SCHEDULE 14A
                                (Rule 14A-101)
                           SCHEDULE 14A INFORMATION

               Proxy Statement Pursuant to Section 14(a) of the
                        Securities Exchange Act of 1934
                               (Amendment No.  )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

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

[_] Definitive Proxy Statement

[_] Definitive Additional Materials

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


                     Brown & Sharpe Manufacturing Company
               (Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

[_] No fee required.

[X] Fee computed on table below per Exchange Act Rules 14c-6(i)(1) and 0-11.

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

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

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

  (4)  Proposed maximum aggregate value of transaction: $187,000,000.00

  (5)  Total fee paid: $37,400.00

[X] Fee paid previously with preliminary materials.

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

  (1)  Amount Previously Paid:

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

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  (4)  Date Filed:



                           [LOGO OF BROWN & SHARPE]

                                                             March  , 2000

Dear Stockholder:

   You are cordially invited to attend the Special Meeting of Stockholders of
Brown & Sharpe Manufacturing Company (the "Company") on April  , 2001 at 10
a.m. at the Company's executive office.

   Proposed Sale of Substantially All Assets. At the meeting, you will be
asked to approve the proposed sale of substantially all assets of the Company,
including:

     (a) the sale under the Acquisition Agreement for cash to Hexagon AB
  ("Hexagon"), a Swedish corporation, in Stockholm, Sweden, of substantially
  all of the business and assets of the Company and assumption by Hexagon of
  substantially all of the Company's liabilities,

     (b) the sale for cash of our North Kingstown Facility to the buyer under
  the North Kingstown Sales Agreement, and

     (c) the related cash distributions to stockholders, after the closing
  under the Acquisition Agreement (the "Closing"), after the closing under
  the North Kingstown Sales Agreement, and after later sale of the Company's
  real estate (gravel pit) adjacent to Heathrow Airport in the United
  Kingdom. The initial distribution will be made as soon as practicable after
  the Closing, after payment of the Company's senior secured indebtedness at
  the Closing, after payment, or provision for payment, of the estimated
  liabilities and potential contingent liabilities not assumed by Hexagon and
  after retention by the Company of an amount for funding expenses of
  operations of the Company, to be renamed BNS Co., and BSIS, all on dates
  and in amounts to be finally determined by the Board of Directors. You will
  also be asked to approve a proposal to change the name of the Company to
  BNS Co. so that it does not include the name "Brown & Sharpe" as required
  by the Acquisition Agreement.

   Background; Reasons. The Board of Directors believes, given the
alternatives reasonably available to the Company, the history of substantial
net losses and use of cash in the Years 1999 and 2000, the Company's inability
to raise additional debt or preferred stock in late 1999 - June 2000, and
resulting inability to resolve the financial defaults existing since 1999
under the Company's secured lending agreements with its senior lenders, that a
sale of the Company or similar transaction would likely be necessary to
satisfy its senior lenders who may at any time resort to their collateral,
consisting of most of the Company's assets and the stock of most of its
subsidiaries, in which event reorganization proceedings under the Bankruptcy
Code could be one of the possible consequences. The Board also believes that
the purchase price and terms of the sale to Hexagon and related transactions
(including Hexagon's investment in BSIS, Inc., a subsidiary of the Company
engaged in the early stage development and commercialization of a "measuring
software" business, and the arrangements going forward after the Closing
between BSIS and Hexagon), the terms of the proposed sale of our North
Kingstown Facility and, at a later date, the contemplated sale of our
Heathrow, United Kingdom real estate and the related cash distributions to
stockholders on dates and in amounts to be finally determined by the Board of
Directors, with the Company continuing in business as BNS Co., through its
ownership of BSIS (subject to Hexagon's significant minority stockholding),
will be in the best interests of the Company and is in the best interests of
and is fair to the Company's stockholders.

   Purchase Price Payable by Hexagon. The purchase price for the assets and
stock we are transferring to Hexagon is $160 million subject to two
adjustments, plus $2.5 million at Closing and an additional $4.5 million over
the next three years for the sale of additional shares of BSIS stock to
Hexagon. There is not a guaranteed minimum we will receive from Hexagon after
these adjustments.

   In the first adjustment, the purchase price will be increased by the amount
of any Business Operating Profit contingent payment, relating to the business
we are selling to Hexagon. If the Business Operating Profit, as



defined, for the year ended December 31, 2000 is finally determined to be
equal to or less than $15 million, there shall be no change to the $160
million component of the total purchase price to be paid by Hexagon. If such
Business Operating Profit is greater than $15 million, the $160 million
component price would be increased as provided in the detailed provisions of
the Acquisition Agreement. We believe that the Business Operating Profit for
the year ended December 31, 2000 is $18.6 million (which we have provided to
Hexagon) and would accordingly result in an increase of $10 million pursuant
to the first adjustment. However, we cannot guarantee that such amount of
increase will become final until it is agreed to by Hexagon pursuant to the
Acquisition Agreement.

   In the second adjustment, the purchase price will be increased or decreased
(a decrease is expected), with no cap on the increase or floor on the
decrease, by an amount equal to the amount of cash and cash equivalents held
by our subsidiaries being transferred to Hexagon less the amount of
indebtedness of our transferred subsidiaries. The parties must agree on the
definitive net cash adjustment after the Closing. If the Closing had occurred
on December 31, 2000, the amount of this decrease would have been
approximately $3.6 million. We expect to have a net use of cash by the foreign
subsidiaries being transferred to Hexagon between December 31, 2000 and the
expected closing date in April, 2001 and an anticipated corresponding further
decrease to the purchase price under this second adjustment.

   Proposed Sale of North Kingstown Facility. The purchase price for the sale
of the North Kingstown Facility is $15.5 million cash, subject, among other
things, to the    day balance, as of March  , 2001, of a sixty day
investigation period during which the buyer may terminate the North Kingstown
Sales Agreement for any reason.

   Cash Distributions. Based on our estimate of Business Operating Profit used
to determine the first adjustment and on the second adjustment calculated as
of December 31, 2000, the total amount of consideration we would have received
from Hexagon if the Closing had taken place on December 31, 2000 is $168.9
million (plus an additional $4.5 million over three years for the sale of the
additional BSIS stock). The actual amount of consideration that will actually
be received from Hexagon will differ from this estimated amount, based on the
agreement of the parties regarding the first adjustment related to the
Business Operating Profit for the year ended December 31, 2000 (or under the
dispute resolution provisions of the Acquisition Agreement) and the final
determination of the second net cash adjustment, which will be negatively
affected by the date of the Closing as the Company's foreign subsidiaries
being transferred to Hexagon are a user of cash in the early months of the
year, at least through May. Accordingly, you will not know the exact amount of
consideration that we will receive from Hexagon when you vote on the proposal,
or the dollar amounts per share contemplated to be paid to stockholders in the
initial cash distribution as soon as practicable after the Closing or in the
second cash distribution to be paid after the sale of the North Kingstown
Facility. However, based upon the evaluation of management, including the
estimates as to the adjustments to the purchase price payable by Hexagon to us
(after payment of our secured senior debt to our senior lenders of $77.4
million principal amount, plus an early payment fee under our senior note
agreement) at the Closing contemplated for late April, 2001, the estimate of
amounts to be held back from the net proceeds to satisfy known liabilities and
potential contingent liabilities to be retained after the sale to Hexagon and
an amount, estimated at $7.5 million, to be retained to fund the on-going
operations of BNS Co. and BSIS (which includes the $2.5 million invested by
Hexagon at the Closing) and an estimate of the number of shares expected to be
issued on exercise of outstanding options, management estimates that the
initial cash distribution to the Company's stockholders will be in excess of
$3.00 per share (estimated without giving effect to the reverse stock split of
the Company's Common Stock that is the subject of Proposal 5).

   However, the amount of the cash distributions per share will be decreased
in the event that either one or both of Proposals 3 and 4 for reducing the par
value of the Company's Class A Common Stock (the "Class A Stock") and Class B
Common Stock (the "Class B Stock" and together with the Class A Stock the
"Common Stock") are not approved by stockholders (because the effect of such
non-approval will be to preclude the transfer by the Board of an aggregate of
$0.99 multiplied by the number of outstanding shares from the capital account
to the additional paid-in capital account on the balance sheet of the
Company). These additional proposals are discussed below. Assuming a sale of
the North Kingstown Facility for $15.5 million is completed, there will be a
second cash distribution, the amount of which would, subject to the
qualifications below, be equal to the net sale proceeds (after payment of the
existing mortgage and expenses). There will be a third cash



distribution after the sale of our Heathrow, United Kingdom real estate.
However, the amount of such third distribution is not now determinable; we
have not started efforts to sell this property.

   Stockholders should take into account when voting that the Company's
estimates of retained liabilities, including potential contingent liabilities,
may be lower or greater than they may prove to be in actuality by the time of
the second or third distribution, in which event this would lead the Board to
increase or reduce the second distribution to be made after the sale of the
North Kingstown Facility and could require the Company to seek financing or
reduce the amount of the third distribution contemplated to be made from the
net proceeds of sale of the Heathrow, United Kingdom real estate.

   Other Matters. In addition, you will be asked to approve a reduction in the
par value per share of the Class A Stock and the Class B Stock from $1.00 per
share to $0.01 per share, which are related to the legal requirements for the
Board of Director's ability to declare the contemplated cash distributions.
The sale to Hexagon and the related transactions, the sale of our North
Kingstown Facility and the related cash distributions to stockholders, all of
which are integral parts of Proposal 1, are not contingent on the approval of
the proposals that relate to reduction of par value. However, if the proposals
that relate to the reduction of par value per share of the Common Stock are
not approved, the amount of the cash distributions made to stockholders under
Proposal 1 will be reduced because the amount of surplus available under the
Delaware General Corporate Law to permit the Board's declaration of such
distributions will be reduced.

   Finally, you will be asked to approve a one-for-five reverse stock split of
the Class A Stock and Class B Stock to decrease the number of outstanding
shares. It is anticipated that if the sale to Hexagon is approved and the
first one or two contemplated cash distributions are made, the market price of
the Company's Class A Stock will move lower. A reduction in the number of
outstanding shares is designed to bring the market price of the stock into a
higher range. The primary purpose of this proposed reverse stock split is to
assist the Company's efforts to maintain the continued listing of its Class A
Stock on the New York Stock Exchange and to reposition the Company in light of
the sale to Hexagon and related transactions, but there is no assurance that
we will maintain such listing. Proposal 1, however, is not contingent on the
approval of this proposal that relates to the reverse stock split.

   Board Approval. The Board of Directors has unanimously approved the
proposal for the sale of substantially all assets, including the sale to
Hexagon and related transactions, the sale of our North Kingstown Facility and
the related cash distributions to stockholders, has approved the proposal to
change the name of the Company to "BNS Co.", has approved the reduction of the
par value per share of the Class A Stock and Class B Stock and has approved
the one-for-five reverse stock split of the Class A Stock and Class B Stock.
The attached materials consist of Notice of a Special Meeting of the
Stockholders and a Proxy Statement (including Annexes) describing Proposal
1 -- sale of substantially all assets, including the proposed sale of assets
to Hexagon and related transactions, the proposed sale of our North Kingstown
Facility and later sale of our Heathrow, United Kingdom real estate and the
related cash distributions to stockholders, Proposal 2 -- the proposed change
of the name of the Company, Proposals 3 and 4 -- the reduction in par value
per share of the Company's Class A Stock and Class B Stock, and Proposal 5 --
 the reverse stock split of the outstanding shares of the Class A Stock and
the Class B Stock and form of Proxy Card. You are urged to read these
materials in their entirety.

   THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH OF THE FIVE
PROPOSALS.

   Whether or not you plan to attend the Special Meeting, we urge you to sign
and return the enclosed proxy so that your shares will be represented at the
meeting. If you so desire, you can withdraw your proxy and vote in person at
the Meeting.

                                          Sincerely,

                                          John M. Nelson
                                          Chairman of the Board

                                          Kenneth N. Kermes

                                          President and Chief Executive
                                           Officer



                     Brown & Sharpe Manufacturing Company

                                Precision Park
                              200 Frenchtown Road
                        North Kingstown, RI 02852-1700
                                (401) 886-2000

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

                        NOTICE OF SPECIAL MEETING
                                OF STOCKHOLDERS

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

                        To Be Held April [ ], 2001

                                                             March  , 2001

   Notice is Hereby Given that a Special Meeting of Stockholders of Brown &
Sharpe Manufacturing Company ("Brown & Sharpe" or the "Company" or "BNS Co."
after the Closing with Hexagon), a Delaware corporation, will be held at 10
a.m., Eastern Standard Time, on April  , 2001, at the Company's executive
offices at Precision Park, 200 Frenchtown Road, North Kingstown, Rhode Island
02852, to consider and act upon the following items of business:

     1. To consider and vote upon a proposal to approve the sale of
  substantially all the assets of the Company, and to authorize the Board of
  Directors to take all action necessary to carry out such sale and related
  transactions, including: (a) approval of the Acquisition Agreement dated as
  of November 16, 2000, as amended, between the Company and Hexagon AB
  ("Hexagon"), a Swedish corporation (the "Acquisition Agreement") and the
  sale thereunder for a cash purchase price (subject to adjustments as
  provided therein) to Hexagon and its Affiliates (as defined in the
  Acquisition Agreement) of substantially all the Company's business and
  assets and the related assumption by Hexagon (and its Affiliates) of
  substantially all the Company's liabilities (other than Excluded Assets and
  Excluded Liabilities, each as defined in the Acquisition Agreement),
  including:

      (i) the provisions therein (and in the BSIS Stock Purchase Agreement
    and the BSIS Stockholders' Agreement contemplated therein)
    contemplating a software license, software purchase arrangements and
    software royalty arrangements between BSIS, Inc. (presently a wholly
    owned subsidiary of the Company that is an Excluded Asset) and Hexagon
    (or an Affiliate) and contemplating the sale for cash, for a total
    investment by Hexagon of $7 million, to Hexagon (or an Affiliate of
    Hexagon) of specified percentages of the authorized but unissued shares
    of BSIS, which will continue to be owned by the Company under the name
    Xygent Inc. after the Closing under the Acquisition Agreement, with
    such minority investments by Hexagon (or its Affiliate), and

      (ii) the provisions therein contemplating a lease (the "Lease") of a
    portion of the Company's North Kingstown Facility at Precision Park to
    Hexagon for a term of five (5) years, with a declining amount of space
    rented to Hexagon over the term, the Company retaining responsibility
    for structural repair and a rental rate consisting of a base rent with
    appropriate charges for taxes, utilities and insurance calculated in a
    manner consistent with past practice,

     (b) approval of the Purchase and Sale Agreement (the "North Kingstown
  Sales Agreement") dated as of March   , 2001 between the Company, as seller
  and Precision Park Partners LLC, as buyer, and the sale thereunder for cash
  of our North Kingstown, Rhode Island Manufacturing facility (the "North
  Kingstown Facility") including approximately 169 acres of real property and
  improvements located on Frenchtown Road in North Kingstown, Rhode Island
  (with a portion thereof located in East Greenwich, Rhode Island) and the
  assignment of the Lease and other existing tenant leases to the buyer
  thereof.



     (c) approval of, as an integral part of the proposal for the sale of
  substantially all of the assets of the Company: (1) an initial contemplated
  pro rata cash distribution to the stockholders of the Company as soon as
  practical following (i) the Closing under the Acquisition Agreement, (ii)
  the payment, or provision for payment, of estimated liabilities and
  contingent liabilities remaining with the Company, and the retention of
  portions of the net proceeds under the Acquisition Agreement to be
  available (together with the funds to be invested by Hexagon in BSIS) for
  funding the on-going operations of BNS Co. and BSIS; (2) a second
  contemplated pro rata cash distribution to stockholders of the Company upon
  the sale of the North Kingstown Facility; and (3) a third contemplated pro
  rata cash distribution to stockholders following the sale of Heathrow,
  United Kingdom real estate when such real estate is sold as part of the
  proposal for sale of substantially all assets, and in all cases, the cash
  distributions will be made on dates and in the amounts as the Board of
  Directors may determine,

  all as set forth in the accompanying Proxy Statement



     2. To consider and vote upon an amendment to the Certificate of
  Incorporation of the Company to change the name of the Company to "BNS Co."
  (or such other name not using the words "Brown & Sharpe" as shall be
  determined by the Board of Directors of the Company) and to authorize the
  Board of Directors to take all action necessary to give effect thereto, all
  as set forth in the accompanying Proxy Statement.

     3. To consider and vote upon an amendment to the Certificate of
  Incorporation of the Company to reduce the par value of the Company's Class
  A Stock from $1.00 per share to $0.01 per share and to authorize the Board
  of Directors to take all action to give effect thereto, all as set forth in
  the accompanying Proxy Statement.

     4. To consider and vote upon an amendment to the Certificate of
  Incorporation of the Company to reduce the par value of the Company's Class
  B Stock from $1.00 per share to $0.01 per share and to authorize the Board
  of Directors to take all action to give effect thereto, all as set forth in
  the accompanying Proxy Statement.

     5. To consider and vote upon an amendment to the Certificate of
  Incorporation of the Company to effect a reverse stock split of the
  outstanding shares of Class A Stock and Class B Stock (the reverse stock
  split would, when effective, combine every five shares of Class A Stock
  held by a stockholder into one share of Class A Stock and every five shares
  of Class B Stock held by a stockholder into one share of Class B Stock) and
  to authorize the Board of Directors to take all action to give effect
  thereto, all as set forth in the accompanying Proxy Statement.

     6. To consider and vote upon matters incident to the conduct of the
  Special Meeting or any adjournments or postponements thereof.

   All of the above matters are more fully described in the accompanying Proxy
Statement. Only stockholders of record of the Company at the close of business
on March   , 2001 will be entitled to receive notice of and to vote at the
special meeting of stockholders or any adjourned session (the "Meeting" or the
"Special Meeting"). A list of all stockholders of record as of March   , 2001
will be open for inspection at the Special Meeting.

   The telephone number of our executive office is (401) 886-2000.

                                          By Order of the Board of Directors,

                                          /s/ James W. Hayes, III
                                          James W. Hayes III

                                          Secretary


   ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY
CARD PROMPTLY SO THAT YOUR SHARES MAY BE REPRESENTED AT THIS MEETING AND TO
ENSURE A QUORUM. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES USING
THE ACCOMPANYING ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR
PROXY AND VOTE YOUR SHARES. PROXIES CAN ALSO BE REVOKED BY SUBMITTING A NEW
PROXY WITH A LATER DATE OR BY DELIVERING WRITTEN INSTRUCTIONS TO THE SECRETARY
OF BROWN & SHARPE.

   When completing your Proxy Card, please sign your name as it appears
printed. If signing as an attorney, executor, administrator, trustee or
guardian, please give your full title. A Proxy executed by a corporation must
be signed by an authorized officer.

North Kingstown, Rhode Island

March   , 2001

                                       3



                            SUMMARY TERM SHEET

   The following summary briefly describes the material terms of the proposed
sale of substantially all the business and assets of the Company to Hexagon
and the related transactions, the sale of the North Kingstown Facility and the
later sale of the Heathrow, United Kingdom real estate and the related
distributions to stockholders. This summary does not contain all the
information that may be important for you to consider when evaluating the
proposed transaction. We encourage you to read this proxy statement and the
annexes attached to the proxy statement before voting. We have included
section references to direct you to a more complete description of the topics
described in this summary. Proposals 2-5 are not covered in the Summary Term
Sheet.

  .  Brown & Sharpe Manufacturing Company, located in North Kingstown, R. I.,
     currently operates in the metrology industry. Hexagon AB is a limited
     liability company existing under the laws of Sweden and has listed its
     series B shares in the OM Stockholm Exchange. Hexagon's primary business
     focuses on acquiring and developing, on a long-term basis, engineering
     companies. Please read Proposal 1--Brown & Sharpe and Proposal 1--
     Hexagon beginning on pages    .

  .  The Board of Directors has unanimously approved the proposal for the
     sale to Hexagon and related transactions, the sale of the North
     Kingstown Facility, the later sale of the Heathrow, United Kingdom real
     estate and the contemplated related distributions to stockholders, and
     has approved the proposal to change the name of the Company to "BNS Co."
     to omit the words "Brown & Sharpe". The Board believes that the sale to
     Hexagon is in the best interests of the Company and the stockholders and
     is fair to the stockholders due to, among other reasons more fully
     described in this Proxy Statement, the weakened financial condition of
     the Company and insufficient capital structure, our inability to raise
     capital, defaults under our senior secured lending agreements, the
     likelihood that, absent a sale to satisfy our senior secured lenders,
     reorganization proceedings under Chapter 11 of the Bankruptcy Code may
     be one of the possible consequences and the fact that since the process
     to sell all or part of the Company began on June 27, 2000, no other
     party presented an offer more favorable than the offer by Hexagon.
     Please read Proposal 1--Background and Reasons for the Sale; Directors
     Recommendation beginning on page    .

  .  If the proposed sale to Hexagon is closed, the Company will receive a
     purchase price of $160 million from Hexagon, subject to two adjustments,
     plus $2.5 million at Closing and an additional $4.5 million over the
     next three years for the sale of up to 47% of the shares of BSIS, Inc.,
     a subsidiary of the Company in the early stages of developing a
     "measuring software" business.

    .  In the first adjustment, the purchase price shall be increased at
       the Closing by an amount of any Business Operating Profit contingent
       payment, related to the business we are selling to Hexagon.
       Management believes that their will be an increase of $10 million
       pursuant to this first adjustment; however, we cannot guarantee that
       such amount of increase will become final until it is agreed to by
       Hexagon pursuant to the Acquisition Agreement.

    .  In the second adjustment the purchase price payable at the closing
       will be increased or decreased (a decrease is expected), with no cap
       on the increase or floor on the decrease, by an amount equal to the
       estimated amount of cash and cash equivalents held by our
       subsidiaries being transferred to Hexagon at the Closing less the
       estimated amount or indebtedness of our transferred subsidiaries. If
       the closing had occurred on December 31, 2000, the amount of this
       decrease would have been approximately $3.6 million. We expect to
       have a net use of cash by the foreign subsidiaries being transferred
       to Hexagon between December 31, 2000 and the expected closing date
       in April, 2001 and an anticipated corresponding further decrease to
       the purchase price under this second adjustment.

    .  Approximately $77.4 million of the purchase price shall be paid
       directly to our lenders at the Closing to pay off in full the
       principal amount of our indebtedness, plus an amount for an early
       payment fee. In addition, an estimated amount will be held back from
       the net proceeds to satisfy known liabilities and potential
       contingent liabilities retained after the sale to Hexagon and an
       amount, estimated at $7.5 million, to be retained for funding the
       on-going operations of BNS Co. and BSIS (which includes the $2.5
       million invested by Hexagon at Closing).

                                       i



   Please read Principal Provisions of the Acquisition Agreement and Related
Agreements "Principal Provisions of Agreement"--Purchase Price Payable to Us
beginning on page    .

  .  The contemplated initial cash distribution to stockholders following the
     Closing with Hexagon and payment to our senior secured lenders (based
     upon management's estimates of the adjustments to the purchase price
     payable by Hexagon, estimates of amounts to be held back to satisfy
     retained liabilities and to fund BNS Co. and BSIS and an estimate of
     shares to be issued on exercise of outstanding options) is estimated by
     management to be in excess of $3.00 per share (estimated without giving
     effect to the reverse stock split of the Company's Common Stock that is
     the subject of Proposal 5). However, the amount of the cash
     distributions per share will be decreased in the event that either one
     or both of Proposals 3 and 4 for reducing the par value of the Company's
     Class A Stock and Class B Stock are not approved by stockholders
     (because the effect of such non-approval will be to preclude the
     transfer by the Board of an aggregate of $0.99 multiplied by the number
     of outstanding shares from the capital account to the additional paid-in
     capital account on the balance sheet of the Company). Stockholders
     should take into account when voting that the Company's estimates of
     retained liabilities, including potential contingent liabilities, may be
     lower or greater than they may prove to be in actuality by the time of
     the second or third distribution, in which event this would lead the
     Board to increase or reduce the second distribution to be made after the
     sale of the North Kingstown Facility and could require the Company to
     seek financing or reduce the amount of the third distribution
     contemplated to be made from the net proceeds of sale of the Heathrow,
     United Kingdom real estate. These additional proposals 3,4 and 5 are
     discussed below.

     Assuming a sale of the North Kingstown Facility for $15.5 million is
     completed, there will be a second cash distribution, the amount of which
     would be approximately equal to the net sale proceeds (after payment of
     the existing mortgage and expenses). There will be a third cash
     distribution after the sale of our Heathrow, United Kingdom real estate.
     However, the amount of such third distribution is not now determinable;
     we have not started efforts to sell this property. Stockholders should
     take into account when voting that the Company's estimates of retained
     liabilities, including potential contingent liabilities, may be lower or
     greater than they may prove to be in actuality by the time of the second
     or third distribution, in which event this would lead the Board to
     increase or reduce the second distribution to be made after the sale of
     the North Kingstown Facility and could require the Company to seek
     financing or reduce the amount of the third distribution contemplated to
     be made from the net proceeds of sale of the Heathrow, United Kingdom
     real estate. Please read Proposal 1--Cash Distribution to Stockholders
     beginning on page   .

  .  The Company will transfer to Hexagon substantially all of our assets,
     including the stock of most of our subsidiaries and the Metrology
     Business, which is the business of the Company and consists primarily of
     the MS Division and PMI Division excluding the Excluded Assets (as
     defined under the Acquisition Agreement). The Company will retain the
     following Excluded Assets:

    .  its stock in BSIS less Hexagon's purchase of BSIS's shares. Hexagon
       will own up to a maximum of 47% of the outstanding common stock of
       BSIS after three years from the Closing. BSIS plans to develop an
       early stage "measuring software business," which is focused on the
       commercialization of its new XACTMEASURE Measuring Software and has
       not generated any revenue since its formation in 1997. The business
       of the BSIS subsidiary is subject to a variety of risks and special
       considerations. As a result, the stockholders of the Company should
       carefully consider the risks summarized in the proxy statement.
       Please read Business Activities Following the Proposed Sale and
       Related Transactions: BSIS beginning on page   and Risk Factors
       Relating to BSIS beginning on page    .

    .  the Heathrow, United Kingdom real estate owned by Brown & Sharpe
       Group Ltd., to be sold later. Hexagon declined to exercise its
       option to purchase this real estate, which is operating as a gravel
       pit, for $5 million. The Company has not commenced efforts to sell
       the property. Please read Principal Provisions of Agreement--
       Transferred Stock and Transferred Assets, Principal Provisions of
       the Agreement--Excluded Assets Retained by Us and Principal
       Provisions of Agreement--Heathrow Airport Property beginning on page
          .

                                      ii



  .  Hexagon will assume all liabilities of the transferred subsidiaries
     other than as specified in the Acquisition Agreement. The following are
     the principal liabilities that will be retained by us: (a) all of our
     liabilities and the liabilities of our retained subsidiaries to the
     extent they relate to the Excluded Assets including the mortgage on the
     North Kingstown Facility; (b) liabilities for taxes by or attributable
     to us or our retained subsidiaries; (c) our unpaid fees and expenses of
     negotiating and documenting the proposed transaction and any brokerage,
     finder's or advisory fee payable by us; (d) all liabilities under our
     Senior Executive Supplemental Umbrella Pension Plan to persons who do
     not accept employment with Hexagon, all liabilities under our Long-Term
     Deferred Cash Incentive Plan in respect of year 2000 cash bonuses, and
     all liabilities to participants in our regular Supplemental Executive
     Retirement Plans; (e) all liabilities under employee change in control
     contracts (except with regard to executives hired or retained at the
     Closing or within one year thereafter by Hexagon or its affiliates); and
     (f) estimated contingent liabilities in respect of all litigation
     matters pending on the date of the Acquisition Agreement, other than two
     specified matters that will be assumed by Hexagon and all liabilities,
     claims or expenses, whether known or unknown, absolute or contingent,
     accrued or unaccrued, relating to the excluded assets or otherwise, not
     directly resulting from the conduct of the transferred business. Please
     read Principal Provisions of Agreement--Liabilities to be Assumed by
     Hexagon and Principal Provisions of Agreement--Excluded Liabilities
     Retained by Us beginning on page    .

  .  Hexagon's and the Company's obligations to complete the proposed
     purchase and sale of substantially all of the Company's business and
     assets is subject to the satisfaction or waiver of several conditions,
     one of which is that the Company's stockholders must approve the
     proposed sale to Hexagon and related transactions under the Acquisition
     Agreement. Please read Principal Provisions of Agreement--Conditions to
     the Proposed Sale beginning on page    .

  .  The Acquisition Agreement requires the Company to pay Hexagon a fee of
     $4 million, plus expenses of Hexagon relating to the transaction not in
     excess of $2 million if the Acquisition Agreement is terminated by us or
     Hexagon because the Company's Board has recommended to the stockholders
     that they approve an alternative acquisition or tender their shares in a
     tender or exchange offer. In the event the Company fails to obtain
     stockholder approval, we will be required to pay up to $2 million for
     the expenses of Hexagon. Please read Principal Provisions of Agreement--
     Fees and Expenses beginning on page    .

  .  Under a Purchase and Sale Agreement dated March   , 2001 (the "North
     Kingstown Sales Agreement") with Precision Park Partners LLC, a
     commercial buyer, the Company will sell its North Kingstown Facility,
     including the transfer of all the leases pursuant to which we lease
     portions of the North Kingstown Facility to third parties (including the
     Lease to Hexagon to be signed at the Closing under the Acquisition
     Agreement), for cash purchase price of $15.5 million. Precision Park
     Partners LLC has a sixty-day review period (of which     days remain as
     of March   , 2001) in which Precision Park Partners LLC may terminate
     the agreement for any reason. Please read Proposal 1--Sale of North
     Kingstown Facility beginning on page   .

  .  Brown & Sharpe retained Houlihan Lokey Howard & Zukin Financial
     Advisors, Inc. who rendered an opinion as to the fairness, from a
     financial point of view, of the proposed Hexagon transaction to the
     Company. Please read Proposal 1--Opinion of Houlihan Lokey Howard &
     Zukin Financial Advisors, Inc. beginning on page    .

  .  Any of our stockholders who do not vote for the Proposal 1 Transaction
     are not entitled to appraisal or dissenter's rights under Delaware law
     or our Certificate of Incorporation. Please read No Dissenters' Rights
     beginning on page    .

  .  The Company has agreed under the Acquisition Agreement that we shall
     change our corporate name and the names of any of our retained
     subsidiaries to eliminate any reference to "Brown & Sharpe". Brown &
     Sharpe will be changed to "BNS Co." and BSIS will be changed to "Xygent,
     Inc." Please read Principal Provisions of Agreement--Name Change"
     beginning on page    .

  .  The Company anticipates that the Company's Class A Common Stock (the
     "Class A Stock") will continue to be listed on the New York Stock
     Exchange, subject to ongoing review by the New York Stock Exchange. The
     reverse stock split that is the subject of Proposal 5 is intended to
     assist the Company to maintain its listing, by meeting certain of the
     qualitative and quantitive requirements of

                                      iii



     the NYSE for continued listing. However, even with implementation of the
     one-for-five reverse stock split, it is possible that future results of
     the Company (which will be engaged only in the software business
     conducted by BSIS) or future discussions with the New York Stock
     Exchange may lead to delisting of the Company's Class A Stock by the New
     York Stock Exchange and it is possible that the Company may not at that
     time be able to list the Class A Stock on another stock exchange. Please
     read Proposal 5--Amendment to Certificate of Incorporation to Effect a
     One-for-Five Reverse Stock Split beginning on page    and Business
     Activities Following the Proposed Sale and Related Transactions: BSIS
     beginning on page    .

  .  Options for an aggregate of 880,700 shares of the Company's Class A
     Stock awarded under the Company's 1999 Equity Incentive Plan are
     currently outstanding and held by management employees including
     executive officers and by non-employee directors at exercise prices
     ranging from $1.875 to $2.375. All of these options are currently at
     exercise prices below current market value and


     will immediately vest and become exercisable upon stockholder approval
     of the proposed sale to Hexagon and related transactions. Please read
     Interests of Certain Persons in the Acquisition Agreement and North
     Kingstown Sales Agreement beginning on page   .


                                      iv


                   QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

Q. WHAT AM I BEING ASKED TO VOTE UPON?

A. Five proposals will be voted on at the Special Meeting. First, whether to
   approve the sale of substantially all assets of the Company including (a)
   the proposed sale of substantially all of the business and assets of the
   Company to Hexagon AB, a Swedish corporation, headquartered in Stockholm,
   Sweden, and related transactions, (b) the proposed sale of our North
   Kingstown Facility and (c) the related cash distributions to stockholders,
   after the Closing under the Acquisition Agreement, after the closing under
   the North Kingstown Sales Agreement, and after later sale of the Company's
   real estate (gravel pit) adjacent to Heathrow Airport in the United Kingdom
   which is part of this proposal. Second, whether to approve the name change.
   The name change is required to be made by the terms of the Acquisition
   Agreement between the Company and Hexagon. Third, whether to amend the
   Company's Certificate of Incorporation to reduce the par value of the
   Company's Class A Stock from $1.00 per share to $0.01 per share. Fourth,
   whether to amend the Company's Certificate of Incorporation to reduce the
   par value of the Company's Class B Stock from $1.00 per share to $0.01 per
   share. Fifth, whether to amend the Company's Certificate of Incorporation
   to reduce the number of outstanding shares of Common Stock by effecting a
   one-for-five reverse stock split of both the Class A Stock and Class B
   Stock.

Q. WHAT WILL HAPPEN IF THE SALES AND RELATED CASH DISTRIBUTIONS ARE APPROVED?

A. If the sale of substantially all assets is approved, we will sell
   substantially all the Company's business and assets to Hexagon for cash and
   the assumption by Hexagon of substantially all of the Company's liabilities
   and we will sell our North Kingstown Facility. As soon as practicable after
   the Closing of the Sale to Hexagon and completion of purchase price
   adjustments, and after payment, or provision for payment, of the
   liabilities and potential contingent liabilities not assumed by Hexagon, an
   initial cash distribution will be made to stockholders in an amount to be
   determined by the Board of Directors. The Company will retain the early
   stage software business of its subsidiary BSIS and will also retain from
   the sale proceeds an amount for funding the expenses of operations of BNS
   Co. and BSIS (together with funding from investments required to be made by
   Hexagon). Once the sale to Hexagon has closed, then upon the sale of the
   North Kingstown Facility and upon the sale of the Heathrow, United Kingdom
   real estate, there will be additional cash distributions. Other than the
   reduction in par value, there will not be a change in the equity of the
   Company, and the number of outstanding shares of Common Stock will not be
   changed by the transactions (however, the number of shares will be
   increased by the exercise of outstanding options under the 1999 Equity
   Incentive Plan).

Q. WHAT WILL HAPPEN IF THE SALES AND DISTRIBUTIONS ARE NOT APPROVED?

A. Under the terms of the Acquisition Agreement, if the Company fails to
   obtain a stockholder vote in favor of the Acquisition Agreement, the
   Company pays certain actual documented, out-of-pocket expenses of Hexagon
   up to $2 million. In addition, there has been and continues to be, Events
   of Default under the Company's Senior Note Agreement and its Revolving
   Credit Agreement (as defined therein). The senior lenders under the Senior
   Note Agreement and Revolving Credit Agreement may at any time declare the
   notes and loan to be immediately due and payable and may resort to
   collateral securing the Company's obligations to the senior lenders.
   Accordingly, if the sale of substantially all of the assets is not approved
   the Company must seek other strategic alternatives, including sale or
   merger of the Company in order to satisfy its senior lenders because the
   Company is unable to pay its loans if they are called and bankruptcy
   reorganization could be one of the possible consequences.

Q. WHEN WILL THE STOCKHOLDERS RECEIVE ANY PAYMENT FROM THE SALE?

A. The initial cash distribution will occur at a date later selected by the
   Board of Directors, as soon as practicable after the Closing and completion
   of purchase price adjustments. Additional distributions from the net
   proceeds of the North Kingstown Facility and the Heathrow, United Kingdom
   real estate will be

                                       v



   made as soon as practicable after the closing of such sales. The Company
   has not commenced efforts to sell the Heathrow, United Kingdom real estate
   since Hexagon only recently declined to exercise its option to purchase
   that property for $5 million.

Q. WHAT IS THE AMOUNT OF THE PAYMENT THAT STOCKHOLDERS WILL RECEIVE FROM THE
   SALE TO HEXAGON AND SALE OF NORTH KINGSTOWN FACILITY?

A. Since there are a number of details remaining to be resolved, including the
   fact that the purchase price payable by Hexagon is subject to increase
   pursuant to an adjustment depending upon the year 2000 Operating Profit (as
   defined) for the Metrology Business being sold and subject to an
   adjustment, up or down (expected to be down) depending on the amount of a
   net cash adjustment for the subsidiaries being transferred to Hexagon, it
   is not possible to determine either the purchase price, or the dollar
   amount per share contemplated to be paid to stockholders as an initial
   distribution. However, based upon evaluation of management, including (i)
   an estimate as to the amount of any increase from the Business Operating
   Profit contingent payment; (ii) an estimate of the net cash adjustment
   following the Closing (which adjustment is expected to become a greater
   reduction by the date of the Closing); (iii) an estimate of the amounts to
   be held back to satisfy known liabilities and estimated contingent
   liabilities retained by us, and (iv) an amount, estimated at $7.5 million,
   to be retained for funding the ongoing operations of BNS Co. and BSIS
   (which includes the $2.5 million invested by Hexagon at the Closing), it is
   estimated by management that the initial cash distribution will be in
   excess of $3.00 per share (estimated without giving effect to the reverse
   stock split of the Company's Common Stock that is the subject of Proposal
   5). However, the amount of the cash distributions per share will be
   decreased in the event that either one or both of Proposals 3 and 4 for
   reducing the par value of the Company's Class A Stock and Class B Stock are
   not approved by stockholders (because the effect of such non-approval will
   be to preclude the transfer by the Board of an aggregate of $0.99
   multiplied by the number of outstanding shares from the capital account to
   the additional paid-in capital account on the balance sheet of the
   Company). Assuming a sale of the North Kingstown Facility for $15.5 million
   is completed, there will be a second cash distribution, the amount of which
   would, subject to the qualifications below, equal to the net sale proceeds
   (after payment of mortgage and expenses). There will be a third cash
   distribution after the sale of our Heathrow, United Kingdom real estate.
   The amount of the cash distribution resulting from the net sale proceeds of
   this real estate is not now determinable.

     Stockholders should take into account when voting that the Company's
   estimates of retained liabilities, including potential contingent
   liabilities, may be lower or greater than they may prove to be in actuality
   by the time of the second or third distribution, in which event this would
   lead the Board to increase or reduce the second distribution to be made
   after the sale of the North Kingstown Facility and could require the
   Company to seek financing or reduce the amount of the third distribution
   contemplated to be made from the net proceeds of sale of the Heathrow,
   United Kingdom real estate.

Q. WHAT DO I NEED TO DO NOW?

A. After carefully reading and considering the information contained in this
   Proxy Statement, you should complete and sign your proxy and return it in
   the enclosed return envelope as soon as possible so that your shares may be
   represented at the meeting. A majority vote of the entitled votes of the
   shares of Brown & Sharpe Class A Stock and Class B Stock outstanding on the
   record date, voting together as a single class, is required to approve
   Proposal 1: sale of substantially all assets, including the Acquisition
   Agreement and related transactions, the sale of our North Kingstown
   Facility and the related contemplated distributions to stockholders and
   Proposal 2: the name change. A majority vote of the entitled votes of the
   Class A Stock outstanding on the record date and a majority vote of the
   entitled votes of the shares of Class A and Class B Stock outstanding on
   the record date, voting together as a single class, is required to approve
   Proposal 3: the reduction in the par value per share of the Class A Stock.
   A majority vote of the entitled votes of the Class B Stock outstanding on
   the record date and a majority vote of the entitled votes of the shares of
   Class A and Class B Stock outstanding on the record date, voting together
   as a single class, is required to approve Proposal 4: the reduction in the
   par value per share of the Class B Stock. A majority vote of the

                                      vi



   entitled votes of the entitled vote of shares of Class A Stock and Class B
   Stock outstanding on the record date, voting as a single class, is required
   to approve Proposal 5--one-for-five reverse stock split of outstanding
   shares of the Class A Stock and Class B Stock.

Q. WHAT DOES THE BROWN & SHARPE BOARD OF DIRECTORS RECOMMEND?

A. The Brown & Sharpe Board unanimously recommends voting in favor of the sale
   of substantially all of the assets, including the proposed sale to Hexagon
   and related transactions, the proposed sale of our North Kingstown Facility
   and related cash distributions to stockholders, the proposed name change
   and the reduction of the par value per share of the Company's two classes
   of Common Stock.

Q. CAN THE COMPANY STOCKHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED THEIR
   SIGNED PROXIES?

A. Yes. You can change your vote at any time before your proxy is voted at the
   special meeting. You can change your vote in one of three ways. First, you
   can send a written notice to our Secretary, James W. Hayes III, at our
   executive offices, stating that you would like to revoke your proxy.
   Second, you can complete and submit a new proxy. If you choose either of
   these two methods, you must submit the notice of revocation or the new
   proxy to the Company. Third, you can attend the special meeting and vote in
   person. Simply attending the meeting, however, will not revoke your proxy;
   you must vote at the special meeting.

Q. IF THE COMPANY SHARES ARE HELD IN "STREET NAME" BY YOUR BROKER, WILL THE
   BROKER VOTE THESE SHARES ON MY BEHALF?

A. You will vote your Company shares only if you provide the broker with
   instructions on how to vote. You should follow the directions provided by
   you broker regarding how to instruct your broker to vote the shares.

Q. CAN I STILL PURCHASE OR SELL SHARES OF COMPANY CLASS A STOCK ON THE NEW
   YORK STOCK EXCHANGE?

A. We expect that following the sale to Hexagon the Company's Class A Stock
   will continue to be listed on the New York Stock Exchange, subject to
   ongoing review by the New York Stock Exchange. The Company is also asking
   stockholders in Proposal 5 of this Proxy Statement to approve a one-for-
   five reverse stock split of its outstanding Class A Stock and Class B
   Stock, in order to reposition the Company in light of the planned sale to
   Hexagon and continue to maintain its listing on the New York Stock
   Exchange. It is possible, however, that future results of the Company may
   lead to a delisting of the Company's Class A Stock on the New York Stock
   Exchange, in which event you would not be able to buy or sell our Class A
   Stock on the New York Stock Exchange. If delisting would occur, the Company
   would use its best efforts to seek alternative trading arrangements for its
   stockholders.

Q. WHAT ARE THE TAX CONSEQUENCES OF THE SALE TO ME?

A. The Company has estimated that it will have neither current earnings and
   profits nor accumulated earnings and profits at either the time of
   distributions in 2001 or for the full year (2001) in which the initial
   distribution and the second distribution are expected to be made, in which
   event the distributions would not be treated as a dividend for federal
   income tax purposes. Instead, the distribution would first be treated as
   non-taxable return of each shareholders adjusted basis in the stock of the
   Company to the extent of such basis. Any distribution in excess of a
   shareholder's basis will be treated as capital gain from the exchange of
   the respective shares. Distributions to shareholders that are corporations
   will not qualify for the dividend received deduction. In the event that the
   Heathrow, United Kingdom real estate is sold after December 31, 2001, it is
   possible that the Company may have sufficient earnings and profits for 2002
   such that the cash distribution following such sale could be taxable as a
   dividend.

                                      vii


Q. WHO CAN HELP ANSWER QUESTIONS?

A. If you have any additional questions about the proposed sale to Hexagon
   under the Acquisition Agreement or the other matters to be acted on at the
   Special Meeting or if you need additional copies of this Proxy Statement or
   any public filings referred to in this Proxy Statement, you should contact:
   Andrew Genor, Vice President and Chief Financial Officer, at (401) 886-
   2000. Our public filings can also be accessed at the SEC's web site at
   www.sec.gov.

                                     viii


                               TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
Summary Term Sheet........................................................    i
Question and Answers about the Proposal...................................    v
Summary...................................................................    1
Proxy Statement...........................................................   17
Solicitation of proxies...................................................   17
Cautionary Statement Regarding Forward Looking Statements.................   18
Proposal 1: To Approve the Sale of Substantially All Assets, Including the
 Acquisition Agreement and the Sale to Hexagon and Related Transactions,
 the Sale of the North Kingstown Facility and Related Cash Distributions
 to Stockholders..........................................................   19
  General.................................................................   19
  Purchase Price Payable to Us and Excluded Liabilities Under the
   Acquisition Agreement..................................................   20
  Brown & Sharpe..........................................................   20
  Hexagon.................................................................   21
  Background and Reasons for the Sale; Directors' Recommendation..........   21
  Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. ......   29
  Sale of North Kingstown Facility........................................   33
  Cash Distributions to Stockholders......................................   33
Principal Provisions of the Acquisition Agreement and Related Agreements..   34
Principal Provisions of the North Kingstown Sales Agreement...............   46
The Business of the Company...............................................   48
Selected Historical Financial Data........................................   61
Pro forma Financial Information...........................................   63
Management's Discussion and Analysis of Financial Condition and Results of
 Operations...............................................................   66
Risk Factors Prior to Sale of Substantially All Assets....................   73
No Dissenters' Rights.....................................................   78
Accounting Treatment......................................................   78
Certain Federal Income Tax Considerations.................................   78
Interests of Certain Persons in the Acquisition Agreement and North
 Kingstown Sales Agreement................................................   79
Business Activities Following the Proposed Sales and Related Transactions:
 BSIS Inc. to Be Renamed Xygent, Inc. ....................................   80
Risk Factors Relating to BSIS.............................................   86
Regulatory Approvals......................................................   89
Stock Ownership of Certain Beneficial Owners and Management...............   90
Proposal 2: Amendment of Certificate of Incorporation to Change the Name
 of the Company...........................................................   94
Proposal 3: Amendment to Certificate of Incorporation to Reduce Par Value
 Per Share of Class A Stock...............................................   94
Proposal 4: Amendment to Certificate of Incorporation to Reduce Par Value
 Per Share of Class B Stock...............................................   95
Proposal 5: Amendment to the Certificate of Incorporation to Effect a One-
 For-Five Reverse Stock Split of the Class A Stock and Class B Stock......   95
Other Matters.............................................................  100
Independent Auditors......................................................  100
Available Information.....................................................  100
Consolidated Financial Statements.........................................  F-1
Annex A:Acquisition Agreement
Annex B:Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
Annex C:Amended Article FOURTH of the Certificate of Incorporation
Annex D:North Kingstown Sales Agreement
Annex E:Amended Article FOURTH A of the Certificate of Incorporation


                                      viii


                                    SUMMARY

   This Summary highlights selected information from this proxy Statement, and
may not contain all of the information that is important to you. To understand
the proposed sale of substantially all the business and assets of the Company
in Proposal 1 fully and for a more complete description of the sale to Hexagon
and related transactions, the sale of the North Kingstown Facility, the later
sale of the Heathrow, United Kingdom real estate, and the contemplated cash
distributions to stockholders and other matters to be acted upon at the
Special Meeting of stockholders, you should read carefully this entire Proxy
Statement and the documents to which we have referred you. See "Where You Can
Find More Information" (pages     through    ). The Acquisition Agreement
covering the sale to Hexagon, including general provisions of the investments
by Hexagon in BSIS and the lease of a portion of the North Kingstown Facility
at Precision Park to Hexagon, is attached as Annex A to this document. The
North Kingstown Sale Agreement, covering the sale of our Rhode Island Facility
is attached as Annex D. Hexagon has advised us that its acquisition of our
assets does not require a vote of its stockholders and that it plans to fund
the purchase price from the proceeds of committed bank borrowings. We
encourage you to read the Acquisition Agreement, and the North Kingstown Sale
Agreement, as they are the legal documents that govern those sales and the
opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., attached as
Annex B, as to the fairness to the Company of the sale to Hexagon. We also
encourage you to read the form of Amended Article FOURTH and FOURTH A of the
Company's Certificate of Incorporation for Proposals 3, 4 and 5 attached as
Annexes C and E.

   The Companies (pages   through  )

       Brown & Sharpe Manufacturing Company
       Precision Park
       200 Frenchtown Road
       North Kingstown, RI 02852-1700
       (401) 886-2000

   The Company currently operates entirely in the metrology industry through
three business units:

  .  MS Division: manufactures and markets a wide range of manual and
     computer-controlled, high precision coordinated measuring machines and
     is the largest division;

  .  PMI Division: manufactures mechanical and electronic measuring and
     inspection tools and is the second largest division;

  .  Brown & Sharpe Information Systems ("BSIS"): develops measuring software
     and has had no sales to date; and

   The Company has entered into an agreement to sell the assets of the
Electronics Division, which designs and manufactures surface inspection
systems, for a total of $2 million, prior to payment to minority shareholder
and post-closing adjustments.

   The Company has had net losses of $42.9 million and $57.3 million for the
years ending December 31, 1999 and December 31, 2000, respectively.

   The Metrology Business being sold to Hexagon, consisting primarily of the
MS Division and PMI Division excluding the Excluded Assets as defined under
the Acquisition Agreement, is believed by the Company to have had revenue, as
defined without regard to SAB 101, of $288.5 million and Operating Profit as
defined under the Acquisition Agreement of $18.6 million for the year 2000.

       Hexagon AB
       P-O Box 1112
       S0131 26 Nacka Strand
       Stockholm, Sweden


                                       1


   Hexagon AB is a limited liability company existing under the laws of Sweden
and has listed its series B shares on the OM Stockholm Exchange. Hexagon's
primary business concept is to acquire and develop, on a long-term basis,
engineering companies. The Hexagon Group consists of eight directly reporting
subsidiaries that are grouped in three fields of operation:

  .  Industrial Components and Systems: produces hydraulics, flow technology,
     temperature technology, mechanical maintenance products and transmission
     equipment;

  .  Niche Manufacturing: produces gaskets for plate heat exchangers and
     special wheels, sliding bearings, cage rings and preprocessed special
     steel, tools and components as well as systems and/or components for
     industrial robots, trucks and base stations for mobile phone systems;
     and

  .  Hexagon Wireless: develops and markets antennas and antenna systems for
     mobile handsets and Bluetooth applications ranging from lap tops, palm
     tops, up to large industrial applications for process controlling
     purposes.

   Reasons for the Proposed Sale of Substantially All of the Assets, including
Substantially All the Business and the Assets of the Company to Hexagon and
Related Transactions and Sale of the North Kingstown Facility and Later Sale
of the Heathrow, United Kingdom Real Estate and the Cash Distributions (pages
  through  ).

   Our board of directors (the "Board") believes that the sale of
substantially all of the Company's assets, including (a) the proposed sale to
Hexagon under the Acquisition Agreement and related transactions, (b) the sale
of our North Kingstown Facility and later sale of the Heathrow, United Kingdom
real estate and (c) the contemplated cash distributions to stockholders on
dates and in amounts to be finally determined by our Board is in the best
interest of the Company and our stockholders and is fair to the stockholders.

   In reaching its decision to approve this first proposal, our Board
considered a number of factors, including the following:

  . The low historical market prices (and related financial multiples), and
    trading range of the Company's Class A Stock from 1998 up to June 27,
    2000, when Brown & Sharpe announced commencement of its process for
    merger or sale of substantially all assets of the Company, or other
    strategic transaction. This shows an overall downward trend, which
    reinforced, in the Board's view, the need to negotiate and complete such
    a transaction.

  . Our inability to raise additional subordinated debt or preferred stock in
    late 1999 - June, 2000, in an effort to resolve the financial defaults
    existing since 1999 under the secured lending agreements with our senior
    lenders, including a payment default under our $30 million bank revolving
    credit since November 10, 2000. The Board believed that, under the
    circumstances, a sale of the Company would likely be necessary to satisfy
    its lenders who would otherwise resort to their collateral, consisting of
    most of the Company's assets and stock in most of its subsidiaries, in
    which event proceedings under Chapter 11 of the Bankruptcy Code could be
    one of the possible consequences.

  . The history of losses, declining cash flows and weakened capital
    structure, including net losses of $42.9 million in 1999 and an expected
    net loss for the entire year 2000 (which turned out to be a net loss of
    $57.3 million, including the impact of adopting of SAB 101), and the
    Company's declining prospects as an independent company in the Metrology
    Business in light of the long-standing financial defaults in agreements
    with our senior lenders and the resulting insufficiency of the Company's
    capital structure. The Company is unable to pay its lenders in full, if
    the loans were called, and unable to find alternative sources of capital
    to use to pay its lenders.

  . The Board's decision, in light of the foregoing factors, to hire Chase
    Securities, as announced on June 27, 2000, to identify prospective
    purchasers and/or investors that might be interested in pursuing a
    strategic transaction with the Company, such as a possible merger or sale
    of the Company or substantial investment in the Company or similar
    transaction, was viewed as a positive procedural factor by the Board.

                                       2



  . The information Chase Securities reviewed with the Board at its meeting
    on September 18, 2000 with respect to the results of the process
    undertaken by the Company and Chase Securities, including the
    recommendation of Chase Securities to the Board at its September 18
    meeting, made in the context of the results of that process and the
    continued request of Hexagon for negotiating exclusivity, for the Company
    to pursue the Hexagon bid on an exclusive basis for a limited period, and
    the further review of the process and the proposed definitive Acquisition
    Agreement between Hexagon and the Company that was presented to the Board
    for approval at its meeting on November 16, 2000 were positive factors.

  . The fact that, since the commencement on June 27, 2000 of the process
    undertaken by the Company, with the assistance of Chase Securities, no
    other party had, in the Board's view, presented the Company with an
    acquisition proposal that, taken as a whole, would be more favorable to
    the Company and its stockholders than the purchase offer from Hexagon
    embodied in the Acquisition Agreement (and related agreements) and that
    would be as certain to be consummated within the same time frame (Spring
    2001) as the Hexagon offer, was a positive factor for the Board.

  . The opinion of Houlihan Lokey Howard & Zukin Financial Advisors to the
    Board of Directors of the Company that, subject to the matters set froth
    in its opinion, the consideration to be received by the Company in
    connection with the proposed sale to Hexagon will be fair, from a
    financial point of view, to us. While this opinion was not "adopted" as
    such by Board resolution, it was a positive factor in the Board's
    decision.

  . The purchase price and terms of the proposed sale to Hexagon, as
    reflected in the Acquisition Agreement, including the opportunity to
    receive additional purchase price to the extent that our Metrology
    Business Operating Profit (as defined) for the year 2000 exceeds certain
    specified levels. The Board found that the opportunity to receive a
    purchase price increase was a positive factor in its decision to
    recommend the proposed sale, as it provided a potential increase to the
    Company and stockholders for performance. In the Board's view, this was a
    balance to the negative effect of the second adjustment relating to the
    net cash (net of debt) position of the subsidiaries to be transferred to
    Hexagon. The second adjustment will be adversely affected by the date of
    the Closing in April, as the Company's foreign subsidiaries being
    transferred to Hexagon are users of cash at least through May.

  . The Company's ability to make a cash distribution to stockholders out of
    the net proceeds under the Acquisition Agreement with Hexagon, after
    paying the Company's debt obligations to its senior lenders, after
    payment, or making provision for the payment, of its estimated retained
    liabilities, a retention for funding the expenses of BNS Co. and BSIS
    (together with the $7 million to be received over three years by BSIS
    from Hexagon for purchases of the stock of BSIS) for development of the
    early stage BSIS software business, was a positive factor in the Board's
    view.

  . The willingness of Hexagon to make substantial investments in BSIS
    aggregating $7 million over the next three years, eventually owning up to
    as much as 47% of the equity of BSIS, thereby enabling the Company to
    focus on development and commercialization of BSIS's software products,
    was a positive factor for the Board.

  . The fact that BSIS, which will be a controlled subsidiary after the
    Closing and will be the only active operations of the Company, has not
    yet generated any revenues. Although the Board considered this a negative
    factor, it was mitigated by the opportunity to develop BSIS and the fact
    that BSIS will benefit from the cash provided by Hexagon's purchase of a
    significant portion of its stock. In connection with the retention of
    BSIS, the Board considered and viewed the effects of transferring to
    Hexagon the 30% interest in Wilcox Associates, Inc. as only ancillary
    since the important asset relating to Wilcox Associates Inc. to the
    Metrology Business was the exclusive technology license being sold to
    Hexagon, rather than the 30% interest and the 30% interest did not
    contribute to sales and earnings of Brown & Sharpe and did not have an
    easily realizable value. The Board also considered the requirement that
    BSIS sell software products to Hexagon at prices substantially below
    prices charged to others and the need for additional employees resulting
    from our sale to Hexagon as negative, but manageable, factors.

  . The Company's decision to sell the assets of Company's Electronics
    Division and to stop funding the projects for the development of new non-
    contact metrology technology as one of the owners of a 50/50

                                       3



    joint venture with Metroptic Technology in Israel. The Board recognized
    the Company's inability to obtain new sources of cash flow for its
    ongoing business, which reinforced the attractiveness of the purchase
    price under the Acquisition Agreement.

  . The Company's ability to sell its North Kingstown Facility pursuant to
    the North Kingstown Sales Agreement subject to satisfaction of closing
    conditions was viewed as a positive factor, in the Board's view, for the
    Company and its stockholders.

  . The possibility that the Class A Stock of the Company (BNS Co. after the
    Closing) may be delisted by the New York Stock Exchange after the Closing
    was considered to be a negative factor by the Board because the Board
    believes there are clear advantages to being listed on a national
    exchange.

  . The potential disadvantages and complexity of retaining certain unassumed
    liabilities and potential contingent liabilities of the Company and its
    retained subsidiaries under the Acquisition Agreement was considered a
    negative factor. However, the Board considered that the potential
    disadvantages were outweighed by the determination that the proposed sale
    to Hexagon was the superior proposal.

  . The fact that, pursuant to the Acquisition Agreement, the Company and its
    representatives may not (a) encourage the initiation of any inquiries or
    proposals regarding the acquisition by any person of the Common Stock of
    the Company in a takeover bid, or all or a material portion of the
    business and assets of the Company (an "Acquisition Proposal"), (b)
    engage in negotiations or discussions concerning the Acquisition
    Proposal, or (c) agree to, approve or recommend any Acquisition Proposal,
    unless in each case the Board reasonably determines after consultation
    with its outside counsel that such Acquisition Proposal is a superior
    proposal and determines in good faith (based on the advice of its
    financial advisor and outside counsel) that it is required to take such
    actions in order to discharge properly its fiduciary duties. Although the
    Board viewed this as a negative factor in entering into the Acquisition
    Agreement, the Board considered this a positive factor in that the
    provision allows the Board to consider other superior offers under
    certain circumstances.

  . The fact that, pursuant to the Acquisition Agreement, the Board has the
    right to terminate the Acquisition Agreement in order to accept a
    superior company proposal if (a) the Board is required to accept such
    proposal to discharge properly its fiduciary duties, (b) the Company
    gives Hexagon notice of the Company's intention to accept such superior
    proposal, and (c) the Company pays to Hexagon a break-up fee of $4
    million plus up to $2 million of actual expenses, and if the Company
    fails to obtain a stockholder vote in favor of the Acquisition Agreement,
    the Company pays actual expenses of Hexagon of up to $2 million. The
    Board considered this provision a negative factor in entering into the
    Acquisition Agreement because of the break-up fee, but a positive factor
    in that the provision allows the Board to consider other superior offers
    under certain circumstances.

   Recommendation of the Brown & Sharpe Board (page  )

   The Brown & Sharpe Board has unanimously approved the sale of substantially
all the business and assets of the Company, including the Acquisition
Agreement and the related transactions, the sale of the North Kingstown
Facility, the sale of the Heathrow, United Kingdom real estate and the
contemplated future cash distributions to stockholders on dates and in amounts
to be finally determined by the Brown & Sharpe Board, and the name change, the
reduction of the par value per share of each Class of the Company's Common
Stock and the reverse stock split of each Class of the Company's Common Stock
and recommends that you vote in favor of the matters that are in Proposals 1-
5.

   Purposes of the Special Meeting (page  )

   The purposes of the Special Meeting are to consider and vote upon:

   .  the sale of substantially all assets of the Company including:

    --  the provisions therein for approval of the Acquisition Agreement
        dated as of November 16, 2000, as amended, between the Company and
        Hexagon AB (the "Acquisition Agreement") and the sale thereunder to
        Hexagon of substantially all the Company's business and assets and
        the related

                                       4


      assumption by Hexagon of substantially all the Company's liabilities
      and to authorize the Board of Directors to take all action necessary
      to carry out the sale and related transactions contemplated under the
      Acquisition Agreement, including:

    --  the provisions in the Acquisition Agreement contemplating agreements
        between BSIS, a subsidiary of the Company that is to be retained by
        the Company, and Hexagon, and contemplating Hexagon's investments in
        BSIS,

    --  the provisions in the Acquisition Agreement contemplating a lease
        (the "Lease") of a portion of the Company's North Kingstown facility
        at Precision Park to Hexagon for a term of five (5) years,

    --  the provision therein for approval of the sale of our North
        Kingstown Facility.

    --  contemplated cash distributions to stockholders of the Company, such
        distributions to be at dates later selected by the Board of
        Directors of the Company and in amounts as shall be later determined
        by the Board. Based upon the evaluation of management including the
        estimates as to the two adjustments to the purchase price payable by
        Hexagon at the Closing contemplated for late April, 2001, the
        estimate of amounts to be held back from the net proceeds to satisfy
        known retained liabilities and potential contingent liabilities and
        an amount, estimated at $7.5 million, to be retained for funding the
        ongoing operations of BNS Co. and BSIS (which includes the $2.5
        million invested by Hexagon at the Closing), and an estimate of
        shares expected to be issued on exercise of outstanding options, it
        is estimated by management that the initial cash distribution will
        be in excess of $3.00 per share (estimated without giving effect to
        the reverse stock split of the Company's Common Stock that is the
        subject of Proposal 5). However, the amount of the cash
        distributions per share will be decreased in the event that either
        one or both of Proposals 3 and 4 for reducing the par value of the
        Company's Class A Stock and Class B Stock are not approved by
        stockholders (because the effect of such non-approval will be to
        preclude the transfer by the Board of an aggregate of $0.99
        multiplied by the number of outstanding shares from the capital
        account to the additional paid-in capital account on the balance
        sheet of the Company). Assuming a sale of the North Kingstown
        Facility for $15.5 million is completed, there will be a second cash
        distribution, the amount of which would, subject to the
        qualifications below, be equal to the net sale proceeds (after
        payment of the existing mortgage and expenses). There will be a
        third cash distribution after the sale of our Heathrow, United
        Kingdom real estate (when sold), which is a part of the first
        proposal. However, the amount of such third distribution is not now
        determinable; we have not started efforts to sell this property.

      Stockholders should take into account when voting that the Company's
      estimates of retained liabilities, including potential contingent
      liabilities, may be lower or greater than they may prove to be in
      actuality by the time the second or third distribution, in which event
      this would lead the Board to increase or reduce the second
      distribution to be made after the sale of the North Kingstown Facility
      and could require the Company to seek financing or reduce the amount
      of the third distribution contemplated to be made from the net
      proceeds of sale of the Heathrow, United Kingdom real estate.

  .   An amendment to the Certificate of Incorporation of the Company to
      change the name of the Company to "BNS Co." (or such other name not
      using the words "Brown & Sharpe" as shall be determined by the Board of
      Directors of the Company).

  .   An amendment to the Certificate of Incorporation to reduce the par
      value per share of the Class A Common Stock from $1.00 per share to
      $0.01 per share,

  .   An amendment to the Certificate of Incorporation to reduce the par
      value per share of the Class B Common Stock from $1.00 per share to
      $0.01 per share,

  .   An amendment to the Certificate of Incorporation to effect a one-for-
      five reverse stock split of the outstanding shares of Class A Stock and
      Class B stock.

all as set forth in each case in the accompanying Proxy Statement, and

  .  other matters incident to the conduct of the Special Meeting or any
     adjournments or postponements thereof.

                                       5


   Date, Time and Place (page  )

   The Special Meeting of the Brown & Sharpe stockholders will be held at 10
a.m., Eastern Standard time, on April  , 2001, at the Company's executive
offices at Precision Park, 200 Frenchtown Road, North Kingstown, Rhode Island
02852.

Record Date; Required Votes (page  )

   The close of business on March [  ], 2001 is the record date for the
special meeting. Only Brown & Sharpe stockholders on the record date are
entitled to notice of and vote at the special meeting. On the record date, the
Company had      shares of common stock outstanding comprised of      shares
of Class A Common Stock, $1.00 par value (the "Class A Stock") and      share
of Class B Common Stock, $1.00 par value (the "Class B Stock" and together
with the Class A Common Stock, the "Common Stock"). The Company's Certificate
of Incorporation provides that each share of Class A Stock outstanding on the
record date entitles the holder thereof to one vote and each share of Class B
Stock outstanding on the record date entitles the holder thereof to ten votes
except as otherwise provided by law or by the Certificate of Incorporation.

   A majority vote of the entitled votes of the shares of Brown & Sharpe Class
A Stock and Class B Stock outstanding on the record date, voting together as a
single class, is required to approve Proposal 1: the sale of substantially all
assets of the Company, including the sale to Hexagon and related transactions,
the sale of the North Kingstown Facility and the related cash distributions to
stockholders and Proposal 2: the name change of the Company.

   A majority vote of the entitled votes of the Class A Stock outstanding on
the record date and a majority vote of the entitled votes of the shares of
Class A Stock and Class B Stock outstanding on the record date, voting
together as a single class, is required to approve Proposal 3: the reduction
in the par value per share of the Class A Common Stock. A majority vote of the
entitled votes of the Class B Stock outstanding on the record date and a
majority vote of the entitled votes of the shares of Class A Stock and Class B
Stock outstanding on the record date, voting together as a single class, is
required to approve Proposal 4: the reduction in the par value per share of
the Class B Stock; A majority vote of the entitled votes of shares of Class A
Stock and Class B Stock Outstanding on the record date, voting as a single
class, is required to approve Proposal 5: the one-for-five reverse stock split
of Class A Stock and Class B Stock.

Cash Distributions To Stockholders

   As an integral part of the proposal for the sale of substantially all of
the assets of the Company, the Company proposes (1) a contemplated cash
distribution in an amount estimated by management to be in excess of $3.00 per
share (estimated without giving effect to the reverse stock split of the
Company's Common Stock that is the subject of Proposal 5) to the stockholders
of the Company as soon as practical following (i) the Closing under the
Acquisition Agreement and payment of $77.4 million principal amount, plus a
prepayment fee to our senior lenders (ii) the payment, or provision for
payment, of estimated liabilities and contingent liabilities remaining with
the Company, and (iii) the retention of portions of the net proceeds under the
Acquisition Agreement to be available (together with the funds to be invested
by Hexagon in BSIS) for funding operations of BNS Co. and BSIS.; (2) a second
contemplated cash distribution to the stockholders of the Company upon the
sale of the North Kingstown Facility; and (3) a third contemplated cash
distribution to the stockholders of the Company following the sale of
Heathrow, United Kingdom real estate when such real estate is sold, and in all
cases, the cash distributions will be made on dates and in the amounts as the
Board of Directors may finally determine.

   Stockholders should take into account when voting that the Company's
estimates of retained liabilities, including potential contingent liabilities,
may be lower or greater than they may prove to be in actuality by the time of
the second or third distribution, in which event this would lead the Board to
increase or reduce the second distribution to be made after the sale of the
North Kingstown Facility and could require the Company to seek financing or
reduce the amount of the third distribution contemplated to be made from the
net proceeds of sale of the Heathrow, United Kingdom real estate.

                                       6



   However, the amount of the cash distributions per share will be decreased
in the event that either one or both of Proposals 3 and 4 for reducing the par
value of the Company's Class A Stock and Class B Stock are not approved by
stockholders (because the effect of such non-approval will be to preclude the
transfer by the Board of an aggregate of $.99 multiplied by the number of
outstanding shares from the capital account to the additional paid-in capital
account on the balance sheet of the Company; thus the amount of surplus
available under the Delaware General Corporate Law to permit the Board's
declaration of such distributions will be reduced).

   The Acquisition Agreement and Related Agreements between us and Hexagon
(pages   through  )

Purchase Price Payable To Us

   The purchase price for the assets and stock we are transferring to Hexagon
is $160 million subject to two adjustments, plus $2.5 million at Closing and
an additional $4.5 million over the next three years for the sale of
additional shares of BSIS stock to Hexagon. There is not a guaranteed minimum
we will receive from Hexagon after these adjustments.

   In the first adjustment, the purchase price will be increased by the amount
of any Business Operating Profit contingent payment, relating to the business
we are selling to Hexagon. If the Business Operating Profit, as defined, for
the year ended December 31, 2000 is finally determined to be equal to or less
than $15 million, there shall be no change to the $160 million component of
the total purchase price to be paid by Hexagon. If such Business Operating
Profit is between $17 million and $20 million, the purchase price shall be
increased by $10 million. If the amount of such Business Operating Profit is
greater than $15 million but less than $17 million, the purchase price shall
be between $160 million and $170 million as provided in detail in the
Acquisition Agreement. We believe that the Business Operating Profit for the
year ended December 31, 2000 is $18.6 million (which we have provided to
Hexagon), which would accordingly result in an increase of $10 million
pursuant to the first adjustment. However, we cannot guarantee that such
amount of increase will become final until it is agreed to by Hexagon pursuant
to the Acquisition Agreement.

   In the second adjustment, the purchase price will be increased or decreased
(a decrease is expected), with no cap on the increase or floor on the
decrease, by an amount equal to the amount of cash and cash equivalents held
by our subsidiaries being transferred to Hexagon less the amount of
indebtedness of our transferred subsidiaries. The parties must agree on the
definitive net cash adjustment after the Closing. If the Closing had occurred
on December 31, 2000, the amount of this decrease would have been
approximately $3.6 million. We expect to have a net use of cash by the foreign
subsidiaries being transferred to Hexagon between December 31, 2000 and the
expected closing date in April, 2001 and an anticipated corresponding further
decrease to the purchase price under this second adjustment.

   Approximately $77.4 million of the purchase price shall be paid directly to
our senior lenders to pay off in full the principal amount of our indebtedness
under the agreements with our senior lenders, plus an amount for an early
payment fee. Hexagon shall pay the balance of the purchase price to us. In
addition, at the Closing Hexagon shall pay to BSIS, one of the subsidiaries we
are retaining, the amount of $2.5 million in respect of Hexagon's first
required investment in BSIS.

Transferred Stock and Transferred Assets

   The proposed transaction involves a transfer of substantially all of our
assets, including the stock of most of our subsidiaries. We or our affiliates
are directly transferring to Hexagon or its affiliates all of the shares of
stock we hold of the following subsidiaries:

  . Brown & Sharpe International Capital Corporation

  . Brown & Sharpe DEA S.p.A.

  . BSP, Inc.

                                       7


  . Brown & Sharpe Foreign Sales Corp.

  . Brown & Sharpe Finance Company

  . Borel & Dunner, Inc.

  . Qingdao Brown & Sharpe Qianshao Trading Company Limited

  . Qingdao Brown & Sharpe Qianshao Technology Company Limited

  . Brown & Sharpe Aftermarket Services, Inc.

   We are also indirectly transferring to Hexagon all of the stock of the
various subsidiaries held by the companies listed above, as well as the 30%
interest in Wilcox Associates, Inc. held by Brown & Sharpe Aftermarket
Services, Inc. The Board considered and viewed the effects of transferring to
Hexagon the 30% interest in Wilcox Associates, Inc. an ancillary issue. In
particular, the important asset to Brown & Sharpe was the exclusive technology
license from Wilcox Associates, Inc. to the Metrology Business, and the 30%
interest did not contribute to sales and earnings of Brown & Sharpe and did
not have an easily realizable value.

Excluded Assets Retained By Us Under the Acquisition Agreement

   The following are the principal excluded assets to be retained by the
Company: (a) our stock in BSIS, and all of its XACTMEASURE products under
development and rights owned or licensed and its employees and assets; (b) our
50% ownership in the Metroptic joint venture, (c) our stock of Brown & Sharpe
Surface Inspection Systems Inc., and all of its assets (including stock in its
subsidiaries), which is in the process of being sold to another third party;
(d) our North Kingstown, R.I. Manufacturing Facility and our landlord
leasehold interests with respect to tenants occupying the building, which is
to be sold pursuant to the provisions of the North Kingstown Sales Agreement
as part of Proposal 1, and (e) the real estate adjacent to the Heathrow
Airport in the United Kingdom (the "Heathrow, United Kingdom real estate")
owned by Brown & Sharpe Group Ltd. (as to which Hexagon recently declined to
exercise its option to purchase for an additional price of $5 million). We
plan to sell the Heathrow, United Kingdom real estate later, and thereafter
make another cash distribution to stockholders, the amount of which is not now
determinable. For a number of years, this property has been used as a gravel
pit, generating gross revenue of approximately $550,000 in 2000.

   The Electronics Division consisted of Brown & Sharpe Surface Inspection
Systems and produced metrology tools for electronics component manufacturers
that focused on the detection and classification of micron level defects on a
variety of surfaces. The Company has decided to exit the Electronics Division
primarily because the market for its products did not materialize. The Company
has entered into an agreement to sell the assets of the Electronics Division
for a total of $2 million, prior to payment to minority shareholder and post-
closing adjustments. The operations of the Brown & Sharpe Surface Inspection
System Inc., are not material and the sale of the assets of this unit does not
require a stockholder vote.

   We do not believe a stockholder vote for a sale of the Heathrow United
Kingdom real estate, contemplated for later this year (or possibly in 2002),
will require a vote of stockholders of the Company; however, we will assess
the matter when this real estate is under a sales agreement.

Purchase By Hexagon of Stock in BSIS, Inc.; BSIS Stockholders' Agreement

   Hexagon has agreed to purchase (or cause one of its affiliates to purchase)
shares of our subsidiary BSIS, representing 16.7% of the issued and
outstanding common stock of BSIS at the closing for a purchase price of $2.5
million in cash. Pursuant to arms-length negotiations between representatives
of the Company and Hexagon, BSIS was valued for purposes of the Acquisition
Agreement at $15 million including Hexagon's initial investment.

   In addition, on each of the first three anniversaries of the closing,
Hexagon or its affiliate shall purchase additional shares of BSIS for a
purchase price of $1.5 million on each such anniversary. Hexagon will purchase
an additional 10% of the shares, up to a total after its last investment of
46.7% (or a percentage less than 10% on each of the next three anniversaries
if the then-agreed fair market value of BSIS prior to the additional
investment on such anniversary date is greater than $15 million).

                                       8


Liabilities to be Assumed by Hexagon

   At the Closing, Hexagon and its affiliates will assume all of our
liabilities and the liabilities of our transferred subsidiaries (other than
certain excluded liabilities described immediately below), including all
liabilities, commitments, obligations, claims and expenses, known or unknown,
absolute or contingent, accrued or unaccrued, directly relating to the conduct
of the transferred business as it has been directly or indirectly conducted by
us (except as expressely otherwise provided).

Excluded Liabilities Retained by Us

   The following are the principal excluded liabilities that will be retained
by us: (a) all of our liabilities and the liabilities of our retained
subsidiaries to the extent they relate to the excluded assets (book value of
$11.2 million) which totaled $3.3 million at December 31, 2000; plus the
mortgage on the North Kingstown Facility which totaled $4.2 million at
December 31, 2000; (b) liabilities for taxes payable by or attributable to us
or our retained subsidiaries which totaled $200,000 at December 31, 2000; (c)
our unpaid fees and expenses of negotiating and documenting the proposed
transaction and any brokerage, finder's or advisory fee payable by us which
are estimated to be about $4.0 million; (d) all liabilities under our Senior
Executive Supplemental Umbrella Pension Plan to persons who do not accept
employment with Hexagon, all liabilities under our Long-Term Deferred Cash
Incentive Plan in respect of year 2000 cash bonuses, and all liabilities to
participants in our regular Supplemental Executive Retirement Plans which are
estimated in the aggregate at $11.5 million; (f) all liabilities under
employee change in control contracts (except with regard to executives hired
or retained at the Closing or within one year thereafter by Hexagon or its
affiliates) estimated at $6.5 million; and (g) estimated contingent
liabilities in respect of all litigation matters pending on the date of the
Acquisition Agreement, other than two specified matters that will be assumed
by Hexagon and all liabilities, claims or expenses, whether known or unknown,
absolute or contingent, accrued or unaccrued, relating to the excluded assets
or otherwise, not directly resulting from the conduct of the transferred
business which are estimated to be $1.0 million at December 31, 2000.

Employee Matters

   Hexagon has agreed that either it or one or more of its affiliates will
offer employment, effective as of the closing date, to substantially all
individuals employed by us in the transferred business other than those
employees who have change in control or severance agreements with us (except
such as Hexagon has agreed to continue their employment), and Hexagon shall be
responsible for and indemnify us against all severance or termination amounts
payable to all individuals employed by us in the transferred business (whether
or not receiving an offer from Hexagon), other than such employees who have
change in control or severance agreements with us (except such as Hexagon has
agreed to continue their employment). The Acquisition Agreement provides for
Hexagon 401(k) plans to be established to accept rollovers from the Company's
401(k) plans and provides for the Company's Employee Stock Ownership Plan to
be terminated.

Representation, Warranties and Indemnification

   The Acquisition Agreement contains representation and warranties by us and
Hexagon, provisions for their survival past the Closing in some cases, and
specified indemnification.

Conduct of Our Business Pending the Closing

   We must conduct the transferred business only in the ordinary course
consistent with our past practice and we have agreed not to take certain
actions without Hexagon's consent.

Conditions to the Proposed Sale

   Hexagon's and the Company's obligations to complete the proposed purchase
and sale of substantially all of the Company's business and assets is subject
to the satisfaction or waiver of several conditions, including the following:

                                       9


  . The Company's stockholders must approve the proposed sale to Hexagon and
    related transactions;

  . No law or court order prohibits the sale of substantially all the
    Company's assets to Hexagon or makes the sale illegal;

  . Hexagon and the Company obtain all regulatory and third party approvals
    necessary to complete the sale;

  . Each of Hexagon and the Company shall have certified to the other that
    its representations and warranties made in the Acquisition Agreement are
    true (except in the case of the Company for such failures to be true as
    do not, in the aggregate, have a material adverse effect (as defined) on
    the transferred business) and that its obligations under the Acquisitions
    Agreement have been complied with in all material respects;

  . Hexagon's obligation to close is subject to the absence of any event or
    condition having occurred since September 30, 2000 which has had or is
    reasonably likely to result in a material adverse effect on the
    transferred business, except as previously disclosed;

  . The Company's obligations to complete the proposed sale offer to Hexagon
    of substantially all of the Company's business and assets is subject to
    Hexagon having paid or made arrangements to pay certain of the Company's
    indebtedness (owed to senior lenders) simultaneously with the Closing and
    the payment by Hexagon of the required $2.5 million initial investment in
    BSIS.

   In the event that the Company proposes to waive a condition, consideration
will be given at that time to whether or not the significance or materiality
of the condition is such that resolicitation would be required.

Solicitation of Alternative Transactions

   Under the Acquisition Agreement, we may not take, directly or indirectly,
any action to solicit, encourage, negotiate, assist or otherwise facilitate
any alternate proposal for acquisition of any of the transferred stock or all
or a material portion of the transferred business. However, if our Board
determines in good faith, upon the advice of outside counsel, that it would be
a violation of its fiduciary duties to our stockholders under applicable law
not to do so, we may, in response to an alternative proposal for acquisition
of any of the transferred stock or all or a material portion of the
transferred business or of the transferred assets, furnish information to and
participate in negotiations with the third party making such superior
proposal.

Termination

   The Acquisition Agreement may be terminated at any time prior to the
closing:

     (i) by mutual written consent of us and Hexagon;

     (ii) by either Hexagon or the Company if the other party breaches the
  Acquisition Agreement in a manner likely to result in a material adverse
  effect, as specified and does not cure such breach;

     (iii) by either Hexagon or the Company if the Closing shall not have
  occurred on or before April 30, 2001; or

     (iv) by Hexagon or the Company, if our Board shall have recommended to
  our stockholders a merger offer, tender offer, exchange offer or proposal
  to purchase substantially all the assets of the Company, if such action by
  our Board is required to be taken to satisfy its fiduciary duties.

Fees and Expenses

   Except as set forth below, all fees and expenses incurred in connection
with the Acquisition Agreement shall be paid by the party incurring such
expenses, whether or not the transaction is consummated.

   The Acquisition Agreement requires us to pay Hexagon a fee of $4 million,
plus documented out-of-pocket expenses of Hexagon relating to the transactions
contemplated by the Acquisition Agreement not in excess of $2 million in the
aggregate upon the termination of the Acquisition Agreement by us or Hexagon
on the basis described under clause (iv) of "Termination" above.

                                      10



   In the event the Company fails to obtain stockholder approval for the
proposed sale, we will be required to pay up to $2 million of documented out
of pocket expenses of Hexagon.

   In no event shall be we be required to pay Hexagon more than one fee
pursuant to these termination provisions. In the event that more than one fee
would be applicable, we will be required to pay the highest of such fees.

The North Kingstown Sale Agreement

   Parties and Purchase Price. We and Precision Park Partners LLC are parties
to the North Kingstown Sales Agreement for the proposed sale of our North
Kingstown Facility and approximately 169 acres of land, and including transfer
of all of the leases pursuant to which we lease portions of the North
Kingstown Facility to third parties (including the Lease to Hexagon to be
signed at the Closing under the Acquisition Agreement). The purchase price is
$15.5 million subject to adjustment in the event that there is certain damage
or loss to the property prior to the Closing.

