketed under the trade name BIODAC(R), are currently used as a carrier
    to deliver agricultural chemicals for professional turf, home lawn and
    garden, and mosquito control applications.

        In September 1996, Thermo Fibergen sold 4,715,000 units, each unit
    consisting of one share of Thermo Fibergen common stock and one
    redemption right, in an initial public offering at $12.75 per unit for
    net proceeds of approximately $55.8 million. The common stock and
    redemption rights began trading separately on December 13, 1996. Holders
    of a redemption right have the option to require Thermo Fibergen to
    redeem in September 2000 and 2001, one share of Thermo Fibergen common
    stock at $12.75 per share. The redemption rights carry terms that
    generally provide for their expiration if the closing price of Thermo
    Fibergen's common stock exceeds $19 1/8 for 20 of any 30 consecutive
    trading days prior to September 2001. The redemption rights are
    guaranteed, on a subordinated basis, by Thermo Electron. The Company has
    agreed to reimburse Thermo Electron in the event Thermo Electron is

                                        2PAGE

    required to make a payment under the guarantee. Following the initial
    public offering, the Company owned 68% of Thermo Fibergen's outstanding
    common stock.

        On February 26, 1997, the Company entered into a letter of intent to
    acquire the assets, subject to certain liabilities, of the
    stock-preparation business of The Black Clawson Company (Black Clawson)
    for approximately $110 million in cash. Black Clawson is a leading
    supplier of recycling equipment used in processing fiber for the
    manufacture of "brown paper" such as that used for corrugated boxes. The
    transaction is subject to several conditions, including completion by the
    Company of its due diligence investigation; negotiation of a definitive
    agreement; regulatory approvals, including antitrust clearances; and
    approval by the Board of Directors of the Company, Thermo Electron, and
    Black Clawson. If this transaction is consummated, the Company intends to
    borrow a portion of the purchase price from Thermo Electron.

        At December 28, 1996, Thermo Electron owned 51,520,895 shares, or
    84%, of the Company's outstanding common stock. Thermo Electron is a
    world leader in environmental monitoring and analysis instruments,
    biomedical products such as heart-assist devices and mammography systems,
    papermaking and paper-recycling equipment, biomass electric power
    generation, and other specialized products and technologies. Thermo
    Electron also provides a range of services related to environmental
    quality.

        Thermo Electron intends, for the foreseeable future, to maintain at
    least 80% ownership of the Company so that it may continue to file
    consolidated U.S. federal income tax returns with the Company. This may
    require the purchase by Thermo Electron of additional shares of the
    Company's common stock from time to time as the number of outstanding
    shares of the Company increases. These and any other purchases may be
    made either in the open market, directly from the Company, or pursuant to
    conversion of the subordinated convertible note issued by the Company to
    Thermo Electron. During 1996*, Thermo Electron purchased 2,383,350 shares
    of the Company's common stock in the open market at a total cost of
    $29,082,000. See Notes 5 and 8 to Consolidated Financial Statements in
    the Company's 1996 Annual Report to Shareholders for a description of
    outstanding stock options and the convertible note issued by the Company.

    Forward-looking Statements

        Forward-looking statements, within the meaning of Section 21E of the
    Securities Exchange Act of 1934, are made throughout this Annual Report
    on Form 10-K. For this purpose, any statements contained herein that are
    not statements of historical fact may be deemed to be forward-looking
    statements. Without limiting the foregoing, the words "believes,"
    "anticipates," "plans," "expects," "seeks," "estimates," and similar
    expressions are intended to identify forward-looking statements. There
    are a number of important factors that could cause the results of the
    Company to differ materially from those indicated by such forward-looking
    statements, including those detailed under the caption "Forward-looking

    * References to 1996, 1995, and 1994 herein are for the fiscal years
      ended December 28, 1996, December 30, 1995, and December 31, 1994,
      respectively.
                                        3PAGE

    Statements" in the Registrant's 1996 Annual Report to Shareholders
    incorporated herein by reference.

    (b)  Financial Information About Industry Segments

        The Company is engaged in one business segment: the design and
    manufacture of equipment, accessory products, and water-management
    systems for the paper and paper-recycling industries.

    (c)  Description of Business

        (i)    Principal Products and Services

    Recycling

        The Company develops, designs, and manufactures custom-engineered
    systems that remove debris, impurities, and ink from wastepaper, and
    processes it into a fiber mix used to produce either white or brown
    grades of recycled paper. The Company offers more than 20 products
    related to all aspects of the recycling process. Some of the systems
    include:

        Pulping and Trash Removal Systems, including specialized high- and
    low-consistency pulpers that blend wastepaper with water and certain
    chemicals to form pulp without contaminant breakdown, thus increasing the
    efficiency of debris removal; and poires (scavengers) that remove large
    debris.

        Cleaning and Screening Systems, including high-density screens and
    cleaners to remove metals and sand from the pulp mixture, fine screens to
    filter microscopic particles of glue and plastic from the pulp mixture,
    and the patented Gyroclean(R) system to remove "stickies" and the
    lightest plastics from the pulp.

        De-inking Systems, including the newly patented MacCell that uses the
    latest generation of Autoclean injectors to produce small air bubbles in
    the bottom of the pulp slurry. The ink bonds to the air bubbles and rises
    to the surface, where it is removed through a unique propellant system.
    The efficiency of this unit and the reduced floor space required for
    equivalent ink removal make the MacCell one of the Company's most
    important products within a de-inking system.

        Reject-handling and Water-treatment Systems, including gravity type
    strainers and in-line filtration (developed by the Company's AES
    Engineered Systems (AES) division), as well as compactors and sand
    separators designed to recapture "good" fiber rejected with debris in the
    primary process line.

        The Company's GranTek subsidiary employs patented technology to
    produce absorbing granules from papermaking sludge. These granules,
    marketed under the trade name BIODAC, are currently used as a carrier to
    deliver agricultural chemicals for professional turf, home lawn and
    garden, and mosquito control applications. 

                                        4PAGE

        Revenues from the Company's paper-recycling business were $56.2
    million, $77.0 million, and $50.7 million in 1996, 1995, and 1994,
    respectively.

    Accessories

        The Company designs, develops, and manufactures a wide range of
    accessories that continuously clean the rolls of a papermaking machine,
    remove the sheet (web) from the roll, automatically cut the web during
    sheet breaks, and remove curl from the sheet. These functions are
    critical for paper manufacturers because it helps them avoid potential
    catastrophic damage to the papermaking equipment while reducing expensive
    machine downtime and improving paper quality. Accessories include:

        Doctors and related equipment, that shed the sheet from the roll
    during sheet breaks and start-ups and keep rolls clean by removing stock
    accumulations, water rings, fuzz, pitch, and filler buildup.

        Profiling Systems, that help ensure a uniform gloss on the web and
    control moisture and curl within the sheet.

        Revenues from the Company's accessories business were $82.2 million,
    $73.9 million, and $60.4 million in 1996, 1995, and 1994, respectively.

    Water-management

        The Company designs, develops, and manufactures equipment used to
    drain water from the pulp's slurry, form the sheet web, and reuse the
    process water. These systems include:

        Formation Tables, consisting of free-draining elements and vacuum
    augmented elements to control the amount of water removed from the pulp
    slurry to form the paper web.

        Showers and Felt-conditioning Systems, used to clean and condition
    the fabrics and felts which in turn are used to transport the paper web
    through various stages of the papermaking machine.

        Water-filtration Systems, consisting of pressure, gravity, and vacuum
    assisted filters and strainers used to remove extraneous contaminants
    from the process water before reuse and to recover reusable fiber for
    recycle back into the pulp slurry.

        Revenues from the Company's water-management business were $40.0
    million, $40.8 million, and $32.2 million in 1996, 1995, and 1994,
    respectively.

    Other

        The Company also manufactures and markets dryers and pollution-
    control equipment for the printing, papermaking, and converting
    industries. The Company's dryers transfer heat efficiently from the dryer
    to the paper web resulting in significant energy savings and improved
    paper and printing quality. The Company's thermal incinerators reduce

                                        5PAGE

    volatile organic compounds (VOCs) that are produced when solvents
    contained in the printed or coated material evaporate.

        (ii) and (xi)  New Products; Research and Development

        The Company believes that it has a reputation as a technological
    innovator in the market niches it serves, although rapid technological
    obsolescence is not characteristic of the Company's business. The
    Company, which maintains active programs for the development of new
    products using both new and existing technologies, has technology centers
    in Europe and the U.S. dedicated to specific research projects and
    markets.

        For recycling equipment, the Company maintains a stock-preparation
    pilot laboratory adjacent to the manufacturing facility at its E. & M.
    Lamort, S.A. (Lamort) subsidiary that contains all equipment necessary to
    replicate a commercial stock-preparation system. A customer's wastepaper
    can be tested to determine the exact system configuration that would be
    recommended for its future facility. The testing laboratory is also used
    to evaluate prototype equipment, enabling research teams to quickly and
    thoroughly evaluate new designs. In addition, the Company works closely
    with its customers in the development of products, typically field
    testing new products on the customers' papermaking machines. In the U.S.,
    one facility houses an operation for continued development of accessory
    products, while another includes development of new water-management
    products. GranTek's processing center in Green Bay, Wisconsin, contains a
    pilot plant that has been used to develop many of the processes employed
    in GranTek's main facility.

        The Company seeks to develop a broad range of equipment for all
    facets of the markets it serves. Over the next several years the Company
    expects to focus its research and development efforts on the advancement
    of paper-recycling equipment to further improve the quality of recycled
    paper. In 1996, the Company accelerated expenditures at its Thermo
    Fibergen subsidiary to develop technology to recover materials from
    papermaking sludge generated by plants that produce virgin and recycled
    pulp and paper.

        Research and development expenses for the Company were $5.5 million,
    $4.1 million, and $3.8 million in 1996, 1995, and 1994, respectively.

        (iii)  Raw Materials

        Raw materials, components, and supplies purchased by the Company are
    either available from a number of different suppliers or from alternative
    sources that could be developed without a material adverse effect on the
    Company's business. To date, the Company has experienced no difficulties
    in obtaining these materials.

        (iv)   Patents, Licenses, and Trademarks

        The Company protects its intellectual property rights by applying for
    and obtaining patents when appropriate. The Company also relies on
    technical know-how, trade secrets, and trademarks to maintain its

                                        6PAGE

    competitive position. The Company has numerous U.S. and foreign patents,
    expiring on various dates ranging from 1997 to 2014.

        Third parties have certain rights in two of the Company's patents
    that were jointly developed with such parties. The initial development of
    the Company's Gyroclean equipment was provided by Centre Technique du
    Papier (CTP), to which the Company provided further design refinement and
    applications expertise. The Company currently holds an exclusive
    long-term, worldwide license for a patent on technology that CTP
    developed. The Company and CTP have joint ownership of a second patent on
    technology that was jointly developed.

        The Company maintains a worldwide network of licensees and cross-
    licensees of products with other companies servicing the pulp,
    papermaking, converting, and paper-recycling industries. The Company
    holds an exclusive worldwide license for its de-inking cells under an
    agreement that extends until 2007. The Company also has license
    arrangements with several companies with regard to its dryers, pollution-
    control equipment, and accessory equipment. The Company's Thermo Fibergen
    subsidiary has granted two companies nonexclusive licenses under two of
    its patents to sell cellulose-based granules produced at an existing site
    for sale in the oil-and-grease absorption and cat-box filler markets.

        The Company's 95%-owned Fiberprep subsidiary was granted a license in
    1988 from Aikawa Iron Works Co., Ltd. (Aikawa) to manufacture and sell
    stock-preparation equipment for brown paper in the U.S. and Canada.
    Aikawa owns 5% of Fiberprep's common stock. The Company granted to
    Fiberprep a similar license for stock-preparation equipment for white
    paper. The licenses with Fiberprep automatically renew every two years
    unless canceled upon six months' notice by Fiberprep or the respective
    licensors.

        (v)    Seasonal Influences

        There are no significant seasonal influences on the Company's sales
    of products and services.

        (vi)   Working Capital Requirements

        There are no special inventory requirements or credit terms extended
    to customers that would have a material adverse effect on the Company's
    working capital.

        (vii)  Dependency on a Single Customer

        No single customer accounted for more than 10% of the Company's
    revenues in any of the past three years.

        (viii) Backlog

        The Company's backlog of firm orders as of December 28, 1996, and
    December 30, 1995, was $37.1 million and $50.8 million, respectively. The
    Company anticipates that substantially all of the backlog at December 28,
    1996, will be shipped or completed in 1997.

                                        7PAGE

        (ix)   Government Contracts

        Not applicable.

        (x)    Competition

        The Company faces significant competition in each of its principal
    markets. The Company competes principally on the basis of quality,
    service, technical expertise, product innovation, and price. The Company
    believes that the reputation it has established over more than 80 years
    for quality products and in-depth process knowledge provides it with a
    competitive advantage. In addition, a significant portion of the
    Company's business is generated from its existing customer base. To
    maintain this base, the Company has emphasized service and a
    problem-solving relationship with its customers.

        The Company is a leading supplier of recycling equipment for the
    preparation of wastepaper to be used in the production of recycled paper.
    There are several major competitors that supply various pieces of
    equipment for this process. The Company's principal competitors on a
    worldwide basis are Voith Sulzer Papiertechnik, Black Clawson, Beloit
    Corporation, Ahlstrom Machine Company, Kvaerner Pulping Technologies,
    Sunds Defibrator Inc., Maschinenfabrik Andwitz AG, and Celleco AB.
    Various competitors tend to specialize in niche market segments such as
    white paper or brown paper. The Company competes in the
    recycling-equipment marketplace primarily on the basis of systems
    knowledge, product innovation, and price.

        The Company is a leading supplier of specialty accessory equipment
    for papermaking machines. Because of the high capital costs of
    papermaking machines and the role of the Company's accessories in
    maintaining the efficiency of these machines, the Company generally
    competes in this market on the basis of service, technical expertise, and
    performance.

        The Company is a leading supplier of water-management systems.
    Various competitors exist in the formation table, conditioning and
    cleaning systems, and filtration systems markets. JWI Group/Johnson Foils
    is a major supplier of formation tables while a variety of smaller
    companies compete within the cleaning and conditioning and filtration
    markets. In each of these areas, process knowledge, application
    experience, product quality, service, and price are key factors.

        (xii)  Environmental Protection Regulations

        The Company believes that compliance by the Company with federal,
    state, and local environmental regulations will not have a material
    adverse effect on its capital expenditures, earnings, or competitive
    position.

        (xiii) Number of Employees

        As of December 28, 1996, the Company employed approximately 1,100
    people. Approximately 68 employees at the Company's Kaukauna, Wisconsin,
    operation are represented by a labor union collective bargaining

                                        8PAGE

    agreement expiring May 31, 1998. Approximately 32 employees at the
    Company's Pointe Claire, Quebec, Canada, operation are represented by a
    labor union collective bargaining agreement expiring August 31, 1999.
    Approximately 38 employees at the Company's Guadalajara, Mexico,
    operation are represented by a labor union under an annual collective
    bargaining agreement. In addition, employees of the Company's
    subsidiaries in France and England are represented by trade unions. The
    Company has had no work stoppages and considers its relations with
    employees and unions to be good.

    (d) Financial Information About Exports by Domestic Operations and About
        Foreign Operations

        Financial information about foreign operations is summarized in Note
    12 to Consolidated Financial Statements in the Registrant's 1996 Annual
    Report to Shareholders and is incorporated herein by reference. The
    Company's export operations currently are insignificant.

    (e) Executive Officers of the Registrant

                                       Present Title
    Name                       Age     (Year First Became Executive Officer)
    ------------------------------------------------------------------------
    William A. Rainville       55      President and Chief Executive Officer
                                         (1991)
    John N. Hatsopoulos*       62      Vice President and Chief Financial
                                          Officer (1991)
    Jan-Eric Bergstedt         61      Vice President (1996)
    Edwin D. Healy             59      Vice President; President, Fiberprep,
                                         Inc. (1994)
    Bruno Lamort de Gail       62      Vice President (1991)
    Thomas M. O'Brien          45      Vice President, Finance (1994)
    Edward J. Sindoni          52      Vice President; President, Thermo
                                         Web Systems, Inc. (1994)
    Paul F. Kelleher           54      Chief Accounting Officer (1991)

    * John N. Hatsopoulos and Dr. George N. Hatsopoulos, a director of the
     Company, are brothers.

         Each executive officer serves until his successor is chosen or
     appointed by the Board of Directors and qualified or until earlier
     resignation, death, or removal. All executive officers except Messrs.
     Bergstedt, Healy, O'Brien, and Sindoni have held comparable positions
     for at least five years with the Company or with its parent company,
     Thermo Electron. Mr. Bergstedt has been a Vice President of the Company
     since November 1993 and was designated an executive officer in 1996.
     Prior to joining the Company, Mr. Bergstedt was Group Vice President,
     Pulp and Paper, at Andritz Sprout-Bauer, Inc., a supplier of equipment
     to the pulp and paper industry, from January 1991 to December 1992. Mr.
     Healy has been a Vice President of the Company since November 1991,
     President of Fiberprep since May 1988, and was designated an executive
     officer of the Company in 1994. Mr. O'Brien has been Vice President,
     Finance of the Company since November 1991 and was designated an
     executive officer in 1994. Mr. Sindoni has been a Vice President of the
     Company since November 1991, President of the Company's Thermo Web

                                        9PAGE

     Systems, Inc. subsidiary since January 1993, was Senior Vice President
     of Thermo Web Systems Inc. from 1987 to January 1993, and was
     designated an executive officer in 1994. Messrs. Hatsopoulos and
     Kelleher are full-time employees of Thermo Electron, but devote such
     time to the affairs of the Company as the Company's needs reasonably
     require.


    Item 2. Properties

        The Company owns approximately 925,000 square feet and leases
    approximately 219,000 square feet of manufacturing, engineering, and
    office space worldwide under leases expiring at various dates ranging
    from 1997 to 2001. The majority of the Company's engineering and
    manufacturing space is located in Auburn, Massachusetts; Queensbury, New
    York; Kaukauna, Wisconsin; Green Bay, Wisconsin; Pointe Claire, Quebec,
    Canada; Vitry-le-Francois, France; and Bury, England. The Company also
    has smaller facilities in the United States, England, Germany, Sweden,
    and Italy. The Company believes that its facilities are in good condition
    and are suitable and adequate for its present operations and that
    suitable space is readily available if any of such leases are not
    extended.


    Item 3.  Legal Proceedings

        Not applicable.


    Item 4.  Submission of Matters to a Vote of Security Holders

        Not applicable.






