Subscription Agreement

EXECUTION COPY


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


SUBSCRIPTION AGREEMENT


BY AND BETWEEN


PITNEY BOWES CREDIT CORPORATION


AND


JCC MANAGEMENT LLC


DATED AS OF


March 31, 2005


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


TABLE OF CONTENTS


Page
---- ARTICLE I Definitions............................................................................... 2


ARTICLE II Sale, Purchase and Repurchase............................................................ 18


SECTION 2.01. Agreement to Sell and to Purchase; Purchase Price............................ 18
SECTION 2.02. Tranche I Closing............................................................ 19
SECTION 2.03. Distribution................................................................. 20
SECTION 2.04. Tranche II Closing........................................................... 21
SECTION 2.05. Preparation of Closing Date Balance Sheet; Purchase Price
Adjustment...................................................... 21
SECTION 2.06. Specified Lease Purchase Price Adjustment.................................... 23
SECTION 2.07. Stock Split; Common Stock Issuances.......................................... 23
SECTION 2.08. Repurchase of the Tranche I Stock............................................ 24


ARTICLE III Representations and Warranties of the Company........................................... 24


SECTION 3.01. Organization and Standing.................................................... 24
SECTION 3.02. Capital Stock................................................................ 25
SECTION 3.03. Authorization; Enforceability................................................ 26
SECTION 3.04. No Violation; Consents....................................................... 26
SECTION 3.05. Financial Statements......................................................... 27
SECTION 3.06. Material Adverse Change...................................................... 27
SECTION 3.07. Assets....................................................................... 28
SECTION 3.08. Intellectual Property........................................................ 28
SECTION 3.09. Employee Benefit Plans....................................................... 29
SECTION 3.10. Employees and Labor Relations................................................ 30
SECTION 3.11. No Undisclosed Material Liabilities.......................................... 30
SECTION 3.12. Compliance with Laws......................................................... 31
SECTION 3.13. Litigation................................................................... 31
SECTION 3.14. Compliance with Constituent Documents........................................ 31
SECTION 3.15. Environmental Matters........................................................ 31
SECTION 3.16. Real Property................................................................ 31
SECTION 3.17. Taxes........................................................................ 32
SECTION 3.18. Financings................................................................... 32
SECTION 3.19. Financing Policies........................................................... 33
SECTION 3.20. Contracts.................................................................... 34
SECTION 3.21. Certain Business Practices................................................... 35
SECTION 3.22. Insurance.................................................................... 36
SECTION 3.23. Licenses and Permits; Governmental Notices................................... 36
SECTION 3.24. Affiliated Transactions...................................................... 36
SECTION 3.25. Vote Required................................................................ 36
SECTION 3.26. Representations and Warranties............................................... 37


-i-


TABLE OF CONTENTS


Page
---- ARTICLE IV Representations and Warranties of the Purchaser.......................................... 37


SECTION 4.01. Organization; Authorization; Enforceability.................................. 38
SECTION 4.02. Private Placement............................................................ 38
SECTION 4.03. No Violation; Consents....................................................... 39
SECTION 4.04. Litigation................................................................... 39
SECTION 4.05. Financing.................................................................... 40
SECTION 4.06. Ownership of Shares.......................................................... 40
SECTION 4.07. Future Acquisitions.......................................................... 40
SECTION 4.08. Future Dispositions.......................................................... 40
SECTION 4.09. Conversion of the Non-Voting Preferred Stock................................. 40
SECTION 4.10. HSR.......................................................................... 40
SECTION 4.11. Representations and Warranties............................................... 40


ARTICLE V Covenants of the Company.................................................................. 40


SECTION 5.01. Compliance with Conditions; Commercially Reasonable Efforts.................. 40
SECTION 5.02. Access to Books and Records.................................................. 41
SECTION 5.03. Consents and Approvals....................................................... 41
SECTION 5.04. Certificate of Incorporation, Certification of Designation
and Bylaws...................................................... 41
SECTION 5.05. Use of Proceeds.............................................................. 42
SECTION 5.06. Board of Directors........................................................... 42
SECTION 5.07. No Solicitation of Other Offers.............................................. 42
SECTION 5.08. Confidentiality; Information................................................. 43
SECTION 5.09. Registration Rights Agreement and Subordinated Debt Agreement................ 45
SECTION 5.10. Escrow Agreement............................................................. 45
SECTION 5.11. The Distribution Agreements.................................................. 45
SECTION 5.12. Rights Agreement............................................................. 46
SECTION 5.13. Reservation of Shares........................................................ 46
SECTION 5.14. Listing of Shares............................................................ 46
SECTION 5.15. Preemptive Rights............................................................ 46
SECTION 5.16. Conduct of Business.......................................................... 49
SECTION 5.17. Registration Statement; Information Statement or Prospectus.................. 52
SECTION 5.18. Compliance with Sarbanes-Oxley Act of 2002................................... 53
SECTION 5.19. Imagistics................................................................... 53
SECTION 5.20. Financial Statements......................................................... 53
SECTION 5.21. Monthly Management Reports................................................... 53
SECTION 5.22. Ruling Request............................................................... 54
SECTION 5.23. Tax Elections; Tax Accounting Changes........................................ 54
SECTION 5.24. Statute of Limitations....................................................... 54
SECTION 5.25. Financing Transactions....................................................... 54