   Sixty-Day Review Period. Under the North Kingstown Sales Agreement,
Precision Park Partners LLC has a 60 day review period (of which    days
remain as of March  , 2001) in which Precision Park Partners LLC may terminate
the agreement for any reason.

   Representations and Warranties; Conditions, Defaults and Remedies. In the
North Kingstown Sales Agreement, we have made certain representations and
warranties relating to our existing leases, environmental issues, service
contracts relating to the property, and other matters. Further, if we are
unable to convey good and marketable title by the date of closing, the closing
will be automatically extended for a period of 60 days while we attempt to
remedy any such deficiencies. If we are still unable to comply with our
obligations after 60 days, Precision Park Partners LLC will have the option to
terminate the agreement. Moreover, we will not be required to sell the real
property and Precision Park Partners LLC will not be required to purchase it
unless, prior to the closing under the North Kingstown Sales Agreement, we
have entered into the lease with an Affiliate of Hexagon on the terms
described elsewhere in this Proxy Statement.

   Operating Covenants and Risk of Loss. Until the closing under the North
Kingstown Sales Agreement, we have agreed not to take various actions
regarding the property and to maintain insurance coverage on the property.
Further, if any loss or damage to the property occurs prior to the closing in
excess of $500,000, Precision Park Partners LLC has the option to terminate
the agreement. In the event there is a loss or damage less than or equal to
$500,000, the transaction will proceed with a reduction to the purchase price
equal to the repair costs.

   Closing. The Closing is scheduled for       , 2001.

No Dissenter's Rights (page  )

   Any of our stockholders who do not approve of the proposed sale of
substantially all assets, including the sale to Hexagon and related
transactions and proposed sale of our North Kingstown Facility and later sale
of the Heathrow, United Kingdom real estate are not entitled to appraisal or
dissenter's rights with respect to such matters under Delaware law or our
Certificate of Incorporation.

Material Federal Income Tax Considerations of the Contemplated Distribution to
Stockholders (page  )

   The Company estimates that it will have neither current earnings and
profits nor accumulated earnings and profits at either the time of the
contemplated cash distributions in 2001 or for the year 2001 in which the
distributions are expected to be made, in which event the contemplated
distributions would not be treated as a dividend for federal income tax
purposes. Instead, the distribution would first be treated as non-taxable
return of each stockholders adjusted basis in the stock of the Company to the
extent of such basis. Any distribution in excess of a stockholder's basis
would be treated as capital gain from the exchange of the respective shares.
Distributions to stockholders that are corporations will not qualify for the
dividend received deduction. In the event that the Heathrow, United Kingdom
real estate (gravel pit) is sold after December 31, 2001, it is possible that
the Company may have sufficient earnings and profits for 2002 such that the
cash distribution following such sale could be taxable as a dividend.

                                      11



   The federal, state or foreign tax consequences of the distributions to you
will depend on the facts of your own situation. You should consult your tax
advisors for a full understanding of the tax consequences of the contemplated
distributions to you.

Accounting Treatment

   The proposed sale to Hexagon will be accounted for as a sale of certain
assets, including the stock of certain subsidiary corporations, and assumption
of certain liabilities. Upon consummation of the proposed sale, the Company
will recognize financial reporting gain equal to the net proceeds (the sum of
the purchase price received less the expenses relating to the proposed sale)
less the closing net book value of the assets sold and liabilities assumed by
Hexagon.

   The proposed sale of the North Kingstown Facility will be accounted for as
a sale of assets.

Interests of Certain Persons in the Acquisition Agreement and the North
Kingstown Sales Agreement (page  )

   Options for an aggregate of 880,700 shares of the Company's Class A Stock
awarded under the Company's 1999 Equity Incentive Plan are currently
outstanding and held by management employees including executive officers and
by non-employee directors at exercise prices ranging from $1.875 to $2.375.
All of these options are currently at exercise prices below current market
value and will immediately vest and become exercisable upon approval of the
proposed sale to Hexagon and related transactions. Accordingly, in the event
the sale to Hexagon is approved, it is likely that some or all of those stock
options would be exercised. Directors (other than the President and Chief
Executive Officer) hold an aggregate of options for 74,000 shares; executive
officers, including the Company's President and Chief Executive hold options
for 375,000 shares under such Plan.

Business Activities of the Company Following the Proposed Sale: BSIS

   We are presently engaged in the Metrology Business in the design,
manufacture, and sale of precision measuring tools and instruments and manual
and computer controlled measuring machines. After the sale of our Metrology
Business to Hexagon, we will no longer maufacture and sell precision measuring
tools and instruments or measuring machines but will retain ownership of our
early stage development subsidiary, BSIS Inc. ("BSIS"), a "measuring software"
business, which has no sales history. As a result of the developmental nature
of the business and lack of sales revenue, BSIS has had no revenues and
operating losses since its inception in 1997, with a use of cash run rate
averaging $450,000 per month.

   BSIS was formed in December 1997 to consolidate the several software
development groups dispersed within Brown & Sharpe into a single global
software development organization, which would provide next generation
metrology software applications for the various Metrology Business units. As
its secondary mission, BSIS was to establish and execute a "measuring
software" business strategy, which would ultimately lead to the formulation of
a software business that could spin off as an independent business separate
from the metrology equipment manufacturing businesses. Accordingly, BSIS is
now focused on the commercialization of its new XACTMEASURE measuring
software, which has been in development for approximately three years and is
nearing introduction as detailed below.

   The operating funds for BSIS will initially be provided by the Company and
by Hexagon's investments under the acquisition agreement. Hexagon has agreed
to invest $2.5 million at the Closing of the Acquisition Agreement for a 16.7%
ownership stake and will invest an additional $1.5 million on each of the next
three anniversaries of the Closing, raising its ultimate stake up to as much
as 46.7% of the equity of BSIS. (The sale of BSIS common stock to Hexagon on
these terms was negotiated between the parties at arm's length.) The Company
will retain $7.5 million (including the $2.5 million invested in BSIS by
Hexagon at the Closing) to fund the operations of BNS Co. and BSIS. There can
be no assurance that said aggregate funding will be sufficient to fund the
contemplated operations of BSIS or that, if needed and determined appropriate
at that time

                                      12



by the Company and Hexagon, the two stockholders of BSIS, additional funding
could be raised. Moreover, the Company may entertain offers to purchase BSIS
as an alternative to the proposed execution of the BSIS business plan
described above. The Company will remain a public company and will continue to
have public reporting obligations, creating expenses to be funded, including a
need to fund these expenses prior to any period when its controlled
subsidiary, BSIS, may generate sufficient income to carry these expenses.

   The number of outstanding shares will be decreased by approximately a
factor of five if the reverse stock split, which is the subject of Proposal 5,
is approved (and will be increased only by the exercise of options). The size
and composition of the Board of Directors may change.

Risk Factors Relating to BSIS (pages    through   )

   The business of BSIS is subject to a variety of risks and special
considerations. As a result, stockholders of the Company should carefully
consider the risks summarized below and the other information in the Proxy
Statement before voting at the Special Meeting.

  .  BSIS software product is still in development; if we fail to develop our
     software product or our product fails to obtain market acceptance, we
     will not generate sufficient revenue to be successful. BSIS has not yet
     completed or sold a software product. There can be no assurance that
     BSIS will be able to complete its development of a software product that
     is accepted by consumers on a basis which is profitable to BSIS.

  .  BSIS has not had any sales and may not have any sales in the future.
     Since BSIS has not yet completed development of a product for sale to
     customers, BSIS has had no revenues, and hence its operating results to
     date (losses) does not form any basis for conclusion that BSIS will
     become profitable.

  .  The Company and BSIS may not have adequate resources for funding the
     operations of BSIS. We will have substantially more limited financial
     and other resources than all, or most, of our software competitors and
     potential software competitors and we may be unable to compete
     significantly against them. The Company will have limited funds
     available for investment in BSIS after the payment of the contemplated
     distribution(s) to stockholders following the Closing, and there can be
     no assurance that BSIS, or the Company, will be able to raise additional
     funds for funding the operations of BSIS.

  .  Our industry is very competitive and we may not be successful if we fail
     to compete effectively. In addition to the significant competition for
     software products, with many offerings in the marketplace, the software
     products to be developed by BSIS are expected at the outset to compete
     with software used by the Metrology Business sold to Hexagon, and may be
     competitive with software developed in the future by the Metrology
     Business being purchased by Hexagon. In its marketing efforts BSIS will
     not be able to use the "Brown & Sharpe" name or the aftermarket sales
     force of the Metrology Business as an entree to prospective customers
     making competing more difficult. Increased competition may result in
     lower prices for our products and reduced opportunities for growth and
     profitability.

  .  Royalty and other obligations of BSIS to the Metrology Business sold to
     Hexagon may prevent BSIS from achieving profitability. For five years
     after the Closing, BSIS is required to sell its XACTMEASURE software
     products to Hexagon, on a non-exclusive basis, for use in coordinated
     measuring machine ("CMM") applications at a price per unit which is
     expected to be substantially below the price charged by BSIS to other
     customers for CMM applications. In addition, BSIS is required for the
     five year period to pay a significant royalty to Hexagon per unit of
     software sold to persons other than Hexagon for CMM market applications.
     The effect of these provisions is necessarily adverse to the business of
     BSIS. Royalty and other obligations of BSIS to the Metrology Business
     sold to Hexagon may prevent BSIS from achieving profitability.

                                      13



  .  The relationship between BSIS and Wilcox Associates, Inc. ends with the
     Closing under the Acquisition Agreement. Our Metrology Business has been
     significantly dependent on a software license from Wilcox Associates,
     Inc. and the services of William Wilcox, its President. Our license
     rights from Wilcox Associates and our relationship with William Wilcox
     are being acquired by Hexagon. While BSIS believes that its software
     products under development are and will be completely independent of
     PCDIMIS, the ending of this relationship may adversely affect BSIS
     because PCDIMIS is the leading software for CMMs. BSIS and PCDIMIS will
     be competitive substitutes for one another.

  .  BSIS management has limited experience managing a software company and
     may fail to manage effectively, limiting BSIS's potential. While BSIS
     has significant software business experience, there is no assurance the
     Company and BSIS will be able to successfully manage a "software
     company." BSIS management may not have the skills to introduce and
     market BSIS's software product, to manage future growth, or obtain funds
     to fund growth and/or operations and their inexperience in these areas
     may detract from BSIS's business.

  .  If BSIS fails to develop software products for markets other than CMM
     applications, BSIS may fail to achieve profitability. The BSIS business
     plan contemplates the development of additional software products for
     markets other than CMM applications, including primarily Vision and CNC
     applications. There can be no assurance such additional software
     products will be developed, or, if developed, will be of interest to
     customers in fields beyond those in which the Metrology Business has
     been engaged in. Failure to develop and successfully market such
     products may prevent BSIS from achieving profitability.

  .  BSIS may not succeed if it is unable to attract and retain key personnel
     and skilled employees. In order to grow our business, we will have to
     hire additional employees. We do not know whether we will be successful
     in hiring or retaining qualified personnel. Competition for qualified
     personnel throughout the software industry is intense. The inability to
     hire additional qualified employees or the loss of the services of some
     of the existing foreign technical employees that are currently doing
     work for BSIS could have a material adverse effect on the business of
     BSIS.

  .  BSIS may be unable to form the strategic alliances that are key to its
     strategy. The BSIS business plan calls for BSIS to establish marketing,
     development and distribution relationships through strategic alliance,
     and plans to enter into various agreements with other companies to
     achieve its marketing, development and distribution goals. There can be
     no assurance that BSIS will be able to establish any such agreements and
     accordingly, there can be no assurance that BSIS will be able to achieve
     its planned objectives for the year 2001 or establish a software
     business that will grow and be profitable. In addition, BSIS is required
     for a five year period after the closing to pay royalties to Hexagon for
     any unit of software for CMM market applications sold to persons other
     than Hexagon and is required to sell its Xact Measure software products
     to Hexagon at a price per unit substantially below the price charged by
     BSIS to other customers, with Hexagon making no purchase commitment.


  .  The success of BSIS may depend, in part, on its ability to obtain and
     maintain patent protection for its computer software products, to
     protect and preserve its proprietary information and trade secrets and
     to operate and sell its products without infringing the proprietary
     rights of others. It has been BSIS's policy to seek where appropriate to
     protect its proprietary positions by maintaining its product information
     a trade secret and filing United States and corresponding foreign patent
     applications covering its technology, inventions and improvement that
     are important to the development of its business. Although we have three
     patent applications pending, there can be no assurance that any pending
     patents will be issued, or that any pending applications will not be
     challenged, invalidated or circumvented in the future. Further, there
     can be no assurance that competitors, many of whom have substantially
     more resources than BSIS will not seek to apply for and obtain patents
     that will prevent, limit or interfere with BSIS's ability to make, use
     or sell its products in the United States or internationally. No
     assurance can be given that competitors will not independently develop
     substantially equivalent proprietary information and technologies or
     otherwise

                                      14



     gain access to BSIS's proprietary technology, or that BSIS can
     meaningfully protect its rights in unpatented proprietary technology.
     The failure or inability of BSIS to adequately protect its intellectual
     property rights could have a material adverse effect on its business,
     financial condition, and future prospects and business plans.

  .  Risks particular to BSIS's international operations and potential
     international sales could adversely affects its results. Our financial
     condition and results of operation may be adversely affected by
     international business risks, including currency exchange rate
     fluctuation, inflation, import and export controls, exchange controls
     and other business factors in foreign countries that may complicate BSIS
     operations, including the fact that the protection of copyrights and
     other intellectual property is difficult to achieve under the laws of
     certain foreign countries.

  .  Risks relating to the use of funds in the development of BSIS. Our board
     of directors and management will have broad discretion over the use of
     the funds invested in BSIS by Hexagon and funds retained by the Company.
     You may disagree with the judgment of our board of directors and
     management regarding the application of how the funds are used in the
     development of BSIS.

  .  Sales of Company stock in the market before and after the closing may
     adversely impact this market. The market price of the our Common Stock
     could decline as a result of sales of shares by our stockholders,
     including option holders who become shareholders, before or after the
     Closing under the Acquisition Agreement, including sales by trustees or
     beneficiaries under the our Employee Stock Ownership Plan (which will be
     terminated in connection with the Closing) and sales under other Company
     employee benefit plans.

  .  Possible delisting of Company stock by NYSE may prevent the Company from
     sustaining an active trading market. Although we expect that the
     Company's Class A Stock will continue to be listed on the New York Stock
     Exchange, it is possible that future results of the Company (which will
     be engaged only in the software business conducted by BSIS) or future
     discussions with the NYSE, may lead to delisting of the Company's Class
     A Stock by the New York Stock Exchange, in which event the Company may
     not be able to have its shares quoted on another stock exchange.
     Consequently, an active trading market for the Company's shares may not
     be sustained following the Closing under the Acquisition Agreement.
     There is no assurance that the one-for-five reverse stock split of the
     Company's Class A Stock and Class B Stock, if approved by the
     stockholders and effectuated, will assist the Company in meeting the
     qualitative and quantitative requirements of the New York Stock Exchange
     to maintain its listing.

  .  Possible change in capital structure after the Closing may negatively
     impact the market price of the Company's common stock. Other than the
     reduction in par value, the cash amounts in the contemplated
     distributions to stockholders, additional shares issued on exercise of
     existing options and the effects of the investments by Hexagon in BSIS,
     there will not be a change in the stockholders' equity of the Company
     from the proposed transaction. The proposed sale to Hexagon and related
     transactions and the related Distributions to stockholders will not
     affect the number of outstanding shares of Common Stock of the Company.
     The proposed reverse stock split will affect the number of and market
     price for the outstanding shares of Class A Stock and Class B Stock, but
     except for cash settlement of fractional shares, it should not affect
     the stockholders' equity of the Company. It is possible that the Board
     may, after the Closing and depending on developments with BSIS and other
     factors, decide to recommend some further change in the capital
     structure, requiring Board and stockholder approval in the future.
     However, there is no present intention to take any such action. In
     addition, the Company can not predict the effect the sale to Hexagon and
     related transactions, the sale of the North Kingstown Facility and the
     related cash distributions will have on the market price of the
     Company's Common Stock.

                                      15



Proposal 5: One-for-Five Reverse Stock Split

   The Board unanimously approved on    , 2001, subject to approval by
stockholders, an amendment to the Certificate of Incorporation which will
carry out a one-for-five reverse stock split of the outstanding shares of
Class A Stock,and of Class B Stock. The reverse stock split of the Class A
Stock will assist in (but not guarantee) continued maintenance of the listing
of the Class A Stock on the New York Stock Exchange ("NYSE") when it is to be
expected that, after one or more distributions to stockholders after the
Closing with Hexagon pursuant to Proposal 1, the market price per share on the
NYSE will decline. The NYSE has a minimum stock price maintenance requirement
of an average closing price of $1.00 per share over a 30 day period.

   The Class B Stock is not listed; however, sales of Class B Stock generally
result in conversion of the Class B Stock into Class A Stock. Accordingly, the
Board has unanimously approved a one-for-five reverse stock split of the
outstanding shares of Class B Stock.

                                      16


                                PROXY STATEMENT

                           [LOGO OF BROWN & SHARPE]

                            SOLICITATION OF PROXIES

   General. The enclosed Proxy is solicited by our Board of Directors (the
"Board") for the purposes set forth in the Notice of Special Meeting of
Stockholders (the "Special Meeting") of Brown & Sharpe Manufacturing Company.
The terms "we," "our," "Brown & Sharpe" and the "Company" (or "BNS Co." after
the closing) as used in this Proxy Statement refers to Brown & Sharpe
Manufacturing Company (and, if applicable, its subsidiaries). The term "you"
refers to the stockholders of Brown & Sharpe Manufacturing Company. The term
"Hexagon" refers to Hexagon AB, a Swedish corporation (and, if applicable, its
Affiliates). The term "Precision Park Partners LLC" refers to the purchaser of
our North Kingstown Facility. The solicitation is being made by mail and we
may also use our officers and regular employees to solicit proxies from
stockholders either in person or by telephone, facsimile, e-mail or letter
without additional compensation. We will pay the cost for solicitation of
proxies, including preparation, assembly and mailing the proxy statement and
proxy. Such costs normally include charges from brokers and other custodians,
nominees and fiduciaries for the distribution of proxy materials to the
beneficial owners of our common stock.

   Recent Data. Each stockholder of record at the close of business on March
 , 2001, (the "record date") is entitled to notice of and vote at the Meeting.
As of the close of business on the record date, the Company had      shares of
common stock outstanding comprised of      shares of Class A Common Stock,
$1.00 par value (the "Class A Stock") and     share of Class B Common Stock,
$1.00 par value (the "Class B Stock" and, together with Class A Stock, the
"Common Stock"). The Company's Certificate of Incorporation provides that each
share of Class A Stock outstanding on the record date entitles the holder
thereof to one vote and each share of Class B Stock outstanding on the record
date entitles the holder thereof to ten votes except as otherwise provided by
law or by the Certificate of Incorporation.

   Votes Required to Approve Each of Proposals 1 and 2. Holders of record of
the Class A Stock on the record date are entitled to one vote per share and
holders of record of the Class B Stock on the record date are entitled to ten
votes per share on any other matter which may properly come before the Special
Meeting. A majority vote of the entitled votes of the shares of Class A Stock
and Class B Stock outstanding on the record date, voting together as a single
class, is necessary to approve each of Proposal 1 and Proposal 2.

   Votes Required to Approve Proposal 3. A majority vote of the entitled votes
of the shares of Class A Stock and Class B Stock outstanding on the record
date, voting together as a single class, and a majority vote of the entitled
votes of the shares of Class A Stock outstanding on the record date, is
necessary to approve Proposal 3.

   Votes Required to Approve Proposal 4. A majority vote of the entitled votes
of the shares of Class A Stock and Class B Stock outstanding on the record
date, voting together as a single class, and a majority of the entitled votes
of the shares of Class B Stock outstanding on the record date, is necessary to
approve Proposal 4.

   Votes Required to Approve Proposal 5. A majority vote of the entitled votes
of the shares of Class A Stock and Class B Stock outstanding on the record
date, voting as a single class, is necessary to approve Proposal 5.

   Proxies. Proxies returned to us or our transfer agent, Equiserve ("Transfer
Agent"), and properly executed will be voted in accordance with stockholders'
instructions. You specify your choice by appropriately marking the enclosed
Proxy card. Brokers holding shares for the account of their clients may vote
such shares in the manner directed by their clients. Properly executed proxies
that are marked abstain or held in street name by brokers that are not voted
on one or more proposals, if otherwise voted on at least one proposal ("broker
non-votes"), will be included in the number of shares present at the Special
Meeting for the purpose of determining whether a quorum exists for the conduct
of business. Abstentions have the same effect as a vote against the proposal
for which such abstention applies while broker non-votes are not treated as a
vote for or a vote against

                                      17



any of the proposals to which such broker non-votes applies. Any Proxy which
is timely signed and returned with no other markings will be voted in
accordance with the recommendation of our Board. The Proxies also give the
Board discretionary authority to vote the shares represented thereby on any
matter which was not known as of the date of this Proxy Statement and is
properly presented for action at the Special Meeting. If sufficient votes in
favor of Proposal 1 are not received by the time scheduled for the Special
Meeting, the persons named as proxies may propose one or more adjournments of
the Special Meeting for a period of not more than 30 days to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of the votes properly cast on the question in person or by
proxy at the session of the Special Meeting to be so adjourned.

   The execution of a Proxy will in no way affect your right to attend the
Special Meeting and vote in person. You have the right to revoke your Proxy
prior to the Special Meeting by giving notice to our Secretary, James W.
Hayes, III, at our executive offices. You may also complete and submit a new
proxy prior to the Special Meeting or you may revoke a previously submitted
proxy at the Special Meeting by giving notice to our Secretary at the Special
Meeting.

   For convenience in voting your shares on the enclosed Proxy card, we have
enclosed a postage-paid return envelope to our Transfer Agent who will assist
in tabulating the stockholder vote. Brown & Sharpe's mailing address is
Precision Park, 200 Frenchtown Road, North Kingstown, RI 02852-1700. Our
telephone number is (401) 886-2000, and facsimile number is (401) 886-2214.

   The approximate mailing date of this Proxy Statement and Notice and Form of
Proxy is March   , 2001.

           CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

   THIS PROXY STATEMENT AND THE ACCOMPANYING LETTER TO STOCKHOLDERS CONTAIN
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES AND ARE NOT BASED ON
HISTORICAL FACT AND ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. AMONG OTHER THINGS, THEY
RELATE TO THE COMPANY'S LIQUIDITY, FINANCIAL CONDITION, OPERATIONAL MATTERS,
OR CERTAIN STRATEGIC INITIATIVES AND PLANS, OBJECTIVES AND INTENTIONS
PERTAINING TO BSIS, INC. AND ALTERNATIVES AFTER THE CLOSING UNDER THE
ACQUISITION AGREEMENT AND THEIR POTENTIAL OUTCOMES, THE AMOUNT OF LIABILITIES
AND POTENTIAL CONTINGENT LIABILITIES RETAINED BY THE COMPANY AND THE POTENTIAL
VALUE OF THE COMPANY'S PROPERTY AND ASSETS, INCLUDING THE POTENTIAL VALUE OF
BSIS AS A CONTROLLED SUBSIDIARY AFTER THE CLOSING UNDER THE ACQUISITION
AGREEMENT. WORDS OR PHRASES DENOTING THE ANTICIPATED RESULTS OF FUTURE EVENTS,
SUCH AS "ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECTS," "MAY," "NOT CONSIDERED
LIKELY," "ARE EXPECTED TO," "WILL CONTINUE," "PROJECT," "COULD," AND SIMILAR
EXPRESSIONS THAT DENOTE UNCERTAINTY ARE INTENDED TO IDENTIFY SUCH FORWARD-
LOOKING STATEMENTS. THE METHODS USED BY THE BOARD AND MANAGEMENT IN ESTIMATING
THE VALUE OF THE COMPANY'S PROPERTY OR ASSETS WHICH ARE CONTEMPLATED TO BE
SOLD OR THE AMOUNT OF LIABILITIES AND POTENTIAL CONTINGENT LIABILITIES TO BE
RETAINED AFTER THE SALE TO HEXAGON DO NOT, WITH CERTAINTY, RESULT IN AN EXACT
DETERMINATION OF VALUE OR THE AMOUNT OF SUCH LIABILITIES AND POTENTIAL
CONTINGENT LIABILITIES TO BE RETAINED BY THE COMPANY. THE AMOUNT OF THE SALE
PROCEEDS UNDER THE ACQUISITION AGREEMENT WITH HEXAGON CANNOT BE DETERMINED IN
ADVANCE OF THE STOCKHOLDER VOTE OR THE CLOSING AND WILL DEPEND ON VARIOUS
FACTORS, INCLUDING, WITHOUT LIMITATION, THAT THE PURCHASE PRICE PAYABLE BY
HEXAGON IS SUBJECT TO ADJUSTMENT BASED ON METROLOGY BUSINESS YEAR 2000
OPERATING PROFIT (AS DEFINED) AND THE NET CASH POSITION OF

                                      18



THE BUSINESS TRANSFERRED TO HEXAGON. THE PRICE AT WHICH THE COMPANY WILL BE
ABLE TO SELL THE TWO REMAINING REAL ESTATE PROPERTIES, THE CONDITION OF REAL
ESTATE AND FINANCIAL MARKETS AND THE TIMING OF THE SALE OF SUCH ASSETS. THE
AMOUNT OF THE CONTEMPLATED CASH DISTRIBUTIONS TO STOCKHOLDERS CANNOT BE
DETERMINED IN ADVANCE AS IT WILL DEPEND UPON THE AMOUNT OF SALES PROCEEDS FROM
HEXAGON, SALES PROCEEDS FROM THE SALES OF THE NORTH KINGSTOWN FACILITY UNDER
THE NORTH KINGSTOWN SALES AGREEMENT AND OF THE HEATHROW, UNITED KINGDOM REAL
ESTATE WHICH IS NOT YET UNDER CONTRACT OF SALE AND AMOUNTS TO BE RETAINED BY
THE COMPANY TO PAY, OR MAKE PROVISION FOR PAYMENT OF, RETAINED LIABILITIES AND
POTENTIAL CONTINGENT LIABILITIES AND TO FUND, FOR A PERIOD OF TIME TO BE
DETERMINED BY THE BOARD, THE OPERATING EXPENSES OF BSIS AND THE "PUBLIC
COMPANY OVERHEAD" OF THE COMPANY.

                                  PROPOSAL 1

 TO APPROVE THE SALE OF SUBSTANTIALLY ALL ASSETS,INCLUDING (A) THE ACQUISITION
  AGREEMENT BETWEEN THE COMPANY AND HEXAGON AND THE RELATED TRANSACTIONS, (B)
     THE NORTH KINGSTOWN SALE AGREEMENT, AND (C) THE CASH DISTRIBUTIONS TO
    STOCKHOLDERS IN AMOUNTS TO BE DETERMINED BY THE BOARD OF DIRECTORS

General

   Our Board is proposing the sale of substantially all assets of the Company,
including:

   (a) the approval of the Acquisition Agreement dated as of November 16, 2000
between the Company and Hexagon AB ("Hexagon"), a Swedish corporation, (the
"Acquisition Agreement"), which calls for (i) the sale thereunder for a cash
purchase price (subject to adjustments as provided therein described below) to
Hexagon (or its Affiliates) of substantially all the Company's business and
assets and the related assumption by Hexagon (or its Affiliates) of
substantially all the Company's liabilities (other than Excluded Assets and
Excluded Liabilities, each as defined in the Acquisition Agreement), (ii) the
investment thereunder by Hexagon in BSIS, Inc., an early stage "measuring
software" business with products in development and no sales history which is
being retained as a controlled subsidiary by the Company, and related
agreements, and (iii) the lease agreed upon thereunder of a portion of the
North Kingstown Facility at Precision Park by the Company to Hexagon and to
authorize the Board, after approval by stockholders at the Special Meeting, to
take all action necessary to carry out the sale and related transactions
(including Hexagon's investment in BSIS and the lease between the Company and
Hexagon) contemplated under the Acquisition Agreement;

   (b) the Purchase and Sale Agreement dated as of     , 2001 between the
Company and Precision Park Partners LLC (the "North Kingstown Sale
Agreement"), and the sale thereunder of our North Kingstown Facility; and

   (c) the related cash distributions to shareholders (the initial
distribution of which will be made as soon as practicable following the
Closing under the Acquisition Agreement) and the subsequent cash distributions
to shareholders upon the sale of our North Kingstown Facility under the North
Kingstown Sale Agreement and upon the further sale of the Heathrow United
Kingdom real estate (when sold), at dates and in amounts to be finally
determined by the Board. The Acquisition Agreement, the North Kingstown Sales
Agreement and the proposal for cash distributions to stockholders at a date as
soon as practicable after the three sales to be later selected by the Board
and in amounts to be finally determined by the Board were unanimously approved
by the Board. A copy of the Acquisition Agreement is attached as Annex A and a
copy of the North Kingstown Sales Agreement is attached as Annex D to this
Proxy Statement. Certain material features of the Acquisition Agreement (and
the related agreements) and the related cash distributions to stockholders and
the on-going operations of the Company after Closing under the Acquisition
Agreement are summarized below. STOCKHOLDERS SHOULD READ THE ACQUISITION
AGREEMENT AND THE NORTH KINGSTOWN SALES AGREEMENT IN THEIR ENTIRETY.


                                      19



Purchase Price Payable to Us and Excluded Liabilities

Under the Acquisition Agreement

   The purchase price for the assets and stock we are transferring to Hexagon
is $160 million subject to two adjustments, plus $2.5 million at Closing and
an additional $4.5 million over the next three years for the sale of
additional shares of BSIS stock to Hexagon. There is not a guaranteed minimum
we will receive from Hexagon after these adjustments.

   In the first adjustment, the purchase price will be increased by the amount
of any Business Operating Profit contingent payment, relating to the business
we are selling to Hexagon. If the Business Operating Profit, as defined, for
the year ended December 31, 2000 is finally determined to be equal to or less
than $15 million, there shall be no change to the $160 million component of
the total purchase price to be paid by Hexagon. If such Business Operating
Profit is between $17 million and $20 million, the purchase price shall be
increased by $10 million. If the amount of such Business Operating Profit is
greater than $15 million but less than $17 million, the purchase price shall
be between $160 million and $170 million as provided in the detail in the
Acquisition Agreement. We believe that the Business Operating Profit for the
year ended December 31, 2000 is $18.6 million (which we have provided to
Hexagon) and would accordingly result in an increase of $10 million pursuant
to the first adjustment. However, we cannot guarantee that such amount of
increase will become final until it is agreed to by Hexagon pursuant to the
Acquisition Agreement.

   In the second adjustment, the purchase price will be increased or decreased
(a decrease is expected), with no cap on the increase or floor on the
decrease, by an amount equal to the amount of cash and cash equivalents held
by our subsidiaries being transferred to Hexagon less the amount of
indebtedness of our transferred subsidiaries. The parties must agree on the
definitive net cash adjustment after the Closing. If the Closing had occurred
on December 31, 2000, the amount of this decrease would have been
approximately $3.6 million. We expect to have a net use of cash by the foreign
subsidiaries being transferred to Hexagon between December 31, 2000 and the
expected closing date in April, 2001 and an anticipated corresponding further
decrease to the purchase price under this second adjustment.

   Based on our estimate of Business Operating Profit used to determine the
first adjustment and on the second adjustment calculated as of December 31,
2000, the total amount of consideration we would have received from Hexagon if
the Closing had taken place on December 31, 2000 is $168.9 million (plus an
additional $4.5 million over three years for the sale of the additional BSIS
stock). The actual amount of consideration that will actually be received from
Hexagon will differ from this estimated amount, based on the agreement of the
parties regarding the first adjustment related to the Business Operating
Profit for the year ended December 31, 2000 (or under the dispute resolution
provisions of the Acquisition Agreement) and the final determination of the
second net cash adjustment, which will be negatively affected by the date of
the Closing as the Company's foreign subsidiaries being transferred to Hexagon
are a user of cash in the early months of the year, at least through May.
Accordingly, you will not know the exact amount of consideration that we will
receive from Hexagon when you vote on the proposal, or the dollar amounts, per
share contemplated to be paid to stockholders in the initial cash distribution
as soon as practicable after the Closing, in the second cash distribution to
be paid after the sale of the North Kingstown Facility or in the third cash
distribution after the sale of our Heathrow, United Kingdom real estate.

   We estimate that the total amount of Excluded Liabilities, as defined in
the Acquisition Agreement to be retained by us after the Closing (which
includes some contingent liabilities) will be in the range of $25.0 million to
$30.0 million. Payment, or provision of payment, of the retained liabilities
as estimated by management will be made before any cash distributions to
stockholders. Stockholders should take into account when voting that the
Company's estimates of retained liabilities, including potential contingent
liabilities, may be lower or greater than they may prove to be in actuality by
the time of the second or third distribution, in which event this would lead
the Board to increase or reduce the second distribution to be made after the
sale of the North Kingstown Facility and could require the Company to seek
financing or reduce the amount of the third distribution contemplated to be
made from the net proceeds of sale of the Heathrow, United Kingdom real
estate.

Brown & Sharpe

   The Company currently operates entirely in the metrology industry through
three business segments. The MS Division ("MSD"), which manufactures and
markets a wide range of manual and computer-controlled, high precision
coordinated measuring machines ("CMMs") is the largest division, historically
generating more than

                                      20



70% of the Company's sales. The MSD includes the former Custom Metrology
Division ("CMD"), which, after its reorganization in 1999, was dedicated to
the production and development of non-contact technology. The PMI Division
("PMI"), which manufactures mechanical and electronic measuring and inspection
tools is the second largest division. The Brown & Sharpe Information Systems
("BSIS") measuring software business has had no sales. The Electronics
Division ("ED"), which was acquired in 1999 and is being sold to a third
party, designed and manufactured surface inspection systems. MSD sales include
revenue from aftermarket sales and service for CMMs. More than half of the
Company's sales historically have been outside the United States (based upon
the location of customers who are situated within the market areas assigned to
subsidiaries located outside of the United States.) The Company has had losses
for the years ending December 31, 1999, and December 30, 2000 of $42.9 million
and $57.3 million. The Company believes the Operating Profit (as defined) of
the Metrology Business was $18.6 million, without regard to SAB 101, for the
full year 2000.

   See "Business of the Company" elsewhere in this Proxy Statement for details
on the Company prior to the proposed sale to Hexagon.

Hexagon

   Hexagon AB is a limited liability company existing under the laws of Sweden
and has listed its series B shares on the OM Stockholm Exchange. Hexagon's
primary business concept is to acquire and develop, on a long-term basis,
engineering companies. The Hexagon Group consists of eight directly reporting
subsidiaries that are grouped in three fields of operation: Industrial
Components and Systems, Niche Manufacturing and Hexagon Wireless. The
subsidiaries grouped within these three fields of operation are all niche
oriented, operate in markets with exclusively industrial customers, have
leading positions within their respective market niches, and conduct their
product or production technology development within the framework of applied
technology. The three companies that comprise the Industrial Components and
Systems business area principally produce hydraulics, flow technology,
temperature technology, mechanical maintenance products and transmission
equipment. The three companies comprising the Niche Manufacturing business
area produce gaskets for plate heat exchangers and special wheels, sliding
bearings, cage rings and preprocessed special steel, tools and components as
well as systems and/or components for industrial robots, trucks and base
stations for mobile phone systems. Hexagon Wireless is active in the field of
wireless communication. It develops and markets antennas and antenna systems
for mobile handsets and Bluetooth applications ranging from lap tops, palm
tops, up to large industrial applications for process controlling purposes.

   Hexagon's principal executive offices are located P-O Box 1112, S-131 26,
Nacka Strand, Stockholm, Sweden, (tel): +46 (0) 8 601 26 20 and (fax) +46 (0)
8 601 26 21. e-mail: postmaster@hexagon.se, web site: www.hexagon.se.

Background and Reasons for the Sale; Directors' Recommendation

Background

   November, 1999--The Company agreed with its senior secured lenders,
including its senior bank lenders under a $30 million secured revolving credit
bank agreement and insurance companies holding privately placed secured
promissory notes in an aggregate amount of $50 million, to reduce the
Company's senior debt by $35 million. The Company agreed to such action as,
during 1999, the Company breached certain financial covenants, including the
debt to EBITDA ratio, which is the most restrictive covenant in its senior
note agreements and its revolving credit agreement, and also breached the debt
to net worth and interest coverage ratios. The Company's lenders granted
waivers curing the financial covenants defaults incurred under these
agreements through the end of 1999, but not thereafter. In addition, borrowing
rates under the Company's senior lending agreements were increased for the
private placement, and the agreements with the senior lenders were amended to
add covenants to require the Company to grant the lenders a security interest
in certain of its United States assets and to complete a financing transaction
acceptable to the senior lenders. From then until June 2000, the Company, with

                                      21



the assistance of Chase Securities, endeavored to raise subordinated
debt/mezzanine financing or preferred stock to accomplish this refinancing,
but the Company was not able to secure any such refinancing on a basis
considered by the Company to be acceptable and in the best interest of the
Company and its stockholders.

   April 2000--Representatives of Hexagon contacted Chase Securities to
inquire about the Company's search for privately placed equity securities.

   June 27, 2000--Brown & Sharpe announced in a press release that the Company
had engaged Chase Securities to pursue various strategic alternatives,
including a possible sale or merger of the Company, to enhance shareholder
value.

   July 17, 2000--Ola Rollen, Chief Executive Officer of Hexagon, had an
introductory meeting with Ken Kermes, President and Chief Executive Officer
and Andy Genor, Chief Financial Officer of Brown & Sharpe, at Brown & Sharpe's
North Kingstown headquarters. At the meeting Ola Rollen presented briefing on
Hexagon, and Ken Kermes discussed the June 27 decision by the Board and the
process that was envisioned to pursue these various strategic alternatives.


   August 15-17, 2000--Business presentations in North Kingstown by both
Hexagon and Brown & Sharpe, including in-depth divisional financial/business
reviews on MSD (Measuring Systems Division) and PMI (Precision Measuring
Instruments Division), the two major Brown & Sharpe divisions comprising the
Metrology Business, and on BSIS (Brown & Sharpe's software development
business).

   August 21-25, 2000--Hexagon representatives make due diligence visits to
Brown & Sharpe's locations in Telford, UK (MS), Wetzlar, Germany (MS), Renens,
Switzerland (PMI), Torino, Italy (MS) and North Kingstown (MS and corporate
headquarters).

   September 4, 2000 and following--There were discussions between investment
banking representatives of the parties, concerning Hexagon not acquiring
certain assets not directly associated with the core Metrology Business
(including: Surface Inspection Systems Electric Division business; the North
Kingstown Facility, the Telford, United Kingdom building, the Heathrow, United
Kingdom (gravel pit) real estate; the investment in the Metroptic Joint
Venture in Israel; blade machine assets, including inventory at Telford and
blade machine patents, miscellaneous other parts of the Telford Custom
Metrology Operation, various third party software license tools, the 30% stock
interest in Wilcox Associates, Inc. and BSIS Inc.). Hexagon's representatives
indicated an interest to proceed with further due diligence on an exclusive
basis. That oral indication was either a cash purchase of all of the Company's
stock at a small premium over market price or an acquisition of the Metrology
Business. Brown & Sharpe indicated that the stock purchase proposal was not at
a sufficient level to grant Hexagon negotiating exclusivity but that Brown &
Sharpe would entertain a proposal for the acquisition of the Metrology
Business. (Of the assets not directly associated with the Metrology Business,
Hexagon ended up taking the 30% stock interest in Wilcox Associates, Inc.,
(subject to the first refusal right of the shareholders of Wilcox Associates,
Inc.), the Telford United Kingdom building, certain machines at Telford and
substantially all the Telford employees. The other assets listed above are
excluded from the transaction and are part of the Excluded Assets.)

   September 12-13, 2000, representatives of the parties and their respective
investment bankers and counsel met in New York to discuss and reach a
preliminary understanding on key points, including deal structure, purchase
price and excluded assets and excluded liabilities.

   Following the New York meeting--Brown & Sharpe prepared and sent to Hexagon
a "Summary of Proposed Principal Terms (For Discussion)", dated September 15,
2000, for the cash purchase of the Metrology Business of Brown & Sharpe, with
Brown & Sharpe retaining certain Excluded Assets and Excluded Liabilities. The
Summary contemplated a purchase by Hexagon of the shares of a company created
by Brown & Sharpe to hold the U.S. assets and a purchase by Hexagon of the
shares of the Brown & Sharpe subsidiaries holding the foreign subsidiaries
engaged in the Metrology Business. The Summary provided for a break-up fee
payable to

                                      22



Hexagon in an amount to be negotiated, including a "fiduciary out" for the
Brown & Sharpe Board of Directors to respond to more favorable unsolicited
offers. The closing would be conditioned upon, among other things, approval of
Brown & Sharpe's stockholders, a lease by Hexagon of a portion of the North
Kingstown facilities and other conditions to be set forth in a mutually
acceptable definitive acquisition agreement to be entered into between the
parties.

   At a meeting of the Brown & Sharpe Board of Directors on September 18,
2000, at which time the Board reviewed, among other matters, the information
presented by Chase Securities with respect to the results of the process
undertaken by Brown & Sharpe and by Chase Securities since June 27, 2000,
including the fact that more than 100 parties were contacted by the Company
and Chase Securities regarding their potential interest in pursuing a
strategic transaction with the Company, more than 50 parties executed
confidentiality agreements with the Company and were sent a descriptive
memoranda concerning the Company, and more than 15 parties provided
preliminary indications of interest or indicative bids at some point during
the process. Chase Securities also reviewed with the Board the indicative bids
received for the Company to be acquired, to sell all or a portion of its
Metrology Business, or for the parties to make an equity investment in the
Company. Following this meeting, Brown & Sharpe granted Hexagon negotiating
exclusivity for two weeks, which was later extended to about three weeks,
until October 6.

   September 18, 2000--Hexagon began its financial due diligence on Brown &
Sharpe's Metrology Business. Hexagon's representatives (representatives of
KPMG, a public accounting firm) visited the Metrology Business locations at
Telford, United Kingdom; Wetzlar, Germany; Rennes, Switzerland; Torino, Italy
and North Kingstown for extensive financial due diligence.

   October 5, 2000--A draft of Acquisition Agreement was forwarded by Brown &
Sharpe's counsel to Hexagon and its counsel.

   October 10-13, 2000--After the Hexagon Board meeting on or about October 10
to review the KPMG findings, Hexagon raised concerns to Brown & Sharpe
relating to Brown & Sharpe's projected fourth quarter results for the
Metrology Business. Hexagon's position was that the $180 million purchase
price then under discussion was based on the Metrology Business meeting
certain operating profit projections. Brown & Sharpe then prepared and sent
Hexagon historical information on Brown & Sharpe's nine months and fourth
quarter results for the Metrology Business.

   October 16-17, 2000--The parties and their respective investment bankers
and counsel met in New York City to discuss the Acquisition Agreement draft
dated October 5, and related matters, including comments submitted to Brown &
Sharpe by Hexagon's counsel dated October 16 and a memorandum of "major
issues", including break-up fee, purchase price, Metrology Business, fourth
quarter earnings of the Metrology business, a no material adverse condition,
investment in BSIS and certain technical matters, which had been prepared by
Hexagon and distributed at the meeting. Hexagon did not accept such results as
justification for the $180 million purchase price. Brown & Sharpe countered
Hexagon with a Brown & Sharpe proposal (oral) for a purchase price of $170
million, and including in the assets to be sold Brown & Sharpe's 30% interest
in Wilcox Associates, Inc., a software firm that had granted an exclusive
license to Brown & Sharpe on its PCDIMIS measuring software for Brown & Sharpe
machines, and including certain software rights. Hexagon proposed a break-up
fee of $5 million, which was negotiated by Brown & Sharpe down to $4 million.
Following this meeting, the parties continued to discuss various matters,
including Brown & Sharpe's likely fourth quarter 2000 results for the
Metrology Business, whether or not a closing condition relating to no material
adverse change with respect to the Metrology Business operating results would
be a part of the Acquisition Agreement and various other matters.

   October 24, 2000--A revised draft of the Acquisition Agreement was sent to
Brown & Sharpe by Hexagon's counsel, and on October 27 a further revised draft
of the Acquisition Agreement was sent to Hexagon

                                      23


by Brown & Sharpe's counsel, together with a memorandum commenting on the
changes made in the draft, including changes in the definition of material
adverse effect, closing conditions and various other matters.

   There was also considerable discussion between the parties on the key
issues remaining after the New York meeting, including the introduction of a
proposal for a "collar" on the purchase price, which would provide for a
purchase price of $170 million, subject to being decreased to $160 million for
failure to meet expected Year 2000 Operating Profit (as defined) of the
Metrology Business and subject to being increased up to $180 million,
depending on higher Year 2000 Operating Profit of the Metrology Business.
(This is the "collar" that was ultimately agreed upon by the parties. We have
described it throughout this document as a purchase price of $160 million,
subject to increase in the first adjustment, based on Year 2000 Operating
Profit (as defined) for the Metrology Business, and subject to a further
second net cash adjustment, up or down, which was not related to Operating
profit of the Metrology Business. The parties discussed whether the "collar"
on the purchase could be in lieu of a closing condition relating to no
material adverse change with respect to the Metrology Business operating
results.

   October 30-31, 2000--Details of a proposal for the collar on the purchase
price were discussed by the respective investment bankers for Hexagon and
Brown & Sharpe, and on October 31 Brown & Sharpe's proposal for a collar was
orally conveyed by its investment bankers to Hexagon. The parties agreed that
the collar would be included in the agreement rather than a closing condition
regarding material adverse change with respect to the Metrology Business
operating results as to be defined for the year 2000.

   November 3, 2000--A revised draft of Acquisition Agreement was sent by
Brown & Sharpe's counsel to Hexagon, which contained a purchase price collar,
and on November 6 a memorandum from Brown & Sharpe's counsel was sent to
Hexagon making certain changes in the draft of collar and various other
portions of the November 3 draft Acquisition Agreement and the schedules of
Excluded Assets and Excluded Liabilities, and noting open points to be
discussed and principally agreed in order to complete the Acquisition
Agreement after Hexagon's first investment.

   November 3-9, 2000--The parties discussed and agreed upon Hexagon's
investment in BSIS, and BSIS was valued by the parties at $15 million after
Hexagon's initial investment of $2.5 million to be made at the Closing.

   November 10, 2000--The parties and their counsel and Brown & Sharpe's
investment bankers met in Boston to discuss the November 3 draft of
Acquisition Agreement, including details related to the collar on the purchase
price, details of the Excluded Assets and Excluded Liabilities, the lease for
a portion of the North Kingstown facility to be occupied by Hexagon and a
discussion of Brown & Sharpe's undeveloped software business (BSIS), including
proposed investments by Hexagon in BSIS and certain possible software and
other arrangements between Brown & Sharpe and BSIS on the one hand and Hexagon
on the other hand, as buyer of the Metrology Business and an investor in BSIS.

   November 12-16, 2000--Representatives of Hexagon and Brown & Sharpe and
their counsel, and for part of the time representatives of their respective
investment bankers, discussed and negotiated by phone and e-mail the remaining
"open" issues on the draft Acquisition Agreement and Schedules and on the
wording of a press release to be issued by Brown & Sharpe at 8 a.m. on Friday,
November 17 in the United States and a press release to be issued by Hexagon
at 2 p.m. in Sweden (assuming that the parties had signed the Acquisition
Agreement). A further revised draft of the Acquisition Agreement was sent on
November 14 by Brown & Sharpe's counsel to Hexagon.

   November 16, 2000--Following a further telephone conference call between
representatives and counsel for each of the parties on November 16, the Board
of Brown & Sharpe at a meeting held 6 p.m. on November 16, 2000 unanimously
approved the Acquisition Agreement and the related transactions and the
contemplated distributions to stockholders, to be made at such later dates and
in such amounts to be finally determined by the Board. At this meeting the
Board gave consideration to various factors, including the opinion of Houlihan
Lokey and the results of the process undertaken by the Company and Chase
Securities and the other factors discussed in the following section of this
Proxy Statement entitled "Our Reasons For the Proposed Sale and Related

                                      24



Transactions and Distributions, to Stockholders; Approval by the Board of
Directors". Following Brown & Sharpe Board approval, counsel for each of the
parties agreed on final changes to the Acquisition Agreement, and the
Acquisition Agreement was then signed by representatives of both parties.

   November 17, 2000--Brown & Sharpe and Hexagon each issued a press release
announcing signing of the Acquisition Agreement.

   [Need to add North Kingstown Date]

OUR REASONS FOR THE PROPOSED SALE OF SUBSTANTIALLY ALL ASSETS, INCLUDING THE
SALE TO HEXAGON AND RELATED TRANSACTIONS AND THE SALE OF THE NORTH KINGSTOWN
FACILITY, THE LATER SALE OF OUR HEATHROW, UNITED KINGDOM REAL ESTATE AND
CONTEMPLATED CASH DISTRIBUTIONS TO STOCKHOLDERS; APPROVAL BY THE BOARD OF
DIRECTORS

   OUR BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED SALE OF SUBSTANTIALLY ALL
ASSETS, INCLUDING THE SALE UNDER THE ACQUISITION AGREEMENT AND RELATED
TRANSACTIONS AND THE SALE OF THE NORTH KINGSTOWN FACILITY UNDER THE NORTH
KINGSTOWN SALES AGREEMENT, THE LATER SALE OF OUR HEATHROW, UNITED KINGDOM REAL
ESTATE AND THE CONTEMPLATED CASH DISTRIBUTIONS TO STOCKHOLDERS ON DATES AND IN
AMOUNTS TO BE FINALLY DETERMINED BY OUR BOARD OF DIRECTORS IS IN THE BEST
INTEREST OF THE COMPANY AND OUR STOCKHOLDERS. ACCORDINGLY, THE BOARD OF
DIRECTORS HAS APPROVED THE PROPOSED SALE AND RELATED TRANSACTIONS UNDER THE
ACQUISITION AGREEMENT, THE SALE OF THE NORTH KINGSTOWN FACILITY UNDER THE
NORTH KINGSTOWN SALES AGREEMENT, THE LATER SALE OF OUR HEATHROW, UNITED
KINGDOM REAL ESTATE AND THE RELATED CONTEMPLATED CASH DISTRIBUTIONS TO
STOCKHOLDERS.


   In reaching its decision to approve this first proposal, our Board
considered a number of factors, including the following:

     (i) The low historical market prices (and related financial multiples)
  and trading range of the Company's Class A Stock. The high and low at
  closing price range for our Class A Stock was $6.625 to $16.125 for the
  year 1998, $1.875 to $8.50 for the year 1999, $1.625 to $3.0625 for the
  first quarter of 2000, $1.625 to $3.1875 for the second quarter of 2000.
  This shows a downward trend from 1998 up to June 27, 2000 when the Company
  announced commencement of its process for merger or sale of substantially
  all assets of the Company, or other strategic transaction, which
  reinforced, in the Board's view, the need to negotiate and complete such a
  transaction. The Board considered the low share price and the potential
  value to the Company and the stockholders from the proposed sale and
  distributions to stockholders as a reason to recommend the proposed sale to
  Hexagon.

     Subsequent to November 17, 2000, the date of the press release
  announcing the signing of our agreement with Hexagon, the closing stock
  prices have been $4.375 to $5.125 for the rest of the fourth quarter of
  2000 and $4.93754 to $5.5625 for January 2001.

     (ii) Our inability to raise additional subordinated debt or preferred
  stock in late 1999--June, 2000, in an effort to resolve the financial
  defaults existing since 1999 under the lending agreements with our senior
  secured lenders, including a payment default under our $30 million bank
  revolving credit since November 10, 2000. Our inability to raise additional
  debt has caused us to remain in default under our lending agreements and
  subjects us to the possibility that our senior secured lenders could call
  our debt for payment at any time. The Board believed that, under the
  circumstances, a sale of the Company would likely be necessary to satisfy
  its senior lenders who would otherwise resort to their collateral
  consisting of most of the Company's assets or stock in most of its
  subsidiaries, in which event the proceedings under Chapter 11 of the
  Bankruptcy Code could be one of the possible consequences.

                                      25



     (iii) The financial condition, history of losses, declining cash flows
  and weakened capital structure, including the net losses of $42.9 million
  in 1999 and expected net loss for the entire year 2000, (which turned out
  to be $57.3 million) and the Company's declining prospects as an
  independent company in the Metrology Business in light of the long-standing
  financial defaults in agreements with our senior lenders and the resulting
  insufficiency of the Company's capital structure. In addition, the Company
  is unable to pay its senior lenders in full if the loans were called and
  unable to find alternative sources of capital to pay its lenders. All the
  factors reinforced the Board's view that a sale was appropriate.

     (iv) The Board's decision, in light of the foregoing factors, to hire
  Chase Securities, as announced on June 27, 2000, to identify prospective
  purchasers and/or investors that might be interested in pursuing a
  strategic transaction with the Company, such as a possible merger or sale
  of the Company or substantial investment in the Company or similar
  transaction was viewed as a positive procedural factor by the Board.

     (v) The process undertaken by the Company on June 27, 2000, with the
  assistance of its financial advisor Chase Securities, to identify
  prospective purchasers and/or investors that might be interested in
  pursuing a strategic transaction with the Company contributed to the
  Board's belief that it identified the superior proposal to sell the Company
  and its decision to recommend the proposed sale to Hexagon to shareholders.
  As part of the process, the alternatives explored included a possible
  merger or sale of the Company or a substantial investment in the Company.
  More than 100 parties were contacted by the Company and Chase Securities
  regarding their potential interest in such a transaction, more than 50
  parties executed confidentiality agreements with the Company and were sent
  a descriptive memorandum concerning the Company, and more than 15 parties
  provided preliminary indications of interest or indicative bids at some
  point during the process. The indicative bids received were subject to
  extensive further due diligence on the part of the bidder before any
  specific negotiations on price could take place (and were subject to
  further due diligence on the part of the Company to determine whether the
  bidder had the ability to complete and/or finance the transaction). At such
  early stage, the indicative bids offered a purchase price for purchase of
  the entire Company at a per share price at then current market price or a
  slight premium over then current market price. Indicative bids also
  included bids to purchase a portion of the Company. Indicative interest in
  smaller parts of the Company was viewed as less favorable than selling most
  or all of the Company as it brings greater risk of not favorably executing
  the sale of the remaining parts of the Company, and risk of failure to find
  buyers for the remaining parts. The terms of the bids for equity investment
  in the Company were not attractive and were considered a less favorable
  option than a sale of a large portion of the Company as the amount of
  interest indicated would not likely satisfy lenders. Also, theinformation
  Chase Securities reviewed with the Board at its meeting on September 18,
  2000 with respect to the results of the process undertaken by the Company
  and Chase Securities, including (i) the indicative bids received for the
  Company to be acquired, (ii) the indicative bids received for all or a
  portion of its Metrology Business, (iii) offers from parties willing to
  make an equity investment in the Company, and (iv) the recommendation of
  Chase Securities to the Board at its September 18 meeting, made in the
  context of the results of that process and continued request of Hexagon for
  negotiating exclusivity, for the Company to pursue the Hexagon bid on an
  exclusive basis for a limited period; and the further review of the process
  and the proposed definitive Acquisition Agreement between Hexagon and the
  Company that was presented to the Board for approval at its meeting on
  November 16, 2000, also contributed to the Board's belief that it had
  identified the superior proposal to sell the Company and its decision to
  recommend the proposed sale to Hexagon to shareholders.

     (vi) The fact that since the Company's announcement on June 27, 2000 to
  the effect that it had engaged Chase Securities to pursue various strategic
  alternatives, including a possible sale or merger of the Company, to
  enhance shareholder value, no other party had presented the Company with an
  acquisition proposal that, taken as a whole, would be more favorable to the
  Company and its shareholders than the purchase offer from Hexagon embodied
  in the Acquisition Agreement (and related agreements) and that would be as
  certain to be consummated within the same time frame as the Hexagon offer
  in Spring 2001. The indicative bids for sale of all or most of the Company
  received by the Company were bids made subject to significant further due
  diligence before any specific negotiation on price would occur and were at
  a per share price at then current market price or a slight premium over
  then current market price, subject to

                                      26



  revision upon completion of due diligence. The Company received offers for
  separate units of the Company, but did not receive offers for a sufficient
  number of units of the Company to create a package that compared favorably,
  taking account of after-tax proceeds, to a sale of substantially all assets
  to Hexagon as negotiated. (There were significant tax disadvantages to a
  larger number of piece meal sales of units in the Metrology Business.) In
  addition, the Board considered the risks of selling off separate units of
  the Company, including the risk of not finding buyers for the remaining
  units. At the time the Company entered into the agreement with Hexagon the
  Board believed it was a better value than the other offers still on the
  table and that the transaction with Hexagon could proceed more quickly to
  closing than other offers (which the Board considered favorable as the
  Company is currently a user of cash). The Board felt that sufficient time
  had passed for competing proposals to be presented, and since none of the
  proposals presented were more favorable than Hexagon's, this contributed to
  the Board's decision to recommend the proposed sale to Hexagon to
  shareholders.

     (vii) The opinion of Houlihan Lokey to the Board that, subject to the
  matters set forth in its opinion, the consideration to be received by the
  Company in connection with the proposed sale to Hexagon will be fair, from
  a financial point of view, to us. The opinion, while not "adopted" as such
  by Board resolution, was a positive factor in the Board's decision to
  recommend the proposed sale to Hexagon to shareholders. The full text of
  the written opinion dated as of November 16, 2000 which sets forth the
  assumptions made, matters considered and limitations on the review
  undertaken, is attached to this Proxy Statement as Annex B hereto and is
  incorporated herein by reference. Holders of shares of Company Common Stock
  are urged to read such opinion carefully in its entirety.

     (viii) The purchase price of $160 million, plus $2.5 million at Closing
  (and an additional $4.5 million over the next three years) for the sale of
  additional BSIS stock, subject to two adjustments, and the overall terms of
  the proposed sale to Hexagon, as reflected in the Acquisition Agreement was
  a positive factor in the Board's decision to recommend the proposed sale.
  The Board views the overall terms of the Acquisition Agreement as fair to
  the Company and its stockholders. In the first adjustment, the purchase
  price shall be increased at the Closing by the amount of any Business
  Operating Profit Contingent Payment relating to the business we are selling
  Hexagon. The Board found the opportunity to receive a purchase price
  increase to the $160 million component of the purchase price (ranging from
  $0 to $20 million with an anticipated increase of $10 million, subject to
  agreement by the parties under the Acquisition Agreement) to the extent
  that our Business Operating Profit, as so defined, for the year 2000
  exceeds certain specified levels (starting at $15 million with the highest
  adjustment at $22 million of Business Operating Profit) was a positive
  factor in the Board's decision to recommend the proposed sale to Hexagon as
  it provided a potential financial increase to the Company and stockholders
  for performance. The second adjustment to the purchase price is a net cash
  adjustment. The purchase price will be increased or decreased by this
  adjustment (a decease is expected), with no cap on the increase or floor on
  the decrease, by an amount equal to the amount of cash and cash equivalents
  held by our subsidiaries being transferred to Hexagon or its affiliates at
  the Closing less the amount of indebtedness of our transferred subsidiaries
  at the Closing. Since the foreign subsidiaries being transferred to Hexagon
  are users of cash in the early months of the year, at least through May,
  this second adjustment was viewed in November, 2000, as likely to be
  negative for the Company.

     (ix) The purchase price under the Acquisition Agreement, including the
  purchase price for shares of BSIS, and the rental amounts under the Lease
  were negotiated on an arm's-length basis between our representatives and
  representatives of Hexagon.

     (x) The Company's ability to make a cash distribution to stockholders
  out of the net proceeds under the Acquisition Agreement with Hexagon after
  paying the Company's debt obligations to its senior lenders, after payment
  (or making provision for the payment) of its estimated retained
  liabilities, and after a retention to fund ongoing expenses of BNS Co. and
  expenses of BSIS related to its development of the early stage BSIS
  software business, was a positive factor in the Board's view.

     (xi) The opportunity to develop the early stage "measuring software"
  business being conducted by the Company's subsidiary, BSIS, in which
  Hexagon will make substantial investments aggregating $7 million

                                      27



  over the next three years, eventually owning up to as much as 47% of the
  equity of BSIS was a positive factor in the Board's decision, as the
  opportunity provides the potential for creating value for the stockholders
  after the sale of substantially all assets. However, in view of the
  speculative nature of the prospects for BSIS, the Board has determined to
  make an initial substantial distribution to stockholders of the Hexagon
  sale proceeds as described above.

     (xii) The fact that BSIS, which will be a controlled subsidiary after
  the Closing and will be the only active operations of the Company, has not
  yet generated any revenues and had not introduced its product (and that its
  earlier contemplated product introduction in 2000 had been postponed) was
  considered by the Board as a negative factor, though this factor was
  mitigated by the opportunity to develop BSIS and the fact that BSIS will
  benefit from the cash provided by Hexagon's purchases of portions of its
  stock. In connection with the retention of our controlled subsidiary BSIS,
  the Board considered the effects of transferring to Hexagon the 30%
  interest in Wilcox Associates, Inc. as only ancillary since the important
  asset relating to Wilcox Associates Inc. to the Metrology Business was the
  exclusive technology license being sold to Hexagon, and the 30% interest
  did not contribute to sales and earnings of Brown & Sharpe and did not have
  an easily realizable value. The Board also considered the requirement that
  BSIS sell software products to Hexagon at prices substantially below prices
  charged to others and the need for additional employees resulting from the
  sale of our business to Hexagon. See "Business Activities of the Company
  Following the Proposed Sale: BSIS" and "Risk Factors Related to BSIS".

     (xiii) The Company's decision in the second quarter of 2000 to exit the
  electronics industry segment and sell the assets of the Company's
  Electronics Division and to stop funding, as one of the owners of a 50/50
  joint venture with Metroptic Technology in Israel, for the development of
  new non-contact metrology technology. The Board recognized the Company's
  inability to obtain new sources of cash flow for its ongoing businesses,
  which reinforced the attractiveness of the purchase price under the
  Acquisition Agreement.

     (xiv) The Company's ability to sell its North Kingstown Facility
  pursuant to the North Kingstown Sales Agreement subject to satisfaction of
  closing conditions satisfies the Board that the Company will be able to
  dispose of such asset in a manner considered beneficial to the Company and
  shareholders, and that the proposed sale to Hexagon does not impair the
  Company's ability to do so.

     (xv) The possibility that the Class A Stock of the Compnay (BNS Co.
  after the Closing) may be delisted by the New York Stock Exchange after the
  Closing was considered to be a negative factor by the Board because the
  Board believes there are clear advantages to being listed on a national
  exchange.

     (xvi) The potential disadvantages and complexity of not selling the
  entire Company to a single buyer (or several buyers) including the
  retention of certain unassumed liabilities of the Company and its retained
  subsidiaries estimated to total from $25.0 million to $30.0 million on the
  Closing. The Board considered that the potential disadvantages were
  outweighed by the determination that the proposed sale to Hexagon was the
  superior proposal and by the opportunity provided by the retention of BSIS
  as a controlled subsidiary with $4.5 million additional funding from
  Hexagon over three years.

     (xvii) The fact that, pursuant to the Acquisition Agreement, the Company
  and its representatives may not (a) solicit, initiate or encourage the
  initiation of any inquiries or proposals regarding the acquisition by any
  person of the common stock of the Company in a takeover bid, or all or a
  material portion of the business and assets of the Company (an "Acquisition
  Proposal"), (b) engage in negotiations or discussions concerning, or
  furnish or permit to be furnished any non-public information concerning the
  Company's business, properties or assets to any person relating to, any
  Acquisition Proposal, or (c) agree to, approve or recommend any Acquisition
  Proposal, unless in each case the Board reasonably determines after
  consultation with its outside counsel that such Company Acquisition
  Proposal is a superior proposal and determines in good faith (based on the
  advice of its financial advisor and outside counsel) that it is required to
  take such actions in order to discharge properly its fiduciary duties. The
  Board considered this factor as a negative in entering into the Acquisition
  Agreement, but considered this factor as a positive in that the provision
  allows the Board to consider other superior offers under certain
  conditions.

                                      28



     (xviii) The fact that, pursuant to the Acquisition Agreement, the Board
  has the right, to terminate the Acquisition Agreement in order to accept a
  superior company proposal if (a) the Board of Directors has determined,
  based upon the advice of legal counsel, that it is required to accept such
  proposal to discharge properly its fiduciary duties under applicable law,
  (b) the Company gives Hexagon AB written notice of the Company's intention
  to accept such superior proposal, and (c) the Company pays to Hexagon a
  break-up fee of $4 million plus up to $2 million of actual expenses, and if
  the Company fails to obtain a Stockholder vote in favor of the Acquisition
  Agreement, the Company pays certain actual expenses of Hexagon of up to $2
  million. The Board considered this factor as a negative in entering into
  the Acquisition Agreement with a break up fee, but a positive factor in
  that the provision allows the Board to consider other superior offers under
  certain circumstances.

   The above information and factors considered by the Board are not intended
to be exhaustive, but includes all of the material factors, both negative and
positive, considered by the Board. The Board did not attempt to quantify or
otherwise assign relative weights to the specific factors it considered or
determine that any factor was of particular importance. A determination of
various weightings would, in the view of the Board, be impractical. Rather,
the Board viewed its position and recommendations as being based on all of the
information presented to, and considered by, it. In addition, individual
members of the Board may have given different weight to different factors.


   ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE SALE OF SUBSTANTIALLY ALL ASSETS
INCLUDING (A) THE ACQUISITION AGREEMENT AND THE RELATED TRANSACTIONS, (B) THE
SALE OF THE NORTH KINGSTOWN FACILITY UNDER THE NORTH KINGSTOWN SALE AGREEMENT
(C) THE LATER SALE OF OUR HEATHROW, UNITED KINGDOM REAL ESTATE AND (D) THE
RELATED CONTEMPLATED CASH DISTRIBUTIONS TO STOCKHOLDERS ON DATES AND IN
AMOUNTS TO BE FINALLY DETERMINED BY THE BOARD OF DIRECTORS, ALL AS DESCRIBED
IN PROPOSAL 1.

Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc.

   The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The
following is a brief summary and general description of the valuation
methodologies utilized by Houlihan Lokey Howard & Zukin Financial Advisors,
Inc. The summary does not purport to be a complete statement of the analyses
and procedures applied, the judgments made or the conclusion reached by
Houlihan Lokey or a complete description of its presentation. Houlihan Lokey
believes, and so advised the Board, that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors
considered by it, without considering all factors and analyses, could create
an incomplete view of the process underlying its analyses and opinions.

   The Company retained Houlihan Lokey to render an opinion as to the
fairness, from a financial point of view, of the Transaction to the Company.
At the November 16, 2000 meeting of the Board, Houlihan Lokey presented its
analysis as hereinafter described and on November 16, 2000 delivered its
written opinion that as of such date and based on the matters described
therein, the consideration to be received by the Company in connection with
the Transaction is fair to the Company from a financial point of view.

   THE COMPLETE TEXT OF HOULIHAN LOKEY'S OPINION IS ATTACHED HERETO AS ANNEX
B. THE SUMMARY OF THE OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH OPINION. THE STOCKHOLDERS ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE
FACTORS CONSIDERED AND THE ASSUMPTIONS MADE BY HOULIHAN LOKEY.

                                      29



   Houlihan Lokey's opinion to the Board addresses only the fairness from a
financial point of view of the Transaction, and does not constitute a
recommendation to the stockholders as to how such stockholder should vote at
the Special Meeting. Houlihan Lokey's opinion does not address the Company's
underlying business decision to effect the Transaction. Houlihan Lokey has not
been requested to, and did not, solicit third party indications of interest in
acquiring all or part of the Company. Furthermore, at the Board's request,
Houlihan Lokey did not (i) participate in the negotiations with regard to the
Transaction nor (ii) advise the Board with respect to their alternatives to
the Transaction.

   In connection with the preparation of its opinion, Houlihan Lokey made such
reviews, analyses and inquiries as they deemed necessary and appropriate under
the circumstances. Among other things, Houlihan Lokey: (i) reviewed the
Company's audited financial statements on Form 10-K for the three fiscal years
ended December 31, 1999, and unaudited financial statements on Form 10-Q for
the three quarters ended September 30, 2000, which the Company's management
has identified as being the most current financial statements available; (ii)
reviewed drafts of certain documents to be delivered at the closing of the
Transaction; (iii) met with certain members of the senior management of the
Company to discuss the operations, financial condition, future prospects and
projected operations and performance of the Company; (iv) spoke with
representatives of the Company's investment banker to discuss certain matters;
(v) visited certain facilities and business offices of the Company; (vi)
reviewed forecasts and projections prepared by the Company's management with
respect to the Company for the years ended December 31, 2000 through 2004;
(vii) reviewed the historical market prices and trading volume for the
Company's publicly traded securities; (viii) reviewed documents pertaining to
Company's businesses and assets which will not be purchased and acquired by
Hexagon; (ix) reviewed certain other publicly available financial data for
certain companies that we deem comparable to the Company, and publicly
announced transactions that Houlihan Lokey considered similar to the
Transaction; and (x) conducted such other studies, analyses and inquiries as
we have deemed appropriate.

   In assessing the financial fairness of the Transaction to the Company,
Houlihan Lokey: (i) independently valued Brown & Sharpe using widely accepted
valuation methodologies, (ii) analyzed the reasonableness of the consideration
being offered in the Transaction, and (iii) reviewed the valuation
implications to the Company's stockholders of various alternatives to the
Transaction.

 Valuation of Brown & Sharpe

   Houlihan Lokey completed an independent valuation of the Company using the
market multiple, the discounted cash flow and comparable transaction
approaches.

   Market Multiple Approach. The first approach, the market multiple approach
involved the multiplication of revenue and cash flow measures by appropriate
risk-adjusted multiples. Multiples were determined through an analysis of
certain publicly traded companies, selected on the basis of operational and
economic similarity with the principal business operations of the Company.
Revenue and cash flow multiples were calculated for the comparative companies
based upon daily trading prices. A comparative risk analysis between the
Company and the public companies formed the basis for the selection of
appropriate risk adjusted multiples for the Company . The risk analysis
incorporated both quantitative and qualitative risk factors, which relate to,
among other things, the nature of the industry in which the Company, and the
other comparative companies were engaged.

   For purposes of this analysis, Houlihan Lokey selected seven publicly
traded, domestic companies involved in manufacturing precision measuring
products. The companies include Mocon, Inc., Badger Meter, Inc., K-Tron
International, Inc., MTS Systems, Inc., Transmation, Inc., L.S. Starrett Co.,
and Hardinge, Inc. The market multiple approach yielded an enterprise value in
the range of $90.0 million to $110.0 million.

   Discounted Cash Flow Approach. In the second approach, the discounted cash
flow analysis ("DCF"), we used financial projections prepared by management.
The present value of the cash flows and the terminal value was determined
using a risk-adjusted rate of return or "discount rate." The discount rate, in
turn, was developed through an analysis of rates of return on alternative
investment opportunities on investments in

                                      30



companies with similar risk characteristics to the entity being valued. The
discount rate is intended to reflect all risks of ownership and the associated
risks of realizing the stream of projected future cash flows. It can also be
interpreted as the rate of return that would be required by providers of
capital to the Company to compensate them for the time value of their money,
as well as the risk inherent in the particular investment. The discounted cash
flow approach yielded an enterprise value in the range of $170.0 million to
$210.0 million.

   Comparable Transaction Approach. The third approach, the comparable
transaction approach, involved multiples of revenue and cash flow similarly to
the market multiple approach. Multiples analyzed in this approach involved
controlling interest transactions for companies with operations similar in
some manner to the Company's operations. For purposes of this analysis
Houlihan Lokey analyzed 13 completed transactions between April 1998 and
October 2000. The comparative transaction approach yielded an enterprise value
in the range of $150.0 million to $170.0 million.

   Houlihan Lokey informed the Board that based on the three approaches,
Houlihan Lokey concluded that the value of the Company on a total invested
capital ("TIC") basis is reasonably stated in the range of $140.0 million to
$170.0 million, or $66.0 million to $96.0 million ($4.79 to $6.97 per share),
after deducting outstanding debt, net of cash.

 Fairness Analysis

   To determine the fairness of the Transaction to the Company from a
financial point of view Houlihan Lokey compared the value of (i) the
consideration be received by the Company and the value of assets to be
retained by the Company to (ii) the estimated value of the Company.

   Houlihan Lokey valued the cash to be paid at closing, net of the
indebtedness to be paid off which Houlihan Lokey understands to have been
$103.7 million as of September 30, 2000. Houlihan Lokey concluded that the
value of the consideration to be received in connection with the Transaction
which Houlihan Lokey understands to be (i) $160.0 million in cash, (ii) the
potential earn-out of up to $20.0 million based on certain operating profits
of Brown & Sharpe's Worldwide Measuring Systems and Precision Measuring
Instrument businesses, and (iii) $7.5 million payable over 3 years for a 46%
interest in the BSIS business, plus the value of the assets to remain with the
Company which Houlihan Lokey estimated, after discussing with management, to
be in the range of $23.1 million to $51.5 million, less the remaining
liabilities and transaction costs which management estimated to be in the
range of $26.4 million to $41.4 million, was approximately $98.3 million, or
$7.13 per share, which Houlihan Lokey noted was greater than the concluded
value of the Company of $6.16 per share.

 Assessment of Brown & Sharpe's Strategic Alternatives to the Transaction

   In evaluating the fairness of the Transaction, from a financial point of
view, Houlihan Lokey considered the expected value to the Company of
completing the Transaction and certain alternatives to the Transaction. With
regard to each alternative Houlihan Lokey's analysis qualitatively considered
the valuation implications to the Company, the probability of successfully
completing the alternative, and the cost and time to implement.

   For purposes of this analysis Houlihan Lokey considered the following
strategic alternatives: (i) status quo; (ii) debt financing; (iii) public
offering of common stock; (iv) issuance of a preferred security; and (v) the
Transaction. Houlihan Lokey noted that of the strategic alternatives
considered, the Transaction appears to provide the greatest value to Brown &
Sharpe.

   Houlihan Lokey relied upon and assumed, without independent verification,
that the financial forecasts and projections provided to them, and as adjusted
based on their discussions with management, were reasonably prepared and
reflected the best currently available estimates of the future financial
results and condition of the Company, and that there had been no material
change in the assets, financial condition, business or prospects of the
Company since the date of the most recent financial statements made available
to them.

                                      31



   Houlihan Lokey did not independently verify the accuracy and completeness
of the information supplied to them with respect to the Company and do not
assume any responsibility with respect to it. Houlihan Lokey has not made any
independent appraisal of any of the properties or assets of the Company.
Houlihan Lokey's opinion was necessarily based on business, economic, market
and other conditions as they existed and could be evaluated by them at the
date of their letter.

   Houlihan Lokey is a nationally recognized investment banking firm with
special expertise in, among other things, valuing businesses and securities
and rendering fairness opinions. Houlihan Lokey is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, private placements of debt and equity,
corporate reorganizations, employee stock ownership plans, corporate and other
purposes. The Company selected Houlihan Lokey because of its experience and
expertise in performing valuation and fairness analysis. Houlihan Lokey does
not beneficially own nor has it ever beneficially owned any interest in the
Company.

   Fees and Expenses. Pursuant to an agreement dated September 26, 2000,
Houlihan Lokey was retained by the Company to analyze the fairness of the
consideration to be received by Brown & Sharpe in connection with the
Transaction from a financial point of view. The Company has agreed to pay
Houlihan Lokey a fee of $200,000 plus its reasonable out-of-pocket expenses
incurred in connection with the rendering of a fairness opinion. The Company
has further agreed to indemnify Houlihan Lokey against certain liabilities and
expenses in connection with the rendering of its services.

                                      32



                     SALE OF NORTH KINGSTOWN FACILITY

   As part of the sale of substantially all assets our Board of Directors is
proposing the approval of the Purchase and Sale Agreement (the "North
Kingstown Sales Agreement") dated March [  ], 2001 with Precision Park
Partners LLC, a commercial buyer having no affiliation with the Company, for
its North Kingstown, Rhode Island manufacturing facility, known as Precision
Park, for a cash purchase price of $15.5 million dollars. The facility is
comprised of a 734,000 sq. ft. industrial building, of which approximately
333,000 sq.ft. is occupied by the Company's Metrology Business and Corporate
headquarters and the remainder by three commercial tenants unrelated to the
Company, is situated on 169 acres of commercially zoned land and is the
principal U.S. manufacturing site for the Company's Metrology Business. Under
the terms of the North Kingstown Sales Agreement the Buyer has 60 consecutive
days from the date of the Agreement (of which   days remain as of March  ,
2001) to inspect the Precision Park building and real property, including
conducting environmental testing, and has the right exercisable at any time
prior to expiration of such inspection period if it is not satisfied with the
results of such inspection, or for any reason or no reason, in its sole
discretion by furnishing notice to the Company to terminate the Agreement and
forfeit a non-refundable $50,000 deposit paid to the Company upon execution of
the Agreement. If the Buyer does not elect to terminate prior to expiration of
the inspection period the Buyer is required to pay the Company an additional
deposit of $650,000 to be credited to the Buyer at closing.

   The Agreement is also subject the Buyer's acceptance and agreement to the
terms of a Lease Agreement to be entered into between the Company and Hexagon
Holdings, Inc., a subsidiary of Hexagon AB, who will be purchasing the
Company's Metrology Business and assets and who has agreed to lease from the
Company the space currently occupied by the Metrology Business, with a right
to put back space up to a minimum leased space of 135,000 sq. ft., for a
period of five years from the closing of the Hexagon transaction. In addition
to the Hexagon lease the property will be conveyed to the Buyer with the
assignment of the three existing tenant leases including all rents and profits
from those leases accruing from and after the closing of the sale of such
property.

   The Precision Park property is subject to a first mortgage loan to the
Company by Sun Life of Canada in the principal amount of $5 million and a
second mortgage given to Chase Manhatten Bank, as agent, to secure the
principal amount outstanding under the Company's $30 million revolving bank
credit facility and the Company's $50 million senior notes. The closing of the
sale of the property will occur after the closing of the Hexagon transaction
at which the second mortgage lien to Chase Manhatten Bank will be released and
discharged. At the closing of the sale of the property the principal
outstanding balance of approximately $4 million on the Sun Life mortgage loan
will be paid out of the proceeds at closing and after payment of such loan,
brokerage commissions, applicable transfer taxes and other related expenses
the net proceeds to be realized by the Company upon sale of the North
Kingstown Facility will be approximately $10.5 million.

                    CASH DISTRIBUTIONS TO STOCKHOLDERS

   As an integral part of the proposal for the sale of substantially all of
the assets of the Company, the Company proposes (1) an initial contemplated
cash distribution to the stockholders of the Company as soon as practical
following (i) the Closing under the Acquisition Agreement, (ii) the payment,
or provision for payment, of estimated liabilities and contingent liabilities
remaining with the Company (including payment to our senior lenders), and
(iii) the retention of portions of the net proceeds under the Acquisition
Agreement to be available (together with the funds to be invested by Hexagon
in BSIS) for funding ongoing operations of BNS Co. and BSIS; (2) a second
contemplated cash distribution to the stockholders of the Company upon the
sale of the North Kingstown Facility; and (3) a third contemplated cash
distribution to the stockholders of the Company following the sale of
Heathrow, United Kingdom real estate when such real estate is sold. In all
cases, the cash distributions will be made on dates and in the amounts as the
Board may determine. Based upon the evaluation of management including the
estimates as to the adjustments to the purchase price payable by Hexagon at
the Closing contemplated for late April, 2001, the estimate of amounts to be
held back from

                                      33



the net proceeds to satisfy known (retained liabilities and potential
contingent liabilities and an amount, estimated at $7.5 million, to be
retained for funding the on-going operations of BNS Co. and BSIS (which
includes the $2.5 million invested by Hexagon at the Closing) and an estimate
of shares expected to be issued on exercise of outstanding options, it is
estimated by management that the initial cash distribution will be in excess
of $3.00 per share (estimated without giving effect to the reverse stock split
of the Company's Common Stock that is the subject of Proposal 5). However, the
amount of the cash distributions per share will be decreased in the event that
either one or both of Proposals 3 and 4 for reducing the par value of the
Company's Class A Stock and Class B Stock are not approved by stockholders
(because the effect of such non-approval will be to preclude the transfer by
the Board of an aggregate of $0.99 multiplied by the number of outstanding
shares from the capital account to the additional paid-in capital account on
the balance sheet of the Company). Assuming a sale of the North Kingstown
Facility for $15.5 million is completed, there will be a second cash
distribution, the amount of which would, subject to the qualifications below,
be equal to the net sale proceeds (after payment of the existing mortgage and
expenses). There will be a third cash distribution after the sale of our
Heathrow, United Kingdom real estate. However, the amount of such third
distribution is not now determinable; we have not started efforts to sell this
property.