                                       10PAGE

                                     PART II


    Item 5.  Market for Registrant's Common Equity and Related Stockholder
             Matters

        Information concerning the market and market price for the
    Registrant's Common Stock, $.01 par value, and dividend policy is
    included under the sections labeled "Common Stock Market Information" and
    "Dividend Policy" in the Registrant's 1996 Annual Report to Shareholders
    and is incorporated herein by reference.


    Item 6.  Selected Financial Data

        The information required under this item is included under the
    sections labeled "Selected Financial Information" and "Dividend Policy"
    in the Registrant's 1996 Annual Report to Shareholders and is
    incorporated herein by reference.


    Item 7.  Management's Discussion and Analysis of Financial Condition and
             Results of Operations

        The information required under this item is included under the
    heading "Management's Discussion and Analysis of Financial Condition and
    Results of Operations" in the Registrant's 1996 Annual Report to
    Shareholders and is incorporated herein by reference.


    Item 8.  Financial Statements and Supplementary Data

        The Registrant's Consolidated Financial Statements as of December 28,
    1996, and Supplementary Data are included in the Registrant's 1996 Annual
    Report to Shareholders and are incorporated herein by reference.


    Item 9.  Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure

        Not applicable.



                                       11PAGE

                                    PART III


    Item 10.  Directors and Executive Officers of the Registrant

        The information concerning directors required under this item is
    incorporated herein by reference from the material contained under the
    caption "Election of Directors" in the Registrant's definitive proxy
    statement to be filed with the Securities and Exchange Commission
    pursuant to Regulation 14A, not later than 120 days after the close of
    the fiscal year. The information concerning delinquent filers pursuant to
    Item 405 of Regulation S-K is incorporated herein by reference from the
    material contained under the heading "Section 16(a) Beneficial Ownership
    Reporting Compliance" in the Registrant's definitive proxy statement to
    be filed with the Securities and Exchange Commission pursuant to
    Regulation 14A, not later than 120 days after the close of the fiscal
    year.


    Item 11.  Executive Compensation

        The information required under this item is incorporated herein by
    reference from the material contained under the caption "Executive
    Compensation" in the Registrant's definitive proxy statement to be filed
    with the Securities and Exchange Commission pursuant to Regulation 14A,
    not later than 120 days after the close of the fiscal year.


    Item 12.  Security Ownership of Certain Beneficial Owners and Management

        The information required under this item is incorporated herein by
    reference from the material contained under the caption "Stock Ownership"
    in the Registrant's definitive proxy statement to be filed with the
    Securities and Exchange Commission pursuant to Regulation 14A, not later
    than 120 days after the close of the fiscal year.


    Item 13.  Certain Relationships and Related Transactions

        The information required under this item is incorporated herein by
    reference from the material contained under the caption "Relationship
    with Affiliates" in the Registrant's definitive proxy statement to be
    filed with the Securities and Exchange Commission pursuant to Regulation
    14A, not later than 120 days after the close of the fiscal year.


                                       12PAGE

                                     PART IV


    Item 14. Exhibits, Financial Statement Schedules, and Reports on
             Form 8-K

    (a),(d)  Financial Statements and Schedules

             (1) The consolidated financial statements set forth in the list
                 below are filed as part of this Report.

             (2) The consolidated financial statement schedule set forth in
                 the list below is filed as part of this Report.

             (3) Exhibits filed herewith or incorporated herein by reference
                 are set forth in Item 14(c) below.

             List of Financial Statements and Schedules Referenced in this
             Item 14

             Information incorporated by reference from Exhibit 13 filed
             herewith:

                 Consolidated Statement of Income
                 Consolidated Balance Sheet
                 Consolidated Statement of Cash Flows
                 Consolidated Statement of Shareholders' Investment
                 Notes to Consolidated Financial Statements
                 Report of Independent Public Accountants

             Financial Statement Schedules filed herewith:

                 Schedule II: Valuation and Qualifying Accounts

             All other schedules are omitted because they are not applicable
             or not required, or because the required information is shown
             either in the financial statements or in the notes thereto.

    (b)      Reports on Form 8-K

             During the Company's quarter ended December 28, 1996, the
             Company was not required to file, and did not file, any Current
             Report on Form 8-K.

    (c)      Exhibits

             See Exhibit Index on the page immediately preceding exhibits.
                                       13PAGE

                                   SIGNATURES


        Pursuant to the requirements of Section 13 or 15(d) of the Securities
    Exchange Act of 1934, the Registrant has duly caused this report to be
    signed on its behalf by the undersigned, thereunto duly authorized.

    Date: March 12, 1997               THERMO FIBERTEK INC.



                                       By: William A. Rainville
                                           --------------------
                                           William A. Rainville
                                           President and Chief Executive
                                           Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934,
    this report has been signed below by the following persons on behalf of
    the Registrant and in the capacities indicated, as of March 12, 1997.

    Signature                          Title


    By: William A. Rainville           President, Chief Executive Officer,
        ---------------------
        William A. Rainville             and Director


    By: John N. Hatsopoulos            Vice President, Chief Financial
        ---------------------
        John N. Hatsopoulos             Officer, and Director


    By: Paul F. Kelleher               Chief Accounting Officer
        ---------------------
        Paul F. Kelleher


    By: Walter J. Bornhorst            Director
        ---------------------
        Walter J. Bornhorst


    By: George N. Hatsopoulos          Director
        ---------------------
        George N. Hatsopoulos


    By: Donald E. Noble                Chairman of the Board and Director
        ---------------------
        Donald E. Noble


                                       14PAGE

                    Report of Independent Public Accountants


    To the Shareholders and Board of Directors of Thermo Fibertek Inc.:

        We have audited, in accordance with generally accepted auditing
    standards, the consolidated financial statements included in Thermo
    Fibertek Inc.'s Annual Report to Shareholders incorporated by reference
    in this Form 10-K, and have issued our report thereon dated February 3,
    1997 (except with respect to the matter discussed in Note 14 as to which
    the date is February 26, 1997). Our audits were made for the purpose of
    forming an opinion on those statements taken as a whole. The schedule
    listed in Item 14 on page 13 is the responsibility of the Company's
    management and is presented for purposes of complying with the Securities
    and Exchange Commission's rules and is not part of the basic consolidated
    financial statements. This schedule has been subjected to the auditing
    procedures applied in the audits of the basic consolidated financial
    statements and, in our opinion, fairly states in all material respects
    the consolidated financial data required to be set forth therein in
    relation to the basic consolidated financial statements taken as a whole.



                                                 Arthur Andersen LLP



    Boston, Massachusetts
    February 3, 1997






                                       15PAGE

Schedule II


                              THERMO FIBERTEK INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)


                               
                  Balance at   Provision              Accounts           Balance
                   Beginning     Charged   Accounts    Written            at End
                     of Year  to Expense  Recovered        Off Other(a)  of Year
                  ----------  ----------  ---------  --------- -------   -------
Year Ended
December 28, 1996

  Allowance for 
    Doubtful
    Accounts          $2,552      $ (450)   $   74      $ (202) $  (26)   $1,948

Year Ended
December 30, 1995

  Allowance for
    Doubtful
    Accounts          $2,097      $  440    $    -      $ (110) $  125    $2,552

Year Ended
December 31, 1994

  Allowance for
    Doubtful
    Accounts          $1,641      $  508    $    -      $ (163) $  111    $2,097



(a)  In 1996, represents translation adjustment, net of $30 allowance of
     business acquired during the year as described in Note 3 to Consolidated
     Financial Statements in the Registrant's 1996 Annual Report to
     Shareholders, and represents translation adjustment in 1995 and 1994.

                                       16PAGE

    Exhibit
    Number       Description of Exhibit
    ------------------------------------------------------------------------

      2.1        Share Redemption Agreement, dated as of December 22, 1994,
                 by and among the Registrant, Fiberprep, and Aikawa Iron
                 Works Co., Ltd. (filed as Exhibit 2.1 to the Registrant's
                 Current Report on Form 8-K relating to events occurring on
                 January 2, 1995 [File No 1-11406] and incorporated herein
                 by reference).

      3.1        Certificate of Incorporation, as amended, of the Registrant
                 (filed as Exhibit 3(i) to the Registrant's Quarterly Report
                 on Form 10-Q for the quarter ended July 2, 1994 [File No.
                 1-11406] and incorporated herein by reference).

      3.2        By-Laws of the Registrant (filed as Exhibit 3(b) to the
                 Registrant's Registration Statement on Form S-1 [Reg. No.
                 33-51172] and incorporated herein by reference).

      4.1        Note Purchase Agreement dated as of February 22, 1994,
                 between the Registrant and Thermo Electron (filed as
                 Exhibit 4.1 to the Registrant's Annual Report on Form 10-K
                 for the fiscal year ended January 1, 1994 [File No.
                 1-11406] and incorporated herein by reference).

      4.2        $15,000,000 principal amount Subordinated Convertible Note
                 due 1997 from the Registrant to Thermo Electron (filed as
                 Exhibit 4.2 to the Registrant's Annual Report on Form 10-K
                 for the fiscal year ended January 1, 1994 [File No.
                 1-11406] and incorporated herein by reference).

      4.3        $5,000,000 promissory note dated September 14, 1993, from
                 the Registrant to Thermo Electron (filed as Exhibit 2(c) to
                 the Registrant's Quarterly Report on Form 10-Q for the
                 quarter ended October 2, 1993 [File No. 1-11406] and
                 incorporated herein by reference).

      4.4        $10,400,000 promissory note dated January 5, 1995, from
                 Fiberprep, Inc. to Thermo Electron (filed as Exhibit 2.2 to
                 the Registrant's Current Report on Form 8-K relating to
                 events occurring on January 2, 1995 [File No. 1-11406] and
                 incorporated herein by reference).

      10.1       Exchange Agreement dated as of December 28, 1991, between
                 Thermo Electron and the Registrant (filed as Exhibit 10(a)
                 to the Registrant's Registration Statement on Form S-1
                 [Reg. No. 33-51172] and incorporated herein by reference).

                                       17PAGE

    Exhibit
    Number       Description of Exhibit
    ------------------------------------------------------------------------

      10.2       Amended and Restated Corporate Services Agreement dated
                 January 3, 1993, between Thermo Electron and the Registrant
                 (filed as Exhibit 10(b) to the Registrant's Annual Report
                 on Form 10-K for the fiscal year ended January 2, 1993
                 [File No. 1-11406] and incorporated herein by reference).

      10.3       Thermo Electron Corporate Charter, as amended and restated
                 effective January 3, 1993 (filed as Exhibit 10(e) to the
                 Registrant's Annual Report on Form 10-K for the fiscal year
                 ended January 2, 1993 [File No. 1-11406] and incorporated
                 herein by reference).

      10.4       Thermo Web Systems, Inc. (formerly Thermo Electron Web
                 Systems, Inc.) Retirement Plan, as amended (filed as
                 Exhibit 10(g) to the Registrant's Registration Statement on
                 Form S-1 [Reg. No. 33-51172] and incorporated herein by
                 reference).

      10.5       Noncompetition Agreement dated May 30, 1990, between Thermo
                 Electron and Bruno Lamort de Gail (filed as Exhibit 10(h)
                 to the Registrant's Registration Statement on Form S-1
                 [Reg. No. 33-51172] and incorporated herein by reference).

      10.6       Lamort Retirement Plan (filed as Exhibit 10(i) to the
                 Registrant's Registration Statement on Form S-1 [Reg. No.
                 33-51172] and incorporated herein by reference).

      10.7       Lamort Retirement Plan for Key Employees (filed as Exhibit
                 10(j) to the Registrant's Registration Statement on Form
                 S-1 [Reg. No. 33-51172] and incorporated herein by
                 reference).

      10.8       Severance Agreement dated January 8, 1988, between Thermo
                 Electron and William A. Rainville (filed as Exhibit 10(p)
                 to the Registrant's Registration Statement on Form S-1
                 [Reg. No. 33-51172] and incorporated herein by reference).

      10.9       Employment Agreement dated as of May 30, 1990, between the
                 Registrant and Bruno Lamort de Gail (filed as Exhibit 10(q)
                 to the Registrant's Registration Statement on Form S-1
                 [Reg. No. 33-51172] and incorporated herein by reference).

      10.10      Form of Indemnification Agreement for officers and
                 directors (filed as Exhibit 10(s) to the Registrant's
                 Registration Statement on Form S-1 [Reg. No. 33-51172] and
                 incorporated herein by reference).

                                       18PAGE

    Exhibit
    Number       Description of Exhibit
    ------------------------------------------------------------------------

      10.11      Tax Allocation Agreement dated as of December 28, 1991,
                 between the Registrant and Thermo Electron (filed as
                 Exhibit 10.13 to the Registrant's Annual Report on Form
                 10-K for the fiscal year ended January 1, 1994 [File No.
                 1-11406] and incorporated herein by reference).

      10.12      Amended and Restated Master Repurchase Agreement dated as
                 of December 28, 1996.

      10.13      Assignment Agreement dated as of December 22, 1994, between
                 Thermo Electron and TE Great Lakes, Inc. (filed as Exhibit
                 10.1 to the Registrant's Quarterly Report on Form 10-Q for
                 the quarter ended September 30, 1995 [File No. 1-11406] and
                 incorporated herein by reference).

      10.14      Management Services Agreement dated as of December 22,
                 1994, between TE Great Lakes, Inc. and Fiberprep (filed as
                 Exhibit 10.2 to the Registrant's Quarterly Report on Form
                 10-Q for the quarter ended September 30, 1995 [File No.
                 1-11406] and incorporated herein by reference).

      10.15      Equipment Supply Agreement dated as of December 22, 1994,
                 between TE Great Lakes, Inc. and Fiberprep, Inc. (filed as
                 Exhibit 10.3 to the Registrant's Quarterly Report on Form
                 10-Q for the quarter ended September 30, 1995 [File No.
                 1-11406] and incorporated herein by reference).

    10.16-10.18  Reserved.

      10.19      Incentive Stock Option Plan of the Registrant (filed as
                 Exhibit 10(k) to the Registrant's Registration Statement on
                 Form S-1 [Reg. No. 33-51172] and incorporated herein by
                 reference).

      10.20      Nonqualified Stock Option Plan of the Registrant (filed as
                 Exhibit 10(l) to the Registrant's Registration Statement on
                 Form S-1 [Reg. No. 33-51172] and incorporated herein by
                 reference).

      10.21      Equity Incentive Plan of the Registrant (filed as
                 Attachment A to the Proxy Statement dated May 3, 1994, of
                 the Registrant [File No. 1-11406] and incorporated herein
                 by reference).

      10.22      Deferred Compensation Plan for Directors of the Registrant
                 (filed as Exhibit 10(m) to the Registrant's Registration
                 Statement on Form S-1 [Reg. No. 33-51172] and incorporated
                 herein by reference).

                                       19PAGE

    Exhibit
    Number       Description of Exhibit
    ------------------------------------------------------------------------

      10.23      Directors' Stock Option Plan of the Registrant (filed as
                 Exhibit 10.23 to the Registrant's Annual Report on Form
                 10-K for the fiscal year ended December 31, 1994 [File No.
                 1-11406] and incorporated herein by reference).

      10.24      Thermo Fibergen Inc. Equity Incentive Plan (filed as
                 Exhibit 10.11 to Thermo Fibergen Inc.'s Registration
                 Statement on Form S-1 [Registration No. 333-07585] and
                 incorporated herein by reference).

      10.25      Thermo Fibertek - Thermo Fibergen Nonqualified Stock Option
                 Plan.

                 In addition to the stock-based compensation plans of the
                 Registrant, the executive officers of the Registrant may be
                 granted awards under stock-based compensation plans of
                 Thermo Electron for services rendered to the Registrant or
                 to such affiliated corporations. Such plans were filed as
                 Exhibits 10.21 through 10.44 to the Annual Report on Form
                 10-K of Thermo Electron for the year ended December 30,
                 1995 [File No. 1-8002] and as Exhibit 10.19 to the Annual
                 Report on Form 10-K of Trex Medical Corporation for the
                 fiscal year ended September 28, 1996 [File No. 1-11827] and
                 are incorporated herein by reference.

      10.26      Restated Stock Holding Assistance Plan and Form of
                 Promissory Note.

      11         Statement re: Computation of Earnings per Share.

      13         Annual Report to Shareholders for the year ended December
                 28, 1996 (only those portions incorporated herein by
                 reference).

      21         Subsidiaries of the Registrant.

      23         Consent of Arthur Andersen LLP.

      27         Financial Data Schedule.

                                        20
                                                            Exhibit 10.12

                AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

             The Master Repurchase Agreement dated as of January 1, 1994
        between Thermo Electron Corporation, a Delaware corporation
        ("Seller"), and Thermo Fibertek Inc., a Delaware corporation (the
        "Buyer"), is hereby amended and restated in its entirety as
        follows on and as of December 28, 1996.

        1.   Applicability

             From time to time Buyer and Seller may enter into
        transactions in which Seller agrees to transfer to Buyer certain
        securities and/or financial instruments ("Securities") against
        the transfer of funds by Buyer, with a simultaneous agreement by
        Buyer to transfer to Seller such Securities on demand, against
        the transfer of funds by Seller.  Each such transaction shall be
        referred to herein as a "Transaction" and shall be governed by
        this Agreement, unless otherwise agreed in writing.

