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