   Stockholders should take into account when voting that the Company's
estimates of retained liabilities, including potential contingent liabilities,
may be lower or greater than they may prove to be in actuality by the time of
the second or third distribution, in which event this would lead the Board to
increase or reduce the second distribution to be made after the sale of the
North Kingstown Facility and could require the Company to seek financing or
reduce the amount of the third distribution contemplated to be made from the
net proceeds of sale of the Heathrow, United Kingdom real estate.

   As discussed more fully under "Business Activities Following the Proposed
Sales and Related Transactions: BSIS, Inc. to be Renamed Xygent, Inc.," the
Company plans to retain $7.5 million of the proceeds to be available (which
shall include the $2.5 million invested in BSIS by Hexagon at the Closing) for
use in funding the ongoing operations of BNS Co. and BSIS. There will be no
change in the number of outstanding shares (except for exercise of now
outstanding options) as a result of the sale of assets in Proposal 1 and the
Company will remain a public company and will continue to have public
reporting obligations creating expenses needed to be funded, including funding
prior to any period when its controlled subsidiary BSIS may generate income.

               PRINCIPAL PROVISIONS OF THE ACQUISITION AGREEMENT
                            AND RELATED AGREEMENTS

   We and Hexagon are parties to the Acquisition Agreement. The following
summarizes the material provisions of the Acquisition Agreement and related
agreements. You should carefully read the full text of the Acquisition
Agreement attached to this Proxy Statement as Appendix A which qualifies this
description and is incorporated by reference into this Proxy Statement.

Purchase Price Payable to Us

   The purchase price for the assets and stock we are transferring to Hexagon
is $160 million subject to two adjustments, plus $2.5 million at Closing and
an additional $4.5 million over the next three years for the sale of
additional shares of BSIS stock to Hexagon. There is not a guaranteed minimum
we will receive from Hexagon after these adjustments.

   A portion of the purchase price shall be paid directly to our lenders to
pay off in full all of our indebtedness (aggregating $77.4 million principal
amount) under the Credit Agreement dated as of November 10, 1997 between us,
certain lenders and The Chase Manhattan Bank, as agent, as amended, and the
Note Agreement dated November 10, 1997 between us and certain lenders, as
amended, plus an amount for an early payment fee. Hexagon shall pay the
balance of the purchase price to us.

                                      34



   In the first adjustment, the purchase price will be increased by the amount
of any Business Operating Profit contingent payment, relating to the business
we are selling to Hexagon. If the Business Operating Profit of the transferred
business, as adjusted, for the year ended December 31, 2000 is finally
determined to be equal to or less than $15 million, there shall be no further
adjustment to the purchase price. If such Business Operating Profit is equal
to or greater than $17 million and equal to or less than $20 million, the
purchase price shall be increased by $10 million. If the Business Operating
Profit is equal to or greater than $22 million, the purchase price shall be
increased by $20 million. If the amount of such Business Operating Profit is
greater than $15 million but less than $17 million, the purchase price shall
be increased by an amount equal to the product of (i) five multiplied by (ii)
the difference between the amount of Business Operating Profit and $15
million. If the amount of such Business Operating Profit is greater than $20
million but less than $22 million, the purchase price shall be increased by an
amount equal to the product of (i) five multiplied by (ii) the difference
between the amount of Business Operating Profit and $20 million. Any amount
due as a result of an increase in the purchase price pursuant to this
paragraph shall be paid in cash on the later of the closing date and the date
that is five days after final determination of the Business Operating Profit
of the transferred business for the year ended December 31, 2000.

   We must deliver a draft statement of the Business Operating Profit of the
transferred business for the year ended December 31, 2000, defined so as to
(i) disregard all effects of Staff Accounting Bulletin No. 101, (ii) exclude
all income or gains and expenses or losses attributable to the assets or
liabilities being retained by us, (iii) include all accruals for royalty
payments made or to be made by us or any of our affiliates to Wilcox
Associates, Inc. and (iv) deduct the sum of $8.5 million. If Hexagon objects
to our draft statement of Business Operating Profit within fifteen days of its
delivery, we and Hexagon shall attempt to resolve the dispute. If we cannot
resolve the dispute within 15 days, a "Big Five" accounting firm shall finally
determine the amount of Business Operating Profit of the transferred business,
as adjusted, for the year ended December 31, 2000. On February 9, 2001, we
delivered the draft statement to Hexagon.

   In the second adjustment, the purchase price will be increased or decreased
(a decrease is expected), with no cap on the increase or floor on the
decrease, by an amount equal to the amount of cash and cash equivalents held
by our subsidiaries being transferred to Hexagon less the amount of
indebtedness of our transferred subsidiaries. The parties must agree on the
definitive net cash adjustment after the Closing. If the Closing had occurred
on December 31, 2000, the amount of this decrease would have been
approximately $3.6 million. We expect to have a net use of cash by the foreign
subsidiaries being transferred to Hexagon between December 31, 2000 and the
expected closing date in April, 2001 and an anticipated corresponding further
decrease to the purchase price under this second adjustment.

Transferred Stock and Transferred Assets

   The proposed transaction involves a transfer of substantially all of our
assets, including the stock of most of our subsidiaries. We or our affiliates
are directly transferring to Hexagon or its affiliates all of the shares of
stock we hold of the following subsidiaries:

  . Brown & Sharpe International Capital Corporation

  . Brown & Sharpe DEA S.p.A.

  . BSP, Inc.

  . Brown & Sharpe Foreign Sales Corp.

  . Brown & Sharpe Finance Company

  . Borel & Dunner, Inc.

  . Qingdao Brown & Sharpe Qianshao Trading Company Limited

  . Qingdao Brown & Sharpe Qianshao Technology Company Limited

                                      35


  .  Brown & Sharpe Aftermarket Services, Inc.

   We are also indirectly transferring to Hexagon all of the stock of the
various subsidiaries of the companies listed above, as well as the 30%
interest in Wilcox Associates, Inc. held by Brown & Sharpe Aftermarket
Services, Inc. (subject to the right of first refusal described in "Wilcox
Associates, Inc." below).

   In addition to the stock and assets of the subsidiaries we are
transferring, we are transferring to Hexagon substantially all of our assets,
properties and rights of every nature, kind and description, tangible and
intangible (including goodwill), whether real, personal or mixed, whether
accrued, contingent or otherwise, other than the stock of the subsidiaries we
are retaining (and the assets of such subsidiaries), and the excluded assets
described below under "Excluded Assets Retained by Us."

Excluded Assets Retained by Us

   The transferred assets specifically exclude, and we will retain, the
following excluded assets: (a) our stock of BSIS, and all of its XactMeasure
products and rights owned or licensed and its employees and assets which were
on the date of the Acquisition Agreement employed and utilized by us and our
transferred subsidiaries in the transferred business; (b) the assets of Brown
& Sharpe Surface Inspection Systems Inc., which are now being sold by the
Company to a third party; (c) our owned real estate in North Kingstown, R.I.
and our landlord leasehold interests with respect to tenants occupying the
building; (d) the Heathrow, United Kingdom Airport property owned by Brown &
Sharpe Group Ltd.; (e) all of our cash and the cash of our retained
subsidiaries; (f) our patents, trademarks and other intellectual property,
including know-how, which are not employed in the operation of the transferred
business; (g) all corporate records, including corporate financial and
accounting records, income tax returns and corporate minute books of meetings
of our Board of Directors and stockholders; (h) U.S. federal and state income
tax, credits and net operating loss carryforwards; (i) our third party
accounts, notes, investments and other receivables unrelated to the operation
of the transferred business; (j) our Metroptic investment 50% interest and our
notes receivable due from Metroptic; (k) all inventory and fixed assets
relating to or utilized in the development of the turbine blade measuring
machine situated at Telford, U.K.; and (l) insurance policies relating to
funding of those excluded liabilities under our Umbrella Supplemental
Executive Retirement Plan.

Heathrow Airport Property

   Hexagon had the option to purchase our Heathrow, United Kingdom real estate
for $5 million. Hexagon has declined to exercise that option. Accordingly, we
or one of our affiliates will acquire (by dividend or otherwise) the Heathrow,
United Kingdom real estate from Brown & Sharpe Group Limited at no cost to
Hexagon prior to the Closing. We will be responsible for any taxes arising out
of this acquisition by us. We plan to sell this real estate later in the year,
or possibly in 2002. We have not commenced any selling efforts. The Heathrow,
United Kingdom real estate consists of 85 acres of land adjacent to the
Heathrow airport, currently used as a gravel pit. The property is subject to
zoning restrictions which limit its development. The property is also subject
to agreements with an adjacent land owner and a gravel pit operator for
extraction of gravel and procuring acceptable material for land fill. The
royalty for gravel removal is currently $4 per ton and the estimate of
remaining gravel that can be extracted is one million tons. The royalty for
landfill is 30% of the land fill revenue. The gravel and land fill royalties
are shared 77%/23% between the Company and the adjacent land owner. The gravel
pit operator is responsible for restoring the property after extraction of
gravel and landfill is complete. In the year 2000 revenues from the property
were approximately $550,000.

Wilcox Associates, Inc.

   One of the subsidiaries being transferred to Hexagon, Brown & Sharpe
Aftermarket Services, Inc., holds a 30% interest in Wilcox Associates, Inc.
Pursuant to the terms of an Incorporation Agreement dated as of August 10,
1990 among Wilcox Associates, Brown & Sharpe Aftermarket Services and the
other stockholders of Wilcox Associates, such other stockholders have a right
of first refusal on the transfer of the shares of Wilcox Associates,

                                      36


whether directly or indirectly through a transfer of Brown & Sharpe
Aftermarket Services. Unless the other stockholders waive this right, Brown &
Sharpe Aftermarket Services will be required to offer its shares of Wilcox
Associates to the other stockholders. Hexagon has agreed to provide us with a
notice setting forth the dollar amount of the purchase price payable to us
that will be allocated by Hexagon to the shares of Wilcox Associates held by
Brown & Sharpe Aftermarket Services. Such dollar amount will be the purchase
price at which the shares are offered to the other stockholders of Wilcox
Associates.

   If the right of first refusal is exercised, the purchase price payable to
us by Hexagon at the closing will be reduced by the amount paid to Brown &
Sharpe Aftermarket Services by the stockholders of Wilcox Associates to
exercise their right of first refusal, and the shares purchased pursuant to
such right of first refusal shall be deemed excluded assets for purposes of
the Acquisition Agreement. To the extent that the cash received by Brown &
Sharpe Aftermarket Services is left in such subsidiary, it shall be included
in the cash adjustment to the purchase price described under "Purchase Price
Payable to Us." If the right of first refusal is not exercised or is waived,
Brown & Sharpe Aftermarket Services shall continue to hold its shares of
Wilcox Associates through the closing and there shall be no adjustment to the
purchase price paid by Hexagon.

Purchase by Hexagon (or an Affiliate) of Stock in BSIS, Inc.; BSIS
Stockholders' Agreement

   In addition to acquiring the transferred Metrology Business, Hexagon has
agreed to purchase (or cause on of its affiliates to purchase) at the Closing
shares of our subsidiary BSIS, representing 16.7% of the issued and
outstanding common stock of BSIS for a purchase price of $2.5 million in cash.
Such purchase and sale, which was based on a negotiated valuation of BSIS for
purposes of the Acquisition Agreement of $15 million after the first Hexagon
investment, will be made pursuant to the BSIS Stock Purchase Agreement to be
entered into pursuant to the terms of the Acquisition Agreement, and at the
Closing we and Hexagon (or its affiliate) shall enter into a mutually
acceptable stockholders' agreement (the "BSIS Stockholders' Agreement")
containing investment restrictions necessary for a "private placement" under
United States securities laws, transfer restrictions, voting provisions, a
BSIS right of first refusal on any transfer of BSIS Shares by Hexagon to a
third party and a Hexagon right of first refusal in connection with offers by
a third party to us or BSIS for the acquisition of BSIS (by sale of stock,
merger or otherwise).

   On each of the first three anniversaries of the closing, Hexagon or its
affiliate shall purchase additional shares of BSIS for an additional purchase
price of $1.5 million on each such anniversary. The number of shares sold to
Hexagon shall be the lesser of (a) 10% of the outstanding common stock of BSIS
or (b) a percentage of the outstanding common stock of BSIS equal to the
quotient of $1.5 million divided by the fair market value of BSIS determined
as of a date which is 30 days prior to the scheduled additional purchase date
(or, if the shares of BSIS are at the time publicly traded, determined by
reference to the average of the closing prices of such BSIS shares on the
applicable exchange over the thirty-day period ending three (3) days prior to
the scheduled purchase date). If we and Hexagon cannot agree as to the fair
market value as of any date, such determination shall be made by a "Big Five"
independent accounting firm, whose determination shall be final and binding on
the parties and whose fees shall be shared equally by the parties. Hexagon
shall have the right to accelerate the timing of the purchases it is obligated
to make at any time. The terms of the sale of the BSIS stock to Hexagon were
negotiated by the parties at arm's length.

   We and Hexagon have acknowledged and agreed that (i) the legacy software
(including Quindos, Tutor, Chorus and MM4) owned by us and/or our subsidiaries
is and shall continue to be after the closing an exclusive asset of the
transferred business; (ii) the XactMeasure legacy derivatives, or proprietary
software enhancements to basic software programs based on Metrology Business
machines (including XactQuindos, Chorus X, MM4X and Tutor X) of BSIS, shall be
transferred by BSIS to the appropriate unit in the transferred business prior
to the closing (with BSIS retaining rights to its XactMeasure MR1 and MR2
Technology) and BSIS shall have no right to sell or license the XactMeasure
legacy derivatives software; and (iii) the XactMeasure product is and shall
continue to be after the closing an exclusive asset of BSIS, and BSIS's rights
to use the legacy software and XactMeasure legacy derivatives in connection
with the development of XactMeasure and its progeny (but not the derivatives
transferred as part of the transferred business above), as embodied in
Software Programming Services Agreements between BSIS and certain of our
transferred subsidiaries, will continue in

                                      37


full force and effect following the closing. We have agreed to make such
mutually agreed changes to the various Software Programming Services
Agreements as may be necessary to protect the proprietary rights of Hexagon
and our transferred subsidiaries in the legacy software products.

   The BSIS Stockholders' Agreement shall provide that for a five year period
following the Closing, (a) BSIS shall sell XactMeasure licenses to Hexagon and
its affiliates for OEM use and for distribution in connection with the
transferred business at a price of $1,500 per unit for coordinate measuring
machine applications and (b) BSIS shall pay to Hexagon a royalty of $5,000 per
unit for XactMeasure licenses sold by BSIS through distribution channels other
than Hexagon or its affiliates for coordinate measuring machine applications.

Liabilities to be Assumed by Hexagon

   At the closing, Hexagon and its affiliates will assume all of our
liabilities and the liabilities of our transferred subsidiaries (other than
the excluded liabilities specified below under "Excluded Liabilities Retained
by Us"), including all liabilities, commitments, obligations, claims and
expenses, known or unknown, absolute or contingent, accrued or unaccrued,
directly relating to the conduct of the transferred business as it has been
directly or indirectly conducted by us, except as otherwise expressly
provided.

Excluded Liabilities Retained by Us

   The following are the principal excluded liabilities that will be retained
by us: (a) all of our liabilities and the liabilities of our retained
subsidiaries to the extent they relate to the excluded assets (book value of
$11.2 million) which totaled $3.3 million at December 31, 2000, plus the
mortgage on the North Kingstown Facility which totaled $4.2 million at
December 31, 2000; (b) liabilities for taxes payable by or attributable to us
or our retained subsidiaries which totaled $200,000 at December 31, 2000; (c)
our unpaid fees and expenses of negotiating and documenting the proposed
transaction and any brokerage, finder's or advisory fee payable by us which
totaled $4.0 million; (d) all liabilities under our Senior Executive
Supplemental Umbrella Pension Plan to persons who do not accept employment
with Hexagon, all liabilities under our Long-Term Deferred Cash Incentive Plan
in respect of year 2000 cash bonuses, and all liabilities to participants in
our regular Supplemental Executive Retirement Plans which are estimated at
$11.5 million; (e) all liabilities under employee change in control contracts
(except with regard to executives hired or retained at the Closing or within
one year thereafter by Hexagon or its affiliates) estimated at $6.5 million;
and (f) estimated contingent liabilities in respect of all litigation matters
pending on the date of the Acquisition Agreement, other than two specified
matters that will be assumed by Hexagon and all liabilities, claims or
expenses, whether known or unknown, absolute or contingent, accrued or
unaccrued, relating to the excluded assets or otherwise, not directly
resulting from the conduct of the transferred business which are estimated to
be $1.0 million at December 31, 2000.

The Closing

   It is anticipated that the closing will take place at the offices of Ropes
& Gray, One International Place, Boston, MA at 10:00 a.m. (local time), within
five business days following the date on which all closing conditions
contained in the Acquisition Agreement have been satisfied or waived, or at
such other place, time or date as may be mutually agreed upon by us and
Hexagon.

Representations and Warranties by Us

   We have made certain representations and warranties on behalf of ourselves
and our subsidiaries relating to, among other things, (i) corporate
organization; (ii) our authority relative to the Acquisition Agreement; (iii)
noncontravention of the Company's charter and by-laws, laws to which the
Company is subject and agreements to which the Company is a party; (iv) the
brokers used in connection with the transactions contemplated by the
Acquisition Agreement; (v) the ownership and condition of the transferred
assets and the transferred stock; (vi) capitalization; (vii) our financial
statements; (vii) any change in our financial condition and assets; (viii)
taxes;

                                      38


(ix) real properties; (x) patents, trademarks and other intellectual property;
(xi) our contracts and commitments; (xii) outstanding powers of attorney;
(xiii) the existence of any litigation; (xiv) compliance with agreements and
laws, including environmental laws; (xv) our employee relations and benefit
plans; (xvi) any required consents; (xvii) the absence of undisclosed
liabilities; (xviii) transactions with our affiliates; (xix) any outstanding
guarantees; (xx) absence of any improper payments; (xxi) insurance; and (xxii)
restrictions on our business activities.

Representations and Warranties by Hexagon

   Hexagon has made certain representations and warranties on behalf of itself
and its affiliates relating to, among other things, (i) its corporate
organization; (ii) its authority relative to the Acquisition Agreement; (iii)
noncontravention of Hexagon's charter and by-laws, laws to which Hexagon is
subject, and agreements to which Hexagon is party; (iv) its investment intent;
(v) the brokers used in connection with the transactions contemplated by the
Acquisition Agreement; (vi) any required consents; and (vii) its financial
capacity to consummate the proposed transaction.

Survival of Representations and Warranties

   With the exception of representations and warranties relating to authority
relative to the Acquisition Agreement, brokers and title to assets and stock,
which shall survive indefinitely, all representations and warranties of the
parties shall terminate upon the closing.

Indemnification

   Pursuant to the Acquisition Agreement, we have agreed to indemnify Hexagon
from and against any liability, damages, losses, expenses and costs as a
result of or arising out of (i) the inaccuracy of any our representations or
warranties that survive the closing; (ii) any breach or nonfulfillment after
the closing of any of our agreements or covenants contained in the Acquisition
Agreement or in any agreement or instrument required to be entered into in
connection with the Acquisition Agreement that survives the closing; (iii) any
lawsuit or claim by any of our stockholders in their capacity as our
stockholders relating or in any way arising out of the transactions
contemplated by the Acquisition Agreement, except to the extent any such
lawsuit or claim arises from a breach by Hexagon; (iv) any excluded liability;
(v) any tax liability arising out of a transfer of the Heathrow Airport
property to us or our designee; (vi) any violation of the Worker Adjustment
and Restraining Notification Act of 1988 or any state plant closing or
notification law, or similar law in jurisdictions outside the United States,
arising out of, or relating to, any actions to close a plant taken by us or
one of our retained subsidiaries prior to, at or after the closing; (vii) any
tax liability that any of our transferred subsidiaries incurs in respect of
the liability of us or any of our retained subsidiaries in a United States,
consolidated, combined or unitary tax return we file for periods ending or
before the closing date; or (viii) non-compliance with applicable bulk sales
laws of the United States.

   Hexagon has agreed to indemnify us from and against any liability, damages,
losses, expenses and costs as a result of or arising out of (i) the inaccuracy
of any its representations or warranties that survive the closing; (ii) any
breach or nonfulfillment after the closing of any of its agreements or
covenants contained in the Acquisition Agreement or in any agreement or
instrument required to be entered into in connection with the Acquisition
Agreement that survives the closing, including its agreement to assume the
assumed liabilities; (iii) any violation of the Worker Adjustment and
Restraining Notification Act of 1988 or any state plant closing or
notification law, or similar law in jurisdictions outside the United States,
arising out of, or relating to, any actions taken by Hexagon or its affiliates
on or after the closing; (iv) all severance or termination payments payable to
all individuals employed by us in the transferred business (whether or not
receiving an offer of employment from Hexagon), other than such employees who
have change in control or severance agreements with us; or (vi) any tax
resulting from any action taken without our written consent by Hexagon or any
of our transferred subsidiaries after the closing.


                                      39


   Neither party has any obligation to indemnify the other from and against
any claim based on the inaccuracy of a representation or warranty until and
then only to the extent that the aggregate amount of losses suffered by such
other party is in excess of $1,000,000, in which case the indemnifying party
will be liable for the amount of such losses in excess of $1,000,000.

Conduct of the Business Pending the Closing

   We have agreed that, pending the closing, we shall operate the transferred
business only in ordinary course consistent with past practice and consult
with Hexagon and keep it informed as to all changes in policies or practices
material to the transferred business as a whole. We have also agreed not to
take, or allow our transferred subsidiaries to take, the following specified
actions without the consent of Hexagon: (i) allow any of our transferred
subsidiaries to issue or sell any shares of any class of its capital stock, or
any securities convertible into or exchangeable for any such shares, or issue,
sell, grant or enter into any subscriptions, options, warrants, conversion or
other rights, agreements, commitments, arrangement or understandings of any
kind, contingently or otherwise, to purchase or otherwise acquire any such
shares or any securities convertible into or exchangeable for any such shares;
(ii) incur any indebtedness (other than any borrowings from or prepayments to
any of our affiliates) except in the ordinary course of business consistent
with past practice; (iii) pay or commit to pay any bonus, other incentive
compensation, change-in-control or similar compensation to any officer,
director, employee, sales representative, agent or consultant or grant or
commit to grant to any officer, director, employee, sales representative,
agent, consultant or affiliate any other increase in, or additional,
compensation in any form, other than those made under existing plans or
programs; (iv) enter into, institute, adopt or materially amend or commit to
enter into, institute, adopt or materially amend any employment, consulting,
retention, change-in-control, collective bargaining, bonus or other incentive
compensation, profit-sharing, health or other welfare, stock option or other
equity, pension, retirement, vacation, severance, deferred compensation or
other employment, compensation or benefit plan, policy, agreement trust, fund
or arrangement in respect of or for the benefit of any officer, director,
employee, sales representative, agent or consultant or affiliate (whether or
not legally binding), except as contemplated by the Acquisition Agreement; (v)
sell, transfer, assign, mortgage, pledge, hypothecate, grant any security
interest in, or otherwise subject to any other lien, any of our assets other
than inventory in the ordinary course of business consistent with past
practice and other than in accordance with existing agreements, provided,
however, that this clause shall not prohibit Brown & Sharpe Aftermarket
Services, Inc. from selling its shares of Wilcox Associates, Inc. to the other
stockholders of Wilcox Associates, Inc. in the event that such stockholders
elect to exercise their right of first refusal (as described under "Wilcox
Associates, Inc." above); (vi) enter into or assume any contract providing for
the payment of an amount in excess of $1,000,000 per year, or enter into or
permit any amendment, supplement, waiver or other modification in respect
thereof other than in the ordinary course of business consistent with past
practice; (vii) cause or permit any amendment, supplement, waiver or
modification to or of any of our certificate of incorporation, by-laws or
other organizational documents; (viii) merge or consolidate with, or agree to
merge or consolidate with, or purchase substantially all of the assets of, or
otherwise acquire, any business, business organization or division thereof, or
any other person, other than with respect to excluded assets; (ix) agree or
otherwise commit to take any of the actions described in the foregoing clauses
(i) through (viii); (x) accelerate, terminate, make material modifications to,
or cancel any contract to which we are a party or by which we are bound,
except where such acceleration, modification or cancellation would not have a
material adverse effect on the transferred business; (xi) make any capital
expenditures or commitments in excess of $9,000,000 in the aggregate; (xii)
make any material investment in, or any loan to, any other person (other than
our existing subsidiaries); (xiii) grant any license or sublicense of any
rights under or with respect to any of our intellectual property, except where
the grants (individually or in the aggregate) would not have a material
adverse effect on the transferred business; (xiv) settle, release or forgive
any claim or litigation or waive any right, except where such settlement,
release, forgiveness or waiver would not have a material adverse effect on the
transferred business; (xv) make any changes in any method of accounting, or
accounting principles, which would increase the purchase price or the timing
of the payment thereof or which our independent certified public accountant
would consider material, other than changes related to Staff Accounting
Bulletin No. 101, which shall be disregarded for all purposes of the
Acquisition Agreement; and (xvi) increase in any material respect the average
time of payment of our United States accounts payable to vendors beyond the
level applicable at September 30, 2000.

                                      40


   Pending the closing, we have also agreed to (i) use commercially reasonable
efforts to keep in full force and effect insurance comparable in amount and
scope of coverage to insurance carried by us as of the date of the Acquisition
Agreement; (ii) maintain our books of account and records in the ordinary
course of business consistent with past practice; (iii) maintain our
properties and facilities in as good working order and condition as at the
date of the Acquisition Agreement, ordinary wear and tear excepted; (iv) abide
by, carry out and fully perform in all material respects the terms, covenants,
provisions, conditions and agreements contained in our real property leases,
and to not cause, allow or suffer any material breach or default thereof to
occur; (v) provide Hexagon and its representatives to have reasonable access
to our premises, properties, books records and documents pertaining to the
transferred business; (vi) call and hold a special meeting of stockholders for
the purpose of voting on the Acquisition Agreement and the transactions
contemplated thereby; and (vii) discuss in good faith with Hexagon the
possibility of altering the structure of the transactions contemplated by the
Acquisition Agreement for tax planning purposes.

Employee Matters

   Hexagon has agreed that either it or one or more of its affiliates will
offer employment, effective as of the closing date, to substantially all
individuals employed by us in the transferred business other than those
employees who have change in control or severance agreements with us, (except
such as Hexagon has agreed to continue their employment) and Hexagon shall be
responsible for and indemnify us against all severance or termination amounts
payable to all individuals employed by us in the transferred business (whether
or not receiving an offer from Hexagon), other than such employees who have
change in control or severance agreements with us (except such as Hexagon has
agreed to continue their employment). Each such individual who accepts such
offer of employment with Hexagon or one of its affiliates and each individual
who, as of the closing date, is employed by one of our transferred
subsidiaries shall be referred to herein as a "Transferred Employee". On the
closing date, Hexagon shall provide all Transferred Employees with employment
on substantially the same terms and conditions with, at a minimum,
substantially the same compensation and substantially the same or comparable
benefits as are provided to such employees by us or one of the transferred
subsidiaries immediately prior to the closing date.

   As of the closing date, all Transferred Employees shall cease to
participate in our welfare benefit plans and shall commence to participate in
welfare benefit plans of Hexagon. Hexagon shall cause the replacement plans to
(i) waive all limitations as to pre-existing condition exclusions and actively
at work requirements as to each Transferred Employee except to the extent such
exclusions or requirements had not been satisfied with respect to such
Transferred Employee's participation under the comparable benefit plan in
which such Transferred Employee was a participant immediately prior to his
commencement of participation in the applicable replacement plan, (ii)
recognize the service of each Transferred Employee with the us or one of the
transferred subsidiaries completed prior to the closing date for purposes of
any waiting period or other eligibility requirements under the replacement
plans to the extent such service would have been taken into account under the
comparable benefit plan in which such Transferred Employee was a participant
immediately prior to his commencement of participation in the applicable
replacement plan and (iii) for purposes of satisfying any deductible or out-
of-pocket requirements under each replacement plan for the year in which the
closing date falls, provide each Transferred Employee with credit for any co-
payments and deductibles paid during such year and prior to the closing date
under the terms of the comparable benefit plan in which such Transferred
Employee was a participant immediately prior to his commencement of
participation in the applicable replacement plan.

   Hexagon has also agreed to cause the trustee of one or more defined
contribution plans of Hexagon or Hexagon's United States affiliate that
qualify under section 401(a) of the Internal Revenue Code to accept rollovers,
including "direct rollovers" described in Section 401(a)(31) of the Code, of
all or any portion of any "eligible rollover distribution" described in
Section 402(c)(4) of the Code or Section 408(d)(3) of the Code with respect to
the benefits of a Transferred Employee under any our benefit plans that is a
defined contribution plan qualifying under section 401(a) of the Code. In the
case of any such Transferred Employee whose interest in a transferor plan
includes one or more outstanding participant loans, Hexagon shall cause the
applicable transferee plan to accept in kind, as part of a direct rollover
described in the preceding sentence, the promissory note(s) representing such
loan(s) and to facilitate the continuation of such outstanding loan in
accordance with its terms.

                                      41


   Notwithstanding the foregoing, Hexagon shall not accept a rollover of our
employee stock option plans and shall not assume any liabilities under our
Umbrella Supplemental Executive Retirement Plan except with respect to
employees of us or one of our transferred subsidiaries that Hexagon or its
affiliates hire or retain on the closing date without giving a termination
notice in respect thereto. Hexagon shall not assume any liabilities under the
Company's Employee Stock Ownership Plan, which shall be terminated.

Conditions to the Proposed Sale

   Pursuant to the Acquisition Agreement, the obligations of Hexagon to effect
the proposed transaction are subject to, among other things, (i) our
representations and warranties being true in all respects as set forth in the
Acquisition Agreement at and as of the date of the Acquisition Agreement and
on and as of the closing date, except for such failures to be true and correct
as do not, in the aggregate, have a "material adverse effect" (as defined in
the Acquisition Agreement) on the transferred business; (ii) our having
performed and complied with all of our covenants and agreements under the
Acquisition Agreement through the closing in all material respects; (iii) the
receipt by us and Hexagon of all requisite consents and approvals of all third
parties whose consent or approval is required in order to consummate the
transactions contemplated by the Acquisition Agreement; (iv) there being no
action, suit or proceeding pending or threatened before any governmental
entity wherein an unfavorable injunction, judgment, order, decree, ruling or
charge would prevent consummation of any material transactions contemplated by
the Acquisition Agreement, or any such injunction, judgment, order, decree,
ruling or charge in effect; (v) the delivery by us to Hexagon of a certificate
to the effect that each of the conditions specified in clauses (i) and (ii)
above have been satisfied in all respects; (vi) the execution and delivery by
us of a lease with Hexagon or one of its affiliates for real property located
in Precision Park, North Kingstown, RI; (vii) all applicable waiting periods
under the Hart-Scott-Rodino Act (and the applicable antitrust laws of Germany)
with respect to all contemplated transactions under the Acquisition Agreement
having expired or been terminated; (viii) the approval and adoption of the
Acquisition Agreement and the transactions contemplated thereby by the
requisite vote of our stockholders; (ix) the receipt by Hexagon of an opinion
from our counsel; (x) the receipt by Hexagon of the resignations of the
directors of our transferred subsidiaries; (xi) the delivery by us of the
required transfer documentation; (xii) the execution and delivery by us and
BSIS of a stock purchase agreement and stockholders' agreement in connection
with the BSIS stock purchase and related matters described above under
"Purchase of Stock in BSIS, Inc."; and (xiii) since September 30, 2000, no
event having occurred and no condition having arisen which has had or is
reasonably likely to result in a material adverse effect (as defined) on the
transferred business, except as previously disclosed.

   Our obligation to effect the proposed transaction is subject to, among
other things, (i) the representations and warranties of Hexagon being true in
all respects as set forth in the Acquisition Agreement at and as of the date
of the Acquisition Agreement and on and as of the closing date; (ii) Hexagon
having performed and complied with all of its covenants and agreements under
the Acquisition Agreement through the closing in all material respects, and
having paid the purchase price; (iii) the receipt by us and Hexagon of all
requisite consents and approvals of all third parties whose consent or
approval is required in order to consummate the transactions contemplated by
the Acquisition Agreement; (iv) there being no action, suit or proceeding
pending or threatened before any governmental entity wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would prevent
consummation of any material transactions contemplated by the Acquisition
Agreement, or any such injunction, judgment, order, decree, ruling or charge
in effect; (v) the delivery by Hexagon to us of a certificate to the effect
that each of the conditions specified in clauses (i) and (ii) above have been
satisfied in all respects; (vi) the execution and delivery by Hexagon or one
of its affiliates of a lease with us for real property located in Precision
Park, North Kingstown, RI; (vii) all applicable waiting periods under the
Hart-Scott-Rodino Act (and the applicable antitrust laws of Germany) with
respect to all contemplated transactions under the Acquisition Agreement
having expired or been terminated; (viii) the approval and adoption of the
Acquisition Agreement and the transactions contemplated thereby by the
requisite vote of our stockholders; (ix) the receipt by us of an opinion from
counsel to Hexagon; (x) Hexagon having paid or made arrangements satisfactory
to us to permit us to pay in full simultaneously with the closing all of our
indebtedness under the Credit Agreement dated as of November 10, 1997 between
us, certain lenders and The Chase Manhattan Bank, as amended, and

                                      42


the Note Agreement dated November 10, 1997 between us and certain insurance
company lenders, as amended, and having released us and our retained
subsidiaries from any guarantees of obligations of our transferred
subsidiaries; (xi) the delivery by Hexagon of the required assumption
documentation; and (xii) the execution and delivery by Hexagon of a stock
purchase agreement and stockholders' agreement in connection with the BSIS
stock purchase and related matters described above under "Purchase of Stock in
BSIS, Inc.", and the payment by Hexagon of the required initial $2.5 million
investment in BSIS.

   In the event that the Company proposes to waive a condition, consideration
will be given at that time to whether or not the significance or materiality
of the condition is such that resolicitation would be required.

Solicitation of Alternative Transactions

   Under the Acquisition Agreement, we and our subsidiaries may not take, or
permit any of our directors, officers, employees, agents or representatives to
take, directly or indirectly, any action to solicit, encourage, negotiate,
assist or otherwise facilitate (including by furnishing confidential
information with respect to the transferred business or the transferred assets
or permitting access to the transferred assets and business) any alternate
proposal for acquisition of any of the transferred stock or all or a material
portion of the transferred business or of the transferred assets. However, if,
at any time prior to the closing of the sale and purchase of the transferred
assets and stock contemplated by the Acquisition Agreement, our Board of
Directors determines in good faith, upon the advice of outside counsel, that
it would be a violation of its fiduciary duties to our stockholders under
applicable law not to do so, we may, in response to an alternative proposal
for acquisition of any of the transferred stock or all or a material portion
of the transferred business or of the transferred assets, furnish information
to and participate in negotiations with the third party making such superior
proposal. See the related discussions below under "Termination" and "Fees and
Expenses."

Non-competition and Non-solicitation

   We have agreed that neither us nor BSIS shall, on or prior to the date that
is five years after the closing date, directly or indirectly, own, manage,
operate, control or invest in any business or venture engaged in whole or in
part in the transferred business or any portion thereof. However, neither we
nor BSIS shall be precluded from developing and marketing the XactMeasure or
other software products of BSIS, other than the legacy software derivatives
being transferred to Hexagon at the closing.

   In addition, we have agreed that for five years neither we nor BSIS will
directly or indirectly, without the prior written consent of Hexagon, recruit,
offer employment, employ, engage as a consultant, lure or entice away or in
any other manner persuade or attempt to persuade any person who is an employee
or full-time or half-time consultant of Hexagon or its affiliates to leave the
employ of Hexagon or such affiliate, unless such person has been terminated by
Hexagon or one of its affiliates. These restrictions shall not prohibit us
from employing employees who are not specifically recruited or solicited in
any way and who seek employment with us or BSIS on their own initiative or in
response to general advertising or a recruiting firm not targeted on hiring
any particular individual or any employees of Hexagon or its affiliates.
Hexagon has agreed to similar restrictions on its ability to hire employees of
us or BSIS.

Termination

   The Acquisition Agreement may be terminated at any time prior to the
closing:

     (i) by mutual written consent of us and Hexagon;

     (ii) by either party (a) in the event the other party has materially
  breached the Acquisition Agreement and the breach is not cured after notice
  of such breach is provided to the other party or (b) if the closing shall
  not have occurred on or before April 30, 2001 by reason of the failure of
  any condition precedent to such party's obligations to close (unless the
  failure results primarily from such party itself breaching the Acquisition
  Agreement); or

                                      43



     (iii) by either party, if our Board of Directors shall have recommended
  to our stockholders that they approve an alternative acquisition
  transaction or tender their shares in a tender or exchange offer. We only
  have termination rights under this paragraph if our Board of Directors is
  required to make the recommendation under its fiduciary duties and we have
  complied with our obligations described under "Solicitation of Alternative
  Transactions" above.

   If the Acquisition Agreement is terminated, there shall be no liability on
the part of any party thereto except (i) as otherwise set forth under "Fees
and Expenses" below and (ii) liabilities for any breach of the Acquisition
Agreement occurring prior to termination.

Effect of Termination

   In the event of the termination of the Acquisition Agreement, the Merger
Agreement shall forthwith become void and there shall be no liability on the
part of any party thereto or any of its affiliates, directors, officers or
stockholders except (i) as otherwise set forth under "Fees and Expenses"
below, and (ii) nothing in the Acquisition Agreement shall relieve any party
from liability for any breach thereof occurring prior to termination.

Fees and Expenses

   Except as set forth below, all fees and expenses incurred in connection
with the Acquisition Agreement and the transactions contemplated thereby shall
be paid by the party incurring such expenses, whether or not the transaction
is consummated.

   The Acquisition Agreement requires us to pay Hexagon a fee of $4 million
(the "Fee"), plus up to $2 million of Hexagon's expenses relating to the
transactions contemplated by the Acquisition Agreement ("Expenses"), if the
Acquisition Agreement is terminated by us or Hexagon because our Board of
Directors has recommended to our stockholders that they approve an alternative
acquisition transaction or tender their shares in a tender or exchange offer.

   The Acquisition Agreement requires us to pay Hexagon the Fee plus the
Expenses if all of the following events have occurred:

     (i) a bona fide alternative acquisition transaction is publicly
  commenced, publicly disclosed, publicly proposed or publicly communicated
  to us at any time on or after the date of the Acquisition Agreement and on
  or prior to the date of the meeting of our stockholders (including the last
  date on which any adjourned session thereof is reconvened);

     (ii) the requisite vote for approval and adoption of the Acquisition
  Agreement by our stockholders shall not have been obtained by April 30,
  2001 and either we or Hexagon terminate the Acquisition Agreement because
  of the failure to close by such date; and

     (iii) thereafter on or prior to the anniversary of the date of
  termination, (A) the alternative acquisition transaction is consummated or
  (B) there is consummated any transaction, whether or not commenced,
  publicly disclosed, publicly proposed or communicated to us prior to such
  termination, that would be considered such an alternative acquisition
  transaction under the Acquisition Agreement.

   In the event that our stockholders' meeting for the approval of the
transactions contemplated by the Acquisition Agreement is held and the
requisite vote for approval and adoption shall not have been obtained at such
meeting or any adjournment thereof other than as a result of Hexagon being in
material breach of its obligations under the Acquisition Agreement, we shall
reimburse Hexagon for (x) up to $1,000,000 of its expenses relating to the due
diligence, negotiation and documentation of the transactions contemplated by
the Acquisition Agreement and (y) up to $1,000,000 of its expenses related to
commitments made to individuals hired specifically to work in the transferred
business.

   In no event shall be we be required to pay Hexagon more than one fee
pursuant to these termination provisions. In the event that more than one fee
would be applicable, we will be required to pay the highest of such fees.

                                      44


Name Change

   We have agreed that, immediately following the Closing, we shall change our
corporate name and the names of any of our retained subsidiaries to eliminate
any reference to "Brown & Sharpe", and to adopt corporate names that would not
be reasonably likely to cause confusion with the Brown & Sharpe name. We are
proposing to change the Company's name to "BNS Co." and the name of BSIS to
"Xygent, Inc."

                                      45



                       PRINCIPAL PROVISIONS OF THE

                     NORTH KINGSTOWN SALES AGREEMENT

   We and Precision Park Partners LLC are parties to the North Kingstown Sales
Agreement. The following summarizes the material provisions of the North
Kingstown Sales Agreement. You should carefully read the full text of the
North Kingstown Sales Agreement attached to this Proxy Statement as Annex D
which qualifies this description and is incorporated by reference into this
Proxy Statement.

Purchase Price Payable to Us

   The purchase price for the real property we are transferring to Precision
Park Partners LLC is $15.5 million. Precision Park Partners LLC has deposited
the sum of $50,000 with an escrow agent, to be held pending closing of the
sale of the real property or termination of the agreement. Following the
expiration of the 60-day review period described below, Precision Park
Partners LLC will deposit an additional $650,000 with the escrow agent if the
agreement has not been terminated.

   Items such as real estate taxes, fire district taxes, water bills and
betterment or improvement assessments will be prorated as is customary in real
estate transactions. Deposits and prepaid rents held by us under existing
leases will be transferred over to Precision Park Partners LLC.

Transferred Real Property

   The proposed transaction involves a transfer of our North Kingstown
Facility, including approximately 169 acres of land, with the buildings,
fixtures and improvements thereon and rights associated therewith, located at
200 Frenchtown Road, North Kingstown, Rhode Island (with a portion thereof
located in East Greenwich, Rhode Island). We will also be transferring to
Precision Park Partners LLC all of the leases pursuant to which we lease
portions of the North Kingstown Facility to third parties, including the
proposed lease with Hexagon.

Review Period

   Precision Park Partners LLC has a period of 60 days from the date of the
North Kingstown Sales Agreement to conduct a review of the real property and
such related documents and information as he deems appropriate, and to obtain
financing for his purchase of the real property. Precision Park Partners LLC
may terminate the North Kingstown Sales Agreement for any reason prior to the
expiration of the review period. Upon any such termination, Precision Park
Partners LLC shall be entitled to a refund of their $50,000 deposit.

Closing

   It is anticipated that the closing will take place at the offices of
Edwards & Angell, LLP, 2800 BankBoston Plaza, Providence, Rhode Island at
10:00 a.m. (local time) on , 2001, or at such other place, time or date as may
be mutually agreed upon by us and Precision Park Partners LLC.

   At the closing, we will be obligated to convey good and marketable title
free and clear of all liens and encumbrances, subject to limited exceptions.
If we are unable to do so by the closing, the closing will be automatically
extended for a period of 60 days while we attempt to remedy the deficiencies.
If we are still unable to comply with our obligations after 60 days, Precision
Park Partners LLC will have the option to terminate the agreement and receive
his deposit back.

Representations and Warranties

   We have made certain representations and warranties relating to, among
other things, (i) our existing leases; (ii) utilities; (iii) service contracts
relating to the property; (iv) violations of laws or regulations; (v) absence
of litigation; (vi) condemnation proceedings; (vii) underground storage tanks;
(viii) environmental matters; (ix) corporate organization and authority; and
(x) noncontravention of agreements.

                                      46



   With the exception of our representations and warranties regarding our
existing leases, which shall survive for a period of 6 months following the
closing, all of our representations and warranties shall terminate upon the
closing.

   Precision Park Partners LLC has made representations and warranties to us
regarding his legal capacity and authority to enter into and perform the North
Kingstown Sales Agreement and the lack of consents and approvals required.

Default and Remedies

   If either party fails to close for any reason other than such party's
breach or a permitted termination of the agreement, the other party shall be
entitled to terminate the agreement and receive the deposit from the escrow
agent. Each party shall also be entitled to pursue any other available remedy
against the party so failing to close. In addition, each party has agreed to
indemnify the other party from and against all claims, demands, costs and
expenses resulting from any misrepresentation made by such party in the
agreement to the other.

Operating Covenants

   Until the closing under the North Kingstown Sales Agreement, we have agreed
not to take various actions regarding the real property, including (i) making
modifications or additions to the property without Precision Park Partners
LLC's consent; (ii) further encumbering the property; or (iii) enter into any
new agreements relating the property. In addition, we have agreed to maintain,
at our expense, standard all-risk insurance coverage on the real property.

Conditions Precedent

   We shall not be required to sell the real property and Precision Park
Partners LLC shall not be required to purchase it unless, prior to the
closing, we have entered into a lease with Hexagon Holdings, Inc. on the terms
described elsewhere in this Proxy Statement.

   If either party discovers, prior to or at the closing, that any of the
other party's representations or warranties has been breached, the discovering
party may terminate the agreement. If Precision Park Partners LLC is the
discovering party, they shall be entitled to the immediate return of his
deposit.

Risk of Loss

   If there occurs prior to the closing any loss or damage to the property in
an amount equal to or less than $500,000, the transaction shall proceed with a
reduction to the purchase price in an amount equal to the cost to repair such
damage. If there occurs any such loss or damage in an amount greater than
$500,000, Precision Park Partners LLC shall have the option to terminate the
agreement and receive his deposit back. If they elect to proceed with the
closing, we have agreed to assign our insurance coverage to him and reduce the
purchase price by the amount of the deductibles under our insurance policies
plus any costs to repair the portion of such damage that are not covered by
insurance.

   If prior to the closing, any part of the real property is threatened by
condemnation or eminent domain proceedings (other than one known proceeding),
Precision Park Partners LLC may terminate the agreement and receive their
deposit back. If he elects to proceed with the closing, we shall assign to him
all of our rights to any condemnation awards payable or to become payable on
account of the condemnation or eminent domain proceedings.

                                      47



                       THE BUSINESS OF THE COMPANY

   The information under this heading "The Business of the Company" describes
the current business of the Company, prior to any sale to Hexagon.

General

   The Company, which was founded in 1833, is a leading designer,
manufacturer, and marketer of metrology products worldwide under numerous
internationally recognized brand names. Metrology is the science of the
physical measurement of objects using various precision instruments and
equipment. The Company's high precision products measure physical dimensions
of, and inspect and verify conformance to specifications of, components and
products and are used in manufacturing, quality control, and product
development operations. The Company's product line ranges from hand tools and
instruments to customized computer-controlled metrology systems which
integrate hardware and software and are augmented by service, training, and
aftermarket support. The Company markets its metrology products and services
in North America, Europe, Asia, South America, and the Middle East. Important
end user markets for the Company's products include the automotive, aerospace,
industrial machinery, electronics, and computer industries, and the Company's
customers include Ford Motor Co., Daimler Chrysler, Toyota, General Motors,
BMW, Boeing Co., Eastman Kodak Co. Inc., International Business Machines
Corp., Hewlett-Packard Co., General Electric Co., Caterpillar Inc., United
Technologies Corp., Motorola Inc., Phillips, Samsung, and Xerox Corp.

   The Company's operations are conducted through three management units:
Measuring Systems (which includes the former Custom Metrology Division), the
Precision Measuring Instruments and Brown & Sharpe Information Systems.

  .  The Measuring Systems Division ("MS Division" or "MSD"), which accounted
     for approximately 74% of the Company's sales in 2000, manufactures and
     markets a wide range of manual and computer-controlled, high precision
     Coordinate Measuring Machines ("CMM") including "in-process" measuring
     systems under the Brown & Sharpe, Brown & Sharpe--Wetzlar and Brown &
     Sharpe--DEA brand names. Incorporated in the MS Division is After Market
     Services which offers its customers services such as: software, parts,
     technical support, upgrade and rebuilds, training and contract
     inspection. The Company estimates that it has an installed base of over
     25,000 CMMs worldwide. In the third quarter of 2000, Custom Metrology
     Division ("CMD"), which previously was operated as a separate division,
     was included in the MS Division. As a result, the MS Division also
     produces non-contact "profile" machines for the measurement of shafts
     and round components.

  .  The Precision Measuring Instruments ("PMI") Division, which accounted
     for approximately 26% of the Company's sales in 2000, manufactures a
     wide range of mechanical and electronic measuring and inspection tools
     (including height gauges, calipers, dial indicators, and micrometers)
     which are marketed under the Brown & Sharpe, Tesa, Etalon, Interapid,
     Standard Gage, Mauser, Mercer, and Roch brand names through more than
     450 distributors and catalog houses worldwide.

  .  Brown & Sharpe Information Systems ("BSIS"), is an early software
     development business focused on the commercialization and introduction
     of measuring software. In the event that the Company closes the sale to
     Hexagon under the Acquisition Agreement, BSIS will be the only active
     operation of the Company. See "Business Activities Following the
     Proposed Sale and Related Transactions: BSIS" and "Risk Factors Related
     to BSIS" elsewhere in this Proxy Statement.

                                      48



Repositioning Initiatives

   Over the past several years, the Company has undertaken a series of
divestutures, acquisitions and other strategic initiatives which have
repositioned the Company from its historical origins as a machine tool
manufacturer into a leader in the field of metrology. These repositioning
initiatives included:

  .  Divestiture of Non-Core Operations. The divestiture of non-strategic
     operations, including the machine tool, pump and hydraulics businesses,
     and Technicomp, Inc. during 1997, which enabled the Company to focus on
     its core metrology technologies and market distribution strengths.

  .  Strategic Metrology Acquisitions. Strategic acquisitions which enabled
     the Company to increase greatly the breadth of its metrology product
     offering and the strength of its distribution system. These acquisitions
     include the 1994 acquisition of DEA's metrology business headquartered
     in Italy. During 1997, the Company acquired the remaining 50% of its
     equity investee ASI, which developed measurement software and provided
     training and services and other aftermarket support to manufacturing
     industries and is now a significant part of MS' aftermarket business. In
     1999, the Company acquired a 60% interest in QI Tech (subsequently named
     Brown & Sharpe/Qianshao located in the People's Republic of China). The
     latter investment was entered into in order to expand the Company's
     presence in the Asian market.

  .  Rationalization and Consolidation of Operations. Lowering the Company's
     overhead cost structure by reducing duplicative functions and associated
     headcount and by consolidating and rationalizing the Company's
     manufacturing facilities and operations, which enabled the Company to
     increase productivity and efficiency, including the consolidation of all
     of the PMI's manufacturing sites into one location in Renens,
     Switzerland. In 1999, the Company implemented a reorganization plan in
     which it implemented a "Focused Factories" strategy for MS which
     consolidated production of specific CMM products to a single
     manufacturing location. In 1999, the Company also reorganized CMD to
     focus on non-contact products such as "Profile" machines and, in 2000,
     by including CMD in the MSD.

     During the second quarter of 2000, the Board approved the decision to
     sell the stock or assets of the Company's Electronics Division. The
     Electronics Division consisted of Brown & Sharpe Surface Inspection
     Systems, a business which was acquired in 1999, and produced metrology
     tools for electronics component manufacturers that focused on the
     detection and classification of micron level defects on a variety of
     surfaces. The Company has discontinued the Electronics Division
     primarily because the market for its products did not materialize and
     because of the cash needs of its operations. The Electronics Division
     assets are an Excluded Asset under the Acquisition Agreement with
     Hexagon. The Company is selling the assets of the Electronics Division
     under an agreement reached on February 13, 2001. This agreement calls
     for the Company to receive cash consideration of approximately
     $2,000,000, before minority interest and post-closing adjustments. In
     the third quarter of 2000, the Company decided to discontinue the
     development of non-contact sensor technology and stopped the funding, as
     one of the owners of a 50/50 joint venture formed in 1999 with Metroptic
     Technology in Israel, of projects for the development of new non-contact
     metrology technology. The decision to stop funding of the joint venture
     was made primarily because of the continued cash needs of the project,
     the lack of a completed product to date, and the greater development
     period than had been contemplated. See Note 5 to the Consolidated
     Financial Statements for financial information related to discontinuance
     of operations of Electronics Division and the stopping of the funding of
     the Metroptic Joint Venture.

   See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" elsewhere in this Proxy Statement.

                                      49



Proposed Sale of Substantially All Assets of the Company.

   On November 16, 2000, the Company entered into the Acquisition Agreement
with Hexagon, pursuant to which the Company would sell substantially all of
its assets to Hexagon. Under a Purchase and Sale Agreement dated as of March
 , 2001 with Precision Park Partners LLC, a commercial buyer, the Company will
sell its North Kingstown, Rhode Island manufacturing facility, known as
Precision Park, for a cash purchase price of $15.5 million. See "Proposal 1:
To Approve the Sale of Substantially All Assets, Including the Acquisition
Agreement and the Sale to Hexagon and Related Transactions, the Sale of the
North Kingstown Facility and Related Cash Distributions to Stockholders"
located elsewhere in this Proxy Statement for a description of these matters.

Business Strategy

   As noted, the Company proposes to sell substantially all of its assets,
including the sale of substantially all assets to Hexagon pursuant to the
Acquisition Agreement and the sale to Precision Park Partners LLC of its North
Kingstown Facility under the North Kingstown Sales Agreement and, later in
this year, the Company plans to sell its Heathrow, United Kingdom real estate.
The Company proposes to make cash distributions to stockholders (the initial
distribution of which would be made as soon as practical following the Closing
under the Acquisition Agreement) and subsequent cash distributions to the
stockholders upon the sale of the North Kingstown Facility and upon the
further sale of the Heathrow, United Kingdom real estate, which has been an
operating gravel pit, on dates and in amounts as finally determined by the
Board of Directors. Until the completion of the sale to Hexagon, the Company
is focused on that transaction while continuing to implement its business
strategy based on the following elements described below. In the event that
the Company is unable to complete the sale to Hexagon, the Company plans to
seek other strategic alternatives, including another sale or merger in order
to satisfy its senior secured lenders who, at any time, may resort to
collateral, consisting of substantially all of the Company's assets and
significant pledges of stock of its subsidiaries, to remedy the Company's
inability to pay its loans to the senior lenders, which have been in default
since 1999.

   In the event that the proposed sale to Hexagon is completed, the Company's
business strategy will be substantially different from the elements described
below since, while BSIS has not yet been material to the business of the
Company, it will be the only active operation of the Company following the
completion of the sale to Hexagon. See "Business Activities Following the
Proposed Sale and Related Transactions: BSIS to be renamed Xygent, Inc."
elsewhere in this Proxy Statement.

  .  Continue Cost Improvements. The Company intends to continue to implement
     measures designed to reduce its product costs through: (i) standardizing
     product designs worldwide; (ii) increasing the cost-effectiveness of
     product designs; (iii) outsourcing components and products; (iv)
     increasing supplier partnering; and (v) focusing on core manufacturing
     processes. The Company also intends to streamline its sales, marketing,
     and general and administrative processes in an effort to reduce selling,
     general and administrative expenses as a percentage of sales.

  .  Develop New Products and End User Markets. The Company's goal is to
     increase net sales by expanding penetration of served industrial end
     user markets and by capitalizing on high growth end user markets where
     metrology needs are growing rapidly. To expand its penetration of served
     industrial end user markets, the Company expects to continue the
     introduction of new metrology systems utilizing both contact and non-
     contact technologies and to develop sensors and other sophisticated
     products that can be embedded in a variety of manufacturing processes.
     The Company plans to form technical and commercial alliances with
     manufacturers of process equipment to provide enhanced combined
     manufacturing systems utilizing the Company's sensors and other
     products.

                                      50



  .  Enhance Existing and Develop New Software. The Company intends to
     emphasize research and development of software systems and applications
     designed to meet the evolving metrology needs of its end users. To that
     end, the Company intends to leverage off its software development team
     of software and applications engineers and technicians in the following
     four areas: (i) metrology software for inspection and verification of
     piece-part integrity and conformance to design specifications;
     (ii) process control software designed to detect and correct drifts in
     part tolerances before the manufacturing process produces scrap or
     improperly configured components; (iii) enhanced management information
     systems that report statistical and quality information from the
     manufacturing process; and (iv) new software that will link the
     Company's CMMs and, therefore, the manufacturing process with computer-
     aided engineering and manufacturing systems that will provide the means
     for real-time feedback, analysis and, ultimately, control of
     manufacturing to design specifications. The Company believes that its
     existing library of metrology software, together with newly developed
     software, should enable it to respond to the growing demand in
     manufacturing for on-line inspection and verification. The Company also
     believes that its experience with CMM software and manufacturing
     processes is critical to the successful development of software that is
     linked with computer aided engineering systems. To meet the needs of
     this growth market, the Company formed BSIS in 1997. This subsidiary,
     with a common corporate vision, combines all the Company's software
     development expertise under one roof. See "Business Activities Following
     the Proposed Sale and Related Transactions: BSIS to be Renamed Xygent,
     Inc." and "Risk Factors Relating to BSIS" elsewhere in this Proxy
     Statement.

  .  Leverage Worldwide Distribution Capability. Through its acquisitions,
     Brown & Sharpe has expanded its product lines and strengthened its
     marketing and distribution capabilities in Europe, South America, the
     Middle East, India, and China. The 1999 acquisition of Qianshao (60%
     owned) has given the Company direct entry into the China CMM market. The
     Company plans to continue to strengthen and expand its worldwide
     distribution capability, principally by continuing to rationalize its
     existing distribution network and by opening new demonstration centers
     and adding direct sales capacity and distributors where cost effective.
     The Company also intends to capitalize on the strength of its global
     distribution network by increasing the number of Company-designed and
     third-party sourced products sold through its distribution channels in
     an effort to increase gross profit without a corresponding increase in
     selling, general and administrative expenses.

  .  Increase Aftermarket Sales and Services. The Company intends to increase
     its focus on higher margin aftermarket sales and services, including
     consulting services, calibration and rebuilding of CMMs, software
     upgrades, and parts sales. The Company believes that the worldwide
     installed base of CMMs, estimated at over 82,000 (including 25,000 of
     the Company's CMMs), creates a significant demand for such aftermarket
     services. The Company believes that the level of customer service it
     provides, as measured by third-party surveys of its customers, is
     superior to that of its principal competitors, and expects to further
     strengthen its customer relationships through enhanced aftermarket
     support and increased partnering efforts. The Company's sales
     attributable to aftermarket sales and service in 2000 were estimated to
     be approximately 32% of MS Division's net sales for the same period.

                                      51



Metrology Industry

 General

   Metrology products and systems range from hand tools for simple tasks to
complex integrated systems of hardware and software that can measure,
digitize, inspect, and verify manufactured parts and components, to exacting
specifications. Manufacturers depend upon metrology hardware and software
products to monitor consistent product conformance to their exacting
specifications, thereby improving the reliability, fit, and finish of their
products. In addition to these quality and performance benefits, metrology
products help manufacturers lower costs by reducing errors, scrap, rework and
warranty expense, improving the manufacturing process, lowering throughput
time, increasing capacity, and reducing work-in-progress inventories. In
recent years, manufacturers have accelerated the integration of quality
control functions directly into the production process by incorporating the
use of metrology products on the factory floor.

   Software has also become increasingly important in metrology solutions as
manufacturer's specifications have become tighter. The CMM software provides a
critical link between the computerized design and the manufacturing
environments. In addition, most large companies are starting to build
worldwide dimensional databases to store and evaluate the data gathered by
CMMs. Furthermore, potential software upgrades on the estimated 82,000 CMMs
worldwide open up a large market for new and dynamic software systems.

   In addition, manufacturers are demanding more precise, capable and flexible
metrology systems as their products become smaller, more complex and/or must
meet more stringent quality and safety standards. Their exacting product
specifications often require measurement to an accuracy of less than one
micron (one millionth of a meter or approximately 1/100th of the thickness of
a human hair) or, in some special cases, measurement of nanometers (one
billionth of a meter or the unit of measurement for the wavelength of light).
Increasingly, metrology systems must incorporate a mix of traditional contact
and newer non-contact technologies because of reduced part sizes and the great
diversity of new materials used in manufactured products. Metrology systems
are purchased by customers regardless of their need for additional production
capacity because of ever-increasing quality requirements and the need to
reduce product costs.

   Metrology products serve a broad range of measurement requirements. The
simplest metrology products include devices such as calipers, dial gauges,
micrometers, surface plates, and height gauges. These are generally
inexpensive hand-held tools that measure in one dimension to within an
accuracy of between two (80 millionths of an inch) and 25 microns (1/100th of
an inch). Fixed gauges are often more expensive devices that inspect and
verify in one to three dimensions to within an accuracy of between one and 25
microns and are typically used where manufacturers need to measure a single,
uniform product at a high rate of speed. Fixed gauges tend to make simple,
comparative measurements of products in a manufacturing process. CMMs are more
sophisticated, complex machines that use a variety of technologies to measure
in three dimensions to an accuracy of between 0.5 and 100 microns. These
technologies range from advanced probes that physically "contact" the product
being measured to highly sophisticated non-contact vision, optical, laser and
scanning probes that collect precise data without touching the product being
measured. While some CMMs are manually operated, most are now automatically
controlled by software systems that not only compare the product to a
manufacturer's CAD models, but when no CAD model exists, also provide
manufacturers with dimensions of the product to reverse engineer the product
and create a CAD model. CMMs are highly flexible machines that can measure
different products for a manufacturer without re-tooling or other significant
changes as opposed to fixed gages that are designed solely for a single
feature of a single product and also requires expensive and time-consuming
retooling when the product design changes. The price points of metrology
products range from $100 for a caliper to over $1.5 million for a
sophisticated CMM such as those used to measure car and truck bodies.

                                      52



 Markets

   Participants in the metrology industry generally compete in one or more of
six broad product areas: (i) simple and relatively inexpensive tools that
measure in one dimension, such as calipers, dial gauges, micrometers, surface
plates, and transfer gauges; (ii) digital electronic height gauges of varying
accuracies and

sizes; (iii) sophisticated special purpose metrology systems including fixed
gauges; (iv) general purpose and application-specific CMMs; (v) alternative
technologies such as vision tunnels or surface finish and geometry
measurement; and (vi) customized metrology solutions to specific metrology
problems. The Company competes in all of the foregoing product areas other
than fixed gauges and most of the alternative technologies.

   Sales of simple metrology products and less sophisticated height gauges are
driven by price, brand, product innovation, ease of purchase, and
effectiveness of distribution. Products in this category are generally hand-
held or relatively small devices that permit a manufacturer to make
measurements in one or occasionally two dimensions. These products are
generally inexpensive, providing a cost-effective solution to simple metrology
problems where the industrial customer does not need the increased
capabilities of fixed gauges, CMMs or certain other sophisticated metrology
systems. However, simple metrology products are generally limited in terms of
accuracy, flexibility and/or their ability to collect data. Further, they are
dependent upon skilled operators. The market for simple metrology products is
fragmented, with many regional suppliers. End user markets for these products
include most basic industries, including the automotive, construction,
industrial machinery, appliance, and farm equipment industries.

   Sales of fixed gauges have traditionally been driven by manufacturers'
needs for one, two, or three dimensional metrology on the factory floor.
Products in this category, typically more expensive than simple metrology
products, compete directly with CMMs regarding inspection and verification of
manufactured parts. Fixed gauge systems are frequently a more expensive
investment than comparable CMM systems, but for the specific purpose intended,
may be less expensive over the long run. Fixed gauges can range from simple
one dimensional tools to semi- and fully-automatic three dimensional factory
floor systems that quickly compare production parts to "master parts."
However, because these gauge systems are "fixed," they are inherently
inflexible. The fixed gauge must be reworked or a new gauge designed and built
every time manufacturers make dimensional changes in the part being measured.
The trend of the industry is away from fixed gauges and toward flexible gauges
because of the need to make costly changes to fixed gauges when the part they
measure changes.

   Sales of CMMs and more sophisticated height gauges are driven by
manufacturers' needs for high accuracy, flexibility, speed, and information.
Products in this category, while typically more expensive than simple
metrology products and some fixed gauges, are generally more versatile
machines that can measure, digitize, inspect, and verify diverse manufactured
parts. The accelerating use of more sophisticated software has played an
important role in the evolution of CMMs in response to the marketplace.
Improved software and linkage to CAD/CAM and network technologies enable CMMs
both to compensate automatically for the position of the piece to be measured,
eliminating the need for the time consuming manual positioning necessary with
less advanced metrology products, such as surface plate gauges, and also to
relay information to the manufacturer's CAD/CAM model to facilitate production
process adjustments. Although CMM-type software can be added to on-machine
gauging and a small percentage of fixed gauges, CMMs are easier to use, more
flexible, and generally provide more analytical information than most products
using competing technologies. Presently, CMMs are installed at sites ranging
from highly controlled laboratory sites to hostile, factory floor industrial
settings, and can measure objects ranging in size from a semiconductor chip to
an aircraft exterior, and can provide accuracies with tolerances of 0.5 to 100
microns. CMMs can achieve this through contact or non-contact probing methods,
depending upon the manufacturer's needs. The market for CMMs is dominated by
five competitors, including the Company.

   Aftermarket sales are critical to manufacturers, as they are needed to
insure the continued operation of the CMM equipment after it has been
installed. Furthermore, aftermarket services can also be provided to
competitors machines, which offers additional growth potential and the ability
to gain a competitive advantage over its major competitors, all of whom do not
currently offer such services.

                                      53



   The Company believes that non-contact sensor technology will continue to
play a critical role in the future of the metrology industry. As manufacturers
from traditional industrial manufacturers to leading high-tech

companies continue to be driven by customers to produce smarter, faster,
smaller and higher performance products, the need for more sophisticated
measuring devices to enable production will increase. Sensor development,
through the Company's R&D efforts and joint ventures will play an important
role in sales growth, profitability, and retaining the Company's leadership in
metrology.

 MS Division

   The MS Division, the largest of the Company's three units, accounted for
approximately 74% of the Company's sales in 2000. The MS Division is
headquartered in North Kingstown, Rhode Island and manufactures and markets
CMMs. MS Division products sold under the Brown & Sharpe name are manufactured
at the Company's North Kingstown Facility, Wetzlar, Germany, Turin, Italy
facilities and also in its Telford, United Kingdom facilities. The primary end
user markets for the Company's CMM products include the automotive (including
automotive suppliers), heavy transport, aerospace, electronics, computer,
industrial machinery, and medical industries.

   MS Division products range from small, manually operated CMMs to large,
high speed, high precision automatic CMMs. In addition to these standard and
custom-configured CMMs, the Company also produces and sells high-speed process
control systems. The smallest machines can measure in a volume up to 400 x 350
x 300 mm and are priced at approximately $10 thousand, while the larger, high
speed, high accuracy CMMs with integrated software systems can cost over $1.5
million. The MS Division also provides laser scanning and optically based
measuring machinery from microscopes to vision systems.

   The Company believes that its "user-friendly" CMM application software
gives it a competitive advantage in the marketplace for CMMs. These
proprietary software products provide the MS Division's customers with an
understandable, icon-based inspection analysis capability, graphical user
interfaces and outputs, and the capability to network with manufacturing
systems. The MS Division also provides its customers with special software and
systems that integrate the MS Division's products with the customer's host
information and communications network. In addition to sales of CMMs, the MS
Division provides aftermarket sales and service, including calibration and
rebuilding of CMMs, software upgrades and parts sales, for Brown & Sharpe CMMs
and competing CMMs. The Company's sales attributable to aftermarket sales and
services in 2000 were estimated to be approximately 32% of MS Division's sales
for the same period.

   The MS Division now produces non-contact "Profile" machines for the
measurement of shafts or round components, and manufactures primary standard
calibration instruments, used currently by 26 countries as their standard for
measurement.

   See Note 14 to the Consolidated Financial Statements for financial
information related to this business segment.

 PMI Division

   The principal products of the Company's PMI Division are precision
measuring tools and related instruments such as micrometers, dial indicators,
calipers, and electronic height gauges. PMI Division products accounted for
approximately 26% of the Company's sales in 2000. The PMI Division's products
have broader applications and lower unit list prices (with a range of $100 to
approximately $13,000) than the prices of the MS Division's products. These
tools and instruments typically measure in one or two dimensions, and are
often used in comparative measuring where an unknown part or dimension is
compared to a previously measured part or dimension. Some PMI Division
products also include systems and application software for measuring and
statistical process control. The Company believes that the primary end user
markets for the products of the PMI Division are the automotive, aerospace,
metal processing, and defense industries, although the PMI Division

                                      54



products are used in virtually all types of industrial settings. Brown &
Sharpe's PMI Division is headquartered in Renens, Switzerland, and its
products were traditionally manufactured at its plants in Rolle and Renens,
Switzerland; Poughkeepsie, New York; Leicester, St. Albans, and Plymouth,
England; and Luneville, France. In 1999, the Company closed its Leicester,
St. Albans, Torpoint and Luneville plants and consolidated its PMI
manufacturing at its Renens site. See Notes 4 and 14 to the Consolidated
Financial Statements for financial information related to the restructuring
and to the business segment, respectively. The Company also purchases
components and products from third parties located in various countries.

 BSIS Division

   BSIS was formed in December 1997. At that time, BSIS' primary mission was
to consolidate the several independent software development groups of Brown &
Sharpe into a single global software development organization which would
provide next generation metrology software applications for the various
Metrology Business units. As its secondary mission, BSIS was to establish and
execute a software business strategy, which would ultimately lead to the
formulation of a software business that could spin-off as an independent
business separated from the metrology manufacturing businesses. Accordingly,
BSIS is now focused on the commercialization and introductions of its new
XACTMEASURE Measuring Software, in development for approximately three years.
Following the completion of the proposed sale to Hexagon, the Company will
continue in the business of developing measuring software through its
controlled subsidiary, BSIS (in which Hexagon has committed to invest a total
of $7 million over the next three year) will be renamed Xygent after the
Closing under the Acquisition Agreement, and BSIS will be the only active
operation of the Company following the sale to Hexagon. See "Business
Activities Following Proposed Sale and Related Transactions: BSIS" and "Risk
Factors Relating to BSIS" elsewhere in this Proxy Statement. See Note 14 to
the Consolidated Financial Statements for financial information related to
this business segment.

Sales and Distribution

   The MS Division distributes its products primarily through a 107-person
worldwide sales force directly to U.S. and European customers, and utilizes a
network of independent agents and distributors to cover the Pacific Rim, South
American, and African markets. The typical MS Division sales process involves
lengthy, technical, one-on-one discussions between the salesperson or the
distributor/sales agent and customer and is often part of a competitive bid
process. As an important part of its marketing and distribution strategy, the
Company provides in-depth training to its customers at 25 support and
demonstration centers located throughout the United States, Europe, and Asia.
The Company's direct sales force also provides the Company with important
opportunities to cross-sell the products of its PMI Division.

   In contrast to the MS Division, the PMI Division generally distributes its
products through international import companies, regional distributors, and
catalog houses throughout the world. As of December 31, 2000, the PMI Division
utilized in excess of 80 major distributors located in over 40 countries to
market its products. The Company believes that the PMI Division's established
distribution network provides it with a competitive advantage and intends to
capitalize on this network to increase sales of internally developed and
third-party products.

   The Company has no single customer which accounts for 10% or more of its
consolidated net sales; however, several well recognized major automotive
manufacturers (without regard to their suppliers) account for a significant
portion of the Company's net sales. The loss of a few of these major customers
would have a substantial effect upon the Company.

                                      55



Engineering and Product Development

   The Company's commercial success is dependent upon its ability to develop
products, enhancements, and applications that meet changing customer metrology
needs and anticipate and respond to technological changes. The Company
designs, develops, and refines its products internally through engineering
departments within its product groups and divisions. When it is more cost-
effective to do so, the Company purchases product designs or portions of
product designs from engineering subcontractors or acquires rights to such
designs

through licensing arrangements. The Company also benefits from research and
development efforts which are subsidized by customer funds and, in certain
countries, by government research grants. Brown & Sharpe research, development
and manufacturing engineering activities are conducted in the United States,
Italy, Switzerland, Germany, the United Kingdom, Lithuania, and, until the PMI
restructuring which was implemented in January 2000, France.

   The Company's current design and engineering focus is in the development of
the CMM "Global" machine, which will provide greater accuracy and speed,
software development, and non-contact metrology products. In 2000, the Company
invested $15.5 million, or 5.5% of its net sales during that period in product
design and manufacturing engineering. In 1998 and 1999, the Company expended
$17.8 million and $14.4 million, respectively, for product design,
development, refinement, and manufacturing engineering.

Foreign Operations

   The Company manufactures and sells substantial amounts of its metrology
products in foreign countries. As of December 31, 2000, approximately 71%
(based on book values) of the Company's assets, 59% of the Company's sales
(based on customer location) and 68% of its employees were located outside the
United States. The Company's manufacturing operations are located in Italy,
Switzerland, Germany, England, and, until the PMI restructuring which was
implemented in January 2000, France, as well as in the United States. Brown &
Sharpe's products are sold in over 60 countries worldwide. See Note 14 to the
Consolidated Financial Statements for financial information related to foreign
operations.

Raw Materials and Sources of Supply

   Brown & Sharpe purchases raw materials, supplies, and other components from
a variety of suppliers, and considers its sources of supply to be adequate. At
times, the Company depends upon various sole sources of supply for certain
components used by the Company (generally of items designed by the Company),
but has not experienced any significant difficulty in meeting delivery
obligations because of its reliance on such a supplier. In addition, the
Company currently purchases substantially all of its externally sourced low to
medium accuracy electronic touch trigger sensor probes and heads from a
publicly held United Kingdom company which is the dominant supplier of such
sensor probes to CMM manufacturers.

   No alternative supplier for this class of electronic sensor probes, which
are a key component of substantially all of the Company's lower accuracy CMMs,
is currently available and developing an alternative source for the probes and
heads could take more than a year. The Company continues to explore means of
lowering production costs through selective outsourcing in situations where
the Company can achieve its high quality standards via subcontractors.

Patents, Licenses, Trademarks, and Proprietary Information

   The Company's business is not significantly affected by or dependent upon
the procurement or maintenance of patents covering the Company's products.
Nevertheless, the Company pursues, where appropriate, patent protection for
inventions, developments and improvements relating to its products both in the
United States and abroad. In addition, the Company relies on a combination of
copyrights, trade secret law and contracts to protect its proprietary
information (principally related to its software and software development).
Despite these precautions, it may be possible to copy or otherwise obtain and
use the Company's proprietary information without authorization. In addition,
effective copyright and trade secret protection may be unavailable or limited
in certain foreign countries.

                                      56



   Brown & Sharpe and its subsidiaries own, or have the right to use, a number
of trademarks which they believe are valuable in promoting the sale of certain
of their principal products. The Company and its subsidiaries have registered,
or have applied to register, the trademarks owned by them in the United States
and in some foreign countries. See "Business Activities Following the Proposed
Sale and Related Transactions: BSIS to be Renamed Xygent, Inc." for a
description of BSIS' intellectual property.

Environmental Matters

   The Company is not significantly affected by compliance with rules and
regulations promulgated under environmental laws since its manufacturing
processes do not produce, as a by-product, material amounts of waste, water
discharges, or air emissions deemed hazardous under such laws. However, the
Company is subject from time to time to environmental claims. See Note 17 to
the Consolidated Financial Statements for financial information related to
contingencies.

Employees

   At December 31, 2000, the Company had 2,106 employees (as compared with
2,216 at December 31, 1999), including approximately 1,422 employees located
outside the United States. The Company considers its relations with its
employees to be good, although there can be no assurance that the Company's
cost-cutting efforts or other factors will not cause a deterioration in these
relations.

   Approximately 426 of the Company's employees located at sites in the United
States, Italy, Switzerland, England, and France are covered by collective
bargaining agreements which expire at various times before June 30, 2002. The
Company expects that these collective bargaining agreements will be
renegotiated successfully prior to their expiration. However, there can be no
assurance that successor collective bargaining agreements will be successfully
negotiated, that negotiations will not result in work stoppages, or that a
work stoppage would not materially interfere with the Company's ability to
produce the products manufactured at the affected location.

   In addition to the collective bargaining agreements that cover workers at
certain of the Company's foreign subsidiaries, it is customary for these
employees to be represented by various works or shop councils. These councils
are governed by applicable labor laws and are comprised of members who are
elected or appointed by the work force. Except for the top level of
management, these councils represent the entire work force at their location
in its dealings with senior management on matters affecting the work force or
arising under the relevant labor contracts in effect at the location.

   The following table sets forth the location of the Company's employees as
of December 31, 2000:



      Country                                                       Employees(1)
      -------                                                       -----------
                                                                 
      China........................................................    151
      France.......................................................    79
      Germany......................................................    191
      Israel.......................................................    28
      Italy........................................................    372
      Japan........................................................    24
      Spain........................................................    24
      Switzerland..................................................    417
      United Kingdom...............................................    128
      Mexico.......................................................    8
      United States................................................    684
          Total....................................................    2,106

- --------

(1) Part-time employees are included on a full-time equivalent basis.

                                      57



Competition

   The Company's MS Division currently has four principal direct domestic and
foreign competitors, some of which are owned by entities that have greater
financial and other resources than the Company. The MS Division also faces
indirect competition from other types of metrology firms such as manufacturers
of fixed gauging

systems. The primary industries to which the MS Division sells its products
are characterized by a relatively small number of large participants with
significant purchasing power. As a result, the Company experiences severe
pricing competition in connection with sales by its MS Division which can have
an adverse impact on the Company's net sales and margins. During periods when
the metrology industry suffers from over capacity, downward pricing pressure
experienced by the MS Division is likely to be more intense and the Company's
margins may be more severely impacted. In addition, certain of the Company's
competitors that have access to greater financial resources may be able to
withstand such pricing pressure more effectively than the Company. The MS
Division competes with Mitutoyo/MTI Corp., a subsidiary of Mitutoyo Solsakusho
Co. Ltd., a Japan-based company, which is the largest supplier of metrology
equipment and products worldwide. In addition to Mitutoyo, the MS Division's
main competitors are Carl Zeiss, Inc., a subsidiary of Carl Zeiss-Stiftung AG,
the Sheffield Measurement Division of Giddings & Lewis, Inc., and LK Tool Co.
Ltd.

   The market for the PMI Division's products is fragmented and the PMI
Division competes with a large number of competitors, including the market
leader in this area, primarily on the basis of the strength of its third party
distribution network, price, and product innovation. New competitors from
emerging industrialized countries with lower cost products than the Company's
represent a significant competitive challenge to the Company. As a result, the
PMI Division's continued success and profitability will be dependent on its
ability to continue to develop cost-effective and innovative products. The
primary competitors of the PMI Division are Mitutoyo, L.S. Starrett Co., and
Carl Mahr Holding GmbH.

Backlog

   The Company's backlog of product orders was approximately $58 million at
year-end 2000, compared to approximately $59 million and $72 million at year-
end 1999 and 1998, respectively.

   All of the orders included in the Company's year-end 2000 backlog were
requested to be filled and completed within one year and are, subject to
possible customer cancellation, expected to be completed in 2001.

Significant Customers

   The Company has no single customer which accounts for 10% or more of its
consolidated net sales; however, several well recognized major automotive
manufacturers (without regard to their suppliers) account for a significant
portion of the Company's net sales. The loss of a few of these major customers
would have a substantial effect upon the Company.

Working Capital

   A substantial amount of working capital investment in inventory and
accounts receivable is required to operate the Company's businesses. Working
capital was approximately negative $33.31 million at year-end 2000 compared to
approximately positive $9.7 million at year-end 1999. See the discussion of
working capital in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" elsewhere in this Proxy Statement.

Segment Information

   The Company operates exclusively in the Metrology Business. See "Business
of the Company--General" for a further description of the Company's business.
Sales to unaffiliated customers from Europe are defined as sales of products
that are primarily assembled in a foreign country. See also "Financial
Information by Business Segment and Geographic Area" included in Note 14 to
the Consolidated Financial Statements.

                                      58



                                PROPERTIES

   The following table sets forth certain information concerning the Company's
major operating facilities:



                    Owned/                                          Approximate
    Location        Leased               Principal Use             Square Footage
    --------        ------               -------------             --------------
                                                          
 United States
  N. Kingstown,      Owned     Manufacturing, Engineering,            348,000(1)
  Rhode Island                 Sales, and Administration


  Poughkeepsie,      Owned     Manufacturing                           58,000
  New York

  Wixom,            Leased     Sales and Administration                37,600
  Michigan

 Italy
  Grugliasco        Leased     Assembly                               107,000(2)


  Moncalieri        Leased     Manufacturing                           70,000(2)


 Switzerland
  Renens             Owned     Manufacturing, Engineering, Sales      139,000
                               and Administration

  Rolle              Owned     Manufacturing                           51,000


 Germany
  Wetzlar            Owned     Manufacturing, Engineering,            280,000
                               Sales, and Administration

  Ludwigsburg       Leased     Sales                                   15,000(2)


 United Kingdom
  Telford            Owned     Manufacturing, Engineering,             32,000
                               Sales, and Administration

  Torpoint          Leased     Manufacturing, Sales, and                5,000(2)(3)
                               Administration

 France
  Luneville         Leased     Manufacturing, Engineering, and         77,100(2)(3)
                               Sales

  Villebon          Leased     Sales                                   18,000(2)


 Spain
  Barcelona         Leased     Sales                                    9,000(2)


 China
  Qingdao           Leased     Manufacturing, Engineering,             34,000(2)
                               Sales, and Administration

- --------

(1) Excludes approximately 412,000 square feet leased to unrelated parties.

(2) The leases in China, Grugliasco, Ludwigsburg, Torpoint, Luneville,
    Villebon and Barcelona expire on December 31, 2001, December 31, 2002,
    September 30, 2003, August 18, 2001, March 23, 2003, October 20, 2001, and
    July 31, 2008, respectively.

(3) Included in PMI's restructuring. (See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations" elsewhere in
    this Proxy Statement and also Note 4 to the Consolidated Financial
    Statements.)