        2.   Definitions

             (a)  "Act of Insolvency", with respect to either party (i)
        the commencement by such party as debtor of any case or
        proceeding under any bankruptcy, insolvency, reorganization,
        liquidation, dissolution or similar law, or such party seeking
        the appointment of a receiver, trustee, custodian or similar
        official for such party or any substantial part of its property;
        or (ii) the commencement of any such case or proceeding against
        such party, or another seeking such an appointment, which (A) is
        consented to or not timely contested by such party, (B) results
        in the entry of an order for relief, such an appointment or the
        entry of an order having a similar effect, or (C) is not
        dismissed within 15 days; or (iii) the making by a party of a
        general assignment for the benefit of creditors; or (iv) the
        admission in writing by a party of such party's inability to pay
        such party's debts as they become due; 

             (b)  "Additional Purchased Securities", Securities provided
        by Seller to Buyer pursuant to Paragraph 4(a) hereof; 

             (c)  "Income", with respect to any Security at any time, any
        principal thereof then payable and all interest, dividends or
        other distributions thereon; 

             (d)  "Market Value", with respect to any Securities as of
        any date, the price for such Securities on such date obtained
        from a generally recognized source agreed to by the parties or
        the most recent closing bid quotation from such a source, plus
        accrued Income to the extent not included therein (other than any
        Income transferred to Seller pursuant to Paragraph 6 hereof) as
        of such date (unless contrary to market practice for such
        Securities);
PAGE

             (e)  "Other Buyers", third parties that have entered into an
        agreement with Seller that is substantially similar to this
        Agreement; 

             (f)  "Pricing Rate", a rate equal to the Commercial Paper
        Composite rate for 90-day maturities provided by Merrill Lynch,
        Pierce, Fenner & Smith Incorporated (or, if such rate is not
        available, a substantially equivalent rate agreed to by Buyer and
        Seller) plus 25 basis points, which rate shall be adjusted on the
        first business day of each fiscal quarter and shall be in effect
        for the entirety such fiscal quarter;
         
             (g)  "Purchase Price", the price at which Purchased
        Securities are transferred by Seller to Buyer; 

             (h)  "Purchased Securities", the Securities transferred by
        Seller to Buyer in a Transaction hereunder, and any Securities
        substituted therefor in accordance with Paragraph 9 hereof.  The
        term "Purchased Securities" with respect to any Transaction at
        any time also shall include Additional Purchase Securities
        transferred pursuant to Paragraph 4(a) and shall exclude
        Securities returned pursuant to Paragraph 4(b);  

             (i)  "Repurchase Collateral Account", a book account
        maintained by Seller containing, among other Securities, the
        Purchased Securities; and

             (j)  "Repurchase Price", for any Purchased Security, an
        amount equal to the Purchase Price paid by Buyer to Seller for
        such Purchased Security. 

        3.   Transactions

             (a)  A Transaction may be initiated by Buyer upon the
        transfer of the Purchase Price to Seller's account.  Upon such
        transfer, Seller shall transfer to Buyer Purchased Securities
        having a Market Value equal to 103% of the Purchase Price.

             (b)  Purchased Securities shall be held in custody for Buyer
        by Seller in the Repurchase Collateral Account.  Seller shall
        indicate on its books for such account Buyer's ownership of the
        Purchased Securities.  Upon reasonable request from Buyer, Seller
        shall provide Buyer with a complete list of Purchased Securities
        owned by Buyer.  

             (c)  Upon demand by Buyer or Seller, Seller shall repurchase
        from Buyer, and Buyer shall sell to Seller, for the Repurchase
        Price all or any part of the Purchased Securities then owned by
        Buyer.
                                       2PAGE

        4.   Margin Maintenance

             (a)  If at any time the aggregate Market Value of all
        Purchased Securities then owned by Buyer is less than 103% of the
        aggregate Repurchase Price for such Purchased Securities, then
        Seller shall transfer to Buyer additional Securities ("Additional
        Purchased Securities"), so that the aggregate Market Value of
        such Purchased Securities, including any such Additional
        Purchased Securities, will thereupon equal or exceed 103% of such
        aggregate Repurchase Price.

             (b)  If at any time the aggregate Market Value of all
        Purchased Securities then owned by Buyer exceeds 103% of the
        aggregate Repurchase Price for such Purchased Securities, then
        Seller may transfer Purchased Securities to Seller, so that the
        aggregate Market Value of such Purchased Securities will
        thereupon not exceed 103% of such aggregate Repurchase Price.

        5.   Interest Payments

             If during any fiscal month Buyer owned Purchased Securities,
        then on the first day of the next following fiscal month Seller
        shall pay to Buyer an amount equal to the sum of the aggregate
        Repurchase Prices of the Purchased Securities owned by Buyer at
        the close of each day during the preceding fiscal month divided
        by the number of days in such month and the product multiplied by
        the Pricing Rate times the number of days in such month divided
        by 360.

        6.   Income Payments and Voting Rights

             Where a particular Transaction's term extends over an Income
        payment date on the Purchased Securities subject to that
        Transaction, Buyer shall, on the date such Income is payable,
        transfer to Seller an amount equal to such Income payment or
        payments with respect to any Purchased Securities subject to such
        Transaction.  Seller shall retain all voting rights with respect
        to Purchased Securities sold to Buyer under this Agreement.

        7.   Security Interest

             Although the parties intend that all Transactions hereunder
        be sales and purchases and not loans, in the event any such
        Transactions are deemed to be loans, Seller shall be deemed to
        have pledged to Buyer as security for the performance by Seller
        of its obligations under each such Transaction and this
        Agreement, and shall be deemed to have granted to Buyer a
        security interest in, all of the Purchased Securities with
        respect to all Transactions hereunder and all proceeds thereof.

                                        3PAGE

        8.   Payment and Transfer

             Unless otherwise mutually agreed, all transfers of funds
        hereunder shall be in immediately available funds.  As used
        herein with respect to Securities, "transfer" is intended to have
        the same meaning as when used in Section 8-313 of the
        Massachusetts Uniform Commercial Code or, where applicable, in
        any federal regulation governing transfers of the Securities.

        9.   Substitution

             Buyer hereby grants Seller the authority to manage, in
        Seller's sole discretion, the Purchased Securities held in
        custody for Buyer by Seller in the Repurchase Collateral Account.
        Buyer expressly agrees that Seller may (i) substitute other
        Securities for any Purchased Securities and (ii) commingle
        Purchased Securities with other Securities held in the Repurchase
        Collateral Account.  Substitutions shall be made by transfer to
        Buyer of such other Securities and transfer to Seller of the
        Purchased Securities for which substitution is being made.  After
        substitution, the substituted Securities shall be deemed to be
        Purchased Securities.  Securities which are substituted for
        Purchased Securities shall have a Market Value at the time of
        substitution equal to or greater than the Market Value of the
        Purchase Securities for which such Securities were substituted.

        10.  Representations

             Each of Buyer and Seller represents and warrants to the
        other that (i) it is duly authorized to execute and deliver this
        Agreement, to enter into the Transactions contemplated hereunder
        and to perform its obligations hereunder and has taken all
        necessary action to authorize such execution, delivery and
        performance, (ii) the person signing this Agreement on its behalf
        is duly authorized to do so on its behalf, (iii) it has obtained
        all authorizations of any governmental body required in
        connection with this Agreement and the Transactions hereunder and
        such authorizations are in full force and effect and (iv) the
        execution, delivery and performance of this Agreement and the
        Transactions hereunder will not violate any law, ordinance,
        charter, by-law or rule applicable to it or any agreement by
        which it is bound or by which any of its assets are affected.  On
        the date for any Transaction Buyer and Seller shall each be
        deemed to repeat all the foregoing representations made by it.

        11.  Events of Default

             In the event that (i) Seller fails to repurchase or Buyer
        fails to transfer Purchased Securities upon demand for repurchase
        from either Buyer or Seller, (ii) Seller or Buyer fails, after
        one business day's notice, to comply with Paragraph 4 hereof,
        (iii) Buyer fails to make payment to Seller pursuant to Paragraph
        6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof,
        (v) an Act of Insolvency occurs with respect to Seller or Buyer,

                                        4PAGE

        (vi) any representation made by Seller or Buyer shall have been
        incorrect or untrue in any material respect when made or repeated
        or deemed to have been made or repeated, or (vii) Seller or Buyer
        shall admit to the other its inability to, or its intention not
        to, perform any of its obligations hereunder (each an "Event of
        Default"):

             (a)  At the option of the nondefaulting party, exercised by
        written notice to the defaulting party (which option shall be
        deemed to have been exercised, even if no notice is given,
        immediately upon the occurrence of any Act of Insolvency), Seller
        shall become obligated to repurchase, and Buyer shall become
        obligated to sell, all Purchased Securities then owned by Buyer
        for the Repurchase Price of such Purchased Securities.

             (b)  If Seller is the defaulting party and Buyer exercises
        or is deemed to have exercised the option referred to in
        subparagraph (a) of this Paragraph, (i) the Seller's obligations
        hereunder to repurchase all Purchased Securities in such
        Transactions shall thereupon become immediately due and payable,
        (ii) all Income paid after such exercise or deemed exercise shall
        be retained by Buyer and applied to the aggregate unpaid
        Repurchase Prices owed by Seller, and (iii) Seller shall
        immediately deliver to Buyer any Purchased Securities subject to
        such Transactions then in Seller's possession.

             (c)  In all Transactions in which Buyer is the defaulting
        party, upon tender by Seller of payment of the aggregate
        Repurchase Prices for all such Transactions, Buyer's right, title
        and interest in all Purchased Securities subject to such
        Transactions shall be deemed transferred to Seller, and Buyer
        shall deliver all such Purchased Securities to Seller.

             (d)  After one business day's notice to the defaulting party
        (which notice need not be given if an Act of Insolvency shall
        have occurred, and which may be the notice given under
        subparagraph (a) of this Paragraph or the notice referred to in
        clause (ii) of the first sentence of this Paragraph), the
        nondefaulting party may: 

                  (i)  as to Transactions in which Seller is the
        defaulting party, (A) immediately sell, in a recognized market at
        such price or prices as Buyer may reasonably deem satisfactory,
        any or all Purchased Securities subject to such Transactions and
        apply the proceeds thereof to the aggregate unpaid Repurchase
        Prices and any other amounts owing by Seller hereunder or (B) in
        its sole discretion elect, in lieu of selling all or a portion of
        such Purchased Securities, to give Seller credit for such
        Purchased Securities in an amount equal to the price therefor on
        such date, obtained from a generally recognized source or the
        most recent closing bid quotation from such a source, against the
        aggregate unpaid Repurchase Prices and any other amounts owing by
        Seller hereunder; and
                                        5PAGE

                  (ii) as to Transactions in which Buyer is the
        defaulting party, (A) purchase securities ("Replacement
        Securities") of the same class and amount as any Purchased
        Securities that are not delivered by Buyer to Seller as required
        hereunder or (B) in its sole discretion elect, in lieu of
        purchasing Replacement Securities, to be deemed to have purchased
        Replacement Securities at the price therefor on such date,
        obtained from a generally recognized source or the most recent
        closing bid quotation from such a source.

             (e)  As to Transactions in which Buyer is the defaulting
        party, Buyer shall be liable to Seller (i) with respect to
        Purchased Securities (other than Additional Purchased
        Securities), for any excess of the price paid (or deemed paid) by
        Seller for Replacement Securities therefor over the Repurchase
        Price for such Purchased Securities and (ii) with respect to
        Additional Purchased Securities, for the price paid (or deemed
        paid) by Seller for the Replacement Securities therefor.  

             (g)  The defaulting party shall be liable to the
        nondefaulting party for the amount of all reasonable legal or
        other expenses incurred by the nondefaulting party in connection
        with or as a consequence of an Event of Default.

             (h)  The nondefaulting party shall have, in addition to its
        rights hereunder, any rights otherwise available to it under any
        other agreement or applicable law.

        12.  Single Agreement

             Buyer and Seller acknowledge that, and have entered hereinto
        and will enter into each Transaction hereunder in consideration
        of and in reliance upon the fact that, all Transactions hereunder
        constitute a single business and contractual relationship and
        have been made in consideration of each other.  Accordingly, each
        of Buyer and Seller agrees (i) to perform all of its obligations
        in respect of each Transaction hereunder, and that a default in
        the performance of any such obligations shall constitute a
        default by it in respect of all Transactions hereunder, (ii) that
        each of them shall be entitled to set off claims and apply
        property held by them in respect of any Transaction against
        obligations owing to them in respect of any other Transactions
        hereunder and (iii) that payments, deliveries and other transfers
        made by either of them in respect of any Transaction shall be
        deemed to have been made in consideration of payments, deliveries
        and other transfers in respect of any other Transactions
        hereunder, and the obligations to make any such payments,
        deliveries and other transfers may be applied against each other
        and netted.

                                        6PAGE

        13.  Entire Agreement; Severability

             This Agreement shall supersede any existing agreements
        between the parties containing general terms and conditions for
        repurchase transactions.  Each provision and agreement and
        agreement herein shall be treated as separate and independent
        from any other provision or agreement herein and shall be
        enforceable notwithstanding the unenforceability of any such
        other provision or agreement.

        14.  Non-assignability; Termination

             The rights and obligations of the parties under this
        Agreement and under any Transactions shall not be assigned by
        either party without the prior written consent of the other
        party.  Subject to the foregoing, this Agreement and any
        Transactions shall be binding upon and shall inure to the benefit
        of the parties and their respective successors and assigns.  This
        Agreement may be canceled by either party upon giving written
        notice to the other, except that this Agreement shall,
        notwithstanding such notice, remain applicable to any
        Transactions then outstanding.

        15.  Governing Law

             This Agreement shall be governed by the laws of the
        Commonwealth of Massachusetts without giving effect to the
        conflict of law principles thereof.

        16.  No Waivers, Etc.

             No express or implied waiver of any Event of Default by
        either party shall constitute a waiver of any other Event of
        Default and no exercise of any remedy hereunder by any party
        shall constitute a wavier of its right to exercise any other
        remedy hereunder.  No modification or waiver of any provision of
        this Agreement and no consent by any party to a departure
        herefrom shall be effective unless and until such shall be in
        writing and duly executed by both of the parties hereto. 

        17.  Intent

             (a)  The parties recognize that each Transaction is a
        "repurchase agreement" as that term is defined in Section 101 of
        Title 11 of the United States Code, as amended (except insofar as
        the type of Securities subject to such Transaction or the term of
        such Transaction would render such definition inapplicable), and
        a "securities contract" as that term is defined in Section 741 of
        Title 11 of the United States Code, as amended.

             (b)  It is understood that either party's right to liquidate
        Securities delivered to it in connection with Transactions
        hereunder or to exercise any other remedies pursuant to Paragraph
        11 hereof, is a contractual right to liquidate such Transaction

                                        7PAGE

        as described in Sections 555 and 559 of Title 11 of the United
        States Code, as amended.

             IN WITNESS WHEREOF, the parties have executed this Agreement
        as of December 28, 1996.


        THERMO ELECTRON CORPORATION        THERMO FIBERTEK INC.


        By:  Jonathan W. Painter           By:  William A. Rainville

        Name:     Jonathan W. Painter      Name:    William A. Rainville

        Title:    Treasurer                Title:   President 

                                                            EXHIBIT 10.25
                              THERMO FIBERTEK INC.

                 THERMO FIBERGEN NONQUALIFIED STOCK OPTION PLAN

        1.   Purpose

             This Nonqualified Stock Option Plan (the "Plan") is intended
        to encourage ownership of Common Stock, $0.01 par value (the
        "Common Stock"), of Thermo Fibergen Inc. ("Subsidiary"), a
        subsidiary of Thermo Fibertek Inc. (the "Company"), by persons
        selected by the Board of Directors (or a committee thereof) in
        its sole discretion, including directors, executive officers, key
        employees and consultants of the Company and its subsidiaries,
        and to provide additional incentive for them to promote the
        success of the business of the Company and Subsidiary.  The Plan
        is intended to be a nonstatutory stock option plan.

        2.   Effective Date of the Plan

             The Plan shall become effective when adopted by the Board of
        Directors of the Company.

        3.   Stock Subject to Plan

             At no time shall the number of shares of the Common Stock
        then outstanding which are attributable to the exercise of
        options granted under the Plan plus the number of shares then
        issuable upon the exercise of outstanding options granted under
        the Plan exceed 200,000 shares, subject however,  to the
        provisions of paragraph 11 of the Plan.  Shares to be issued upon
        the exercise of options granted under the Plan shall be shares of
        Subsidiary beneficially owned by the Company.  If any option
        expires or terminates for any reason without having been
        exercised in full, the unpurchased shares subject thereto shall
        again be available for options thereafter to be granted.

        4.   Administration

             The Plan shall be administered by a committee (the
        "Committee") composed of the members of the Board of Directors of
        the Company, no member of which shall act upon any matter
        exclusively affecting any option granted or to be granted to
        himself or herself under the Plan.  Subject to the provisions of
        the Plan, the Committee shall have complete authority, in its
        discretion, to make the following determinations with respect to
        each option to be granted by the Company:  (a) the person to
        receive the option (the "Optionee"); (b) the time of granting the
        option; (c) the number of shares subject thereto; (d) the option
        price; (e) the option period; and (f) the terms of the option and
        form of option agreement (which need not be identical, but which
        shall conform to the applicable terms and conditions of the Plan
        and contain such other provisions as the Board of Directors deems
        advisable and not inconsistent with the Plan).  In making such
PAGE

        determinations, the Committee may take into account the nature of
        the services rendered by the Optionees, their present and
        potential contributions to the success of the Company and/or one
        or more of its subsidiaries, and such other factors as the
        Committee in its discretion shall deem relevant.  Subject to the
        provisions of the Plan, the Committee shall also have complete
        authority to interpret the Plan, to prescribe, amend, and rescind
        rules and regulations relating to it, to determine the terms and
        provisions of the respective option agreements (which need not be
        identical), and to make all other determinations necessary or
        advisable for the administration of the Plan.  The Committee's
        determinations on the matters referred to in this paragraph 4
        shall be conclusive.

        5.   Eligibility

             An option may be granted to any person selected by the
        Committee in its sole discretion.

        6.   Time of Granting Options

             The granting of an option shall take place at the time
        specified by the Committee.  Only if expressly so provided by the
        Committee shall the granting of an option be regarded as taking
        place at the time when a written option agreement shall have been
        duly executed and delivered by or on behalf of the Company and
        the Optionee to whom such option shall be granted.  The agreement
        shall provide, among other things, that it does not confer upon
        an Optionee any right to continue in the employ of the Company
        and/or one or more of its subsidiaries or to continue as a
        director or consultant of the Company, and that it does not
        interfere in any way with the right of the Company or any such
        subsidiary to terminate the employment of the Optionee at any
        time if the Optionee is an employee, to remove the Optionee as a
        director of the Company if the Optionee is a director, or to
        terminate the services of the Optionee if the Optionee is a
        consultant.

        7.   Option Period

             An option may become exercisable immediately or in such
        installments, cumulative or noncumulative, as the Committee may
        determine.  

        8.   Exercise of Option

             An option may be exercised in accordance with its terms by
        written notice of intent to exercise the option, specifying the
        number of shares of stock with respect to which the option is
        then being exercised.  The notice shall be accompanied by payment
        in the form of cash or shares of Subsidiary Common Stock (the
        "Tendered Shares") with a then current market value equal to the
        option price of the shares to be purchased; provided, however,
        that such Tendered Shares shall have been acquired by the
                                    2PAGE

        Optionee more than six months prior to the date of exercise,
        unless such requirement is waived in writing by the Company.
        Against such payment the Company shall deliver or cause to be
        delivered to the Optionee a certificate for the number of shares
        then being purchased, registered in the name of the Optionee or
        other person exercising the option.  If any law or applicable
        regulation of the Securities and Exchange Commission or other
        body having jurisdiction in the premises shall require the
        Company, Subsidiary or the Optionee to take any action in
        connection with shares being purchased upon exercise of the
        option, exercise of the option and delivery of the certificate or
        certificates for such shares shall be postponed until completion
        of the necessary action, which shall be taken at the Company's
        expense.