-ii-


TABLE OF CONTENTS


Page
---- ARTICLE VI Covenants of the Purchaser............................................................... 54


SECTION 6.01. Compliance with Conditions; Commercially Reasonable Efforts.................. 54
SECTION 6.02. Consents and Approvals....................................................... 54
SECTION 6.03. Restrictions on Transfer..................................................... 55
SECTION 6.04. Standstill................................................................... 55
SECTION 6.05. Confidentiality; Information................................................. 56
SECTION 6.06. Compliance with Section 355 of the Code...................................... 57
SECTION 6.07. Prohibition on Solicitation and Hiring....................................... 57
SECTION 6.08. Registration Rights Agreement and Subordinated Debt Agreement................ 58
SECTION 6.09. Escrow Agreement............................................................. 58
SECTION 6.10. Warehouse Financing Agreement................................................ 58


ARTICLE VII Conditions Precedent to Tranche I Closing, the Distribution and Tranche II Closing...... 58


SECTION 7.01. Conditions to the Company's Obligations in Respect of the
Tranche I Closing............................................... 58
SECTION 7.02. Conditions to the Purchaser's Obligations in Respect of the
Tranche I Closing............................................... 59
SECTION 7.03. Conditions to the Company's Obligations in Respect of the
Distribution.................................................... 61
SECTION 7.04. Conditions to the Purchaser's Obligations in Respect of the
Distribution.................................................... 61
SECTION 7.05. Conditions to Each Party's Obligations in Respect of the
Tranche II Closing.............................................. 62


ARTICLE VIII Miscellaneous.......................................................................... 63


SECTION 8.01. Survival..................................................................... 63
SECTION 8.02. Legends...................................................................... 63
SECTION 8.03. Notices...................................................................... 64
SECTION 8.04. Termination.................................................................. 65
SECTION 8.05. Governing Law................................................................ 67
SECTION 8.06. Waiver Of Jury Trial......................................................... 67
SECTION 8.07. Attorney Fees................................................................ 67
SECTION 8.08. Entire Agreement............................................................. 68
SECTION 8.09. Modifications and Amendments................................................. 68
SECTION 8.10. Waivers and Extensions....................................................... 68
SECTION 8.11. Exhibits and Schedules....................................................... 68
SECTION 8.12. Expenses; Brokers............................................................ 68
SECTION 8.13. Press Releases and Public Announcements...................................... 69
SECTION 8.14. Assignment; No Third Party Beneficiaries..................................... 69
SECTION 8.15. Severability................................................................. 70


-iii-


TABLE OF CONTENTS


Page
---- SECTION 8.16. Counterparts................................................................. 70 SECTION 8.17. Remedies; Specific Performance............................................... 70


SCHEDULES - --------- Schedule 1.01 Projections Schedule 1.02 Specified Leases Schedule 2.06(b) Illustration of Specified Lease Purchase Price Adjustment Schedule 3.01(b)(i) Capital Stock of Subsidiaries Schedule 3.01(b)(ii) Arrangements with Respect to Capital Stock Schedule 3.01(b)(iii) Ownership Interests of the Company in its Subsidiaries Schedule 3.04 No Violation; Consents Schedule 3.06 Material Adverse Change Schedule 3.07 Assets Schedule 3.08(d) Company Intellectual Property Schedule 3.09(a) Employee Benefit Plans Schedule 3.10 Employees and Labor Relations Schedule 3.11 No Undisclosed Material Liabilities Schedule 3.13 Litigation Schedule 3.15 Environmental Matters Schedule 3.16 Real Property Schedule 3.17 Taxes Schedule 3.18(a)(i) Large Ticket Financings Schedule 3.18(a)(ii) Small Ticket Financings Schedule 3.18(b)(i) Large Ticket Financing Defaults Schedule 3.18(b)(ii) Delinquency Reports Schedule 3.18(g) Bankruptcies Schedule 3.19 Financing Policies Schedule 3.20 Material Contracts Schedule 3.23 Licenses and Permits; Governmental Notices Schedule 5.02 Access to Books and Records Schedule 5.03 Consents and Approvals Schedule 5.06 Board of Directors Schedule 7.02(m) Conditions to the Purchaser's Obligations in Respect of the Tranche I Closing