                                      59



   In addition, the Company leases smaller sales offices located in the United
States, Europe, and Asia. In the opinion of management, the Company's
properties are in good condition and adequate for Brown & Sharpe's business as
presently conducted.

                            LEGAL PROCEEDINGS

Other Environmental Matters

   The nature of the Company's current operations are not significantly
affected by environmental laws, rules and regulations. However, because the
Company and its subsidiaries and predecessors have conducted heavy
manufacturing operations in the past, sometimes at facilities which have been
divested or sold and often in locations at which or adjacent to which, other
industrial operations were conducted, from time to time the Company is subject
to environmental claims. As with any such operations that involve the use,
generation, and management of hazardous materials, it is possible that
practices, including practices that were deemed acceptable by regulatory
authorities in the past, may have created conditions which could give rise to
liability under current or future environmental laws. Because the law in this
area is developing rapidly, including in many European countries, and such
environmental laws are subject to amendment and widely varying degrees of
enforcement, the Company may be subject to, and cannot predict with any
certainty the nature and amount of, potential environmental liability related
to these operations or locations that it may face in the future.

Litigation

   See Note 17 "Contingencies" to Consolidated Financial Statements.

                                      60


                      SELECTED HISTORICAL FINANCIAL DATA

   The following are our selected historical financial data on a consolidated
basis for the years ended December 31, 2000, 1999, 1998, 1997 and 1996. You
should read this selected historical consolidated financial data with our
Financial Statements, and with the Notes to Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this Proxy Statement and in our Reports on Form 10-Q
for the periods ending March 31, June 30 and September 30, 2000, all as filed
with the Securities and Exchange Commission.



                                          Year Ended December 31,
                                -----------------------------------------------
                                  2000      1999      1998     1997      1996
                                --------  --------  -------- --------  --------
                                (in thousands except per share information)
                                                        
Statement of Operations Data
Sales.........................  $280,007  $321,388  $339,030 $329,760  $342,684
(Loss) income from continuing
 operations before cumulative
 effect of change in
 accounting principle.........   (18,822)  (41,093)   11,929   (9,164)    7,432
Discontinued operations.......   (11,086)   (1,781)      --       --        --
                                --------  --------  -------- --------  --------
(Loss) income before
 cumulative effect on change
 in accounting principles.....   (29,908)  (42,874)   11,929   (9,164)    7,432
Cumulative effect of change in
 accounting principle, net of
 income taxes.................   (27,401)      --        --       --        --
Net (loss) income.............  $(57,309) $(42,874) $ 11,929 $ (9,164) $  7,432
                                ========  ========  ======== ========  ========
Net (loss) income per common
 share, basic from continuing
 operations, before cumulative
 effect of change in
 accounting principle.........     (1.37)    (3.06)     0.89    (0.69)     0.77
  Discontinued operations.....     (0.81)    (0.13)      --       --        --
  Cumulative effect of change
   in accounting principle....     (2.00)      --        --       --        --
                                --------  --------  -------- --------  --------
Net (loss) income per common
 share, basic.................  $  (4.18) $  (3.19) $   0.89 $  (0.69) $   0.77
Net (loss) income per common
 share, diluted from
 continuing operations, before
 cumulative effect of change
 in accounting principle......     (1.37)    (3.06)     0.88    (0.69)     0.75
  Discontinued operations.....     (0.81)    (0.13)      --       --        --
  Cumulative effect of change
   in accounting principle....     (2.00)      --        --       --        --
                                --------  --------  -------- --------  --------
Net (loss) income per common
 share, diluted...............  $  (4.18) $  (3.19) $   0.88 $  (0.69) $   0.75
Average shares outstanding
 (thousands)..................    13,723    13,456    13,387   13,257     9,670
Balance Sheet Data
  Total Assets................  $250,645  $302,177  $317,778 $296,593  $309,229
  Long-term debt, including
   current maturity...........    65,176    69,030    74,705   76,062    68,497

- --------

(1) The 2000 net loss includes a change in accounting principle as the Company
    adopted SEC Staff Accounting Bulletin No. 101 ("SAB 101"). The effect of
    applying this change in accounting principle was a charge for the
    cumulative effect of the change amounting to $27,401 (net of an income tax
    benefit of $600) or $2.00 per share and a $4.4 million decrease in the
    2000 results from continuing operations (See Note 2 of the Consolidated
    Financial Statements).

(2) During 2000, the Company decided to discontinue its Electronics Division
    ("ED"). As a result, the Company had a loss from operations of $4.8
    million ($.35 per share) and loss on disposal of the Division of $6.2
    million ($.46 per share) (See Note 5 of the Consolidated Financial
    Statements).

(3) In the third quarter of 2000, management decided to discontinue the
    development of non-contact sensor technology. As a result, the Company
    incurred a charge of $5.8 million ($.43 per share) (See Note 5 of the
    Consolidated Financial Statements).

                                      61



(4) The 1999 and 1997 operating losses include a $38,268 and $16,220
    restructuring charge, respectively. See Note 4 to the Consolidated
    Financial Statements for additional information. In addition to the
    restructuring charge, the 1997 net loss includes a $1,346 loss arising
    from the sale of the Company's wholly-owned subsidiary, Technicomp, Inc.,
    and a $1,224 gain resulting from an exchange of shares of common stock,
    which were held for investment.

(5) Pro forma Amounts Assuming the Accounting Change is Accounted for
    Retroactively:

                                                        
   Net (Loss) Income............. $ (29,908) $ (45,677) $7,923 $ (12,280) $4,905
   Per Common Share:
    Net (Loss) Income
     Basic.......................     (2.18)     (3.40)   0.59     (0.93)   0.51
     Diluted.....................     (2.18)     (3.40)   0.58     (0.93)   0.50

   

                                      62



                     PRO FORMA FINANCIAL INFORMATION

   The following describes the pro forma effect of the sale of substantially
all of the Company's business and assets to Hexagon under the Acquisition
Agreement and the sale of its North Kingstown Facility on (i) the audited
consolidated balance sheet information as of December 31, 2000 and (ii) the
audited consolidated statement of operations information for the year ended
December 31, 2000. The unaudited pro forma consolidated financial information
is provided for informational purposes only and does not purport to represent
what the financial position and results of operations of the Company would
actually have been had the sale in fact occurred at the date indicated. The
unaudited pro forma consolidated balance sheet and consolidated statement of
operations information illustrate the estimated effects of the sale as if the
transactions had occurred at the end of the period presented for the
consolidated balance sheet and at the beginning of the period for the
consolidated statement of operations.

              Unaudited Pro Forma Consolidated Balance Sheet

                         As of December 31, 2000



                                               (2)
                                           Proceeds and
                                           Adjustments         (3)
                          Historical   Resulting from Sale   Use of      Pro Forma
                         Balance as of      of Certain        Sale     Balance as of
                         Dec. 31, 2000 Assets & Liabilities  Proceeds  Dec. 31, 2000
                         ------------- -------------------- ---------  -------------
                                                           
Assets
Current Assets:
  Cash and cash
   equivalents..........   $ 27,213         $ 151,227(1)    $(86,958)     $91,482(5)
  Accounts receivable...     35,094           (34,881)                        213
  Inventories...........     94,394           (94,394)                        --
  Prepaid expenses and
   other current
   assets...............     11,548            (9,262)                      2,286
                           --------         ---------       --------      -------
    Total current
     assets.............   $168,249         $  12,690       $(86,958)     $93,981
Property, plant and
 equipment, net              41,761           (41,347)                        414
Goodwill, net...........      8,488            (8,488)
  Other assets..........     32,147           (28,021)                      4,126
                           --------         ---------       --------      -------
                           $250,645         $ (65,166)      $(86,958)     $98,521
                           ========         =========       ========      =======
Liabilities and
 Shareowners' Equity
Current Liabilities:
  Notes payable to
   banks, including in
   2000, $27,400 in
   default..............   $ 38,956         $ (11,556)      $(27,400)     $   --
  Accounts payable......     45,431           (45,431)        (5,358)           0
  Accrued expenses and
   income taxes.........     63,008           (47,012)                     10,638
  Notes payable and
   current installments
   of long-term debt....     54,405            (3,522)        50,883          --
                           --------         ---------       --------      -------
    Total current
     liabilities........   $201,800         $(107,521)      $(83,641)     $10,638
Long-term debt..........     10,772            (7,455)        (3,317)          -
Long-term liabilities...     26,930           (15,586)                     11,344
Total shareowners'
 equity(6)..............     11,143            65,396                      76,539(4)(5)
                           --------         ---------       --------      -------
                           $250,645         $ (65,166)      $(86,958)     $98,521
                           ========         =========       ========      =======

- --------

(1) Represents proceeds amounting to $162.5 million, net of $3.7 million of
    cash for fees paid for the transaction and $22.6 million of cash
    transferred to Hexagon, for sale of the Metrology Business and an
    investment by Hexagon for a 16.7% interest in BSIS Inc. on the Closing
    Date, which is described in this Proxy Statement, and $15.5 million, net
    of $.5 million of cash for commissions and closing costs for the sale of
    the North Kingstown Facility. The Acquisition Agreement also provides for
    a possible additional payment in amounts not to exceed an additional $20
    million, depending upon certain levels of defined operating profits for
    the Metrology Business in 2000 and provides for an additional adjustment
    depending on the net cash

                                      63


   (as defined) transferred to Hexagon at the Closing. The pro forma Balance
   Sheet does not reflect the effect of this contingent payment and assumes no
   net cash adjustment after the Closing.

(2) The adjustments represent the transfer of assets and assumption of
    liabilities upon the closing of the sale to Hexagon as contemplated in the
    Acquisition Agreement and realized gain on the transaction, net of
    $9.9 million of costs relating to accelerated obligations under a defined
    benefit plan and several change in control contract costs that become
    effective on the date of the Closing of the transaction with Hexagon and a
    $.8 million write-off of debt acquisition costs relating to the revolving
    credit agreement and private placement senior notes discussed below.
    Shareowners' equity also includes the $2.5 million investment for BSIS
    Inc. discussed above. In addition, there is a $4.1 million adjustment to
    property, plant and equipment to reflect the elimination of the net book
    value of the North Kingstown Facility described in Note 1.

(3) Represents disbursements for principal and interest for the $27.4 million
    revolving line of credit with certain banks and a $50 million private
    placement of senior notes, which will be paid as part of the Closing on
    the Closing Date under the Acquisition Agreement, and a payment of $4.1
    million for the outstanding mortgage on the North Kingstown Facility. The
    payments also reflect a payment for costs and fees relating to the early
    payment of the private placement loans amounting to $4 million, accrued
    interest amounting to $1.4 million and gain from the transaction amounting
    to $52 million. The $4 million for prepayment costs have been netted
    against the adjustment of accrued expenses.
(4) Includes $2.5 million investment by Hexagon to acquire 16.7% interest in
    BSIS Inc. on the Closing Date but does not include the additional $4.5
    million in investments by Hexagon in BSIS Inc., which will be made in
    three equal installments of $1.5 million on the first three anniversaries
    of the Closing of the metrology acquisition.

(5) Reconciliation of historical shareowners' equity to pro forma shareowners'
    equity:

                                                              
   Historical Balance, December 31, 2000.....................          $ 11,143
   Adjustments:
     Write off debt acquisition costs........................ $  (744)
     Recognition of change in control contracts and
      defined benefit obligation.............................  (9,922)
     Recognition of debt prepayment fees.....................  (4,000)  (14,666)
                                                              -------  --------
                                                                         (3,523)
     Gain on transaction.....................................  66,680
     Investment in BSIS......................................   2,500
                                                              -------
                                                               69,180
     Gain on sale of North Kingstown Facility................  10,882    80,062
                                                              -------  --------
   Pro forma Balance, December 31, 2000......................          $ 76,539
                                                                       ========

   

(6) Does not include the effect of the exercise of stock options for 880,700
    shares of the Company's Class A common stock, which would increase pro
    forma cash and shareowners' equity $2 million. Although it is likely that
    some or all of the stock options will be exercised by the plan
    participants, the exercise of these options is not directly attributable
    to the sale of the Metrology Business.

                                      64



         UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

                   FOR THE YEAR ENDED DECEMBER 31, 2000



                                   Historical                    Pro Forma
                                  Balance Year                 Balance Year
                                      Ended         (1)            Ended
                                  Dec. 31, 2000 Adjustments    Dec. 31, 2000
                                  ------------- -----------    -------------
                                                      
Net Sales........................   $280,007     $(280,007)      $     --
Cost of Sales....................    191,079      (191,079)            --
Research and Development.........     11,657        (6,945)          4,712
Selling, General, Administrative
 expenses........................     79,447       (70,682)          8,765 (2)
Provision for impaired assets of
 Electronics Division............        --            --              --
Refinancing Fees.................      3,615        (3,615)(3)         --
Restructuring (Benefits)
 Charges.........................     (4,001)        4,001 (5)         --
Impairment of partially-owned
 affiliate.......................      5,845           --            5,845
                                    --------     ---------       ---------
Operating Loss...................     (7,635)      (11,687)        (19,322)
Interest Expense.................      9,029        (9,029)(3)         --
Other (Income), net..............       (642)          --             (642)
                                    --------     ---------       ---------
Loss from continuing operations
 before income taxes and
 cumulative effect of change in
 accounting principle............    (16,022)       (2,658)        (18,680)
Income Tax Provision.............      2,800        (2,800)(4)         --
                                    --------     ---------       ---------
Net Loss from continuing
 operations before cumulative
 effect of change in accounting
 principle.......................   $(18,822)    $     142       $ (18,680)(6)
                                    ========     =========       =========
Net Loss per common share:
  Basic and diluted..............   $  (1.37)                    $   (1.36)
  Weighted average shares
   outstanding...................     13,723                        13,723

- --------

(1) Represents the elimination of sales and other costs associated with the
    Metrology Business, which will be sold to Hexagon and rental income and
    building costs associated with the North Kingstown Facility.

(2) Pro forma selling, general and administrative expenses do not include a
    $9.9 million charge for accelerated costs of a defined benefit plan and
    change in control contracts; a $.8 million charge resulting from the
    write-off of deferred debt costs related to the revolving line of credit
    and private placement described above; or $4 million for costs and fees
    relating to the early payments of the private loans; because they have no
    continuing impact on the Company.

(3) Represents costs related to capital restructuring activities. Interest
    expense was adjusted because $5 million of interest costs are related to
    the debt restructuring resulting from the transaction and $.3 million
    relate to the mortgage on the North Kingstown Facility.

(4) Represents taxes applicable to foreign jurisdictions that apply to the
    Metrology Business.

(5) Applies to restructuring activities associated with the Metrology
    Business.

(6) The $65.7 million gain resulting from the sale of the Metrology Business
    and $10.9 million gain on the sale of the North Kingstown Facility are not
    included in the loss before discontinued operations and cumulative effect
    of accounting change but are included in the pro forma shareholders'
    equity at December 31, 2000. See Note 5 of the Unaudited Pro Forma
    Consolidated Balance Sheet.


                                      65



          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS

Overview

   The Company currently operates entirely in the metrology industry through
three business segments: the MS Division ("MSD"), which manufactures and
markets manual and computer-controlled, high precision coordinated measuring
machines ("CMMs") and designs and engineers specialty metrology products,
which accounted for approximately 74% of the Company's sales in 2000; the PMI
Division ("PMI"), which manufactures and distributes mechanical and electronic
measuring and inspection tools, accounted for all of the remaining 26% of the
Company's sales in 2000; and Brown & Sharpe Information Systems ("BSIS"),
which develops measuring software. Approximately 59% of the Company's sales in
2000 were located outside the United States (based upon the location of
customers who are situated within the market areas assigned to subsidiaries
located outside of the United States).

   During 1999 the Company breached certain financial covenants relating to
the debt to EBITDA ratio, debt to net worth and interest coverage ratios under
its $30 million line of credit with four banks and a $50 million private
placement of senior notes, which caused this debt to become due upon demand.
During 2000 the Company pursued various financial alternatives to resolve the
Company's liquidity problems and unfavorable financial situation. After
conducting discussions with various potential investors and acquirors, on
November 16, 2000, the Company entered into an Acquisition Agreement with
Hexagon A.B. ("Hexagon") of Stockholm, Sweden, in which Hexagon will purchase
substantially all of Brown & Sharpe's worldwide Metrology Business for
$160 million in cash, adjusted for an additional possible cash payment up to a
potential maximum of $20 million, based on the Company's year 2000 defined
Metrology Business operating profit and further adjusted up or down (a
downward adjustment is expected) for the difference between cash at the
closing date at its foreign subsidiaries and these subsidiaries' short-term
and long-term borrowings. The Metrology Business is essentially composed of
the MS Division (which includes the former Custom Metrology Division) and the
PMI Division. Hexagon will also acquire an interest in BSIS Inc., the
Company's software development business.

   In 2000 due to the Company's extremely tight cash position and unfavorable
operating results of certain of its investments, the Company took steps to
conserve its cash in order to meet the needs of its core business. Certain of
these steps included the curtailment of the activities of its Electronics
Division, which designed and manufactured surface inspection systems, and
discontinuance of the development of non-contact sensor technology. The
decision to curtail the activities of the Electronics Division resulted in a
loss in 2000 amounting to $11.1 million, including a $6.2 million charge for
impaired assets, and was reported as a discontinued operation. On February 13,
2001 the Company entered into an Asset Purchase Agreement to sell the
Electronics Division for $2 million. The termination of the development of the
non-contact technology resulted in a loss in 2000 amounting to $5.8 million,
which consisted of a write-off of certain assets dedicated to the development
of the non-contact technology amounting to $1.2 million and a $4.6 million
write-off as a worthless investment of its joint venture, Metroptic
Technologies Ltd., which was a corporation dedicated to the development of the
non-contact technology.

   Effective January 1, 2000 the Company adopted SEC "Staff Accounting
Bulletin No. 101--Revenue Recognition in Financial Statements" ("SAB 101").
SAB 101 clarifies generally accepted accounting principles regarding the
timing of revenue recognition. Prior to the adoption of SAB 101, the Company
recognized revenue on the sale of its machines when the machine was shipped to
the customer and the title had passed to the customer, although the Company
often had a further obligation to install the machine, and the customers had
not yet finally accepted the performance of the machine. Since the Company had
a long record of success in installing its machines and obtaining customer
acceptance of the machines, revenue was recognized prior to the final customer
acceptance but after the passage of title. Based upon the new guidelines of
SAB 101, the Company changed its revenue recognition method and now recognizes
revenue upon the final acceptance by the customer, rather than upon the
passage of title to the customer. The effect of adopting SAB 101 was to
decrease 2000 sales $8.5 million and increase the 2000 net loss $4.4 million
($.32 per share). In addition, the results of the operations for the year-
ended December 31, 2000 includes a charge, net of a $.6 million tax benefit,
of $27.4 million for the cumulative effect of an accounting change to reflect
the adoption of SAB 101.

                                      66



Forward Looking Statements

   See "Forward-Looking Statements" elsewhere in this Proxy Statement. In
addition, this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Proxy Statement.

Results of Operations

Sales

   Sales for 2000 were $280 million compared with sales in 1999 of $321.4
million, which is 12.9% below the 1999 level. The 2000 sales would have been
$15.3 million higher than reported, if foreign denominated sales had been
translated at 1999 foreign exchange rates. The reduced U.S. dollar value of
2000 foreign sales is due to the continued strength of the U.S. dollar. As
discussed above, the Company recorded in 2000 a reduction in sales of $8.5
million due to the implementation of SAB 101, all of which applies to the more
fully configured CMMs manufactured and distributed by MSD. When the 2000 sales
are translated at 1999 exchange rates and adjusting for the effect of SAB 101,
2000 sales amount to $303.8 million or a $17.6 million decrease from 1999
levels. The $17.6 million sales decrease in 2000 sales was caused by an $18.2
million decrease in the MS Division, offset by a $.6 million increase for PMI,
which occurred due to increased activity in its Asian market.

   The $18.2 million decrease in MSD sales was due to a $17 million decrease
in aftermarket revenue and a net decrease in machine sales made up of
approximately an $8.1 million increase in the sales of certain of the smaller
CMMs offset by a $9.3 million decrease in the sales of more fully configured
CMMs. Approximately $4 million of the increase in smaller machines in 2000 was
due to the inclusion of a full year of shipments of products manufactured and
distributed by Brown & Sharpe--Qianshao, a 60% owned subsidiary, located in
the People's Republic of China, which was acquired in August 1999, and
included in the 1999 results beginning on September 1, 1999. Another $1.5
million of the increase in shipments of smaller machines in 2000 was due to
increased shipments in Europe using existing software that gained greater
market acceptance in 2000. Sales of more fully configured machines were down
in 2000, due to decreased shipments of sheet metal products to the automobile
industry. Sales for the aftermarket business in 2000 were lower than 1999,
primarily due to a decrease in sales of upgrades and software, which were
higher in 1999 when customers appeared to focus on Y2K problems.

   Sales for 1999 were $321.4 million compared with sales in 1998 of $339
million, which is 5.2% below the 1998 level. The 1999 sales would have been
$5.1 million higher than reported in 1998, if foreign denominated sales had
been translated at 1998 foreign exchange rages. The reduced U.S. dollar value
of 1999 foreign sales, which results from translating the 1999 foreign
denominated sales at the lower 1999 exchange rates, is due to the continued
strength of the U.S. dollar. When the 1999 sales are translated at 1998
exchange rates, the 1999 sales amount to $326.5 million, a $12.5 million
decrease from 1998 levels. The $12.5 million sales decrease in 1999 sales was
caused by a $3.1 million and $9.4 million decrease, respectively, in the MS
and PMI Divisions.

   The $3.1 million decrease in MSD sales was primarily due to an approximate
$15.3 million decrease in the sales of certain of the smaller CMMs and $3
million decrease in the sales of more fully configured CMMs, offset by an
increase of approximately $15.2 million in aftermarket revenue, due to
increased sales of upgrades and software.

   Sales for PMI were down $9.4 million due to decreased sales volume in the
United States caused by stock reduction and consolidation of U.S. catalog
distributors, reduced sales in the United Kingdom due to restructuring, and a
slowdown in the Asian and South American markets.

                                      67



Net Loss

   The Company incurred a net loss in 2000 amounting to $57.3 million. The
2000 results include the following one-time charges.



                                                        In Millions of Dollars
                                                        ----------------------
                                                     
Cumulative Effect of SAB 101 Accounting Change.........         $28.0
Discontinued Operations of Electronics Division........          11.1
Write-off of the Non-Contact Sensor Technology.........           5.8
Fees Relating to Consideration of Refinancing the
 Company's Capital Structure...........................           3.6
Restructuring Benefit..................................          (4.0)
                                                                -----
                                                                $44.5
                                                                =====


   The adoption of SAB 101, discontinued operations and non-contact sensor
technology write-off were previously discussed above in the Overview Section.
The $3.6 million charge for costs incurred for services relate to activity in
2000 in connection with attempts to refinance the overall capital structure of
the Company. The $4 million restructuring benefit relates to a $1.7 million
gain on the sale of a factory that had been previously used by the PMI
operation located in the United Kingdom that was restructured in 1999. The
$2.3 million balance of the $4 million restructuring benefit results from a
decision that was made, subsequent to the implementation of the MSD
restructuring plan, not to vacate a facility located in Italy, due to a
substantial reduction in the lease payments offered by the Lessor of the real
estate in which the future lease payments had been reserved as part of the
restructuring ($.6 million), and a write-down of leasehold improvements for
this location ($.5 million); a sublease of another rental property ($.5
million); and adjustments for severance arrangements in three countries
arising from actual severance payments varying from amounts estimated on the
dates of the implementation of the restructuring plans ($.7 million).

   After adjusting for the $44.5 million in one-time charges, the 2000 net
loss amounted to $12.8 million. $4.4 million of the $12.8 million loss is
caused by the reversal of profit attributable to the $8.5 million in sales
that were not recognized in 2000 due to the adoption of SAB 101. The resulting
adjusted 2000 loss of $8.4 million compares with a $6.1 million loss in 1999,
excluding the effect of $36.8 million, net of tax benefits, of restructuring
charges incurred in 1999. The following discussion will compare the 2000
operating results, excluding the impact of SAB 101 and the other one-time
charges discussed above, with the 1999 operating results, excluding the effect
of the 1999 restructuring charges.

   The Company incurred a $2.2 million operating loss in 2000, which compared
with a 1999 operating profit of $6.4 million. The 2000 gross margin was $93.5
million, which is 33.4% of sales, and compares with a 1999 margin of $100.2
million, which is 31.2% of sales. After adjusting the 2000 gross margin to
reflect 1999 foreign exchange rates, the 2000 gross margin was $102.7 million
(35.6% of 2000 sales). The $2.5 million improvement in 2000 gross margin is a
result of a $5 million improvement in PMI's gross margin offset by a $2.5
million decrease in MSD's gross margin. MSD's reduced margin is due to the
reduced sales of the higher margin aftermarket services product offering,
arising from reduced upgrades and software sales that were partially offset by
improved margins in the former CM Division, which was combined with MSD's
operations in 2000. The former CM Division's improved profitability in 2000
results from the 1999 restructuring effort in which the CM operation
essentially now produces one product after the restructuring, resulting in
greater efficiencies and improved profitability. The gross margins of the
remaining MS product offerings were comparable to prior year amounts. PMI's
2000 increase in gross margin was achieved despite flat sales volume, after
giving effect to the 1999 foreign exchange rates. The improved margins are a
result of the restructuring program implemented during 1999 and early 2000 and
reflects the benefits of concentration of production facilities, reducing the
breakeven point, and successful outsourcing of product offerings.

   Selling, general, and administrative expenses ("SG&A") were 28.4% of sales
as compared to 26.4% in 1999. SG&A expenses for 2000 are $5.6 million lower
than 1999. If 1999 foreign exchange rates had been used

                                      68



to translate SG&A expenses for 2000, 2000 SG&A expenses would have been $2.2
million lower than the same period for 1999. 2000 includes a full year of
expenses incurred by Brown & Sharpe-Qianshao, which was acquired in 1999 and
not included in the entire 1999 results, which increased SG&A in 2000
approximately $2.4 million. Adjusting for the effect of foreign translation
and the previously mentioned acquisition, 2000 SG&A expenses decreased
approximately $4.6 million. The decrease for 2000 results from various
offsetting events. Pension expense in 2000 decreased approximately $5 million
due to a provision in 1999 that was not required in 2000 for certain key
executives who were participants in the Company's Senior Executive
Supplemental Umbrella Pension Plan, who became fully vested in 1999 and
eligible to receive these benefits at that time. Salaries and related costs
were $2.3 million lower than 1999 reflecting the savings from the 1999
restructurings. Offsetting the savings noted above were additional SG&A costs
in 2000 amounting to $2.9 million for foreign exchange losses and $1.6 million
for increased sales commissions.

   Research and development increased from $8.8 million in 1999 to $11.7
million in 2000. $2.3 million of the $2.9 million increase is attributable to
the termination of the capitalization of software development expenses of the
Company's software development subsidiary, BSIS Inc. ("BSIS"). When BSIS's
development activities reached the technological feasibility stage, it began
to capitalize its software production costs incurred to code and test its
software product. Due to the extended testing period, the Company ceased
capitalizing BSIS software development costs in 2000 because of the
uncertainty of the recoverability of the additional costs incurred in 2000.
Management also evaluated the net realizable value of the $3.4 million of
capitalized software development costs at December 31, 2000 and concluded that
the carrying value at December 31, 2000 was recoverable based upon expected
revenues that would result from the sales of the software product.

   Interest expense in 2000 was $1.6 million higher than in 1999 due to
increased average borrowing and higher interest rates in 2000 resulting from
the Company's adverse financial position.

   Results in 2000 included a $2.8 million tax provision as compared to $2.4
million in 1999. The higher tax provision in 2000 results from higher taxable
income in certain jurisdictions that could not be offset by tax benefits in
other jurisdictions.

   The Company's net loss for 1999 was $42.9 million. The loss included, as
discussed above, $36.8 million of restructuring charges, net of taxes.
Excluding the effect of the restructuring charges, 1999 would have incurred a
$6.1 million net loss, which compared with $11.9 million net income for the
same period in 1998.

   The Company had an operating loss of $31.9 million in 1999, which included
$38.3 million of restructuring charges. Excluding the effect of the
restructuring charge, 1999 operating profit would have been $6.4 million,
which is $14.1 million lower than 1998. The gross margin for 1999 was $87.8
million, which included $12.4 million of the $38.3 million restructuring
charges. When the $12.4 million restructuring adjustment is excluded from cost
of goods sold, the 1999 gross margin amounts to $100.2 million, which is 31.2%
of 1999 sales. This compares with a 1998 gross margin of $115.0 million, which
is 33.9% of 1998 sales. The $14.8 million decrease in gross margin was due to
lower margins of $10 million and $4.8 million for the MS and PMI Divisions,
respectively. MSD gross profit is down due to lower margins for CMMs due to
reduced absorption arising from reduced sales of the smaller, less configured
machines, and the incurrence of certain costs, such as training, that were
necessary to grow the aftermarket business. PMI's gross margin was down due to
lower absorption arising from lower sales volume.

   Selling, general, and administrative expenses ("SG&A") in 1999 and 1998
were approximately the same. If 1999 SG&A expenses were translated at 1998
exchange rates, the 1999 SG&A expenses would be $4.7 million higher than 1998.
$.5 million of this increase is due to the recording of expenses of the new
companies acquired during the year. The remainder of the $4.2 million is due
to various reasons, including costs to complete the installation of a new
management information system to support MSD sales activity and increased
pension costs, that were partially offset by reduced agents' commissions, as
well as certain other costs.

   Research and development expenses decreased by $1.7 million in 1999,
because costs for the next generation software achieved the technological
feasibility stage of development which required the capitalization

                                      69



of $3 million of these development costs and, therefore, were not recorded as
development expense as in the prior year.

   Results in 1999 included a $2.4 million tax provision as compared to $3.4
million in 1998. The $2.4 million tax provision is net of a $3.8 million
provision for the pretax operating loss offset by a $1.4 million benefit
relating to the restructuring charge. The 1999 tax provision results from
local taxes in Italy that cannot be offset by net operating loss benefits and
an increase in the valuation allowance for deferred tax assets that was
partially offset by the $1.4 million tax benefit noted above. Most of the tax
benefit from the $40.5 million pretax loss was not recognized, due to the
uncertainty of the ultimate realization of the tax benefits.

Liquidity and Capital Resources

   The Company is obligated under a $50 million private placement of senior
notes with principal payments due from November 2001 to November 2007 and
because of the non-payment default discussed below, a $1.1 million mortgage
note on property located in the United Kingdom, which are classified as
current liabilities, as well as other long-term debt amounting to $10.8
million. The Company also has a $30 million three-year syndicated multi-
currency revolving Credit Agreement with four banks, which had a maturity and
termination date of November 10, 2000 and was amended as of February 7, 2001
to extend the maturity date to April 30, 2001, or at an earlier date if the
Acquisition Agreement between the Company and Hexagon AB is terminated. At
February 16, 2001, only $27.4 million is available of the $30 million under
the line of credit. 65% of the shares of certain of the Company's foreign
subsidiaries were pledged as security for the lenders under the $50 million
private placement and the $30 million line of credit (collectively the "Senior
Lenders"). In addition to the $30 million revolving Credit Agreement, the
Company has $17.8 million in lines of credit with various banks located
outside of the United States. At December 31, 2000, the Company had borrowed
$27.4 million and $11.6 million under the revolving Credit Agreement and
foreign lines of credit, respectively. During 1999, the Company breached
certain financial covenants relating to the debt to EBITDA ratio, debt to net
worth and the interest coverage ratios. The Company's Senior Lenders granted
waivers curing the financial covenant defaults incurred under the Company's
note and revolving credit agreements through the end of 1999. In addition, in
November 1999, borrowing rates under these senior lending agreements with its
Senior Lenders were increased, and these lending agreements were amended to
add covenants requiring the Company to grant the Senior Lenders a security
interest in its U.S. assets and to complete a refinancing acceptable to the
lenders by January 31, 2000. As of February 16, 2001, this refinancing had not
occurred.

   Thus, as previously reported, since the summer of 1999, there has been an
Event of Default under its Revolving Credit Agreement with its banks, and the
Company has not been permitted to borrow any additional amount under the
Revolving Credit Agreement since that date. Also as previously reported, since
the summer of 1999, there has been an Event of Default under its privately
placed senior note agreements. As has been the case since the summer of 1999
with the prior and continuing Event of Default under the note agreements, the
noteholders may at any time declare the notes to be immediately due and
payable and may resort to collateral securing the Company's obligations to the
noteholders under the note agreements and related collateral agreements.

   In June 2000, the Company engaged Chase Securities Inc. to pursue various
strategic alternatives, including a possible sale or merger of the Company.
This decision described in a June 2000 press release was made by the Board of
Directors following the termination of the due diligence process that the
Company had recently been engaged in with private equity investors that had
been considering making a substantial equity investment in the Company. In
addition, the Company had considered internal restructuring on its own,
including the sale of one or more units or selling a minority (or majority)
interest in certain non-core units that would increase the Company's cash
position and improve liquidity. However, there was no guarantee that a
strategic transaction would be completed or that any of the other transactions
described above would be completed and would be sufficient to meet the
Company's financial needs or that the Senior Lenders would not declare the
bank obligations and/or the notes to be immediately due and payable and have
resort to the collateral securing the Company's obligations, in which event
bankruptcy reorganization may be one of the possible consequences.

                                      70



   At February 1, 2001, the Company had $20.8 million of cash on hand and has
been meeting its normal cash needs. Included in the $20.8 million of cash at
February 1, 2001, is $3.7 million of its 60% owned subsidiary, Qingdao Brown &
Sharpe Qianshao Technology Company Limited, PRC, and 75% owned subsidiary,
Qingdao Brown & Sharpe Qianshao Trading Company Limited, PRC, which are
located in the People's Republic of China. Cash balances in China are subject
to currency exchange controls which limit the China subsidiaries' ability to
make loans and advances to the Company. In addition, three of the Company's
wholly-owned European subsidiaries with cash balances amounting to $11.9
million at February 1, 2001, have borrowing with local banks which restrict
payments of loans or advances to the Company by the subsidiaries. In addition,
as a practical matter, the business realities of the Company's operations
through subsidiaries in foreign countries, with credit lines of such
subsidiaries from foreign banks, restrict the ability of the Company to make
long-term transfers of cash in foreign countries into the United States. The
Company is, as a result of 1999 amendments to its agreements with the Senior
Lenders, prohibited from further borrowing. Until the financial covenants have
been reset and the defaults cured or waived, the Company has classified the
$50 million Senior Note obligation, as well as its $1.1 million mortgage in
the United Kingdom, as a current liability. During this period of discussion
with its lenders, the Company is instituting additional cash management
procedures. If the transaction with Hexagon is not completed, the Company must
seek other strategic alternatives, including sale or merger of the Company, in
order to satisfy its Senior Lenders because the Company is unable to pay its
loans if they are called and bankruptcy reorganization may be one of the
possible consequences.

Cash Flow

   Net cash used in operations in 2000 was $.3 million compared with net cash
provided by operations in 1999 of $15.3 million. For the year ended December
31, 2000, the net loss of $57.3 million was decreased by depreciation and
amortization amounting to $11.6 million and other non-cash items, including
$27.4 million for SAB 101; $12.0 million for impaired assets; restructuring
benefits of $2.3 million; and other non-cash items amounting to $4.7 million.
Cash flows from working capital in 2000 increased $3.6 million after adjusting
for the effect of SAB 101. For the year ended December 31, 1999, the net loss
of $42.9 million was decreased by depreciation and other non-cash items of
$54.9 million, including restructuring charges of $30.5 million, depreciation
and amortization of $13 million, pension charges of $5.5 million, and other
non-cash items amounting to $5.9 million. Working capital in 1999 decreased
$3.2 million.

   Net cash used in investment transactions in 2000 and 1999 was $2.3 million
and $24.0 million, respectively. Capital expenditures in 2000 and 1999
amounted to $6.1 million and $9.1 million, respectively, as the Company
curtailed spending and investment transactions in 2000. During 2000, the
Company sold real estate in the United Kingdom previously used by its
restructured PMI Division for cash amounting to $3.8 million. In 1999, the
Company invested in acquisitions amounting to $9.2 million. In 1999, it also
provided an additional $1.9 million to its equity investor Metroptic
Technologies Ltd., invested $.7 million in marketable securities to fund a
defined benefit plan, and invested $3.0 million in internally developed
software costs.

   Cash used in financing transactions was $4.8 million during 2000 compared
with cash provided by financing transactions of $37.7 million in the same
period in 1999. Financing transactions during 2000 consisted of principal
payments of long-term debt and short-term debt. Financing transactions during
the same period in 1999 consisted of an increase of $41.8 million in short-
term borrowings offset by $4.1 million of principal payments of long-term
debt.

Working Capital

   Working capital decreased from $9.7 million at December 31, 1999 to a
negative working capital of $33.6 million at December 31, 2000. When December
31, 1999 foreign exchange rates are used to translate the December 31, 2000
balance sheet, working capital decreased to a negative $33.3 million. After
using the December 31, 1999 foreign exchange rates to translate the December
31, 2000 balance sheet, cash and accounts

                                      71



receivable decreased $8.5 million and $49.9 million, respectively, and
inventory increased $28.4 million. Accounts payable and accrued expenses
increased $17.8 million. The adoption of SAB 101 in 2000 with the associated
reversal of approximately $67.5 million of sales caused accounts receivable to
decrease $42.8 million and inventories to increase $34.7 million, while
accrued expenses increased $22.7 million for cash advances received for the
$67.5 million of sales. After adjusting for the effect of the adoption of SAB
101 and using 1999 foreign exchange rates, 2000 working capital decreased
$12.4 million. The $12.4 million decrease results from a $7.1 million and $6.9
million decrease for accounts receivable and inventory, respectively, and a
$4.9 million decrease in accounts payable and accrued expenses. Offsetting
these decreases was a $4.7 million increase in prepaid expenses and other
current assets, which included $2 million for assets of the Electronics
Division that will be collected upon the closing of these sale of the assets.
The decreases in accounts receivable and inventory in 2000 was a result of
intensified efforts to convert the investment in these assets to cash in
response to the Company's cash requirements, particularly in the United
States, due to the Company's financial problems discussed above. Although
management emphasized cash management throughout 2000, the Company used
$9.4 million of the $36.6 million of cash on hand at December 31, 1999. In
addition $2.5 million of inventory at December 31, 1999, that was acquired as
a result of the purchase of the Electronics Division, was adjusted to reflect
the fair value of the inventory at the acquisition date and contributed to the
change in inventory from 1999 to 2000.

Product Design and Manufacturing Engineering

   The Company invested $15.5 million, or 5.5% of sales; $14.4 million, or
4.5% of sales; and $17.8 million, or 5.3%, in 2000, 1999, and 1998,
respectively, for product design and manufacturing engineering.

                                      72



          RISK FACTORS PRIOR TO SALE OF SUBSTANTIALLY ALL ASSETS

   Following the completion of the proposed sale to Hexagon, the Company will
continue in the business of developing measuring software through its
controlled subsidiary, BSIS, which will be renamed Xygent after the Closing
under the Acquisition Agreement, and BSIS will be the only active operation of
the Company. The operations of the Company following the proposed sale to
Hexagon will be subject to a variety risks and special considerations. See
"Risk Factors Relating to BSIS" elsewhere in this Proxy Statement concerning
these risks and special considerations. The Risk Factors set forth below
assume no sale to Hexagon.

Indebtedness and Liquidity

   As set forth in "Management's Discussion & Analysis--Liquidity and Capital
Resources", during 1999 and continuing in 2000, the Company breached certain
financial ratio covenants. The Company received waivers curing the defaults
through the end of 1999. In addition, the lending agreements were amended to
add covenants to require the Company to grant the lenders a security interest
in certain of its United States assets with a carrying value amounting to
$50.4 million at December 31, 1999 and to complete a subordinated debt
financing acceptable to the lenders by January 31, 2000. The Company was
unable to complete a subordinated debt financing acceptable to the lenders by
January 31, 2000. On February 7, 2001, the Company's lenders granted waivers
curing the requirements that the Company complete a subordinated debt
financing and amended the maturity date of the revolving credit facility to be
the earlier of the completion of the sale to Hexagon or April 30, 2001.
However, the Company continues to be in violation of financial ratio covenants
in its note and loan agreements with its senior lenders and is also in default
on its payment of its $27.4 million line of credit under its Revolving Credit
Agreement. As a result, the Company has not been permitted to borrow any
additional amount under the Revolving Credit Agreement. In addition, the
Company's senior lenders may at any time declare the Company's loans and notes
due and payable and may have to resort to the collateral securing those
obligations, in which even bankruptcy reorganization may be one of the
possible consequences.

   The Company proposes to sell substantially all of its assets, including the
sale of substantially all of its metrology assets to Hexagon pursuant to the
Acquisition Agreement between the Company and Hexagon and the sale to
Precision Park Partners LLC of the North Kingstown Facility under the North
Kingstown Facility Agreement, which are described under "Proposal 1: To
Approve the Sale of Substantially All of the Assets, Including the Acquisition
Agreement and Sale to Hexagon and Related Transactions, the Sale of the North
Kingstown Facility and Related Cash Distribution to Stockholders" elsewhere in
this Proxy Statement. There can be no assurance that the Company will complete
these transactions. In the event that these transactions are not completed,
there can be no assurance the Company will be able to complete a financing
transaction which will remedy the present default situation, extend the
maturity of its obligations under the revolving credit, and remedy the
Company's existing indebtedness and liquidity problem, acceptable to the
senior lenders or will be able to negotiate amendments on satisfactory terms
to the Note Agreement with its private placement lenders and to the Credit
Agreement (and an extension thereof) with its revolving credit lenders. In
such an event, the Company expects that the terms of any such financing
transaction will call for issuance of equity securities in a private placement
(more likely) or possibly subordinated debt with warrants to purchase shares
of common stock of the Company. If the Company is unable to complete such a
financing transaction in a satisfactory amount (and the Company was unable to
do so for December 1999 through June 2000 and no such financing transaction is
now under consideration) and if its parallel negotiations with both sets of
its present senior lenders are not successful in resolving these issues under
the Note Agreement and the Revolving Credit Agreement (and they have not been
successful prior hereto), the Company must seek some form of strategic
transaction alternative, including a sale or merger of the Company. Indeed, in
the event that the Company is unable to complete the sale to Hexagon, the
Company plans to seek other strategic alternatives, including another sale or
merger, in order to satisfy its senior secured lenders who, at any time, may
resort to collateral, consisting of substantially all the Company's assets and
the substantial pledges of stock of its subsidiaries, to remedy the Company's
inability to pay its loans to the senior lenders, in which event bankruptcy
reorganization may be one of the possible consequences. However, it is also
not possible to predict whether any such strategic alternative arrangements
could be negotiated on satisfactory terms sufficient to resolve the Company's
defaults under the agreements with its senior lenders and its present
indebtedness and liquidity problem. For additional details, see "Management's
Discussion & Analysis--Liquidity and Capital Resources", elsewhere in this
Proxy Statement, and Note 3 of the Consolidated Financial Statements and "Risk
Factors--Recent History of Losses".

                                      73



Recent History of Losses

   The Company reported a 12.9% decrease in revenue for fiscal 2000 as
compared to fiscal 1999. Net losses for fiscal 2000 and 1999, respectively,
were $57.3 million and $42.9 million. Continued negative operating results
could adversely impact the Company's relationships with customers, vendors and
employees, as well as its liquidity, its ability to return to compliance with
respect to the financial ratio covenants in its Senior Note Agreement and
Revolving Credit Agreement. Such results would adversely impact its extension
of the Revolving Credit Agreement and its ability to return to compliance with
respect to the financial ratio covenants in its Senior Note Agreement and
Revolving Credit Agreement (neither of which is likely) as well as its
continued listing of the Class A Stock on the New York Stock Exchange. (See
"Risk Factors--Possible Delisting on the New York Stock Exchange".) The
Company received a report from its independent auditors for the year ended
December 31, 2000 (as it had for the year ended December 31, 1999) containing
an explanatory paragraph stating that the Company's operating loss and
noncompliance with certain covenants of loan agreements (see "Risk Factors--
Indebtedness and Liquidity") raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans to continue as a
going concern relies heavily on its ability to raise additional equity
financing, or alternatively, on its ability to complete the proposed sale
under the Acquisition Agreement to Hexagon and to sell its North Kingstown
Facility under the North Kingstown Sale Agreement (with retention of some of
the net proceeds of such sales for the operations of the Company and of its
controlled subsidiary BSIS). (See "Proposal 1: To Approve the Sale of
Substantially All of the Assets, Including the Acquisition Agreement and Sale
to Hexagon and Related Transactions, the Sale of the North Kingstown Facility
and Related Cash Distributions to Stockholders" elsewhere in this Proxy
Statement.) However, there can be no guarantee that such sales and other
matters will be satisfactorily concluded.

Competition

   The Company's MS Division currently has four principal direct domestic and
foreign competitors, some of which are owned by entities that have greater
financial and other resources than the Company. The MS Division also faces
indirect competition from other types of metrology firms such as manufactures
of fixed gauging systems. The primary industries to which the MS Division
sells its products are characterized by a relatively small number of large
participants with significant purchasing power. The Company experiences
significant pricing competition in connection with sales by its MS Division,
which can have an adverse impact on the Company's sales and margins. During
periods when the metrology industry suffers from over capacity, downward
pricing pressure experienced by the MS Division is likely to be more intense
and the Company's margins may be more severely impacted. In addition, certain
of the Company's competitors have access to greater financial resources and
may be able to withstand such pricing pressure more effectively than the
Company. Competitive pressures on pricing have intensified and the competition
for orders has increased, which is in part responsible for the recent lack of
growth in orders and shipments of the MS Division. Accordingly, there can be
no assurance that the MS Division will be able to continue to compete
effectively against existing competitors or new competitors, especially during
periods of over capacity.

   The market for the PMI Division's products is fragmented, and the PMI
Division competes with a large number of competitors, including the market
leader in this area, primarily on the basis of the strength of its third-party
distribution network, price and product innovation. New competitors from
emerging industrialized countries with lower production costs than the
Company's represent a significant competitive challenge to the Company. As a
result, the PMI Division's continued success and profitability will be
dependent on its ability to continue to develop cost-effective sourcing and
innovative products.

Cyclicality of End User Markets

   The primary end user markets for the Company's products, which include the
aerospace, heavy transport and automotive (including automotive suppliers)
industries, experience cyclicality in connection with recessionary periods
affecting these industries in the various geographic areas. As a consequence,
the prices of and margins for the Company's products have been and are likely
to continue to be adversely impacted by decreases in capital spending by such
end user markets during recessionary periods. In addition, because the PMI
Division sells primarily through distributors, the PMI Division is likely to
experience significant declines in sales

                                      74



volumes during recessionary periods because catalog houses and distributors
typically reduce purchases of the Company's products at the onset of such
recessionary periods even more than the decline in their end user markets'
demands would dictate, in order to reduce their inventories. There can be no
assurance that the Company will be able to operate profitably, especially
during any recessionary downturn.

Foreign Operations

   As of December 31, 2000, approximately 71% (based on book values) of the
Company's assets, 59% of the Company's sales (based on customer location) and
68% of its employees were located outside the United States. Foreign
operations are subject to special risks that can materially affect the sales,
profits, cash flows and financial position of the Company, including taxes on
distributions or deemed distributions to the Company or any U.S. subsidiary,
currency exchange rate fluctuations, inflation, maintenance of minimum capital
requirements, import and export controls, exchange controls and other business
factors in foreign countries that may restrict the Company's ability to
transfer cash from one foreign country to another of the United States and
social (labor) programs.

   In addition, the wide-spread geographic locations of the Company's
facilities and operations make it more difficult for the Company to coordinate
its financial and operating reporting and oversee its operations and
employees. While the Company believes it has satisfactory financial and
operational reporting and oversight for its present business, additional
system revisions may be needed if the Company should experience a further
increase in the number of foreign facilities.

Dependence on Key Supplier

   The Company currently purchases the vast majority of its externally sourced
low to medium accuracy electronic touch trigger sensor probes and heads from a
publicly held United Kingdom company (the "Supplier"), which is the dominant
supplier of such sensor probes to CMM manufactures. No alternative supplier
for this class of electronic sensor probes, which are a key component of
substantially all of the Company's lower accuracy CMMs, is currently available
and developing an alternative source for the probes and heads could take more
than a year. Although adequate supplies of such probes and heads for at least
several months is potentially available from current inventories of the
Company and its customers, any reductions or interruptions in supply or
material increases in the price of electronic sensor probes purchased from the
Supplier could cause the Company to suffer disruptions in the operation of its
business or incur higher than expected costs, which could have a material
adverse effect on the Company.

Technology

   As the size of some components measured by metrology products decreases and
the required speed and precision of such measurements increases, the Company's
products may become obsolete unless the Company develops more sophisticated
software and metrology systems. Although the Company's strategy is to focus
research and development in the area of software development, there can be no
assurance that the Company will be successful in competing against new
technologies or competitors, some of whom may not now participate in the
metrology industry.

Dependence on Limited Number of Key Personnel

   On April 28, 2000, Kenneth Kermes, then a newly-elected Director, became
President and CEO, replacing Frank Curtin, who retired. The success of the
Company is dependent to a significant extent upon the continuing services of a
limited number of key executives of the senior management team. Loss of the
services of one or more of these senior executives could have a material
adverse effect on the Company's operations and its financial condition.

Implementation of Company Operating Strategy

   The 1999 restructuring initiatives focus on two areas: (i) closing high
cost or duplicate PMI factories and outsourcing manufacturing where
appropriate, and (ii) creating focused factories and eliminating overlapping

                                      75



products in the MS Division. Key elements of the Company's business strategy
for 2000 included the start of realization of the planned benefit of the 1999
restructuring and focusing, through the Company's subsidiary, BSIS, on
software development to have a single metrology operating platform which will
be utilized on Brown & Sharpe equipment and on equipment of other metrology
manufacturers. There can be no assurances that the Company will be able to
achieve its planned objectives from the 1999 restructuring or the new software
products under development. However, the Company's 2001 strategy is to focus
on completing the sale of substantially all its assets and making the cash
distributions contemplated by Proposal 1 elsewhere in this Proxy Statement to
its stockholders.

Possible Delisting on the New York Stock Exchange

   The Company's Class A Stock is currently traded on the New York Stock
Exchange. There are a number of qualitative and quantative requirements for
maintenance of listing on the New York Stock Exchange. While the New York
Stock Exchange has not formally indicated that the Company has triggered any
of the quantative tests, the Company did receive a letter from the New York
Stock Exchange indicating that, based on a review of the Company's stock, the
Company was close to triggering one of the quantative factors. No assurance
can be made whether the Company can continue to maintain its current listing.
In the event that the Company's Class A Stock is delisted by the New York
Stock Exchange, the Company may not be able to have its shares listed on
another stock exchange.

Qualitative and Quantitative Disclosure About Market Risk

   The Company has no derivative financial instruments or derivative commodity
instruments but does have outstanding long-term debt. Substantially all of its
long-term debt is fixed rate obligations. An increase in interest rates would
not significantly increase interest expense or cash flows due to the fixed
nature of the debt obligations, and a 10% change in interest rates would not
result in a material change in the fair value of its debt obligations.

   A portion of the Company's consolidated long-term debt consists of
obligations of certain of its foreign subsidiaries, which are denominated in
the currencies of the countries in which these subsidiaries are located. The
Company does not hedge these foreign denominated debt obligations, since all
of the foreign debt is payable in the functional currencies of these foreign
subsidiaries. Since there is no foreign currency exchange risk related to the
debt obligations of these foreign subsidiaries, net (loss) income and net cash
flows are not affected by changes in the foreign exchange rates of these
obligations, and a 10% increase in the foreign exchange rates of these debt
obligations would not have a material effect on the Company's financial
position.

European Monetary Union

   Effective January 1, 1999, eleven of fifteen member countries of the
European Union ("EU") established fixed conversion rates between their
existing sovereign currencies and a common currency, the "Euro". During a
transition period from January 1, 1999 to June 30, 2002, non-cash transactions
may be denominated in either Euros or the existing currencies of the EU
participants from January 1, 1999 to January 1, 2002. After January 1, 2002,
all non-cash transactions must be denominated in Euro. Euro currency will not
be issued until January 1, 2002, and on June 30, 2002, all national currencies
of the EU participating countries will become obsolete.

   The Company has significant operations in several of the EU countries that
will convert, or that may convert, to the Euro. The introduction of the Euro
may present substantial risks to the Company for its operations located in the
EU participating countries. These risks include competitive implications of
conversion resulting from harmonization of pricing policies and practices in
our European operations; possible increased costs associated with the
conversion; and the ability to modify existing information systems on a timely
basis, if at all, as well as the ability to absorb the costs associated with
the systems' modifications, if required.

   The Company has established various policies to be implemented during the
transition period. The Company has taken a position on pricing policy.
Essentially, Euro pricing will be provided if requested by customers;

                                      76



otherwise, pricing will continue in legacy currencies. This pricing policy
will apply to both Euro and non-Euro countries. For accounting purposes, the
Company will treat the Euro as any other currency while maintaining its
accounts records in legacy currency. All affected locations have been
contacted about their ability to manage the required triangulation when
converting from one legacy currency to another. Although the present
accounting systems do not handle triangulation, the calculation is being done
using commercial software. All of the Company's banks are providing dual
statements and can accept and make payments in both legacy currency and Euro.

   Some of the Company's current business operating software is not Euro
compliant. One of the operating companies has installed a software patch which
will make the software Euro compliant. The installation is currently being
tested for compliance. Another operation has purchased operating software
which is Euro compliant. The Company believes it will be completely Euro
compliant by the mandatory conversion date.


                                      77


                             NO DISSENTERS' RIGHTS

   Any of our stockholders who do not approve of the proposed sale and related
matters are not entitled to appraisal or dissenter's rights with respect to
the proposed sale and related matters under Delaware law or our Certificate of
Incorporation.

                             ACCOUNTING TREATMENT

   The proposed sale to Hexagon will be accounted for as a sale of certain
assets, including the stock of certain subsidiary corporations and assumption
of certain liabilities. Upon consummation of the proposed sale to Hexagon, the
Company will recognize financial reporting gain equal to the net proceeds (the
sum of the purchase price received less the expenses relating to the proposed
sale) less the closing net book value of the assets sold and liabilities
assumed.

   The proposed sale of the North Kingstown Facility to Precision Park
Partners LLC will be accounted for as a sale of certain assets. Upon
consummation of the proposed sale to Precision Park Partners LLC, the Company
will recognize financial reporting gain equal to the net proceeds (the sum of
the purchase price less the expenses relating to the proposed sale) less the
net closing book value of the assets sold and liabilities assumed.

                   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

   The following is a summary of the principal United States federal income
tax considerations relating to the sale to Hexagon, sale of our North
Kingstown Facility and the distributions. This summary does not purport to be
a complete analysis of tax considerations. The considerations pertaining to
shareholders relate only to shareholders that hold their shares as a capital
asset and are either citizens or residents of the United States, entities
taxable as corporations organized under the laws of the United States, and
estates or trusts that are treated as United States persons pursuant to the
Internal Revenue Code. The summary does not consider the effect of any
applicable foreign, state local or other tax laws nor does it address tax
considerations applicable to investors that may be subject to special federal
income tax rules.

   The federal, state or foreign tax consequences of the distribution to you
will depend on the facts of your own situation. You should consult your tax
advisors for a full understanding of the tax consequences of the contemplated
distribution to you.

   Corporate Tax Considerations. From a federal income tax perspective the
proposed transactions with Hexagon and Precision Park Partners LLC will
predominantly be treated as a sale of corporate assets, including the stock of
certain subsidiary corporations, in exchange for cash and the assumption of
certain liabilities. As a consequence of the anticipated tax loss that will be
incurred in connection with the transactions and other losses previously
incurred by the Company, the proposed transactions should not have any
material federal income tax consequences to the Company.

   Shareholder Tax Considerations. The Company has estimated that it will have
neither current earnings and profits nor accumulated earnings and profits at
either the time of distribution in 2001 or for the year (2001) in which the
initial distribution is expected to be made, in which case the contemplated
distribution would not be treated as a dividend for federal income tax
purposes. Instead, the distribution would first be treated as non-taxable
return of each shareholder's adjusted basis in the stock of the Company to the
extent of such basis . Any distribution in excess of a shareholder's basis
will be treated as capital gain from the exchange of the respective shares.
Distributions to shareholders that are corporations will not qualify for the
dividend received deduction. In the event that the Heathrow, United Kingdom
real estate is sold after December 31, 2001, it is possible that the Company
may have sufficient earnings and profits for 2002 such that the cash
distribution following such sale could be taxable as a dividend.

                                      78



           INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION AGREEMENT

                 AND THE NORTH KINGSTOWN SALES AGREEMENT

   In the past, we have granted stock options to our directors, executive
officers and approximately 80 other employees, some of which are currently
exercisable. Because the exercise price of these options has generally been
greater than the trading price of the Common Stock, these options generally
remained unexercised. All options under the 1989 Equity Incentive Plan have
exercise prices greater than the current market price as of March  , 2001.
However, options for an aggregate of 880,700 shares of the Company's Class A
Stock are outstanding under the 1999 Equity Incentive Plan that are
exercisable at option prices from $1.875 to $2.375 per share. It is expected
that all options which are not currently exercisable will become exercisable,
pursuant to the terms of the 1999 plan, at or shortly before the closing date
under the Acquisition Agreement. If the Acquisition Agreement is approved, it
is anticipated that the amounts ultimately distributed with respect to each
share of common stock may be greater than the exercise price of many of the
stock options. In that event, it is likely that some or all of those stock
options would be exercised. A detail of the holders of such options is
provided in the table below. Additional information regarding our stock
options is set forth in Note 8 to the Consolidated Financial Statements for
the year ended December 31, 2000 included elsewhere in this Proxy Statement.

                                      79



Options under 1999 Equity Incentive Plan



Principal Executive Officers
- ----------------------------
                                        
A. Aparicio                                 35,000
E. DiLuigi                                  25,000
E. Genor                                    65,000
P. James                                    50,000
K. Kermes                                  150,000
Other Executive Officers                    75,000

Non-Employee Directors
- ----------------------
                                        
Russell A. Boss                              4,000
Howard K. Fuguet                             4,000
Rob Held                                     4,000
Roger Levien                                 4,000
John M. Nelson                              54,000
Henry D. Sharpe III                          4,000
All Other Employees                        406,700
                                           -------
Total Options Outstanding under 1999 Plan  880,700


Information regarding our stock options is set forth in Note 8 to the
Consolidated Financial Statements for the year ended December 31, 2000.

BUSINESS ACTIVITIES FOLLOWING THE PROPOSED SALE AND RELATED TRANSACTIONS: BSIS
                     INC. TO BE RENAMED XYGENT, INC.

General

   We are presently engaged in the Metrology Business in the design,
manufacture, and sale of precision measuring tools and instruments and manual
and computer controlled measuring machines. After the sale of our Metrology
Business to Hexagon, we will no longer manufacture and sell precision
measuring tools and instruments or measuring machines but will retain
ownership of our early stage software development subsidiary, BSIS Inc.
("BSIS"), a "measuring software" business, which has no sales history. As a
result of the developmental nature of the business and lack of sales revenue,
BSIS has had no revenues and operating losses since its inception in 1997,
with a use of cash run rate averaging $450,000 per month.

   BSIS was formed in December 1997 to consolidate the several software
development groups dispersed within Brown & Sharpe into a single global
software development organization, which would provide next generation
metrology software applications for the various Metrology Business units. As
its secondary mission, BSIS was to establish and execute a "measuring
software" business strategy, which would ultimately lead to the formulation of
a software business that could spin off as an independent business separate
from the metrology equipment manufacturing businesses. Accordingly, BSIS is
now focused on the commercialization of its new XACTMEASURE measuring
software, which has been in development for approximately three years and is
nearing introduction as detailed below.

Background

   "Metrology" is defined as "The science of measuring physical attributes"
such as the physical dimensions, like part size and feature position of
manufactured component parts, but also extends into the measurement of color,
weight, surface finish or any other physical attributes that are defined by a
design standard and can be inspected and compared to the designer's intended
specification. The metrology machine or instrument hardware, together with
metrology or measuring software, forms a complete metrology system, which is
used by manufacturers of mechanical and electrical components for the purposes
of inspecting and verifying that the physical dimensions of the manufactured
components meet their required "dimensional design specifications".

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   Market Definition

   BSIS has defined three major measuring software market segments by
inspection device type: CMMs (Coordinate Measuring Machines), which include
any device that collects three dimensional coordinate data points from a
component part; Vision Systems, which collect a video camera image of a
manufactured part or feature into a frame grabbing sub-system; and CNC
(Computer Numerically Controlled) Machine Tools, which cover CNC metal cutting
or forming Machine Tools equipped with measuring probes.

   Customer Profile

   BSIS's potential end user customers can be categorized as Large Original
Equipment Manufacturers ("OEMs"), such as automotive, aerospace, and heavy
equipment manufacturers, typically with production facilities located around
the world; Medium (sized) production equipment manufacturers and assembly
subsystem suppliers to the Large OEMs, such as engine or transmission transfer
lines or vehicle subassemblies; and Small component part specialized tooling
and fixture job shop manufacturers which supply to both the Medium and Large
OEM manufacturers.

The BSIS/XYGENT Strategy and Products in Development

   BSIS's product strategy is to become the leading provider of metrology
software applications. BSIS currently has three software applications products
in various stages of development, one of which is in the final stages of the
quality assurance process, and all of which operate with BSIS's Common
Metrology Operating System, known as XACTMOS, developed by BSIS.

 Market Trends

   A significant trend in the measuring software market is the desire of large
sized users of metrology equipment to standardize on one measuring system
software product throughout such organizations. Such standardization will
enable the users to more easily transfer skilled operators within the
enterprise and facilitate movement of inspection and measuring programs
between various user production sites. Further there has been an emerging
trend in the measuring machine retrofit and upgrade market for users to de-
couple vendor provided software from the vendor provided measuring and
inspection machine hardware, including machine controllers, in a desire to
obtain the best available independent pluggable measuring system components.

   Another significant trend is the penetration of PC platforms, Microsoft
Windows NT and CE and the Internet/Intranet technologies out onto the
manufacturing shop floor. These advanced technologies permit the transmission
of data, including design engineering and production data, throughout the
manufacturing enterprise and its supply network. The combination of these
technologies with the open architecture and other application features of BSIS
measuring software products will enable operators of measuring systems and
machine tools located at diverse manufacturing sites to share manufacturing
data to improve productivity.

 Products

   The XACTMOS Common Metrology Operating System is designed to allow any
measuring inspection device to be operated with:

  .  A common intelligent "User Interface", that will automatically
     reconfigure itself to expose only those measurement capabilities that a
     specific device can accomplish, thus minimizing the options and
     streamlining the programming and operating task.

  .  A common and error free access to Computer Aided Design ("CAD")
     specifications which allows high quality CAD data to be made available
     to any inspection device.

  .  A common analysis and reporting capability of all measurements taken
     from a part and automatic comparison to the design specifications
     defined in the Geometric Dimension and Tolerance Standard.

  .  A common WEB enabled HTML reporting and data storage method, which
     allows for easy electronic delivery of the resulting inspection analysis
     anywhere in the world.

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  .  The ability to move between the CAD offline programming environment, the
     physical part online programming environment and the blue print, user
     data entry, environment.

  .  An accurate 3D rendering of both the CAD part and the Inspection device
     mechanical motion within a single 3D virtual space. This offers the
     advantage of having several CAD designs or fixture designs co-mingled
     within a single 3D working space.

  .  An open and extensible architecture which allows for any inspection
     device manufacturer, contracting firm, or customer to easily create
     custom functionality to BSIS's products using the fully integrated
     Microsoft Visual Basic for Applications (VBA) Developers Environment
     (IDE).

   The following table identifies BSIS's measuring software products currently
under development which will utilize the XACTMOS Operating System and their
development status:



Product                       Description                   Development Status
- -------                       -----------                   ------------------
                                                      
XACTMEASURE                   A metrology software          Final stages of quality
                              application which is used to  assurance. Beta tested by
                              drive a CMM to collect and    strategic partners and
                              analyze measured data.        select distributors.

XACTVISION                    A metrology software          Prototype, proof of concept
                              application which is          application developed.
                              expected to drive a non-      Commercial application under
                              contact vision system to      development. Expected
                              collect and analyze measured  release third quarter 2001.
                              data.

XACTCNC                       A metrology software          Product development
                              application which is          underway. Commercial release
                              expected to drive a CNC       expected in third quarter
                              machine tool to collect and   2001.
                              analyze measured data as
                              part of a manufacturing in-
                              process inspection system.


XACTMEASURE

   XACTMEASURE is a metrology software system designed to be used with both
Computer Controlled and Manual CMMs. Features include full CAD support,
Kinematic display of part and CMM, ASME compliant Geometric Dimensioning and
Tolerancing and HTML result reporting. XACTMEASURE is scheduled to make its
major US market debut at Quality Expo International in Chicago in April, 2001.
This debut will include the first independent appearance by the BSIS/Xygent
Company and its products within their own trade show booth. It is also
anticipated that this debut will include selected product demonstrations that
highlight the capabilities of our current commercial product XACTMEASURE plus
will feature advanced technology demonstrations of both XACTVISION and
XACTCNC.

XACTVISION

   XACTVISION is slated to be the next member of the Xact Technology family
projected to be released in the third quarter of 2001. XACTVISION is based on
the same component core as XACTMEASURE but substitutes functions designed to
support non-contact vision systems that use image analysis as the primary
means of part data acquisition.

XACTCNC

   XACTCNC is also projected for a third quarter 2001 release. XACTCNC
supports in-process inspection on board machine tools utilizing touch probes.
The Xact Technology component core is augmented by functions to support tuning
of CNC machining processes as well as the conversion of these machines into
fully functional CMMs. Prototype testing is expected to begin in June 2001
with refinements taking place in July. Final quality assurance testing and
then commercial release is expected in August and September 2001,
respectively.

   There can be no assurance that the projected release dates will be met for
these three software products.

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Strategic Alliances and Beta Site Testing

   Prior to commencement and during the development cycle of its three
measuring software products, BSIS engaged thirteen global, industrial
companies to participate in the definition, prototype review, beta testing and
subsequent production implementation of the BSIS's products. These strategic
partners helped BSIS define the specifications and features of the products.

Sales, Marketing and Distribution Strategy

   Initially BSIS intends to target sales of its XACTMEASURE software products
to OEM end-users and others located in the United States, Europe, and Far East
using established Metrology Business distribution channels. For sales of
XACTMEASURE into the installed base of Brown & Sharpe machines, BSIS intends
to establish a resellers (OEM) agreement with the Metrology Business
distribution organizations in the Americas, Europe and within Asia. However,
there can be no assurance that BSIS will be able to establish such agreements.
The BSIS Stockholders' Agreement includes license and royalty arrangements
between BSIS and Hexagon, which provide that, for a period of five years from
the date of the Closing under the Acquisition Agreement, Hexagon may purchase
XACTMEASURE licenses from BSIS for $1,500 per unit. This per license price
should make BSIS products attractive to the Hexagon sales and distribution
organizations (including those of the Metrology Business). However, because
there are no purchase commitments from Hexagon, there is no assurance Hexagon
will purchase such licenses from BSIS.

   In addition BSIS plans to implement a strategy of selling its software
through third party independent retrofit dealers and new machine OEM channels
to ensure, to the extent possible, that BSIS's products will be represented
and supported to the highest level by distribution channels with a proven
track record by independent dealers and machine OEM companies who can also
offer the greatest entree into the large customer installed bases. There can
be no assurance that this strategy will be successful. BSIS will pay Hexagon a
royalty of $5,000 per unit for any XACTMEASURE licenses sold by BSIS through a
distribution channel other than Hexagon.

   With regard to its XACTVISION product, BSIS is having discussions and
expects to conclude an agreement with a leading vision system OEM for
distribution of such product. Currently there are no agreements in effect with
such independent organizations to market and sell BSIS's software, and there
can be no assurance that we will finalize any such agreements; however,
discussions with a number of organizations are nearing completion. BSIS has
been in joint development of a prototype version of XACTVISION integrated with
this OEM's frames and cameras and expects an announcement of this relationship
near the time of the first commercial release. However, there can be no
assurance that this relationship will be successful. BSIS will not pay Hexagon
a royalty fee for any XACTVISION licenses sold by BSIS through its independent
distribution channels.

   With regard to its XACTCNC product, BSIS is having discussions and expects
to conclude an agreement with a leading retrofit CNC dealer for distribution
of such product, but there can be no assurance this agreement will be
finalized. BSIS has been in joint development of a prototype version of
XACTCNC and expects an announcement of this relationship near the time of the
first commercial release. BSIS will not pay Hexagon a royalty fee for any
XACTCNC licenses sold by BSIS through its independent distribution channels.

Product Support Functions

   Software users in our industry require service and support as a major
criteria in their purchasing decision. BSIS will have hot-line service support
made available to BSIS's distribution partners, and BSIS expects to have the
authorized distribution partners provide 24 hours-a-day, seven-days-a-week
support to the actual end-user customer.

   BSIS plans to support the distribution partner's direct sales force to
allow them to perform efficiently as a sales force. BSIS intends to treat the
distribution partner's direct sales force as an extension of BSIS's direct
sales force, and they will be given the same support as the BSIS direct sales
staff.

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   Technical backup to OEM and Dealer support groups will be provided by
BSIS's internal experts. The OEM and Dealer support staffs will respond to the
needs of their customers directly. When the OEMs and Dealers encounter a
support issue that requires more information, they may contact BSIS directly
to obtain the necessary information.

Research and Development

   BSIS's product development activities take place in facilities located in
the United States, United Kingdom, France, Germany and Italy. BSIS has
connected the software development tools and infrastructures of each of these
facilities in order to make a global software development organization. As of
February 1, 2001, BSIS product development staff had 25 employees, most of
whom hold degrees and have industry experience in engineering, mathematics,
computer science or related disciplines.

   The American National Standards Institute (ANSI), American Society of
Mechanical Engineers (ASME), and the International Standards Organization
(ISO) all influence the evolution of standards directly related to BSIS's end
users and their businesses. BSIS actively participates in the creation of
standards in order to assure that BSIS's product evolution tracks the
evolution of relevant standards and to project an image of technical
leadership in key disciplines governed by these standards. BSIS participates
in the GD&T standard, known as ANSI/ASME Y14.5.1; the NIST/ISO STEP AP219,
which will define exchange of metrology and feature/tolerance information
between software systems; the B89 standard, which propagates best measurement
practices throughout the industry.

Software Production

   All of BSIS's products include a commercial "soft key" licensing mechanism
whereby a unique code locks the product to a specific computer and enables the
purchased options to be executed by the customer. The generation of these soft
keys has been WEB Enabled by BSIS to allow any authorized distributor,
anywhere in the world, to distribute and activate BSIS's products.

   BSIS plans to create master CDs that contain a standard Microsoft
Installation Procedure (e.g. RUN: SETUP). The normal Setup procedure is
followed by the user and the product installs itself on the selected hard
drive. Following installation the user enters the supplied soft key license
and the correct options are enabled. Master CDs will be distributed to
authorized high-volume OEMs along with suitable artwork for packaging with our
permission to copy as needed. BSIS plans and has the resources to initially
produce commercial copies of its software products, but may outsource the
production function as the business grows.

Patents and Intellectual Property Rights

   As of February 14, 2001, BSIS has filed three patent applications, two in
the United States and one foreign application, covering methods and apparatus
embodied in its measuring software products (i) for simulating the measurement
of a part without using a physical measurement system and (ii) for interacting
with measuring devices by allowing users to extend the capabilities of
software for controlling measuring devices. These patent applications are
pending, and there can be no assurance that any pending patents will be
issued, or that any pending applications will not be challenged, invalidated
or circumvented in the future. Further, there can be no assurance that
competitors, many of whom have substantially more resources than BSIS will not
seek to apply for and obtain patents that will prevent, limit or interfere
with BSIS's ability to make, use or sell its products in the United States or
internationally. BSIS has obtained rights to XactMeasure(R) as a Registered
Trademark. Also, BSIS owns the domain name for XactMeasure.com

Competition

   The markets in which we will sell our products includes established
competitors that fit into one of two classes: those that produce software
only, selling through one or more OEMs or retrofitters, of which there are

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five principal competitors, and CMM or vision OEMs that produce both hardware
and software, of which there are eight CMM competitors and six vision systems
competitors. To attain a competitive position, BSIS is in the process of
establishing similar relationships with appropriate distribution channels for
each of its products.

   The CMM Inspection software market is shared by two classes of
participants; those that produce measurement system hardware and software
including Zeiss, Mitutoyo, MS-Mexagon (formerly MS-Brown Sharpe), LK,
Sheffield, Starrett, IMS and Wentzel, and those that produce software only
including Metrologic, Wilcox and Associates, Inc., AAT, Tecnomatix, Silma and
Dassault (Deneb).

   The Vision Inspection software market consists primarily of participants
that produce measurement system hardware and customized software to run their
hardware. Each of the major OEMs; OGP & View Engineering (both now held by
QVII), Sony, Nikon, MicroVu, and J-mar, all produce their own non-contact
systems including software. In addition, Metronics markets Quandra-Check(R)
both as OEM and retrofit software in the lower end of the Vision software
segment. The principal competition in the CNC Inprocess Inspection software
market is Renishaw, which produces an inspection probe, controller card and
software macros to run an inspection cycle from within an NC-Gcode program.

Orders and Backlog

   BSIS intends to ship its software products upon receipt of customer orders,
however, since it has not yet commercially released its product, it has not
accepted any orders and, therefore, has no sales or order backlog.

Funding of BSIS Operations

   The operating capital for BSIS will initially be provided by the Company
and by Hexagon's investments under the Acquisition Agreement. Hexagon has
agreed to invest $2.5 million at the Closing of the Acquisition Agreement for
a 16.7% ownership stake and will invest an additional $1.5 million on each of
the next three anniversaries of the Closing, raising its ultimate stake up to
as much as 46.7% of the equity of BSIS. (The sale of BSIS common stock to
Hexagon on these terms was negotiated between the parties at arm's length.)
The Company will retain $7.5 million (including the $2.5 million invested in
BSIS by Hexagon at the Closing) to fund the operations of BSIS and BNS Co.
There can be no assurance that said aggregate funding will be sufficient to
fund the contemplated operations of BSIS or that, if needed and determined
appropriate by BNS Co. and Hexagon, the two stockholders of BSIS, additional
funding could be raised. Moreover, BNS Co. may entertain offers for the
purchase of BSIS as an alternative to the proposed execution of the BSIS
business plan described above. There will be no change in the number of
outstanding shares (except for exercise of options and the one to five reverse
stock split), and the Company will remain a public company and will continue
to have public reporting obligations, creating expenses to be funded,
including a need for funding expenses prior to any period when its controlled
subsidiary, BSIS, may generate sufficient income to carry these expenses.

Employees and Management

   As of February 1, 2001, BSIS had thirty-two (32) employees, fifteen (15) of
whom reside in the United States, eight (8) of whom reside in Germany, five
(5) of whom reside in Italy, three (3) of whom reside in the United Kingdom
and one (1) of whom resides in France. These include eighteen (18) software
development professionals, four (4) software quality assurance professionals,
eight (8) sales and marketing professionals, and three (3) administrative and
information technology professionals. None of BSIS's employees are covered by
a collective bargaining agreement and management believes that its
relationship with its employees is good. BSIS is expected to grow its staff in
2001 to about forty (40) people, most in sales and marketing roles.


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Facilities

   Currently BSIS operations worldwide (except in the United Kingdom and
France) share facilities with Metrology Business production factories. Soon
after the date of the Closing of the sale to Hexagon, BSIS headquarters is
expected to move to an independent facility somewhere in or near Rhode Island.
Additionally, BSIS is in the process of establishing legal entities within
Germany, Italy and the United Kingdom. Upon completion, BSIS headquarters and
all global organizations will operate at independent facilities relatively
near each of the Metrology Business factories.

Legal Proceedings

   BSIS is not currently a party to any legal proceedings.

   In connection with Hexagon's investment in BSIS, the Company and BSIS, on
     , 2001, entered into the BSIS Stockholders' Agreement with Hexagon. Such
BSIS Stockholders' Agreement gives Hexagon the right to designate two of the
five candidates for the Board of Directors of BSIS, gives BSIS a right of
first refusal on any transfer of BSIS shares by Hexagon, at the same terms as
the proposed transfer by Hexagon, and gives Hexagon a right of first refusal
on any transfer of BSIS shares by the Company, at the same terms as the
proposed transfer by the Company.

   BNS Co. will continue as a publicly-owned corporation after the Closing and
the contemplated distributions to stockholders. However, the size and
composition of the Board of Directors may change.

                         RISK FACTORS RELATING TO BSIS

   The business of BSIS is subject to a variety of risks and special
considerations. As a result, stockholders of the Company should carefully
consider the risks described below and the other information in the Proxy
Statement before voting at the Special Meeting.

   As noted, this Proxy Statement contains certain forward-looking statements
that involve risks and uncertainties. See "Forward Looking Statements". The
Company's actual results after the Closing under the Acquisition Agreement
could differ materially from those discussed in this Proxy Statement. Factors
that could contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this Proxy Statement.

   1. BSIS software product is still in development; if we fail to develop our
software product or our product fails to obtain market acceptance, we will not
generate sufficient revenue to be successful. BSIS was formed in December,
1997. BSIS has not yet completed or sold a software product. There can be no
assurance that BSIS will be able to complete its development of a software
product that is accepted by consumers on a basis which is profitable to BSIS.
Market acceptance of the new software products is dependent in part on our
ability to demonstrate the cost effectiveness, ease of use and technological
advantages of our products over competing products.

   2. We have not had any sales and may not have any sales in the
future. Since BSIS has not yet completed development of a product for sale to
customers, BSIS has had no revenues, and hence its operating results to date
(losses) does not form any basis for conclusion that BSIS will become
profitable. During fiscal 1999 and for fiscal year 2000, BSIS had operating
losses of $5.1 million and $  million, respectively, and as of December 30,
2000, BSIS has an accumulated deficit of $  million.

   3. We may not have adequate resources for funding the operations of
BSIS. We will have substantially more limited financial and other resources
than all, or most, of our software competitors and potential software
competitors and we may be unable to compete significantly against them.
Hexagon has committed to invest an aggregate of $7 million over the next three
years. The Company will have limited funds

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available for investment in BSIS after the payment of the contemplated
distributions to stockholders following the Closing, and there can be no
assurance that BSIS, or the Company, will be able to raise additional funds
for funding. There can be no assurance that Hexagon, which is expected to own
up to as much as 47% of BSIS once it completes its four investments and which
may view BSIS as a competitor, would want to, or be able to raise, additional
funds for BSIS.

   4. Our industry is very competitive and we may not be successful if we fail
to compete effectively. In addition to the significant competition for
software products, with many offerings in the marketplace, the software
products to be developed by BSIS are expected at the outset to compete with
software used by the Metrology Business sold to Hexagon, and may be
competitive with software developed in the future by the Metrology Business
being purchased by Hexagon. In addition, BSIS must, as a practical matter,
concentrate initially on selling to businesses, including automotive and
airplane manufacturers, who are customers of the Metrology Business sold to
Hexagon; and in its marketing efforts BSIS will not be able to use the "Brown
& Sharpe" name or the aftermarket sales force of the Metrology Business,
unless an agreement is reached with Hexagon, as an entree to prospective
customers making competing more difficult and Hexagon has no obligation to
enter into such agreement. Increased competition may result in lower prices
for our products and reduced opportunities for growth and profitability.

   5. Royalty and other obligations of BSIS to the Metrology Business sold to
Hexagon may prevent BSIS from achieving profitability. For five years after
the Closing of the sale to Hexagon, BSIS is required to sell its XACTMEASURE
software products to Hexagon, on a non-exclusive basis, for use in coordinated
measuring machine ("CMM") applications at a price per unit of $1,500, which is
expected to be substantially below the price charged by BSIS to other
customers for CMM applications. In addition, BSIS is required for the five
year period to pay a significant royalty to Hexagon of $5,000 per unit of
software sold to persons other than Hexagon for CMM market applications. The
effect of these provisions is necessarily adverse to the business of BSIS.
Royalty and other obligations of BSIS to the Metrology Business sold to
Hexagon may prevent BSIS from achieving profitability.

   6. The relationship between BSIS and Wilcox Associates, Inc. ends with the
Closing under the acquisition agreement. Our Metrology Business has been
significantly dependent on a software license from Wilcox Associates, Inc. and
the service of William Wilcox, its President, and we have owned 30% of the
stock of Wilcox Associates, Inc. A number of software products used by the
Metrology Business sold to Hexagon were based on PCDIMIS, a software product
developed by Wilcox Associates, Inc. Our license rights from Wilcox Associates
and its relationship with William Wilcox are being acquired by Hexagon. (At
this date it is not known whether the 30% stock interest will be purchased by
the other Wilcox shareholders or Wilcox Associates, Inc. pursuant to their
existing right of first refusal or by Hexagon which will make the purchase of
the right of first refusal as not timely exercised or timely closed during the
existing agreements.) While BSIS believes that its software products under
development are and will be completely independent of PCDIMIS, the ending of
this relationship may adversely affect BSIS because PCDIMIS is the leading
software for CMMs. BSIS and PCDIMIS will be competitive substitutes for one
another.