        9.   Transferability

             Options shall not be transferable, otherwise than by will or
        the laws of descent and distribution, except as may be authorized
        by the Committee, in its sole discretion. The Committee may, in
        its discretion, determine the extent to which options granted to
        an Optionee shall be transferable, and such provisions permitting
        transfer shall be set forth in the written option agreement
        executed and delivered by or on behalf of the Company and the
        Optionee.

        10.  Vesting, Restrictions and Termination of Options

             The Committee, in its sole discretion, may determine the
        manner in which options shall vest, the rights of the Company to
        repurchase the shares issued upon the exercise of any option and
        the manner in which such rights shall lapse, and the terms upon
        which any option granted shall terminate.  The Board of Directors
        shall have the right to accelerate the date of exercise of any
        installment or to accelerate the lapse of the Company's
        repurchase rights.  All of such terms shall be specified in a
        written option agreement executed and delivered by or on behalf
        of the Company and the Optionee to whom such option shall be
        granted.

        11.  Adjustment of Number of Shares

             Each stock option agreement shall provide that in the event
        of any stock dividend payable in the Common Stock or any split-up
        or contraction in the number of shares of the Common Stock
        occurring after the date of the agreement and prior to the
        exercise in full of the option, the number of shares for which
        the option may thereafter be exercised shall be proportionately
        adjusted and the price to be paid for each share subject to the
        option shall be proportionately adjusted.  Each such agreement
        shall also provide that in case of any reclassification or change
        of outstanding shares of the Common Stock or in case of any
        consolidation or merger of Subsidiary with or into another
        company or in case of any sale or conveyance to another company
                                   3PAGE

        or entity of the property of Subsidiary as a whole or
        substantially as a whole, the Optionee shall, upon exercise of
        the option, be entitled to receive shares of stock or other
        securities in its place equivalent in kind and value to those
        shares which he would have received if he had exercised the
        option in full immediately prior to such reclassification,
        change, consolidation, merger, sale or conveyance and had
        continued to hold the shares subject to the option (together with
        all other shares, stock and securities thereafter issued in
        respect thereof) to the time of the exercise of the option;
        provided, that if any recapitalization is to be effected through
        an increase in the par value of the Common Stock without an
        increase in the number of authorized shares and such new par
        value will exceed the option price under such agreement, the
        Company shall notify the Optionee of such proposed
        recapitalization, and the Optionee shall then have the right,
        exercisable at any time prior to such recapitalization becoming
        effective, to purchase all of the shares subject to the option
        which he has not theretofore purchased (anything in such
        agreement to the contrary notwithstanding), but if the Optionee
        fails to exercise such right before such recapitalization becomes
        effective, the option price under such agreement shall be
        appropriately adjusted.  Each such agreement shall further
        provide that upon dissolution or liquidation of Subsidiary, the
        option shall terminate, but the Optionee (if at the time an
        employee or director of the Company and/or any one or more of its
        subsidiaries) shall have the right, immediately prior to such
        dissolution or liquidation, to exercise the option to the full
        extent not theretofore exercised; that no adjustment provided for
        above shall apply to any share with respect to which the option
        has been exercised prior to the effective date of such
        adjustment; and that no fraction of a share or fractional shares
        shall be purchasable or deliverable under such agreement, but in
        the event any adjustment thereunder of the number of shares
        covered by the option shall cause such number to include a
        fraction of a share, such fraction shall be adjusted to the
        nearest smaller whole number of shares.  In the event of changes
        in the outstanding Common Stock by reason of any stock dividend,
        split-up, contraction, reclassification, or change of outstanding
        shares of the Common Stock of the nature contemplated by this
        paragraph 11, the number of shares of Common Stock available for
        the purpose of the Plan as stated in paragraph 3 hereof shall be
        correspondingly adjusted by the Committee.

        12.  Limitation of Rights in Option Stock

             The Optionees shall have no rights as stockholders in
        respect of shares as to which their options shall not have been
        exercised, certificates issued and delivered and payment as
        herein provided made in full, and shall have no rights with
        respect to such shares not expressly conferred by this Plan.
                                  4PAGE

        13.  Stock Reserved

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

        14.  Securities Laws Restrictions

             Each Optionee exercising an option, at the request of the
        Company, will be required to give a representation in form
        satisfactory to counsel for the Company that he will not
        transfer, sell or otherwise dispose of the shares received upon
        exercise of the option at any time purchased by him, upon
        exercise of any portion of the option, in a manner which would
        violate the Securities Act of 1933, as amended, and the
        regulations of the Securities and Exchange Commission thereunder
        and the Company may, if required or at its discretion, make a
        notation on any certificates issued upon exercise of options to
        the effect that such certificate may not be transferred except
        after receipt by the Company of an opinion of counsel
        satisfactory to it to the effect that such transfer will not
        violate such Act and such regulations.

        15.  Tax Withholding

             The Company shall have the right to deduct from payments of
        any kind otherwise due to an Optionee any federal, state or local
        taxes of any kind required by law to be withheld with respect to
        any shares issued upon exercise of options under the Plan (the
        "withholding requirements").  The Committee will have the right
        to require that the Optionee or other appropriate person remit to
        the Company an amount sufficient to satisfy the withholding
        requirements, or make other arrangements satisfactory to the
        Committee with regard to such requirements, prior to the delivery
        of any Common Stock pursuant to exercise of an option.  If and to
        the extent that such withholding is required, the Committee may
        permit the Optionee or such other person to elect at such time
        and in such manner as the Committee provides to have the Company
        hold back from the shares to be delivered, or to deliver to the
        Company, Common Stock having a value calculated to satisfy the
        withholding requirements.

        16.  Termination and Amendment of Plan

             The Board of Directors may at any time, and from time to
        time, modify or amend the Plan in any respect.

             Notwithstanding any other provisions hereof, the Plan shall
        terminate on December 31, 2006 and no options shall be granted
        hereunder thereafter.

                                                        EXHIBIT 10.26
                              THERMO FIBERTEK INC.

                     RESTATED STOCK HOLDING ASSISTANCE PLAN
                
        SECTION 1.   Purpose.

             The purpose of this Plan is to benefit Thermo Fibertek Inc.
        (the "Company") and its stockholders by encouraging Key Employees
        to acquire and maintain share ownership in the Company, by
        increasing such employees' proprietary interest in promoting the
        growth and performance of the Company and its subsidiaries and by
        providing for the implementation of the Stock Holding Policy.  

        SECTION 2.     Definitions.

             The following terms, when used in the Plan, shall have the
        meanings set forth below:

             Committee:   The Human Resources Committee of the Board of
        Directors of the Company as appointed from time to time.

             Common Stock:   The common stock of the Company and any
        successor thereto.

             Company:   Thermo Fibertek Inc., a Delaware corporation.

             Stock Holding Policy:   The Stock Holding Policy of the
        Company, as adopted by the Committee and as in effect from time
        to time.

             Key Employee:   Any employee of the Company or any of its
        subsidiaries, including any officer or member of the Board of
        Directors who is also an employee, as designated by the
        Committee, and who, in the judgment of the Committee, will be in
        a position to contribute significantly to the attainment of the
        Company's strategic goals and long-term growth and prosperity.

             Loans:   Loans extended to Key Employees by the Company
        pursuant to this Plan.

             Plan:   The Thermo Fibertek Inc. Stock Holding Assistance
        Plan, as amended from time to time.


        SECTION 3.     Administration.

             The Plan and the Stock Holding Policy shall be administered
        by the Committee, which shall have authority to interpret the
        Plan and the Stock Holding Policy and, subject to their
        provisions, to prescribe, amend and rescind any rules and
        regulations and to make all other determinations necessary or
        desirable for the administration thereof.  The Committee's
        interpretations and decisions with regard to the Plan and the
PAGE

        Stock Holding Policy and such rules and regulations as may be
        established thereunder shall be final and conclusive.  The
        Committee may correct any defect or supply any omission or
        reconcile any inconsistency in the Plan or the Stock Holding
        Policy, or in any Loan in the manner and to the extent the
        Committee deems desirable to carry it into effect.  No member of
        the Committee shall be liable for any action or omission in
        connection with the Plan or the Stock Holding Policy that is made
        in good faith.

        SECTION 4.     Loans and Loan Limits.

             The Committee has determined that the provision of Loans
        from time to time to Key Employees in such amounts as to cause
        such Key Employees to comply with the Stock Holding Policy is, in
        the judgment of the Committee, reasonably expected to benefit the
        Company and authorizes the Company to extend Loans from time to
        time to Key Employees in such amounts as may be requested by such
        Key Employees in order to comply with the Stock Holding Policy.
        Such Loans may be used solely for the purpose of acquiring Common
        Stock (other than upon the exercise of stock options or under
        employee stock purchase plans) in open market transactions or
        from the Company.

             Each Loan shall be full recourse and evidenced by a
        non-interest bearing promissory note substantially in the form
        attached hereto as Exhibit A (the "Note") and maturing in
        accordance with the provisions of Section 6 hereof, and
        containing such other terms and conditions, which are not
        inconsistent with the provisions of the Plan and the Stock
        Holding Policy, as the Committee shall determine in its sole and
        absolute discretion.

        SECTION 5.     Federal Income Tax Treatment of Loans.

             For federal income tax purposes, interest on Loans shall be
        imputed on any interest free Loan extended under the Plan.  A Key
        Employee shall be deemed to have paid the imputed interest to the
        Company and the Company shall be deemed to have paid said imputed
        interest back to the Key Employee as additional compensation.
        The deemed interest payment shall be taxable to the Company as
        income, and may be deductible to the Key Employee to the extent
        allowable under the rules relating to investment interest.  The
        deemed compensation payment to the Key Employee shall be taxable
        to the employee and deductible to the Company, but shall also be
        subject to employment taxes such as FICA and FUTA.

        SECTION 6.     Maturity of Loans.

             Each Loan to a Key Employee hereunder shall be due and
        payable on demand by the Company.  If no such demand is made,
        then each Loan shall mature and the principal thereof shall
        become due and payable in five equal annual installments from the
        payment of annual cash incentive compensation (referred to as
                                        2PAGE

        bonus) to the Key Employee by the Company, beginning with the
        first such bonus payment to occur after the date of the Note
        evidencing the Loan, and on each of the next four bonus payment
        dates, provided that the Committee may, in its sole and absolute
        discretion, authorize such other maturity and repayment schedule
        as the Committee may determine.  Each Loan shall also become
        immediately due and payable in full, without demand, upon  the
        occurrence of any of the events set forth in the Note; provided
        that the Committee may, in its sole and absolute discretion,
        authorize an extension of the time for repayment of a Loan upon
        such terms and conditions as the Committee may determine.

        SECTION 7.     Amendment and Termination of the Plan.

             The Committee may from time to time alter or amend the Plan
        or the Stock Holding Policy in any respect, or terminate the Plan
        or the Stock Holding Policy at any time.  No such amendment or
        termination, however, shall alter or otherwise affect the terms
        and conditions of any Loan then outstanding to Key Employee
        without such Key Employee's written consent, except as otherwise
        provided herein or in the promissory note evidencing such Loan.

        SECTION 8.     Miscellaneous Provisions.

             (a)  No employee or other person shall have any claim or
        right to receive a Loan under the Plan, and no employee shall
        have any right to be retained in the employ of the Company due to
        his or her participation in the Plan.

             (b)  No Loan shall be made hereunder unless counsel for the
        Company shall be satisfied that such Loan will be in compliance
        with applicable federal, state and local laws.

             (c)  The expenses of the Plan shall be borne by the Company.

             (d)  The Plan shall be unfunded, and the Company shall not
        be required to establish any special or separate fund or to make
        any other segregation of assets to assure the making of any Loan
        under the Plan.

             (e)  Except as otherwise provided in Section 7 hereof, by
        accepting any Loan under the Plan, each Key Employee shall be
        conclusively deemed to have indicated his acceptance and
        ratification of, and consent to, any action taken under the Plan
        or the Stock Holding Policy by the Company, the Board of
        Directors of the Company or the Committee.

             (f)  The appropriate officers of the Company shall cause to
        be filed any reports, returns or other information regarding
        Loans hereunder, as may be required by any applicable statute,
        rule or regulation.

        SECTION 9.     Effective Date.
                                        3PAGE

             The Plan and the Stock Holding Policy shall become effective
        upon approval and adoption by the Committee.













                                        4PAGE

                               EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN


                              THERMO FIBERTEK INC.

                                 Promissory Note



        $_________                                                       
                                                Dated:____________


             For value  received, ________________,  an individual  whose
        residence is located at _______________________ (the "Employee"),
        hereby promises to pay to  Thermo Fibertek Inc. (the  "Company"),
        or assigns, ON DEMAND, but in any case on or before [insert  date
        which  is  the  fifth  anniversary  of  date  of  issuance]  (the
        "Maturity Date"), the  principal sum  of [loan  amount in  words]
        ($_______), or such part thereof as then remains unpaid,  without
        interest.   Principal shall  be payable  in lawful  money of  the
        United States of America, in immediately available funds, at  the
        principal office of  the Company or  at such other  place as  the
        Company may  designate  from  time  to time  in  writing  to  the
        Employee. 

              Unless the Company has already made a demand for payment in
        full of this Note, the Employee  agrees to repay the Company   an
        amount equal to 20% of the  initial principal amount of the  Note
        from the payment of annual cash incentive compensation  (referred
        to as bonus) to the Employee  by the Company, beginning with  the
        first such bonus payment  to occur after the  date of this  Note,
        and on each  of the next  four bonus payment  dates.  Any  amount
        remaining unpaid under this Note, if  no demand has been made  by
        the Company, shall be due and payable on the Maturity Date.

             This Note may be prepaid at  any time or from time to  time,
        in whole  or  in part,  without  any  premium or  penalty.    The
        Employee acknowledges and agrees that the Company has advanced to
        the Employee the principal  amount of this  Note pursuant to  the
        Company's Stock Holding Assistance Plan,  and that all terms  and
        conditions of such Plan are incorporated herein by reference.  

             The unpaid principal amount of this Note shall be and become
        immediately due  and payable  without notice  or demand,  at  the
        option of  the  Company,  upon  the  occurrence  of  any  of  the
        following events:

                  (a)  the termination of the Employee's employment  with
             the Company, with or without cause, for any reason or for no
             reason;

                  (b)  the death or disability of the Employee;

                                        5PAGE

                  (c)  the failure  of the  Employee to  pay his  or  her
             debts as they  become due, the  insolvency of the  Employee,
             the filing by or against the Employee of any petition  under
             the United  States Bankruptcy  Code (or  the filing  of  any
             similar  petition   under   the  insolvency   law   of   any
             jurisdiction),  or  the  making   by  the  Employee  of   an
             assignment or trust mortgage for the benefit of creditors or
             the appointment of  a receiver, custodian  or similar  agent
             with respect  to,  or  the  taking by  any  such  person  of
             possession of, any property of the Employee; or

                  (d)  the issuance of any writ of attachment, by trustee
             process or otherwise, or any restraining order or injunction
             not removed, repealed or  dismissed within thirty (30)  days
             of issuance, against or affecting the person or property  of
             the Employee or any liability or obligation of the  Employee
             to the Company.

             In case any payment  herein provided for  shall not be  paid
        when due,  the Employee  further  promises to  pay all  costs  of
        collection, including all reasonable attorneys' fees.

             No  delay  or  omission  on  the  part  of  the  Company  in
        exercising any right hereunder shall operate as a waiver of  such
        right or of any other right of the Company, nor shall any  delay,
        omission or waiver  on any  one occasion be  deemed a  bar to  or
        waiver of the  same or any  other right on  any future  occasion.
        The  Employee  hereby  waives  presentment,  demand,  notice   of
        prepayment,  protest  and  all  other  demands  and  notices   in
        connection with the delivery, acceptance, performance, default or
        enforcement of this Note.  The undersigned hereby assents to  any
        indulgence  and  any  extension  of  time  for  payment  of   any
        indebtedness  evidenced  hereby  granted  or  permitted  by   the
        Company.  

             This Note  has been  made pursuant  to the  Company's  Stock
        Holding Assistance Plan and shall be governed by and construed in
        accordance with, such Plan and the laws of the State of  Delaware
        and shall have the effect of a sealed instrument.


                                      _______________________________

                                      Employee Name: _________________


        ________________________
        Witness



                                                                   Exhibit 11


                              THERMO FIBERTEK INC.

                        Computation Of Earnings Per Share


                                                   Year Ended
                                    ---------------------------------------
                                        Dec. 28,      Dec. 30,     Dec. 31,
                                            1996          1995         1994
                                    ------------  ------------  -----------
    Computation of Fully Diluted
      Earnings per Share:
    Income:
      Net income                    $19,894,000   $20,249,000   $10,894,000

      Add: Convertible debt
           interest, net of tax         315,000       315,000       271,000
                                    -----------   -----------   -----------
      Income applicable to common
        stock assuming full
        dilution (a)                $20,209,000   $20,564,000   $11,165,000
                                    -----------   -----------   -----------
    Shares:
      Weighted average shares
        outstanding                  61,040,179    60,784,640    60,393,818

      Add: Shares issuable from
           assumed conversion of
           subordinated convertible
           obligations                1,888,113     1,888,113     1,619,121

           Shares issuable from
           assumed exercise of
           options (as determined
           by the application of
           the treasury stock
           method)                    1,414,480     1,590,708     1,011,399
                                    -----------   -----------   -----------
      Weighted average shares
        outstanding, as
        adjusted (b)                 64,342,772    64,263,461    63,024,338
                                    -----------   -----------   -----------
    Fully Diluted Earnings per
      Share (a) / (b)               $       .31   $       .32   $       .18
                                    ===========   ===========   ===========

                                                                   Exhibit 13























                              THERMO FIBERTEK INC.

