Employment Agreement - Pitney Bowes Inc. and Marc C. Breslawsky


[Letterhead of Pitney Bowes]



October 27, 2000


Marc C. Breslawsky
51 Eleven O'Clock Road
Weston, Connecticut 06883

RE: Letter of Agreement

Dear Marc:

This letter agreement is intended to set forth the commitments Pitney Bowes (the
"Company") intends to undertake if the Company both establishes a new legal 
entity to operate the majority of the Company's existing Office Systems Division
business (the "Business") and spins off the Business in a separate transaction 
to be determined in the future. For purposes of this Agreement, the spin-off 
Business shall be referred to as "Spinco."

The Company shall offer you the position of Chief Executive Officer of Spinco.
During your employment with the Company, you agree to perform the duties of
Chief Executive Officer of Spinco in addition to your duties of Chief Operating
Officer of the Company without any additional compensation. Immediately prior to
the spin off of the Business in a separate transaction, you will assume the
duties of the Chief Executive Officer of Spinco on a full-time basis and your
compensation, benefits and incentive package as the full-time Chief Executive
Officer of Spinco shall be as follows:

     1.  Salary. Your annual salary shall be $825,000.

     2.  Annual Incentive. You will be eligible to participate in Spinco's 
annual incentive compensation program. For the first full fiscal year of your 
employment, you shall be entitled to a minimum incentive award of $577,500, the 
equivalent of 70% of your salary, and a maximum award of $1,072,500, the 
equivalent of 130% of your salary, depending upon the achievement of performance
targets established by Spinco's Board of Directors.

     3.  Long-Term Incentive. You shall be eligible to participate in Spinco's 
Long-Term Incentive Plan. You shall be eligible for a minimum award of $625,000 
and a maximum of award $1,250,000, depending upon Spinco's achievement of 
performance goals established by the Board of Directors of Spinco for multi-year
cycles. The payment

 
[LOGO] Pitney Bowes

shall be made at the end of each performance cycle in accordance with the terms 
of the plan.

     4.  Equity. You may be granted stock options in Spinco at the discretion of
Spinco's Board of Directors.

     5.  Benefits. During the period of your employment, you shall be eligible 
to participate in Spinco's benefits programs which are made available to Spinco 
employees of equal status.

     6.  Welfare Benefits. During your employment, you and your eligible 
dependents shall be eligible to participate in Spinco's group medical and dental
plans which are made available to Spinco employees of equal status.

You understand and agree that immediately prior to the spin-off, the terms and 
conditions of your employment with Spinco may be reflected in a formal written 
document, which would contain the compensation terms herein and would be subject
to the approval of the Spinco Board following the spin-off. In the event the 
Business is not spun-off, this agreement imposes no further independent 
obligations upon the Company with respect to your employment or termination of 
employment by the Company.

This agreement shall be effective as of the date you sign the agreement and 
shall continue in effect until you are notified in writing by me that the 
agreement ceases to be effective as of a date I shall specify in the notice.


Sincerely,


/s/ Michael J. Critelli
Michael J. Critelli
Chairman and 
Chief Executive Officer

Agreed to and Accepted by:

/s/ Marc C. Breslawsky
----------------------------
 Marc C. Breslawsky

   11/8/00
----------------------------
 DATE

                                       2

 
[LOGO] Pitney Bowes
       Chairman of the Board
       and Chief Executive Officer


October 27, 2000

Marc C. Breslawsky
51 Eleven O'Clock Road
Weston, Connecticut 06883

RE:  Separation Agreement

Dear Marc:

This letter is intended to provide you with the Company's understanding of how 
the Separation Agreement between you and the Company dated October 27, 2000 (the
"Separation Agreement") will affect certain employee and executive benefit and 
incentive plans and programs in which you participate if you incur a termination
of employment pursuant to the Separation Agreement. This letter will also serve 
as the Company's commitment to administer these plans and programs in the manner
set forth below. The defined terms in this letter have the meanings that are 
contained in the Separation Agreement unless a term is more specifically defined
in this Agreement.

Stock Options.
-------------

As of the Registration Date, all outstanding stock options granted to you prior 
to October 20, 2000 pursuant to the Company's 1991 Stock Plan or any successor 
plan shall remain exercisable in accordance with their existing terms. Such 
options shall expire on their stated expiration date; provided, however, options
granted prior to 1999 will expire on the earlier of (i) the fourth anniversary 
of your termination from the Company or any company that is a spin-off of the 
Company, as defined in the 1991 Stock Plan (a "Spin Off"), whichever occurs 
later, and (ii) their original term.