   7. BSIS management has limited experience managing a software company and
may fail to manage effectively, limiting BSIS's potential. The Company has
historically been a manufacturing Company, after the sale to Hexagon, it will
be a software Company. While BSIS has significant software business
experience, there is no assurance the Company and BSIS will be able
successfully to manage a "software company" and the possible loss of the
services of any member of the management team may be materially adverse to the
business of BSIS. BSIS management may not have the skills to introduce and
market BSIS's software product, to manage future growth or obtain funds to
fund growth and/or operations and their inexperience in these areas may
detract from BSIS's business.

   8. If BSIS fails to develop software products other than CMM applications,
BSIS may fail to achieve profitability. The BSIS business plan contemplates
the development of additional software products for markets other than CMM
applications, including primarily Vision (non-contract) and CNC applications.
There can be no assurance such additional software products will be developed,
or, if developed, will be of interest to

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customers in fields beyond those in which the Metrology Business has been
engaged in. Failure to develop and successfully market such products may
prevent BSIS from achieving profitability.

   9. BSIS may not succeed if it is unable to attract and retain key personnel
and skilled employees. In order to grow our business, we will have to hire
additional employees. Our future success, therefore, will depend, in part, on
attracting and retaining additional qualified management, marketing and
technical personnel. We do not know whether we will be successful in hiring or
retaining qualified personnel. Competition for qualified personnel throughout
the software industry is intense. The inability to hire additional qualified
employees or the loss of the services of some of the foreign technical
employees that are currently doing work for BSIS could have a material adverse
effect on the business of BSIS.

   10. BSIS may be unable to form the strategic alliances that are key to its
strategy. The BSIS business plan calls for BSIS to establish marketing,
development and distribution relationships through strategic alliance, and
plans to enter into various agreements with other companies to achieve its
marketing, development and distribution goals. There can be no assurance that
BSIS will be able to establish any such agreements and, accordingly, there can
be no assurance that BSIS will be able to achieve its planned objectives for
the year 2001 or establish a software business that will grow and be
profitable. In addition, BSIS is required for a five year period after the
closing to pay royalties to Hexagon for any unit of software for CMM market
applications sold to persons other than Hexagon and is required to sell its
XACTMEASURE software products to Hexagon at a price per unit substantially
below the price charged by BSIS to other customers, with Hexagon making no
purchase commitment.

   11. BSIS software may be subject to intellectual property infringement
claims, which could limit BSIS's sales. If we become subject to intellectual
property infringement claims, or if we are unable to protect important
intellectual property, we could incur significant expenses and be prevented
from offering specific products, and we may lose prospective sales to
competitors.

   The success of BSIS may depend, in part, on its ability to obtain and
maintain patent protection for its computer software products, to protect and
preserve its proprietary information and trade secrets and to operate and sell
its products without infringing the proprietary rights of others. It has been
BSIS's policy to seek, where appropriate, to protect its proprietary positions
by, among other methods maintaining its product information a trade secret,
filing United States and corresponding foreign patent applications covering
its technology, inventions and improvement that are important to the
development of its business. As of February 14, 2001 BSIS has filed three
patent applications, two in the United States and one foreign application,
covering methods and apparatus (i) for simulating the measurement of a part
without using a physical measurement system and (ii) for interacting with
measuring devices by allowing users to extend the capabilities of software for
controlling measuring devices. These patent applications are pending and there
can be no assurance that any pending patents will be issued, or that any
pending applications will not be challenged, invalidated or circumvented in
the future. Further, there can be no assurance that competitors, many of whom
have substantially more resources than BSIS will not seek to apply for and
obtain patents that will prevent, limit or interfere with BSIS's ability to
make, use or sell its products in the United States or internationally.

   BSIS, like many software companies, also relies upon trade secrets,
technical know-how and skill of its employees and continuing technical
creativity and innovation to develop and maintain its products and its
anticipated position in the software business market. It requires its
employees, consultants and advisors to execute confidentiality and disclosure
agreements and assignment of invention agreements in connection with their
employment, consulting or advisory relationships with the Company. There can
be no assurance, however, that these agreements will not be breached or that
BSIS will have or be able to obtain and adequate remedy for any breach.
Further no assurance can be given that competitors will not independently
develop substantially equivalent proprietary information and technologies or
otherwise gain access to BSIS's proprietary technology, or that BSIS can
meaningfully protect its rights in unpatented proprietary technology. The
failure or inability of BSIS to adequately protect its intellectual property
rights could have a material adverse effect on its business, financial
condition, and future prospects and business plans.


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   12. Risks particular to BSIS's international operations and potential
international sales could adversely affect its results. Our financial
condition and results of operations may be adversely affected by international
business risks, including currency exchange rate fluctuation, inflation,
import and export controls, exchange controls and other business factors in
foreign countries that may complicate BSIS operations, including the fact that
the protection of copyrights and other intellectual property is difficult to
achieve under the laws of certain foreign countries.

   13. Sales of Company stock in the market before and after the closing may
adversely impact this market. The market price of our Common Stock could
decline as a result of sales of shares by the Company's existing stockholders,
including option holders who become shareholders, before or after the Closing
under the Acquisition Agreement, including sales by trustees under the
Company's Employee Stock Ownership Plan ("ESOP"), (which will be terminated in
connection with the Closing) and sales by trustees of the Company's other
employee benefit plans (or of employees benefit plans of Hexagon which receive
shares of stock of the Company previously held in accounts under the Company's
other employee benefit plans), or sales by Metrology Business employees or
other former employees of the Company having accounts under these other plans,
could further adversely affect the market price for the Company's stock.
Approximately 969,031 shares of Common Stock were held under the ESOP and
approximately 675,378 shares were held under the Company's other employee
benefit plans at February 15, 2001.

   14. Possible delisting of Company stock by NYSE may prevent the Company
from sustaining an active trading market. Although we expect the Company's
Class A Stock will continue to be listed on the New York Stock Exchange, it is
possible that future results of the Company (which will be engaged only in the
software business conducted by BSIS) or future discussions with the NYSE, may
lead to delisting of the Company's Class A Stock by the New York Stock
Exchange, in which event the Company may not be able to have its shares quoted
on another stock exchange. Consequently, an active trading market for the
Company's shares may not be sustained following the Closing under the
Acquisition Agreement. There is no assurance that the one-for-five reverse
stock split of the Company's Class A Stock and Class B Stock if approved by
the stockholders and effectuated, will assist the Company in meeting the
qualitative and quantitative requirements of the New York Stock Exchange to
maintain its listing.

   15. Possible change in capital structure after the closing may negatively
impact the market price of the Company's Common Stock. Other than the
reduction in par value per, and the cash amounts distributed in the
contemplated distributions to stockholders, and the issuance of additional
shares upon exercise of outstanding options and the effects of the investment
by Hexagon in BSIS, there will not be any change in the stockholders' equity
of the Company from the transaction. The proposed sale to Hexagon and related
transactions and the related distributions to stockholders will not affect the
number of outstanding shares of Common Stock of the Company. The proposed
reverse stock split will affect the number of and price for the outstanding
shares of Class A and Class B Stock but, except for cash settlement of
fractional shares, it should not affect the stockholders' equity of the
Company. It is possible that the Board may, after the Closing, depending on
developments with BSIS and other factors, decide to recommend some further
change in the capital structure, which may require stockholder approval in the
future. However, there is no present intention to take any such action. In
addition, the Company can not predict the effect the sale of Hexagon, related
transactions, sale of the North Kingstown Facility, and related cash
distributions will have on the market price of the Company's Common Stock.

                             REGULATORY APPROVALS

   We are not aware of any governmental or regulatory approvals required in
connection with the proposed sale other than compliance with applicable
securities laws, and expiration or early termination of the applicable thirty
day waiting period under Hart-Scott-Rodino Act of 1976, as amended and
compliance with the Act Against Restraints of Competition of the Federal
Republic of Germany. On January 29, 2001, Brown & Sharpe and Hexagon made the
required filings under the Hart-Scott-Rodino Act and the waiting period
commenced. Early termination under the Hart-Scott-Rodino Act was granted on
February 13, 2001. Further, in January, 2001, the German Bundeskartellamt
approved the terms of the transaction.

                                      89


          STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

I. Security Ownership of Certain Beneficial Owners

   Set forth below, as of February 15, 2001 are the persons or groups known to
the Company who beneficially own, under the applicable rules and regulations of
the Securities and Exchange Commission, more than 5% of any class of the
Company's voting securities.



                             Amount and Nature
                          of Beneficial Ownership
                         -------------------------                    Percent of
   Name and Address      Title of Class                     Percent    Combined
  of Beneficial Owner    of Common Stock  Direct   Indirect of Class Voting Power
  -------------------    --------------- --------- -------- -------- ------------
                                                      
Fiduciary Trust Company      Class A       168,196    --       1.2        3.9
International(1)             Class B        56,064    --      11.1
Two World Trade Center
New York, NY 10048-0074

Henry D. Sharpe, Jr.(2)      Class A       476,766  7,200      3.5       11.1
Pojac Point, RFD No. 2       Class B       158,920  2,400     32.0
North Kingstown, RI
02852

Edward D. DiLuigi(3)         Class A       840,489    --       6.2       13.6
c/o Brown & Sharpe           Class B       169,332    --      33.6
Manufacturing Company
Precision Park
200 Frenchtown Road
N. Kingstown, RI 02852-
1700

Andrew C. Genor(3)           Class A       802,968    --       5.9       13.2
c/o Brown & Sharpe           Class B       166,063    --      32.9
Manufacturing Company
Precision Park
200 Frenchtown Road
N. Kingstown, RI 02852-
1700

Putnam Fiduciary             Class A       622,634    --       4.6        6.2
Trust(4) Company             Class B        52,744    --      10.4
859 Williard Street
Quincy, MA 02169

Merrill Lynch & Co.,         Class A     1,276,200    --       9.4        6.9
Inc.(6)                      Class B           --     --       --
On behalf of Merrill
Lynch Asset
Management Group
World Financial Center
North Tower
250 Vesey Street
New York, NY 10381

Merrill Lynch Special        Class A       846,900    --       6.2        5.1
Value Fund, Inc.(5)          Class B           --     --       --
800 Scudders Mill Road
Plainsboro, NJ 08536

Dimensional Fund             Class A     1,151,441    --       8.4        6.2
Advisors Inc.(6)             Class B           --     --       --
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401



                                       90




                              Amount and Nature
                           of Beneficial Ownership
                          -------------------------                    Percent of
    Name and Address      Title of Class                     Percent    Combined
  of Beneficial Owner     of Common Stock  Direct   Indirect of Class Voting Power
  -------------------     --------------- --------- -------- -------- ------------
                                                       
Ironwood Capital              Class A     1,298,400   --       9.5        7.1
Management LLC                Class B           --    --       --         --
21 Custom House Street
Suite 240
Boston, MA 02109

Gabelli Asset Management      Class A       766,200   --       5.6        4.2
Inc. (7)                      Class B           --    --       --         --
One Corporate Center
Rye, NY 10580-1434

Benson Associates Inc.        Class A       700,644   --       5.1        3.8
111 S.W. Fifth Avenue         Class B           --    --       --         --
Suite 2130
Portland, OR 97204

- --------
(1)  Fiduciary Trust Company International, a bank, by virtue of various
     investment management contracts and trust agreements with members of the
     Sharpe family, including Henry D. Sharpe, III, a Director, holds the
     shares of Class A and Class B Stock in the Table. See Footnote (2) below.

(2)  Various members of the family of Henry D. Sharpe, Jr. (father of Henry D.
     Sharpe III) beneficially own an aggregate of 635,686 shares of common
     stock of the Company comprised of 476,766 shares of Class A Stock and
     158,920 shares of Class B Stock of the Company. These holdings amount to
     3.6% and 32.0%, respectively, of each class of stock and represent 11.4%
     of the combined voting power of the Class A Stock and Class B Stock. The
     table includes (a) an aggregate of 168,076 shares of Class A Stock and
     56,024 shares of Class B Stock held by Henry D. Sharpe, Jr.'s wife and
     children, including Henry D. Sharpe, III, a Director of the Company, and
     by trusts, of which they are beneficiaries under agreements with
     Fiduciary Trust Company International and under which they each have sole
     voting and dispositive power with respect to their shares and with
     respect to which Mr. Sharpe, Jr. disclaims beneficial ownership; (b) 120
     shares of Class A Stock and 40 shares of Class B Stock held by the Sharpe
     Family Foundation, a charitable foundation, held by Fiduciary Trust
     Company International with whom Mr. Sharpe, Jr. shares voting power and
     with respect to which beneficial ownership is disclaimed; (c) 7,200
     shares of Class A Stock and 2,400 shares of Class B Stock as to which
     Henry D. Sharpe, Jr. has neither voting nor dispositive power but as to
     which he is a beneficiary under a trust established under the will of
     Henry D. Sharpe, Sr.; and (d) 308,570 shares of Class A Stock and 102,856
     shares of Class B Stock held by Fiduciary Trust Company International as
     to which Henry D. Sharpe, Jr. has sole voting and dispositive power.

(3)  Messrs. DiLuigi and Genor are Executive Officers of the Company and serve
     as co-Trustees of the Brown & Sharpe Employee Stock Ownership and Profit
     Participation Plan (the "ESOP"). The Table includes (i) 802,968 shares of
     Class A Stock and 166,063 shares of Class B Stock held by the ESOP, which
     are deemed to be beneficially owned by each of the foregoing persons, but
     as to all of which ESOP shares, except, with respect to their own vested
     shares of Class A Stock and Class B Stock in such plan, they disclaim
     beneficial ownership; and (ii) shares of Class A Stock issuable upon
     exercise of stock options held by such Executive Officers. (See II.
     Security Ownership of Management Footnote (3) and Aggregated Options
     Table.)
(4)  Putnam Fiduciary Trust Company acts as Trustee of the Brown & Sharpe
     Savings and Retirement Plan and the Brown & Sharpe Savings and Retirement
     Plan for Management Employees (together referred to as the "SARP"),
     substantially similar tax qualified 401-K savings plans covering the
     Company's U.S. employees, and in that capacity shares voting power with
     respect to the shares of Class A Stock and Class B Stock with and subject
     to direction from participants in the SARP as to all of which shares
     Putnam disclaims beneficial ownership.

(5) Merrill Lynch & Co. Inc. is a parent holding company and Merrill Lynch
    Special Value Fund, Inc. is a subsidiary of such company, and such
    companies, as registered investment advisors, share voting and dispositive
    control over such shares with certain clients.

                                      91



(6) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
    advisor, has sole voting and dispositive control over such shares and is
    deemed to have beneficial ownership of the reported shares, all of which
    shares are held in portfolios of DFA Investment Dimensions Group Inc., a
    registered open-end investment company, or in series of the DFA Investment
    Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
    Participation Group Trust, investment vehicles for qualified employee
    benefit plans, as to all of which Dimensional Fund Advisors Inc. serves as
    investment manager. Dimensional disclaims beneficial ownership of all such
    shares.

(7) Gabelli Asset Management, Inc. ("Gabelli"), has sole voting and
    dispositive control over such shares and is deemed to have beneficial
    ownership of the reported shares, all of which are held in portfolios of
    Gabelli Funds, LLC, a registered investment advisor, or in GAMCO
    Investors, Inc., a registered investment advisor, or in Gabelli Associates
    Limited, a British Virgin Islands corporation, or in Gabelli Associates
    Fund, a New York limited partnership, or in Gabelli Fund LDC, a British
    Virgin Islands Company. Gabelli disclaims beneficial ownership of all such
    shares.

II. Security Ownership of Management

   The following table and accompanying footnotes set forth certain
information about the beneficial ownership of the Company's Class A Stock and
Class B Stock as of February 15, 2001 by the Directors, the top five Executive
Officers and all Directors and Executive Officers as a group.



                                              Amount and
                                                Nature
                                            of Beneficial
                                              Ownership               Percent of
    Name and Address     Title of Class of ---------------- Percent    Combined
  of Beneficial Owner      Common Stock    Direct  Indirect of Class Voting Power
  -------------------    ----------------- ------- -------- -------- ------------

                                                      
Henry D. Sharpe, III
 (1)....................      Class A       59,145  2,400       *        1.3
                              Class B       18,381    800     3.6

John M. Nelson..........      Class A       60,553
                              Class B          151    --        *          *

Howard K. Fuguet........      Class A        5,000    --        *
                              Class B          --     --      --           *

Russell A. Boss.........      Class A       12,000    --        *
                              Class B          --     --      --           *

J. Robert Held..........      Class A        9,000    --                   *
                              Class B          --     --      --*

Roger E. Levien.........      Class A        6,000    --        *
                              Class B          --     --      --           *

Richard A. Donnelly.....      Class A          --     --      --         --
                              Class B          --     --      --         --

Kenneth N. Kermes.......      Class A      150,000    --      1.1          *
                              Class B          --     --      --         --

Philip James............      Class A      187,763            1.4
                              Class B          827    --      --         1.1


                                      92





                                           Amount and Nature
                                             of Beneficial
                                               Ownership                Percent of
    Name and Address     Title of Class of ------------------ Percent    Combined
  of Beneficial Owner      Common Stock     Direct   Indirect of Class Voting Power
  -------------------    ----------------- --------- -------- -------- ------------
                                                        
Antonio Aparicio........      Class A        138,700    --       1.0
                              Class B            --     --       --           *

Andrew C. Genor (2).....      Class A        892,968    --       6.4
                              Class B        166,063    --      32.9       13.6

Edward D. DiLuigi (2)...      Class A        910,648    --       6.6
                              Class B        168,538    --      33.6       13.9

All Directors, Nominees
 and Executive Officers
 as a Group 17 persons)
 (3)....................      Class A      2,305,704  2,400     16.7
                              Class B        328,957    800     65.3       29.9

Less than one percent
 (1%)...................

- --------

(1) See Footnote (2) I. Security Ownership of Certain Beneficial Owners.

(2) See Footnote (3) I. Security Ownership of Certain Beneficial Owners.

(3) With respect to Executive Officers who are not Directors, includes (i)
    46,200 shares of Class A Stock directly owned by two of the Executive
    Officers and as to which they have sole voting and investment power; (ii)
    41,412 vested shares of Class A Stock and 4,593 vested shares of Class B
    Stock in the aggregate as to which certain Executive Officers have shared
    voting power as participants in the SARP and ESOP; and (iii) for Messrs.
    Sharpe, Nelson, Fuguet, Boss, Held, Kermes, James, Aparicio, Genor and
    DiLuigi includes 4,000, 54,000, 4,000, 4,000, 4,000, 150,000, 150,000,
    123,000, 90,000 and 80,000 shares, respectively, of Class A Stock and
    180,000 shares of Class A stock for three other Executive Officers, which
    are subject to stock options presently exercisable or exercisable within
    sixty (60) days of the expected date of mailing of this Proxy Statement,
    granted to such Executive Officers pursuant to the Company's 1989 Equity
    Incentive Plan and 1999 Equity Incentive Plan.


                                       93



                                PROPOSAL 2

              AMENDMENT TO THE CERTIFICATE OF INCORPORATION
                       TO CHANGE THE COMPANY'S NAME FROM

             BROWN & SHARPE MANUFACTURING COMPANY TO BNS Co.

   General. On January 30, 2001, the Board of Directors unanimously approved
the Amendment to the Certificate of Incorporation to change the name of Brown
& Sharpe to "BNS Co." or such other name as the Board of Directors may decide,
and recommended that the amendment be submitted to stockholders for approval,
so that we can fulfill our obligation under the Acquisition Agreement to sell
and assign the name "Brown & Sharpe Manufacturing Company" to Hexagon.

   Vote Required. A majority vote of the entitled votes of the shares of the
Class A Stock and Class B Stock outstanding on the record date, voting
together as a single class, is required to approve Proposal 2.

                                PROPOSAL 3

               AMENDMENT TO CERTIFICATE OF INCORPORATION TO

               REDUCE PAR VALUE PER SHARE OF CLASS A STOCK

   General. On January 30, 2001, the Board of Directors unanimously voted to
approve amendments to the Company's Certificate of Incorporation to reduce the
par value per share of its Class A Stock and its Class B Stock from $1.00 to
$0.01 per share, and to submit such amendments to the Company's shareholders
with the Board's recommendation that they be approved. The proposed amendments
are attached as Annex C. Approval of the amendments will permit the Company to
reduce the amount required to be allocated to capital when it issues any
shares of Class A Stock or Class B Stock, as the case may be, in the future
and will also permit the Board of Directors, following the effectiveness of
such amendments, to review the Company's liabilities and financial position
and vote at that time to transfer from stated capital to additional paid-in
capital an amount equal to the difference between $1.00 and $0.01 times the
number of previously issued shares of Class A Stock and Class B Stock.

   Under the present provisions of the Delaware General Corporation Law, the
par value of shares determines the amount of a corporation's stated capital,
but, as a general matter, stated capital has little practical significance.
However, Section 170 of the Delaware General Corporation Law provides, in
relevant part, that the directors may pay dividends out of surplus as defined
and not out of capital. A reduction in par value per share and a later
decision by the Board to make such transfers from capital to capital surplus
will increase the amount of surplus by the amount of $0.99 times the number of
issued shares of Common Stock. (Once the stated capital (par value) has been
reduced, Delaware General Corporation Law allows the Board to transfer the
amount of the reduction from stated capital to surplus for previously issued
shares.) Such transfers will be appropriate, depending on the determination of
the contemplated amount of the contemplated distributions in order to reduce
the likelihood that the amount of the distributions to stockholders
contemplated by Proposal 1 would have to be cut back as a result of the
limitations of Section 170 of the Delaware General Corporation Law. It is not
anticipated upon approval and effectiveness of Proposals 3 and 4, that the
limitation of Delaware General Corporation Law on the payment of dividends
will reduce the amounts of cash distributions to stockholders.

   The proposed amendments reducing the par value per share of the Company's
Common Stock will have no effect on the value of such stock or the number of
authorized, issued or outstanding shares of stock. However, if the one-for-
five reverse stock split under Proposal 5 is approved, the number of issued
and outstanding shares of Class A Stock and Class B Stock and the value of
such shares will be affected when such reverse stock split is effected.

   The sale to Hexagon and related transactions, the sale of the North
Kingstown Facility and the related cash distributions to stockholders under
Proposal 1 is not contingent on the approval of the proposed Amendments
reducing the par value per share of the Company's Common Stock (Proposals 3
and 4). However, if Proposal 3

                                      94



and/or Proposal 4 are not approved, the amount of the cash distributions made
to stockholders under Proposal 1 (if approved) will be reduced because the
amount of surplus available under the Delaware General Corporate Law to permit
the Board's declaration of such distributions will be reduced if these
Proposals are not approved by the stockholders.

   Vote Required. A majority vote of the entitled votes of the Class A Stock
outstanding on the record date and a majority vote of the entitled votes of
the shares of Class A Stock and Class B Stock outstanding on the record date,
voting together as a single class, is required to approve Proposal 3: the
reduction in the par value per share of the Class A Stock.

   Recommendation. The Board of Directors unanimously recommends that the
stockholders vote FOR approval of the proposed amendment to the Certificate of
Incorporation under this Proposal 3, reducing the par value per share of the
Company's Class A Stock.

                                PROPOSAL 4

      AMENDMENT TO CERTIFICATE OF INCORPORATION TO REDUCE PAR VALUE

                        PER SHARE OF CLASS B STOCK

   General. See "General" above under Proposal 3 which discusses the reduction
in the par value per share of the Class A Stock and the Class B Stock.

   Vote Required. A majority vote of the entitled votes of the Class B Stock
outstanding on the record date and a majority vote of the entitled votes of
the shares of Class A Stock and Class B Stock outstanding on the record date,
voting together as a single class, is required to approve Proposal 4: the
reduction in the par value per share of the Class B Stock.

   Recommendation. The Board of Directors unanimously recommends that the
stockholders vote FOR approval of the proposed amendment to the Certificate of
Incorporation under this Proposal 4, reducing the par value per share of the
Company's Class B Stock.

                                  PROPOSAL 5

  AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECT A ONE-FOR-FIVE REVERSE
              STOCK SPLIT OF CLASS A STOCK AND CLASS B STOCK

   General. On            , 2001, the Board of Directors, after reviewing a
presentation by management on communications between the Company and the New
York Stock Exchange ("NYSE") with respect to issues to be addressed in the
continued listing of the Company's Class A Stock on the NYSE, unanimously
voted to approve an amendment to the Company's Certificate of Incorporation to
effectuate a one-for-five reverse stock split of the outstanding shares of the
Company's Class A Stock and Class B Stock and to submit such amendment to the
Company's stockholders with the Board's recommendation that it be approved.
The proposed amendment is attached as Annex E (the "Reverse Stock Split
Amendment" and the reverse stock split, the "Reverse Stock Split"). If the
proposed Reverse Stock Split Amendment is approved, each holder of five shares
of Class A Stock and each holder of five shares of the Class B Stock
immediately prior to the effectiveness of the Reverse Stock Split would
respectively become the holder of one share of Class A Stock and one share
Class B Stock after the effectiveness of the Reverse Stock Split. No
fractional shares will be issued and stockholders will be paid cash for
fractional shares resulting from the Reverse Stock Spilt.

                                      95


   Except as otherwise indicated, all share and per share information in this
Proxy Statement is presented without giving effect to the Reverse Stock Split.

   The Company is currently authorized to issue 30,000,000 shares of Class A
Stock and 2,000,000 shares of Class B Stock. In connection with the Reverse
Stock Split, it is not proposed to amend the Company's Certificate of
Incorporation to reduce the authorized number of shares of Class A Stock or
Class B Stock.

   Reasons for the Reverse Stock Split. The Company's Class A Stock is
currently traded under the symbol "BNS" on the NYSE. The primary purpose of
the Reverse Stock Split is to assist to the Company's efforts to maintain the
continued listing of the Class A Stock on the NYSE and reposition the Company
in light of the sale to Hexagon and related transactions. The Reverse Stock
Split of the Class A Stock will assist in (but will not guarantee) maintenance
of the listing of the Class A Stock on the NYSE when it is to be expected
that, after the Board's declaration of one or more cash distributions to
stockholders after the Closing with Hexagon pursuant to Proposal 1, the market
price per share of Class A Stock on the NYSE will decline. There are a number
of qualitative and quantitative requirements for maintenance of listing on the
NYSE including market capitalization and stockholder equity minimums, ongoing
business operations and a minimum stock price maintenance requirement of an
average closing price of $1.00 per share over a 30 day period. If the Company
falls below any criteria, the NYSE will determine the suitability for
continued listing and give consideration to any definitive action plans that
the Company would propose that would bring it above continued listing
standards within specific timelines.

   The proposed sale of the Metrology Business to Hexagon will result in a
very significant reduction in the Company's operating assets and scope of
business, triggering certain of the continued listing standards. The
contemplated cash distributions to the stockholders pursuant to Proposal 1
would cause the Company to fall below the minimum stockholder's equity
standard. The Company will need to satisfy the NYSE as to the ongoing
viability and potential for BSIS, its remaining development stage measuring
software business unit, in relation to the NYSE minimum standards, in order to
maintain the Company's NYSE listing for the Class A Stock.

   The Class B Stock is not listed on the NYSE. However, sales of Class B
Stock generally result under the Company's Certificate of Incorporation in
conversion of the Class B Stock into Class A Stock. Moreover, because each
share of Class B Stock is convertible into one share of Class A Stock under
the Certificate of Incorporation, the two classes of stock must be treated the
same in terms of any stock split. Accordingly, the Board has unanimously
approved a one-for-five reverse stock split of the outstanding shares of Class
B Stock.

   The Board has determined that it is in the best interests of the Company's
stockholders to endeavor to maintain the continued listing of the Class A
Stock on the NYSE. In addition, the Company believes that a higher stock price
may increase investor interest and reduce resistance of brokerage firms to
maintain active analysis and potentially recommend the purchase of the Class A
Stock. Certain institutional investors have internal policies preventing the
purchase of low-priced stocks and many brokerage houses do not permit low-
priced stocks to be used as collateral for margin accounts. Further, a variety
of brokerage house policies and practices tend to discourage brokers within
those firms from dealing in low-priced stocks. Moreover, the Board believes
that the perception of the investment community may be negative toward common
stock that sells at an abnormally low price and that the Reverse Stock Split
may improve the perception of the Class A Stock as an ongoing investment.

   While the Company believes that the Reverse Stock Split will cause the
trading price of the Class A Stock to rise and meet the NYSE minimum stock
price requirements, there can be no assurance that the market price of the
Class A Stock will rise in proportion to the reduction in the number of
outstanding shares resulting from the Reverse Stock Split or that the Company
will be able to maintain its listing on the NYSE.

   Potential Effects of the Reverse Stock Split. Although the Reverse Stock
Split will not, by itself, impact the Company's assets or properties, the
Reverse Stock Split could over time result in a decrease in the aggregate
market value of the Company's equity capital. The Board believes that this
risk is outweighed by the likelihood

                                      96



that the trading price of the Class A Stock will stabilize at the post-split
price level and that this will assist in maintaining (but will not guarantee)
the continued listing of the Class A Stock on the NYSE. In addition, if
approved, the Reverse Stock Split will result in some stockholders owning
"odd-lots" of less than 100 shares of Class A Stock or Class B Stock.
Brokerage commissions and other costs of transactions in odd-lots are
generally higher than the costs of transactions in "round-lots" of even
multiples of 100 shares.

   Shares of Class A and Class B Stock Issued and Outstanding; Options;
Stockholder Rights Plan. The Company is currently authorized to issue a
maximum of 30,000,000 shares of Class A Stock and 2,000,000 shares of Class B
Stock under its Certificate of Incorporation. As of the record date, there
were      shares of Class A Stock issued and outstanding and      shares of
Class B Stock issued and outstanding. Although the number of authorized shares
of Class A Stock and Class B Stock will not change as a result of the Reverse
Stock Split, the number of shares of Class A Stock and the number of shares of
Class B Stock issued and outstanding will each be reduced to a number that
will be approximately equal to the number of shares of Class A Stock and the
number of shares of Class B Stock, respectively, issued and outstanding
immediately prior to the effectiveness of the Reverse Common Stock Split,
divided by five (the reverse split ratio). The number of issued but not
outstanding shares in the treasury of the Company will not be changed.

   With the exception of the decrease in the number of shares of Class A Stock
and Class B Stock issued and outstanding from the Reverse Stock Split and
other than an adjustment (reduction in the aggregate numbers) which may occur
due to cash settlement of fractional shares, the rights of the shares of the
Class A Stock and the Class B Stock prior and subsequent to the Reverse Stock
Split will remain the same. Each share of Class B Stock will continue to be
convertible into one share of Class A Stock under the terms of the Certificate
of Incorporation. In addition, the par value of the Class A Stock and Class B
Stock prior and subsequent to the Reverse Stock Split, will remain the same.
(Proposals 3 and 4 relate to the change in the par value of Class A Stock and
Class B Stock, respectively, and this Proposal 5 is not contingent on either
of those Proposals.) Stockholders' equity will remain unchanged due to the
reverse split except for the effects of any cash payments for fractional
shares, described below.

   The number shares of Class A Stock and Class B Stock reserved for issuance
upon exercise of the outstanding options and the exercise price of such
options will be appropriately adjusted pursuant to the authorization in the
Company's option plans to give effect to the Reverse Stock Split upon its
effectiveness. In addition, the appropriate adjustments under the terms of the
Company's Shareholder Rights Plan, dated as of February 13, 1998, will be made
to the number of shares and price of such shares which may be purchased under
the Shareholder Rights Plan to give effect to the Reverse Stock Split upon its
effectiveness.

   Increase of Shares of Common Stock for Future Issuance. As a result of the
Reverse Stock Split, there will be a decrease in the number of shares of Class
A Stock and Class B Stock issued and outstanding, and an associated increase
in the number of authorized shares that are unissued and available for future
issuance after the Reverse Stock Split (the "Increased Available Common
Shares"). The Board could issue the Increased Available Common Shares for any
proper corporate purpose, including, among others, future financing
transactions, without stockholder approval.

   Because the Reverse Stock Split will create the Increased Available Common
Shares, the Reverse Stock Split may be construed as having an anti-takeover
effect. Although neither the Board nor the management of the Company views the
Reverse Stock Split as an anti-takeover measure, the Company could use the
Increased Available Common Shares to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company.

   Effective Time of the Reverse Stock Split. The Reverse Stock Split, if
approved by the Company's stockholders, would become effective upon the filing
with the Secretary of State of the State of Delaware of the Reverse Stock
Split Amendment (the "Effective Time"). It is expected that such filing will
take place shortly after the date of the first or the first two of the
contemplated cash distributions to stockholders after the Closing of the sale
of assets to Hexagon (if Proposal 1 is approved by the stockholders). However,
the exact timing of

                                      97



the filing of the Reverse Stock Split Amendment will be determined by the
Board, after consultation with and the approval of the NYSE, based upon its
evaluation as to when such action will be most advantageous to the Company and
its stockholders, and the Board reserves the right to cause the filing to be
made earlier after the date of stockholder approval or delay the filing for up
to twelve months following stockholder approval thereof. In addition, the
Board reserves the right, notwithstanding stockholder approval and without
further action by the stockholders, to elect not to proceed with the Reverse
Stock Split Amendment if, at any time prior to filing the Reverse Stock Split
Amendment, the Board, in its sole discretion, determines, after consultation
with the NYSE, that it is no longer in the best interests of the Company and
its stockholders.

   Exchange of Share Certificates; No Fractional Shares. A holder of Class A
Stock or Class B Stock will be entitled to receive a whole number of the same
class of shares plus a fraction of a share if the number of shares of Class A
Stock or Class B Stock held by the holder prior to the Reverse Stock Split is
not evenly divisible by five. However, no certificate or scrip representing
fractional shares of Class A Stock or Class B Stock will be issued. Fractional
share interests in Class A Stock and Class B Stock resulting from the Reverse
Stock Spilt will be terminated at the Effective Time and such fractional share
interests will have no right to share in the assets, cash distributions or
future growth of the Company. Stockholders entitled to receive a fractional
share of Class A Stock or Class B Stock will, instead, receive a cash payment
(the "Fractional Share Payment") in U.S. dollars equal to the product of: (a)
the fractional share times the average of the daily average of the high and
low price per share of Class A Stock on the NYSE for the five trading days
immediately preceding the Effective Time; and (b) five (the fractional share
value is multiplied by the reverse split ratio to adjust the value to a post-
split basis). Those persons will be entitled to receive their Fractional Share
Payment upon surrender of their stock certificates as described below.

   The Company will notify holders of Class A Stock and Class B Stock of the
Effective Time and will furnish the holders of record of shares of Class A
Stock and Class B Stock, as the case may be, at the close of business on such
effective date with a letter of transmittal for use in exchanging
certificates. The holders of Class A Stock and Class B Stock will be required
to promptly mail their certificates representing shares of Class A Stock or
Class B Stock, as the case may be, to the Transfer Agent, in order that new
certificates giving effect to the Reverse Stock Split may be issued and
Fractional Share Payments. STOCKHOLDERS SHOULD NOT SEND THEIR STOCK
CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE A TRANSMITTAL FORM.

   Commencing with the Effective Time, subject to the treatment of fractional
interests as described above, previously outstanding certificates representing
shares of Class A Stock and Class B Stock will be deemed for all purposes to
represent a fraction of the number of shares previously represented thereby
equal to the product of the number of shares held prior to the Effective Time
after the Reverse Stock Split divided by the five (the reverse split ratio),
except that the holder of such unexchanged certificates will not be entitled
to receive any distributions payable by the Company (including any cash
distributions which may become payable if Proposal 1 is approved) after the
Effective Time, until the old certificates have been surrendered. Such
distributions, if any, will be accumulated and, at the time of surrender of
the old certificates, all such unpaid distributions will be paid without
interest.

   No service charge will be payable by stockholders in connection with the
exchange of certificates, all costs of which will be borne and paid by the
Company.

   In the event that the reduction in par value per share of Class A Stock or
Class B Stock under Proposal 3 and/or Proposal 4 are approved, the par value
of the Class A Stock and/or Class B Stock, as applicable, before and after
giving effect to the Reverse Stock Amendment will be the par value of the
Class A Stock and/or Class B Stock after giving effect to those amendments.

   No Dissenter's Rights. Any of our stockholders who do not approve the
Reverse Stock Split Amendment (including the payment of any Fractional Share
Payment) are not entitled to appraisal or dissenter's rights with respect to
such matters under Delaware law or the Company's Certificate of Incorporation.

                                      98


   Certain Federal Income Tax Consequences. A summary of the federal income
tax consequences of the Reverse Stock Split as contemplated in this Proposal
is set forth in the paragraph below. The discussion is based on the present
federal income tax law. The discussion is not intended to be, nor should it be
relied on as, a comprehensive analysis of the tax issues arising from or
relating to the proposed reverse stock split. Income tax consequences to
stockholders may vary from the federal tax consequences described generally
below. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE EFFECT OF
THE CONTEMPLATED REVERSE STOCK SPLIT UNDER APPLICABLE FEDERAL, STATE AND LOCAL
INCOME TAX LAWS.

   The proposed Reverse Stock Split will reconstitute a "recapitalization" to
the Company and its stockholders to the extent that issued shares of Class A
Stock and Class B Stock are exchanged for a reduced number of shares of Class
A Stock or Class B Stock, as applicable. Therefore, neither the Company nor
its stockholders will recognize any gain or loss for federal income tax
purposes as a result of the reverse stock split, except that a stockholder who
receives cash in lieu of receiving fractional shares of Class A Stock or Class
B Stock, as applicable, will be treated as selling such fractional shares and
will recognize a capital gain or loss equal to the difference between the cash
received and the basis of such fractional shares.

   The shares of Class A Stock or Class B Stock, as applicable, to be issued
to each stockholder will have an aggregate basis, for computing gain or loss,
equal to the aggregate basis of the shares of such stock held by such
stockholder immediately prior to the Effective Time reduced by the basis, if
any, allocated to fractional shares that are treated as sold. A stockholder's
holding period for the shares of Class A Stock or Class B Stock, as
applicable, to be issued will include the holding period for such shares held
immediately prior to the Effective Time if the shares of such stock were held
by the stockholder as capital assets on the Effective Time of the Reverse
Stock Split.

   Vote Required. A majority vote of the entitled votes of the shares of the
Class A Stock and Class B Stock outstanding on the record date, voting
together as a single class, is required to approve this Proposal 5. As part of
this proposal, the Board has the authority, consistent with Delaware law, to
abandon the Reverse Stock Split at any time prior to its effectiveness if it
determines that the Reverse Stock Split is not in the best interests of the
Company or its stockholders. Stockholders are urged to read in its entirety
the Reverse Stock Split Amendment attached as Annex E to the Proxy Statement.

   Recommendation. The Board of Directors unanimously recommends that the
stockholders vote FOR approval of the proposed amendment to the Certificate of
Incorporation under this Proposal 5, providing for a one-for-five reverse
stock split of the outstanding shares of the Company's Class A Stock and Class
B Stock.

                                      99



                              OTHER MATTERS

   If sufficient votes in favor of Proposals 1, 3, 4 and/or 5 are not received
by the time scheduled for the Brown & Sharpe Special Meeting, the persons
named as proxies may propose one or more adjournments of the Brown & Sharpe
Special Meeting for a period of not more than 30 days to permit further
solicitation of proxies relating to Proposal 1, 3, 4 and/or 5 as the case may
be. The persons named as proxies will vote in favor of such adjournment
(relating to Proposal 1, 3, 4 and/or 5 as the case may be) those proxies which
authorize them to vote in favor of Proposal 1, 3, 4 and/or 5 as the case may
be. They will vote against any such adjournment (relating to Proposal 1, 3, 4
and/or 5 as the case may be) those proxies which direct them to vote against
Proposal 1, 2, 3, 4 and/or 5 as the case may be. Any such adjournment will
require the affirmative vote of a majority of the votes properly cast on the
questions in person or by proxy at the session of the Brown & Sharpe Special
Meeting to be adjourned. The costs of any such additional solicitation and of
any adjourned session will be borne by Brown & Sharpe.

   It is not expected that any matters other than those described in this
Proxy Statement will be brought before the Brown & Sharpe Special Meeting. If
any other matters are presented, however, it is the intention of the persons
named in the Brown & Sharpe proxy to vote the proxy in accordance with the
discretion of the persons named in such proxy.

                           INDEPENDENT AUDITORS

   The consolidated financial statements of the Company at December 31, 2000
and 1999 and for each of the three years in the period ended December 31, 2000
appearing in this Proxy Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority
of such firm as experts in accounting and auditing.

                          AVAILABLE INFORMATION

   We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, which requires us to file reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
You may inspect and request copies of our reports, proxy statements and other
information filed by us at the public reference facilities at the SEC's office
at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
at the SEC's Regional Office at Seven World Trade Center, Suite 1300, New
York, New York 10048 and at the SEC's Regional Office at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You may also obtain a copy of
such material from the Public Reference Section of the SEC at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed
rates. Our reports, proxy statements and other information can also be
inspected and copied at the offices of the New York Stock Exchange, 11 Wall
Street, New York, New York 10005 or be accessed electronically by means of the
SEC's home page on the Internet at http://www.sec.gov.

                                      100



                   BROWN & SHARPE MANUFACTURING COMPANY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                          Page
                                                                          ----
                                                                       
Brown & Sharpe Manufacturing Company:

Report of Independent Accountants........................................  F-2

Consolidated Statements of Operation for the Years Ended December 31,
 2000, 1999 and 1998.....................................................  F-3

Consolidated Balance Sheets as of December 31, 2000 and 1999.............  F-4

Consolidated Statements of Cash Flows for the Years Ended December 31,
 2000, 1999 and 1998.....................................................  F-5

Consolidated Statements of Shareowners' Equity for the Years Ended
 December 31, 2000, 1999 and 1998........................................  F-6

Notes to Consolidated Financial Statements...............................  F-7

Metrology Business:

Statements of Operations for the Years Ended December 31, 2000, 1999 and
 1998 (unaudited)........................................................ F-28

Balance Sheets as of December 31, 2000 and 1999 (unaudited).............. F-29

Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and
 1998 (unaudited)........................................................ F-30

Notes to the financial statements........................................ F-31


                                      F-1


                        REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Directors
 of Brown & Sharpe Manufacturing Company

   We have audited the accompanying consolidated balance sheets of Brown &
Sharpe Manufacturing Company as of December 31, 2000 and 1999, and the related
consolidated statements of operations, shareowners' equity, and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Brown &
Sharpe Manufacturing Company at December 31, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.

   The accompanying financial statements have been prepared assuming that
Brown & Sharpe Manufacturing Company will continue as a going concern. As more
fully described in Note 3, the Company has an operating loss and has not
complied with certain covenants of loan agreements. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3.
The financial statements do not include any adjustments to reflect the
possible future effects of the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.

   As discussed in Note 2 to the financial statements, in 2000 the Company
changed its method of accounting for revenue recognition.

                                          /s/ ERNST & YOUNG LLP

Providence, Rhode Island
February 15, 2001



                      BROWN & SHARPE MANUFACTURING COMPANY

                     CONSOLIDATED STATEMENTS OF OPERATIONS

             For the Years Ended December 31, 2000, 1999, and 1998
                 (dollars in thousands, except per share data)



                                                    2000      1999      1998
                                                  --------  --------  --------
                                                      (Restated Note 5)
                                                             
Sales...........................................  $280,007  $321,388  $339,030
Cost of goods sold (Note 4).....................   191,079   233,622   223,999
Research and development expense................    11,657     8,783    10,523
Selling, general and administrative expense.....    79,447    84,999    84,895
Refinancing fees................................     3,615       --        --
Impairment of partially-owned affiliate (Note
 5).............................................     5,845       --        --
Restructuring charge (benefit) (Note 4).........    (4,001)   25,858     ( 896)
                                                  --------  --------  --------
  Operating (loss) profit.......................    (7,635)  (31,874)   20,509
Interest expense................................     9,029     7,384     6,164
Other income, net...............................       642       515       949
                                                  --------  --------  --------
  (Loss) income from continuing operations
   before income taxes and cumulative effect of
   change in accounting principle...............   (16,022)  (38,743)   15,294
Income tax provision............................     2,800     2,350     3,365
                                                  --------  --------  --------
  (Loss) income from continuing operations
   before cumulative effect of change in
   accounting principle.........................   (18,822)  (41,093)   11,929
Discontinued operations:
  Loss from operations..........................    (4,849)   (1,781)      --
  Loss on disposal..............................    (6,237)      --        --
                                                  --------  --------  --------
                                                   (11,086)   (1,781)      --
                                                  --------  --------  --------
(Loss) income before cumulative effect of change
 in accounting principle........................   (29,908)  (42,874)   11,929
Cumulative effect of change in accounting
 principle, net of income taxes (Note 2)........   (27,401)      --        --
                                                  --------  --------  --------
Net (loss) income...............................  $(57,309) $(42,874) $ 11,929
                                                  ========  ========  ========
Net (loss) income per common share, basic from
 continuing operations, before cumulative effect
 of change in accounting principle (Note 10)....  $  (1.37) $  (3.06) $   0.89
  Discontinued operations.......................      (.81)     (.13)      --
  Cumulative effect of change in accounting
   principle....................................     (2.00)      --        --
                                                  --------  --------  --------
Net (loss) income per common share, basic.......  $  (4.18) $  (3.19) $   0.89
                                                  ========  ========  ========
Net (loss) income per common share, diluted,
 from continuing operations before cumulative
 effect of change in accounting principle (Note
 10)............................................  $  (1.37) $  (3.06) $   0.88
  Discontinued operations.......................      (.81)     (.13)      --
  Cumulative effect of change in accounting
   principle....................................     (2.00)      --        --
                                                  --------  --------  --------
Net (loss) income per common share, diluted.....  $  (4.18) $  (3.19) $   0.88
                                                  ========  ========  ========


    The accompanying notes are an integral part of the financial statements.

                                      F-3


                      BROWN & SHARPE MANUFACTURING COMPANY

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 2000 and 1999
                 (dollars in thousands, except per share data)



                                                             2000       1999
                                                           ---------  --------
                                                                
                          ASSETS
Current assets:
  Cash and cash equivalents............................... $  27,213  $ 36,643
  Accounts receivable, net of allowances for doubtful
   accounts of $4,461 and $4,759..........................    35,094    88,300
  Inventories.............................................    94,394    68,310
  Prepaid expenses and other current assets...............    11,548     5,553
                                                           ---------  --------
      Total current assets................................   168,249   198,806
Property, plant and equipment:
  Land....................................................     3,990     6,510
  Buildings and improvements..............................    33,181    35,465
  Machinery and equipment.................................    91,621    94,011
                                                           ---------  --------
                                                             128,792   135,986
Less-accumulated depreciation.............................    87,031    88,667
                                                           ---------  --------
                                                              41,761    47,319
Goodwill, net.............................................     8,488    11,145
Other assets (Note 11)....................................    32,147    44,907
                                                           ---------  --------
                                                           $ 250,645  $302,177
                                                           =========  ========

           LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
  Notes payable to banks.................................. $  38,956  $ 41,110
  Accounts payable........................................    45,431    41,916
  Accrued expenses and income taxes.......................    63,009    52,504
  Current portion of long-term debt.......................    54,404    53,585
                                                           ---------  --------
      Total current liabilities...........................   201,800   189,115
Long-term debt (Note 12)..................................    10,772    15,445
Long-term liabilities (Note 13)...........................    26,930    26,083
Commitments and Contingencies (Notes 9 and 17)............       --        --
Shareowners' Equity:
  Preferred stock, $1 par value; authorized 1,000,000
   shares; none issued....................................       --        --
  Common stock:
    Class A, par value $1; authorized 30,000,000 shares;
     issued shares in 13,328,774 in 2000 and 13,010,623 in
     1999.................................................    13,329    13,011
    Class B, par value $1; authorized 2,000,000 shares;
     issued 501,703 shares in 2000 and 504,414 shares in
     1999.................................................       502       504
  Additional paid-in capital..............................   113,473   113,085
  Retained deficit........................................  (101,543)  (44,234)
  Accumulated other comprehensive loss....................   (14,163)  (10,377)
  Treasury stock; 42,592 shares in 2000 and 1999, at
   cost...................................................      (455)     (455)
                                                           ---------  --------
Total shareowners' equity.................................    11,143    71,534
                                                           ---------  --------
                                                           $ 250,645  $302,177
                                                           =========  ========


    The accompanying notes are an integral part of the financial statements.

                                      F-4


                      BROWN & SHARPE MANUFACTURING COMPANY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

             For the Years Ended December 31, 2000, 1999, and 1998
                             (dollars in thousands)



                                                     2000      1999      1998
                                                   --------  --------  --------
                                                              
Cash Provided By Operations:
Net (Loss) Income................................. $(57,309) $(42,874) $ 11,929
Cumulative effect of change in accounting
 principle........................................   27,401       --        --
                                                   --------  --------  --------
                                                    (29,908)  (42,874)   11,929
Adjustment for Noncash Items:
  Provision (benefit) for restructuring...........   (2,257)   30,506      (896)
  Depreciation and amortization...................   11,593    13,039    11,132
  Pension charges.................................      543     5,453     2,360
  Deferred income taxes...........................    1,484     3,691     1,035
  Termination indemnities.........................    1,033     1,134       336
  Provision for impaired assets...................   11,960       --        --
  Other noncash items.............................    1,654     1,123       246
Changes in Working Capital:
  Decrease (increase) in accounts receivable......   12,169     7,154    (1,224)
  (Increase) decrease in inventories..............   (4,112)    3,644    (6,051)
  (Increase) decrease in prepaid expenses and
   other current assets...........................   (1,527)    1,064      (181)
  (Decrease) increase in accounts payable and
   accrued expenses...............................   (2,945)   (8,659)   (1,325)
                                                   --------  --------  --------
    Net Cash (Used in) Provided by Operations.....     (313)   15,275    17,361
Investment Transactions:
Acquisitions, net of cash acquired................      --     (9,241)      --
Capital expenditures..............................   (6,105)   (9,144)  (17,160)
Proceeds from sale of fixed assets................    3,816       --        --
Other investing activities........................      --     (5,633)   (4,764)
                                                   --------  --------  --------
    Net Cash Used in Investment Transactions......   (2,289)  (24,018)  (21,924)
Financing Transactions:
(Decrease) increase in short-term debt............   (1,566)   41,822       --
Proceeds from issuance of long-term debt..........      --        --        591
Principal payments of long-term debt..............   (3,280)   (4,109)   (2,938)
Other financing transactions......................      --        --        278
                                                   --------  --------  --------
    Net Cash (Used in) Provided by Financing
     Transactions.................................   (4,846)   37,713    (2,069)
Effect Of Exchange Rate Changes on Cash...........   (1,982)   (4,617)   (1,536)
                                                   --------  --------  --------
Cash and Cash Equivalents:
(Decrease) increase during the year...............   (9,430)   24,353    (8,168)
Beginning balance.................................   36,643    12,290    20,458
                                                   --------  --------  --------
Ending balance.................................... $ 27,213  $ 36,643  $ 12,290
                                                   ========  ========  ========
Supplementary Cash Flow Information:
Interest paid..................................... $  7,546  $  6,703  $  3,856
                                                   ========  ========  ========
Taxes paid........................................ $  2,300  $  2,386  $  1,975
                                                   ========  ========  ========


    The accompanying notes are an integral part of the financial statements.

                                      F-5


                      BROWN & SHARPE MANUFACTURING COMPANY

                 CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY

             For the Years Ended December 31, 2000, 1999, and 1998
                             (dollars in thousands)



                                                         Accumulated,
                          Common                             Other
                          Stock   Additional             Comprehensive
                          $1 Par   Paid-In    Retained      Income     Treasury  Total
                          Value    Capital    Deficit        (Loss)     Stock    Equity
                         -------- ---------- ----------  ------------- -------- --------
                                                              
Balance December 31,
 1997................... $ 13,335 $ 111,772  $  (13,289)   $   2,603    $ (455) $113,966
Net Income..............      --        --       11,929          --        --     11,929
Foreign Currency
 Translation
 Adjustment.............      --        --          --         2,925       --      2,925
                                                                                --------
Comprehensive Income....                                                          14,854
                                                                                --------
ESOP Contribution.......       52       458         --           --        --        510
Stock Options
 Exercised..............       47       278         --           --        --        325
                         -------- ---------  ----------    ---------    ------  --------
Balance December 31,
 1998...................   13,434   112,508      (1,360)       5,528      (455)  129,655
                         -------- ---------  ----------    ---------    ------  --------
Net Loss................      --        --      (42,874)         --        --    (42,874)
Foreign Currency
 Translation
 Adjustment.............      --        --          --       (15,905)      --    (15,905)
                                                                                --------
Comprehensive Loss......                                                         (58,779)
                                                                                --------
ESOP Contribution.......       81       577         --           --        --        658
                         -------- ---------  ----------    ---------    ------  --------
Balance December 31,
 1999...................   13,515   113,085     (44,234)     (10,377)     (455)   71,534
                         -------- ---------  ----------    ---------    ------  --------
Net Loss................      --        --      (57,309)         --        --    (57,309)
Foreign Currency
 Translation
 Adjustment.............      --        --          --        (3,786)      --     (3,786)
                                                                                --------
Comprehensive Loss......                                                         (61,095)
                                                                                --------
ESOP Contribution.......      316       388         --           --        --        704
                         -------- ---------  ----------    ---------    ------  --------
Balance December 31,
 2000................... $ 13,831 $ 113,473  $ (101,543)   $ (14,163)   $ (455) $ 11,143
                         ======== =========  ==========    =========    ======  ========



    The accompanying notes are an integral part of the financial statements.

                                      F-6


                     BROWN & SHARPE MANUFACTURING COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (dollars in thousands, except share and per share data)

1. SIGNIFICANT ACCOUNTING POLICIES

 Business

   Brown & Sharpe Manufacturing Company is a multinational manufacturer of
metrology products, which include manual and computer-controlled high
precision machines, mechanical and electronic measuring and inspection tools,
and until its discontinuance in 2000 (see Note 5), surface inspection systems.
The principal markets for its products are North America, Europe, Asia, South
America, and the Middle East. The primary end user markets for its products
are the automotive, aerospace, industrial machinery, electronics, and computer
industries.

 Basis of Presentation

   The consolidated financial statements include the accounts of the Company
and all subsidiaries. Intercompany transactions have been eliminated from the
consolidated financial statements. Investments in 20% to 50% partially-owned
affiliates are accounted for on the equity method.

   The preparation of the consolidated 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 and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

   Certain account balances for prior years have been reclassified to conform
with the 2000 presentation.

 Inventories

   Inventories are stated at the lower of cost or market. Cost is determined
principally on a last-in, first-out (LIFO) basis for all domestic inventories
and principally on a first-in, first-out (FIFO) basis for inventories outside
the United States. Provision is made to reduce slow-moving and obsolete
inventories to net realizable values. Current FIFO cost exceeds the LIFO value
of inventories by approximately $15,380 and $12,532 at December 31, 2000 and
1999, respectively. Year-end inventories valued under the LIFO method were
$32,779 in 2000 and $17,991 in 1999.

   The composition of inventory at year end was as follows:



                                                                2000     1999
                                                              -------- --------
                                                                 
   Parts, raw materials and supplies......................... $ 31,563 $ 29,591
   Work in progress..........................................   14,731   14,274
   Finished goods............................................   48,100   24,445
                                                              -------- --------
                                                              $ 94,394 $ 68,310
                                                              ======== ========


 Property, Plant and Equipment

   Property, plant and equipment is carried at cost and is being depreciated
principally on a straight-line basis over the estimated useful lives of the
assets which generally range from 20 to 40 years for buildings and
improvements and from 3 to 12 years for machinery and equipment. Depreciation
expense was $7,511, $9,468 and $7,624 in 2000, 1999, and 1998, respectively.
Repair and maintenance costs are charged against income while renewals and
betterments are capitalized as additions to the related assets. Retirements,
sales, and disposals of assets are recorded by removing the cost and
accumulated depreciation from the asset and accumulated depreciation accounts
with any resulting gain or loss reflected in income. At December 31, 2000,
land and buildings with a net book value of $13,777 were pledged as collateral
for mortgage loans of $11,509.

                                      F-7


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Goodwill and Other Assets

   Goodwill, which is net of accumulated amortization of $5,374 in 2000 and
$4,700 in 1999, is being amortized on a straight-line basis over periods
ranging from 7 to 20 years. In 1999, the Company reduced goodwill $250 to
reflect a reduction of a deferred tax liability recorded as part of a purchase
price adjustment for a business combination occurring in prior years.
Amortization expense amounted to $674 in 2000 and $670 in 1999, and $583 in
1998.

   Other assets includes software and software development costs, along with
certain intangible assets, which are being amortized on a straight-line basis
over periods ranging from 3 to 10 years. Amortization expense for these assets
was $2,543, $2,901, and $2,925, in 2000, 1999, and 1998, respectively.
Accumulated amortization for these assets was $16,445 in 2000 and $13,902 in
1999.

 Foreign Currency

   Assets and liabilities of those subsidiaries located outside the United
States whose cash flows are primarily in local currencies are translated at
year-end exchange rates, and income and expense items are translated at
average monthly rates. Translation gains and losses are accounted for in a
separate shareowners' equity account "accumulated other comprehensive loss."

   There were no forward exchange contracts outstanding at December 31, 2000
and 1999. A transaction gain of $47 was recorded in 1999 while transaction
losses of $2,786 and $508 were recorded in 2000 and 1998, respectively.

 Credit Risk

   Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade receivables. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to trade receivables are limited due to the Company's
large number of customers and their dispersion across many different
industries and countries worldwide. At December 31, 2000 and 1999, the Company
had no significant concentrations of credit risk.

 Stock Incentive Plans

   The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees" (see Footnote
8 for further details).

 Income Taxes

   The Company provides for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires an asset and liability
based approach in accounting for income taxes.

   Deferred income tax assets and liabilities are recorded to reflect the tax
consequences on future years of temporary differences of revenue and expense
items for financial statement and income tax purposes. Valuation allowances
are provided against assets which are not likely to be realized. Federal
income taxes are not provided on the unremitted earnings of foreign
subsidiaries since it has been the practice and is the intention of the
Company to continue to reinvest these earnings in the business outside the
United States.

                                      F-8


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Cash and Cash Equivalents

   Cash and cash equivalents are comprised of cash on hand and deposits in
banks with a maturity of three months or less. The carrying amount of cash and
cash equivalents approximates fair value.

 Advertising Cost

   The Company expenses advertising costs as incurred. Advertising expense for
the three years ended December 31, 2000 was approximately $3,800, $4,100, and
$4,300, respectively.

2. ACCOUNTING CHANGE

   In 2000, the Company adopted SEC Staff Accounting Bulletin No. 101 ("SAB
101"). As a result of adopting SAB 101, the Company changed the way it
recognizes revenue for machines sold to customers. Prior to the adoption of
SAB 101, the Company recognized revenue when the machines were shipped and
title passed to the customer. Effective as of January 1, 2000, the Company
recognizes revenue for machines sold to customers once the performance of
machines is accepted by the customers. The effect of applying this change in
accounting principle was to decrease 2000 sales $8,500 and increase the 2000
net loss by $4,400 ($0.32 per share). In addition, the results of operations
for the year ended December 31, 2000 includes a charge of $27,401 (net of an
income tax benefit of $600), or $2.00 per share.

   Adopting this new method of revenue recognition for 2000, 1999 and 1998,
would have produced the following pro forma results:



                                                     2000      1999     1998
                                                   --------  --------  -------
                                                              
As reported, before the cumulative effect of the
 accounting change
  Net (loss) income............................... $(29,908) $(42,874) $11,929
  Net (loss) income per common share, basic....... $  (2.18) $  (3.19) $  0.89
  Net (loss) income per common share, diluted..... $  (2.18) $  (3.19) $  0.88
Pro forma, assuming the accounting change is
 applied retroactively:
  Net (loss) income............................... $(29,908) $(45,677) $ 7,923
  Net (loss) income per common share, basic....... $  (2.18) $  (3.40) $  0.59
  Net (loss) income per common share, diluted..... $  (2.18) $  (3.40) $  0.58


3. GOING CONCERN

   In 2000, the Company incurred a net loss amounting to $57,309, which
included the cumulative effect of a change in accounting principle amounting
to $27,401 (see Note 2). In addition to the operating loss, the Company also
incurred a loss amounting to $3,786 arising from the translation of the
balance sheets of its foreign subsidiaries, which are denominated in foreign
currencies. This loss was recorded as Other Comprehensive Loss and classified
in shareowners' equity. The aggregate effect of the 2000 net loss and the loss
arising from foreign translation reduced the Company's net worth at December
31, 2000 by $61,095.

   The 1999 operating results caused the Company to violate certain of its
loan covenants with several banks who had provided the Company with a $30,000,
three-year syndicated, multi-currency revolving credit facility, which had a
$27,400 balance outstanding at December 31, 2000, and with its private
placement lenders who had provided $50,000 of long-term financing in 1997 (see
Note 12). The 1999 operating loss caused the Company to violate the debt to
EBITDA ratio and debt to net worth ratio covenants, as well as certain other
covenants. In November 1999, the Company's lenders granted waivers curing the
financial covenant defaults incurred under its loan agreements through the end
of 1999. The lending agreements were also amended at that time to add

                                      F-9


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

certain other covenants, including a requirement that the Company complete a
subordinated debt financing acceptable to the lenders by January 31, 2000. The
Company was unable to complete a refinancing by January 31, 2000. On February
7, 2001, the Company's lenders granted waivers curing the requirements that
the Company complete a subordinated debt financing and amended the maturity
date of the revolving credit facility to be the earlier of the completion of
the sale to Hexagon or April 30, 2001.

   On November 16, 2000, the Company entered into an Acquisition Agreement
with Hexagon, A.B. of Stockholm, Sweden, in which Hexagon will purchase
substantially all of the Company's world-wide Metrology Business. The Company
will retain ownership of its software development business, BSIS, which is
focused on the commercialization of new metrology software, and certain real
estate in the United States and the United Kingdom. The purchase price for the
Metrology Business is $160,000 in cash plus an additional contingent cash
payment of up to $20,000, based on the operating profit of its Metrology
Business (as defined) for the year ended December 31, 2000, subject to an
adjustment up or down depending on the net cash position (net of indebtedness)
of the subsidiaries being transferred to Hexagon at the closing. Hexagon will
also pay $2,500 at closing and an additional $4,500 over three years after the
closing to acquire a minority interest in BSIS.

   The Company intends to pay off at the closing all of the Company's
outstanding debt to its banks and private placement lenders. The Company will
also retain various liabilities which it will settle shortly after the
closing. The Company expects to use a substantial amount of the net proceeds
to fund a distribution to its shareowners.

   The transaction is subject to shareowner approval and a meeting to vote on
the transaction is expected to be held in March or April 2001. If the
shareowners do not approve the transaction, the Company must seek other
strategic alternatives, including sale or merger of the Company in order to
satisfy its senior lenders because the Company is unable to pay its loans if
they are called and bankruptcy reorganization could be one of the possible
consequences.

   The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments relating to the recoverability and
classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.

4. RESTRUCTURING CHARGE

   During 1999, the Company implemented a plan in which it reorganized each of
its significant operating divisions. A portion of the plan provided for the
reorganization of the manufacturing and administrative operations of its
Precision Measuring Instruments Division ("PMI") by consolidating all of PMI's
European manufacturing sites into one location in Renens, Switzerland and was
designed to provide for greater production and administrative efficiencies.
The PMI reorganization eliminated four factories in Europe. The total charge
related to the PMI Division amounted to approximately $17,200 during 1999. The
1999 reorganization plan also included a strategy for the Measuring Systems
Division ("MSD") in which a focus factory mission would be implemented, where
each factory would function as a center of excellence with a goal of taking
advantage of product strengths in each of the manufacturing sites. The MSD
plan also provided for cost improvements in the R&D, selling, and service
areas. MSD's portion of the total restructuring charge was approximately
$10,700. Finally, the Company also reorganized the Custom Metrology Division
("CMD") located in Telford, England by exiting certain non-core products and
eliminating operating cost that was related to those products. The
restructuring charge applicable to CM amounted to approximately $7,900. Total
charges for Corporate were approximately $2,500.

                                     F-10


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   As a result of the 1999 Corporate-wide restructuring, the Company recorded
restructuring charges totaling $36,798 net of a $1,470 tax benefit ($2.73 per
share). The 1999 restructuring charge, as well as the 1997 charge discussed
below, included costs associated with involuntary employee termination
benefits for employees (415 in 1999 and 160 in 1997), writedowns of inventory
to net realizable value, writedowns of impaired fixed assets and certain
intangible assets to fair value, and other restructuring costs.

   In 1997, the Company also implemented a reorganization plan in which it
restructured certain of its European operations, along with other less
significant changes in other parts of the world. As a result of the
restructuring, the Company recognized a charge in 1997 amounting to $16,220
($1.22 per share).

   During 2000, the Company realized a net gain of approximately $1,800
arising from the sale of real estate located in the United Kingdom that was
closed as a result of the 1999 restructuring of the PMI division.

   The 1997 restructuring plan is completed and the 1999 plan is completed at
all locations except for a small number of employees in Italy will be leaving
in the first half of 2001.

   The following is an analysis of the restructuring charges and reserves for
each plan:

 1997 Restructuring



                          Employee               Fixed Asset
                         Termination                 and
                         Benefits(2)   Inventory Intangible   Other    Total
                         -----------   --------- ----------- -------  -------
                                                       
Balance December 31,
 1997...................   $7,550       $ 5,373    $ 1,647   $ 1,650  $16,220
  Utilized..............   (4,029)       (1,663)    (1,647)   (1,432)  (8,771)
  Other.................     (882)(1)       --         --        --      (882)
                           ------       -------    -------   -------  -------
Balance at December 31,
 1998...................    2,639         3,710        --        218    6,567
  Utilized..............     (992)         (297)       --       (218)  (1,507)
                           ------       -------    -------   -------  -------
Balance at December 31,
 1999...................    1,647 (3)     3,413        --        --     5,060
  Utilized..............     (543)         (610)       --        --    (1,153)
  Other.................     (137)(5)       --         --        --      (137)
                           ------       -------    -------   -------  -------
Balance at December 31,
 2000...................   $  967 (3)   $ 2,803    $   --    $   --   $ 3,770
                           ======       =======    =======   =======  =======


 1999 Restructuring



                          Employee               Fixed Asset
                         Termination                 and
                         Benefits(2)   Inventory Intangible     Other       Total
                         -----------   --------- -----------   -------     --------
                                                            
Balance at January 1,
 1999...................   $   --       $   --     $   --      $   --      $    --
  1999 Charges..........    11,420       12,409      8,767       5,672       38,268
  Utilized..............    (6,307)      (6,275)    (6,485)       (580)     (19,647)
                           -------      -------    -------     -------     --------
Balance December 31,
 1999...................     5,113        6,134      2,282       5,092       18,621
  Utilized..............    (2,699)      (3,940)    (1,799)     (2,544)     (10,982)
  Benefit...............      (600)(6)      --        (483)(7)  (1,037)(7)   (2,120)
                           -------      -------    -------     -------     --------
Balance at December 31,
 2000...................   $ 1,814 (4)  $ 2,194    $   --      $ 1,511 (4) $  5,519
                           =======      =======    =======     =======     ========

- --------
(1) Includes an $896 reversal for employee termination benefits arising from
    changes in final settlement allowances with certain employees due to
    conditions arising in 1998. The remainder of the adjustment is due to
    foreign exchange.

(2) Personnel reductions amounted to 121 in 2000, 257 in 1999 and 159 in 1998.

                                     F-11


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(3) Future cash payments relating to employee termination benefits amount to
    $364 in 2001, $238 in 2002 and $365 thereafter.
(4) Future cash payments relating to employee termination benefits, leases,
    and other restructuring costs amount to $3,140 in 2001, $134 in 2002 and
    $51 thereafter.
(5) Includes a $137 reversal for employee termination benefits arising from
    changes in final settlement allowances with certain employees that were
    different from the amounts expected to be paid at the accrual date.
(6) Includes a $600 reversal for employee termination benefits due to the
    resignation of certain employees before the Company became obligated to
    pay these individuals.
(7) Represents a reversal of $483, $565, and $472 for leasehold improvements,
    lease commitments and the sublease of rental property, respectively, as a
    result of a decision in 2000 to not vacate a plant that was included in
    the 1999 restructuring plan.

5. BUSINESS COMBINATION AND DISCONTINUANCE

   During 1999, management entered into two separate transactions that were
intended to extend the Company's core methodology expertise into new markets.
In June, the Company incorporated Brown & Sharpe's Surface Inspection Systems
("SIS") to acquire substantially all of the assets and assume certain
liabilities of Display Inspection Systems, Inc. and Digital Data Inspection
Systems, Ltd. for cash amounting to $5,400. This acquisition was entered into
to expand the Company's presence in the electronics market (see below). In
August 1999, the Company acquired a 60% interest in QI Tech (subsequently
named Brown & Sharpe/Qianshao ("BSQ") located in the People's Republic of
China for cash amounting to $3,800. The BSQ investment was entered into in
order to expand the Company's presence in the Asian market. Both of these
transactions were accounted for using the purchase method of accounting with
the operating results of these companies included in the Company's
consolidated results of operations beginning on the date of acquisition. The
excess of cost over the estimated value of net assets acquired in these
acquisitions was allocated to goodwill, which amounted to $3,000, and will be
amortized on a straight-line basis over 20 years.

   The unaudited pro forma consolidated results of operations, assuming the
above acquisitions had been made at January 1, 1998, is as follows:



                                                                December 31
                                                             ------------------
                                                               1999      1998
                                                             --------  --------
                                                                 
   Sales.................................................... $325,357  $342,829
   Net (loss) income........................................  (42,452)    9,768
   Net (loss) income per common share:
     Basic.................................................. $  (3.15) $   0.73
     Diluted................................................ $  (3.15) $   0.72


   In the second quarter of 2000, the Board of Directors approved a plan to
discontinue the Electronics Division (ED). As a result of a study to determine
the future of ED, management concluded that the carrying value of ED exceeded
the fair value of these assets and recorded a $7,600 charge to adjust the
carrying value of the impaired assets to fair value. A charge amounting to
$1,100 was recorded in operating results to record inventory at net realizable
value. In February 2001, the Company entered into an agreement to sell ED.
Under the terms of the agreement, the Company is expecting to receive cash
consideration of approximately $2,000, subject to post-closing adjustments.

                                     F-12


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The results of operations of ED have been classified as discontinued
operations and prior periods have been restated. The results of discontinued
operations do not reflect any interest expense or management fees allocated by
the Company. Selected results for ED are as follows:



                                                           2000     1999    1998
                                                         --------  -------  ----
                                                                   
   Revenues............................................. $    385  $ 1,912  $--
   Loss from operations.................................   (4,849)  (1,781)  --
   Loss on disposal.....................................   (6,237)     --    --
                                                         --------  -------  ----
                                                         $(11,086) $(1,781) $--
                                                         ========  =======  ====


   Assets and liabilities, excluding intercompany amounts of ED included in
the consolidated statements of financial position, are as follows:



                                                                    2000   1999
                                                                   ------ ------
                                                                    
   Current assets................................................. $2,313 $2,863
   Total assets...................................................  2,313  8,334
   Current liabilities............................................  1,120  1,242
   Total liabilities..............................................  1,120  1,242


   In the third quarter of 2000, management decided to discontinue the
development of noncontact sensor technology. As a result of this decision, the
Company wrote-off its investment in its joint venture, Metroptic Technology,
Ltd. and certain other costs that were dedicated to the development of the
noncontact technology and incurred a charge amounting to $5,800. This
investment was part of the MS segment.

6. INCOME TAXES

   (Loss) income from continuing operations before income taxes and the
cumulative effect of a change in accounting principle consisted of the
following:



                                                      2000      1999     1998
                                                    --------  --------  -------
                                                               
   Domestic.......................................  $(23,865) $(16,325) $(4,418)
   Foreign........................................     7,843   (22,418)  19,712
                                                    --------  --------  -------
     (Loss) income from continuing operations
      before income taxes and cumulative effect of
      change in accounting principle..............  $(16,022) $(38,743) $15,294
                                                    ========  ========  =======


   The following table reconciles the income tax provision (benefit) at the
U.S. statutory rate to that in the financial statements:



                                                     2000      1999     1998
                                                    -------  --------  ------
                                                              
Taxes computed at 34%.............................. $(5,448) $(13,173) $5,200
Goodwill amortization..............................      92       106     106
Local foreign tax..................................     776     1,474   1,267
Additional tax on foreign income...................     --        --      789
State taxes (net)..................................      67        73      99
Net operating losses and other losses..............   7,583       365  (4,389)
Restructuring charge...............................     --     10,513     --
Valuation allowance recorded for deferred tax
 asset.............................................     --      3,106     --
Other (net)........................................    (270)     (114)    293
                                                    -------  --------  ------
  Income tax provision............................. $ 2,800  $  2,350  $3,365
                                                    =======  ========  ======


                                     F-13


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The income tax provision (benefit) from continuing operations before the
cumulative effect of the change in accounting principle consisted of the
following:



                                                         2000   1999     1998
                                                        ------ -------  -------
                                                               
Current:
  Federal.............................................. $  --  $(2,482) $ 1,355
  State................................................    101     110      150
  Foreign..............................................  1,215   1,031      825
                                                        ------ -------  -------
                                                         1,316  (1,341)   2,330
Deferred:
  Federal..............................................    --    2,933   (1,663)
  Foreign..............................................  1,484     758    2,698
                                                        ------ -------  -------
                                                         1,484   3,691    1,035
                                                        ------ -------  -------
Income tax provision................................... $2,800 $ 2,350  $ 3,365
                                                        ====== =======  =======


   Provision has not been made for U.S. taxes on $59,635 of cumulative
undistributed earnings of foreign subsidiaries as those earnings are intended
to be permanently reinvested.

   The components of the Company's deferred tax assets and liabilities as of
December 31, 2000 and 1999 are as follows:



                                                                 2000    1999
                                                                ------- -------
                                                                  
Deferred tax assets:
  Inventory reserves........................................... $ 5,794 $ 5,457
  Warranty expense.............................................     697     800
  Allowance for doubtful accounts..............................     797     708
  Depreciation.................................................   1,407   1,350
  Tax credit and loss carryforwards............................  42,408  34,911
  SAB 101......................................................  10,864     --
  Restructuring reserves.......................................   5,676   8,527
  Other........................................................   9,153   3,542
                                                                ------- -------
    Gross deferred assets......................................  76,796  55,295
Less valuation allowance.......................................  68,331  51,676
                                                                ------- -------
    Deferred tax asset......................................... $ 8,465 $ 3,619
                                                                ======= =======
Deferred tax liabilities:
  Pension expense.............................................. $ 1,913 $ 2,167
  Inventory reserves...........................................   2,885   1,720
  Depreciation.................................................   1,785   1,600
  Other........................................................   6,353   1,671
                                                                ------- -------
    Deferred tax liability..................................... $12,936 $ 7,158
                                                                ======= =======


   A valuation allowance has been established due to the uncertainty of
realizing certain tax credit and loss carryforwards and a portion of the other
deferred tax assets. The Company recorded a $16,655 increase in the valuation
allowance to reflect management's uncertainty regarding the realization of
previously recognized tax loss carryforwards in another tax jurisdiction and
certain other deferred tax assets. The recognition of any future tax benefits
resulting from the reduction of $5,827 of the valuation allowance will reduce
any goodwill related to the DEA acquisition remaining at the time of such
reduction.


                                     F-14


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   For income tax purposes, the Company has operating loss and capital loss
carryforwards of $6,400 and $100, respectively, in the U.K., operating loss
and capital loss carryforwards of $25,800 and $3,700, respectively, in the
U.S. and net operating loss carryforwards of $32,000, $8,800, $5,100, and
$5,500, respectively, in Germany, France, Japan, and Italy. The French,
Japanese, and Italian carryforwards expire between 2001 and 2006. The U.S.
capital loss carryforward expires in 2002 and 2003 and the U.S. net operating
loss carryforward expires in 2018 and 2020. There is no time limit for the
U.K. and German carryforwards.

   The Internal Revenue Service is currently examining the U.S. income tax
returns through 1998. The Company believes it has adequately provided for any
additional tax assessment.

7. OTHER INCOME AND EXPENSE

   Other income (expense), net from continuing operations includes:



                                                         2000   1999    1998
                                                        ------  -----  ------
                                                              
   Interest income..................................... $1,192  $ 901  $1,106
   Equity interest in net loss of less than 50% owned
    investments........................................   (710)  (865)   (566)
   Gain (loss) on sale of fixed assets.................    (57)    27      18
   Other income........................................    217    452     391
                                                        ------  -----  ------
                                                        $  642  $ 515  $  949
                                                        ======  =====  ======


8. INCENTIVE AND RETIREMENT PLANS

   The Company has for many years utilized stock options and other stock-based
awards as part of its overall management incentive compensation programs. The
1989 Equity Incentive Plan ("the '89 Plan") as amended, expired February 24,
1999. On February 12, 1999, the Company adopted the 1999 Equity Incentive Plan
("the '99 Plan").

 Stock Incentive Plans

   Under the provisions of the Company's 1999 Equity Incentive Plan ("the '99
Plan") and the 1989 Equity Incentive Plan ("the '89 Plan"), which has expired
and under which no further awards may be granted, a variety of stock and stock
based incentive awards, including stock options are available to be granted to
eligible key employees of the Company and its subsidiaries. The Plans permit
the granting of stock options which qualify as incentive stock options under
the Internal Revenue Code and non-statutory options which do not so qualify.
Options were granted in 2000 under the "99 Plan to purchase a total of 236,000
shares for a seven-year term, of Class A Common Stock granted at exercise
prices between $1.875 and $2.375 per share. A total of 221,000 of options
granted in 2000 become fully exercisable after April 28, 2007; the remaining
15,000 of options granted in 2000 become fully exercisable after July 31, 2007
(the "Vesting Date") except, however, that options for up to one-third of the
shares shall become exercisable and vest on and after each of the dates that
the Company's thirty-day average closing share price reaches $10.00, $15.00
and $20.00, respectively, at any time prior to the Vesting Date. The exercise
price for Shares covered by options awarded under the '99 Plan were 100% of
the market value on the date such options are granted. The aggregate amount of
shares of Class A or Class B Common Stock, including options, which may be
awarded under the '99 Plan are 1,800,000. Including forfeiture, 919,300 shares
of Class A Common Stock remain available, at December 31, 1999 for issuance
under the '99 Plan in connection with future awards.

   All options granted under the '99 Plan and the '89 Plan become vested upon
a stockholder vote to sell substantially all assets of the Company.

                                     F-15


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Option activity during the past three years is summarized as follows:



                                   2000                     1999                     1998
                         ------------------------ ------------------------ ------------------------
                         Options Weighted-Average Options Weighted-Average Options Weighted-Average
                          (000)   Exercise Price   (000)   Exercise Price   (000)   Exercise Price
                         ------- ---------------- ------- ---------------- ------- ----------------
                                                                 
Outstanding--beginning
 of year................  2,008       $7.16        1,244       $10.05         904       $ 9.69
Granted.................    236        1.91          803         2.51         464        10.12
Exercised...............    --          --           --           --          (47)        6.84
Forfeited or canceled...   (355)       7.85          (39)       12.04         (77)       10.73
                          -----       -----        -----       ------       -----       ------
Outstanding--end of
 year...................  1,889        5.83        2,008       $ 7.16       1,244       $10.05
                          =====                    =====                    =====
Exercisable at end of
 year...................    955        9.77          760       $ 9.57         367       $ 9.54
Weighted-average fair
 value of options
 granted during the
 year...................              $1.65                    $ 1.10                   $ 3.73


   Exercise prices for options outstanding as of December 31, 2000 ranged from
$1.875 to $14.125. The weighted-average remaining contractual life of those
options is 6.10 years.

   The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
No. 123, "Accounting for Stock-Based Compensation" (FAS 123), requires use of
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

   Pro forma information regarding net income and earnings per share is
required by FAS 123, which also requires that the information be determined as
if the Company has accounted for its employee stock options granted subsequent
to December 31, 1994 under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for 2000, 1999, and 1998, respectively: risk-free interest rates of 5.0%,
5.9%, and 5.4%, volatility factors of the expected market price of the
Company's common stock of 128%, 45%, and 35%, and a weighted-average expected
life of the option of 4.25 years. No dividend yield was utilized due to the
fact that the Company does not anticipate that it will pay dividends in the
foreseeable future.

   The Black-Scholes option valuation 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 valuation models require the
input of highly subjective assumptions including the 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.

   For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:



                                                      2000      1999     1998
                                                    --------  --------  -------
                                                               
   Pro forma net (loss) income..................... $(57,765) $(43,934) $10,884
   Pro forma (loss) earnings per share:
     Basic and diluted............................. $  (4.21) $  (3.26) $  0.81



                                     F-16


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Profit Incentive Plan

   Under the provisions of the Company's Amended Profit Incentive Plan as
originally approved in 1979, awards of cash could be made as bonuses to
certain management employees. Plan awards provisions under the Plan in the
amounts of $1,659, $1,152, and $2,194, were made in 2000, 1999, and 1998,
respectively, based on performance objectives for the respective year.