                        Consolidated Financial Statements

                                      1996
PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                        Consolidated Statement of Income

    (In thousands except per share amounts)        1996       1995      1994
    ------------------------------------------------------------------------
    Revenues (includes $1,876 and
      $14,737 from related party
      in 1996 and 1995; Notes 9 and 12)        $192,209  $206,743   $162,625
                                               --------  --------   --------
    Costs and Operating Expenses:
      Cost of revenues (includes $639
        and $8,797 for related party
        revenues in 1996 and 1995; Note 9)      109,537   123,094     96,581
      Selling, general, and administrative
        expenses (Note 9)                        47,093    48,659     43,316
      Research and development expenses           5,460     4,061      3,812
                                               --------  --------   --------
                                                162,090   175,814    143,709
                                               --------  --------   --------

    Operating Income                             30,119    30,929     18,916

    Interest Income                               3,568     3,497      1,952
    Interest Expense                               (123)     (188)      (229)
    Interest Expense, Related Party (Note 8)       (540)   (1,178)      (708)
                                               --------  --------   --------
    Income Before Provision for Income Taxes
      and Minority Interest                      33,024    33,060     19,931
    Provision for Income Taxes (Note 7)          12,684    12,578      7,570
    Minority Interest Expense                       446       233      1,467
                                               --------  --------   --------
    Net Income                                 $ 19,894  $ 20,249   $ 10,894
                                               ========  ========   ========
    Earnings per Share:
      Primary                                  $    .33  $    .33   $    .18
                                               ========  ========   ========
      Fully diluted                            $    .31  $    .32   $    .18
                                               ========  ========   ========
    Weighted Average Shares:
      Primary                                    61,040    60,785     60,394
                                               ========  ========   ========
      Fully diluted                              64,343    64,263     63,024
                                               ========  ========   ========


    The accompanying notes are an integral part of these consolidated
    financial statements.

                                        2PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                           Consolidated Balance Sheet

    (In thousands)                                           1996       1995
    ------------------------------------------------------------------------
    Assets
    Current Assets:
      Cash and cash equivalents                          $109,805  $ 57,028
      Available-for-sale investments, at quoted
        market value (amortized cost of $2,781 in
        1995; Note 2)                                           -     2,784
      Accounts receivable, less allowances of
        $1,948 and $2,552                                  38,115    43,085
      Unbilled contract costs and fees                      1,236     1,921
      Inventories                                          24,467    27,102
      Prepaid income taxes (Note 7)                         7,220     9,069
      Other current assets                                  1,582     1,287
                                                         --------  --------
                                                          182,425   142,276
                                                         --------  --------
    Property, Plant, and Equipment, at Cost, Net           26,540    21,209
                                                         --------  --------
    Other Assets (Note 4)                                   8,720     1,298
                                                         --------  --------
    Cost in Excess of Net Assets of Acquired
      Companies (Notes 3 and 7)                            39,547    34,888
                                                         --------  --------
                                                         $257,232  $199,671
                                                         ========  ========









                                        3PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                     Consolidated Balance Sheet (continued)

    (In thousands except share amounts)                      1996       1995
    ------------------------------------------------------------------------
    Liabilities and Shareholders' Investment
    Current Liabilities:
      Accounts payable                                   $ 16,805  $ 20,747
      Accrued payroll and employee benefits                10,989    11,115
      Billings in excess of contract costs and fees         2,540     3,018
      Accrued warranty costs                                7,752     9,759
      Accrued income taxes (includes $1,340 and
        $1,521 due to parent company)                       2,414     4,430
      Other accrued expenses                                8,707    11,466
      Due to parent company and affiliated
        companies (Note 8)                                 17,609    10,859
                                                         --------  --------
                                                           66,816    71,394
                                                         --------  --------
    Deferred Income Taxes and Other Deferred
      Items (Note 7)                                        3,168     3,031
                                                         --------  --------
    Long-term Obligations (including $15,000 due
      to parent company in 1995; Note 8)                       34    15,041
                                                         --------  --------

    Minority Interest (Note 3)                                277       574
                                                         --------  --------

    Commitments and Contingency (Note 10)

    Common Stock of Subsidiary Subject to Redemption
      ($60,116 redemption value; Note 1)                   56,087         -
                                                         --------  --------

    Shareholders' Investment (Notes 5 and 6):
      Common stock, $.01 par value, 75,000,000
        shares authorized; 61,154,930 and
        40,623,919 shares issued                              612       406
      Capital in excess of par value                       65,951    65,222
      Retained earnings                                    66,181    46,287
      Treasury stock at cost, 23,550 and 33,223
        shares                                               (360)     (446)
      Cumulative translation adjustment                    (1,534)   (1,840)
      Net unrealized gain on available-for-sale
        investments (Note 2)                                    -         2
                                                         --------  --------
                                                          130,850   109,631
                                                         --------  --------
                                                         $257,232  $199,671
                                                         ========  ========

    The accompanying notes are an integral part of these consolidated
    financial statements.


                                        4PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                      Consolidated Statement of Cash Flows

    (In thousands)                                 1996       1995     1994
    -----------------------------------------------------------------------
    Operating Activities:
      Net income                              $ 19,894   $ 20,249  $ 10,894
      Adjustments to reconcile net
        income to net cash provided 
        by operating activities:
          Depreciation and amortization          4,983      4,760     4,240
          Provision for losses on
            accounts receivable                   (450)       440       508
          Minority interest expense                446        233     1,467
          Deferred income tax expense
            (benefit)                            2,017     (1,876)     (406)
          Other noncash items                     (316)      (111)      (29)
          Changes in current accounts,
            excluding the effects of
            acquisitions:
              Accounts receivable                5,724     (8,052)   (3,800)
              Inventories and unbilled 
                contract costs and fees          3,139     (3,113)   (2,440)
              Other current assets               1,468        398      (995)
              Accounts payable                  (3,436)     3,731       418
              Other current liabilities         (6,417)     1,718     8,098
                                              --------   --------  --------
    Net cash provided by operating activities   27,052     18,377    17,955
                                              --------   --------  --------
    Investing Activities:
      Acquisitions, net of cash acquired
        (Note 3)                               (12,066)   (12,783)        -
      (Issuance) repayment of notes
        receivable (Note 4)                     (6,000)       150       240
      Purchases of available-for-sale
        investments                                  -          -    (4,250)
      Proceeds from sale and maturities of
        available-for-sale investments           2,750      4,700     1,330
      Purchases of property, plant, and
        equipment                               (3,936)    (3,493)   (3,126)
      Other                                       (150)       440       503
                                              --------   --------  --------
    Net cash used in investing activities      (19,402)   (10,986)   (5,303)
                                              --------   --------  --------
    Financing Activities:
      Net proceeds from issuance of Company
        and subsidiary common stock (Note 1)    55,923        235       442
      Issuance (repayment) of short-term
        obligations (Note 8)                   (10,400)    10,400    (5,000)
      Repayment of long-term obligations             -       (385)     (203)
                                              --------   --------  --------
    Net cash provided by (used in) financing
      activities                              $ 45,523   $ 10,250  $ (4,761)
                                              --------   --------  --------
                                        5PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                Consolidated Statement of Cash Flows (continued)

    (In thousands)                                 1996      1995      1994
    -----------------------------------------------------------------------
    Exchange Rate Effect on Cash              $   (396) $  2,137   $  1,763
                                              --------  --------   --------
    Increase in Cash and Cash Equivalents       52,777    19,778      9,654
    Cash and Cash Equivalents at Beginning
      of Year                                   57,028    37,250     27,596
                                              --------  --------   --------
    Cash and Cash Equivalents at End of Year  $109,805  $ 57,028   $ 37,250
                                              ========  ========   ========

    Cash Paid For:
      Interest                                $    662  $  1,391   $    947
      Income taxes                            $ 12,625  $ 14,760   $  5,472

    Noncash Activities:
      Retirement of subordinated convertible
        note                                  $      -  $      -   $(15,000)
      Issuance of subordinated convertible
        note                                  $      -  $      -   $ 15,000
      Issuance of Company common stock in 
        connection with the redemption of
        Fiberprep stock (Note 3)              $      -  $  1,428   $      -

      Fair value of assets of acquired
        company                               $ 12,480  $      -   $      -
      Cash paid for acquired company           (12,070)        -          -
                                              --------  --------   --------

        Liabilities assumed of acquired
          company                             $    410  $      -   $      -
                                              ========  ========   ========


    The accompanying notes are an integral part of these consolidated
    financial statements.




                                        6PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

               Consolidated Statement of Shareholders' Investment

    (In thousands)                                1996       1995       1994
    ------------------------------------------------------------------------
    Common Stock, $.01 Par Value
      Balance at beginning of year           $    406   $    269    $    268
      Issuance of stock under employees'
        and directors' stock plans                  2          1           1
      Effect of three-for-two stock splits        204        135           -
      Issuance of Company common stock for
        redemption of Fiberprep stock
        (Note 3)                                    -          1           -
                                             --------   --------    --------
        Balance at end of year                    612        406         269
                                             --------   --------    --------

    Capital in Excess of Par Value
      Balance at beginning of year             65,222     62,954      62,072
      Issuance of stock under employees'
        and directors' stock plans                 54        680         441
      Effect of three-for-two stock splits       (204)      (135)          -
      Issuance of Company common stock for
        redemption of Fiberprep stock
        (Note 3)                                    -      1,427           -
      Tax benefit related to employees'
        and directors' stock plans                781        296         428
      Effect of majority-owned subsidiary's
        equity transactions                        98          -          13
                                             --------   --------    --------
        Balance at end of year                 65,951     65,222      62,954
                                             --------   --------    --------

    Retained Earnings
      Balance at beginning of year             46,287     26,038      15,144
      Net income                               19,894     20,249      10,894
                                             --------   --------    --------
        Balance at end of year                 66,181     46,287      26,038
                                             --------   --------    --------

    Treasury Stock
      Balance at beginning of year               (446)         -           -
      Activity under employees' and
        directors' stock plans                     86       (446)          -
                                             --------   --------    --------
        Balance at end of year                   (360)      (446)          -
                                             --------   --------    --------

    Cumulative Translation Adjustment
      Balance at beginning of year             (1,840)    (4,539)     (6,731)
      Translation adjustment                      306      2,699       2,192
                                             --------   --------    --------
      Balance at end of year                 $ (1,534)  $ (1,840)   $ (4,539)
                                             --------   --------    --------

                                        7PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

         Consolidated Statement of Shareholders' Investment (continued)

    (In thousands)                                1996       1995       1994
    ------------------------------------------------------------------------
    Net Unrealized Gain (Loss) on Available-
      for-sale Investments
      Balance at beginning of year            $     2   $    (26)   $      -
      Change in net unrealized gain (loss)
        on available-for-sale investments
        (Note 2)                                   (2)        28         (42)
      Effect of change in accounting
        principle (Note 2)                          -          -          16
                                             --------   --------    --------
      Balance at end of year                        -          2         (26)
                                             --------   --------    --------
    Total Shareholders' Investment           $130,850   $109,631    $ 84,696
                                             ========   ========    ========


    The accompanying notes are an integral part of these consolidated
    financial statements.

















                                        8PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies

    Nature of Operations
        Thermo Fibertek Inc. (the Company) designs and manufactures
    processing machinery and accessories for the paper and paper-recycling
    industries. The Company's principal products include custom-engineered
    systems and equipment for the preparation of wastepaper for conversion
    into recycled paper, accessory equipment and related consumables
    important to the efficient operation of papermaking machines, and
    water-management systems essential for draining, purifying, and recycling
    process water.
    Relationship with Thermo Electron Corporation
        The Company was incorporated in November 1991 as a wholly owned
    subsidiary of Thermo Electron Corporation (Thermo Electron). As of
    December 28, 1996, Thermo Electron owned 51,520,895 shares of the
    Company's common stock, representing 84% of such stock outstanding.

    Principles of Consolidation
        The accompanying financial statements include the accounts of the
    Company, its wholly owned subsidiaries, its 68%-owned public subsidiary
    Thermo Fibergen Inc. (Thermo Fibergen), and its 95%-owned Fiberprep, Inc.
    (Fiberprep) subsidiary (Note 3). All significant intercompany accounts
    and transactions have been eliminated.

    Fiscal Year
        The Company has adopted a fiscal year ending the Saturday nearest
    December 31. References to 1996, 1995, and 1994 are for the fiscal years
    ended December 28, 1996, December 30, 1995, and December 31, 1994,
    respectively. The Company's E. & M. Lamort, S.A. (Lamort) subsidiary,
    based in France, has a fiscal year ending on the Saturday nearest
    November 30 to allow sufficient time for the Company to receive Lamort's
    financial statements.
    Revenue Recognition
        The Company recognizes revenues upon shipment of its products. The
    Company provides a reserve for its estimate of warranty costs at the time
    of shipment. Revenues and profits on large contracts are recognized using
    the percentage-of-completion method. Revenues recorded under the
    percentage-of-completion method were $31,066,000 in 1996, $51,741,000 in
    1995, and $42,122,000 in 1994. The percentage of completion is determined
    by relating the actual costs incurred to date to management's estimate of
    total costs to be incurred on each contract. If a loss is indicated on
    any contract in process, a provision is made currently for the entire
    loss. The Company's contracts generally provide for billing of customers
    upon the attainment of certain milestones specified in each contract.
    Revenues earned on contracts in process in excess of billings are
    classified as unbilled contract costs and fees, and amounts billed in
    excess of revenues are classified as billings in excess of contract costs
    and fees in the accompanying balance sheet. There are no significant
    amounts included in the accompanying balance sheet that are not expected
    to be recovered from existing contracts at current contract values, or
    that are not expected to be collected within one year, including amounts
    that are billed but not paid under retainage provisions.
                                        9PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies
        (continued)

    Stock-based Compensation Plans
        The Company applies Accounting Principles Board Opinion (APB) No. 25,
    "Accounting for Stock Issued to Employees" and related interpretations in
    accounting for its stock-based compensation plans (Note 5). Accordingly,
    no accounting recognition is given to stock options granted at fair
    market value until they are exercised. Upon exercise, net proceeds,
    including tax benefits realized, are credited to equity.

    Income Taxes
        The Company and Thermo Electron have a tax allocation agreement under
    which the Company and its subsidiaries, exclusive of its foreign
    operations, its Fiberprep subsidiary, and, beginning in 1996, its Thermo
    Fibergen subsidiary, are included in the consolidated federal and certain
    state income tax returns filed by Thermo Electron. The agreement provides
    that in years in which these entities have taxable income, the Company
    will pay to Thermo Electron amounts comparable to the taxes it would have
    paid if the Company had filed separate tax returns. If Thermo Electron's
    equity ownership of the Company were to drop below 80%, the Company would
    be required to file its own federal income tax returns.
        In accordance with Statement of Financial Accounting Standards (SFAS)
    No. 109, "Accounting for Income Taxes," the Company recognizes deferred
    income taxes based on the expected future tax consequences of differences
    between the financial statement basis and the tax basis of assets and
    liabilities calculated using enacted tax rates in effect for the year in
    which the differences are expected to be reflected in the tax return.

    Earnings per Share
        Primary earnings per share have been computed based on the weighted
    average number of shares outstanding during the year. Because the effect
    of the assumed exercise of the Company's stock options would be
    immaterial, they have been excluded from the primary earnings per share
    calculation. Fully diluted earnings per share have been computed assuming
    conversion of the Company's subordinated convertible note and elimination
    of the related interest expense, where dilutive, as well as the exercise
    of stock options and their related income tax effects.

    Stock Split
        All share and per share information, except as noted below, has been
    restated to reflect three-for-two stock splits, effected in the form of
    50% stock dividends, which were distributed in June 1996 and September
    1995. Share information in the accompanying 1995 balance sheet has not
    been restated for the stock split distributed in June 1996.

    Cash and Cash Equivalents
        As of December 28, 1996, $75,566,000 of the Company's cash
    equivalents were invested in a repurchase agreement with Thermo Electron.
    Under this agreement, the Company in effect lends excess cash to Thermo
    Electron, which Thermo Electron collateralizes with investments
    principally consisting of U.S. government agency securities, corporate
    notes, commercial paper, money market funds, and other marketable

                                       10PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies
        (continued)

    securities, in the amount of at least 103% of such obligation. The
    Company's funds subject to the repurchase agreement are readily
    convertible into cash by the Company. The repurchase agreement earns a
    rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
    points, set at the beginning of each quarter. As of year-end 1996 and
    1995, the Company's cash equivalents also include money market fund
    investments of the Company's foreign subsidiaries, which have original
    maturities of three months or less. Cash equivalents are carried at cost,
    which approximates market value.

    Inventories
        Inventories are stated at the lower of cost (on a first-in, first-
    out or weighted average basis) or market value and include materials,
    labor, and manufacturing overhead. The components of inventories are as
    follows:

    (In thousands)                                           1996      1995
    -----------------------------------------------------------------------
    Raw materials and supplies                            $13,778   $14,283
    Work in process                                         4,180     7,577
    Finished goods                                          6,509     5,242
                                                          -------   -------
                                                          $24,467   $27,102
                                                          =======   =======

    Property, Plant, and Equipment
        The costs of additions and improvements are capitalized, while
    maintenance and repairs are charged to expense as incurred. The Company
    provides for depreciation and amortization using the straight-line method
    over the estimated useful lives of the property as follows: buildings, 15
    to 50 years; machinery and equipment, 2 to 15 years; and leasehold
    improvements, the shorter of the term of the lease or the life of the
    asset. Property, plant, and equipment consists of the following:

    (In thousands)                                           1996      1995
    -----------------------------------------------------------------------
    Land and buildings                                    $22,293  $18,891
    Machinery, equipment, and leasehold improvements       35,576   31,085
                                                          -------  -------
                                                           57,869   49,976
    Less: Accumulated depreciation and amortization        31,329   28,767
                                                          -------  -------
                                                          $26,540  $21,209
                                                          =======  =======

                                       11PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies
        (continued)

    Other Assets
        Other assets in the accompanying balance sheet includes the cost of
    patents acquired in 1996 that are amortized using the straight-line
    method over an estimated useful life of 12 years. These assets were
    $958,000, net of accumulated amortization of $42,000, at year-end 1996.

    Cost in Excess of Net Assets of Acquired Companies
        The excess of cost over the fair value of net assets of acquired
    companies is amortized using the straight-line method over periods
    ranging between 20 to 40 years. Accumulated amortization was $3,521,000
    and $2,523,000 at year-end 1996 and 1995, respectively. The Company
    assesses the future useful life of this asset whenever events or changes
    in circumstances indicate that the current useful life has diminished.
    The Company considers the future undiscounted cash flows of the acquired
    companies in assessing the recoverability of this asset. If impairment
    has occurred, any excess of carrying value over fair value is recorded as
    a loss.