-iv-


TABLE OF CONTENTS


EXHIBITS Page - -------- ---- Exhibit A Form of Certificate of Designation Exhibits B-1 - B-3 Distribution Term Sheets Exhibit C Form of Escrow Agreement Exhibit D Form of Registration Rights Agreement Exhibit E Form of Separation and Distribution Agreement Exhibit F Form of Subordinated Debt Agreement Exhibit G Form of Tax Sharing Agreement Exhibit H Unaudited Balance Sheet Exhibit I Form of Amended and Restated Certificate of Incorporation Exhibit J Form of Amended Bylaws Exhibit K Warehouse Financing Term Sheet


-v-


SUBSCRIPTION AGREEMENT


This SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of March 31, 2005, is made by and between Pitney Bowes Credit Corporation, a Delaware corporation (the "Company"), and a wholly owned subsidiary of Pitney Bowes Inc., a Delaware corporation ("Pitney Bowes"), and JCC Management LLC, a Delaware limited liability company (the "Purchaser"). Unless otherwise expressly set forth in this Agreement, capitalized terms used herein shall have the meaning ascribed to such terms in Article I of this Agreement.


WHEREAS, as a condition to the consummation of the Transactions contemplated hereby, Pitney Bowes and the Company will enter into the Distribution Agreements;


WHEREAS, as a condition to the consummation of the Transactions and in accordance with the Separation and Distribution Agreement and subject to the terms and conditions thereof, prior to the PBGFS Distribution, the Company will contribute to Pitney Bowes Global Financial Services Inc. (f/k/a PB Mailing Financial Services Inc.), a Delaware corporation, and as of the date hereof a Subsidiary of the Company ("PBGFS"), certain of its assets and transfer certain of its liabilities, including, the Company's outstanding Indebtedness with respect to the Indentures (collectively, the "PBGFS Contribution");


WHEREAS, as a condition to the consummation of the Transactions and in accordance with the Separation and Distribution Agreement and subject to the terms and conditions thereof, after the PBGFS Contribution and prior to the Company Contribution, the Company will obtain all of the Capital Stock of PBGFS and thereafter will distribute all of the Capital Stock of PBGFS to Pitney Bowes (the "PBGFS Distribution");


WHEREAS, as a condition to the consummation of the Transactions and in accordance with the Separation and Distribution Agreement, prior to the Company Contribution, the Company shall consummate one or more transactions taking the form of a high yield debt offering, a revolving credit facility, securitization of certain financial assets of the Company or any other similar transactions (the "Financing Transactions");


WHEREAS, as a condition to the consummation of the Transactions and in accordance with the Separation and Distribution Agreement and subject to the terms and conditions thereof, after the PBGFS Distribution and Financing Transactions and prior to the Distribution, Pitney Bowes will contribute to the Company certain of its assets and transfer certain of its liabilities and Pitney Bowes will assume or otherwise retire, cancel or forgive certain outstanding intercompany Indebtedness of the Company and the Company will satisfy the remaining outstanding intercompany Indebtedness that was not assumed or otherwise retired, cancelled or forgiven by Pitney Bowes (collectively, the "Company Contribution");


WHEREAS, as a condition to the consummation of the Transactions and in accordance with the Separation and Distribution Agreement and subject to the terms and conditions thereof, after the Company Contribution, Pitney Bowes will distribute all of the shares of the Common Stock held by Pitney Bowes (the "Distribution") to the holders of record of


Pitney Bowes common stock as of the record date set forth in the Information Statement or Prospectus, as applicable;


WHEREAS, the Company desires, subject to the terms and conditions set forth herein, to issue and sell to the Purchaser, immediately following the consummation of the Company Contribution and prior to the Distribution, 114.2821 shares (as adjusted pursuant to Section 2.07) (the "Tranche I Stock") of Common Stock of the Company, par value $0.001 per share (the "Common Stock");


WHEREAS, the Company desires, subject to the terms and conditions set forth herein, to issue and sell to the Purchaser, as soon as practicable following the consummation of the Distribution, a number of shares (as adjusted pursuant to Section 2.07) of the Company's Non-Voting Series A Convertible Preferred Stock, par value $0.001 per share (the "Non-Voting Preferred Stock") that are convertible into 310.3332 shares of Common Stock (in accordance with the terms of the Certificate of Designation) (the "Tranche II Stock"); and


WHEREAS, the Purchaser desires to purchase the Shares from the Company and the Company desires to issue and sell the Shares to the Purchaser, in each case subject to the terms and conditions set forth herein.


NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:


ARTICLE I


Definitions


(a) As used in this Agreement, the following terms shall have the following meanings:


"Acquisition Proposal" means (a) any inquiry, proposal or offer (whether or not in writing) from any Person or group directly or indirectly to acquire or purchase, in a single transaction or series of transactions, by stock acquisition, asset acquisition, merger, consolidation, liquidation, dissolution, business combination, recapitalization or similar transaction (i) at least 10% or more of the consolidated assets of the Company and its Subsidiaries (after taking into effect the PBGFS Contribution, the PBGFS Distribution, the Financing Transactions and the Company Contribution), (ii) at least 10% or more of any class of equity or debt securities of the Company (after taking into effect the PBGFS Contribution, the PBGFS Distribution, the Financing Transactions and the Company Contribution) or (iii) at least 10% or more of any class of equity or debt securities of one or more of the Company's Subsidiaries (after taking into effect the PBGFS Contribution, the PBGFS Distribution, the Financing Transactions and the Company Contribution) which in the aggregate constitute 10% or more of the net revenues, net income or assets (including equity securities) of the Company and its Subsidiaries (after taking into effect the PBGFS Contribution, the PBGFS Distribution, the Financing Transactions and the Company Contribution) or (b) any public announcement by or on behalf of the Company or any of its Affiliates of a proposal, plan or intention to engage in any of


-2-


the foregoing or enter into any agreement with respect to the foregoing, in each case other than the Transactions or the Internal Restructuring.


"Adjusted Net Worth Difference Amount" means in case the Net Worth Difference Amount is adjusted pursuant to Section 2.06, an amount equal to the Net Worth Difference Amount adjusted upward or downward as set forth in Section 2.06, and, in case the Net Worth Difference Amount is not adjusted pursuant to Section 2.06, an amount equal to the New Worth Difference Amount.


"Adjusted Projections" means the Projections adjusted solely to take into account all adjustments to Projection Inputs with respect to the Specified Leases in each taxable period within the Relevant Periods as prescribed by the most recent Final Resolution of an SL Tax Matter and any prior Final Resolution of an SL Tax Matter, regardless of whether a change to net taxable income is actually reported on the Tax Return of any Party as a result of such adjustment.


"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, whether or not through one or more intermediaries, by Contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.


"Aggregate PV Audit Result Excess Amount" means the aggregate amount of the PV Audit Result Excess in each taxable period within the Relevant Periods.


"Aggregate PV Base Case Excess Amount" means the aggregate amount of the PV Base Case Excess in each taxable period within the Relevant Periods.


"Applicable Law" means (a) any United States Federal, state, local or foreign law, statute, rule, regulation, order, writ, injunction, judgment, decree or Permit of any Governmental Authority and (b) any rule or regulation of the Commission or any rule or listing requirement of any national stock exchange, NASDAQ or Commission-recognized trading market on which securities issued by the Company or any of its Subsidiaries are listed or quoted.


"Audit Result Amount" means the net taxable income for the Specified Leases in each taxable period based on the Adjusted Projections.


"Audit Result Excess" means the amount by which the Audit Result Amount exceeds the Base Case Amount. In the event the Audit Result Amount does not exceed the Base Case Amount, the Audit Result Excess shall be zero and deemed not to exist.


"Audit Result Excess Amount" means forty percent (40%) of the Audit Result Excess.


"Base Case Amount" means the net taxable income for the Specified Leases in each taxable period based on the Projections.


-3-


"Base Case Excess" means the amount by which the Base Case Amount exceeds the Audit Result Amount. In the event the Base Case Amount does not exceed the Audit Result Amount, the Base Case Excess shall be zero and deemed not to exist.


"Base Case Excess Amount" means forty percent (40%) of the Base Case Excess.


"Base Line Equity" means $115,000,000.


"Big Four Public Accounting Firms" means each of Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP, and PricewaterhouseCoopers LLP.


"Board of Directors" means, with respect to any Person, its board of directors or similar governing body.


"Business" means the business and operations of providing financing and syndication for a wide variety of real property and personal property not manufactured or owned by Pitney Bowes as of the Distribution Date, including vendor finance, single investor finance and large-ticket financing, but in any event not the PBGFS Business or the Pitney Bowes Business.


"Business Day" means any day other than a Saturday, a Sunday, or a day when banks in The City of New York are required or authorized by Applicable Law to be closed.


"Capital Stock" means (a) with respect to any Person that is a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock and (b) with respect to any other Person, any and all partnership or other equity interests of such Person.


"Cash Adjustment Amount" means an amount equal to the aggregate amount of cash dividended or distributed by the Company to Pitney Bowes between the date hereof and the Distribution Date (excluding any amounts dividended or distributed to Pitney Bowes out of the proceeds of the Financing Transactions).


"Cerberus" means Cerberus Capital Management, L.P., a Delaware limited partnership.


"Certificate of Desi ...