 Long-Term Deferred Cash Incentive Plan

   The Brown & Sharpe Key Employee's Long-Term Deferred Cash Incentive Plan
(the "LTDCIP") provides long-term deferred incentive compensation to key
executive employees of the Company with award credits being established,
subject to certain vesting requirements, in unfunded LTDCIP accounts for each
LTDCIP participant. For 1997 an award pool calculated at 6% of adjusted annual
pre-tax income (as defined in the LTDCIP) was shared by LTDCIP participants,
pro rata based on annual participant salaries. The LTDCIP was amended in 1998
to provide that beginning in 1998 participant award opportunities are
individually determined by the Compensation and Nominating Committee of the
Board of Directors administering the LTDCIP as a percentage of adjusted annual
pre-tax profit. The 2000, 1999, and 1998, consolidated financial statements
contain provisions resulting from awards made under this Plan of $(149), $231,
and $222, respectively.

 Savings Plans

   The Company has 401(k) stock bonus and thrift savings plans for U.S.
employees, which include retirement income features consisting of employer
contributions and employee tax deferred contributions. Contributions under all
plans are invested in professionally managed portfolios and Company stock. The
savings plans' expense for the three years ended December 31, 2000 was $2,052,
$1,994, and $1,858, respectively.

 Stock Ownership Plan

   Under the provisions of the Company's Employee Stock Ownership Plan (ESOP),
the Company may make contributions of common stock or cash to purchase common
stock from the Company or otherwise, to be held in trust for employees meeting
certain eligibility requirements until the employees reach retirement age. The
ESOP may also borrow funds to purchase common shares, in which event the
Company would contribute amounts as necessary to pay down the indebtedness.
ESOP expense was $0 in 2000, $704 in 1999, and $657 in 1998. In lieu of a
contribution to the ESOP, the Board of Directors approved an additional 2%
contribution to each participant of the Savings Plan during 2000. At December
31, 2000, there were no unallocated shares of Class A Common Stock and Class B
Common Stock held in the ESOP as all shares were allocated to participants'
accounts.

 Retirement Plans

   The Company has a defined contribution retirement plan covering employees
in its Swiss subsidiary and defined benefit retirement plans covering
substantially all employees in its U.K. and German subsidiaries, as well as,
beginning in 1998, a Senior Executive Supplemental Umbrella Pension Plan
covering certain key employees of the parent company in the United States. The
Defined Contribution Plan expense for the three years ended December 31, 2000
was $1,089, $1,148, and $1,249, respectively.

   The defined benefit plans provide benefits based on years of service and
employee compensation. Retirement costs under the plans are compiled based on
the projected unit credit actuarial method.

   The following is an analysis of the change in benefit obligation, change in
plan assets, weighted-average assumptions, and components of net periodic
benefit cost for the three years ended December 31, 2000.

                                     F-17


                      BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)




                                                        Pension Benefits
                                                     -------------------------
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                              
Change in benefit obligation
Benefit obligation at beginning of year............. $34,405  $33,344  $23,940
Prior service cost..................................     --       --     2,871
Service cost........................................     707    2,580    2,329
Interest cost.......................................   1,970    2,058    2,070
Plan participants' contributions....................      90      357      392
Amendments..........................................     --       189      --
Foreign exchange gain (loss)........................  (1,992)  (1,459)     463
Actuarial gain (loss)...............................    (375)  (1,273)   2,916
Benefits paid.......................................  (2,261)  (1,391)  (1,637)
                                                     -------  -------  -------
Benefit obligation at end of year................... $32,544  $34,405  $33,344
                                                     =======  =======  =======

                                                        Pension Benefits
                                                     -------------------------
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                              
Change in plan assets
Fair value of plan assets at beginning of year......  31,347   29,624   26,505
Actual return on plan assets........................     417    3,412    4,616
Employer contributions..............................     932      --       --
Foreign exchange (loss) gain........................  (2,283)    (789)     140
Benefits paid.......................................  (2,261)    (900)  (1,637)
                                                     -------  -------  -------
Fair value of plan assets at end of year............  28,152   31,347   29,624
                                                     -------  -------  -------
Unfunded status.....................................  (4,392)  (3,058)  (3,720)
Unrecognized net actuarial loss.....................  (3,232)  (4,941)  (1,934)
Unrecognized prior service cost.....................     269      324    3,237
                                                     -------  -------  -------
Accrued benefit cost................................ $(7,355) $(7,675) $(2,417)
                                                     =======  =======  =======

                                                        Pension Benefits
                                                     -------------------------
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                              
Components of net periodic benefit cost
Service cost........................................ $   707  $ 2,580  $ 2,329
Interest cost.......................................   1,970    2,058    2,070
Expected return on plan assets......................  (1,742)  (3,418)  (4,078)
Amortization of prior service cost..................      38    4,694    2,509
Recognized net actuarial loss.......................    (430)    (461)    (470)
                                                     -------  -------  -------
Net periodic benefit cost........................... $   543  $ 5,453  $ 2,360
                                                     =======  =======  =======

                                                        Pension Benefits
                                                     -------------------------
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                              
Weighted-average assumptions as of December 31
Discount rate.......................................     6.8%     7.0%    6.83%
Expected return on plan assets......................     6.6%     7.0%    6.50%
Rate of compensation increase.......................     4.4%     4.5%    4.50%



                                      F-18


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The amortization of prior service cost increased in 1999 due to a change in
estimate of years of service expected to be rendered in the future by certain
participants in the United States plan.

9. RENTAL EXPENSE AND LEASE COMMITMENTS

   At December 31, 2000, the Company was obligated under operating leases
expiring on various dates. Rental expense for the three years ended December
31, 2000 was $4,707, $6,093, and $6,222, respectively. Annual rental
commitments under noncancelable leases pertaining principally to buildings and
equipment at December 31, 2000 are $4,521, $3,261, $2,316, $1,319, and $678
for the years 2001 through 2005, and aggregate to $3,573 for all years
subsequent to 2005.

10. NET INCOME (LOSS) PER SHARE

   The following table sets forth the computation of basic and diluted (loss)
earnings per share:



                                                     2000      1999     1998
                                                   --------  --------  -------
                                                              
Numerator:
  (Loss) Income from Continuing Operations before
   Cumulative Effect of Change in Accounting
   Principle...................................... $(18,822) $(41,093) $11,929
  Loss from Discontinued Operations...............  (11,086)   (1,781)     --
                                                   --------  --------  -------
  (Loss) Income Before Cumulative Effect of Change
   in Accounting Principle........................  (29,908)  (42,874)  11,929
Cumulative Effect of Change in Accounting
 Principle........................................  (27,401)      --       --
                                                   --------  --------  -------
Net (Loss) Income................................. $(57,309) $(42,874) $11,929
                                                   ========  ========  =======
Denominator for Basic Earnings Per Share:
  Weighted-Average Shares.........................   13,723    13,456   13,387
Effect of Dilutive Securities:
  Employee Stock Options..........................      --        --       138
                                                   --------  --------  -------
Denominator for Diluted Earnings Per Share:
  Weighted-Average Shares and Assumed
   Conversions....................................   13,723    13,456   13,525
                                                   ========  ========  =======
Basic (Loss) Earnings Per Share from Continuing
 Operations Before Cumulative Effect of Change in
 Accounting Principle............................. $  (1.37) $  (3.06) $  0.89
Discontinued Operations...........................     (.81)     (.13)     --
Cumulative Effect of Change in Accounting
 Principle........................................    (2.00)      --       --
                                                   --------  --------  -------
Basic (Loss) Earnings Per Share................... $  (4.18) $  (3.19) $  0.89
                                                   ========  ========  =======
Diluted (Loss) Earnings Per Share from Continuing
 Operations Before Cumulative Effect of Change in
 Accounting Principle............................. $  (1.37) $  (3.06) $  0.89
Discontinued Operations...........................     (.81)     (.13)     --
Cumulative Effect of Change in Accounting
 Principle........................................    (2.00)      --       --
                                                   --------  --------  -------
Diluted (Loss) Earnings Per Share................. $  (4.18) $  (3.19) $  0.89
                                                   ========  ========  =======


   Diluted loss per share is the same as basic loss per share in 2000 and 1999
because the computation of diluted earnings per share would have an
antidilutive effect on loss per share.


                                     F-19


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11. OTHER ASSETS



                                                                 2000    1999
                                                                ------- -------
                                                                  
   Enterprise resource planning................................ $ 3,722 $ 3,914
   Other internal use software costs...........................   3.098   3,763
   Demonstration equipment.....................................   8,824  10,138
   Developed software..........................................   3,425   3,562
   Prepaid pension.............................................   5,612   5,897
   Equity investments..........................................   2,305   6,527
   Patents.....................................................     --    3,500
   Capitalized acquisition cost................................   2,700   3,300
   Other.......................................................   2,461   4,306
                                                                ------- -------
                                                                $32,147 $44,907
                                                                ======= =======


   During 2000, other includes the following: Capitalized leases--$800,
deferred pension assets--$700; capitalized debt cost--$800 and miscellaneous--
$200.

   During 1999, other includes the following: Capitalized leases--$1,600,
deferred pension assets--$1,400, capitalized debt cost--$900 and
miscellaneous--$400.

12. LONG-TERM DEBT

   Long-term debt consisted of the following:



                                                                2000    1999
                                                               ------- -------
                                                                 
   8.79% term loan............................................ $50,000 $50,000
   Mortgages at rates ranging from 4.25% to 8.98%.............  11,509  14,491
   Notes payable, due various dates with interest rates
    ranging from 2.96% to 8.22%...............................   3,667   4,539
                                                               ------- -------
                                                                65,176  69,030
   Less: current installments.................................  54,404  53,585
                                                               ------- -------
   Total long-term debt....................................... $10,772 $15,445
                                                               ======= =======


   The $50,000 term loan is a private placement of senior notes with principal
payments due from November 2001 to November 2007. During 1999, the Company
breached certain financial covenants, including the debt to EBITDA ratio,
which is the most restrictive covenant in its senior note agreement and its
revolving credit agreement. The Company's lenders granted waivers curing the
financial covenants defaults incurred under these agreements through the end
of 1999. In addition, borrowing rates under the Company's lending agreement
were increased for the private placement, and the lending agreements were
amended to add covenants to require the Company to grant the lenders a
security interest in certain of its United States assets with a carrying value
amounting to $50,400 at December 31, 1999 and to complete a subordinated debt
financing acceptable to the lenders by January 31, 2000. The Company was
unable to complete a subordinated financing acceptable to the lenders by
January 31, 2000. On February 7, 2001, the Company's lenders granted waivers
curing the requirements that the Company complete a subordinated debt
financing and amended the maturity date of the revolving credit facility to be
the earlier of the completion of the sale to Hexagon or April 30, 2001.

   On November 16, 2000, the Company entered into an Acquisition Agreement
with Hexagon, A.B. (see Note 3). Upon the consummation of that transaction,
the Company intends to pay off all outstanding debt to

                                     F-20


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

its banks and private placement lenders. The transaction is subject to
shareowner approval and a meeting to vote on the transaction is expected to be
held in March or April, 2001. If the shareowners do not approve the
transaction, it is not possible to predict whether any alternative arrangement
could be implemented or what action, if any, the Company's banks and private
placement lenders may take.

   Annual maturities of long-term debt are as follows: 2001--$54,404; 2002--
$5,900; 2003--$1,411; 2003--$1,498; 2005--$458; and $1,505 thereafter.
Interest rates on long-term debt averaged approximately 7.93% in 2000 and 7.7%
in 1999.

   The revolving credit facility and the 8.79% senior notes require the
Company to comply with certain covenants, the most restrictive of which is
debt to EBITDA ratio. The Company presently is in violation of this covenant.
The carrying amount of long-term debt approximates fair value.

13. LONG-TERM LIABILITIES

   Long-term liabilities consisted of the following:



                                                                 2000    1999
                                                                ------- -------
                                                                  
   Unfunded accrued pension cost............................... $11,794 $13,152
   Termination indemnities.....................................   6,746   7,167
   Deferred income taxes.......................................   5,118   3,280
   Other long-term liabilities.................................   3,272   2,484
                                                                ------- -------
                                                                $26,930 $26,083
                                                                ======= =======


14. FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC AREA

 Segment Information

   The Company operates exclusively in the Metrology Business and has
historically conducted its business through the Measuring Systems Group
("MS"), Precision Measuring Instruments Division ("PMI"), Custom Metrology
Division ("CM"), Brown & Sharpe Information Systems ("BSIS") and Electronics
Division ("ED"). During 2000, the Company discontinued the Electronics
Division (see Note 5 for further details) and began evaluating operating
decisions based on the MS and CM segments on a combined basis. Accordingly,
all prior periods presented have been restated to reflect the revised MS
segment and discontinuance of the ED segment. See Note 1 for a further
description of the Company's business.


                                                   2000
                                         --------------------------
                                            MS       PMI     BSIS     TOTALS
                                         --------  -------  -------  --------
                                                         
Revenues from external customers........ $207,600  $72,407  $   --   $280,007
Intersegment revenues...................      208       55    6,000     6,263
Interest expense (income)...............    5,773    1,594    1,419     8,786
Depreciation and amortization...........    7,395    2,844      524    10,763
Restructuring charge (benefit)..........   (1,857)  (2,144)     --     (4,001)
Segment profit (loss)...................    2,491    7,688  (11,505)   (1,326)
Pension and defined contribution
 charges................................     (118)   1,089      --        971
Termination indemnity...................    1,033      --       --      1,033
Segment assets..........................  162,335   56,490   15,299   234,124
Expenditures for segment assets.........    3,465    1,824      305     5,594


                                     F-21


                      BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)




                                                   1999
                                          -------------------------
                                             MS       PMI     BSIS    TOTALS
                                          --------  -------  ------  --------
                                                         
Revenues from external customers......... $245,626  $75,762  $  --   $321,388
Intersegment revenues....................      166      293     --        459
Interest expense (income)................    1,585    1,562   1,745     4,892
Depreciation and amortization............    4,322    3,348      77     7,747
Equity in net (income) of investees
 accounted for by the equity method......     (279)     --      --       (279)
Restructuring charge.....................   18,554   17,180     --     35,734
Segment profit (loss)....................   (8,724) (16,033) (5,123)  (29,880)
Pension and defined contribution
 charges.................................      333    1,148     --      1,481
Termination indemnity....................    1,133      --      --      1,133
Segment assets...........................  166,633   58,799   3,828   229,260
Investment in equity method investees....    1,763      --      --      1,763
Expenditures for segment assets..........    4,211    3,596      77     7,884




                                                    1998
                                           ------------------------
                                              MS       PMI    BSIS    TOTALS
                                           --------  ------- ------  --------
                                                         
Revenues from external customers.......... $252,515  $86,515 $  --   $339,030
Intersegment revenues.....................    2,458      650    --      3,108
Interest expense..........................    4,937    2,036    --      6,973
Depreciation and amortization.............    7,083    3,742     59    10,884
Equity in net (income) of investees
 accounted for by the equity method.......      (75)     --     --        (75)
Restructuring benefit.....................      896      --     --        896
Segment profit (loss).....................   13,922    5,216 (5,154)   13,984
Pension and defined contribution charges
 (benefit)................................      187    1,249    --      1,436
Termination indemnity.....................    1,037      --     --      1,037
Segment assets............................  205,975   73,660  1,465   281,100
Investment in equity method investees.....    1,384    ----   ----      1,384
Expenditures for segment assets...........    3,857    3,936    283     8,076


                                      F-22


                      BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                        RECONCILIATION OF SELECTED ITEMS



                                                  2000       1999       1998
                                                ---------  ---------  ---------
                                                          (Restated
                                                           Note 5)
                                                             
PROFIT OR LOSS
  Total (loss) profit for reportable segments.. $  (1,326) $ (29,880) $  13,984
  Unallocated amounts:
    Impairment of partially-owned affiliate....    (5,845)       --         --
    Refinancing fees...........................    (3,615)       --         --
    Restructuring charge.......................       --      (2,534)       --
    Interest expense...........................      (466)    (2,594)       --
    Interest income............................     1,192        901      1,106
    Other income (expense).....................    (5,962)    (4,636)       204
                                                ---------  ---------  ---------
      Profit (Loss) From Continuing Operations
       Before Income Taxes and Cumulative
       Effect of Change in Accounting
       Principle............................... $ (16,022) $ (38,743) $  15,294
                                                =========  =========  =========
ASSETS
  Total assets for reportable segments......... $ 234,124  $ 229,260  $ 281,100
  Other assets.................................    16,521     72,917     36,678
                                                ---------  ---------  ---------
      Consolidated Totals...................... $ 250,645  $ 302,177  $ 317,778
                                                =========  =========  =========
DEPRECIATION AND AMORTIZATION
  Total depreciation and amortization for
   reportable segments......................... $  10,763  $   7,747  $  10,884
  Corporate charges............................       830      5,292        248
                                                ---------  ---------  ---------
                                                 $ 11,593  $  13,039  $  11,132
                                                =========  =========  =========
EXPENDITURES FOR SEGMENT ASSETS
  Total expenditures for segment assets for
   reportable segments......................... $   5,594  $   7,884  $   8,076
  Corporate expenditures.......................       511      1,260      9,084
                                                ---------  ---------  ---------
                                                  $ 6,105  $   9,144  $  17,160
                                                =========  =========  =========


                                      F-23


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Geographic Area

   The following is a summary by geographic area of revenues from customers
and long-lived assets.



                                                     2000      1999      1998
                                                   --------- --------- ---------
                                                         (Restated Note 5)
                                                              
REVENUES
  United States................................... $ 112,731 $ 138,136 $ 141,305
  Italy...........................................    30,989    22,502    22,630
  Germany.........................................    32,262    41,460    41,575
  France..........................................     8,259    20,619    25,397
  United Kingdom..................................    17,331    21,272    22,675
  Switzerland.....................................     7,677     8,051     8,896
  Other...........................................    70,758    69,348    76,552
                                                   --------- --------- ---------
                                                   $ 280,007 $ 321,388 $ 339,030
                                                   ========= ========= =========
LONG-LIVED ASSETS
  United States................................... $  39,434 $  47,208 $  41,150
  Italy...........................................     8,273     9,529    11,538
  Germany.........................................    10,073    11,151    15,214
  France..........................................     2,038     2,297     3,981
  United Kingdom..................................     6,109    16,320    18,146
  Switzerland.....................................    12,888    13,094    14,560
  Other...........................................     3,581     3,772     1,871
                                                   --------- --------- ---------
                                                    $ 82,396 $ 103,371 $ 106,460
                                                   ========= ========= =========


   Revenues are attributed to countries based upon the location of customers
who are situated within the market areas assigned to subsidiaries located in
the respective countries.

   The Company has no single customer which accounts for 10% or more of its
consolidated net sales; however several well recognized major automotive
manufacturers account for a significant portion of the Company's net sales.

15. COMMON STOCK

   Both classes of common stock have equal rights upon liquidation. Class A
Common Stock may not receive less cash dividends per share than Class B Common
Stock, nor may such dividends be less frequent. The Class A Common Stock has
one vote per share. Except as otherwise provided by the Certificate of
Incorporation and by law, the Class B Common Stock has ten votes per share,
and the Class B Common Stock is convertible into Class A Common Stock on a
one-for-one basis, and can be transferred in Class B form only to specified
transferees, generally members of a shareowner's family and certain others
affiliated with a shareowner. During 2000 and 1999, 2,711 and 3,395 shares,
respectively, were converted from Class B Common Stock to Class A Common
Stock.

   The Company has reserved a total of 919,300 shares of Class A Common Stock
for future issuance under certain benefit and stock incentive plans.

                                     F-24


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


16. PREFERRED STOCK PURCHASE RIGHTS

   On February 13, 1998, the Board approved a new Rights Plan and declared a
dividend purchase right (a "Right") for every outstanding share of the
Company's Class A Common Stock and Class B Common Stock to be distributed on
March 9, 1998 to stockholders of record as of the close of business on that
date. The Rights expire on February 13, 2008 or upon the earlier redemption of
the Rights, and they are not exercisable until a distribution date on the
occurrence of certain specified events. This Plan replaces a substantially
similar Rights Plan and Rights distributed in connection with such Plan
adopted by the Company on March 23, 1988, which by its terms expired in March
of 1998.

   Each Right entitles the holder to purchase from the Company one one-
hundredth of a share of Series B Participating Preferred Stock, $1.00 par
value per share, at a price of $40.00 per one one-hundredth of a share,
subject to adjustment. The Rights will, on the distribution date, separate
from the Common Stock and become exercisable ten days after a person has
acquired beneficial ownership of 20% or more of the outstanding shares of
Common Stock of the Company or commencement of a tender or exchange offer that
would result in any person owning 20% or more of the Company's outstanding
Common Stock.

   Each holder of a Right will in such event have the right to receive shares
of the Company's Class A Common Stock having a market value of two times the
exercise price of the Right, which has been set at $40.00; and in the event
that the Company is acquired in a merger or other business combination, or if
more than 25% of its assets or earning power is sold, each holder of a Right
would have the right to receive common stock of the acquiring company with a
market value of two times the exercise price of the Right. Following the
occurrence of any of these events, any Rights that are beneficially owned by
any acquiring person will immediately become null and void. The Company, by a
majority vote of the Board, may redeem the Rights at a redemption price of
$.01 per Right.

17. COMMITMENTS AND CONTINGENCIES

   The Company is a defendant in a variety of legal claims that arise in the
normal course of business. Based upon the information presently available to
management, the Company believes that any liability for these claims would not
have a material effect on the Company's results of operations or financial
condition.

   In connection with the transaction entered into with Hexagon, A.B. of
Stockholm, Sweden on November 16, 2000, the Company must settle, shortly after
the transaction is consummated, liabilities which were not accruable at
December 31, 2000 of approximately $9,900 relating to accelerated obligations
under a defined benefit plan and several change in control contracts with
management employees.

18. ALLOWANCE FOR DOUBTFUL ACCOUNTS

   The activity in the Company's allowance for doubtful accounts is as
follows:



                                                              (1)
                       Balance at   Charged                 Foreign    Balance
                       Beginning  to Costs and    (2)      Currency   at End of
                       of Period    Expenses   Deductions Translation  Period
                       ---------- ------------ ---------- ----------- ---------
                                                       
2000..................   $4,759      $1,088      $1,072      $(314)    $4,461
1999..................    3,657       1,826         394       (330)     4,759
1998..................    3,456       1,639       1,673        235      3,657

- --------
(1) Adjustment resulting from translating allowance for doubtful accounts of
    foreign subsidiaries at year-end exchange rates.
(2) Write-offs of uncollectible accounts.

                                     F-25


                     BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


19. QUARTERLY DATA (UNAUDITED)


                                                                        (2)
                          Previously           Previously            Previously      (2)
                           Reported  Restated   Reported  Restated    Reported     Restated
                           March 31  March 31   June 30   June 30   September 30 September 30 December 31
                          ---------- --------  ---------- --------  ------------ ------------ -----------
                                                                         
2000
Sales...................   $ 72,473  $ 73,124   $ 70,632  $ 76,150    $ 64,266     $ 60,264    $ 70,469
Gross profit............     23,152    24,125     21,930    24,574      20,973       18,096      22,133
Income (loss) from
 continuing operations
 before cumulative
 effect of accounting
 change.................        (72)     (237)   (15,295)  (12,996)     (9,531)     (10,680)      5,091
Income (loss) from
 discontinued operations
 (3)....................        --     (1,042)       --     (9,541)        --          (918)        415
Cumulative effect of
 accounting change, net
 of tax: (1)............        --    (27,401)       --        --          --           --          --
                           --------  --------   --------  --------    --------     --------    --------
Net income (loss).......        (72)  (28,680)   (15,295)  (22,537)     (9,531)     (11,598)      5,506
Per common share:
  Income (loss) from
   continuing operations
   before cumulative
   effect of accounting
   change
    Basic...............       (.01)     (.02)     (1.11)     (.94)       (.69)        (.77)        .37
    Diluted.............       (.01)     (.02)     (1.11)     (.94)       (.69)        (.77)        .36
  Income (loss) from
   discontinued
   operations (3)
    Basic and diluted...        --       (.08)       --       (.69)        --          (.07)        .03
  Cumulative effect of
   change in accounting
   principle............        --      (2.02)       --        --          --           --          --
  Net income (loss):
    Basic...............       (.01)    (2.12)     (1.11)    (1.63)       (.69)        (.84)        .40
    Diluted.............       (.01)    (2.12)     (1.11)    (1.63)       (.69)        (.84)        .39

- --------
(1) During the fourth quarter of 2000, the Company changed its method of
    accounting for revenue recognition in accordance with Staff Accounting
    Bulletin No. 101, Revenue Recognition in Financial Statements. Pursuant to
    Financial Accounting Standards Board Statement No. 3, Reporting Accounting
    Changes in Interim Financial Statements, effective January 1, 2000, the
    Company recorded the cumulative effect of the accounting change and
    accordingly, the quarterly information for the first three quarters of
    2000, which had been previously reported, has been restated. No
    restatement of 1999 information was necessary.
(2)  In the third quarter of 2000, management decided to discontinue the
     development of noncontact sensor technology. As a result of this
     decision, the Company wrote-off its investment in its joint venture,
     Metroptic, Ltd. and certain other costs that were dedicated to the
     development of the noncontact technology and incurred a charge of $5,800.
(3) Relates to the pending sale of the Company's Electronics Division. See
    Note 5 for further details.

                                     F-26


                      BROWN & SHARPE MANUFACTURING COMPANY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)




                          Previously             Previously            Previously               Previously
                           Reported   Restated    Reported  Restated    Reported     Restated    Reported    Restated
                           March 31   March 31    June 30   June 30   September 30 September 30 December 31 December 31
                          ----------  ---------  ---------- --------  ------------ ------------ ----------- -----------
                                                                                    
1999
Sales...................  $  82,414   $  82,414   $ 81,652  $ 81,652    $ 72,712     $ 71,733    $  86,522   $  85,589
Gross profit............     21,171      21,171     24,712    24,712      21,834       21,196       20,708      20,687
Loss from continuing
 operations.............    (15,047)    (15,047)    (8,554)   (8,554)     (2,511)      (2,072)     (16,762)    (15,420)
Loss from discontinued
 operations.............        --          --         --        --          --          (439)         --       (1,342)
                          ---------   ---------   --------  --------    --------     --------    ---------   ---------
Net loss................  $ (15,047)  $ (15,047)  $ (8,554) $ (8,554)   $ (2,511)    $ (2,511)   $ (16,762)  $ (16,762)
Per common share:
 Loss from continuing
  operations:
 Basic and diluted......  $   (1.12)  $   (1.12)  $   (.63) $   (.63)   $   (.19)    $   (.16)   $   (1.24)  $   (1.14)
 Loss from discontinued
  operations:
 Basic and diluted......        --          --         --        --          --          (.03)         --         (.10)
 Net loss:
 Basic and diluted......  $   (1.12)  $   (1.12)  $   (.63) $   (.63)   $   (.19)    $   (.19)   $   (1.24)  $   (1.24)


                                      F-27



                            METROLOGY BUSINESS

                         STATEMENTS OF OPERATIONS

                                (Unaudited)

           For the Years Ended December 31, 2000, 1999, and 1998

                          (dollars in thousands)



                                                    2000      1999      1998
                                                  --------  --------  --------
                                                             
Sales............................................ $280,007  $321,388  $339,030
Cost of goods sold (Note 3)......................  191,079   233,622   223,999
Research and development expense.................    6,945     6,408     7,370
Selling, general and administrative expense......   73,349    73,884    81,487
Restructuring (benefit) charge (Note 3)..........   (4,001)   25,858      (896)
                                                  --------  --------  --------
  Operating profit (loss)........................   12,635   (18,384)   27,070
Interest expense.................................    1,554     1,599     1,906
Other (expense) income, net......................      (85)     (245)      178
                                                  --------  --------  --------
  Income (loss) before income taxes and
   cumulative effect of change in accounting
   principle.....................................   10,996   (20,228)   25,342
Income tax provision.............................    2,837     2,922     4,764
                                                  --------  --------  --------
  Income (loss) before cumulative effect of
   change in accounting principle................    8,159   (23,150)   20,578
Cumulative effect of change in accounting
 principle, net of income taxes (Note 2).........  (21,746)      --        --
                                                  --------  --------  --------
Net (loss) income................................ $(13,587) $(23,150) $ 20,578
                                                  ========  ========  ========


 The accompanying notes are an integral part of the financial statements.

                                      F-28



                            METROLOGY BUSINESS

                              BALANCE SHEETS

                                (Unaudited)

                        December 31, 2000 and 1999

                          (dollars in thousands)



                                                                2000     1999
                                                              -------- --------
                                                                 
                           ASSETS
Current assets:
  Cash and cash equivalents.................................. $ 22,532 $ 27,746
  Accounts receivable, net of allowances for doubtful
   accounts of $4,340 and $4,637.............................   34,812   88,017
  Inventories................................................   94,394   65,557
  Prepaid expenses and other current assets..................   20,111    9,444
                                                              -------- --------
    Total current assets.....................................  171,849  190,764
Property, plant and equipment:
  Land.......................................................    3,357    5,843
  Buildings and improvements.................................   25,670   28,049
  Machinery and equipment....................................   80,048   82,407
                                                              -------- --------
                                                               109,075  116,299
Less-accumulated depreciation................................   71,848   74,273
                                                              -------- --------
                                                                37,227   42,026
Goodwill, net................................................    8,488    9,640
Other assets (Note 9)........................................   27,277   31,574
                                                              -------- --------
                                                              $244,841 $274,004
                                                              ======== ========

                   LIABILITIES AND EQUITY
Current liabilities:
  Notes payable to banks..................................... $ 11,556 $ 13,670
  Accounts payable...........................................   45,152   40,856
  Accrued expenses and income taxes..........................   64,062   53,500
  Current portion of long-term debt..........................    3,521    2,901
                                                              -------- --------
    Total current liabilities................................  124,291  110,927
Long-term debt (Note 10).....................................    7,454   11,175
Long-term liabilities (Note 11)..............................   18,741   17,504
Commitments and Contingencies (Notes 8 and 13)...............      --       --
Equity.......................................................   94,355  134,398
                                                              -------- --------
                                                              $244,841 $274,004
                                                              ======== ========


 The accompanying notes are an integral part of the financial statements.

                                      F-29



                            METROLOGY BUSINESS

                         STATEMENTS OF CASH FLOWS

                                (Unaudited)

           For the Years Ended December 31, 2000, 1999, and 1998

                          (dollars in thousands)



                                                    2000      1999      1998
                                                  --------  --------  --------
                                                             
Cash Provided By Operations:
Net (Loss) Income................................ $(13,587) $(23,150) $ 20,578
Cumulative effect of change in accounting
 principle.......................................   21,746       --        --
                                                  --------  --------  --------
                                                     8,159   (23,150)   20,578
Adjustment for Noncash Items:
  (Benefit) provision for restructuring..........   (2,257)   28,006      (896)
  Depreciation and amortization..................   10,239    12,655    10,825
  Pension charges................................     (117)      712       360
  Deferred income taxes..........................       26      (552)      347
  Termination indemnities........................    1,033     1,134       336
  Other noncash items............................    1,654     1,123       246
Changes in Working Capital:
  Decrease (increase) in accounts receivable.....   12,169     7,189    (1,936)
  (Increase) decrease in inventories.............   (6,864)    6,396    (6,051)
  Decrease (increase) in prepaid expenses and
   other current assets..........................    3,744      (998)   (1,955)
  (Decrease) increase in accounts payable and
   accrued expenses..............................   (1,506)   (5,137)   (1,188)
                                                  --------  --------  --------
    Net Cash Provided by Operations..............   26,280    27,378    20,666
Investment Transactions:
Acquisitions, net of cash acquired...............      --     (3,841)      --
Capital expenditures.............................   (5,289)   (7,807)   (7,793)
Proceeds from sale of fixed assets...............    3,816       --        --
Other investing activities.......................      --      3,092        24
                                                  --------  --------  --------
    Net Cash Used in Investment Transactions.....   (1,473)   (8,556)   (7,769)
Financing Transactions:
(Decrease) increase in short-term debt...........   (1,726)   19,459    (5,021)
Proceeds from issuance of long-term debt.........      --        --      2,080
Net cash contributed to the Company..............  (23,795)  (16,554)  (12,194)
Principal payments of long-term debt.............   (2,327)   (4,109)   (2,938)
Other financing transactions.....................     (191)       71       533
                                                  --------  --------  --------
    Net Cash (Used in) Provided by Financing
     Transactions................................  (28,039)   (1,133)  (17,540)
Effect of Exchange Rate Changes on Cash..........   (1,982)   (4,617)   (1,536)
                                                  --------  --------  --------
Cash and Cash Equivalents:
(Decrease) increase during the year..............   (5,214)   13,072    (6,179)
Beginning balance................................   27,746    14,674    20,853
                                                  --------  --------  --------
Ending balance................................... $ 22,532  $ 27,746  $ 14,674
                                                  ========  ========  ========
Supplementary Cash Flow Information:
  Interest paid.................................. $  1,600  $  1,600  $  1,900
                                                  ========  ========  ========
  Taxes paid..................................... $  2,300  $  2,400  $  2,000
                                                  ========  ========  ========


 The accompanying notes are an integral part of the financial statements.

                                      F-30



                            METROLOGY BUSINESS

                      NOTES TO FINANCIAL STATEMENTS

                          (dollars in thousands)

1. SIGNIFICANT ACCOUNTING POLICIES

 Business

   The Metrology Business includes the manufacturing and distribution of
manual and computer-controlled high precision machines, mechanical and
electronic measuring and inspection tools. The principal markets for its
products are North America, Europe, Asia, South America, and the Middle East.
The primary end user markets for its products are the automotive, aerospace,
industrial machinery, electronics, and computer industries.

 Basis of Presentation

   On November 16, 2000, Brown and Sharpe Manufacturing Company (the Company)
entered into an Acquisition Agreement with Hexagon, A.B. of Stockholm, Sweden,
in which Hexagon will purchase substantially all of the Company's world-wide
Metrology Business. These financial statements represent the assets and
liabilities and results of operations of the business being sold. Pursuant to
the Acquisition Agreement, the Company will sell the shares of stock in the
following subsidiaries:

     Brown & Sharpe International Capital Corporation

     Brown & Sharpe DEA S.p.A.

     BSP, Inc.

     Brown & Sharpe Foreign Sales Corp.

     Brown & Sharpe Finance Company

     Borel & Dunner, Inc.

     Qingdao Brown & Sharpe Qianshao Trading Company Limited

     Qingdao Brown & Sharpe Qianshao Technology Company Limited

     Brown & Sharpe Aftermarket Services, Inc.

   The Company is also indirectly transferring to Hexagon the 30% interest in
Wilcox Associates, Inc. held by Brown & Sharpe Aftermarket Services, Inc.

   In addition to the stock and assets of the subsidiaries, the Company is
transferring, to Hexagon, substantially all of its assets, properties and
rights of every nature, kind and description, tangible and intangible
(including goodwill), whether real, personal, or mixed, whether accrued,
contingent or otherwise, other than the stock of the subsidiaries that it is
retaining (and the assets of such subsidiaries), and the excluded assets and
liabilities described below.

   The principal assets not being sold include:

     Stock in BSIS, Inc.

     Stock in Brown & Sharpe Surface Inspection Systems, Inc.

     Real estate owned in North Kingstown, RI

     Heathrow Airport property (gravel pit) owned by a subsidiary of the
  Company

     Various other assets and liabilities of the Company agreed by the
  parties.

                                     F-31


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

   Additionally, certain liabilities of the Company are being retained by the
Company and, therefore, have been excluded from the Metrology Business balance
sheets. The following are the principal liabilities not being assumed and
include:

     The revolving credit facility with a balance of $27,400 at December 31,
  2000 and 1999 and the $50,000 term loan to private placement lenders.

     Liabilities associated with the retained subsidiaries to the extent that
  they relate to excluded assets.

     Contingent liabilities in respect of all litigation pending at the date
  of the sale, except for two specific matters being assumed by Hexagon.

     Liabilities under the Umbrella Supplemental Executive Retirement Plan to
  persons who do not accept employment with Hexagon, liabilities under the
  Long-term Deferred Cash Incentive Plan and liabilities to participants in
  the regular Supplemental Executive Retirement Plans.

     Liabilities for fees and expenses associated with the transaction,
  including liabilities under employee change in control contracts.

   These financial statements reflect only the results of operations of the
Metrology Business ("the Business"). Furthermore, the direct expenses of
certain Company executives who have not provided specific services to the
Metrology Business being sold and certain corporate overhead charges have been
excluded from the statements of operations.

   The preparation of the consolidated 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 and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

 Equity

   Equity includes intercompany payables, components of accumulated other
comprehensive income, principally representing translation adjustments and the
retained earnings (losses) associated with the Metrology Business.

 Inventories

   Inventories are stated at the lower of cost or market. Cost is determined
principally on a last-in, first-out (LIFO) basis for all domestic inventories
and principally on a first-in, first-out (FIFO) basis for inventories outside
the United States. Provision is made to reduce slow-moving and obsolete
inventories to net realizable values. Current FIFO cost exceeds the LIFO value
of inventories by approximately $15,380 and $12,532 at December 31, 2000 and
1999, respectively. Year-end inventories valued under the LIFO method were
$32,779 in 2000 and $17,991 in 1999.

   The composition of inventory at year end was as follows:



                                                                 2000    1999
                                                                ------- -------
                                                                  
   Parts, raw materials and supplies........................... $31,563 $29,105
   Work in progress............................................  14,731  13,106
   Finished goods..............................................  48,100  23,346
                                                                ------- -------
                                                                $94,394 $65,557
                                                                ======= =======


                                     F-32


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

 Property, Plant and Equipment

   Property, plant and equipment is carried at cost and is being depreciated
principally on a straight-line basis over the estimated useful lives of the
assets which generally range from 20 to 40 years for buildings and
improvements and from 3 to 12 years for machinery and equipment. Depreciation
expense was $7,163, $9,122 and $7,253 in 2000, 1999, and 1998, respectively.
Repair and maintenance costs are charged against income while renewals and
betterments are capitalized as additions to the related assets. Retirements,
sales, and disposals of assets are recorded by removing the cost and
accumulated depreciation from the asset and accumulated depreciation accounts
with any resulting gain or loss reflected in income. At December 31, 2000,
land and buildings with a net book value of $12,387 were pledged as collateral
for mortgage loans of $7,308.

 Goodwill and Other Assets

   Goodwill, which is net of accumulated amortization of $5,336 in 2000 and
$4,662 in 1999, is being amortized on a straight-line basis over periods
ranging from 7 to 20 years. In 1999, the Company reduced goodwill $250 to
reflect a reduction of a deferred tax liability recorded as part of a purchase
price adjustment for a business combination occurring in prior years.
Amortization expense amounted to $636 in 2000, $632 in 1999, and $583 in 1998.

   Other assets includes certain intangible assets, which are being amortized
on a straight-line basis over periods ranging from 3 to 10 years. Amortization
expense for these assets was $2,440, $2,901, and $2,989, in 2000, 1999, and
1998, respectively. Accumulated amortization for these assets was $16,016 in
2000 and $13,902 in 1999.

 Foreign Currency

   Assets and liabilities of those subsidiaries located outside the United
States whose cash flows are primarily in local currencies are translated at
year-end exchange rates, and income and expense items are translated at
average monthly rates. Translation gains and losses are accounted for in
equity.

   There were no forward exchange contracts outstanding at December 31, 2000
and 1999. A transaction gain of $47 was recorded in 1999 while transaction
losses of $2,786 and $508 were recorded in 2000 and 1998, respectively.

 Credit Risk

   Financial instruments which potentially subject the Business to
concentrations of credit risk consist principally of temporary cash
investments and trade receivables. The Business places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to trade receivables are limited due to the Business'
large number of customers and their dispersion across many different
industries and countries worldwide. At December 31, 2000 and 1999, the
Business had no significant concentrations of credit risk.

 Income Taxes

   The Business provides for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No. 109 requires an asset and
liability based approach in accounting for income taxes.

   The U.S. Metrology Business is included in the consolidated tax return of
the Company. The income taxes have been computed as if the U.S. Metrology
Business was a stand alone company for income tax purposes.

                                     F-33


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

   Deferred income tax assets and liabilities are recorded to reflect the tax
consequences on future years of temporary differences of revenue and expense
items for financial statement and income tax purposes. Valuation allowances
are provided against assets which are not likely to be realized. Federal
income taxes are not provided on the unremitted earnings of foreign
subsidiaries since it has been the practice and is the intention of the
Business to continue to reinvest these earnings in the business outside the
United States.

 Cash and Cash Equivalents

   Cash and cash equivalents are comprised of cash on hand and deposits in
banks with a maturity of three months or less. The carrying amount of cash and
cash equivalents approximates fair value.

 Advertising Cost

   The Business expenses advertising costs as incurred. Advertising expense
for the three years ended December 31, 2000 was approximately $3,800, $4,100,
and $4,300, respectively.

2. ACCOUNTING CHANGE

   In 2000, the Business adopted SEC Staff Accounting Bulletin No. 101 ("SAB
101"). As a result of adopting SAB 101, the Business changed the way it
recognizes revenue for machines sold to customers. Prior to the adoption of
SAB 101, the Business recognized revenue when the machines were shipped and
titled passed to the customer. Effective as of January 1, 2000, the Business
recognizes revenue for machines sold to customers once the machines are
accepted by the customers. The effect of applying this change in accounting
principle was to decrease 2000 sales $8,500 and increase the 2000 net loss by
$4,400. In addition, the results of operations for the year ended December 31,
2000, includes a charge of $21,746 (net of an income tax benefit of $6,210).

   Adopting this new method of revenue recognition for 2000, 1999 and 1998,
would have produced the following pro forma results:



                                                       2000    1999     1998
                                                      ------ --------  -------
                                                              
As reported, before the cumulative effect of the
 accounting change
  Net income (loss).................................. $8,159 $(23,150) $20,578
Pro forma, assuming the accounting change is applied
 retroactively:
  Net income (loss).................................. $8,159 $(25,953) $16,572


3. RESTRUCTURING CHARGE

   During 1999, the Business implemented a plan in which it reorganized each
of its significant operating divisions. A portion of the plan provided for the
reorganization of the manufacturing and administrative operations of its
Precision Measuring Instruments Division ("PMI") by consolidating all of PMI's
European manufacturing sites into one location in Renens, Switzerland and was
designed to provide for greater production and administrative efficiencies.
The PMI reorganization eliminated four factories in Europe. The total charge
related to the PMI Division amounted to approximately $17,200 during 1999. The
1999 reorganization plan also included a strategy for the Measuring Systems
Division ("MSD") in which a focus factory mission would be implemented, where
each factory would function as a center of excellence with a goal of taking
advantage of product strengths in each of the manufacturing sites. The MSD
plan also provided for cost improvements in the R&D, selling, and service
areas. MSD's portion of the total restructuring charge was approximately
$10,700. Finally, the Business also reorganized the Custom Metrology Division
("CMD") located in Telford, England by exiting certain non-core products and
eliminating operating cost that was related to those products. The
restructuring charge applicable to CM amounted to approximately $7,900.

                                     F-34


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

   As a result of the 1999 Business-wide restructuring, the Business recorded
restructuring charges totaling $36,798. The 1999 restructuring charge, as well
as the 1997 charge discussed below, included costs associated with involuntary
employee termination benefits for employees (415 in 1999 and 160 in 1997),
writedowns of inventory to net realizable value, writedowns of impaired fixed
assets and certain intangible assets to fair value, and other restructuring
costs.

   In 1997, the Business also implemented a reorganization plan in which it
restructured certain of its European operations, along with other less
significant changes in other parts of the world. As a result of the
restructuring, the Business recognized a charge in 1997 amounting to $16,220.

   During 2000, the Business realized a net gain of approximately $1,800
arising from the sale of real estate located in the United Kingdom that was
closed as a result of the 1999 restructuring of the PMI division.

   The 1997 restructuring plan is completed and the 1999 plan is completed at
all locations except for a small number of employees in Italy will be leaving
in the first half of 2001.

   The following is an analysis of the restructuring charges and reserves for
each plan:

 1997 Restructuring



                          Employee               Fixed Asset
                         Termination                 and
                         Benefits(2)   Inventory Intangible   Other    Total
                         -----------   --------- ----------- -------  -------
                                                       
Balance December 31,
 1997...................   $ 7,550      $ 5,373    $ 1,647   $ 1,650  $16,220
  Utilized..............    (4,029)      (1,663)    (1,647)   (1,432)  (8,771)
  Other.................      (882)(1)      --         --        --      (882)
                           -------      -------    -------   -------  -------
Balance at December 31,
 1998...................     2,639        3,710        --        218    6,567
  Utilized..............      (992)        (297)       --       (218)  (1,507)
                           -------      -------    -------   -------  -------
Balance at December 31,
 1999...................     1,647 (3)    3,413        --        --     5,060
  Utilized..............      (543)        (610)       --        --    (1,153)
  Other.................      (137)(5)      --         --        --      (137)
                           -------      -------    -------   -------  -------
Balance at December 31,
 2000...................   $   967 (3)  $ 2,803    $   --    $   --   $ 3,770
                           =======      =======    =======   =======  =======


 1999 Restructuring



                          Employee               Fixed Asset
                         Termination                 and
                         Benefits(2)   Inventory Intangible     Other       Total
                         -----------   --------- -----------   -------     --------
                                                            
Balance at January 1,
 1999...................   $   --       $   --     $   --      $   --      $    --
  1999 Charges..........    11,420       12,409      8,767       5,672       38,268
  Utilized..............    (6,307)      (6,275)    (6,485)       (580)     (19,647)
                           -------      -------    -------     -------     --------
Balance December 31,
 1999...................     5,113        6,134      2,282       5,092       18,621
  Utilized..............    (2,699)      (3,940)    (1,799)     (2,544)     (10,982)
  Benefit...............      (600)(6)      --        (483)(7)  (1,037)(7)   (2,120)
                           -------      -------    -------     -------     --------
Balance at December 31,
 2000...................   $ 1,814 (4)  $ 2,194    $   --      $ 1,511 (4) $  5,519
                           =======      =======    =======     =======     ========

- --------

(1)  Includes an $896 reversal for employee termination benefits arising from
     changes in final settlement allowances with certain employees due to
     conditions arising in 1998. The remainder of the adjustment is due to
     foreign exchange.

(2)  Personnel reductions amounted to 121 in 2000, 257 in 1999 and 159 in
     1998.

                                     F-35


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

(3)  Future cash payments relating to employee termination benefits amount to
     $364 in 2001, $238 in 2002 and $365 thereafter.

(4)  Future cash payments relating to employee termination benefits, leases,
     and other restructuring costs amount to $3,140 in 2001, $134 in 2002 and
     $51 thereafter.

(5)  Includes a $137 reversal for employee termination benefits arising from
     changes in final settlement allowances with certain employees that were
     different than the amounts expected to be paid at the accrual date.

(6)  Includes a $600 reversal for employee termination benefits due to the
     resignation of certain employees before the Business became obligated to
     pay these individuals.

(7)  Represents a reversal of $483, $565, and $472 for leasehold improvements,
     lease commitments and the sublease of rental property, respectively, as a
     result of a decision in 2000 to not vacate a plant that was included in
     the 1999 restructuring plan.

4. BUSINESS COMBINATION AND DISCONTINUANCE

   During 1999, management entered into a transaction that was intended to
extend the Business' core methodology expertise into new markets. In August
1999, the Business acquired a 60% interest in QI Tech (subsequently named
Brown & Sharpe/Qianshao ("BSQ") located in the People's Republic of China for
cash amounting to $3,800. The BSQ investment was entered into in order to
expand the Business' presence in the Asian market. The transaction was
accounted for using the purchase method of accounting with the operating
results of the company included in the Business' consolidated results of
operations beginning on the date of acquisition. The excess of cost over the
estimated value of net assets acquired in this acquisition was allocated to
goodwill, which amounted to $1,463, and will be amortized on a straight-line
basis over 20 years.

   The unaudited pro forma consolidated results of operations, assuming the
above acquisition had been made at January 1, 1998, is as follows:



                                                                 December 31
                                                              ------------------
                                                                1999      1998
                                                              --------  --------
                                                                  
   Sales..................................................... $325,357  $342,829
   Net (loss) income.........................................  (22,728)   18,417


5. INCOME TAXES

   Income (loss) before income taxes and the cumulative effect of a change in
accounting principle consisted of the following:



                                                        2000     1999     1998
                                                       ------- --------  -------
                                                                
   Domestic..........................................  $ 3,153 $  2,190  $ 5,629
   Foreign...........................................    7,843  (22,418)  19,713
                                                       ------- --------  -------
     Income (loss) before income taxes and cumulative
      effect of change in accounting principle.......  $10,996 $(20,228) $25,342
                                                       ======= ========  =======


                                     F-36


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

   The following table reconciles the income tax provision (benefit) at the
U.S. statutory rate to that in the financial statements:



                                                       2000     1999     1998
                                                      -------  -------  -------
                                                               
   Taxes computed at 34%............................. $ 3,739  $(6,877) $ 8,616
   Goodwill amortization.............................      92      106      106
   Local foreign tax.................................     776    1,474    1,267
   Additional tax on foreign income                       --       --       789
   State taxes (net).................................     106      196      212
   Net operating losses and other losses.............  (1,606)  (2,401)  (6,499)
   Restructuring charge..............................     --    10,513      --
   Other (net).......................................    (270)     (89)     273
                                                      -------  -------  -------
     Income tax provision............................ $ 2,837  $ 2,922  $ 4,764
                                                      =======  =======  =======


   The income tax provision (benefit) before the cumulative effect of the
change in accounting principle consisted of the following:



                                                       2000     1999     1998
                                                      -------  -------  -------
                                                               
Current:
  Federal............................................ $ 1,435  $ 2,146  $ 3,272
  State..............................................     161      297      321
  Foreign............................................   1,215    1,031      825
                                                      -------  -------  -------
                                                        2,811    3,474    4,417
Deferred:
  Federal............................................  (1,458)  (1,310)  (2,351)
  Foreign............................................   1,484      758    2,698
                                                      -------  -------  -------
                                                           26     (552)     347
                                                      -------  -------  -------
Income tax provision................................. $ 2,837  $ 2,922  $ 4,764
                                                      =======  =======  =======


   Provision has not been made for U.S. taxes on $59,635 of cumulative
undistributed earnings of foreign subsidiaries as those earnings are intended
to be permanently reinvested.

   The components of the Business' deferred tax assets and liabilities as of
December 31, 2000 and 1999 are as follows:



                                                                 2000    1999
                                                                ------- -------
                                                                  
  Deferred tax assets:
    Inventory reserves......................................... $ 5,794 $ 5,457
    Warranty expense...........................................     697     800
    Allowance for doubtful accounts............................     797     708
    Depreciation...............................................   1,407   1,350
    Tax credit and loss carryforwards..........................  33,611  31,581
    SAB101.....................................................  10,864     --
    Restructuring reserves.....................................   3,941   8,527
    Other......................................................   7,656   3,542
                                                                ------- -------
      Gross deferred assets....................................  64,767  51,965
  Less valuation allowance.....................................  46,521  38,311
                                                                ------- -------
      Deferred tax asset....................................... $18,246 $13,654
                                                                ======= =======


                                     F-37


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)



                                                                  2000    1999
                                                                 ------- -------
                                                                   
  Deferred tax liabilities:
    Pension expense............................................. $ 1,913 $ 2,167
    Inventory reserves..........................................   2,885   1,720
    Depreciation................................................   1,785   1,600
    Other.......................................................   5,167   7,853
                                                                 ------- -------
      Deferred tax liability.................................... $11,750 $13,340
                                                                 ======= =======


   The U.S. portion of the Metrology Business is included in the Company's
U.S. consolidated tax return. This tax provision has been computed for the
Metrology Business as a stand-alone entity. On a stand-alone basis, the U.S.
portion of the Metrology Business recorded a current Federal and State tax
provision in each year presented greater than the amount recorded on the
Company's consolidated statements. The excess current Federal and State tax
provision amounted to $1,495, $4,815 and $2,087 in 2000, 1999 and 1998,
respectively. These increases to the current tax provision have been included
in accrued expenses and income taxes payable on the balance sheet.
Additionally, the U.S. portion of the Metrology Business recorded a deferred
Federal benefit in each year presented in excess of the amount recorded on the
Company's consolidated statements. This increased deferred Federal tax benefit
amounted to $1,458, $4,243 and $688 in 2000, 1999 and 1998, respectively. This
increased deferred Federal tax benefit over the amount recorded in the
Company's consolidated statements has been included as an increase to the
prepaid expenses and other current assets account in the amounts of $5,121 and
$3,947 in 2000 and 1999, respectively, and a decrease to the Business' long-
term liabilities in the amounts of $1,268 and $984 in 2000 and 1999,
respectively. In addition to the above, the Metrology Business has recorded a
deferred Federal tax benefit on the cumulative change in accounting method in
excess of the benefit provided in the Company's consolidated statements. This
excess is related to the U.S. Metrology Business and amounted to $5,655. This
increase in the Federal deferred tax benefit has been included in prepaid
expenses and other current assets.

   A valuation allowance has been established due to the uncertainty of
realizing certain tax credit and loss carryforwards and a portion of the other
deferred tax assets. The Business recorded a $8,901 increase in the valuation
allowance to reflect management's uncertainty regarding the realization of
previously recognized tax loss carryforwards in another tax jurisdiction and
certain other deferred tax assets. The recognition of any future tax benefits
resulting from the reduction of $5,827 of the valuation allowance will reduce
any goodwill related to the DEA acquisition remaining at the time of such
reduction.

   For income tax purposes, the Business has operating loss and capital loss
carryforwards of $6,400 and $100, respectively, in the U.K., and net operating
loss carryforwards of $32,000, $8,800, $5,100, and $5,500, respectively, in
Germany, France, Japan, and Italy. The French, Japanese, and Italian
carryforwards expire between 2001 and 2006. There is no time limit for the
U.K. and German carryforwards.

   The Internal Revenue Service is currently examining the U.S. income tax
returns through 1998. The Business believes it has adequately provided for any
additional tax assessment.

                                     F-38


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

6. OTHER INCOME AND EXPENSE

   Other income (expense), net includes:


                                                          2000   1999    1998
                                                         ------  -----  ------
                                                               
  1998 Interest income.................................. $1,192  $ 901  $1,106
  Equity interest in net loss of less than 50% owned
   investments..........................................   (710)  (865)   (566)
  Gain (loss) on sale of fixed assets...................    (57)    27      18
  Other (expense) income................................   (510)  (308)   (380)
                                                         ------  -----  ------
                                                         $  (85) $(245) $  178
                                                         ======  =====  ======


7. INCENTIVE AND RETIREMENT PLANS

 Profit Incentive Plan

   Under the provisions of the Business' United States Amended Profit
Incentive Plan as originally approved in 1979, awards of cash could be made as
bonuses to certain management employees. Plan awards provisions under the Plan
in the amounts of $1,199, $865, and $1,708, were made in 2000, 1999, and 1998,
respectively, based on performance objectives for the respective year.

 Savings Plans

   The Business has 401(k) stock bonus and thrift savings plans for U.S.
employees, which include retirement income features consisting of employer
contributions and employee tax deferred contributions. Contributions under all
plans are invested in professionally managed portfolios and Brown & Sharpe
stock. The savings plans' expense for the three years ended December 31, 2000
was $2,052, $1,994, and $1,858, respectively.

 Retirement Plans

   The Business has a defined contribution retirement plan covering employees
in its Swiss subsidiary and defined benefit retirement plans covering
substantially all employees in its U.K. and German subsidiaries. The Defined
Contribution Plan expense for the three years ended December 31, 2000 was
$1,309, $1,148, and $1,249, respectively.

   The defined benefit plans provide benefits based on years of service and
employee compensation. Retirement costs under the plans are compiled based on
the projected unit credit actuarial method.

                                     F-39


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

   The following is an analysis of the change in benefit obligation, change in
plan assets, weighted-average assumptions, and components of net periodic
benefit cost for the three years ended December 31, 2000.



                                                         Pension Benefits
                                                      -------------------------
                                                       2000     1999     1998
                                                      -------  -------  -------
                                                               
Change in benefit obligation
Benefit obligation at beginning of year.............. $26,820  $28,300  $18,940
Prior service cost...................................     --       --     2,871
Service cost.........................................     499    1,129    2,329
Interest cost........................................   1,544    1,571    2,070
Plan participants' contributions.....................      90      357      392
Amendments...........................................     --       --       --
Foreign exchange gain (loss).........................  (1,992)  (1,459)     463
Actuarial gain (loss)................................    (401)  (1,687)   2,916
Benefits paid........................................  (1,461)  (1,391)  (1,637)
                                                      -------  -------  -------
Benefit obligation at end of year.................... $25,099  $26,820  $28,344
                                                      =======  =======  =======




                                                        Pension Benefits
                                                     -------------------------
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                              
Change in plan assets
Fair value of plan assets at beginning of year...... $31,347  $29,624  $26,505
Actual return on plan assets........................     417    3,412    4,616
Employer contributions..............................     132      --       --
Foreign exchange (loss) gain........................  (2,283)    (789)     140
Benefits paid.......................................  (1,461)    (900)  (1,637)
                                                     -------  -------  -------
Fair value of plan assets at end of year............  28,152   31,347   29,624
                                                     -------  -------  -------
Unfunded status.....................................   3,053    4,527    1,280
Unrecognized net actuarial loss.....................  (3,232)  (4,941)  (1,934)
Unrecognized prior service cost.....................     269      324      631
                                                     -------  -------  -------
Prepaid (accrued) benefit cost...................... $    90  $   (90) $   (23)
                                                     =======  =======  =======




                                                         Pension Benefits
                                                      -------------------------
                                                       2000     1999     1998
                                                      -------  -------  -------
                                                               
Components of net periodic benefit cost
Service cost......................................... $   499  $ 1,129  $ 1,329
Interest cost........................................   1,544    1,571    2,070
Expected return on plan assets.......................  (1,742)  (3,418)  (4,078)
Amortization of prior service cost...................      12    1,891    1,509
Recognized net actuarial loss........................    (430)    (461)    (470)
                                                      -------  -------  -------
Net periodic benefit cost............................ $  (117) $   712  $   360
                                                      =======  =======  =======


                                     F-40


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)




                                                                     Pension
                                                                    Benefits
                                                                 ---------------
                                                                 2000 1999 1998
                                                                 ---- ---- -----
                                                                  
Weighted-average assumptions as of December 31
Discount rate................................................... 6.8% 7.0% 6.83%
Expected return on plan assets.................................. 6.6% 7.0% 6.50%
Rate of compensation increase................................... 4.4% 4.5% 4.50%


8. RENTAL EXPENSE AND LEASE COMMITMENTS

   At December 31, 2000, the Business was obligated under operating leases
expiring on various dates. Rental expense for the three years ended December
31, 2000 was $4,568, $5,949, and $6,222, respectively. Annual rental
commitments under noncancelable leases pertaining principally to buildings and
equipment at December 31, 2000 are $4,165, $3,020, $2,154, $1,149, and $635
for the years 2001 through 2005, and aggregate to $3,573 for all years
subsequent to 2005.

9. OTHER ASSETS



                                                                 2000    1999
                                                                ------- -------
                                                                  
  Enterprise resource planning................................. $ 3,722 $ 3,914
  Other internal use software costs............................   3,098   3,763
  Demonstration equipment......................................   8,824  10,138
  Prepaid pension..............................................   5,612   5,897
  Equity investments...........................................   2,305   1,896
  Capitalized acquisition cost.................................   2,700   3,274
  Other........................................................   1,016   2,692
                                                                ------- -------
                                                                $27,277 $31,574
                                                                ======= =======


   During 2000, other includes the following: Capitalized leases--$800 and
miscellaneous--$200.

   During 1999, other includes the following: Capitalized leases--$1,600,
deferred pension assets--$700, and miscellaneous--$400.

10. LONG-TERM DEBT

   Long-term debt consisted of the following:



                                                                 2000    1999
                                                                ------- -------
                                                                  
  Mortgages at rates ranging from 4.25% to 8.98%............... $ 7,308 $ 9,537
  Notes payable, due various dates with interest rates ranging
   from 2.96% to 8.22%.........................................   3,667   4,539
                                                                ------- -------
                                                                 10,975  14,076
  Less: current installments...................................   3,521   2,901
                                                                ------- -------
    Total long-term debt....................................... $ 7,454 $11,175
                                                                ======= =======


   Annual maturities of long-term debt are as follows: 2001--$3,521; 2002--
$4,943; 2003--$373; 2004--$372; 2005--$261; and $1,505 thereafter. Interest
rates on long-term debt averaged approximately 7.9% in 2000 and 7.7% in 1999.

                                     F-41


                              METROLOGY BUSINESS

                  NOTES TO FINANCIAL STATEMENTS--(Continued)

11. LONG-TERM LIABILITIES

   Long-term liabilities consisted of the following:



                                                                 2000    1999
                                                                ------- -------
                                                                  
  Unfunded accrued pension cost................................ $ 5,523 $ 5,567
  Termination indemnities......................................   6,746   7,167
  Deferred income taxes........................................   3,850   2,296
  Other long-term liabilities..................................   2,622   2,474
                                                                ------- -------
                                                                $18,741 $17,504
                                                                ======= =======


12. FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC AREA

 Segment Information

   The Business operates exclusively in the Metrology Business and has
historically conducted its business through the Measuring Systems Group
("MS"), the Precision Measuring Instruments Division ("PMI"), and Custom
Metrology Division ("CM"). During 2000, the Business began evaluating
operating decisions based on the MS and CM segments on a combined basis.
Accordingly, all prior periods presented have been restated to reflect the
revised MS segment. See Note 1 for a further description of the Business. The
Metrology Business financial statements do not include a provision for a
corporate function; accordingly, certain corporate assets of the Company have
been allocated to the segments below.



                                                              2000
                                                    ---------------------------
                                                       MS       PMI     TOTALS
                                                    --------  -------  --------
                                                              
Revenues from external customers................... $207,600  $72,407  $280,007
Depreciation and amortization......................    7,395    2,844    10,239
Segment operating profit...........................   15,389   10,180    25,569
Pension and defined contribution charges...........     (118)   1,089       971
Restructuring benefit..............................   (1,857)  (2,144)   (4,001)
Termination indemnity..............................    1,033      --      1,033
Segment assets.....................................  181,635   63,206   244,841
Expenditures for segment assets....................    3,465    1,824     5,289




                                                                1999
                                                      -------------------------
                                                         MS      PMI    TOTALS
                                                      -------- ------- --------
                                                              
Revenues from external customers..................... $245,626 $75,762 $321,388
Depreciation and amortization........................    9,307   3,348   12,655
Segment operating profit.............................   21,985   7,134   29,119
Restructuring charge.................................   18,554  17,180   35,734
Pension and defined contribution charges.............      333   1,148    1,481
Termination indemnity................................    1,133     --     1,133
Segment assets.......................................  202,536  71,468  274,004
Investment in equity method investees................    1,763     --     1,763
Expenditures for segment assets......................    4,211   3,596    7,807


                                     F-42


                               METROLOGY BUSINESS

                   NOTES TO FINANCIAL STATEMENTS--(Continued)




                                                                1998
                                                      -------------------------
                                                         MS      PMI    TOTALS
                                                      -------- ------- --------
                                                              
Revenues from external customers..................... $252,515 $86,515 $339,030
Depreciation and amortization........................    7,083   3,742   10,825
Restructuring benefit................................      896     --       896
Segment operating profit.............................   25,614  10,188   35,802
Pension and defined contribution charges.............      187   1,249    1,436
Termination indemnity................................    1,037     --     1,037
Segment assets.......................................  205,975  73,660  279,635
Investment in equity method investees................    1,384     --     1,384
Expenditures for segment assets......................    3,857   3,936    7,793


                     RECONCILIATION OF SELECTED ITEMS



                                                     2000      1999     1998
                                                   --------  --------  -------
                                                              
PROFIT OR LOSS
  Total operating profit for reportable segments.. $ 25,569  $ 29,119  $35,802
  Unallocated amounts:
    Restructuring benefit (charge)................    4,001   (35,734)     896
    Foreign exchange..............................   (2,786)       47     (508)
    Interest expense..............................   (1,554)   (1,599)  (1,906)
    Other income (expense)/corporate charges......  (14,234)  (12,061)  (8,942)
                                                   --------  --------  -------
      Profit (Loss) Before Income Taxes and
       Cumulative Effect of Change in Accounting
       Principle.................................. $ 10,996  $(20,228) $25,342
                                                   ========  ========  =======


Geographic Area

   The following is a summary by geographic area of revenues from customers and
long-lived assets.



                                                        2000     1999     1998
                                                      -------- -------- --------
                                                               
REVENUES
  United States...................................... $112,731 $138,136 $141,305
  Italy..............................................   30,989   22,502   22,630
  Germany............................................   32,262   41,460   41,575
  France.............................................    8,259   20,619   25,397
  United Kingdom.....................................   17,331   21,272   22,675
  Switzerland........................................    7,677    8,051    8,896
  Other..............................................   70,758   69,348   76,552
                                                      -------- -------- --------
                                                      $280,007 $321,388 $339,030
                                                      ======== ======== ========


                                      F-43


                               METROLOGY BUSINESS

                   NOTES TO FINANCIAL STATEMENTS--(Continued)




                                                        2000     1999     1998
                                                       ------- -------- --------
                                                               
LONG-LIVED ASSETS
  United States....................................... $39,434 $ 47,208 $ 41,150
  Italy...............................................   8,273    9,529   11,538
  Germany.............................................  10,073   11,151   15,214
  France..............................................   2,038    2,297    3,981
  United Kingdom......................................   6,109   16,320   18,146
  Switzerland.........................................  12,888   13,094   14,560
  Other...............................................   3,581    3,772    1,871
                                                       ------- -------- --------
                                                       $82,396 $103,371 $106,460
                                                       ======= ======== ========


   Revenues are attributed to countries based upon the location of customers
who are situated within the market areas assigned to subsidiaries located in
the respective countries.

   The Company has no single customer which accounts for 10% or more of its
consolidated net sales; however several well recognized major automotive
manufacturers account for a significant portion of the Company's net sales.

13. COMMITMENTS AND CONTINGENCIES

   The Business is a defendant in a variety of legal claims that arise in the
normal course of business. Based upon the information presently available to
management, the Business believes that any liability for these claims would not
have a material effect on Metrology Business' results of operations or
financial condition.


                                      F-44


                                                                         Annex A

                             ACQUISITION AGREEMENT

                                    BETWEEN

                                   HEXAGON AB

                                      AND

                      BROWN & SHARPE MANUFACTURING COMPANY

                               November 16, 2000


                             ACQUISITION AGREEMENT

   This Acquisition Agreement (the "Agreement") is made as of November 16,
2000, by and between HEXAGON AB, a limited liability company existing under
the laws of Sweden ("Buyer"), on behalf of itself and any of its Affiliates to
which it assigns its rights and obligations hereunder pursuant to Section
10.4, and BROWN & SHARPE MANUFACTURING COMPANY, a Delaware, U.S.A. corporation
("Seller"). Buyer and Seller are referred to collectively herein as the
"Parties."

   This Agreement contemplates a transaction in which Buyer will, in
consideration of the Purchase Price (as hereinafter defined), acquire the
Metrology Stock and the Metrology Assets (each as hereinafter defined) and
will assume the Metrology Liabilities (as hereinafter defined).

   Now, therefore, in consideration of these premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.

1 Definitions.

   "1999 Year End Balance Sheet" has the meaning set forth in Section 3.9(a).

   "Acquisition Proposal" has the meaning set forth in Section 5.8.

   "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.

   "Aftermarket Services" means Brown & Sharpe Aftermarket Services, Inc., a
Delaware corporation that owns 30% of the outstanding capital stock of WAI.

   "Agreement" has the meaning set forth in the preamble.

   "Alternative Transaction" has the meaning set forth in Section 9.1(d).

   "Auditor" has the meaning set forth in Section 2.4(b).

   "Bank and Insurance Company Debt" means all Indebtedness (including all
outstanding principal, prepayment premiums, if any, and accrued interest, fees
and expenses relating thereto) of Seller and the Transferred Companies under
that certain Credit Agreement dated as of November 10, 1997 between Seller,
certain lenders and The Chase Manhattan Bank, as amended, and that certain
Note Agreement dated November 10, 1997 between Seller and certain lenders, as
amended.

   "BSICC" means Brown & Sharpe International Capital Corporation, a Delaware
corporation and wholly-owned subsidiary of Seller.

   "BSIS" means BSIS, Inc., a Delaware corporation.

   "BSIS Stock Purchase Agreement" has the meaning set forth in Section 5.16.

   "BSIS Stockholders' Agreement" has the meaning set forth in Section 5.16.

   "Buyer" has the meaning set forth in the preamble.

   "Buyer Affiliate" means any Affiliate of Buyer now or hereafter formed, the
obligations of which are guaranteed (by a guarantee of payment and
performance) by Buyer in form and substance satisfactory to Seller.

   "Buyer Employee" has the meaning set forth in Section 5.5(a).

                                      A-1


   "Buyer Indemnitees" has the meaning set forth in Section 8.2.

   "Buyer Lease" has the meaning set forth in Section 7.1.

   "Buyer Required Approvals" has the meaning set forth in Section 4.6.

   "Cash" means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with GAAP applied on a basis
consistent with the preparation of the Metrology Unaudited Financial
Statements.

   "Cash Amount" has the meaning set forth in Section 2.4(b).

   "Closing" has the meaning set forth in Section 2.6.

   "Closing Date" has the meaning set forth in Section 2.6.

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

   "Comparable Benefit Plan" has the meaning set forth in Section 5.5(c).

   "Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, certificate, exemption,
order, registration, declaration, filing, report or notice of, with or to any
Person.

   "Consolidated Audited Financial Statements" has the meaning set forth in
Section 3.9(a).

   "Consolidated Unaudited Balance Sheet" has the meaning set forth in Section
3.9(b).

   "Consolidated Unaudited Financial Statements" has the meaning set forth in
Section 3.9(b).

   "Copyrights" means all copyrights and registrations thereof, including but
not limited to computer software and related documentation, product brochures
and training materials.

   "Dispute" means any opposition, interference, reexamination, injunction,
claim, lawsuit, proceeding, hearing, investigation, complaint, arbitration,
mediation, demand, decree and any other dispute, disagreement or claim
involving the Metrology Intellectual Property.

   "Employee Benefit Plan" means any (a) nonqualified deferred compensation
plan or retirement plan or arrangement which is an Employee Pension Benefit
Plan; (b) qualified defined contribution retirement plan or arrangement which
is an Employee Pension Benefit Plan; (c) qualified defined benefit retirement
plan or arrangement which is an Employee Pension Benefit Plan (including any
multiemployer plan as defined in ERISA Section 3(37)); or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program.

   "Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).

   "Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).

   "Environmental Law" means any Law relating to pollution, or protection or
cleanup of the environment and to human health and safety, including, without
limitation, any Law relating to Releases or threatened Releases of Hazardous
Substances into the environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous Substances.

   "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

                                      A-2


   "ERISA Affiliate" means any person who is in the same controlled group of
corporations or who is under common control with Seller (within the meaning of
Section 414 of the Code).

   "Estimated Cash Amount" has the meaning set forth in Section 2.4(a).

   "Excluded Assets" means (a) the outstanding capital stock and all assets of
the Retained Subsidiaries (other than the XactMeasure legacy derivatives (e.g.
XactQuindos, Chorus X, MM4X, Tutor X) of BSIS, which shall be transferred by
BSIS to Seller prior to Closing, shall constitute Metrology Assets and shall
thereafter be subject to the provisions of the BSIS Stockholders' Agreement);
(b) the real property owned by Seller that is located in North Kingstown,
Rhode Island, U.S.A. known as Precision Park; (c) subject to the provisions of
Section 5.12 of this Agreement, the real estate owned by Brown & Sharpe Group
Ltd. that is located at Heathrow Airport, London, England and operated as a
gravel pit; and (d) the assets set forth on Schedule 1-A hereto and the WAI
Stock (if the WAI Stockholders exercise the "Right of First Refusal" described
in Section 5.16 and purchase the WAI stock).

   "Excluded Liabilities" means (a) Liabilities of the Retained Entities to
the extent relating to the Excluded Assets; (b) Liabilities set forth on
Schedule 1-B; and (c) Liabilities for any Taxes payable by or attributable to
any Retained Entity.

   "Fee" has the meaning set forth in Section 9.2(b).

   "GAAP" means United States generally accepted accounting principles as in
effect at the time of the preparation of the Consolidated Audited Financial
Statements, Consolidated Unaudited Financial Statements or Metrology Unaudited
Financial Statements, as applicable.

   "Governmental Approval" means any Consent of, with or to any Governmental
Entity.

   "Governmental Entity" means any nation or government, any state or other
political subdivision thereof; any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any government
authority, agency, department, board, commission or instrumentality of the
United States or any foreign country, any State of the United States or any
foreign country, or any political subdivision thereof; any court, tribunal or
arbitrator; and any self-regulatory organization.

   "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.

   "Hazardous Substance" means any substance that: (a) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum-derived substances or wastes, radon gas or related
materials; (b) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous waste"
or "hazardous substance" thereunder; or (c) is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is regulated by any Governmental Entity or Environmental Law.

   "Heathrow Property" has the meaning set forth in Section 5.12.

   "Income Tax" means any income, alternative, minimum, accumulated earnings,
personal holding company, franchise, capital stock, net worth, capital,
profits or windfall profits Tax or other similar Tax, including any interest,
penalties or additions attributable thereto.

   "Income Tax Returns" means Tax Returns in respect of Income Tax.

   "Indebtedness" means (a) any indebtedness for borrowed money; (b) any
obligations evidenced by a note, bond, debenture, letter of credit, draft or
similar instrument; (c) that portion of obligations with respect to capital
leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (d) notes payable

                                      A-3


and drafts accepted representing extensions of credit; and (e) any obligation
owed for all or any part of the deferred purchase price of property or
services, which purchase price is due more than six months from the date of
incurrence of the obligations of the type described in the foregoing clauses
(a) through (d) to the extent secured by any Lien on any property or asset
owned or held by any of the Transferred Companies or on any Metrology Assets.

   "Indemnified Losses" has the meaning set forth in Section 8.6.

   "Indemnified Party" has the meanings set forth in Sections 8.5 and 8.6.

   "Indemnifying Party" has the meanings set forth in Sections 8.5 and 8.6.

   "Intellectual Property" means Patents, Copyrights, Trademarks, trade
secrets, Internet domain names, proprietary technology, product
specifications, confidential business information, processes, inventions,
works of authorship, databases, semiconductor chip/mask work rights, designs,
slogans, packaged designs, product designs, other design (model) rights,
formulae and know-how, intellectual property rights similar to any of the
foregoing, copies and tangible embodiments thereof in any form or media
(including electronic media) and licenses of any of the foregoing.

   "June 30 Metrology Unaudited Balance Sheet" means the balance sheet
contained within the Metrology Unaudited Financial Statements.

   "Knowledge of Seller" means the best knowledge of any officer of Seller
after due inquiry, where applicable, of the chief officer in charge of,
respectively, the Metrology Business in the United Kingdom, Germany, Italy,
Switzerland and the United States.

   "Law" means all applicable provisions of all (a) constitutions, treaties,
statutes, laws (including the common law), codes, rules, regulations,
ordinances or orders of any Governmental Entity, (b) Governmental Approvals
and (c) orders, decisions, injunctions, judgments, awards and decrees of or
agreements with any Governmental Entity.

   "Leases" has the meaning set forth in Section 3.12.

   "Liability" means any liability, commitment or obligation (whether known or
unknown, whether absolute or contingent, whether accrued or unaccrued, and
whether due or to become due).

   "Lien" means any mortgage, pledge, lien, security interest, charge,
encumbrance, restriction on transfer, conditional sale or other title
retention device or arrangement (including, without limitation, a capital
lease) or other adverse claim of any kind.

   "Litigation" means any action, cause of action, claim, demand, suit,
proceeding, citation, summons, subpoena, inquiry or investigation of any
nature, civil, criminal or regulatory or otherwise, in law or in equity, by or
before any Governmental Entity.

   "Losses" has the meaning set forth in Section 8.2.

   "Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), assets, liabilities or operating profit of the
Metrology Business, taken as a whole. For purposes of this definition, the
parties acknowledge that the Metrology Business typically does less well in
terms of operating profit/loss in any interim portion of a quarter than in
such quarter as a whole and that the results of the Metrology Business in
terms of operating profit/loss are significantly strongest in the fourth
quarter.

                                      A-4


   "Metrology Assets" means all assets, properties and rights of Seller of
every nature, kind and description, tangible and intangible (including
goodwill), whether real, personal or mixed, whether accrued, contingent or
otherwise and whether now existing or hereinafter acquired as the same may
exist on the Closing Date, other than the Metrology Stock and the Excluded
Assets.

   "Metrology Business" means the Measuring Systems, Precision Measuring
Instruments and Custom Metrology businesses as conducted by the Transferred
Companies and Seller using the Metrology Assets, and does not include the
Excluded Assets or the Excluded Liabilities.

   "Metrology Intellectual Property" means the entire right, title and
interest in and to all Intellectual Property rights of every kind and nature
and owned, held for use or under development by Seller or the Transferred
Companies, all applications therefor and registrations thereof, all goodwill
associated therewith, and any licenses or agreements granting rights related
thereto or to a third party's Intellectual Property, including, without
limitation, all Intellectual Property identified on Schedule 3.13, provided,
however, that Metrology Intellectual Property shall exclude Seller Retained
Intellectual Property.

   "Metrology Liabilities" means all Liabilities of Seller and the Transferred
Companies, other than the Excluded Liabilities.

   "Metrology Stock" means the number and percentage of shares of outstanding
capital stock set forth on Schedule 1-C of BSICC, Brown & Sharpe DEA S.p.A.,
BSP, Inc., Brown & Sharpe Foreign Sales Corp., Brown & Sharpe Finance Company,
Borel & Dunner, Inc., Qingdao Brown & Sharpe Qianshao Trading Company Limited,
Qingdao Brown & Sharpe Qianshao Technology Company Limited and Aftermarket
Services (subject to Section 5.16).

   "Metrology Unaudited Financial Statements" has the meaning set forth in
Section 3.9(c).

   "Party" has the meaning set forth in the preamble.

   "Patents" means any patents, patent applications and patent disclosures
awaiting filing determination (including all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof).

   "Permitted Lien" means (a) statutory liens for Taxes to the extent that the
payment thereof is not in arrears or otherwise due or is being contested in
good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the June 30 Metrology Unaudited Balance Sheet; (b)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the uses of real property if the same do not
materially adversely impair the use of such property in the Metrology Business
as currently conducted; (c) statutory or common law liens to secure landlords,
lessors or rents under leases or rental agreements to the extent such liens
are confined to the premises rented and to the extent that no payment or
performance under any such lease or rental agreement is in arrears; (d)
purchase money liens and liens securing rental payments under capital lease
arrangements; (e) deposits or pledges made in connection with, or to secure
payment of, worker's compensation, unemployment insurance, old age pension
programs mandated under applicable laws or other social security regulations;
(f) statutory or common law liens incurred in the ordinary course of business
in favor of carriers, warehousemen, mechanics and materialmen, statutory or
common law liens to secure claims for labor, materials or supplies and other
like liens, which secure obligations to the extent that payment thereof is not
in arrears or otherwise due; (g) liens for judgments being appealed in good
faith or not exceeding $500,000 in the aggregate; and (h) liens in favor of
customs and revenue authorities arising as a matter of law to secure payment
of custom duties in connection with the importation of goods.

   "Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated
organization, a limited liability company, a Governmental Entity or other
entity.

   "Purchased Assets" means, collectively, the Metrology Assets and the
assets, properties and rights of the Transferred Companies as the same exist
on the Closing Date.

                                      A-5


   "Purchase Price" has the meaning set forth in Section 2.3.

   "Real Property" has the meaning set forth in Section 3.12.

   "Release" means any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the
environment.

   "Replacement Welfare Plans" has the meaning set forth in Section 5.5(c).

   "Retained Entities" means Seller and the Retained Subsidiaries.

   "Retained Subsidiaries" means BSIS and Brown & Sharpe Surface Inspection
Systems Inc., a Delaware corporation (and its subsidiaries).

   "Right of First Refusal" has the meaning set forth in Section 5.16.

   "Securities Act" means the Securities Act of 1933, as amended.

   "Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.

   "Seller" has the meaning set forth in the preamble.

   "Seller Indemnitees" has the meaning set forth in Section 8.4.

   "Seller Required Approvals" has the meaning set forth in Section 3.19.

   "Seller Retained Intellectual Property" means the entire right, title and
interest of the Retained Subsidiaries in and to all Intellectual Property
rights of every kind and nature, all applications therefore and registrations
thereof, all goodwill associated therewith, and any licenses or agreements
related to the foregoing or to a third party's Intellectual Property, and all
Intellectual Property of Seller that constitutes an Excluded Asset.

   "Subsidiary" means any corporation with respect to which a specified Person
directly or indirectly owns a majority of the common stock, has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors or otherwise controls the management policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.

   "Taxes" means all taxes, charges, fees, levies, penalties or other
assessments imposed by any United States federal, state or local or foreign
taxing authority, including, but not limited to, income, excise, property,
sales, value added, transfer, franchise, payroll, withholding, social security
or other taxes, including any interest, penalties or additions attributable
thereto.

   "Tax Return" means any return, report, information return or other document
(including any related or supporting information) required to be supplied to
any authority with respect to Taxes.

   "Third Party" has the meaning set forth in Section 9.1(d).