    Common Stock of Subsidiary Subject to Redemption
        In September 1996 Thermo Fibergen sold 4,715,000 units, each unit
    consisting of one share of Thermo Fibergen common stock and one
    redemption right, in an initial public offering at $12.75 per unit for
    net proceeds of $55,781,000. The common stock and redemption rights began
    trading separately on December 13, 1996. Holders of a redemption right
    have the option to require Thermo Fibergen to redeem, in September 2000
    and 2001, one share of Thermo Fibergen common stock at $12.75 per share.
    The redemption rights carry terms that generally provide for their
    expiration if the closing price of Thermo Fibergen's common stock exceeds
    $19 1/8 for 20 of any 30 consecutive trading days prior to September
    2001. The difference between the redemption value and the original
    carrying amount of common stock of subsidiary subject to redemption is
    accreted over the period ending September 2000, which corresponds with
    the first redemption period. The accretion is charged to minority
    interest expense in the accompanying statement of income. The redemption
    rights are guaranteed, on a subordinated basis, by Thermo Electron. The
    Company has agreed to reimburse Thermo Electron in the event Thermo
    Electron is required to make a payment under the guarantee.

    Foreign Currency
        All assets and liabilities of the Company's foreign subsidiaries are
    translated at year-end exchange rates, and revenues and expenses are
    translated at average exchange rates for the year, in accordance with
    SFAS No. 52, "Foreign Currency Translation." Resulting translation
    adjustments are reflected as a separate component of shareholders'
    investment titled "Cumulative translation adjustment." Foreign currency
    transaction gains and losses are included in the accompanying statement
    of income and are not material for the three years presented.
                                       12PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    1.  Nature of Operations and Summary of Significant Accounting Policies
        (continued)

    Use of Estimates
        The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities,
    disclosure of contingent assets and liabilities at the date of the
    financial statements, and the reported amounts of revenues and expenses
    during the reporting period. Actual results could differ from those
    estimates.

    Presentation
        Certain amounts in 1995 and 1994 have been reclassified to conform to
    the presentation in the 1996 financial statements.

    2.  Available-for-sale Investments

        Effective January 2, 1994, the Company adopted SFAS No. 115,
    "Accounting for Certain Investments in Debt and Equity Securities." In
    accordance with SFAS No. 115, the Company's debt and marketable equity
    securities are considered available-for-sale investments in the
    accompanying balance sheet and are carried at market value, with the
    difference between cost and market value, net of related tax effects,
    recorded currently as a component of shareholders' investment titled "Net
    unrealized gain (loss) on available-for-sale investments." Effect of
    change in accounting principle in the accompanying 1994 statement of
    shareholders' investment represents the unrealized gain, net of related
    tax effects, pertaining to available-for-sale investments held by the
    Company on January 2, 1994.
        Available-for-sale investments in the accompanying 1995 balance sheet
    represents investments in corporate bonds. The difference between the
    market value and the cost basis of available-for-sale investments at
    December 30, 1995, was $3,000, which represents gross unrealized gains on
    those investments.

    3.  Acquisitions

        In July 1996, Thermo Fibergen acquired substantially all of the
    assets, subject to certain liabilities, of Granulation Technology, Inc.
    (Granulation Technology) and Biodac, a division of Edward Lowe
    Industries, Inc., for $12,070,000 in cash. The acquisition has been
    accounted for using the purchase method of accounting, and the combined
    results of operations of Granulation Technology and Biodac have been
    included in the accompanying financial statements from the date of
    acquisition. The cost of the acquisition exceeded the estimated fair
    value of the acquired net assets by $4,862,000, which is being amortized
    over 20 years. Allocation of the purchase price for the acquisition was
    based on the estimated fair value of net assets acquired and is subject
    to adjustment upon finalization of the purchase price allocation. Pro
    forma data is not presented since the acquisition of Granulation
    Technology and Biodac was not material to the Company's results of
    operations.
                                       13PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    3.  Acquisitions (continued)

        In January 1995, the Company increased its ownership of Fiberprep
    from 51% to 95% through a redemption by Fiberprep of a portion of its
    stock owned by Aikawa Iron Works Co., Ltd. (Aikawa) for a total purchase
    price equal to (a) $12,783,000 in cash, which included a royalty payment
    of $845,000, (b) a ten-year 1% royalty on sales of certain Aikawa
    products, and (c) the issuance of 225,000 shares of the Company's common
    stock. The acquisition has been accounted for using the purchase method
    of accounting. The cost of the acquisition exceeded the estimated fair
    value of the incremental net assets by $7,516,000, which is being
    amortized over 40 years. The accompanying statement of income includes
    royalty expense in connection with this agreement of $66,000 and $258,000
    in 1996 and 1995, respectively.
        Based on unaudited data, if the acquisition of the additional 44%
    ownership in Fiberprep had occurred at the beginning of 1994, net income
    and earnings per share on a pro forma basis for 1994 would have been
    $11,468,000 and $.19, respectively. The pro forma results are not
    necessarily indicative of future operations or the actual results that
    would have occurred had the redemption by Fiberprep been made at the
    beginning of 1994. 

    4.  Note Receivable

        In connection with a proposed engineering, procurement, and
    construction project, the Company loaned $6.0 million to Tree-Free Fiber
    Company, LLC (Tree-Free) during 1996. The $6.0 million note to the
    Company is secured by a first priority security interest in the
    membership (equity) interests of the equity owners of Tree-Free, as well
    as certain other assets of Tree-Free. This project has been indefinitely
    delayed due to the current weakness in pulp prices and, therefore, the
    Company expects the project will not proceed in the near future.
    Tree-Free was unable to repay the note upon its original maturity and the
    Company consented to several payment extensions. On March 10, 1997, the
    Company formally notified Tree-Free that Tree-Free was in default of its
    obligations, and demanded payment in full within seven days. If Tree-Free
    is unable to cure the default within seven days, or to make other
    arrangements acceptable to the Company, the Company intends to exercise
    its rights under its security agreement to cause all of such membership
    interests to be transferred to the Company. In such event, the Company
    expects that it will operate an existing tissue mill owned by Tree-Free,
    with the intent of either selling the mill or membership interests at one
    or more public or private sales as soon as practicable thereafter.
    Although no assurance can be given as to either the timing of any such
    sale or the amount of the proceeds that may be received therefrom, the
    Company believes that the fair value of its security exceeds the carrying
    amount of the note from Tree-Free.

                                       14PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Employee Benefit Plans

    Stock-based Compensation Plans

    Stock Option Plans
    ------------------
        The Company has stock-based compensation plans for its key employees,
    directors, and others. Two of these plans, adopted in 1991, permit the
    grant of nonqualified and incentive stock options. A third plan, adopted
    in 1994, permits the grant of a variety of stock and stock-based awards
    as determined by the human resources committee of the Company's Board of
    Directors (the Board Committee), including restricted stock, stock
    options, stock bonus shares, or performance-based shares. To date, only
    nonqualified stock options have been awarded under this plan. The option
    recipients and the terms of options granted under these plans are
    determined by the Board Committee. Generally, options granted to date are
    exercisable immediately, but are subject to certain transfer restrictions
    and the right of the Company to repurchase shares issued upon exercise of
    the options at the exercise price, upon certain events. The restrictions
    and repurchase rights generally lapse ratably over a five to ten year
    period, depending on the term of the option, which may range from five to
    twelve years. In addition, under certain options, shares acquired upon
    exercise are restricted from resale until retirement or other events.
    Nonqualified options may be granted at any price determined by the Board
    Committee, although incentive stock options must be granted at not less
    than the fair market value of the Company's stock on the date of grant.
    To date, all options have been granted at fair market value. The Company
    also has a directors' stock option plan, adopted in 1991, that provides
    for the grant of stock options to outside directors pursuant to a formula
    approved by the Company's shareholders. Options awarded under this plan
    are exercisable six months after the date of grant and generally expire
    three or seven years after the date of grant. In addition to the
    Company's stock-based compensation plans, certain officers and key
    employees may also participate in the stock-based compensation plans of
    Thermo Electron.

    Employee Stock Purchase Program
    -------------------------------
        Substantially all of the Company's full-time U.S. employees are
    eligible to participate in an employee stock purchase program sponsored
    by the Company and Thermo Electron. Under this program, shares of the
    Company's and Thermo Electron's common stock can be purchased at the end
    of a 12-month period at 95% of the fair market value at the beginning of
    the period, and the shares purchased are subject to a six-month resale
    restriction. Prior to November 1, 1995, the applicable shares of common
    stock could be purchased at 85% of the fair market value at the beginning
    of the period, and the shares purchased were subject to a one-year resale
    restriction. Shares are purchased through payroll deductions of up to 10%
    of each participating employee's gross wages. During 1996, 1995, and
    1994, the Company issued 30,830 shares, 38,981 shares, and 67,602 shares,
    respectively, of its common stock under this program.

                                       15PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Employee Benefit Plans (continued)

    Pro Forma Stock-based Compensation Expense
        In October 1995, the Financial Accounting Standards Board issued SFAS
    No. 123, "Accounting for Stock-Based Compensation," which sets forth a
    fair-value based method of recognizing stock-based compensation expense.
    As permitted by SFAS No. 123, the Company has elected to continue to
    apply APB No. 25 to account for its stock-based compensation plans. Had
    compensation cost for awards granted in 1996 and 1995 under the Company's
    stock-based compensation plans been determined based on the fair value at
    the grant dates consistent with the method set forth under SFAS No. 123,
    the effect on the Company's net income and earnings per share would have
    been as follows:

    (In thousands except per share amounts)                 1996         1995
    -------------------------------------------------------------------------
    Net income:
      As reported                                       $19,894      $20,249
      Pro forma                                          19,454       20,118
    Primary earnings per share:
      As reported                                           .33          .33
      Pro forma                                             .32          .33
    Fully diluted earnings per share:
      As reported                                           .31          .32
      Pro forma                                             .31          .32

        Because the method prescribed by SFAS No. 123 has not been applied to
    options granted prior to January 1, 1995, the resulting pro forma
    compensation expense may not be representative of the amount to be
    expected in future years. Pro forma compensation expense for options
    granted is reflected over the vesting period; therefore, future pro forma
    compensation expense may be greater as additional options are granted.
        The fair value of each option grant was estimated on the grant date
    using the Black-Scholes option-pricing model with the following
    weighted-average assumptions:
                                                          1996         1995
    -----------------------------------------------------------------------
    Volatility                                             26%          26%
    Risk-free interest rate                               5.9%         5.9%
    Expected life of options                         4.7 years    4.6 years

        The Black-Scholes option-pricing model was developed for use in
    estimating the fair value of traded options which have no vesting
    restrictions and are fully transferable. In addition, option-pricing
    models require the input of highly subjective assumptions including
    expected stock price volatility. Because the Company's employee stock
    options have characteristics significantly different from those of traded
    options, and because changes in the subjective input assumptions can
    materially affect the fair value estimate, in management's opinion, the
    existing models do not necessarily provide a reliable single measure of
    the fair value of its employee stock options.

                                       16PAGE

   Thermo Fibertek Inc.                              1996 Financial Statements

                   Notes to Consolidated Financial Statements

   5.  Employee Benefit Plans (continued)

   Stock Option Activity
      A summary of the Company's stock option activity is as follows:

                              1996              1995               1994
                        ----------------  ----------------  -----------------
                                Weighted          Weighted           Range of
                        Number   Average  Number   Average  Number     Option
   (Shares in               of  Exercise      of  Exercise      of     Prices
   thousands)           Shares     Price  Shares     Price  Shares  per Share
   --------------------------------------------------------------------------
   Options outstanding,                                              $ 3.00-
     beginning of year  3,783    $ 4.52    3,782   $ 3.91    3,804     6.88
                                                                       6.28
       Granted            102     11.80      315    10.70        6     6.88

       Exercised         (282)     3.25     (236)    3.08      (27)    3.00

       Forfeited          (33)     6.15      (78)    4.53       (1)    6.15
                        -----              -----             -----
   Options outstanding,                                              $ 3.00-
     end of year        3,570    $ 4.81    3,783   $ 4.52    3,782     6.88
                        =====    ======    =====   ======    =====   ======
                                                                     $ 3.00-
   Options exercisable  3,570    $ 4.81    3,783   $ 4.52    3,780     6.88
                        =====    ======    =====   ======    =====   ======
   Options available
     for grant          2,410              2,478             2,715
                        =====              =====             =====
   Weighted average fair
     value per share of
     options granted
     during year                 $ 3.89            $ 3.60
                                 ======            ======

        A summary of the status of the Company's stock options at December 28,
   1996, is as follows:
                                        Options Outstanding and Exercisable
                                        ------------------------------------
                                                       Weighted
                                                        Average     Weighted
                                        Number        Remaining      Average
   Range of                                 of      Contractual     Exercise
   Exercise Prices                      Shares             Life        Price
   -------------------------------------------------------------------------
   (Shares in thousands)
   $ 3.00 - $ 5.83                       2,160        3.2 years      $ 3.00
     5.84 -   8.66                         993        7.8 years        6.16
     8.67 -  11.49                         387        6.0 years       10.71
    11.50 -  14.32                          30       11.2 years       14.32
                                         -----
   $ 3.00 - $14.32                       3,570        4.9 years      $ 4.81
                                         =====
                                       17PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    5.  Employee Benefit Plans (continued)

    401(k) Savings Plan
       Two of the Company's domestic subsidiaries participate in Thermo
    Electron's 401(k) savings plan. Contributions to the plan are made by
    both the employee and the Company. Company contributions are based upon
    the level of employee contributions. For this plan, the Company
    contributed and charged to expense $449,000, $449,000, and $382,000 in
    1996, 1995, and 1994, respectively.

    Profit-sharing Plans
        One of the Company's domestic subsidiaries has adopted a profit-
    sharing plan under which the Company annually contributes 10% of the
    subsidiary's profit-sharing net income, which equals net income before
    profit-sharing expense. All contributions are immediately vested. In
    addition, one of the Company's foreign subsidiaries maintains a
    state-mandated profit-sharing plan and a voluntary profit-sharing plan,
    which the Company has agreed with its trade unions to maintain. Under the
    state-mandated plan, the Company contributes 0-13% of the subsidiary's
    net profit after taxes reduced by 5% of its shareholders' investment.
    Contributions become fully vested after five years. The voluntary plan
    provides for the subsidiary to contribute 8-10% of profit after taxes in
    excess of 5% of its revenues. Contributions become fully vested in May of
    the following year. For these plans, the Company contributed and charged
    to expense $1,263,000, $1,215,000, and $1,189,000 in 1996, 1995, and
    1994, respectively.

    6.  Common Stock

        At December 28, 1996, the Company had reserved 8,630,224 unissued
    shares of its common stock for possible issuance under stock-based
    compensation plans and for issuance upon possible conversion of the
    Company's subordinated convertible note.

    7.  Income Taxes

        The components of income before provision for income taxes and
    minority interest in the accompanying statement of income are as follows:

    (In thousands)                                1996       1995      1994
    -----------------------------------------------------------------------
    Domestic                                  $17,515    $20,472    $13,831
    Foreign                                    15,509     12,588      6,100
                                              -------    -------    -------

                                              $33,024    $33,060    $19,931
                                              =======    =======    =======


                                       18PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    7.  Income Taxes (continued)

        The components of the provision for income taxes in the accompanying
    statement of income are as follows:
    (In thousands)                                 1996      1995       1994
    ------------------------------------------------------------------------
    Currently payable:
      Federal                                   $ 5,672   $ 7,915    $ 4,590
      Foreign                                     3,382     4,776      2,205
      State                                       1,613     1,763      1,181
                                                -------   -------   --------
                                                 10,667    14,454      7,976
                                                -------   -------   --------
    Deferred (prepaid), net:
      Federal                                       142    (1,312)      (435)
      Foreign                                     1,813      (286)        95
      State                                          62      (278)       (66)
                                                -------   -------   --------
                                                  2,017    (1,876)      (406)
                                                -------   -------    -------
                                                $12,684   $12,578    $ 7,570
                                                =======   =======    =======

        The Company receives a tax deduction upon exercise of nonqualified
    stock options by employees for the difference between the exercise price
    and the market price of the Company's common stock on the date of
    exercise. The provision for income taxes that is currently payable does
    not reflect $781,000, $296,000, and $428,000 of tax benefits from
    exercises of stock options that have been allocated to capital in excess
    of par value in 1996, 1995, and 1994, respectively.
        The deferred provision for income taxes in 1995 does not reflect
    $2,409,000 of tax benefits used to reduce cost in excess of net assets of
    acquired companies.
        The provision for income taxes in the accompanying statement of
    income differs from the provision calculated by applying the statutory
    federal income tax rate of 35% in 1996 and 1995 and 34% in 1994 to income
    before provision for income taxes and minority interest due to the
    following:

    (In thousands)                                 1996      1995      1994
    -----------------------------------------------------------------------
    Provision for income taxes at
      statutory rate                            $11,558   $11,571   $ 6,777
    Increases (decreases) resulting from:
      State income taxes, net of federal tax      1,089       965       736
      Dividend from foreign subsidiary, net
        of tax credits                                -       709         -
      Foreign tax rate and tax regulation
        differential                               (233)     (434)       95
      Nondeductible expenses                        150       147       192
      Other                                         120      (380)     (230)
                                                -------   -------   -------
                                                $12,684   $12,578   $ 7,570
                                                =======   =======   =======

                                       19PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    7.  Income Taxes (continued)

        Prepaid income taxes and deferred income taxes in the accompanying
    balance sheet consist of the following:

    (In thousands)                                          1996      1995
    ----------------------------------------------------------------------
    Prepaid income taxes:
      Reserves and accruals                               $5,087    $5,402
      Inventory basis difference                           1,263     2,835
      Accrued compensation                                   602       408
      Allowance for doubtful accounts                        268       250
      Other, net                                               -       174
                                                          ------    ------
                                                          $7,220    $9,069
                                                          ======    ======

    Deferred income taxes, net:
      Amortization of intangible assets                   $  496    $  494
      Depreciation                                           184       304
      Foreign taxes                                          633       347
                                                          ------    ------
                                                          $1,313    $1,145
                                                          ======    ======

        The Company has not recognized a deferred tax liability for the
    difference between the book basis and the tax basis of its investment in
    the stock of its domestic subsidiaries (such difference relates primarily
    to unremitted earnings by subsidiaries) because it does not expect this
    basis difference to become subject to tax at the parent level. The
    Company believes it can implement certain tax strategies to recover its
    investment in its domestic subsidiaries tax free.
        A provision has not been made for U.S. or additional foreign taxes on
    $50.2 million of undistributed earnings of foreign subsidiaries that
    could be subject to tax if remitted to the U.S. because the Company
    currently plans to keep these amounts permanently reinvested overseas.
    The Company believes that any additional U.S. tax liability due upon
    remittance of such earnings would be immaterial due to available U.S.
    foreign tax credits.