The special option granted on October 20, 2000 ("Accelerated Option Grant") 
shall vest and be exercisable in accordance with the terms and conditions set 
forth in your award agreement. Such terms shall include a provision requiring 
the forfeiture of the entire Accelerated Option Grant if you retire or 
voluntarily resign from the Company or the Spin Off, prior to February 1, 2002. 
If you retire or voluntarily resign from the Company or the Spin-off on or after
February 1, 2002, the Accelerated Option Grant shall become immediately 100% 
vested and exercisable as of such retirement or voluntary resignation.

If you are terminated pursuant to Section 3 of the Separation Agreement prior to
February 1, 2002, the entire Accelerated Option Grant shall be immediately 100%

                                       1

 
[LOGO] Pitney Bowes


vested and exercisable as of the date of such termination. For purposes of the 
1991 Stock Plan and options granted to you thereunder, your termination of 
employment from the Company as a result of your employment with the Spin Off 
shall not be treated as a retirement or other termination of employment from the
Company. The 1991 Stock Plan will be amended to reflect the terms and conditions
of the Accelerated Option Grant and other commitments described herein, 
including the retirement, termination of employment, vesting and exercise 
treatment with respect to the Spin Off.

The treatment of your stock options following the execution of the Separation 
Agreement do not differ from that of any similarly situated executive of the 
Company.

Deferred Incentive Savings Plan
-------------------------------

The Company will pay you as soon as practicable following the Resignation Date a
lump sum amount in cash equal to the balance of your accounts under the Deferred
Incentive Savings Plan pursuant to the payment provisions of the plan.

Retirement Plans
----------------

The Company will treat your retirement plan benefits in the following manner:

(a)  401(k) Plan

As of the Resignation Date, your participation in and contributions to the 
Pitney Bowes 401(k) Plan ("401(k) Plan") will cease. Your rights to a 
distribution, rollover, forms of payment and deferral regarding your account 
balance will be determined in accordance with the terms of the 401(k) Plan.

(b)  Pension Plan

You will be credited during your Severance Period with service through March 31,
2004 in lieu of actual years of service with the Company for all purposes under 
the Pitney Bowes Pension Plan, including determining your basic pension benefit 
and any transition credits to which you may be entitled under the Pension Plan. 
Your severance payment under Section 3 of the Separation Agreement and any PBC 
incentive award under Section 4(a) of the Separation Agreement will be credited 
as pensionable earnings. Any CIU payment made under Section 4(b) of the 
Separation Agreement will not be credited as pensionable earnings  in accordance
with the plan's existing provisions. If, after providing the service credit and 
determining pensionable earnings as described in the preceding sentences, your 
pension benefit under the Pension Plan exceeds the limits imposed by the plan 
and applicable law, the excess amounts will be paid from the Pitney Bowes 
Supplemental Pension Plan ("SERP"). If your employment with the Company 
continues beyond March 31, 2004, you will continue to accrue pension benefits in
accordance with the terms and conditions of the Pension Plan and SERP. The

                                       2


 
[LOGO]    [Pitney Bowes]

          determination and payment of your pension benefits under the Pension
          Plan and the SERP remain in all respects subject to the terms and
          conditions of the respective plans.

          Sincerely,                              
                                                  
          /s/ Michael J. Critelli                 
          Michael J. Critelli                     
          Chief Executive Officer                 
                                                  
                                                  
          AGREED TO AND ACCEPTED BY               
                                                  
                                                  
          /s/ Marc C. Breslawsky                  
          ------------------------------          
          Marc C. Breslawsky                      
                                                  
                                                  
          10/27/00                                
          ------------------------------          
          Date                                     


                                       3

 
                             SEPARATION AGREEMENT

     AGREEMENT dated as of October 27, 2000 between Pitney Bowes Inc., a 
Delaware corporation (the "Company"), and Marc C. Breslawsky ("the Executive").