   "Third Party Claim" has the meaning set forth in Section 8.5

   "Trademarks" means any trademarks, service marks, trade dress, trade names,
business and product names and logos, and registrations and applications for
registration thereof together with all translations, adaptations, and
combinations thereof.

                                      A-6


   "Transferred Companies" means the companies designated as such on Schedule
3.8, which exclude Seller and the Retained Subsidiaries.

   "WAI" means Wilcox Associates Inc., a Delaware corporation.

   "WAI Purchase Price" has the meaning set forth in Section 5.16.

   "WAI Stockholders" means William Wilcox and Mark Cluff.

   "WARN Act" has the meaning set forth in Section 5.5(e).

2 Acquisition of Metrology Stock and Metrology Assets by Buyer Affiliates.

   2.1 Purchase and Sale. Seller agrees to sell and transfer to Buyer or the
applicable Buyer Affiliate, and Buyer agrees to acquire, and to cause the
Buyer Affiliates to acquire, from Seller at the Closing, subject to and upon
the terms and conditions contained herein, (a) the Metrology Stock free and
clear of any Lien and (b) the Metrology Assets free and clear of any Liens
other than Permitted Liens.

   2.2 Assumption of Liabilities. On the terms and subject to the conditions
set forth herein, from and after the Closing, Buyer or the applicable Buyer
Affiliate will assume and satisfy or perform when due the Metrology
Liabilities, and Seller will assume and satisfy or perform when due the
Excluded Liabilities.

   2.3 Purchase Price. In consideration of the sale and transfer of the
Metrology Stock and the Metrology Assets by Seller to Buyer, at the Closing
Buyer agrees to pay, or cause Buyer Affiliates to pay, an aggregate amount
(the "Purchase Price") equal to $160,000,000 plus or minus the Estimated Cash
Amount plus any supplemental amount which may be payable for the Heathrow
Property pursuant to Section 5.12 plus the Metrology Business Operating Profit
Contingent Payment (to the extent it has been determined as of the Closing
Date) minus the WAI Purchase Price, if any, paid by the WAI Stockholders upon
exercise of the Right of First Refusal described in Section 5.16. The Purchase
Price shall be payable at the Closing (i) by wire transfer of immediately
available funds, to such accounts as the holders of the Bank and Insurance
Company Debt may specify to Buyer at least three business days prior to the
Closing, of payment in full of the outstanding Bank and Insurance Company Debt
and (ii) by wire transfer of immediately available funds, to such account or
accounts as Seller may specify to Buyer at least three business days prior to
the Closing, of the balance of the Purchase Price.

2.4 Determination of Cash Amount.

     (a) Estimated Cash Amount. Seller will deliver to Buyer, on or prior to
  the third business day preceding the scheduled Closing Date, an estimate of
  the Cash Amount to be calculated pursuant to Section 2.4(b) below. The
  amount of such estimate is referred to in this Agreement as the "Estimated
  Cash Amount".

     (b) Determination of Cash Amount. As promptly as practicable, and in any
  event within 30 days of the Closing, Buyer and Seller shall jointly prepare
  or cause to be prepared a written statement calculating the amount of Cash
  held by the Transferred Companies as of the Closing calculated in a manner
  reasonably satisfactory to Buyer minus the amount of Indebtedness of the
  Transferred Companies as of the Closing (giving effect to the payment of
  the Bank and Insurance Company Debt pursuant to Section 2.3) (the "Cash
  Amount"). If Buyer and Seller cannot agree on the calculation of the Cash
  Amount within 30 days after the Closing, either Party may submit the
  dispute to a "Big Five" accounting firm selected upon mutual agreement of
  the Parties (the "Auditor"), for resolution within 30 days or as soon
  thereafter as reasonably practicable. The Auditor shall determine the
  amount of the Cash Amount, and the decision by the Auditor shall be final
  and binding on the Parties. The costs and expenses of the Auditor shall be
  paid equally by

                                      A-7


  Buyer and Seller. Buyer and Seller shall make available to the Auditor all
  relevant books and records relating to the determination of the Cash
  Amount, and all other information reasonably requested by the Auditor.

     (c) Adjustment to Purchase Price. Upon final determination of the Cash
  Amount, either by agreement between Buyer and Seller or determination in
  accordance with Section 2.4(b): (i) if the Cash Amount exceeds the
  Estimated Cash Amount, the Purchase Price shall be increased by the amount
  of such excess; and (ii) if the Cash Amount is less than the Estimated Cash
  Amount, the Purchase Price shall be decreased by the amount of such
  shortfall. Within ten business days after the final determination of the
  Cash Amount, Buyer (in the case of any increase in the Purchase Price) or
  Seller (in the case of any decrease in the Purchase Price) shall pay to the
  other an amount equal to the amount of such increase or decrease.

2.5 Metrology Business Operating Profit Contingent Payment.

     (a) As soon as reasonably practicable following the receipt of its
  audited financial statements for the year ended December 31, 2000, Seller
  shall cause to be prepared and delivered to Buyer a draft statement of the
  Business Operating Profit of the Metrology Business for the year ended
  December 31, 2000, adjusted as follows (the "Metrology Adjusted Business
  Operating Profit Statement"): (i) all effects of Staff Accounting Bulletin
  No. 101 shall be disregarded; (ii) all income or gains and expenses or
  losses attributable to the Excluded Assets or the Excluded Liabilities
  shall be excluded; (iii) all accruals for royalty payments made or to be
  made by Seller or any of its Affiliates to WAI shall be included; and (iv)
  the sum of $8.5 million shall be deducted as the agreed amount of corporate
  expenses not allocable to the Metrology Business. All calculations to be
  made pursuant to the preceding sentence shall be done in accordance with
  GAAP consistent with Seller's past practice in connection with the
  preparation of the Metrology Business Operating Profit as set out on the
  Metrology Business Operating Profit Statement for the six months ended June
  30, 2000, a form of which is attached as Exhibit A (collectively the
  "Existing Company Practice"). For avoidance of doubt it is agreed that
  changes in the restructuring reserves during the period are not included in
  the calculation of Metrology Business Operating Profit.

   If Buyer shall have any objections to the draft Metrology Adjusted Business
Operating Profit Statement, it will deliver a written notice describing in
detail its objections to Seller within 15 days after receiving the draft
Metrology Adjusted Business Operating Profit Statement. The sole permissible
grounds for objection shall be inconsistency with the terms of this Agreement
or Existing Company Practice, or computational errors.

   Buyer and Seller will use their reasonable best efforts to resolve any such
objections. If a final resolution is not obtained within 15 days after Seller
has received the notice of such objections, the Auditor will resolve any
remaining such objections. The Auditor shall, upon a review of the draft
Metrology Adjusted Business Operating Profit Statement and consideration of
Buyer's objections thereto, resolve any such objections that have not been
resolved by Buyer and Seller and revise the draft Metrology Adjusted Business
Operating Profit Statement (which, as so revised shall constitute the Final
Metrology Adjusted Business Operating Profit Statement (the "Final Adjusted
Metrology Business Operating Profit Statement")), determine the Metrology
Adjusted Business Operating Profit Contingent Payment, and communicate the
foregoing to Buyer and Seller in writing, not later than 15 days following the
date of its receipt of such dispute. Buyer and Seller shall share equally in
the payment of all fees of the Auditor incurred in the resolution of such
objections.

     (b) If Buyer and Seller resolve all such objections, if any, without
  resort to the Auditor, Seller will, within five days of such resolution,
  cause the draft Metrology Adjusted Business Operating Profit Statement to
  be revised as appropriate to reflect such resolution (as agreed upon by the
  parties) and deliver it to Buyer. Such revised Adjusted Metrology Business
  Operating Profit Statement (or the draft Metrology Adjusted Business
  Operating Profit Statement prepared by Seller, if Buyer does not object
  thereto in accordance with Section 2.5(a)) shall constitute the Final
  Adjusted Metrology Business Operating Profit Statement. The Final Adjusted
  Metrology Business Operating Profit Statement as determined under Sections
  2.5(a) or (b) shall be conclusive and binding upon the parties hereto.

                                      A-8


     (c) If the Adjusted Metrology Business Operating Profit shown on the
  Final Adjusted Metrology Business Operating Profit Statement (the "Final
  Adjusted Metrology Business Operating Profit") is equal to or less than $15
  million, there shall be no adjustment to the Purchase Price pursuant to
  this Section 2.5. If the Final Adjusted Metrology Business Operating Profit
  is equal to or greater than $17 million and equal to or less than $20
  million, the Purchase Price shall be increased by $10 million. If the Final
  Adjusted Metrology Business Operating Profit is equal to or greater than
  $22 million, the Purchase Price shall be increased by $20 million. If the
  Final Adjusted Metrology Business Operating Profit is greater than $15
  million but less than $17 million, the Purchase Price shall be increased by
  an amount equal to the product of (i) five multiplied by (ii) the
  difference between the Final Adjusted Metrology Business Operating Profit
  and $15 million. If the Final Adjusted Metrology Business Operating Profit
  is greater than $20 million but less than $22 million, the Purchase Price
  shall be increased by an amount equal to $10 million plus the product of
  (x) five multiplied by (y) the difference between the Final Adjusted
  Metrology Business Operating Profit and $20 million. Any increase in the
  Purchase Price pursuant to this Section 2.5(c) is referred to herein as the
  "Metrology Business Operating Profit Contingent Payment." The Metrology
  Business Operating Profit Contingent Payment, if any, shall be paid in
  cash, on the later of (A) the Closing Date or (B) within five days of the
  delivery of the Final Adjusted Metrology Business Operating Profit
  Statement.

   2.6 The Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Section 7 of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
the offices of Ropes & Gray, One International Place, Boston, Massachusetts at
10:00 A.M. (local time) on such date as the Parties may agree, which date
shall be as soon as practicable but no later than five Business Days following
the date on which all of the closing conditions set forth in Section 7 have
been satisfied or waived; or at such other place or time as the Parties may
agree. The date and time at which the Closing actually occurs is hereinafter
referred to as the "Closing Date."

   2.7 Deliveries at the Closing. At the Closing, (a) Seller will deliver or
cause to be delivered to Buyer the various certificates, instruments, and
documents referred to in Section 7.1, including without limitation the Buyer
Lease, the BSIS Stock Purchase Agreement and the BSIS Stockholders' Agreement;
(b) Seller will execute and deliver to Buyer or the appropriate Buyer
Affiliate: (i) stock certificates duly endorsed (or such other instrument of
transfer as may be necessary or appropriate under Law) for transfer of the
Metrology Stock (including in accordance with Section 5.16 with respect to the
WAI Stock); (ii) bulk bills of sale (or such other instrument of transfer as
may be necessary or appropriate under Law) for the Metrology Assets which
constitute personal property; (iii) general assignments of the Metrology
Intellectual Property owned by Seller; (iv) a Foreign Investment in Real
Property Tax Act Certification and Affidavit with respect to the sale of
Metrology Assets which constitute U.S. real property; and (v) all such other
instruments of assignment or conveyance as shall, in the reasonable opinion of
Buyer and its counsel, be necessary to transfer to Buyer or the appropriate
Buyer Affiliate the Metrology Stock and the Metrology Assets in accordance
with this Agreement; (c) Buyer and/or the appropriate Buyer Affiliates will
execute, acknowledge and deliver (i) an assumption agreement of the Metrology
Liabilities; and (ii) all such other instruments of assumption as shall, in
the reasonable opinion of Seller and its counsel, be necessary for Buyer to
assume the Metrology Liabilities in accordance with this Agreement; (d) Buyer
will deliver or cause to be delivered to Seller the various certificates,
instruments and documents referred to in Section 7.2, including without
limitation the Buyer Lease, the BSIS Stock Purchase Agreement and the BSIS
Stockholders' Agreement; and (e) Buyer will deliver to Seller and the
designated entities the consideration specified in Section 2.3. At any time
and from time to time after the Closing, at the request of Buyer and at
Seller's expense, Seller will execute and deliver or cause to be executed and
delivered, such other instruments of sale, transfer, conveyance, assignment
and confirmation and take such action as Buyer may reasonably determine is
necessary to transfer, convey and assign to Buyer or the appropriate Buyer
Affiliate the Metrology Stock and the Metrology Assets, all such instruments
and action to be in form and substance reasonably acceptable to Seller. At any
time and from time to time after the Closing, at the request of Seller and at
Buyer's expense, Buyer will execute and deliver or cause to be executed and
delivered, such other instruments of assumption and confirmation and take such
action as Buyer may reasonably determine is necessary to assume the Metrology
Liabilities, all

                                      A-9


such instruments and action to be in form and substance reasonably acceptable
to Buyer. At the Closing, Buyer or a Buyer Affiliate shall also invest $2.5
million cash for the purchase of stock of BSIS.

3 Representations and Warranties of Seller.

   Seller represents and warrants to Buyer as follows:

   3.1 Organization of Seller and the Transferred Companies. Each of Seller
and the Transferred Companies is duly organized, validly existing, and in good
standing under the laws of its respective jurisdiction of incorporation.
Copies of the charter and bylaws (or equivalent documents) of each of the
Transferred Companies, in each case as in effect on the date hereof, have been
made available to Buyer. Seller and each Transferred Company is qualified to
do business as a foreign corporation in every jurisdiction in the United
States in which it is required to be so qualified with respect to the
Metrology Business except for those jurisdictions where the failure to be so
qualified will not have a Material Adverse Effect. Each of Seller and the
Transferred Companies has full corporate power and authority and all material
Consents necessary to carry on the Metrology Business in which it is engaged
and to own and use the properties owned and used by it.

   3.2 Authorization of Transaction. Seller has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. Other than the approval by the holders of a majority of the issued
and outstanding shares of capital stock of Seller of the transactions
contemplated by this Agreement, all corporate and other actions or proceedings
to be taken by or on the part of Seller to authorize and permit the execution
and delivery by Seller of this Agreement and the instruments required to be
executed and delivered or caused to be executed and delivered by Seller
pursuant hereto, the performance by Seller of its obligations hereunder, and
the consummation by Seller of the transactions contemplated herein, have been
duly and properly taken. This Agreement has been duly executed and delivered
by Seller and, assuming the due authorization, execution and delivery by
Buyer, constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms. Subject only to
receiving the aforementioned approval by Seller's shareholders, Seller has
taken (and has caused BSICC to take) all corporate action necessary to
authorize the transfer of the Metrology Assets and the Metrology Stock.

   3.3 Noncontravention. Except as set forth on Schedule 3.3, neither the
execution and the delivery of this Agreement nor the consummation of the
transactions contemplated hereby, will (with or without the giving of notice
or the lapse of time or both) (a) violate any provision of the charter, by-
laws or other organizational document of any of Seller or the Transferred
Companies; (b) violate any Law to which any of Seller or the Transferred
Companies is subject; or (c) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right
to accelerate, terminate or modify, or require any notice under any agreement,
contract, lease, license, instrument, indenture, note, mortgage or other
arrangement to which any of Seller or the Transferred Companies is a party or
by which any is bound or to which any of the assets of any such Person is
subject if, in the case of clauses (b) and (c), such violation, conflict,
breach, default, acceleration or other right could reasonably be expected to
have a Material Adverse Effect or to impair materially Seller's ability to
consummate the transactions contemplated by this Agreement. None of Seller or
the Transferred Companies is required to give any notice to, make any filing
with, or obtain any Consent in order for any of them to consummate the
transactions contemplated by this Agreement (including the assignments
referred to in Section 2) except for the filings and Consents set forth on
Schedule 3.19 and except for such filings and Consents which, if not made or
obtained, would not reasonably be expected to have a Material Adverse Effect.

   3.4 Brokers' Fees, etc. Except as set forth on Schedule 3.4, none of Seller
or any Transferred Company has any Liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, and the consummation of the transactions
contemplated hereby will not give rise to any valid claim against Buyer, any
Buyer Affiliate or any Transferred Company for any brokerage or finder's
commission, fee or similar compensation.

   3.5 Assets. Except as set forth on Schedule 3.5, each of Seller and the
Transferred Companies has good title to, or a valid leasehold interest in, or
legal right to use, the properties and assets used by it in the Metrology

                                     A-10


Business and shown on the June 30 Metrology Unaudited Balance Sheet, or
acquired after the date thereof, free and clear of all Liens (other than
Permitted Liens), other than properties and assets disposed of in the ordinary
course of business since the date of the June 30 Metrology Unaudited Balance
Sheet.

   3.6 Business Conveyed. Except as set forth on Schedule 3.6, the Purchased
Assets include all of the assets reflected in the June 30 Metrology Unaudited
Balance Sheet (other than properties and assets disposed of in the ordinary
course of business since the date of the June 30 Metrology Unaudited Balance
Sheet) and constitute all of the assets used by Seller and the Transferred
Companies in the Metrology Business.

   3.7 Title to Shares. Except as set forth in Schedule 3.7, Seller owns
directly or indirectly all of the outstanding shares of each Transferred
Company, free and clear of any restrictions on transfer, Liens, options,
equities, claims, and demands.

   3.8 Capitalization of Transferred Companies. Schedule 3.8 sets forth for
each of the Transferred Companies (a) its name and jurisdiction of
incorporation; (b) the number of shares of authorized capital stock of each
class of its capital stock; (c) the number of issued and outstanding shares of
each class of its capital stock, and the names of the holders thereof. All of
the issued and outstanding shares of capital stock of each Transferred Company
have been duly authorized and are validly issued, fully paid, and
nonassessable. There are no preemptive or similar rights on the part of any
holders of any class of securities of any Transferred Company. Except for this
Agreement, no subscriptions, options, warrants, conversion or other rights,
agreements, commitments, arrangements or understandings of any kind obligating
any Transferred Company contingently or otherwise, to issue or sell, or caused
to be issued or sold, any shares of capital stock of any class of any
Transferred Company or any securities convertible into or exchangeable for any
such shares, are outstanding, and no authorization therefor has been given.
There are no outstanding contractual or other rights or obligations to or of
any Person to repurchase, redeem or otherwise acquire any outstanding shares
or other equity interests of any Transferred Company.

   3.9 Financial Statements. (a) Seller has furnished Buyer with the following
audited financial statements (collectively, the "Consolidated Audited
Financial Statements"): (i) an audited consolidated balance sheet for Seller
and its Subsidiaries as of December 31, 1999 (the "1999 Year End Balance
Sheet"); and (ii) an audited consolidated statement of operating income for
Seller and its Subsidiaries for the year ended December 31, 1999. The
Consolidated Audited Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the period covered thereby,
the balance sheet included in the Consolidated Audited Financial Statements
presents fairly in all material respects the financial condition of Seller and
its Subsidiaries as of the date thereof, and the statement of operating income
included in the Consolidated Audited Financial Statements presents fairly in
all material respects the results of operations of the Seller and its
Subsidiaries for the period thereof. There is no material Liability that was
required to be reflected in the 1999 Year End Balance Sheet in accordance with
GAAP and that was not reserved against or reflected in such balance sheet.

   (b) Seller has furnished Buyer with the following unaudited financial
statements (collectively, the "Consolidated Unaudited Financial Statements"):
(i) an unaudited consolidated balance sheet for Seller and its Subsidiaries as
of June 30, 2000; and (ii) an unaudited consolidated statement of operating
income Seller and its Subsidiaries for the six months ended June 30, 2000 (the
"Consolidated Unaudited Balance Sheet"). The Consolidated Unaudited Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the period covered thereby, the balance sheet included in the
Consolidated Unaudited Financial Statements present fairly in all material
respects the financial condition of Seller and its Subsidiaries as of the date
thereof, and the statement of operating income included in the Consolidated
Unaudited Financial Statements presents fairly in all material respects the
results of operations of Seller and its Subsidiaries for the period thereof,
subject to normal and recurring year end adjustments and the absence of notes.
There is no material Liability that was required to be reflected in the
Consolidated Unaudited Balance Sheet in accordance with GAAP and that was not
reserved against or reflected in such balance sheet.

   (c) Seller has furnished Buyer with the following unaudited financial
statements (collectively, the "Metrology Unaudited Financial Statements"): (i)
an unaudited consolidated balance sheet for the Metrology

                                     A-11


Business as of June 30, 2000 (the "June 30 Metrology Unaudited Balance
Sheet"); and (ii) an unaudited consolidated statement of operating income for
the Metrology Business for the six months ended June 30, 2000. The Metrology
Unaudited Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the period covered thereby, the
balance sheet included in the Metrology Unaudited Financial Statements
presents fairly in all material respects the financial condition of the
Metrology Business as of the dates thereof, and the statement of operating
income included in the Metrology Unaudited Financial Statements presents
fairly in all material respects the results of operations of the Metrology
Business for the period thereof, subject to normal and recurring year end
adjustments and the absence of notes. There is no material Liability that was
required to be reflected in the June 30 Metrology Unaudited Balance Sheet in
accordance with GAAP and that was not reserved against or reflected in such
balance sheet.

   3.10 Absence of Changes. Since September 30, 2000, there has not been any
Material Adverse Effect, except as disclosed in this Agreement or the
schedules attached hereto. Except as set forth on Schedule 3.10, since June
30, 2000 the Metrology Business has been carried on only in the ordinary
course of business consistent with past practice. Without limiting the
foregoing, except as disclosed on Schedule 3.10, since June 30, 2000:

     (a) Seller has not sold, leased, transferred or assigned any assets
  (individually or in the aggregate), tangible or intangible, in excess of
  $1,000,000, other than inventory in the ordinary course of business
  consistent with past practice;

     (b) Seller has not entered into any contract, whether oral or written,
  which involves obligations in excess of $1,000,000 in the aggregate, other
  than purchase obligations in the ordinary course of business consistent
  with past practice;

     (c) No Person, including Seller, has accelerated, terminated, made
  material modifications to, or canceled any contract to which Seller is a
  party or by which it is bound, except where the acceleration, modification
  or cancellation would not have a Material Adverse Effect;

     (d) No Person, including Seller, has imposed any Lien (other than
  Permitted Liens) upon any of Seller's assets, tangible or intangible,
  except pursuant to existing agreements;

     (e) Seller has not made any capital expenditures or commitments in
  excess of $9,000,000 in the aggregate;

     (f) Seller has not made any investment in, or any loan to, any other
  Person, other than its existing Subsidiaries;

     (g) Seller has not incurred any Indebtedness (other than borrowings from
  or prepayments to any of its Affiliates) except in the ordinary course of
  business consistent with past practice;

     (h) Seller has not granted any license or sublicense of any rights under
  or with respect to any Intellectual Property, except where such grants
  (individually or in the aggregate) would not have a Material Adverse
  Effect:

     (i) There has been no change made or authorized in the Certificate of
  Incorporation or in the by-laws or other organizational documents of Seller
  or of any of the Transferred Companies;

     (j) Seller has not experienced any damage, destruction or loss (whether
  or not covered by insurance) to any of its properties or assets in excess
  of $1,000,000;

     (k) Seller has not entered into any employment, severance, change in
  control or similar contract or any collective bargaining agreement, written
  or oral, or modified the terms of any existing such contract or agreement;

     (l) Seller has not lost the employment services of any employee whose
  annual salary exceeds $200,000;

     (m) Seller has not granted any increase in the base compensation of any
  of its directors, officers, employee or group of employees, other than in
  the ordinary course of business consistent with past practice;

                                     A-12


     (n) Except as contemplated by the provisions of this Agreement, Seller
  has not adopted, amended, modified, or terminated any bonus, profit-
  sharing, incentive, severance, change in control or other plan, contract or
  commitment for the benefit of any of its directors, officers, employee or
  group of employees (or taken any such action with respect to any other
  employee benefit plan, contract or arrangement);

     (o) Seller has kept in full force and effect insurance comparable in
  amount and scope to coverage maintained by it as of December 31, 1999 and
  required pursuant to any material agreement, instrument or document to
  which it is a party;

     (p) Seller has not settled, released or forgiven any claim or Litigation
  or waived any right, except where such settlement, release, forgiveness or
  waiver would not have a Material Adverse Effect; and

     (q) The Seller has not committed to do any of the foregoing.

   3.11 Taxes. Except as set forth on Schedule 3.11:

     (a) All Income Tax Returns required to be filed by Seller and the
  Transferred Companies have been filed and were correct and complete in all
  material respects. All Taxes shown to be due on such Income Tax Returns
  have been paid. All other Tax Returns required to be filed by Seller and
  the Transferred Companies have been filed, other than those Tax Returns as
  to which the failure to file would not reasonably be expected to have a
  Material Adverse Effect, and all material Taxes shown as due thereon have
  been paid.

     (b) There are no outstanding liens for Taxes (other than Permitted
  Liens) upon the assets of any of the Transferred Companies or on the
  Metrology Assets which would reasonably be expected to have a Material
  Adverse Effect.

     (c) There is no outstanding dispute or claim concerning any Tax for
  which a Transferred Company could be liable which would reasonably be
  expected to have a Material Adverse Effect.

     (d) None of any Transferred Company, Seller or, with respect to the
  conduct of the Metrology Business or the ownership of the Metrology Assets,
  any member of any group of which any of the foregoing was a member (i) has
  received any written notice of deficiency or assessment from any taxing or
  other governmental authority with respect to Income Taxes or any written
  notice of material deficiency or assessment from any taxing or other
  governmental authority with respect to any other Taxes, (ii) is currently
  under, or has received notice of commencement of, any audit by any taxing
  or other governmental authority concerning any Income Taxes or any material
  audit by any taxing or other governmental authority concerning any other
  Taxes or (iii) has executed any waiver of the statute of limitations with
  respect to the taxable period.

     (e) No Transferred Company is a party to any Tax sharing agreement, Tax
  indemnification agreement or similar arrangement that will remain in effect
  subsequent to the Closing.

     (f) The unpaid Taxes of the Transferred Companies do not exceed by any
  material amount the provision for such Taxes determined in accordance with
  GAAP set forth in the Metrology Unaudited Financial Statements as said
  provision is adjusted for operations and transactions through the Closing
  Date in accordance with past customs and practices of Seller and its
  Subsidiaries. For the avoidance of doubt, it is acknowledged that the term
  "unpaid Taxes" shall not include deferred taxes.

     (g) No Transferred Company has filed a consent under Code Section 341(f)
  relating to collapsible corporations. None of the Transferred Companies has
  made any material payments, is obligated to make any material payment, or
  is a party to any agreement that under certain circumstances could obligate
  it to make any material payments that will not be deductible under Code
  Section 280G.

   3.12 Real Property, Plant and Equipment.

     (a) Schedule 3.12 hereto sets forth a complete and correct list of all
  real property owned by Seller or any of the Transferred Companies, and each
  agreement (including all amendments) under which any real property is
  leased by Seller or any of the Transferred Companies (the "Leases", and
  together with the real property owned by Seller or any of the Transferred
  Companies, the "Real Property"). Seller and each

                                     A-13


  Transferred Company has good and valid title to all the real property
  listed in Schedule 3.12 as owned by it, and valid leasehold interests in
  all real property listed in Schedule 3.12 as leased by it, free and clear
  of all Liens other than Permitted Liens. Each of Seller and the Transferred
  Companies enjoys peaceful and undisturbed possession under all Leases under
  which it operates. Neither Seller nor any Transferred Company has received
  written notice that, and Seller has no Knowledge that, the ownership or
  lease of the Real Property by Seller or a Transferred Company or the use
  thereof, as presently used by Seller or a Transferred Company, violates any
  local zoning or similar land use laws or governmental regulations. Neither
  Seller nor any Transferred Company has received written notice of, and
  Seller has no Knowledge of, any presently existing, violation of or
  noncompliance with any covenant, condition, restriction, order or easement
  affecting the Real Property. Neither Seller nor any Transferred Company has
  received written notice of, and Seller has no Knowledge of, any presently
  pending or threatened, condemnation affecting the Real Property. Seller has
  made available to the Buyer complete and correct copies of the Leases
  referred to in Schedule 3.12. To the Knowledge of Seller, there are no
  material defects in any buildings, structures and appurtenances thereto
  located on the Real Property. Seller affirms that on the date hereof no
  material breach or default under any material Lease has occurred and that
  the Leases and the terms, conditions, covenants, agreements and provisions
  contained therein are in full force and effect in all material respects.

     (b) The tangible personal property included in the Purchased Assets,
  taken as a whole, is in all material respects adequate for the purpose for
  which it is currently used or held for use, has been maintained in
  accordance with normal industry practice and is in satisfactory repair and
  operating condition (subject to normal wear and tear).

   3.13 Intellectual Property. Schedule 3.13 sets forth a list of all
registered Patents and Trademarks owned by Seller and the Transferred
Companies, and such Patents and Trademarks, together with all other Metrology
Intellectual Property, represent all such rights related to the Metrology
Business. Except as set forth in such Schedule 3.13, with respect to each such
item of Metrology Intellectual Property:

     (a) to the Knowledge of Seller, Seller and the Transferred Companies
  have sole, exclusive, valid and unencumbered title to such Metrology
  Intellectual Property, and have not granted any Liens, licenses or other
  agreements thereon or thereto;

     (b) Seller and the Transferred Companies have not undertaken or omitted
  to undertake any acts, and Seller knows of no circumstances or grounds that
  would render unenforceable, invalidate, reduce or eliminate, in whole or in
  part, such Metrology Intellectual Property or Seller's title thereto;

     (c) to the Knowledge of Seller, no Dispute exists which challenges the
  legality, validity, enforceability or uses of such Metrology Intellectual
  Property, and Seller knows of no circumstances or grounds that exist that
  would give rise to such Disputes;

     (d) Seller knows of no third party that has infringed such Metrology
  Intellectual Property, except where such infringement of such item,
  individually or in the aggregate, is not reasonably likely to have a
  Material Adverse Effect;

     (e) such Metrology Intellectual Property is not subject to any
  outstanding injunction, judgment, order, decree, ruling, charge, settlement
  or other disposition of Dispute, and Seller has fully complied with, paid
  and otherwise satisfied all such obligations, if any; and

     (f) to the Knowledge of Seller, Seller and the Transferred Companies
  have full right, power and authority to grant all of the rights, title and
  interests with respect to such Metrology Intellectual Property granted in
  this Agreement.

   3.14 Contracts. Schedule 3.14 lists the following contracts, agreements,
commitments or obligations (whether written or oral) to which any Transferred
Company or, with respect to the Metrology Business, Seller is a party:

     (a) any agreement under which it has created, incurred, assumed, or
  guaranteed any Indebtedness or under which a Lien has been imposed on any
  of its assets, tangible or intangible with a value in excess of

                                     A-14


  $200,000 in the case of any agreement in Italy, Germany, Switzerland or the
  United States or with a value in excess of $1,000,000 in the case of other
  agreements;

     (b) any distribution or selling agreement under which revenues exceeded
  $1,000,000 in 1999;

     (c) any agreement or commitment for capital expenditures in excess of
  $1,000,000 for any single project;

     (d) any agreement for the lease of personal property to or from any
  Person providing for lease payments in excess of $100,000 per year in the
  case of any agreement in Italy, Germany, Switzerland or the United States
  or providing for lease payments in excess of $1,000,000 in the case of
  other agreements;

     (e) any agreement for the purchase or sale of raw materials,
  commodities, supplies, products, or other personal property, or for the
  furnishing or receipt of services, the performance of which will extend
  over a period of more than one year and which involves or is reasonably
  expected to involve consideration in excess of $1,000,000;

     (f) any agreement containing a material noncompetition provision;

     (g) any collective bargaining or similar labor agreement;

     (h) any employment agreement providing for consideration in excess of
  $150,000 per annum or providing severance compensation and benefits having
  an aggregate value in excess of $150,000 in the case of any agreement in
  Italy, Germany, Switzerland or the United States or providing for
  consideration in excess of $1,000,000 per annum or providing severance
  compensation and benefits having an aggregate value in excess of $1,000,000
  in the case of any other agreement and any consultant agreement providing
  for consideration in excess of $200,000 per annum in the case of agreements
  in Italy, Germany, Switzerland or the United States or providing for
  consideration in excess of $1,000,000 per annum in the case of all other
  agreements;

     (i) any brokerage or finder's agreement which involves or is reasonably
  expected to involve consideration in excess of $200,000;

     (j) any joint venture, partnership or similar agreement involving
  sharing of profits or expenses (including joint research and development
  and joint marketing contracts) which is material to the Metrology Business;

     (k) any material operating lease (as lessor, lessee, sublessor or
  sublessee) of any real property (other than Excluded Assets);

     (l) any license (as licensor, licensee, sublicensor or sublicensee) of
  any Intellectual Property which involves or is reasonably expected to
  involve consideration in excess of $100,000 in any one year in the case of
  agreements in Italy, Germany, Switzerland or the United States or in excess
  of $1,000,000 in any one year in the case of all other agreements; and

     (m) any other agreement which is material to the Metrology Business and
  which involves or is reasonably expected to involve consideration in excess
  of $500,000 in the case of agreements in Italy, Germany, Switzerland or the
  United States or in excess of $1,000,000 in the case of all other
  agreements.

Seller has made available to Buyer a copy of each such written agreement and a
written summary setting forth the terms and conditions of each such oral
agreement. Except as disclosed in Schedule 3.14, with respect to each such
agreement: (A) the agreement is in full force and effect and (B) the
Transferred Company or Seller, as applicable, which is a party to such
agreement and, to the Knowledge of Seller, each other party thereto, is not in
breach or default thereof, except for breaches or defaults that would not
reasonably be expected to have a Material Adverse Effect. No Consent of any
third party is required under any such agreement as a result or in connection
with the execution of or the consummation of the transactions contemplated by
this Agreement except for Consents set forth on Schedule 3.19 or Consents
which, if not obtained, would not have a Material Adverse Effect or materially
impair the ability of Seller to consummate the transactions contemplated
hereby or thereby.

                                     A-15


   3.15 Powers of Attorney. Schedule 3.15 sets forth a list of outstanding
powers of attorney executed on behalf of the Transferred Companies or by which
any Purchased Asset is bound.

   3.16 Litigation. Except as set forth in Schedule 3.16, and other than
Excluded Liabilities, Seller is not a party to any suit, claim, action,
proceeding or, to Seller's Knowledge, investigation before any Governmental
Entity or before any arbitrator, and to the Knowledge of Seller, no material
suit, claim, action, proceeding or investigation has been threatened, and to
Seller's Knowledge, there is no reasonable basis for any such material suit,
claim, action, proceeding or investigation. Except as set forth on Schedule
3.16, Seller is adequately insured against any matter listed on Schedule 3.16.
Seller is not subject to any outstanding order, writ, injunction or decree
that, individually or in the aggregate, could have a Material Adverse Effect
on the Metrology Business or the Purchased Assets or that could prevent or
significantly delay the consummation of the transactions contemplated by this
Agreement.

   3.17 Compliance with Law; Environmental Matters. (a) Except as set forth on
Schedule 3.17, each of Seller and its Subsidiaries is not, and has not been,
in conflict with or in violation or breach of or default under (and there
exists no event that, with notice or passage of time or both, would constitute
a conflict, violation, breach or default with, of or under) any Law applicable
to it or any of its properties, assets, operations or business, except for any
such conflict, breaches, violations and defaults that, individually or in the
aggregate, would not reasonably be expected to have or result in a Material
Adverse Effect or to impair materially the ability of Seller to consummate the
transactions contemplated hereby. Without limiting the foregoing, to the
Knowledge of Seller, the Transferred Companies and, with respect to the
Metrology Business, Seller are in compliance with all applicable Laws
regarding employment practices, terms and conditions of employment, wages and
hours and have not been and are not engaged in any unfair labor practice,
except where a failure to comply or engaging in such practice would not
reasonably be expected to have a Material Adverse Effect.

   (b) Except as set forth on Schedule 3.17, to the Knowledge of Seller, the
Transferred Companies and, with respect to the Metrology Business, Seller are
in material compliance with all applicable Environmental Laws, except where
the failure to be in such compliance would not reasonably be expected to have
a Material Adverse Effect, and no notice of such non-compliance has been
received by Seller or any of its Affiliates.

   3.18 Employee Benefits. (a) Schedule 3.18 lists each Employee Benefit Plan
maintained or with respect to which contributions are made by Seller or any of
its Affiliates in respect of any employees of the Transferred Companies or,
with respect to the Metrology Business, Seller, and any other profit-sharing,
stock option, stock purchase, stock appreciation, deferred compensation,
severance or other material plan or arrangement for the benefit of such
employees. Except as set forth in Schedule 3.18, (i) each such Employee
Benefit Plan (and each related trust, insurance contract or fund) complies in
form and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable Laws; (ii) all
contributions which are due have been paid to each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
each such Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice; and (iii) all premiums or other payments for all periods
ending on or before the Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan. Seller has
made available to Buyer copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the Internal
Revenue Service, the most recent Internal Revenue Service Form 5500 Annual
Report, all related trust agreements, insurance contracts, and other funding
agreements which implement or relate to each such Employee Benefit Plan.

   (b) Neither Seller nor any ERISA Affiliate has maintained an Employee
Pension Benefit Plan subject to Title IV of ERISA or any such plan maintained
by the Seller or any ERISA Affiliate has been terminated on a fully funded
basis and termination was approved by both Pension Benefit Guaranty
Corporation and the Internal Revenue Service and there is no post termination
audit or review by any government agency in progress as of the date of
closing.

                                     A-16


   (c) There are no liens on the assets of any Employee Pension Benefit Plan.

   (d) There are no withdrawal liabilities of Seller or an ERISA Affiliate for
any multiemployer pension plan other than as shown on Schedule 3.18.

   (e) There have been no prohibited transactions (as defined in Section 4975
of the Code) with respect to any Employee Pension Benefit Plan and no
transaction which could give rise to any tax or penalty under Section 4975 of
the Code or Section 502 of ERISA, except as shown on Schedule 3.18.

   (f) No Employee Benefit Plan contains a provision which will cause
forfeitures of account balances of Buyer Employees whose benefits are
transferred to a transferee plan of Buyer.

   (g) All Employee Pension Benefit Plans containing assets which will be
transferred to a plan maintained by Buyer have been administered and are in
compliance in all material respects with ERISA and the Code.

   3.19 Consents. Schedule 3.19 sets forth a list of the material Consents
(collectively, the "Seller Required Approvals") required for the consummation
by Seller or its Affiliates of the transactions contemplated hereby.

   3.20 Absence of Undisclosed Liabilities. Except for Liabilities (a)
incurred since June 30, 2000 in the ordinary course of business and consistent
with past practice, (b) otherwise disclosed in Schedule 3.20, or (c) reserved
against or reflected in the June 30 Metrology Unaudited Balance Sheet, none of
the Transferred Companies or, with respect to the Metrology Business, Seller
has any Liabilities (other than Excluded Liabilities) that, individually or in
the aggregate, have had or would be reasonably likely to have a Material
Adverse Effect.

   3.21 Affiliate Transactions. Schedule 3.21 sets forth all material
agreements, contracts, transactions or commitments therefor by which any of
the Transferred Companies on the one hand, and any of the Retained Entities on
the other hand, are a party or are otherwise bound which were in effect prior
to the Closing and which will continue to be in effect after the Closing Date.

   3.22 No Guarantees. Except as set forth in Schedule 3.22, (a) none of the
Liabilities of the Metrology Business or of Seller or any of the Transferred
Companies incurred in connection with the operation of the Metrology Business
is guaranteed by or subject to a similar contingent obligation of any other
Person and (b) none of Seller or any of the Transferred Companies has
guaranteed or become subject to a similar contingent obligation in respect of
the Liabilities of any other Person in connection with the operations of the
Metrology Business.

   3.23 No Improper Payments. Neither Seller nor any agent of Seller, or any
person or entity associated with or acting on behalf of Seller, has directly
or indirectly (a) made any material contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity, private
or public, regardless of what form, whether in money, property or services (i)
to obtain favorable treatment for business secured, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, or (iv) in violation of any legal
requirement, or (b) established or maintained any fund or asset that has not
been recorded in the books and records of Seller. Seller and all agents,
employees and other parties who have acted on behalf of Seller have acted in
full compliance in all material respects with the Prohibited Foreign Trade
Practices Act.

   3.24 Insurance. Seller maintains insurance with respect to the Metrology
Business, and Seller is in compliance with all material requirements and
provisions of their insurance policies. No notice of cancellation has been
given to or received by Seller with respect to lapse and no such insurance
policy is subject to any retroactive rate or audit adjustment or coinsurance
arrangement. Seller will provide to Buyer within 30 days after the date of
this Agreement a complete and accurate list of all insurance policies
maintained by Seller with respect to the Metrology Business.

                                     A-17


   3.25 Restrictions on Business Activities. Except as set forth on Schedule
3.25, there is no judgment, injunction, order or decree binding upon Seller or
any Transferred Company or, to the Knowledge of Seller, threatened that has or
could reasonably be expected to have the effect of prohibiting or impairing
any business practice of Seller or a Transferred Company (either individually
or in the aggregate), any acquisition of property by Seller or a Transferred
Company (either individually or in the aggregate), providing of any service by
Seller or a Transferred Company or the hiring of employees or the conduct of
business by Seller or a Transferred Company (either individually or in the
aggregate), as currently conducted, except for such prohibitions or
impairments which would not reasonably be expected to have a Material Adverse
Effect.

   3.26 Disclosure and Duty of Inquiry. Buyer is not nor will it be required
to undertake any independent investigation to determine the truth, accuracy
and completeness of the representations and warranties made by Seller pursuant
to this Article 3.

4 Representations and Warranties of Buyer.

   Buyer represents and warrants to Seller as follows:

   4.1 Organization of Buyer. Buyer is a limited liability company duly
organized, validly existing, and in good standing under the laws of Sweden. As
of the Closing Date, each of the Buyer Affiliates will be an entity duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and a wholly-owned subsidiary of
Buyer.

   4.2 Authorization of Transaction. Buyer and each Buyer Affiliate have full
corporate power and authority to execute and deliver this Agreement and to
perform their respective obligations hereunder. All corporate and other
actions or proceedings to be taken by or on the part of Buyer or any Buyer
Affiliate to authorize and permit the execution and delivery by Buyer and any
Buyer Affiliate of this Agreement and the instruments required to be executed
and delivered or caused to be executed and delivered by Buyer and the Buyer
Affiliates pursuant hereto, the performance by Buyer and the Buyer Affiliates
of their obligations hereunder, and the consummation by Buyer and the Buyer
Affiliates of the transactions contemplated herein, have been duly and
properly taken. This Agreement has been duly executed and delivered by Buyer
and any applicable Buyer Affiliate and, assuming the due authorization,
execution and delivery by Seller, constitutes a legal, valid and binding
obligation of Buyer and the Buyer Affiliates, enforceable against Buyer and
the Buyer Affiliates in accordance with its terms.

   4.3 Noncontravention. Neither the execution and the delivery of this
Agreement by Buyer, nor the consummation by Buyer or the Buyer Affiliates of
the transactions contemplated hereby will (i) violate any provision of its
charter, by-laws or other organizational document, (ii) violate any Law to
which Buyer or any Buyer Affiliate is subject or (iii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Buyer or any Buyer Affiliate is a party or by
which it is bound or to which any of its assets is subject if, in the case of
clauses (ii) and (iii), such violation, conflict, breach, default,
acceleration or other right could reasonably be expected to impair materially
Buyer's or any Buyer Affiliate's ability to consummate the transactions
contemplated by this Agreement. None of Buyer or any of the Buyer Affiliates
needs to give any notice to, make any filing with, or obtain any Consent in
order for it to consummate the transactions contemplated by this Agreement
(including the assumptions referred to in Section 2), except for the filings
and Consents listed in Schedule 4.6.

   4.4 Purchase for Investment. Buyer (and/or any Buyer Affiliate) is
purchasing the shares of the Transferred Companies for its own account for
investment and not with a view to the disposition thereof or with any present
intention of distribution or selling any of such shares.

   4.5 Brokers' Fees. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Seller or any Retained Subsidiary
could become liable or obligated.

                                     A-18


   4.6 Consents. Schedule 4.6 sets forth a list of the material Consents
(collectively, the " Buyer Required Approvals") required for the consummation
by Buyer and the Buyer Affiliates of the transactions contemplated hereby,
including without limitation all non-United States jurisdictions in which the
approval of any antitrust or similar authority is required for consummation of
the transactions contemplated by this Agreement.

   4.7 Financing. Buyer has sufficient financial resources available to it so
as to enable Buyer to satisfy its obligations under this Agreement.

5 Covenants.

   5.1 General. Each of the Parties will use its reasonable best efforts to
take all actions and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 7 below and including reasonable best efforts to achieve
prompt termination of the waiting period under the Hart-Scott-Rodino Act and
other similar laws in other jurisdictions with respect to all transactions
contemplated hereby, including sale of the WAI Stock and obtain all consents
to transfer to the Buyer the Seller's interests in two Chinese joint ventures
listed in the definition of Metrology Stock.

   Buyer will, within ten days after execution and delivery of this Agreement
advise the Seller in writing of any such similar laws in jurisdictions outside
the United States.

   5.2 Notices and Consents; Stockholder Meeting.  Seller and Buyer will use
their reasonable best efforts to obtain or make the Seller Required Approvals
and the Buyer Required Approvals, as the case may be. Seller shall call and
hold a special meeting of stockholders as promptly as practicable and in
accordance with applicable laws for the purpose of voting upon the approval of
this Agreement and the transactions contemplated hereby. Unless otherwise
required under the applicable fiduciary duties of the directors of Seller, as
determined by such directors in good faith after consultation with and based
upon the written advice of their outside legal counsel, Seller shall (i)
recommend approval of the transactions contemplated by this Agreement by the
stockholders of Seller and (ii) use all reasonable best efforts to solicit
from its stockholders proxies in favor of adoption of this Agreement and
approval of the transactions contemplated hereby and shall take all other
action necessary or advisable to secure the vote or consent of stockholders to
obtain such approval.

   5.3 Operation of Business.  Pending the Closing, Seller shall, and shall
cause the Transferred Companies to, operate the Metrology Business only in the
ordinary course consistent with past practice and to consult with and keep
Buyer fully informed as to all changes in policies or practices material to
the Metrology Business as a whole. Without limiting the generality of the
foregoing, (x) Seller will cause each Transferred Company not to issue or sell
any shares of any class of its capital stock, or any securities convertible
into or exchangeable for any such shares, or issue, sell, grant or enter into
any subscriptions, options, warrants, conversion or other rights, agreements,
commitments, arrangement or understandings of any kind, contingently or
otherwise, to purchase or otherwise acquire any such shares or any securities
convertible into or exchangeable for any such shares and (y) each Transferred
Company and, with respect to the Metrology Business, Seller (other than with
the consent of Buyer) agree:

     (a) not to incur any Indebtedness (other than any borrowings from or
  prepayments to any of its Affiliates) except in the ordinary course of
  business consistent with past practice;

     (b) not to pay or commit to pay any bonus, other incentive compensation,
  change-in-control or similar compensation to any officer, director,
  employee, sales representative, agent or consultant or grant or commit to
  grant to any officer, director, employee, sales representative, agent,
  consultant or Affiliate any other increase in, or additional, compensation
  in any form, other than those made under existing plans or programs or the
  increases, bonuses and other items listed on Schedule 5.3;

     (c) not to enter into, institute, adopt or materially amend or commit to
  enter into, institute, adopt or materially amend any employment,
  consulting, retention, change-in-control, collective bargaining, bonus or

                                     A-19


  other incentive compensation, profit-sharing, health or other welfare,
  stock option or other equity, pension, retirement, vacation, severance,
  deferred compensation or other employment, compensation or benefit plan,
  policy, agreement trust, fund or arrangement in respect of or for the
  benefit of any officer, director, employee, sales representative, agent or
  consultant or Affiliate (whether or not legally binding), except as
  contemplated by this Agreement or as listed on Schedule 5.3;

     (d) not to sell, transfer, assign, mortgage, pledge, hypothecate, grant
  any security interest in, or otherwise subject to any other Lien, any of
  its assets other than inventory in the ordinary course of business
  consistent with past practice and other than in accordance with existing
  agreements; provided, however, that this clause shall not prohibit
  Aftermarket Services from selling its shares of WAI in accordance with the
  Right of First Refusal described in Section 5.16 or transferring the
  proceeds from any such sale to Seller;

     (e) not to enter into or assume any contract providing for the payment
  of an amount in excess of $1,000,000 per year, or enter into or permit any
  amendment, supplement, waiver or other modification in respect thereof
  other than in the ordinary course of business consistent with past
  practice;

     (f) not to cause or permit any amendment, supplement, waiver or
  modification to or of any of its certificate of incorporation, by-laws or
  other organizational documents;

     (g) not to merge or consolidate with, or agree to merge or consolidate
  with, or purchase substantially all of the assets of, or otherwise acquire,
  any business, business organization or division thereof, or any other
  Person, other than with respect to Excluded Assets;

     (h) not to agree or otherwise commit to take any of the actions
  described in the foregoing paragraphs (a) through (g);

     (i) to use commercially reasonable efforts to keep in full force and
  effect insurance comparable in amount and scope of coverage to insurance
  carried by it as of the date hereof;

     (j) to maintain its books of account and records in the ordinary course
  of business consistent with past practice;

     (k) to maintain its properties and facilities in as good working order
  and condition as at present, ordinary wear and tear excepted;

     (l) not to accelerate, terminate, make material modifications to, or
  cancel any contract to which Seller is a party or by which it is bound,
  except where such acceleration, modification or cancellation would not have
  a Material Adverse Effect;

     (m) not to make any capital expenditures or commitments in excess of
  $9,000,000 in the aggregate;

     (n) not to make any material investment in, or any loan to, any other
  Person (other than its existing Subsidiaries);

     (o) not to grant any license or sublicense of any rights under or with
  respect to any Intellectual Property, except where the grants (individually
  or in the aggregate) would not have a Material Adverse Effect;

     (p) not to settle, release or forgive any claim or litigation or waive
  any right, except where such settlement, release, forgiveness or waiver
  would not have a Material Adverse Effect;

     (q) not to make any changes in any method of accounting, or accounting
  principles, which would increase the Purchase Price or the timing of the
  payment thereof or which Seller's independent certified public accountant,
  which is of nationally recognized standing, would consider material, other
  than changes related to Staff Accounting Bulletin No. 101 which shall be
  disregarded for all purposes of this Agreement; and

     (r) not to increase in any material respect the average time of payment
  of its U.S. accounts payable to vendors beyond the level applicable at
  September 30, 2000, which level the parties acknowledge and agree was 63
  days.

                                      A-20


   5.4 Access. Subject to the Confidentiality Agreement dated August 3, 2000
between Seller and Buyer, Seller will permit representatives of Buyer to have
full access at all reasonable times before and after the Closing, upon
reasonable notice, and in a manner so as not to interfere with the normal
business operations of the Metrology Business, to all premises, properties,
books, records, and documents of or pertaining to the Metrology Business.

   5.5 Employee Matters. (a) Buyer shall, or shall cause a Buyer Affiliate to,
offer employment, effective as of the Closing Date, to substantially all
individuals employed by Seller in the Metrology Business other than those
employees who have change in control or severance agreements with the Seller
and Buyer shall be responsible for and indemnify Seller against all severance
or termination amounts payable to all individuals employed by Seller in the
Metrology Business (whether or not receiving an offer from Buyer), other than
such employees who have change in control or severance agreements with the
Seller. Each such individual who accepts such offer of employment with Buyer
or a Buyer Affiliate pursuant to this Section 5.5(a) and each individual who,
as of the Closing Date, is employed by a Transferred Company shall be referred
to herein as a "Buyer Employee".

   (b) On the Closing Date, Buyer shall provide all Buyer Employees with
employment on substantially the same terms and conditions with, at a minimum,
substantially the same compensation and substantially the same or comparable
benefits as are provided to such employees by Seller or a Transferred Company
immediately prior to the Closing Date.

   (c) In the case of each Employee Benefit Plan listed on Schedule 3.18 that
is an Employee Welfare Benefit Plan, as of the Closing Date, all Buyer
Employees shall cease to participate in such Employee Benefit Plan and shall
commence to participate in welfare benefit plans of Buyer (the "Replacement
Welfare Plans"). Buyer shall cause the Replacement Welfare Plans to (i) waive
all limitations as to pre-existing condition exclusions and actively at work
requirements as to each Buyer Employee except to the extent such exclusions or
requirements had not been satisfied with respect to such Buyer Employee's
participation under the comparable Employee Benefit Plan in which such Buyer
Employee was a participant immediately prior to his commencement of
participation in the applicable Replacement Welfare Plan (the "Comparable
Benefit Plan"), (ii) recognize the service of each Buyer Employee with the
Transferred Companies or Seller completed prior to the Closing Date for
purposes of any waiting period or other eligibility requirements under the
Replacement Welfare Plans to the extent such service would have been taken
into account under the Comparable Benefit Plan and (iii) for purposes of
satisfying any deductible or out-of-pocket requirements under each Replacement
Welfare Plan for the year in which the Closing Date falls, provide each Buyer
Employee with credit for any co-payments and deductibles paid under the terms
of the Comparable Benefit Plan during such year and prior to the Closing Date.

   (d) Buyer shall cause the trustee of one or more defined contribution plans
of Buyer or Buyer's United States Affiliate that qualify under section 401(a)
of the Code (the "transferee plan") to accept rollovers, including "direct
rollovers" described in Section 401(a)(31) of the Code, of all or any portion
of any "eligible rollover distribution" described in Section 402(c)(4) of the
Code or Section 408(d)(3) of the Code with respect to the benefits of a Buyer
Employee under any Employee Benefit Plan listed on Schedule 3.18 that is a
defined contribution plan qualifying under section 401(a) of the Code (the
"transferor plan"). In the case of any such Buyer Employee whose interest in a
transferor plan includes one or more outstanding participant loans, Buyer
shall cause the applicable transferee plan to accept in kind, as part of a
direct rollover described in the preceding sentence, the promissory note(s)
representing such loan(s) and to facilitate the continuation of such
outstanding loan in accordance with its terms.

   Notwithstanding the foregoing, Buyer shall not accept a rollover of the
Seller's ESOP and shall not assume any liabilities under Seller's Umbrella
SERP except with respect to employees of Seller or Transferred Companies that
Buyer or its Affiliates hire or retain on the Closing Date without giving a
termination notice in respect thereto.

                                     A-21


   (e) Buyer shall indemnify Seller and its Affiliates and defend and hold
each of them harmless from and against any Losses which may be incurred by any
of them under the Worker Adjustment and Restraining Notification Act of 1988
(the "WARN Act"), or any state plant closing or notification law, or similar
law in jurisdictions outside the United States, arising out of, or relating
to, any actions taken by Buyer or its Affiliates on or after the Closing Date.
Seller shall indemnify Buyer and its Affiliates and defend and hold each of
them harmless from and against any Losses which may be incurred by any of them
under the WARN Act or any state plant closing or notification law, or similar
law in jurisdictions outside the United States, arising out of, or relating
to, any actions to close a plant taken by Seller or the Retained Entities
prior to, at or after the Closing.

   5.6 Bulk Sales Compliance. Buyer hereby waives compliance by Seller with
the provisions of any bulk sales or similar law of any jurisdiction.

   5.7 Notice of Developments. Prior to the Closing Date, Seller or Buyer
shall promptly notify the other party in writing of any development causing a
breach of any of its own representations and warranties contained in this
Agreement.

   5.8 No Solicitation. (a) During the term of this Agreement, Seller shall
not, and shall cause each of its Subsidiaries and its and their respective
directors, officers, employees, agents and representatives not to (x) solicit,
initiate or encourage the initiation of any inquiries or proposals regarding
the acquisition by any Person of any of the Metrology Stock, or all or a
material portion of the Metrology Business or of the Purchased Assets (any of
the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"), (y) engage in negotiations or discussions concerning,
or furnish or permit to be furnished any non-public information concerning the
Metrology Business to any Person relating to, any Acquisition Proposal, or (z)
agree to, approve or recommend any Acquisition Proposal. Nothing contained in
this Section 5.8(a) shall prevent the Board of Directors of Seller from
considering, negotiating, discussing, approving and recommending to the
stockholders of Seller a bona fide Acquisition Proposal not solicited,
initiated or encouraged in violation of this Agreement, provided the Board of
Directors of Seller determines in good faith (upon the advice of outside
counsel) that it is required to do so in order to discharge properly its
fiduciary duties. Nothing contained in this Section 5.8 shall prohibit the
Board of Directors of Seller from complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer.

   (b) Seller shall immediately notify Buyer after receipt of any Acquisition
Proposal, or any modification of or amendment to any Acquisition Proposal, or
any request for non-public information relating to the Metrology Business in
connection with an Acquisition Proposal or for access to the properties, books
or records of Seller or any of its Subsidiaries by any person or entity that
informs the Board of Directors of Seller or such Subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such notice to Buyer
shall be made orally and in writing, and shall indicate whether Seller is
providing or intends to provide the Person making the Acquisition Proposal
with access to information concerning Seller as provided in Section 5.8(c).

   (c) If the Board of Directors of Seller receives a request for material
non-public information by a Person who makes, or indicates that it is
considering making, a bona fide Acquisition Proposal, and the Board of
Directors of Seller determines in good faith and upon the advice of outside
counsel that it is required to cause Seller to act as provided in this Section
5.8(c) in order to discharge properly the directors' fiduciary duties, then,
provided such Person has executed a confidentiality agreement substantially
similar to the one then in effect between Seller and Buyer, Seller may provide
such Person with access to information regarding the Metrology Business.

   (d) Seller shall immediately cease and cause to be terminated any existing
discussions or negotiations with any Persons (other than Buyer) conducted
heretofore with respect to any of the foregoing. Seller agrees not to release
any third party from the confidentiality provisions of any confidentiality
agreement to which Seller is a party.

                                     A-22


   5.9 Noncompetition; Nonsolicitation. Seller agrees that, in consideration
of the purchase of the Metrology Stock and the Metrology Assets by Buyer
hereunder, neither it nor BSIS shall, on or prior to the date which is five
(5) years after the Closing Date, directly or indirectly, own, manage,
operate, control or invest in any business or venture engaged in whole or in
part in the Metrology Business or any portion thereof; provided, however, that
this Section 5.9 shall not preclude Seller or BSIS, together with their
respective Affiliates, from developing and marketing the XactMeasure or other
software products of BSIS (but not the legacy software derivatives referred to
in the third paragraph of Section 5.13). The restrictions contained in this
Section 5.9 shall apply to any successors to the business of Seller or BSIS.

   Reference is made to the BSIS Stockholders' Agreement for certain royalty
obligations of BSIS to the Buyer and related matters.

   Seller further agrees that, on or prior to the date which is five (5) years
after the Closing Date, neither Seller nor BSIS will directly or indirectly
without the prior written consent of Buyer, recruit, offer employment, employ,
engage as a consultant, lure or entice away or in any other manner persuade or
attempt to persuade any person who is an employee or full-time or half-time
consultant of Buyer or any of its Affiliates, to leave the employ of Buyer or
such Affiliate unless such person has been terminated by Buyer or an Affiliate
of Buyer; provided, however, that this provision shall not prohibit Seller or
BSIS from employing employees of Buyer or its Affiliates who are not
specifically recruited or solicited in any way and who seek employment with
Seller or BSIS on their own initiative or in response to general advertising
or a recruiting firm not targeted on hiring any particular individual or any
employees of Buyer or its Affiliates. The BSIS Stock Purchase Agreement shall
contain substantially identical restrictions on the ability of Buyer and its
Affiliates to solicit or hire employees of BSIS following the Closing.

   5.10 Real Property. Seller hereby covenants and agrees at all times through
the Closing faithfully to abide by, carry out and fully perform in all
material respects the terms, covenants, provisions, conditions and agreements
contained in the Leases and agrees not to cause, allow or suffer any material
breach or default thereof to occur.

   5.11 Change of Name. Immediately following the Closing, Seller shall change
its corporate name and the names of any Retained Subsidiaries to eliminate any
reference to Brown & Sharpe and to adopt corporate names which would not be
reasonably likely to cause confusion with the Brown & Sharpe name.

   5.12 Heathrow Airport Property. By written notice to Seller no less than
thirty (30) days prior to the Closing, Buyer shall have the option to have
Brown & Sharpe Group Ltd. retain ownership of the Heathrow Airport Property
and the related rights more particularly described on Schedule 5.12 (the
"Heathrow Property"). In the event that Buyer exercises such option, Buyer
shall be obligated to pay Seller an additional $5 million of Purchase Price at
Closing. In the event that Buyer does not exercise such option, Seller or its
designee shall acquire for no payment the Heathrow Property from Brown &
Sharpe Group Ltd. prior to the Closing and shall be responsible for any Taxes
arising out of such acquisition.

   5.13 BSIS. At the Closing, Buyer or its designated Affiliate shall purchase
and BSIS shall sell shares of its authorized but unissued common stock of BSIS
representing 16.7% of the issued and outstanding common stock of BSIS for a
BSIS Stock Purchase Price of $2.5 million payable in cash. Such purchase and
sale will be made pursuant to a purchase agreement mutually acceptable to
Buyer and Seller to be entered into within 15 days after the execution and
delivery of this Agreement (the "BSIS Stock Purchase Agreement") and at the
Closing Buyer and Seller shall enter into a stockholders' agreement mutually
acceptable to Buyer and Seller relating to the shares of BSIS, such agreement
(the "BSIS Stockholders' Agreement") to contain investment restrictions
necessary for a "private placement" under U.S. securities law, transfer
restrictions, voting provisions and a Buyer right of first refusal in
connection with offers by a third party to Seller or BSIS for the acquisition
of BSIS (by sale of stock, merger or otherwise), the form of which shall be
agreed within 15 days after the execution and delivery of this Agreement.

                                     A-23


   On each of the first three anniversaries of the Closing, Buyer shall
purchase additional shares of BSIS for a purchase price of $1.5 million on
each such anniversary. The number of shares sold to the Buyer shall be the
lesser of (a) 10% of the outstanding common stock of BSIS or (b) a percentage
of the outstanding common stock of BSIS equal to the quotient of $1.5 million
divided by the fair market value of BSIS determined as of a date which is 30
days prior to the scheduled additional purchase date (or, if the shares of
BSIS are at the time publicly traded, determined by reference to the average
of the closing prices of such BSIS shares on the applicable exchange over the
thirty-day period ending three (3) days prior to the scheduled purchase date).
If Buyer and Seller cannot agree as to the fair market value as of any date,
such determination shall be made by the Auditor, whose determination shall be
final and binding on the Parties and whose fees shall be shared equally by the
Parties. Buyer shall have the right to accelerate the timing of the purchases
it is obligated to make pursuant to this Section 5.13.

   The parties acknowledge and agree that (i) the legacy software (e.g.
Quindos, Tutor, Chorus, MM4) owned by Seller and/or its Subsidiaries is
currently and shall continue to be after the Closing an exclusive asset of the
Metrology Business, (ii) the XactMeasure legacy derivatives (e.g. XactQuindos,
Chorus X, MM4X, Tutor X) of BSIS shall be transferred by BSIS to the
appropriate unit in the Metrology Business the core legacy software prior to
the Closing (with BSIS retaining rights to its XactMeasure MR1 and MR2
Technology) and BSIS shall have no right to sell or license the XactMeasure
legacy derivatives software (iii) the XactMeasure product is currently and
shall continue to be after the Closing an exclusive asset of BSIS, and BSIS's
rights to use the legacy software and XactMeasure legacy derivatives in
connection with the development of XactMeasure and its progeny (but not the
derivatives transferred as part of the Metrology Business above), as embodied
in Software Programming Services Agreements between BSIS and the Transferred
Companies, will continue in full force and effect following the Closing. The
parties agree to make such mutually agreed changes to Section 6.4 of the
various Software Programming Services Agreements as may be necessary to
protect the proprietary rights of Buyer and the Transferred Companies in the
legacy software products.

   The BSIS Stockholders' Agreement shall provide that for a five year period
following the Closing, (a) BSIS shall sell XactMeasure licenses to Buyer and
its Affiliates for OEM use and for distribution in connection with the
Metrology Business at a price of $1,500 per unit for coordinate measuring
machine ("CMM") applications and (b) BSIS shall pay to Buyer a royalty of
$5,000 per unit for XactMeasure licenses sold by BSIS through distribution
channels other than Buyer or its Affiliates for CMM applications.

   5.14 North Kingstown Lease (sometimes referred to as the "Buyer Lease"). At
the Closing, Buyer and Seller shall enter into a lease with respect to a
portion of Seller's facility at Precision Park. The lease will provide for:
(a) a term of five (5) years; (b) a declining amount of space rented over the
term; (c) the tenant bearing no responsibility for structural repairs; (d) a
rental rate consisting of a base rent with appropriate charges for taxes,
utilities and insurance calculated in a manner consistent with past practice;
and (e) such other terms as are mutually acceptable to Buyer and Seller, said
lease to be in the form of Exhibit B.

   5.15 Closing Balance Sheet. Following the Closing, Buyer and Seller (to the
extent Seller has available staff, computer or other equipment at the time)
shall cooperate in the preparation of Buyer's Closing Date balance sheet for
the Metrology Business which, at the option of Buyer, may be audited. In
furtherance of the foregoing, Buyer shall have the access provided by Section
5.4.

   5.16 WAI. The parties acknowledge that the transfer of the shares of WAI
held by Aftermarket Services, whether directly or indirectly through the
transfer of the shares of Aftermarket Services, is subject to a right of first
refusal (the "Right of First Refusal") contained in the Incorporation
Agreement dated as of August 10, 1990 among WAI, Aftermarket Services and the
WAI Stockholders. Within a reasonable time after the date of execution and
delivery of this Agreement, Buyer shall provide to Seller a written notice
setting forth the dollar amount of the Purchase Price that will be allocated
to the shares of WAI held by Aftermarket Services. Buyer shall promptly offer
to the WAI Stockholders the right to purchase the shares of WAI held by
Aftermarket Services in accordance with terms of the Right of First Refusal
and a form of Purchase and Sale Agreement

                                     A-24


acceptable to Buyer and Seller for such shares of WAI. If the Right of First
Refusal is exercised in accordance with its terms, the Purchase Price shall be
reduced by the amount paid by the WAI Stockholders to Aftermarket Services for
the WAI shares (the "WAI Purchase Price"), and any portion of the WAI Purchase
Price held by Aftermarket Services at the Closing shall be included in the
calculation of the Cash Amount pursuant to Section 2.4. If the Right of First
Refusal is not exercised in accordance with its terms by the WAI Stockholders,
Aftermarket Services shall continue to hold the shares of WAI through the
Closing (at which Closing Buyer shall purchase the shares of Aftermarket
Services, and indirectly the shares of WAI) and there shall be no adjustment
to the Purchase Price.

   All other provisions of this Agreement shall be interpreted consistently
with the results obtained under this Section 5.16 after the date hereof and
prior to the Closing hereunder.

   5.17 Deal Structure. The parties agree to discuss in good faith the
possibility of altering the structure of the transactions contemplated by this
Agreement for tax planning purposes. In no event shall either party be
obligated to agree to any change in the terms of the structure of such
transactions is such change might reasonably be expected to have an adverse
economic impact on such party.

   5.18 Termination of Intercompany Agreements. Effective as of the Closing,
Seller and the Retained Entities shall enter into a mutual termination and
release with the Transferred Companies providing for the termination of all
agreements and receivables and payables between Seller or a Retained Entity,
on the one hand, and a Transferred Company, on the other hand, other than the
agreements set forth on Schedule 3.21, any agreements entered into in
connection with the transactions contemplated by this Agreement and
receivables and payables between BSIS and any Transferred Company.

6 Tax Matters

   6.1 Tax Returns. (a) Seller shall be responsible for preparing and filing
the Tax Returns of, or which include, Seller or any Retained Subsidiary and
shall be responsible for the payment of any Tax due thereon.

   (b) Buyer shall be responsible for preparing and filing the Tax Returns of,
or which include, any of the Transferred Companies for all tax periods ending
on or prior to the Closing Date which are required to be filed after the
Closing Date and for all tax periods ending after the Closing Date, and shall
be responsible in each case for the payment of all Taxes due thereon, other
than Income Tax Returns with respect to which consolidated, combined or
unitary Tax Returns of the Seller are required to be filed for periods ending
on or before the Closing Date and which include the operations of the
Transferred Companies. Buyer shall permit Seller to review and comment on each
such Tax Return described in the preceding sentence prior to filing and shall
make such revisions to such Tax Returns as are reasonably requested by Seller.

   6.2 Tax Indemnities. Buyer shall indemnify and hold Seller harmless from
(i) all deficiencies in Tax of the Transferred Companies and (ii) all Taxes
resulting from any action taken without Seller's written consent by Buyer or
any Transferred Company after the Closing (including, without limitation,
actions taken outside the ordinary course of business and occurring on the
Closing Date). No loss, credit or other item of a Transferred Company may be
carried back without Seller's written consent, which Seller may withhold in
its sole and absolute discretion, to a taxable period for which Seller or any
Subsidiary of Seller filed a consolidated, unitary or combined Tax Return with
the Transferred Companies unless such carryback is required by law. Seller
shall promptly pay over to Buyer the amount of any refund (including interest)
received as a result of such a permitted carryback but may retain any refund
(including interest) resulting from a carryback not so permitted. Seller
agrees to indemnify Buyer and any Transferred Company for any tax liability
any Transferred Company incurs in respect of the liability of Seller and any
Retained Entity in a United States consolidated, combined or unitary Tax
Return of Seller filed for periods ending on or before the Closing Date.

   6.3 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any Rhode
Island

                                     A-25


and New York State Gains Tax, Sales Tax and any similar tax imposed in other
states or subdivisions), shall be paid by Buyer or a Buyer Affiliate when due,
and Buyer and the Buyer Affiliates will, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable law, Seller will, and will cause its
Affiliates to, join in the execution of any such Tax Returns and other
documentation.

   6.4 Cooperation on Tax Matters. (a) Buyer, the Transferred Companies, and
Seller shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Transferred Companies and Seller agree (i) to retain all books and records
with respect to Tax matters pertinent to the Transferred Companies relating to
any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or Seller,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii)
to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, the Transferred Companies or Seller, as the case may be, shall allow
the other party to take possession of such books and records.

   (b) Buyer and Seller further agree, upon request, to use their best efforts
to obtain any certificate or other document from any governmental authority or
any other Person as may be necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).

   6.5 Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Transferred Companies shall be
terminated as of the Closing Date and, after the Closing Date, none of Seller,
the Retained Entities or the Transferred Companies shall be bound thereby or
have any liability thereunder.

7 Conditions to Obligation to Close.

   7.1 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the
Closing is, at the option of Buyer, subject to satisfaction of the following
conditions:

     (a) Representations and Warranties. The representations and warranties
  set forth in Section 3 shall be true and correct in all respects as set
  forth therein at and as of the date hereof and on and as of the Closing
  Date with the same effect as though made at and as of the Closing Date,
  except for such failures to be true and correct as do not, in the
  aggregate, have a Material Adverse Effect;

     (b) Performance by Seller. Seller shall have performed and complied with
  all of its covenants and agreements hereunder through the Closing in all
  material respects;

     (c) Consents. Seller and Buyer shall have made or obtained all Seller
  Required Approvals and Buyer Required Approvals;

     (d) Absence of Litigation. No action, suit, or proceeding shall be
  pending or threatened before any Governmental Entity wherein an unfavorable
  injunction, judgment, order, decree, ruling, or charge would prevent
  consummation of any material transactions contemplated by this Agreement
  (and no such injunction, judgment, order, decree, ruling, or charge shall
  be in effect);

     (e) Certificates. Seller shall have delivered to Buyer a certificate to
  the effect that each of the conditions specified above in Section 7.1(a)
  and (b) is satisfied in all respects;

     (f) Lease. Seller shall have executed and delivered to Buyer (or one of
  its Affiliates) the lease for real property located in Precision Park
  contemplated by Section 5.14 (the "Buyer Lease");

                                     A-26


     (g) Antitrust Matters. All applicable waiting periods (and any
  extensions thereof) under the Hart-Scott-Rodino Act (and the applicable
  antitrust laws of jurisdictions other than the United States set forth on
  Schedule 4.6) with respect to all contemplated transactions hereunder,
  including the sale of the stock of WAI under Section 5.16 shall have
  expired or otherwise been terminated;

     (h) Stockholder Approval. This Agreement and the transactions
  contemplated hereby shall have been approved and adopted by the requisite
  vote of the stockholders of Seller;

     (i) Opinion. Buyer shall have received from counsel to Seller an opinion
  in form and substance as set forth in Exhibit C attached hereto, addressed
  to Buyer and dated as of the Closing Date;

     (j) Resignations. Buyer shall have received the resignations, dated as
  of the Closing Date, of each director of the Transferred Companies;

     (k) Transfer Documents. Seller shall have delivered to Buyer, the
  appropriate Buyer Affiliate or the relevant Transferred Company at the
  Closing the documents required by Section 2.7(b);

     (l) BSIS Stockholders' Agreement. Seller and BSIS shall have executed
  and delivered to Buyer (or one of its Affiliates) the BSIS Stock Purchase
  Agreement and the BSIS Stockholders' Agreement contemplated by Section
  5.13; and

     (m) Material Adverse Effect. Since September 30, 2000, no event shall
  have occurred and no condition shall have arisen which has had or is
  reasonably likely to result in a Material Adverse Effect, except as
  disclosed in the Agreement or the schedules attached hereto.

   7.2 Conditions to Obligations of Seller. The obligation of Seller to
consummate the transactions to be performed by them in connection with the
Closing is at the option of Seller subject to satisfaction of the following
conditions:

     (a) Representations and Warranties. The representations and warranties
  set forth in Section 4 shall be true and correct in all respects as set
  forth therein (in the case of any representation or warranty containing any
  materiality qualification) or in all material respects (in the case of any
  representation or warranty without any materiality qualification) at and as
  of the date hereof and on and as of the Closing Date with the same effect
  as though made at and as of the Closing Date;

     (b) Performance by Buyer. Buyer shall have performed and complied with
  all of its covenants and agreements hereunder in all material respects
  through the Closing, and shall have paid the Purchase Price in accordance
  with Section 2.3;

     (c) Consents. Seller and Buyer shall have made or obtained all Seller
  Required Approvals and Buyer Required Approvals;

     (d) Absence of Litigation. No action, suit, or proceeding shall be
  pending or threatened before any Governmental Entity wherein an unfavorable
  injunction, judgment, order, decree, ruling, or charge would prevent
  consummation of any material transactions contemplated by this Agreement
  (and no such injunction, judgment, order, decree, ruling, or charge shall
  be in effect);

     (e) Antitrust Matters. All applicable waiting periods (and any
  extensions thereof) under the Hart-Scott-Rodino Act (and the applicable
  antitrust laws of jurisdictions other than the United States set forth on
  Schedule 4.6) with respect to all contemplated transactions, hereunder
  including the sale of stock of WAI, shall have expired or otherwise been
  terminated;

     (f) Stockholder Approval. This Agreement and the transactions
  contemplated hereby shall have been approved and adopted by the requisite
  vote of the stockholders of Seller;

     (g) Certificates. Buyer shall have delivered to Seller a certificate to
  the effect that each of the conditions specified above in Sections 7.2(a)
  and (b) is satisfied in all respects;

     (h) Lease. Buyer (or one of its Affiliates) shall have executed and
  delivered to Seller the Buyer Lease contemplated by Section 5.14;

                                     A-27


     (i) Payment of Bank and Insurance Company Debt; Release of
  Guarantees. Buyer shall have paid or made arrangements satisfactory to
  Seller to permit Seller to pay in full simultaneously with the Closing on
  the Closing Date all Bank and Insurance Company Debt then outstanding and
  shall have obtained releases of all guarantees by the Retained Entities set
  forth on Schedule 3.22;

     (j) Opinion. Seller shall have received from counsel to Buyer an opinion
  in form and substance as set forth in Exhibit D attached hereto, addressed
  to Seller and dated as of the Closing Date;

     (k) Assumption Agreements. Buyer or a Buyer Affiliate shall have
  delivered to Seller at the Closing the documents required by Section
  2.7(c); and

     (l) BSIS Stockholders' Agreement. Buyer (or one of its Affiliates) shall
  have executed and delivered to Seller and BSIS the BSIS Stock Purchase
  Agreement, invested $2.5 Million cash for shares of stock of BSIS and
  executed and delivered the BSIS Stockholders' Agreement contemplated by
  Section 5.13

8 Indemnification.

   8.1 Survival of Representations, Warranties, Agreements and
Covenants. Except as otherwise provided in this Section 8.1, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party
or any of their officers or directors, whether prior to or after the execution
of this Agreement. The representations, warranties and agreements in this
Agreement shall terminate at the Closing or upon the earlier termination of
this Agreement pursuant to Section 9.1, as the case may be, except that the
representations and warranties set forth in Sections 3.2, 3.4, 3.5, 3.7, 4.2,
4.4 and 4.5 and the agreements set forth in Sections 2.2, 2.4, 2.5, 5.4, 5.5,
5.6, 5.9, 5.11, 5.13, 5.15, 6, 8 and 10 shall survive the Closing indefinitely
and those set forth in Section 9.2 shall survive such termination
indefinitely. Nothing in this Section 8.1 shall relieve any party for any
breach of any representation, warranty or agreement in this Agreement
occurring prior to termination.

   8.2 Indemnity by Seller. Seller hereby agrees to indemnify, defend and hold
harmless Buyer, the Transferred Companies, and its and their directors,
officers, employees, agents and Affiliates (the "Buyer Indemnitees") against
and in respect of, and pay and reimburse the Buyer Indemnitees for, all
Liabilities, damages, losses, expenses, and costs (including reasonable
attorneys' and accountants' fees and expenses), whether or not resulting from
third party claims (collectively, "Losses"), as a result of or arising out of
(a) the inaccuracy of any representation or warranty made by Seller herein
that survives the Closing; (b) any breach or nonfulfillment after the Closing
of any agreement or covenant of Seller contained herein or in any agreement or
instrument required to be entered into in connection herewith that survives
the Closing; (c) any lawsuit or claim by any shareholder of Seller in its
capacity as a shareholder of Seller relating to or in any way arising out of
the transactions contemplated by this Agreement, except to the extent any such
lawsuit or claim arises from a breach of this Agreement by Buyer; (d) non-
compliance with applicable bulk sales laws of the United States; (e) any
Excluded Liability; (f) any Tax liability arising out of a transfer of the
Heathrow Property to Seller or its designee pursuant to Section 5.12 or (g)
any breach or nonfulfillment of the Seller's indemnity in Section 5.5(e);
provided, however, that Seller shall have no Liability under clause (a) of
this Section 8.2 in respect of Losses until and then only to the extent that
the aggregate of such Losses exceeds $1,000,000, in which case Seller will be
liable for the amount of such Losses in excess of $1,000,000.

   8.3 Exclusive Remedy. Except for Tax matters, which shall also be governed
by the provisions of Section 6, and the indemnities set forth in Section 5.5,
this Section 8 shall provide the sole and exclusive remedy for any and all
Losses sustained or incurred by Buyer or Seller or their successors and
assigns; provided that the foregoing shall not limit the right of the Parties
to such equitable remedies as may be available or any Party's remedies in
respect of fraud by the other Party in connection herewith.

   8.4 Indemnity by Buyer. Buyer hereby agrees to indemnify, defend and hold
harmless Seller and its directors, officers, employees, agents and Affiliates
(the "Seller Indemnitees") against and in respect of, and pay

                                     A-28


and reimburse the Seller Indemnitees for, all Losses resulting from or arising
out of (a) the inaccuracy of any representation or warranty made by Buyer
herein that survives the Closing or (b) any breach or nonfulfillment after the
Closing of any agreement or covenant of Buyer, including Buyer's or Buyer
Affiliate's agreement to assume the Metrology Liabilities pursuant to Section
2.3, contained herein or in any agreement or instrument required to be entered
into in connection herewith that survives the Closing or (c) any breach or
nonfulfillment of the Buyer's indemnity in Section 5.5(a) or Section 5.5(e);
provided, however, that Buyer shall have no Liability under clause (a) of this
Section 8.4 in respect of Losses until and then only to the extent that the
aggregate of such Losses exceeds $1,000,000, in which case Buyer will be
liable for the amount of such Losses in excess of $1,000,000.

   8.5 Matters Involving Third Parties. (a) If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 8, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing;
provided, however, that a delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder only to the extent the Indemnifying Party thereby is
materially prejudiced.

   (a) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing of its
election to defend and (ii) the Indemnifying Party conducts the defense of the
Third Party Claim diligently. In the event that the Indemnified Party shall in
good faith determine that it may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of a claim subject to
indemnification hereunder, the Indemnified Party shall have the right at all
times to take over and assume control of the defense, settlement, negotiations
or litigation relating to any such claim at the sole cost of the Indemnifying
Party, provided that if the Indemnified Party does so take over and assume
control, the Indemnified Party shall not settle such claim or litigation
without the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld.

   (b) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim diligently, (i) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim, and (ii) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying Party, such
consent not to be unreasonably withheld.

   (c) In the event that the Indemnifying Party does not diligently conduct
the defense, (i) the Indemnified Party may defend against the Third Party
Claim and (ii) the Indemnifying Party will remain responsible for any losses
the Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the extent provided in
this Section 8.

   (d) Except with the prior written consent of the Indemnified Party, which
shall not be unreasonably withheld, no Indemnifying Party, in the defense of
any such claim or litigation, shall consent to entry of any judgment or enter
into any settlement if such judgment or settlement provides for injunctive or
other nonmonetary relief affecting the Indemnified Party or that does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with
respect to such claim or litigation.