    8.  Short- and Long-term Obligations

        In 1991, the Company issued to Thermo Electron a $15.0 million
    principal amount 5% subordinated note due 2001, payable on demand upon 30
    days' notice by Thermo Electron any time after January 15, 1994. In
    February 1994, the Company refinanced this note into a $15.0 million
    principal amount 3.5% subordinated convertible note due August 1, 1997.
    The note is held by Thermo Electron and is convertible into shares of the
    Company's common stock at a conversion price of $7.94 per share. This
    note is included in "Due to parent company and affiliated companies" in
    the accompanying 1996 balance sheet.

                                       20PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    8.  Short- and Long-term Obligations (continued)

        In January 1995, in connection with a partial redemption of Fiberprep
    stock (Note 3), Fiberprep issued to Thermo Electron a $10.4 million
    promissory note due January 1996, bearing interest at the Commercial
    Paper Composite Rate plus 25 basis points, which was repaid in 1996. This
    note is included in "Due to parent company and affiliated companies" in
    the accompanying 1995 balance sheet. The interest rate was 6.01% at
    year-end 1995.
        In September 1993, the Company borrowed $5.0 million from Thermo
    Electron pursuant to a promissory note due September 13, 1994, bearing
    interest at the Commercial Paper Composite Rate plus 25 basis points,
    which was repaid in September 1994.
        See Note 11 for fair value information pertaining to the Company's
    long-term obligations.

    9.  Related Party Transactions

    Corporate Services Agreement
        The Company and Thermo Electron have a corporate services agreement
    under which Thermo Electron's corporate staff provides certain
    administrative services, including certain legal advice and services,
    risk management, certain employee benefit administration, tax advice and
    preparation of tax returns, centralized cash management, and certain
    financial and other services, for which the Company pays Thermo Electron
    annually an amount equal to 1.0% of the Company's revenues. The Company
    paid an annual fee equal to 1.20% and 1.25% of the Company's revenues in
    1995 and 1994, respectively. The annual fee is reviewed and adjusted
    annually by mutual agreement of the parties. For these services, the
    Company was charged $1,922,000, $2,481,000, and $2,033,000 in 1996, 1995,
    and 1994, respectively. The corporate services agreement is renewed
    annually but can be terminated upon 30 days' prior notice by the Company
    or upon the Company's withdrawal from the Thermo Electron Corporate
    Charter (the Thermo Electron Corporate Charter defines the relationship
    among Thermo Electron and its majority-owned subsidiaries). Management
    believes that the service fee charged by Thermo Electron is reasonable
    and that such fees are representative of the expenses the Company would
    have incurred on a stand-alone basis. For additional items such as
    employee benefit plans, insurance coverage, and other identifiable costs,
    Thermo Electron charges the Company based upon costs attributable to the
    Company.

    Recycling Equipment Subcontract
        In December 1994, Thermo Electron subcontracted with Fiberprep to
    supply equipment and services to Thermo Electron, in its role as general
    contractor on a turnkey contract with a customer for an office wastepaper
    de-inking facility. During 1996 and 1995, the Company recorded revenues
    of $1,876,000 and $14,737,000, respectively, and cost of revenues of
    $639,000 and $8,797,000, respectively, under this two-year subcontract.
    No revenues were recorded under this subcontract during 1994.

                                       21PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    9.  Related Party Transactions (continued)

    Repurchase Agreement
        The Company invests excess cash in a repurchase agreement with Thermo
    Electron as discussed in Note 1.

    Short- and Long-term Obligations
        See Note 8 for obligations of the Company held by Thermo Electron.

    10. Commitments and Contingency

    Operating Leases
        The Company occupies office and operating facilities under various
    operating leases. The accompanying statement of income includes expenses
    from operating leases of $1,252,000, $1,167,000, and $1,407,000 in 1996,
    1995, and 1994, respectively. The future minimum payments due under
    noncancellable operating leases as of December 28, 1996, are $1,113,000
    in 1997; $929,000 in 1998; $468,000 in 1999; $159,000 in 2000; $87,000 in
    2001; and $95,000 in 2002 and thereafter. Total future minimum lease
    payments are $2,851,000.

    Contingency
        Fiberprep was a supplier of de-inking equipment to the general
    contractor for a pulp mill (unrelated to the subcontract from Thermo
    Electron discussed in Note 9). The general contractor has received
    notices from the mill owner alleging failure to perform and claiming
    liquidated damages. Although the general contractor is challenging the
    mill owner's claims, if the general contractor is found liable, the
    Company has been informed that the general contractor will seek 50% of
    its damages from the Company. The Company's limit of liability for any
    contractual disputes arising from its contract totals $6.0 million. While
    it is reasonably possible that resolution of this matter could have a
    material effect on the Company's results of operations for a particular
    quarter, in the opinion of management the Company's reserves for such
    matters are adequate and such result is not likely to occur.

    11. Fair Value of Financial Instruments

        The Company's financial instruments consist mainly of cash and cash
    equivalents, available-for-sale investments, accounts receivable,
    accounts payable, due to parent company and affiliated companies,
    long-term obligations, and forward exchange contracts. The carrying
    amount of these financial instruments, with the exception of
    available-for-sale investments, the subordinated convertible note, other
    long-term obligations, and forward exchange contracts, approximate fair
    value due to their short-term nature.
        Available-for-sale investments are carried at fair value in the
    accompanying 1995 balance sheet. The fair values were determined based on
    quoted market prices. See Note 2 for fair value information pertaining to
    these financial instruments.

                                       22PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    11. Fair Value of Financial Instruments (continued)

        The Company enters into forward exchange contracts to hedge certain
    firm purchase and sale commitments denominated in currencies other than
    its subsidiaries' local currencies, principally U.S. dollars, British
    pounds sterling, French francs, and Japanese yen. The purpose of the
    Company's foreign currency hedging activities is to protect the Company's
    local currency cash flows related to these commitments from fluctuations
    in foreign exchange rates. The amounts of such forward exchange contracts
    at year-end 1996 and 1995 were $2,378,000 and $12,274,000, respectively.
        The carrying amount and fair value of the Company's convertible
    obligation, other long-term obligations, and off-balance-sheet financial
    instruments are as follows:

                                            1996                1995
                                     ------------------  ------------------
                                     Carrying      Fair  Carrying      Fair
    (In thousands)                     Amount     Value    Amount     Value
    -----------------------------------------------------------------------
    Convertible obligation           $15,000    $17,400   $15,000   $28,485
    Other long-term obligations           34         34        41        41
                                     -------    -------   -------   -------
                                     $15,034    $17,434   $15,041   $28,526
                                     =======    =======   =======   =======
    Off-balance-sheet financial
      instruments:
        Forward exchange contracts
          payable (receivable)                  $    32             $  (325)

        The fair value of debt obligations was determined based on quoted
    market prices and on borrowing rates available to the Company at the
    respective year-ends. The fair value of the convertible obligation
    exceeds the carrying amount primarily due to the market price of the
    Company's common stock exceeding the conversion price of the convertible
    obligation.
        The fair value of forward exchange contracts is the estimated amount
    that the Company would receive or pay upon termination of the contract,
    taking into account the change in foreign exchange rates.

    12. Geographical Information

        The Company is engaged in one business segment: the design and
    manufacture of processing machinery for paper-recycling, accessories, and
    water-management systems for the paper and paper-recycling industries.
    Revenues from the paper-recycling business were $56,171,000, $76,981,000,
    and $50,698,000 in 1996, 1995, and 1994, respectively. Revenues from the
    accessories business were $82,173,000, $73,934,000, and $60,448,000 in
    1996, 1995, and 1994, respectively. Revenues from the water-management
    business were $39,950,000, $40,835,000, and $32,170,000 in 1996, 1995,
    and 1994, respectively.

                                       23PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    12. Geographical Information (continued)

        The following table shows data for the Company by geographic area.

    (In thousands)                                  1996      1995      1994
    ------------------------------------------------------------------------
    Revenues:
        United States                           $102,118  $121,932  $ 96,434
        France                                    59,941    59,126    42,272
        United Kingdom                            14,644    14,930    15,739
        Other                                     24,070    21,883    16,624
        Transfers among geographic areas (a)      (8,564)  (11,128)   (8,444)
                                                --------  --------- --------
                                                $192,209  $206,743  $162,625
                                                ========  ========  ========

    Income before provision for income taxes
      and minority interest:
        United States                           $ 16,053  $ 21,716  $ 14,945
        France                                     6,598     5,671     3,487
        United Kingdom                             3,081     1,732        64
        Other                                      4,764     3,734     1,610
        Corporate and eliminations (b)              (377)   (1,924)   (1,190)
                                                --------  --------  --------
        Total operating income                    30,119    30,929    18,916
        Interest income, net                       2,905     2,131     1,015
                                                --------  --------  --------
                                                $ 33,024  $ 33,060  $ 19,931
                                                ========  ========  ========

    Identifiable assets:
        United States (c)                       $131,540  $ 81,609  $ 66,593
        France                                    57,643    56,538    50,843
        United Kingdom                            24,496    20,868    21,474
        Other                                     18,999    16,686    13,194
        Corporate and eliminations (d)            24,554    23,970    10,285
                                                --------  --------  --------
                                                $257,232  $199,671  $162,389
                                                ========  ========  ========

    (a) Transfers among geographic areas are accounted for at prices that are
        representative of transactions with unaffiliated parties.
    (b) Primarily general and administrative expenses.
    (c) Reflects the net proceeds from Thermo Fibergen's September 1996
        initial public offering.
    (d) Primarily cash, cash equivalents, and available-for-sale investments.



                                       24PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                   Notes to Consolidated Financial Statements

    13. Unaudited Quarterly Information

    (In thousands except per share amounts)

    1996                                First    Second     Third     Fourth
    ------------------------------------------------------------------------
    Revenues                          $48,980   $48,595   $46,124    $48,510
    Gross profit                       20,788    20,491    19,951     21,442
    Net income                          5,206     4,876     4,213      5,599
    Earnings per share:
      Primary                             .09       .08       .07        .09
      Fully diluted                       .08       .08       .07        .09

    1995                                First    Second     Third     Fourth
    ------------------------------------------------------------------------
    Revenues                          $43,736   $49,588   $56,227    $57,192
    Gross profit                       17,787    19,968    22,268     23,626
    Net income                          3,583     4,628     5,992      6,046
    Earnings per share:
      Primary                             .06       .08       .10        .10
      Fully diluted                       .06       .07       .09        .10

    14. Subsequent Event

        On February 26, 1997, the Company entered into a letter of intent to
    acquire the assets, subject to certain liabilities, of the
    stock-preparation business of The Black Clawson Company (Black Clawson)
    for approximately $110 million in cash. Black Clawson is a leading
    supplier of recycling equipment used in processing fiber for the
    manufacture of "brown paper" such as that used for corrugated boxes. The
    transaction is subject to several conditions, including completion by
    the Company of its due diligence investigation; negotiation of a
    definitive agreement; regulatory approvals, including antitrust
    clearances; and approval by the Board of Directors of the Company,
    Thermo Electron, and Black Clawson. If this transaction is consummated,
    the Company intends to borrow a portion of the purchase price from
    Thermo Electron.



                                       25PAGE


    Thermo Fibertek Inc.                            1996 Financial Statements

                    Report of Independent Public Accountants

    To the Shareholders and Board of Directors of Thermo Fibertek Inc.:

        We have audited the accompanying consolidated balance sheet of Thermo
    Fibertek Inc. (a Delaware corporation and 84%-owned subsidiary of Thermo
    Electron Corporation) and subsidiaries as of December 28, 1996, and
    December 30, 1995, and the related consolidated statements of income,
    shareholders' investment, and cash flows for each of the three years in
    the period ended December 28, 1996. These consolidated financial
    statements are the responsibility of the Company's management. Our
    responsibility is to express an opinion on these consolidated financial
    statements based on our audits.
        We conducted our audits in accordance with generally accepted
    auditing standards. Those standards require that we plan and perform the
    audit to obtain reasonable assurance about whether the financial
    statements are free of material misstatement. An audit includes
    examining, on a test basis, evidence supporting the amounts and
    disclosures in the financial statements. An audit also includes assessing
    the accounting principles used and significant estimates made by
    management, as well as evaluating the overall financial statement
    presentation. We believe that our audits provide a reasonable basis for
    our opinion.
        In our opinion, the consolidated financial statements referred to
    above present fairly, in all material respects, the financial position of
    Thermo Fibertek Inc. and subsidiaries as of December 28, 1996, and
    December 30, 1995, and the results of their operations and their cash
    flows for each of the three years in the period ended December 28, 1996,
    in conformity with generally accepted accounting principles.



                                                Arthur Andersen LLP



    Boston, Massachusetts
    February 3, 1997 (except with
    respect to the matter discussed
    in Note 14 as to which the date
    is February 26, 1997)


                                       26PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

        Forward-looking statements, within the meaning of Section 21E of the
    Securities Exchange Act of 1934, are made throughout this Management's
    Discussion and Analysis of Financial Condition and Results of Operations.
    For this purpose, any statements contained herein that are not statements
    of historical fact may be deemed to be forward-looking statements.
    Without limiting the foregoing, the words "believes," "anticipates,"
    "plans," "expects," "seeks," "estimates," and similar expressions are
    intended to identify forward-looking statements. There are a number of
    important factors that could cause the results of the Company to differ
    materially from those indicated by such forward-looking statements,
    including those detailed immediately after this Management's Discussion
    and Analysis of Financial Condition and Results of Operations under the
    caption "Forward-looking Statements."

    Overview

        The Company designs and manufactures processing machinery,
    accessories, and water-management systems for the paper and
    paper-recycling industries. The Company's principal products include
    custom-engineered systems and equipment for the preparation of wastepaper
    for conversion into recycled paper, accessory equipment and related
    consumables important to the efficient operation of papermaking machines,
    and water-management systems essential for draining, purifying, and
    recycling process water. The Company's Thermo Fibergen Inc. (Thermo
    Fibergen) subsidiary's principal business consists of conducting research
    and development to commercialize equipment and systems to recover
    materials from papermaking sludge generated by plants that produce virgin
    and recycled pulp and paper. Thermo Fibergen's GranTek Inc. (GranTek)
    subsidiary employs patented technology to convert the papermaking sludge
    into granules that are currently used as carriers for agricultural
    chemicals.
        The Company's products are primarily sold to the paper industry.
    Generally, the financial condition of the paper industry corresponds both
    to changes in the general economy, as well as a number of other factors,
    including paper and pulp production capacity. The paper industry entered
    a severe down cycle in early 1996 and has not recovered. This cyclical
    downturn adversely affected the Company's business during the second half
    of 1996. No assurance can be given that the financial condition of the
    paper industry will recover in the near future.
        During 1996, approximately 47% of the Company's revenues originated
    outside the United States, primarily in Europe. Although the Company
    seeks to charge its customers in the same currency as its operating
    costs, the Company's financial performance and competitive position can
    be affected by currency exchange rate fluctuations affecting the
    relationship between the U.S. dollar and foreign currencies. The Company
    reduces its exposure to currency fluctuations through the use of forward
    contracts.

                                       27PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

    Results of Operations

    1996 Compared With 1995
        Revenues decreased 7% to $192.2 million in 1996 from $206.7 million
    in 1995. Revenues earned by the Company's Fiberprep subsidiary under a
    subcontract from Thermo Electron Corporation (Thermo Electron) to supply
    equipment and services for an office wastepaper de-inking facility
    decreased $12.9 million because this subcontract was substantially
    completed in the first quarter of 1996. Revenues from the Company's
    recycling business decreased $7.5 million, excluding the effect of the
    subcontract from Thermo Electron, due to a decrease in demand resulting
    from a severe drop in de-inked pulp prices, offset in part by $2.2
    million of revenues from the Company's GranTek subsidiary, which acquired
    Granulation Technology Inc. (Granulation Technology) and Biodac, a
    division of Edward Lowe Industries, Inc., in July 1996. Revenues from the
    Company's accessories business increased $8.8 million due principally to
    an increase in demand. The unfavorable effects of currency translation
    due to a stronger U.S. dollar decreased revenues by $1.7 million in 1996.
        The gross profit margin increased to 43% in 1996 from 40% in 1995.
    Margins improved at the Company's Lamort subsidiary primarily due to a
    change in product mix, and at the Company's water-management business
    principally due to an increase in direct mill sales. Additionally,
    margins improved at the Company's Fiberprep Inc. (Fiberprep) subsidiary
    primarily due to the effect of a $0.7 million payment received under the
    subcontract from Thermo Electron, which represents the Company's share of
    certain cost savings on the project.
        Selling, general, and administrative expenses as a percentage of
    revenues increased to 25% in 1996 from 24% in 1995, primarily due to a
    decrease in revenues.
        Research and development expenses increased to $5.5 million in 1996
    from $4.1 million in 1995, primarily due to Thermo Fibergen's continued
    development of technology to recover materials from papermaking sludge
    generated by plants that produce virgin and recycled pulp and paper. The
    Company expects Thermo Fibergen to continue to increase research and
    development expenses during the next fiscal year.
        Fiberprep was a supplier of de-inking equipment to the general
    contractor for a pulp mill (unrelated to the office wastepaper de-inking
    facility described above). The general contractor has received notices
    from the mill owner alleging failure to perform and claiming liquidated
    damages. Although the general contractor is challenging the mill owner's
    claims, if the general contractor is found liable, the Company has been
    informed that the general contractor will seek 50% of its damages from
    the Company. The Company's limit of liability for any contractual
    disputes arising from its contract totals $6.0 million. While it is
    reasonably possible that resolution of this matter could have a material
    effect on the Company's results of operations for a particular quarter,
    in the opinion of management the Company's reserves for such matters are
    adequate and such result is not likely to occur.

                                       28PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

    1996 Compared With 1995 (continued)
        Interest income increased to $3.6 million in 1996 from $3.5 million
    in 1995, primarily due to higher average invested balances resulting from
    the net proceeds from Thermo Fibergen's initial public offering in
    September 1996, offset in part by lower prevailing interest rates. The
    Company anticipates an increase in interest income in 1997 from the
    invested net proceeds from Thermo Fibergen's initial public offering.
    Interest expense decreased to $0.7 million in 1996 from $1.4 million in
    1995, primarily due to the January 1996 repayment of a $10.4 million
    promissory note to Thermo Electron.
        Minority interest expense increased to $446,000 in 1996 from $233,000
    in 1995, primarily due to accretion of Thermo Fibergen's common stock
    subject to redemption.
        The effective tax rate was 38% in 1996 and 1995. These rates exceed
    the statutory federal income tax rate primarily due to the impact of
    state income taxes, and in 1995 the tax effect on a dividend from a
    foreign subsidiary, offset in part by the effect of lower foreign tax
    rates.
        In connection with a proposed engineering, procurement, and
    construction project, the Company made a secured loan of $6.0 million to
    Tree-Free Fiber Company, LLC (Tree-Free) during 1996. This project has
    been indefinitely delayed due to the current weakness in pulp prices, and
    Tree-Free was unable to repay the note upon maturity. On March 10, 1997,
    the Company formally notified Tree-Free that Tree-Free is in default of
    its payment obligations. If Tree-Free is unable to cure the default
    within seven days, or to make other arrangements acceptable to the
    Company, the Company intends to foreclose upon the assets securing the
    note (Note 4).