     WHEREAS, Marc C. Breslawsky is a valued executive of the Company;

     WHEREAS, the Company considers it essential to the best interests of its 
shareholders to provide the Company and the Executive with the protections of 
this Agreement; and 

     WHEREAS, the parties desire to enter into this Agreement;

     NOW, THEREFORE, in consideration of the premises and mutual covenants 
herein and for other good and valuable consideration, the parties agree as 
follows:

     SECTION 1  Definitions

     For purposes of this Agreement, the following terms shall have the meanings
indicated.

     "Board" means the Board of Directors of the Company.

     "Cause" means (i) the Executive's conviction or plea of guilty or nolo 
contendere to a felony or crime involving moral turpitude, dishonesty, breach of
trust or unethical business conduct or any crime involving the business of the 
Company; (ii) the Executive, in the performance of his duties for the Company, 
to the material and demonstrable detriment of the Company, engaging in (A) 
willful misconduct, (B) willful or gross neglect, (C) fraud, (D) 
misappropriation, (E) embezzlement or (F) theft; (iii) the Executive's willfully
disobeying the directions of the Board to adhere to the policies and practices 
of the Company or to devote substantially all of his business time and effort to
the Company; (iv) the breach of this Agreement in any material respect, if such 
breach remains uncured (if curable) for a period of thirty (30) days following 
written notice by the Company of such breach; or (v) the Executive's 
acknowledgment in writing in any agreement or stipulation to, or the 
adjudication in, any civil suit, of the commission of any theft, embezzlement, 
fraud, or other intentional act of dishonesty involving any other person. No act
or failure to act on the Executive's part shall be deemed willful unless done or
omitted to be done by the Executive not in good faith and without reasonable 
belief that the Executive's action or omission was in the best interest of the 
Company.

     "Resignation Date" means the date that the Executive terminates employment 
with the Company at the Company's request in its sole discretion and resigns 
from all positions and directorships within the Company, including, but not 
limited to, a termination of employment with the Company as a result of 
employment with a division


 
or subsidiary that has been divested, spun-off, split-off, or sold by the 
Company ("the Divested Entity").

     SECTION 2  Term of Agreement

     This Agreement shall be in effect from the date hereof.

     SECTION 3  Severance

     (a)  If the Executive's employment with the Company is terminated by the 
Company at its request in its sole discretion without Cause (other than by
reason of disability or death), the Company shall pay the Executive cash 
compensation in the amount of $2,805,000, which is equal to the sum of two (2) 
times his current base salary plus 140% of his base salary. If the Executive's 
employment is terminated hereunder prior to April 1, 2002, the payment shall be 
made in equal monthly installments over the period from the Resignation Date 
through March 31, 2004. If the Executive's employment is terminated hereunder on
or after April 1, 2002, the payment shall be made in equal monthly installments 
over a two year period beginning on the Resignation Date. The period during 
which the payment hereunder is made shall be referred to in this Agreement as 
the (the "Severance Period").

     (b)  The severance payments to be made under this Section 3 shall be in 
lieu of any severance pay to which the Executive may otherwise be entitled under
the Company's severance plans and practices; provided, however, that in the 
event of a change of control of the Company the Executive may be entitled to 
certain rights that exist under the Company's Senior Executive Severance Policy,
which rights would be offset by the severance payments made to the Executive 
under Section 3 hereof.

     SECTION 4  Other Incentives

     (a)  The Executive shall be eligible for a pro-rated PBC incentive award
pursuant to the Company's Key Employee Incentive Plan ("the KEIP") based on the
number of whole months of service completed with the Company by the Executive 
during the year in which the Resignation Date occurs. The payment shall be made 
at the time such incentive awards are paid to actively employed senior 
executives in accordance with the terms of the KEIP. It is understood that the 
Executive has no entitlement to the PBC incentive award described hereunder and 
that the determination to pay the Executive such PBC incentive award is made at
the sole discretion of the Board with the Executive's individual performance
rating being based on the Company's overall performance rating.

     (b)  The Company shall pay the Executive a payout of outstanding Cash 
Incentive Units ("CIUs") pursuant to the KEIP at the close of each respective 
cycle in accordance with the terms of KEIP; provided, however, that such payout 
of CIUs shall be based on the Executive's total number of completed months of 
active service with the Company during each 36 month CIU cycle and on the 
achievement of performance-based targets associated with the CIUs. For purposes 
of this prorated calculation, the targeted payout

                                       2

 
shall be multiplied by a fraction, the n