   8.6 Insurance Proceeds. If a party entitled to indemnification under
Section 8.2 or 8.4 (an "Indemnified Party") receives, subsequent to its
receipt of any indemnification from the party required to provide
indemnification under Section 8.2 or 8.4 (an "Indemnifying Party"), an amount
in respect of the Losses for which it has received indemnification (the
"Indemnified Losses") under insurance coverage, then such Indemnified Party
shall promptly reimburse the Indemnifying Party for any indemnification
payment made by such Indemnifying Party up to such amount received under such
insurance coverage. If any Losses for which an Indemnifying Party is
responsible or allegedly responsible pursuant to Section 8.2 or 8.4 are
recoverable or potentially recoverable under insurance coverage at the time
when payment is due hereunder, following payment

                                     A-29


by the Indemnifying Party for such Losses, (a) the Indemnified Party shall
attempt in good faith to collect any and all such Losses under such insurance
coverage or (b) at the request of the Indemnifying Party, the Indemnified
Party shall assign any and all rights that it may have to recover such Losses
to the Indemnifying Party, or, if such rights are not assignable under
applicable law or otherwise, the Indemnified Party shall continue to attempt
in good faith to collect any and all such Losses under such insurance coverage
for the benefit of, and at the expense and direction of, the Indemnifying
Party.

9 Termination.

   9.1 Termination of Agreement. The Parties may terminate this Agreement as
provided below:

   (a) the Parties may terminate this Agreement by mutual written consent at
any time prior to the Closing;

   (b) Buyer may terminate this Agreement by giving written notice to Seller
at any time prior to the Closing (i) in the event Seller has breached any
representation, warranty, or covenant contained in this Agreement in a manner
that has caused or is reasonably likely to result in a Material Adverse
Effect, Buyer has notified Seller of the breach, and the breach has continued
without cure for a period of 10 days after the notice of breach or (ii) if the
Closing shall not have occurred on or before April 30, 2001, by reason of the
failure of any condition precedent under Section 7.1 hereof (unless the
failure results primarily from Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement);

   (c) Seller may terminate this Agreement by giving written notice to Buyer
at any time prior to the Closing (i) in the event Buyer has breached any
representation, warranty, agreement or covenant contained in this Agreement in
a manner that has caused or is reasonably likely to result in a material
adverse effect on Buyer's ability to satisfy its obligations under this
Agreement, Seller has notified Buyer of the breach, and the breach has
continued without cure for a period of 10 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before April 30, 2001, by
reason of the failure of any condition precedent under Section 7.2 hereof
(unless the failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); and

   (d) Either Seller or Buyer may terminate this Agreement by giving written
notice to the other party prior to the Closing if: (i) the Board of Directors
of Seller shall have recommended to the stockholders of Seller an Alternative
Transaction (as defined below) or resolves to do so; or (ii) a tender offer or
exchange offer for 15% or more of the outstanding shares of capital stock of
Seller is commenced (other than by Buyer or an Affiliate of Buyer) and the
Board of Directors of Seller recommends that the stockholders of Seller tender
their shares in such tender or exchange offer; provided, that Seller shall not
be entitled to exercise any termination rights under this Section 9.1(d)
unless (x) any action of the Board of Directors of Seller referred to in
either such clause is required to be taken by the Board of Directors in order
to properly discharge its fiduciary duties as determined in good faith by the
Board of Directors upon the written advice of outside counsel and (y) Seller
has complied with its obligations in Section 5.8.

   As used herein, "Alternative Transaction" means any of (i) a transaction or
series of transactions pursuant to which any Person (or group of Persons)
other than Buyer or its Affiliates (a "Third Party") acquires or would acquire
more than 15% of the outstanding shares of capital stock of Seller, whether
from Seller or pursuant to a tender offer or exchange offer or otherwise, (ii)
any acquisition or proposed acquisition of Seller or any of its significant
Subsidiaries or the Metrology Business by a merger or other business
combination (including any so-called "merger of equals" and whether or not
Seller or any of its significant Subsidiaries is the entity surviving any such
merger or business combination) or (iii) any other transaction pursuant to
which any Third Party acquires or would acquire control of assets (including
for this purpose the outstanding equity securities of Subsidiaries of Seller
and any entity surviving any merger or business combination including any of
them) of Seller or any of its Subsidiaries having a fair market value equal to
more than 35% of the fair market value of all the assets of Seller and its
Subsidiaries, taken as a whole, immediately prior to such transaction. An
Alternative Transaction shall also include a transaction resulting from an
Acquisition Proposal under Section 5.8 to the extent that such transaction
meets the criteria set forth in this Section 9.1(d).

                                     A-30


   9.2 Effect of Termination. (a) If any Party terminates this Agreement
pursuant to Section 9.1 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party except (i) as set forth in clauses (b), (c) or (d) below and (ii)
nothing herein shall relieve any Party from liability for any breach hereof
occurring prior to termination.

   (b) Seller shall pay Buyer a fee of $4,000,000 plus Buyer's verifiable
expenses relating to the due diligence, negotiation and documentation of the
transactions contemplated by this Agreement (including without limitation
accounting, legal and investment banking fees and expenses) not to exceed
$2,000,000 (the "Fee") upon the termination of this Agreement by Seller or
Buyer pursuant to Section 9.1(d).

   (c) Seller shall pay Buyer the Fee if all of the following events have
occurred:

     (1) a bona fide Alternative Transaction is publicly commenced, publicly
  disclosed, publicly proposed or publicly communicated to Seller at any time
  on or after the date of this Agreement and on or prior to the date of the
  meeting of the stockholders of Seller referred to in Section 5.2 hereof
  (including the last date on which any adjourned session thereof is
  reconvened);

     (2) either Seller or Buyer terminates this Agreement pursuant to Section
  9.1(b)(ii) or 9.1(c)(ii) if, in the case of termination under either such
  Section, the requisite vote for approval and adoption of this Agreement and
  the transactions contemplated hereby by the stockholders of Seller shall
  not have been obtained by April 30, 2001; and

     (3) thereafter on or prior to the anniversary of the date of
  termination, (A) such Alternative Transaction is consummated or (B) there
  is consummated any transaction, whether or not commenced, publicly
  disclosed, publicly proposed or communicated to Seller prior to such
  termination, that would constitute an Alternative Transaction (provided
  that for purposes of this clause (3) of Section 9.2(c) the reference to the
  percentage of outstanding shares of capital stock of Seller in clause (i)
  of the definition of Alternative Transaction shall be 50% instead of 15%).
  In no event shall the Fee be payable more than once pursuant to this
  Section 9.2.

   (d) In the event that the shareholders meeting contemplated by Section 5.2
is held and the requisite vote for approval and adoption of this Agreement and
the transactions contemplated hereby by the shareholders of Seller shall not
have been obtained at such meeting or any adjournment thereof other than as a
result of Buyer being in material breach of its obligations under this
Agreement, Seller shall reimburse Buyer for (i) Buyer's verifiable expenses
relating to the due diligence, negotiation and documentation of the
transactions contemplated by this Agreement (including without limitation
accounting, legal and investment banking fees and expenses) not to exceed
$1,000,000 and (ii) expenses related to commitments (not to exceed $1,000,000)
made by Buyer to individuals hired specifically to work in the Metrology
Business, less mitigation if any such individual obtains other employment.

   (e) The Fee payable pursuant to Section 9.2(b) shall be paid within one
business day after the first to occur of any of the events described in
Section 9.2(b). The Fee payable pursuant to Section 9.2(c) shall be paid
within one business day following the consummation of any such Alternative
Transaction. The expenses payable under Section 9.2(d) shall be payable at
such time as the shareholders of Seller vote on this Agreement and the
transactions contemplated hereby with the result that the requisite vote in
favor is not obtained. Notwithstanding the preceding sentences, in no event
shall Seller be required to pay any such Fee or expenses to Buyer if,
immediately prior to the termination of this Agreement, Seller had the right
to terminate this Agreement under Section 9.1(c)(i). In no event shall Buyer
be entitled to payment under both Sections 9.2(b) or 9.2(c) and 9.2(d);
provided, however, that if Buyer would otherwise be entitled to fees under
more than one of such sections, Buyer shall be entitled to receive the higher
of such fees.

10 Miscellaneous.

   10.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
the other Party; provided, however, that any Party may make any public
disclosure it believes in

                                     A-31


good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable efforts to advise the other Party prior to making the
disclosure).

   10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.

   10.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof, except for the Confidentiality Agreement dated August 3, 2000
which remains in full force and effect.

   10.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of the other Party; provided, however, that Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder, provided in each case that Buyer continues to be
responsible for and guarantees all of its obligations hereunder.

   10.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

   10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

   10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) upon
confirmation of facsimile, (ii) when sent by overnight delivery and (iii) when
mailed by registered or certified mail return receipt requested and postage
prepaid at the following address:

       If to Seller:

        Brown & Sharpe Manufacturing Company
        Precision Park
        200 Frenchtown Road
        North Kingstown, RI 02852-1700
        Attn: James W. Hayes, III, Esq.
        Facsimile: 401-886-2214

        with a copy to:

        Ropes & Gray
        One International Place
        Boston, MA 02110
        Attn: Howard K. Fuguet, Esq.
        Facsimile: 617-951-7050

       If to Buyer:

        Hexagon AB
        Kronobryggan, S-261 31
        Landskrona, Sweden
        Attention: Ola Rollen
        Facsimile: +46 418 44 92 08

                                     A-32


        with a copy to:

        Jones, Damia, Kaufman, Borofsky & DePaul, LLC
        301 Main Street, P.O. Box 157
        Danbury, CT 06813-0157
        Attn: Sanford D. Kaufman, Esq.
        Facsimile: 203-797-8403

Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Party notice in the manner herein set forth.

   10.8 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Delaware without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Delaware. Each of Seller and Buyer, by its execution hereof, (a) hereby
irrevocably submits to the exclusive jurisdiction of the state courts of the
State of New York sitting in the County of New York or the United States
District Court for the Southern District of New York for the purpose of any
action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation arising out of or based upon this
Agreement or relating to the subject matter hereof, (b) hereby waives to the
extent not prohibited by applicable law, and agrees not to assert, and agrees
not to allow any of its subsidiaries to assert, by way of motion, as a defense
or otherwise, in any such action, any claim that it is not subject personally
to the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such proceeding brought in one
of the above-named courts is improper, or that this Agreement or the subject
matter hereof or thereof may not be enforced in or by such court and (c)
hereby agrees not to commence or maintain any action, claim, cause of action
or suit (in contract, tort or otherwise), inquiry, proceeding or investigation
arising out of or based upon this Agreement or relating to the subject matter
hereof or thereof other than before one of the above-named courts nor to make
any motion or take any other action seeking or intending to cause the transfer
or removal of any such action, claim, cause of action or suit (in contract,
tort or otherwise), inquiry, proceeding or investigation to any court other
than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Notwithstanding the foregoing, to the extent that any
party hereto is or becomes a party in any litigation in connection with which
it may assert indemnification rights set forth in this agreement, the court in
which such litigation is being heard shall be deemed to be included in clause
(a) above. Each party hereto hereby consents to service of process in any such
proceeding in any manner permitted by New York law, and agrees that service of
process by personal delivery, expedited courier or messenger service, at its
address specified pursuant to Section 10.7 hereof is reasonably calculated to
give actual notice. The provisions of this Section 10.8 shall not restrict the
ability of any party to enforce in any court any judgment obtained in the
federal or state courts of the State of New York.

   10.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Seller. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.

   10.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

                                     A-33


   10.11 Expenses. Each of Buyer and Seller will bear its own costs and
expenses (including legal fees and expenses) and Seller will bear all of the
costs and expenses (including legal fees and expenses) of the Transferred
Companies in connection with the preparation of this Agreement and the
transactions contemplated hereby, except as otherwise expressly provided in
Section 9.

   10.12 Staff Accounting Bulletin. The parties acknowledge and agree that for
all purposes under this Agreement, no effect shall be given to Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements."

                 [Remainder of page intentionally left blank]

                                     A-34


   IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.

                                        HEXAGON AB

                                                      /s/ Ola Rollen
                                        By ____________________________________
                                           Name: Ola Rollen
                                           Title: President and Chief
                                            Executive Officer

                                        BROWN & SHARPE MANUFACTURING COMPANY

                                                  /s/ Kenneth N. Kermes
                                        By ____________________________________
                                           Name: Kenneth N. Kermes
                                           Title: President

                   [Signature page to Acquisition Agreement]

                                     A-35



                             AMENDMENT NO. 1

                                    TO

                          ACQUISITION AGREEMENT

   This Amendment No. 1 to Acquisition Agreement (the "Amendment") is entered
into as of         , 2001, by and among Hexagon AB, a limited liability
company existing under the laws of Sweden ("Buyer"), Brown & Sharpe
Manufacturing Company, a Delaware corporation ("Seller"), and Brown & Sharpe
Aftermarket Services, Inc, a Delaware corporation and wholly-owned subsidiary
of Seller ("Aftermarket Services"). Buyer, Seller and Aftermarket Services are
collectively referred to herein as the "Parties."

   WHEREAS, Buyer and Seller are party to an Acquisition Agreement dated as of
November 16, 2000 (as in effect on the date hereof, the "Agreement"; the
Agreement as amended by this Amendment being hereinafter referred to as the
"Amended Agreement");

   WHEREAS, Aftermarket Services wishes to become party to the Agreement for
certain purposes, and Buyer and Seller wish to add Aftermarket Services to the
Agreement for certain purposes; and

   WHEREAS, the Parties wish to amend the Agreement as hereinafter set forth;

   NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, the Parties agree as follows.

  1. Incorporation of Defined Terms. Terms defined in the Agreement and not
     otherwise defined herein are used herein with the meanings so defined.

  2. Confirmation. It is confirmed that the exercise by the WAI Stockholders
     or WAI of the Right of First Refusal is permitted under the Amended
     Agreement.

  3. Amendments to Agreement.

  a. Section 1: Definitions: The following new definitions are hereby added
     to Section 1:

  "Seller WAI Stock" means the 30 shares of common stock of WAI held by
     Aftermarket Services.

   "WAI Incorporation Agreement" means the Incorporation Agreement dated as of
August 10, 1990 among WAI, Aftermarket Services and the WAI Stockholders.

   "WAI Offer" means the offer made pursuant to Section 5.16 by Buyer to
Seller to purchase the Seller WAI Stock.

   "WAI Purchase Agreement" means that certain WAI Purchase Agreement attached
to the WAI Offer.

  b. Section 2.3: Section 2.3 is hereby amended by adding the words "prior to
     or at the Closing" after the words "paid by the WAI Stockholders" in the
     first sentence thereof.

  c. New Section 3A: A new Section 3A, which shall be applicable, in lieu of
     Section 3, to Buyer's purchase of the Seller WAI Stock (directly or
     indirectly), is hereby added immediately following Section 3, reading as
     follows:

   "3A Seller Representations and Warranties Regarding WAI.

     Seller represents and warrants to Buyer as follows:

     3.1A Title. Seller owns directly or indirectly all of the Seller WAI
  Stock free and clear of any restrictions on transfer, Liens, options,
  equities, claims and demands, except as set forth in the WAI Incorporation
  Agreement.

                                      36



     3.2A Authorization of Transaction. Seller has full corporate power and
  authority to execute and deliver this Agreement and to perform its
  obligations hereunder relating to the transfer of the Seller WAI Stock. All
  corporate and other actions or proceedings to be taken by or on the part of
  Seller to authorize and permit the execution and delivery by Seller of this
  Agreement and the instruments required to be executed and delivered or
  caused to be executed and delivered by Seller pursuant hereto relating to
  the transfer of the Seller WAI Stock, the performance by Seller of its
  obligations hereunder relating to the transfer of the Seller WAI Stock, and
  the consummation by Seller of the transactions contemplated herein relating
  to the transfer of the Seller WAI Stock, have been duly and properly taken.
  This Agreement has been duly executed and delivered by Seller and, assuming
  the due authorization, execution and delivery by Buyer, constitutes a
  legal, valid and binding obligation of Seller, enforceable against Seller
  in accordance with its terms. Seller has taken all corporate action
  necessary to authorize the direct or indirect transfer of the Seller WAI
  Stock.

     3.3A Noncontravention. Neither the execution and the delivery of this
  Agreement nor the consummation of the transactions contemplated hereby
  relating to the transfer of the Seller WAI Stock, will (with or without the
  giving of notice or the lapse of time or both) (a) violate any provision of
  the charter, by-laws or other organizational document of Seller; (b)
  violate any Law to which Seller is subject; or (c) conflict with, result in
  a breach of, constitute a default under, result in the acceleration of,
  create in any party the right to accelerate, terminate or modify, or
  require any notice under any agreement, contract, lease, license,
  instrument, indenture, note, mortgage or other arrangement to which Seller
  is a party or by which it is bound or to which the Seller WAI Stock is
  subject (other than the WAI Incorporation Agreement) if, in the case of
  clauses (b) and (c), such violation, conflict, breach, default,
  acceleration or other right could reasonably be expected to impair
  materially Seller's ability to consummate the transactions contemplated by
  this Agreement relating to the transfer of the Seller WAI Stock.

     3.4A Brokers' Fees, etc. Except as set forth on Schedule 3.4, Seller
  does not have any Liability or obligation to pay any fees or commissions to
  any broker, finder or agent with respect to the transactions contemplated
  by this Agreement relating to the transfer of the Seller WAI Stock, and the
  consummation of the transactions contemplated hereby relating to the
  transfer of the Seller WAI Stock will not give rise to any valid claim
  against Buyer for any brokerage or finder's commission, fee or similar
  compensation.

     3.5A Organization of Seller. Seller is duly organized, validly existing,
  and in good standing under the laws of its jurisdiction of incorporation.
  Seller is qualified to do business as a foreign corporation in every
  jurisdiction in the United States in which it is required to be so
  qualified except for those jurisdictions where the failure to be so
  qualified will not have a material adverse effect on Seller.

     3.6A Litigation. There is no action, claim, suit, proceeding or
  investigation pending or, to the Knowledge of Seller, threatened against
  Seller which questions the validity of this Agreement or any other
  agreements, instruments or documents entered into pursuant to this
  Agreement or the right of Seller to enter into them or to consummate the
  transactions contemplated hereby or thereby, or which might result, either
  individually or in the aggregate, in any material adverse change in the
  business, assets, conditions, operations or affairs of Seller, financial or
  otherwise, nor to the Knowledge of Seller is there any reasonable basis for
  the foregoing.

  For purposes of this Section 3A, the term "Seller" shall be deemed to mean
  both Aftermarket Services and Brown & Sharpe Manufacturing Company, each of
  whom shall be deemed to make each of the representations set forth herein."

  d. Section 4A: A new Section 4A, which shall be applicable, in lieu of
     Section 4, to Buyer's purchase of the Seller WAI Stock (directly or
     indirectly), is hereby added immediately following Section 4, reading as
     follows:

  "4A Buyer Representations and Warranties Regarding WAI.

                                      37


     Buyer represents and warrants to Seller as follows:

     4.1A Authorization of Transaction. Buyer has full power and authority
  (corporate or otherwise) to execute and deliver this Agreement and to
  perform its obligations hereunder relating to the purchase of the Seller
  WAI Stock. All corporate and other actions or proceedings to be taken by or
  on the part of Buyer to authorize and permit the execution and delivery by
  Buyer of this Agreement and the instruments required to be executed and
  delivered or caused to be executed and delivered by Buyer pursuant hereto
  relating to the purchase of the Seller WAI Stock, the performance by Buyer
  of its obligations hereunder relating to the purchase of the Seller WAI
  Stock, and the consummation by Buyer of the transactions contemplated
  herein relating to the purchase of the Seller WAI Stock, have been duly and
  properly taken. This Agreement has been duly executed and delivered by
  Buyer and, assuming the due authorization, execution and delivery by Seller
  and Aftermarket Services, constitutes a legal, valid and binding obligation
  of Buyer, enforceable against Buyer in accordance with its terms.

     4.2A Noncontravention. Neither the execution and the delivery of this
  Agreement by Buyer, nor the consummation by Buyer of the transactions
  contemplated hereby relating to the purchase of the Seller WAI Stock will
  (i) violate any provision of its charter, by-laws or other organizational
  document, (ii) violate any Law to which Buyer is subject or (iii) conflict
  with, result in a breach of, constitute a default under, result in the
  acceleration of, create in any party the right to accelerate, terminate,
  modify, or cancel, or require any notice under any agreement, contract,
  lease, license, instrument, or other arrangement to which Buyer is a party
  or by which it is bound or to which any of its assets is subject if, in the
  case of clauses (ii) and (iii), such violation, conflict, breach, default,
  acceleration or other right could reasonably be expected to impair
  materially Buyer's ability to consummate the transactions contemplated by
  this Agreement relating to the purchase of the Seller WAI Stock. Buyer does
  not need to give any notice to, make any filing with, or obtain any Consent
  in order for it to consummate the transactions contemplated by this
  Agreement relating to the purchase of the Seller WAI Stock.

     4.3A Purchase for Investment. Buyer is purchasing the Seller WAI Stock
  for its own account for investment and not with a view to the disposition
  thereof or with any present intention of distribution or selling any of
  such shares.

     4.4A Suitability. Buyer is an Accredited Investor as such term is
  defined in Rule 501(a) promulgated pursuant to the Securities Act.

     4.5A Financial Condition. Buyer's financial condition is such that it is
  able to bear the risk of holding the Seller WAI Stock for an indefinite
  period of time.

     4.6A Experience. Buyer has such knowledge and experience in financial
  and business matters and in making high risk investments of this type that
  it is capable of evaluating the merits and risks of the purchase of the
  Seller WAI Stock.

     4.7A Brokers' Fees. Buyer has no liability or obligation to pay any fees
  or commissions to any broker, finder, or agent with respect to the
  transactions contemplated by this Agreement relating to the purchase of the
  Seller WAI Stock for which Seller could become liable or obligated.

     4.8A Financing. Buyer has sufficient financial resources available to it
  so as to enable Buyer to satisfy its obligations under this Agreement
  relating to the purchase of the Seller WAI Stock."

  e. Section 5.16. Section 5.16 is hereby amended by inserting the words "and
     closed prior to or at the Closing" before the words "in accordance with
     its terms" in both the fourth sentence thereof and the fifth sentence
     thereof. In addition, Section 5.16 is hereby amended by adding the
     following language at the end of the first paragraph thereof:

    "The parties agree that, if Seller's obligations under the Right of
    First Refusal are not satisfied prior to or at the Closing, (i) the
    outstanding stock of Aftermarket Services shall not be transferred to
    Buyer (or a Buyer Affiliate) at the Closing (and Aftermarket Services
    shall be deemed a Retained Subsidiary

                                      38


    and not a Transferred Company), (ii) at the Closing Aftermarket
    Services shall transfer or grant to Buyer (or a Buyer Affiliate) the
    exclusive right to use and market all current and future products and
    services related to the Metrology Business sold by WAI or any
    subsidiary of WAI subject to the applicable Royalties and Commissions,
    each as defined in the Exclusive Marketing/Cross License Agreement
    dated as of August 10, 1990 between WAI and Aftermarket Services, as
    amended, (iii) from the Closing until such time as the Seller WAI Stock
    is transferred to Buyer (or a Buyer Affiliate) or the WAI Stockholders
    (or redeemed by WAI), Aftermarket Services shall grant to Buyer (or a
    Buyer Affiliate) the right to receive any dividends or distributions in
    respect of the Seller WAI Stock and Seller and Aftermarket Services
    shall not sell, transfer or encumber, or vote or give any consent in
    respect of, the Seller WAI Stock, without the prior written consent of
    Buyer, and (iv) there shall be no reduction in the Purchase Price. If,
    subsequent to the Closing, the Seller WAI Stock is transferred to one
    or both of the WAI Stockholders (or redeemed by WAI) pursuant to the
    Right of First Refusal, Seller or Aftermarket Services, as applicable,
    shall instruct the applicable WAI Stockholders or WAI to pay the WAI
    Purchase Price directly to Buyer; provided that if, notwithstanding the
    foregoing, the WAI Purchase Price is paid to Seller or Aftermarket
    Services, Seller or Aftermarket Services shall promptly forward the WAI
    Purchase Price to Buyer upon receipt thereof. If, subsequent to the
    Closing, the WAI Stockholders fail to purchase (or cause WAI to redeem)
    the Seller WAI Stock in accordance with the Right of First Refusal,
    Buyer shall complete the direct or indirect transfer of the Seller WAI
    Stock to Buyer or a Buyer Affiliate as soon as practicable following
    the Closing."

  f. Section 7.1A: A new Section 7.1A, which shall be applicable, in lieu of
     Section 7.1, to Buyer's purchase of the Seller WAI Stock (directly or
     indirectly), is hereby added immediately following Section 7.1, reading
     as follows:

     "7.1A Conditions to Obligation of Buyer to Purchase Seller WAI
  Stock. The obligation of Buyer to consummate the transactions to be
  performed by it in connection with the purchase of the Seller WAI Stock is
  subject to the fulfillment on or before the Closing of each of the
  following conditions unless waived by Buyer:

       (a) Representations and Warranties. The representations and
    warranties set forth in Section 3A shall be true and correct in all
    respects as set forth therein at and as of the date hereof and on and
    as of the Closing Date with the same effect as though made at and as of
    the Closing Date, except for such failures to be true and correct as do
    not, in the aggregate, have a material adverse effect on Seller or
    Aftermarket Services.

       (b) Performance. Seller shall have performed and complied with all
    of its covenants and agreements hereunder relating to the transfer of
    the Seller WAI Stock through the Closing in all material respects.

       (c) Compliance Certificate. Seller shall have delivered to Buyer a
    certificate to the effect that each of the conditions specified above
    in Sections 7.1(a) and (b) is satisfied in all respects.

       (d) Fulfillment of Other Conditions. Each of the conditions set
    forth in Section 7.1 shall have been fulfilled or waived."

  g. Section 7.2A: A new Section 7.2A, which shall be applicable, in lieu of
     Section 7.2, to Buyer's purchase of the Seller WAI Stock (directly or
     indirectly), is hereby added immediately following Section 7.2, reading
     as follows:

     "7.2A Conditions to Obligation of Seller to Transfer Seller WAI
  Stock. The obligation of Seller to consummate the transactions to be
  performed by it in connection with the transfer of the Seller WAI Stock is
  subject to the fulfillment on or before the Closing of each of the
  following conditions unless waived by Seller:

        (a) Representations and Warranties. The representations and
    warranties set forth in Section 4A shall be true and correct in all
    respects as set forth therein (in the case of any representation or
    warranty

                                      39


    containing any materiality qualification) or in all material respects
    (in the case of any representation or warranty without any materiality
    qualification) at and as of the date hereof and on and as of the
    Closing Date with the same effect as though made at and as of the
    Closing Date.

       (b) Performance. Buyer shall have performed and complied with all of
    its covenants and agreements hereunder relating to the purchase of the
    Seller WAI Stock through the Closing in all material respects.

       (c) Compliance Certificate. Buyer shall have delivered to Seller a
    certificate to the effect that each of the conditions specified above
    in Sections 7.2(a) and (b) is satisfied in all respects.

       (d) Fulfillment of Other Conditions. Each of the conditions set
    forth in Section 7.2 shall have been fulfilled or waived."

  h. Section 8.2. Section 8.2 is hereby amended by adding the following
     language at the end of the last sentence thereof:

    "; provided, further, that the amount of any Losses related to clause
    (a) of Section 8.2A shall be counted towards to the $1,000,000
    threshold under this Section 8.2."

  i. Section 8.4. Section 8.4 is hereby amended by adding the following
     language at the end of the last sentence thereof:

    "; provided, further, that the amount of any Losses related to clause
    (a) of Section 8.4A shall be counted towards to the $1,000,000
    threshold under this Section 8.4."

  j. Section 8A: A new Section 8A, which shall be applicable, in lieu of
     Section 8, to Buyer's purchase of the Seller WAI Stock (directly or
     indirectly), is hereby added immediately following Section 8, reading as
     follows:

   "8A Indemnification with Respect to Seller WAI Stock.

     8.1A Survival of Representations, Warranties, Agreements and
  Covenants. Except as otherwise provided in this Section 8.1A, the
  representations, warranties and agreements of each party hereto relating to
  the transfer of the Seller WAI Stock shall remain operative and in full
  force and effect regardless of any investigation made by or on behalf of
  any other party hereto, any person controlling any such party or any of
  their officers or directors, whether prior to or after the execution of
  this Agreement. The representations, warranties and agreements in this
  Agreement relating to the transfer of the Seller WAI Stock shall terminate
  at the Closing or upon the earlier termination of this Agreement, as the
  case may be, except that the representations and warranties set forth in
  Sections 3.1A, 3.2A, 3.4A, 4.1A and 4.3A-4.7A and the agreements set forth
  in Sections 6.3, 8A and 10 shall survive the Closing indefinitely. Nothing
  in this Section 8.1A shall relieve any party for any breach of any
  representation, warranty or agreement in this Agreement occurring prior to
  termination.

     8.2A Indemnity by Seller. Seller hereby agrees to indemnify, defend and
  hold harmless Buyer and its directors, officers, employees, agents and
  Affiliates (the "Buyer Indemnitees") against and in respect of, and pay and
  reimburse the Buyer Indemnitees for, all Liabilities, damages, losses,
  expenses, and costs (including reasonable attorneys' and accountants' fees
  and expenses), whether or not resulting from third party claims
  (collectively, "Losses"), as a result of or arising out of (a) the
  inaccuracy of any representation or warranty made by Seller in Section 3A
  that survives the Closing; or (b) any breach or nonfulfillment after the
  Closing of any agreement or covenant of the Seller contained herein or in
  any agreement or instrument required to be entered into in connection
  herewith that survives the Closing and is related to the transfer of the
  Seller WAI Stock; provided, however, that Seller shall have no Liability
  under clause (a) of this Section 8.2A in respect of Losses until and then
  only to the extent that the aggregate of such Losses exceeds $187,000, in
  which case Seller will be liable for the amount of such Losses in excess of
  $187,000.

                                      40



     8.3A Exclusive Remedy. This Section 8A shall provide the sole and
  exclusive remedy for any and all Losses sustained or incurred by Buyer or
  Seller or their successors and assigns with respect to the transfer of the
  Seller WAI Stock; provided that the foregoing shall not limit the right of
  the parties to such equitable remedies as may be available or any party's
  remedies in respect of fraud by the other party in connection herewith.

     8.4A Indemnity by Buyer. Buyer hereby agrees to indemnify, defend and
  hold harmless Seller and Aftermarket Services and their respective
  directors, officers, employees, agents and Affiliates (the "Seller
  Indemnitees") against and in respect of, and pay and reimburse the Seller
  Indemnitees for, all Losses resulting from or arising out of (a) the
  inaccuracy of any representation or warranty made by Buyer in Section 4A
  that survives the Closing or (b) any breach or nonfulfillment after the
  Closing of any agreement or covenant of Buyer contained herein or in any
  agreement or instrument required to be entered into in connection herewith
  that survives the Closing and is related to the purchase of the Seller WAI
  Stock; provided, however, that Buyer shall have no Liability under clause
  (a) of this Section 8.4A in respect of Losses until and then only to the
  extent that the aggregate of such Losses exceeds $187,000, in which case
  Buyer will be liable for the amount of such Losses in excess of $187,000.

     8.5A Matters Involving Third Parties. (a) If any third party shall
  notify any party (the "Indemnified Party") with respect to any matter (a
  "Third Party Claim") which may give rise to a claim for indemnification
  against any other party (the "Indemnifying Party") under this Section 8A,
  then the Indemnified Party shall promptly notify the Indemnifying Party
  thereof in writing; provided, however, that a delay on the part of the
  Indemnified Party in notifying any Indemnifying Party shall relieve the
  Indemnifying Party from any obligation hereunder only to the extent the
  Indemnifying Party thereby is materially prejudiced.

       (b) Any Indemnifying Party will have the right to defend the
    Indemnified Party against the Third Party Claim with counsel of its
    choice so long as (i) the Indemnifying Party notifies the Indemnified
    Party in writing of its election to defend and (ii) the Indemnifying
    Party conducts the defense of the Third Party Claim diligently. In the
    event that the Indemnified Party shall in good faith determine that it
    may have available to it one or more defenses or counterclaims that are
    inconsistent with one or more of those that may be available to the
    Indemnifying Party in respect of a claim subject to indemnification
    hereunder, the Indemnified Party shall have the right at all times to
    take over and assume control of the defense, settlement, negotiations
    or litigation relating to any such claim at the sole cost of the
    Indemnifying Party, provided that if the Indemnified Party does so take
    over and assume control, the Indemnified Party shall not settle such
    claim or litigation without the written consent of the Indemnifying
    Party, such consent not to be unreasonably withheld.

       (c) So long as the Indemnifying Party is conducting the defense of
    the Third Party Claim diligently, (i) the Indemnified Party may retain
    separate co-counsel at its sole cost and expense and participate in the
    defense of the Third Party Claim, and (ii) the Indemnified Party will
    not consent to the entry of any judgment or enter into any settlement
    with respect to the Third Party Claim without the prior written consent
    of the Indemnifying Party, such consent not to be unreasonably
    withheld.

       (d) In the event that the Indemnifying Party does not diligently
    conduct the defense, (i) the Indemnified Party may defend against the
    Third Party Claim and (ii) the Indemnifying Party will remain
    responsible for any losses the Indemnified Party may suffer resulting
    from, arising out of, relating to, in the nature of, or caused by the
    Third Party Claim to the extent provided in this Section 8A.

       (e) Except with the prior written consent of the Indemnified Party,
    which shall not be unreasonably withheld, no Indemnifying Party, in the
    defense of any such claim or litigation, shall consent to entry of any
    judgment or enter into any settlement if such judgment or settlement
    provides for injunctive or other nonmonetary relief affecting the
    Indemnified Party or that does not include as an unconditional term
    thereof the giving by each claimant or plaintiff to such Indemnified
    Party of a release from all liability with respect to such claim or
    litigation.

                                      41



     8.6A Insurance Proceeds. If a party entitled to indemnification under
  Section 8.2A or 8.4A (an "Indemnified Party") receives, subsequent to its
  receipt of any indemnification from the party required to provide
  indemnification under Section 8.2A or 8.4A (an "Indemnifying Party"), an
  amount in respect of the Losses for which it has received indemnification
  (the "Indemnified Losses") under insurance coverage, then such Indemnified
  Party shall promptly reimburse the Indemnifying Party for any
  indemnification payment made by such Indemnifying Party up to such amount
  received under such insurance coverage. If any Losses for which an
  Indemnifying Party is responsible or allegedly responsible pursuant to
  Section 8.2A or 8.4A are recoverable or potentially recoverable under
  insurance coverage at the time when payment is due hereunder, following
  payment by the Indemnifying Party for such Losses, (a) the Indemnified
  Party shall attempt in good faith to collect any and all such Losses under
  such insurance coverage or (b) at the request of the Indemnifying Party,
  the Indemnified Party shall assign any and all rights that it may have to
  recover such Losses to the Indemnifying Party, or, if such rights are not
  assignable under applicable law or otherwise, the Indemnified Party shall
  continue to attempt in good faith to collect any and all such Losses under
  such insurance coverage for the benefit of, and at the expense and
  direction of, the Indemnifying Party.

  k. Section 10.11A: A new Section 10.11A, which shall be applicable, in lieu
     of Section 10.11, to Buyer's purchase of the Seller WAI Stock (directly
     or indirectly), is hereby added immediately following Section 10,
     reading as follows:

    "10.11A WAI Expenses. Each of Buyer and Seller will bear its own costs
    and expenses (including legal fees and expenses) in connection with the
    preparation of this Agreement and the transactions contemplated hereby
    relating to the direct or indirect purchase of the Seller WAI Stock."

  l. Section 10.13: A new Section 10.13 is hereby added, reading as follows:

    "10.13 Purchase of Seller WAI Stock. Notwithstanding the provisions of
    any other document, in the event Buyer (or a Buyer Affiliate) purchases
    the Seller WAI Stock (directly or indirectly through the purchase of
    Aftermarket Services), such purchase shall be governed by the
    provisions of this Agreement (which is hereby agreed to include the
    terms and conditions of the offer set forth in the WAI Purchase
    Agreement which is hereby deemed to be included) rather than under the
    WAI Purchase Agreement. In addition, the parties agree that the direct
    or indirect purchase of the Seller WAI Stock shall be governed by
    Sections 3A, 4A, 7.1A, 7.2A and 8A hereof, rather than Sections 3, 4,
    7.1, 7.2 and 8, respectively."

3. Miscellaneous. This Amendment and the Amended Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties with respect to such subject matter. Except as specifically amended
hereby, the Agreement shall remain unmodified, and the Amended Agreement is
hereby confirmed as being in full force and effect. Section and subsection
headings are not to be considered part of this Amendment, are included solely
for convenience, are not intended to be full or accurate descriptions of the
content thereof and shall not affect the construction hereof. This Amendment
shall be deemed to express the mutual intent of the parties, and no rule of
strict construction shall be applied against any party. This Amendment may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute but one and the same
instrument. This Amendment and the Amended Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware,
without giving effect to any choice or conflict of law provision or rule that
would cause the application of the laws of any other jurisdiction.

                                      42



   IN WITNESS WHEREOF, the Parties hereto have executed this Amendment on the
date first above written.

                                        Hexagon AB

                                        By: ______________________________


                                            Title:

                                        BROWN & SHARPE MANUFACTURING
                                          COMPANY


                                        By: ______________________________


                                           Title:

                                        BROWN & SHARPE AFTERMARKET SERVICES


                                        By: ______________________________


                                           Title:

                                       43


                                                                        Annex B

November 16, 2000

To The Board of Directors of Brown & Sharpe Manufacturing Company

Gentlemen:

   We understand that Brown & Sharpe Manufacturing Company ("BNS" or the
"Company") has entered into a non-binding agreement with Hexagon A.B., a
publicly traded limited liability company existing under the laws of Sweden
("HEX"), whereby HEX will acquire (i) the Worldwide Measuring Systems and
Precision Measuring Instrument businesses of the Company, (ii) BNS's 30%
interest in Wilcox Associates Inc., (iii) a 46.7% interest in Brown & Sharpe
Information Systems, Inc. (for an additional $7.0 million), and (iv) an option
to purchase real estate located in London, England operating as a gravel pit
for $5.0 million, for an aggregate purchase price of $160.0 million in cash.
Additionally, there is a potential earn-out payment of up to $20.0 million
based on certain operating profits as of December 31, 2000 (adjusted for
agreed upon items). Such transaction and all related transactions are referred
to collectively herein as the "Transaction." The Company has requested that
Houlihan Lokey render an opinion (the "Opinion") as to the fairness, from a
financial point of view, to the Company of the consideration to be received in
connection with the Transaction.

   You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the
Company. Furthermore, at your request, we have not negotiated the Transaction
or advised you with respect to alternatives to it.

   In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:

  1. reviewed the annual audited financial statements on Form 10-K for BNS
     for the fiscal years ended December 31, 1997, 1998 and 1999 and
     unaudited quarterly financial statements on Form 10-Q for the quarters
     ended March 31, 2000, June 30, 2000 and September 30, 2000;

  2  reviewed drafts of certain documents to be delivered at the closing of
     the Transaction;

  3. met with certain members of the senior management of the Company to
     discuss the operations, financial condition, future prospects and
     projected operations and performance of the Company, and spoke with
     representatives of the Company's investment banker to discuss certain
     matters;


  4. visited certain facilities and business offices of the Company;

  5. reviewed forecasts and projections prepared by the Company's management
     with respect to the Company for the years ended December 31, 2000
     through 2004;

  6. reviewed the historical market prices and trading volume for the
     Company's publicly traded securities;

  7. reviewed documents pertaining to Company's businesses and assets which
     will not be purchased and acquired by HEX;

  8. reviewed certain other publicly available financial data for certain
     companies that we deem comparable to the Company, and publicly announced
     transactions that we considered similar to the Transaction; and

  9. conducted such other studies, analyses and inquiries as we have deemed
     appropriate.

   We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably
prepared and reflect the best currently available estimates of the future
financial results and condition of the Company, and that there has been no
material change in the assets, financial condition, business or prospects of
the Company since the date of the most recent financial statements made
available to us.


                                      B-1


   We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other
conditions as they exist and can be evaluated by us at the date of this
letter.

   Based upon the foregoing, and in reliance thereon, it is our opinion that
the consideration to be received by the Company in connection with the
Transaction is fair to the Company from a financial point of view.

                                          HOULIHAN LOKEY HOWARD & ZUKIN
                                           FINANCIAL ADVISORS, INC.

                                            /s/ Houlihan Lokey Howard & Zukin
                                          _____________________________________
                                                Financial Advisors, Inc.

                                      B-2


                                                                        Annex C

  PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE CERTIFICATE OF INCORPORATION OF
                     BROWN & SHARPE MANUFACTURING COMPANY:

   Replace the first paragraph of Article FOURTH that currently reads:

     "FOURTH: The aggregate number of shares of capital stock which this
  Corporation shall have authority to issue is 33,000,000 shares of which
  30,000,000 shares shall be Class A Common Stock, $1.00 par value per share,
  2,000,000 shares shall be Class B Common Stock, $1.00 par value per share,
  and 1,000,000 shares shall be Preferred Stock, $1.00 par value per share.
  The Class A Common Stock and the Class B Common Stock are sometimes
  hereinafter referred to together as the "Common Stock"."

   With the following paragraph:

     "FOURTH: The aggregate number of shares of capital stock which this
  Corporation shall have authority to issue is 33,000,000 shares of which
  30,000,000 shares shall be Class A Common Stock, $0.01 par value per share,
  2,000,000 shares shall be Class B Common Stock, $0.01 par value per share,
  and 1,000,000 shares shall be Preferred Stock, $1.00 par value per share.
  The Class A Common Stock and the Class B Common Stock are sometimes
  hereinafter referred to together as the "Common Stock"."

   [The remainder of Article FOURTH remains unchanged.]

                                      C-1




                        PURCHASE AND SALE AGREEMENT

                         dated as of March 2, 2001

                              by and between

                   BROWN & SHARPE MANUFACTURING COMPANY

                                 as Seller

                                    and

                          PRECISION PARK PARTNERS, LLC

                                 as Buyer

       with respect to approximately 169 acres of real property and

 improvements located on Frenchtown Road in North Kingstown, Rhode Island

     (with a portion thereof located in East Greenwich, Rhode Island)


                          PURCHASE AND SALE AGREEMENT

   THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of this 2nd day of March, 2001 (the "Effective Date"), by and between
BROWN & SHARPE MANUFACTURING COMPANY, a Delaware corporation having an address
at 200 Frenchtown Road, North Kingstown, Rhode Island 02852 ("Seller"), and
PRECISION PARK PARTNERS, LLC, a Rhode Island limited liability company having
an address at 333 Strawberry Field Road, Warwick, Rhode Island 02806
("Buyer").

                                   ARTICLE I

                                 PROPERTY

   Section 1.01. Property. Seller hereby agrees to sell and convey to Buyer,
and Buyer hereby agrees to purchase from Seller, upon the terms and conditions
set forth herein, those certain lots or parcels of land (the "Land"), with the
buildings, fixtures and improvements thereon (the "Improvements"), located at
200 Frenchtown Road, North Kingstown, Rhode Island, consisting of
approximately 169 acres (with a portion thereof located in East Greenwich,
Rhode Island), and more particularly described on Exhibit A attached hereto
and made a part hereof.

   TOGETHER ALSO with all right, title and interest of Seller, if any, in and
to (i) the land in the bed of any public street, road or avenue, open or
proposed, in front of or adjoining the Land, to the center line thereof, (ii)
any rights of way, easements, appurtenances, alleys, gores and strips of land
adjoining or appurtenant to the Land and used in conjunction therewith, (iii)
any water rights, riparian rights and powers, hereditaments and appurtenances
with respect thereto, all right, title and interest of Seller in and to any
side or spur railroad tracks and all rights of way appurtenant thereto, (iv)
any award made or to be made in lieu of any of the foregoing and any unpaid
award for damage to the Land or the Improvements by reason of change of grade
of any street, road or avenue; (v) any award made or to be made with respect
to the Route 4 Condemnation (as hereinafter defined); (vi) the Existing Leases
(hereinafter defined) and the Hexagon Lease (as hereinafter defined); (vii)
all rents and profits from the Existing Leases and the Hexagon Lease
applicable to any period from and after the Closing Date (hereinafter
defined), and any security or tenant deposit made by any tenant to Seller
whether or not refundable, together with interest required by law or by the
applicable Existing Lease to be paid thereon, and any other documents, records
or rights owned by Seller affecting or relating to the Land, the Existing
Leases or the Improvements; and (viii) all fixtures and/or personal property
listed on Exhibit B attached hereto and made a part hereof (the "Personal
Property").

   All of the foregoing items purchased under this Agreement are collectively
referred to as the "Property".

                                  ARTICLE II

                              PURCHASE PRICE

   Section 2.01. Purchase Price. The purchase price for the Property (the
"Purchase Price") shall be Fifteen Million Five Hundred Thousand and 00/100
Dollars ($15,500,000.00). The Purchase Price will be paid by Buyer to Seller
at the Closing (as hereinafter defined) and recording of the Deed (as
hereinafter defined) in cash or by wire transfer of immediately available
funds.

   Section 2.02. Use of Purchase Price. To enable Seller to make conveyance as
provided in this Agreement, Seller shall use the Purchase Price or any portion
thereof to clear the title of any or all encumbrances or interests, other than
the Permitted Encumbrances (as hereinafter defined), provided that all
instruments so procured are recorded simultaneously with the delivery of the
Deed or that provision for prompt recording thereof satisfactory to the
Buyer's attorneys are made on the date of Closing.

                                      D-1



   Section 2.03. Deposits. The Buyer shall make deposits against the Purchase
Price in the following manner:

     (a) Contemporaneously with the execution of this Agreement, Buyer shall
  deliver to CB Richard Ellis--N.E. Partners, L.P. (the "Escrow Agent") the
  sum of Fifty Thousand and 00/100 Dollars ($50,000.00) as earnest money
  hereunder (the "Initial Deposit");

     (b) On or before the expiration of the Review Period (as defined in
  Section 3.01) the Buyer shall deliver to the Escrow Agent the sum of Six
  Hundred Fifty Thousand and 00/100 Dollars ($650,000.00) (the "Additional
  Deposit");

   As used herein, the term "Deposit" shall mean both the Initial Deposit and
the Additional Deposit, together with all interest earned thereon.

   Any deposit amount required hereunder, may, at the option of Buyer, be in
the form of cash or check. The Escrow Agent shall place the Deposit in an
interest-bearing account at a bank designated by Buyer, with all interest
being paid to Buyer. At the Closing, the Deposit will be applied toward the
Purchase Price, but otherwise the Deposit will be held by the Escrow Agent,
returned to Buyer, or delivered to Seller, in accordance with the terms of
this Agreement.

                                  ARTICLE III

                              REVIEW PERIOD

   Section 3.01. Review Period. Buyer has from the date of this Agreement
until 5:00 p.m., on May 2, 2001, which date is agreed to be sixty (60) days
from the date hereof (the "Review Period") to: (a) review and approve, at
Buyer's expense, such items (including the Existing Leases) and to conduct
such inspections, interviews, tests and audits as Buyer, in its sole
discretion, deems appropriate, including, without limitation, environmental
(including so-called phase I and II testing), engineering and zoning
inspections and investigations and review of those matters disclosed by survey
and any matters related to title to the Property; and (b) obtain financing for
the purchase of the Property.

   Section 3.02. Inspection. Buyer shall have the right, at all reasonable
times during the Review Period and until Closing to conduct on-site
inspections of the Property and physical inspections and tests of the Property
(including, without limitation, the right to enter and inspect all portions of
the Property), provided, however, that any invasive inspection or testing
shall require the prior consent of the Seller, which consent shall not be
unreasonably withheld, and shall be scheduled only upon prior notice to
Seller. Upon the completion of any inspection or test conducted pursuant to
the provisions hereof, the Buyer agrees, at its sole cost and expense, to
return the Property to the condition as existed prior to the commencement of
such inspection or test. Seller hereby agrees to fully cooperate with Buyer in
providing access to any and all information with respect to the Property
requested by Buyer, including the execution of any consents or applications
for information from government or quasi-governmental agencies. Buyer shall
indemnify Seller from any physical damage to the Property and personal injury
resulting from Buyer's entry on the Property during the Review Period.

   Section 3.03. Buyer's Notice. If for any or no reason Buyer, in its sole
and absolute discretion, is not satisfied with the results of such
inspections, interviews, tests or any other fact or situation with respect to
the Property, then in such event Buyer shall have the right to terminate this
Agreement by giving Seller and the Escrow Agent written notice thereof (the
"Buyer's Notice") on or before the expiration of the Review Period, and this
Agreement shall be immediately terminated upon Buyer's delivery of the Buyer's
Notice to Seller. The Seller shall be under no obligation in any event to
extend the Review Period. The Buyer's Notice need not set forth the reason for
such termination. Buyer's failure to deliver the Buyer's Notice on or before
the expiration of the Review Period shall be deemed a waiver of Buyer's right
to terminate this Agreement under this Section 3.03 and the terms of this
Agreement shall continue to bind the parties.


                                      D-2



   Section 3.04. Termination. If Buyer elects to terminate this Agreement by
delivering the Buyer's Notice in accordance with and subject to the terms of
this Article III, the parties hereto shall thereupon be relieved of all
liabilities and obligations hereunder and the Initial Deposit shall be paid to
Seller by Escrow Agent in consideration of the agreements of Seller contained
herein. Buyer expressly acknowledges and agrees that, if Seller requests
Escrow Agent to pay to Seller the Initial Deposit as a result of Buyer's
election to terminate this Agreement under the provisions of this Article III,
then the Escrow Agent shall have no obligation to independently determine
whether Seller has the right to receive the Initial Deposit, and the Escrow
Agent may rely solely upon the written instructions set forth in any written
notice delivered by Seller from and after such election, without the joinder,
approval or consent of Buyer. If Buyer elects to terminate this Agreement in
accordance with and subject to the terms of this Article III, Buyer shall
furnish Seller, upon such termination and without charge, a copy of each
study, report and any other document prepared by Buyer in connection with
Buyer's due diligence for the Property.

                                  ARTICLE IV

                        GOOD AND MARKETABLE TITLE

   Section 4.01. Conveyance. At the Closing, Seller will convey good and
marketable record fee simple and insurable (at Buyer's expense) title to the
Property to Buyer by a warranty deed (the "Deed") and good and marketable
title to the Personal Property by a bill of sale (the "Bill of Sale"), free
and clear of any and all deeds of trust, mortgages or other liens or
indebtedness, encumbrances, conditions, easements, rights-of-way, assessments
and restrictions, except for the following (collectively, the "Permitted
Exceptions"):

     (a) General real estate taxes for the year in which the Closing occurs
  and subsequent years not yet due and payable.

     (b) All easements, restrictions, rights-of-way, encroachments,
  covenants, reservations, agreements, leases, tenancies, licenses,
  conditions and other matters of record as of the date hereof, affecting all
  or any portion of the Property to the extent not disapproved by Buyer
  during the Review Period; Seller shall have no obligation to remove any
  such matters of record, provided, however, nothing contained herein shall
  deprive Buyer of its right to terminate this Agreement pursuant to the
  terms of Section 3.03 hereof.

     (c) The terms and provisions of the Hexagon Lease and of those leases
  listed on Exhibit C attached hereto and made a part hereof (the "Existing
  Leases").

   Section 4.02. Extension to Cure. If Seller shall be unable to give title or
to make conveyance, or to deliver possession of the Premises, all as herein
stipulated, or if on the date of Closing the Property do not conform with the
provisions hereof, then Seller shall use good faith and reasonable efforts to
remove any defects in title, or to deliver possession as provided herein, or
to make the Property conform to the provisions hereof, as the case may be, and
the Closing shall automatically be extended for a period of sixty (60) days
(the "Extended Time"). If at the expiration of the Extended Time Seller shall
have failed so to remove any defects in title, deliver possession, or make the
Property conform, as the case may be, all as herein agreed, after using good
faith and reasonable efforts to do so, then, at Buyer's option, the Deposit
shall be forthwith refunded by Escrow Agent to Buyer and all other obligations
of all parties hereto shall cease and this Agreement shall be void without
recourse to the parties hereto.

   Buyer shall have the election, at either the original date of Closing or
the Extended Time, to accept such title as Seller can deliver to the Property
in its then condition and to pay therefore the Purchase Price without
deduction, in which case Seller shall convey such title.


                                      D-3


                                   ARTICLE V

                                 CLOSING

   Section 5.01. Closing. The purchase and sale of the Property will be held
at Edwards & Angell, LLP, 2800 Financial Plaza, Providence, Rhode Island
("E&A") or such other place as may be agreed upon by Seller and Buyer, and
will occur, subject to satisfaction of all conditions precedent set forth in
Section 9.01 of this Agreement at 10:00 a.m. local time on June 1, 2001 (the
"Closing"). If the day on which the Closing is scheduled to occur is a Sunday
or holiday then the Closing shall take place on the first business day
thereafter.

   Section 5.02. Seller's Obligations. At the Closing, Seller shall execute
and deliver to Buyer, and/or cause the execution and delivery by all parties
other than Buyer of, the following:

     (a) The Deed (with payment by Seller of the required state and/or local
  documentary stamps and any other applicable tax transfers, if any, to be
  affixed thereto).

     (b) An assignment of leases, in the form attached hereto as Exhibit D,
  pursuant to which all of Seller's right, title and interest in and to the
  Existing Leases and the Hexagon Lease shall be assigned to Buyer and Buyer
  shall assume, from and after the Closing, all of Seller's rights and
  obligations under the Existing Leases and the Hexagon Lease (the
  "Assignment of Leases").

     (c) The Bill of Sale.

     (d) A FIRPTA affidavit in a form acceptable to Buyer and the title
  insurance company selected by Buyer (the "Title Company").

     (e) A Rhode Island Residency Affidavit, in a form acceptable to Buyer
  and the Title Company, sufficient to comply with the provisions of R.I.G.L.
  (S) 44-30-71.3 in order that there shall be no lien on the Property.

     (f) Evidence of Seller's good standing in each of Delaware and Rhode
  Island issued by the Secretary of State of each of Delaware and Rhode
  Island.

     (g) A good standing certificate from the Rhode Island Division of
  Taxation and, if the transaction is a sale of all or substantially all of
  the assets of Seller, a discharge of lien from the Division of Taxation.

     (h) Original counterparts (to the extent available) or copies of the
  Existing Leases (and lease files) and of all operating agreements,
  reciprocal easement agreements, options, warranties, guarantees, permits
  and other agreements related to the Property, including all modifications,
  supplements or amendments to each of the foregoing.

     (i) Copies of any permits, licenses and approvals relating to operation
  of the sewage treatment plant facility located at the Property and an
  assignment thereof to Buyer.

     (j) An assignment of any and all permits, licenses, approvals and
  warranties relating to the Property, to the extent assignable.

     (k) To the extent necessary to permit the Title Company to remove any
  exception in the owner's policy for mechanics' and materialmens' liens and
  general rights of parties in possession, an affidavit executed by Seller as
  to the absence of debts and liens and a listing of all parties in
  possession executed by Seller, made to Buyer and the Title Company and in a
  form acceptable to the Title Company, along with any other items reasonably
  required by the Title Company.

     (l) Evidence acceptable to the Title Company of Seller's authority to
  consummate the transactions contemplated by this Agreement.

     (m) Seller's certification that all representations and warranties made
  by Seller under this Agreement are true, complete and correct in all
  material respects as of the Closing.

     (n) A settlement statement with respect to the purchase and sale of the
  Property (the "Settlement Statement").

                                      D-4



     (o) To the extent the same are in Seller's possession, all original
  certificates of occupancy and licenses, permits, authorizations and
  approvals issued by the appropriate authorities with respect to the
  Property.

     (p) Any surveys and architect's plans, specifications and reports
  pertaining to the Property in Seller's possession and any licenses,
  permits, authorizations and approvals pertaining to the operation thereof.

     (q) Notice to each tenant advising such tenant of the sale of the
  Property and instructing such tenant to send all rent to such address as
  Buyer requests.

     (r) The information necessary to complete form 1099B and such other
  forms and information required by the Internal Revenue Code and regulations
  thereunder with respect to the transaction.

     (s) All other instruments and documents to which Buyer may be entitled
  under any provision of this Agreement.

     (t) Signed tenant estoppel certificates and subordination, non-
  disturbance and attornment agreements (on forms acceptable to Buyer and
  Seller) from each of the tenants under the Existing Leases and the Hexagon
  Lease.

     (u) An assignment of any surviving Service Contracts (as hereinafter
  defined), in the form attached hereto as Exhibit E.

   Section 5.03. Buyer's Obligations. At the Closing, Buyer shall pay the
Purchase Price to Seller in cash or by wire transfer of immediately available
funds, and shall execute and deliver to Seller the following:

     (a) The Assignment of Leases.

     (b) Buyer's certification that all representations and warranties made
  by Buyer under this Agreement are true, complete and correct in all
  material respects as of the Closing.

     (c) Appropriate evidence of Buyer's authority to consummate the
  transactions contemplated by this Agreement.

     (d) The Settlement Statement.

   Section 5.04. Possession. At the Closing, full possession of the Property,
subject only to the rights of the tenants under the Existing Leases and the
Hexagon Lease, shall be delivered by Seller to Buyer in the same condition as
it now is, reasonable wear and tear excepted. Buyer acknowledges that it is
purchasing the Property "AS IS".

                                  ARTICLE VI

                           CLOSING ADJUSTMENTS

   Section 6.01. Adjustments and Prorations.

   (a) Real and (if a lien on the Property) personal property taxes, fire
district (if any) taxes, water and sewer bills and any other costs or expenses
allocable to the parties hereto shall be prorated as of the Closing on the
basis of a 365-day year, except that if any amount to be prorated covers a
period of less than a year, the proration as to such amount shall be made as
of the Closing on the basis of the period so covered. Seller shall, at the
Closing, pay a pro rata share of all items so prorated to and including the
day of the Closing, and Buyer shall pay or assume the balance thereof. Seller
shall pay all utility charges on the Property for the period up to Closing.
The net amount of any adjustments shall be added to or subtracted from the
Purchase Price, as applicable. Any unpaid betterment or improvement
assessments (the "Assessments") constituting a lien against the Premises shall
be paid in the following manner: (i) Seller shall pay for all Assessments due
and payable prior to the calendar year 2001; (ii) Assessments due and payable
during the calendar year 2001 shall be prorated as of the Closing Date; and
(iii) Buyer shall pay for all Assessments due and payable in the calendar
years 2002 and beyond.

                                      D-5



   (b) Rents under the Existing Leases and the Hexagon Lease shall be prorated
as of the Closing based on the applicable period relating to such rents,
except that no proration shall be made for rents delinquent as of the Closing
(hereinafter called the "Delinquent Rents"). Delinquent Rents shall be any
rents that are more than thirty (30) days past due. The balance remaining from
any security deposits or prepaid rents which are held by Seller after
deductions previously made by Seller in accordance with the Existing Leases
and the Hexagon Lease shall be transferred to Buyer, provided, however, that
from and after the date hereof Seller will make no further deductions from any
security deposit without the prior written consent of Buyer, which consent
shall not be unreasonably withheld. Buyer shall assume all liability and
obligations relating to such security deposits and prepaid rents and shall
indemnify and hold Seller harmless from all claims, liabilities and
obligations relating thereto. Delinquent Rents, if any, shall be similarly
prorated as of the Closing, and Seller's share thereof shall be remitted to
Seller promptly when, as and if received by Buyer; provided, however, nothing
herein contained shall operate to require Buyer to institute any lawsuit or
other collection procedures to collect any Delinquent Rents. Amounts collected
by Buyer from tenants owing Delinquent Rents shall be applied first to rent
for the month in which the Closing occurs, then current rents owed by such
tenant and finally to Delinquent Rents owed by such tenant in the inverse
order in which the Delinquent Rents arose.

   Section 6.02. Transaction Costs. Each party will pay its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, (a) all costs and expenses stated
herein to be borne by a party, and (b) each party's respective legal fees and
expenses. Buyer, in addition to its other expenses, shall pay at the Closing
(i) all recording charges incident to the recording of the Deed, and (ii) all
premiums for Buyer's title insurance policy. Seller, in addition to its other
expenses, shall pay at the Closing the cost of any documentary stamps or other
sales or transfer taxes applicable to the sale.

   Section 6.03. Brokerage Commissions. Seller and Buyer acknowledge and agree
that neither has dealt with any real estate broker, agent or salesman, except
CB Richard Ellis--N.E. Partners, L.P. ("Ellis"). Seller and Buyer acknowledge
and agree that Seller shall be solely responsible for payment of any broker's
fee or commission due Ellis, and Seller shall indemnify, protect, defend and
hold harmless Buyer from any and all claims for any such fees or commissions
due Ellis. Seller and Buyer further acknowledge and agree that any other fees
or real estate commissions occasioned by the execution and/or consummation of
this Agreement shall be the sole responsibility of the party contracting
therefor, and such party agrees to indemnify, protect, defend and hold
harmless the other party from any and all claims for such other fees or real
estate commissions.

   Sections 6.04. Survival. The terms of this Article VI shall survive the
termination of this Agreement on the Closing and delivery of the Deed.

                                  ARTICLE VII

                           DEFAULT AND REMEDIES

   Section 7.01. Buyer's Default. If Buyer fails to close for any reason,
except (i) Seller's default or (ii) the permitted termination of this
Agreement by Buyer or Seller as herein expressly provided, Seller shall be
entitled to terminate this Agreement and to instruct the Escrow Agent to
deliver the Deposit to Seller as liquidated damages, which right shall be
Seller's sole remedy hereunder.

   Section 7.02. Seller's Default. If Seller is in default under the terms of
this Agreement, or if Seller fails to close for any reason, except (i) Buyer's
default or (ii) the permitted termination of this Agreement by either Seller
or Buyer as herein expressly provided, Buyer shall be entitled to terminate
this Agreement upon written notice to Seller and to request the Escrow Agent
to return the Deposit to Buyer. In addition to, but not in lieu of, the return
of the Deposit, Buyer shall be entitled to exercise any and all available
remedies at law, in equity or otherwise, including specific performance of
this Agreement.


                                      D-6


   Section 7.03. Legal Fees. In the event of any litigation between the
parties with respect to the subject matter of this Agreement, the prevailing
party shall be entitled to recover its reasonable legal fees from the other
party.

                                 ARTICLE VIII

                REPRESENTATIONS, WARRANTIES AND COVENANTS

   Section 8.01. Seller's Representations. Seller hereby represents and
warrants to Buyer, as of the date hereof and as of the Closing, as follows:

     (a) Attached hereto as Exhibit C is a schedule of all Existing Leases.
  Seller covenants that it has previously and/or contemporaneously herewith
  delivered to Buyer true copies of all Existing Leases, and all amendments
  and agreements relating thereto. Seller covenants that prior to the Closing
  it will not enter into any new lease, or amend, modify, extend, assign or
  terminate any Existing Lease or the Hexagon Lease, or consent to any
  assignment or subletting under any Existing Lease or the Hexagon Lease,
  without the prior written consent of Buyer which consent shall not be
  unreasonably withheld or delayed. Except for the Existing Leases there are
  no other leases or occupancy agreements with respect to the Property. The
  Existing Leases are in full force and effect and there are no material
  defaults by either landlord or tenant thereunder;

     (b) The rent roll which is attached as Exhibit F hereto (the "Rent
  Roll") accurately and completely identifies, as of the date of this
  Agreement, all Existing Leases and the Hexagon Lease, including the terms
  thereof and any security deposits and prepaid rent held by Seller. All
  information set forth in the Rent Roll is true and accurate. The Rent Roll
  shall be mutually satisfactory to the parties and shall list, inter alia,
  the base rent, additional rent, options to extend, option rent and any
  rights of first refusal to lease or purchase.

     (c) Except as set forth on the Rent Roll, all rents which are payable by
  tenants under their respective Existing Leases are presently current.

     (d) Except as set forth on the Rent Roll, no tenant has paid rent for
  more than one (1) month in advance.

     (e) Seller shall, from and after the date of this Agreement to the
  Closing Date, perform and discharge its duties and obligations and
  otherwise comply with every material covenant and agreement of the landlord
  under the Existing Leases.

     (f) To the best knowledge of Seller, water, gas and electric lines to
  service the Property are located on or adjacent to the Property directly
  from a public street; there are no unpaid assessments or charges for the
  installation of any such utilities or for making connection thereto that
  have not been fully paid and Seller has no knowledge of any contemplated
  assessments or charges.

     (g) Each service or similar contract (excluding any applicable Permitted
  Encumbrances) relating to the ownership, operation or use of the Property,
  is accurately described on Exhibit G which is attached hereto
  (collectively, the "Service Contracts"). To the best of Seller's knowledge,
  (i) all of the Service Contracts are in full force and effect, and (ii)
  neither Seller nor the vendor under each Service Contract is in default of
  its obligations thereunder.

     (h) Seller has received no written notice alleging that the Property is
  in violation of any applicable building, environmental or zoning laws,
  rules, codes or regulations.

     (i) (i) Seller is not a party to any litigation, arbitration or
  administrative proceeding (1) with any past or present tenant of the
  Property, (2) with any person or entity having or claiming any interest in
  or lien on the Property, or (3) which affects or questions Seller's title
  to the Property or Seller's ability to perform its obligations under this
  Agreement.


                                      D-7


       (ii) Seller knows of no presently pending litigation, arbitration or
    administrative proceeding and no litigation, arbitration or
    administrative proceeding has been threatened against Seller or the
    property, in either case, affecting or questioning Seller's title to,
    or use of, the Property or any part thereof.

     (j) Seller has received no written or other notice of any condemnation
  proceeding nor declaration of taking or other similar instrument filed
  against the Property, but has knowledge that the State of Rhode Island
  intends to take a portion of the Land for purposes of constructing a
  connector to Rhode Island State Route 4 (the "Route 4 Condemnation").

     (k) To the best of Seller's knowledge, (i) there are no underground
  storage tanks on the Property, and (ii) any underground storage tanks
  previously existing on the Property were removed therefrom in accordance
  with applicable law and Seller has obtained closure certificates evidencing
  such removal.

     (l) Seller has not used or knowingly permitted the Property to be used,
  and to the best of Seller's knowledge, the Property has not been used for,
  storage, transfer, transportation or disposal of dangerous, toxic or
  hazardous materials, chemicals, wastes or similar substances or for the
  discharge of the same into the environment other than in the normal course
  of the businesses of Seller and Seller's tenants and in accordance with
  applicable law. Contemporaneously with the execution of this Agreement,
  Seller shall deliver to Buyer (to the extent in Seller's possession or
  control) copies of all environmental site assessments, site inspections,
  agreements and any other environmental due diligence relating to the
  Property.

     (m) The Seller is a corporation (i) duly organized, validly existing and
  in good standing under the laws of the State of Delaware, (ii) qualified to
  conduct business in the State of Rhode Island, and (iii) with full power
  and authority to execute and deliver this Agreement, to perform its
  covenants, agreements and obligations hereunder and to sell the Property.

     (n) This Agreement and its execution by Seller have been duly authorized
  and are a valid and binding obligations of Seller; and the transfer of the
  Property, and the consummation of the transactions contemplated hereby,
  will not result in any violation or breach of any indenture or agreement to
  which Seller is a party or by which Seller or the Property is affected or
  bound.

The representations and warranties in this Section 8.01 are made by Seller in
order to facilitate Buyer's due diligence process and shall not survive the
Closing and delivery of the Deed. Notwithstanding the foregoing limitation,
the terms of Section 8.01(a)-(e) shall survive the Closing and delivery of the
Deed for a period of six (6) months.

   Section 8.02. Buyer's Representations.

     (a) Buyer hereby represents and warrants to Seller, as of the date
  hereof and as of the Closing, that Buyer has the legal capacity and
  complete authority to enter into and perform this Agreement, and no
  consent, approval or other action by any person or entity will be needed
  thereafter to authorize Buyer's execution and performance of this
  Agreement.

     (b) Buyer is a limited liability company duly organized and validly
  existing under the laws of the State of Rhode Island.

   Section 8.03. Operating Covenants. From the date hereof until the date of
Closing, the Seller shall not take any of the following actions with respect
to the Property:

     (a) make or permit any structural modifications of or additions to the
  Property without the Buyer's consent, which consent shall not be
  unreasonably withheld;

     (b) mortgage or otherwise further encumber or to permit liens (whether
  inchoate or not) upon the Property;

     (c) enter into any agreements relating to the operation or maintenance
  of the Property the term of which agreements shall extend beyond the date
  of Closing;

                                      D-8



     (d) enter into any lease, license or other agreement with respect to the
  use or occupancy of the Property or otherwise grant or create any
  easements, restrictions or other encumbrances on or affecting the Property;
  or

     (e) amend, alter or modify any of the Existing Leases or the Hexagon
  Lease.

   Section 8.04. Route 4 Condemnation. From and after the date hereof, Seller
shall promptly deliver to Buyer copies of any and all notices, correspondence
and any other materials received by Seller with respect to the Route 4
Condemnation. Prior to the earlier of termination of this Agreement or
Closing, Seller will not enter into any agreement with any governmental entity
with respect to the Route 4 Condemnation without the prior written consent of
Buyer.

                                  ARTICLE IX

                           CONDITIONS PRECEDENT

   Section 9.01. Mutual Contingency. Seller's obligation to sell the Property
and Buyer's obligation to purchase the Property (as set forth in this
Agreement) shall be contingent upon Seller entering into a lease, prior to
Closing, with Hexagon Holdings, Inc. ("Hexagon") pursuant to which Seller
shall lease to Hexagon approximately 333,080 square feet of space in the
Improvements (the "Hexagon Lease"). The Hexagon Lease shall be in the form
attached hereto as Exhibit H but revised to incorporate the comments set forth
in the memorandum of Donald Wignall dated February 6, 2001 attached hereto as
Exhibit H-1.

   Section 9.02. Discovery. If either Seller or Buyer discovers, prior to or
at the Closing, that any representation or warranty of the other party is
false, misleading or inaccurate in any material respect, the discovering party
may (but shall not be obligated to), at such party's option, terminate this
Agreement and the parties hereto shall be relieved of all liabilities and
obligations hereunder and (a) if Buyer is the discovering party, Buyer shall
be entitled to the immediate return of the Deposit, together with all accrued
interest thereon, and to pursue Buyer's remedies under Article VII of this
Agreement, and (b) if Seller is the discovering party, Seller shall be
entitled to pursue Seller's remedies under Article VII of this Agreement.

                                   ARTICLE X

                                 NOTICES

   Any notice, demand or other communication which may or is required to be
given under this Agreement must be in writing and must be: (a) personally
delivered with a signed receipt; (b) transmitted by United States postage
prepaid mail, registered or certified mail, return receipt requested; (c)
transmitted by reputable overnight courier service, such as Federal Express;
or (d) transmitted by legible facsimile (with answer back confirmation) to
Buyer and Seller as listed below. Notices hereunder shall be directed as
follows:

     If to Seller:

       Brown & Sharpe Manufacturing Company
       200 Frenchtown Road
       North Kingston, Rhode Island 02852

       Attention: James W. Hayes, III, Esq.--Secretary and General Counsel

       Facsimile: (401) 886-2214

     With a copy to (which copy shall not constitute notice):

       Edwards & Angell, LLP
       2800 Financial Plaza
       Providence, Rhode Island 02903
       Attention: Charles F. Rogers, Jr., Esq.

       Facsimile: (401) 276-6611

                                      D-9


     If to Buyer:

       Precision Park Partners, LLC
       333 Strawberry Field Road
       Warwick, Rhode Island 02806
       Attn: John G. Laramee

       Facsimile:

     With a copy to (which copy shall not constitute notice):

       Holland & Knight LLP
       One Financial Plaza
       Providence, Rhode Island 02903
       Attention: David J. Tracy, Esq.

       Facsimile: (401) 824-5175

     If to Escrow Agent:

       CB Richard Ellis--N.E. Partners, L.P.
       10 Dorrance Street
       Providence, Rhode Island 02903
       Attention: Charles T. Francis

       Facsimile: (401) 831-3903

Notwithstanding the foregoing, any notices delivered by one party to the other
party under Article III shall be deemed given on the date and time of posting
if transmitted by United States mail, postage prepaid, registered or certified
mail, return receipt requested, to the respective addresses set forth above.
Buyer's counsel may deliver any notice under Article III on behalf of Buyer.

                                  ARTICLE XI

                               RISK OF LOSS

   Section 11.01. Insurance. Until Closing, Seller shall at its sole cost and
expense keep the Property insured with standard all-risk coverage as provided
in Exhibit I attached hereto.

   Section 11.02. Minor Damage. In the event of "minor" loss or damage being
defined for the purpose of this Agreement as damage to the Property such that
the Property could be repaired or restored, in the opinion of an architect
mutually acceptable to Seller and Buyer (with any fees, costs or expenses
pertaining to such opinion to be borne equally by Buyer and Seller), to a
condition substantially identical to that of the Property immediately prior to
the event of damage at a cost equal to or less than Five Hundred Thousand and
00/100 Dollars ($500,000.00), neither Seller nor Buyer shall have the right to
terminate this Agreement due to such damage but Seller shall reduce the
Purchase Price by an amount equal to the cost to repair such damage and the
Closing shall take place as provided herein, and in such event Seller shall
retain all of Seller's right, title and interest to any claims and proceeds
Seller may have with respect to any casualty insurance policies relating to
the Property.

   Section 11.03. Major Damage. In the event of a "major" loss or damage
(being defined as any loss or damage which is not "minor" as defined
hereinabove), Buyer shall have the option of terminating this Agreement by
written notice to Seller, in which event Seller and Buyer shall thereupon be
released from any and all liability hereunder and the Deposit, together with
all accrued interest thereon, shall be immediately returned to Buyer by the
Escrow Agent. If Buyer elects not to terminate this Agreement, Buyer and
Seller shall proceed with the Closing, provided Seller shall assign all of
Seller's right, title and interest to any claims and proceeds Seller may have
with respect to any casualty insurance policies relating to the Property, and
Buyer shall receive a credit against the Purchase Price in an amount equal to
the aggregate amount of any deductible(s) under the insurance policies
assigned to Buyer, plus any costs to repair any such major damage not covered
by insurance provided, however, that any insurance proceeds remaining after
Buyer shall have so repaired or restored the Property shall be retained by
Buyer.


                                     D-10



   Section 11.04. Condemnation. With the exception of the Route 4
Condemnation, if before the Closing any condemnation or eminent domain
proceedings are threatened or initiated against all or any portion of the
Property and, in the sole discretion of Buyer, such condemnation or eminent
domain proceedings would interfere with the current use of the Property, then
Buyer may terminate this Agreement upon written notice to Seller and Seller
and Buyer shall thereupon be released from any and all further liability
hereunder and the Initial Deposit, together with all accrued interest thereon,
shall be immediately returned to Buyer by the Escrow Agent. If Buyer does not
elect to terminate this Agreement within ten (10) business days after receipt
of written notice of the commencement of any such proceedings, or if, in the
opinion of Buyer, such condemnation or eminent domain proceedings would not
interfere with the current use of the Property, the Closing shall take place
as provided herein and Seller shall assign to Buyer at the Closing all rights
and interest of Seller in and to any condemnation awards payable or to become
payable on account of such condemnation or eminent domain proceedings. Buyer
shall have no right to terminate this Agreement with respect to the Route 4
Condemnation.

                                  ARTICLE XII

                              MISCELLANEOUS

   Section. 12.01 Raw Land. Pursuant to Section 23-19.5-1 of the Rhode Island
General Laws of 1956, as amended, the Buyer acknowledges that the Rhode Island
Department of Environmental Management has not certified the Property for
development as part of a subdivision or approved the Property as being
suitable for on-site disposal of sanitary sewage or other liquid waste.

   Section 12.02. Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors, heirs, administrators and assigns. Without being relieved of any
liability under this Agreement, Buyer reserves the right to take title to the
Property in a name or nominee or assignee other than Buyer.

   Section 12.03. Amendments and Termination. Except as otherwise provided
herein, this Agreement may be amended or modified by, and only by, a written
instrument executed by Seller and Buyer.

   Section 12.04. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Rhode Island.

   Section 12.05. Merger of Prior Agreements. This Agreement supersedes all
prior written or oral agreements and understandings between the parties hereto
relating to the subject matter hereof.

   Section 12.06. Time of Essence. Time is of the essence to both Seller and
Buyer in the performance of this Agreement, and they have agreed that strict
compliance by both of them is required as to any date and/or time set out
herein, including, without limitation, the dates and times set forth in
Article III of this Agreement. If the final day of any period of time set out
in any provision of this Agreement falls upon a Saturday, Sunday or a legal
holiday under the laws of the State of Rhode Island, then and in such event,
the time of such period shall be extended to the next day which is not a
Saturday, Sunday or legal holiday.

   Section 12.07. Counterparts. This Agreement may be executed in identical
counterparts, each of which, when construed together, shall be deemed an
original hereof.

                     (The Next Page is the Signature Page)

                                     D-11


   IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Seller as
of the date and year first above written.

                                          Seller:

                                          Brown & Sharpe Manufacturing
                                           Company,

                                          a Delaware corporation


                                          By: ____________________________

                                             Name:

                                             Title:

                                          Buyer:

                                          Precision Park Partners, LLC,

                                          a Rhode Island limited liability
                                           company


                                          By: ____________________________

                                             Name:

                                             Title:

                                     D-12


Annex E

PROPOSED AMENDMENT TO ARTICLE FOURTH A OF THE CERTIFICATE OF INCORPORATION OF
THE COMPANY

   Upon the approval of Proposal 5, Article Fourth A would be added to the
Certificate of Incorporation to read as follows:

   "FOURTH A: Simultaneously with the effective time of this amendment (the
"Effective Time"), each issued and outstanding five shares of the
Corporation's Class A Common Stock or Class B Common Stock (collectively, the
"Pre-Split Common Stock") shall automatically and without any action on the
part of the holder thereof be reclassified as and reduced to (the "Reverse
Stock Split") one share of Class A Common Stock or Class B Common Stock, as
the case may be (the "Post-Split Common Stock"). Each holder of a certificate
or certificates of Pre-Split Common Stock (the "Pre-Split Certificates,"
whether one or more) shall be entitled to receive, upon surrender of such Pre-
Split Certificates to the Corporation's transfer agent for cancellation, a
certificate or certificates of the same class of shares (the "Post-Split
Certificates," whether one or more), which will equal the number of Pre-Split
Certificates divided by five and rounded down to the nearest whole number. No
script or fractional shares certificates will be issued for Pre-Split Common
Stock in connection with the Reverse Stock Split. Each holder of shares of
Pre-Split Common Stock not evenly divisible by five as of the Effective Time
of the Reverse Stock Split will, in lieu of receiving fractional shares,
receive a cash payment (the "Fractional Share Payment") in U.S. dollars equal
to the product of: (a) the fractional share times the average of the daily
average of the high and low price per share of Class A Common Stock on the New
York Stock Exchange, or such other stock exchange, or as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System or
such other similar system then in use, on which the Class A Common Stock shall
be listed at the time, for the five trading days immediately preceding the
Effective Time, subject to the treatment of fractional shares as described
above, Pre-Split Certificates will be deemed for all purposes to represent the
appropriately reduced number of Post-Split Certificates, except that the
holder of such unexchanged certificates will not be entitled to receive any
distributions payable by the Company after the Effective Time, until the Pre-
Split Certificates have been surrendered. Such distributions, if any, will be
accumulated and, at the time of surrender of the Pre-Split Certificates, all
such unpaid distributions will be paid without interest."


                     BROWN & SHARPE MANUFACTURING COMPANY

                  PROXY CARD FOR SPECIAL MEETING       , 2001

   The undersigned hereby appoints          and          or any one of them
acting in the absence of the other, as attorneys and proxies of the
undersigned, with full power of substitution, for and in the name of the
undersigned, to represent the undersigned at the Special Meeting of
Stockholders of Brown & Sharpe Manufacturing Company, a Delaware corporation
(the "Company"), to be held at         , at        [10:00] a.m. local time
on      , 2001, and at any adjournment or adjournments thereof, and to vote
all shares of stock of the Company standing in the name of the undersigned,
with all of the powers the undersigned would possess if personally present at
such meeting.

1. To approve the Acquisition Agreement, the Proposal to sell substantially
all assets, including the sale of assets and the related transactions, the
sale of our North Kingstown Facility and cash distributions to stockholders.

[_] FOR[_] AGAINST[_] ABSTAIN


2. To approve an amendment to the Certificate of Incorporation to change the
name of the Company.

[_] FOR[_] AGAINST[_] ABSTAIN

3. To approve an amendment to Certificate of Incorporation to reduce par value
per share of Class A Common Stock.

[_] FOR[_] AGAINST[_] ABSTAIN

4. To approve an amendment to Certificate of Incorporation to reduce par value
per share of Class B Common Stock.

5. To approve an amendment to Certificate of Incorporation to effect a one-
for-five reverse stock split of Class A Common Stock and Class B Common Stock.

[_] FOR[_] AGAINST[_] ABSTAIN

6. Matters incident to the conduct of the Special Meeting or any adjournments
or postponements thereof.

MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR THE APPROVAL OF THE
FOREGOING PROPOSALS.

   This Proxy is solicited on behalf of the Board of Directors of the Company.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned. If no direction is made, this Proxy will be voted for the
above Proposals.

Date: ___________________         Signature: _______________________

                                  Signature: _______________________

NOTE: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.