    1995 Compared With 1994
        Revenues increased 27% to $206.7 million in 1995 from $162.6 million
    in 1994. Revenues from the Company's paper-recycling equipment business
    increased $22.3 million primarily due to the inclusion of $14.7 million
    in revenues earned by Fiberprep under the subcontract from Thermo
    Electron. In addition, paper-recycling equipment revenues increased due
    to higher demand at the Company's subsidiary in France. Revenues from the
    Company's accessories and water-management businesses increased $12.5
    million and $10.0 million, respectively, due principally to an increase
    in demand. The favorable effects of currency translation, due to a weaker
    U.S. dollar, increased revenues by $2.7 million.
        The gross profit margin remained relatively unchanged at 40% in 1995,
    compared with 41% in 1994. A decrease in margins at Fiberprep due to the
    establishment of warranty reserves for certain large de-inking projects
    was largely offset by an increase in margins at the Company's North
    American accessories business.
        Selling, general, and administrative expenses as a percentage of
    revenues decreased to 24% in 1995 from 27% in 1994, primarily due to an
    increase in revenues. Research and development expenses remained
    relatively unchanged at $4.1 million in 1995, compared with $3.8 million
    in 1994.
        Interest income increased to $3.5 million in 1995 from $2.0 million
    in 1994 due to higher average invested balances and, to a lesser extent,

                                       29PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

    1995 Compared With 1994 (continued)
    higher prevailing interest rates. Interest expense increased to $1.4
    million in 1995 from $0.9 million in 1994, primarily due to the issuance
    of a $10.4 million promissory note to Thermo Electron in connection with
    a partial redemption of Fiberprep stock in January 1995 (Notes 3 and 8),
    offset in part by the repayment in September 1994 of a $5.0 million
    promissory note to Thermo Electron (Note 8).
        Minority interest expense decreased to $233,000 in 1995 from $1.5
    million in 1994 due to the partial redemption of Fiberprep stock in
    January 1995, which increased the Company's ownership of Fiberprep from
    51% to 95%, offset in part by higher profits at Fiberprep in 1995.
        The effective tax rate was 38% in 1995 and 1994. These rates exceed
    the statutory federal income tax rate primarily due to the impact of
    state income taxes and in 1995 the tax effect on a dividend from a
    foreign subsidiary, offset in part by the effect of lower foreign tax
    rates.

    Liquidity and Capital Resources

        Consolidated working capital was $115.6 million at December 28, 1996,
    compared with $70.9 million at December 30, 1995. Included in working
    capital are cash, cash equivalents, and available-for-sale investments of
    $109.8 million at December 28, 1996, compared with $59.8 million at
    December 30, 1995. Of the $109.8 million balance at December 28, 1996,
    $58.4 million was held by Thermo Fibergen and $2.2 million was held by
    Fiberprep, with the remainder being held by the Company and its wholly
    owned subsidiaries. At December 28, 1996, $21.0 million of the Company's
    cash and cash equivalents were held by its Lamort subsidiary.
    Repatriation of this cash into the United States would be subject to a 5%
    withholding tax in France and could also be subject to a United States
    tax.
        During 1996, $27.1 million of cash was provided by operating
    activities. Cash provided by the Company's operating results was
    increased by a $5.7 million reduction in accounts receivable and a $3.1
    million reduction in inventories and unbilled contract costs and fees.
    These sources of cash were more than offset by the effect of a reduction
    in accounts payable and other current liabilities. The decrease in
    accounts receivable resulted primarily from cash collections and the
    completion of the office wastepaper de-inking facility subcontract with
    Thermo Electron, which also resulted in a reduction in inventories and
    unbilled contract costs and fees. The decrease in other current
    liabilities was primarily due to a warranty claim payment and a decrease
    in accrued income taxes.
        During 1996, the Company's primary investing activities, excluding
    the sale and maturities of available-for-sale investments, included an
    acquisition, the issuance of a note receivable, and capital expenditures.
    In July, Thermo Fibergen acquired substantially all of the assets,
    subject to certain liabilities, of Granulation Technology and Biodac for
    $12.1 million in cash (Note 3). During 1996, the Company loaned $6.0
    million to Tree-Free (Note 4) and expended $3.9 million for purchases of
    property, plant, and equipment.

                                       30PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

    Liquidity and Capital Resources (continued)

        The Company's financing activities provided $45.5 million of cash in
    1996. In September 1996 Thermo Fibergen sold units, each unit consisting
    of one share of Thermo Fibergen common stock and one redemption right, in
    an initial public offering for net proceeds of $55.8 million (Note 1).
    The common stock and redemption rights began trading separately on
    December 13, 1996. Holders of a redemption right have the option to
    require Thermo Fibergen to redeem, in September 2000 and 2001, one share
    of Thermo Fibergen common stock at $12.75 per share. The rights are
    guaranteed, on a subordinated basis, by Thermo Electron. The Company has
    agreed to reimburse Thermo Electron in the event Thermo Electron is
    required to make a payment under the guarantee. In January 1996, the
    Company repaid a $10.4 million promissory note to Thermo Electron (Note
    8).
        On February 26, 1997, the Company entered into a letter of intent to
    acquire the assets, subject to certain liabilities, of the
    stock-preparation business of The Black Clawson Company for approximately
    $110 million in cash (Note 14). If this transaction is consummated, the
    Company intends to borrow a portion of the purchase price from Thermo
    Electron. In 1997, the Company plans to make expenditures for property,
    plant, and equipment of approximately $14 million, including $10 million
    at Thermo Fibergen primarily for construction of one or more
    fiber-recovery plants. Construction of fiber-recovery plants is dependent
    upon Thermo Fibergen entering into long-term contracts with paper mills,
    under which Thermo Fibergen will charge fees to accept the mills' pulp
    sludge. Thermo Fibergen does not currently have such agreements in place
    nor is there any assurance that Thermo Fibergen will be able to obtain
    such contracts. The Company believes that its existing resources are
    sufficient to meet the capital requirements of its existing operations
    for the foreseeable future.


                                       31PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                           Forward-looking Statements

        In connection with the "safe harbor" provisions of the Private
    Securities Litigation Reform Act of 1995, the Company wishes to caution
    readers that the following important factors, among others, in some cases
    have affected, and in the future could affect, the Company's actual
    results and could cause its actual results in 1997 and beyond to differ
    materially from those expressed in any forward-looking statements made
    by, or on behalf of, the Company.
        Dependence on Paper Industry and Pulp and Paper Prices. The Company's
    products are primarily sold to the paper industry. Generally, the
    financial condition of the paper industry corresponds both to changes in
    the general economy, as well as a number of other factors, including
    paper and pulp production capacity. The paper industry entered a severe
    down cycle in early 1996 and has not recovered. This cyclical downturn
    adversely affected the Company's business during the second half of 1996.
    No assurance can be given that the financial condition of the paper
    industry will recover in the near future.
        Risks Associated with International Operations. During 1996,
    approximately 47% of the Company's revenues originated outside of the
    United States, particularly in Europe. International revenues are subject
    to a number of risks, including the following: agreements may be
    difficult to enforce and receivables difficult to collect through a
    foreign country's legal system; foreign customers may have longer payment
    cycles; foreign countries may impose additional withholding taxes or
    otherwise tax the Company's foreign income, impose tariffs, or adopt
    other restrictions on foreign trade; U.S. export licenses may be
    difficult to obtain; and the protection of intellectual property in
    foreign countries may be more difficult to enforce. In addition, although
    the Company seeks to charge its customers in the same currency as its
    operating costs, fluctuations in currency exchange rates may affect
    product demand and adversely affect the profitability in U.S. dollars of
    products provided by the Company in foreign markets where payment for the
    Company's products and services is made in the local currency. There can
    be no assurance that any of these factors will not have a material
    adverse impact on the Company's business and results of operations. 
        Competition. The Company encounters and expects to continue to
    encounter significant competition in each of its principal markets. The
    Company believes that the principal competitive factors affecting the
    markets for its products include quality, service, technical expertise,
    and product innovation. The Company's competitors include a number of
    large multinational corporations. Competition could increase if new
    companies enter the market or if existing competitors expand their
    product lines or intensify efforts within existing product lines. There
    can be no assurance that the Company's current products, products under
    development, or ability to develop new technologies will be sufficient to
    enable it to compete effectively.
        Dependence on Patents and Proprietary Rights. The Company places
    considerable importance on obtaining patent and trade secret protection
    for significant new technologies, products, and processes because of the
    length of time and expense associated with bringing new products through
    the development process and to the marketplace. The Company's success
    depends in part on its ability to develop patentable products and obtain
    and enforce patent protection for its products both in the United States
    and in other countries. The Company owns numerous U.S. and foreign

                                       32PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                           Forward-looking Statements

    patents, and intends to file additional applications as appropriate for
    patents covering its products. No assurance can be given that patents
    will issue from any pending or future patent applications owned by or
    licensed to the Company, or that the claims allowed under any issued
    patents will be sufficiently broad to protect the Company's technology.
    No assurance can be given that any issued patents owned by or licensed to
    the Company will not be challenged, invalidated, or circumvented, or that
    the rights thereunder will provide competitive advantages to the Company.
    The Company could incur substantial costs in defending itself in suits
    brought against it or in suits in which the Company may assert its patent
    rights against others. If the outcome of any such litigation is
    unfavorable to the Company, the Company's business and results of
    operations could be materially adversely affected.
        In addition, there can be no assurance that third parties will not
    assert claims against the Company that the Company infringes the
    intellectual property rights of such parties. The Company could incur
    substantial costs and diversion of management resources with respect to
    the defense of any such claims, which could have a material adverse
    effect on the Company's business, financial condition, and results of
    operations. Furthermore, parties making such claims could secure a
    judgment awarding substantial damages, as well as injunctive or other
    equitable relief, which could effectively block the Company's ability to
    make, use, sell, distribute, or market its products and services in the
    U.S. or abroad. In the event that a claim relating to intellectual
    property is asserted against the Company, the Company may seek licenses
    to such intellectual property. There can be no assurance, however, that
    such licenses could be obtained on commercially reasonable terms, if at
    all. The failure to obtain the necessary licenses or other rights could
    preclude the sale, manufacture, or distribution of the Company's products
    and, therefore, could have a material adverse effect on the Company's
    business, financial condition, and results of operations.
        The Company relies on trade secrets and proprietary know-how which it
    seeks to protect, in part, by confidentiality agreements with its
    collaborators, employees, and consultants. There can be no assurance that
    these agreements will not be breached, that the Company would have
    adequate remedies for any breach, or that the Company's trade secrets
    will not otherwise become known or be independently developed by
    competitors.


                                       33PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements

                         Selected Financial Information

    (In thousands except
    per share amounts)        1996(a)   1995(b)      1994      1993(c)   1992
    -------------------------------------------------------------------------
    Statement of Income
      Data:
    Revenues              $192,209  $206,743    $162,625  $137,088  $125,577
    Net income              19,894    20,249      10,894     7,442     7,702
    Earnings per share:
      Primary                  .33       .33         .18       .12       .15
      Fully diluted            .31       .32         .18       .12       .15

    Balance Sheet Data:
    Working capital       $115,609  $ 70,882    $ 54,879  $ 37,442  $ 57,162
    Total assets           257,232   199,671     162,389   142,608   131,525
    Long-term obligations       34    15,041      15,406    15,806    16,220
    Common stock of
      subsidiary subject
      to redemption         56,087         -           -         -         -
    Shareholders'
      investment           130,850   109,631      84,696    70,753    66,460

    (a) Reflects the July 1996 acquisition of Granulation Technology and
        Biodac, the net proceeds from Thermo Fibergen's September 1996
        initial public offering, and the repayment of a $10.4 million
        promissory note to Thermo Electron.
    (b) Reflects the January 1995 redemption of a portion of Fiberprep's
        stock and the issuance of a $10.4 million promissory note to Thermo
        Electron.
    (c) Reflects the June 1993 acquisition of AES and the issuance of a $5.0
        million promissory note to Thermo Electron.





                                       34PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements



    Common Stock Market Information
        The following table shows the market range for the Company's common
    stock based on reported sales prices on the American Stock Exchange
    (symbol TFT) for 1996 and 1995. Prices have been restated to reflect
    three-for-two stock splits, effected in the form of 50% stock dividends,
    which were distributed in June 1996 and September 1995.

                                                                             
                                             1996                 1995
                                      -----------------   ------------------
    Quarter                             High      Low        High        Low
    ------------------------------------------------------------------------

    First                             $16       $14       $ 7 5/6   $ 6 5/6
    Second                             20        14 7/12    9 1/18    7 1/2
    Third                              18 7/8    12 1/8    11 2/3     8 2/3
    Fourth                             13 1/4     9        15 1/6    10 5/12

        As of January 24, 1997, the Company had 977 holders of record of its
    common stock. This does not include holdings in street or nominee names.
    The closing market price on the American Stock Exchange for the Company's
    common stock on January 24, 1997, was $10 5/8 per share.
        Units, common stock, and redemption rights of Thermo Fibergen Inc.,
    the Company's majority-owned public subsidiary, are traded on the
    American Stock Exchange (symbols TFG-U, TFG, and TFG-R).

    Stock Transfer Agent
        American Stock Transfer & Trust Company is the stock transfer agent
    and maintains shareholder activity records. The agent will respond to
    questions on issuance of stock certificates, change of ownership, lost
    stock certificates, and change of address. For these and similar matters,
    please direct inquiries to:

        American Stock Transfer & Trust Company
        Shareholder Services Department
        40 Wall Street, 46th Floor
        New York, New York 10005
        (718) 921-8200

    Shareholder Services
        Shareholders of Thermo Fibertek Inc. who desire information about the
    Company are invited to contact John N. Hatsopoulos, Chief Financial
    Officer, Thermo Fibertek Inc., 81 Wyman Street, P.O. Box 9046, Waltham,
    Massachusetts 02254-9046, (617) 622-1111. A mailing list is maintained to
    enable shareholders whose stock is held in street name, and other
    interested individuals, to receive quarterly reports, annual reports, and
    press releases as quickly as possible. Beginning in 1997, quarterly
    distribution will be limited to the second quarter report only. All
    quarterly reports and press releases are available through the Internet
    from Thermo Electron's home page on the World Wide Web
    (http://www.thermo.com/subsid/tft.html).

                                       35PAGE

    Thermo Fibertek Inc.                            1996 Financial Statements



    Dividend Policy
        The Company has never paid cash dividends and does not expect to pay
    cash dividends in the foreseeable future because its policy has been to
    use earnings to finance expansion and growth. Payment of dividends will
    rest within the discretion of the Board of Directors and will depend
    upon, among other factors, the Company's earnings, capital requirements,
    and financial condition.

    Form 10-K Report
        A copy of the Annual Report on Form 10-K for the fiscal year ended
    December 28, 1996, as filed with the Securities and Exchange Commission,
    may be obtained at no charge by writing to John N. Hatsopoulos, Chief
    Financial Officer, Thermo Fibertek Inc., 81 Wyman Street, P.O. Box 9046,
    Waltham, Massachusetts 02254-9046.

    Annual Meeting
        The annual meeting of shareholders will be held on Monday, June 2,
    1997, at 8:00 a.m. at the Hyatt Regency Hotel, Hilton Head, South
    Carolina.

                                                                   Exhibit 21

                              THERMO FIBERTEK INC.

                         Subsidiaries of the Registrant

    At February 28,1997, the Registrant owned the following companies:

                                                State or        Registrant's
                                               Jurisdiction         % of
    Name                                     of Incorporation     Ownership
    -----------------------------------      ----------------   ------------

    AES Equipos y Sistemas S.A. de C.V.           Mexico             100
    Enviroprint Inc.                             Delaware            100
    Fibertek Construction Company, Inc.            Maine             100
    Thermo AES Canada Inc.                        Canada             100
    Thermo Web Systems, Inc.                   Massachusetts         100
      Fiberprep, Inc.                            Delaware             95
        (31.05% of which shares are owned 
        directly by E. & M. Lamort, S.A.)
          Fiberprep Securities Corporation       Delaware            100
      Thermo Wisconsin, Inc.                     Wisconsin           100
    Thermo Fibergen Inc.                         Delaware             68
      GranTek Inc.                               Wisconsin           100
    Thermo Fibertek U.K. Limited              United Kingdom         100
      Vickerys Holdings Limited               United Kingdom         100
        Vickerys Limited                      United Kingdom         100
          Paperliners Limited                   New Zealand          100
          Vickerys Projects Limited           United Kingdom         100
          Winterburn Limited                  United Kingdom         100
    TMO Lamort Holdings Inc.                     Delaware            100
      E. & M. Lamort, S.A.                        France             100
        Lamort Equipamentos Industrieis LTDA      Brazil              60
        Lamort GmbH                               Germany            100
        Lamort Iberia S.A.                         Spain             100
        Lamort Italia S.R.L.                       Italy             100
        Lamort Paper Services Ltd.            United Kingdom         100
        Nordiska Lamort Lodding A.B.              Sweden             100

                                                                   Exhibit 23



                    Consent of Independent Public Accountants
                    -----------------------------------------


         As independent public accountants, we hereby consent to the
    incorporation by reference of our reports dated February 3, 1997 (except
    with respect to the matter discussed in Note 14 as to which the date is
    February 26, 1997), included in or incorporated by reference into Thermo
    Fibertek Inc.'s Annual Report on Form 10-K for the year ended December
    28, 1996, into the Company's previously filed Registration Statements as
    follows:  Registration Statement No. 33-58884 on Form S-3, Registration
    Statement No. 33-67190 on Form S-8, Registration Statement No. 33-67192
    on Form S-8, Registration Statement No. 33-67194 on Form S-8,
    Registration Statement No. 33-67196 on Form S-8, Registration Statement
    No. 33-83718 on Form S-8, and Registration Statement No. 33-80751 on Form
    S-8.



                                                Arthur Andersen LLP



    Boston, Massachusetts
    March 12, 1997
 

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO FIBERTEK INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-28-1996 DEC-28-1996 109,805 0 40,063 1,948 24,467 182,425 57,869 31,329 257,232 66,816 34 0 0 612 130,238 257,232 192,209 192,209 109,537 109,537 5,460 (450) 663 32,578 12,684 19,894 0 0 0 19,894 .33 .31