PITNEY BOWES INC /DE/, DEF 14A, 1999-04-01

PITNEY BOWES INC /DE/
DEF 14A, 1999-04-01
OFFICE MACHINES, NEC

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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:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12

Pitney Bowes, Inc.
(Name of Registrant as Specified In Its Charter)

(name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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

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2) Aggregate number of securities to which transaction applies:

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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):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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|__| 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:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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<PAGE>

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[LOGO OMITTED] Pitney Bowes
NOTICE OF THE 1999
ANNUAL MEETING
AND
PROXY STATEMENT

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

Pitney Bowes Inc.
World Headquarters
Stamford, Connecticut 06926-0700
(203) 356-5000

<PAGE>

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

[LOGO OMITTED] Pitney Bowes

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

TO THE STOCKHOLDERS:

We will hold our 1999 annual meeting of stockholders at 9:00 a.m. on Monday, May
10, 1999 at our headquarters in Stamford, Connecticut.

The Notice of Meeting, Proxy Statement and proxy card accompanying this letter
describe in detail the matters to be acted upon at the meeting.

It is important that your shares be represented at the meeting. Whether or not
you plan to attend, please sign, date and return your proxy card in the enclosed
envelope as soon as possible. Stockholders of record also have the option of
voting by telephone or Internet, as described on the proxy card.

We look forward to seeing you at the meeting.
Sincerely yours,

Michael J. Critelli
Chairman and Chief Executive Officer

Stamford, Connecticut
April 1, 1999

<PAGE>

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

NOTICE OF MEETING:

The annual meeting of stockholders of Pitney Bowes Inc. will be held on May 10,
1999, at 9:00 a.m. at the company's World Headquarters, One Elmcroft Road,
Stamford, Connecticut. Directions, including a map, to Pitney Bowes' World
Headquarters are set forth on the back cover page of the Proxy Statement.

The items of business at the annual meeting are:
1. Election of five directors.
2. Appointment of independent accountants for 1999.
3. Such other matters as may properly come before the meeting, including any
continuation of the meeting caused by any adjournment, or any postponement of
the meeting.
March 12, 1999 is the record date for the meeting.
This Proxy Statement and accompanying proxy card are being distributed on or
about April 1, 1999.

Amy C. Corn
Corporate Secretary and
Senior Associate General Counsel

<PAGE>

[LOGO] PITNEY BOWES

PROXY STATEMENT

THE ANNUAL MEETING AND VOTING

Our Board of Directors is soliciting proxies to be used at the annual meeting of
stockholders to be held on May 10, 1999, or at any adjournment of the meeting.
This Proxy Statement contains information about the items being voted on at the
annual meeting.

WHO IS ENTITLED TO VOTE?

Record stockholders of Pitney Bowes common stock and $2.12
preference stock at the close of business on March 12, 1999 (the record date)
can vote at the meeting. As of the record date, 269,561,366 shares of Pitney
Bowes common stock and 72,975 shares of $2.12 preference stock were issued and
outstanding. Each stockholder has one vote for each share of common stock owned
as of the record date, and 16 votes for each share of $2.12 preference stock
owned as of the record date.

HOW DO I VOTE?

You may choose one of three methods. This year, on-line voting is available via
the Internet. If you have access to the Internet, we encourage you to vote at
the following Web address: www.vote-by-net.com. You may instead vote by
telephone (800-OK-2VOTE) or by completing and mailing the enclosed proxy card.

MAY I CHANGE MY VOTE?

You may revoke your proxy at any time before it is voted at the meeting in
several ways. You may send in a revised proxy dated later than the first; or you
may vote in person at the meeting; or you may notify the corporate secretary in
writing prior to the meeting that you have revoked your proxy.

WHAT CONSTITUTES A QUORUM?

A majority of the outstanding shares, present in person or represented by proxy,
constitutes a quorum. If you vote by computer, telephone or proxy card, you will
be considered part of the quorum. Abstentions, broker non-votes and votes
withheld from director nominees are included in the count to determine a quorum.
If a quorum is present, director candidates receiving the highest number of
votes will be elected, and the appointment of independent accountants will be
approved if a majority of the votes cast by the stockholders are voted in favor.

WHAT IS THE EFFECT OF BROKER NON-VOTES?

Under New York Stock Exchange rules, if your broker holds your shares in its
"street" name, the broker may vote your shares on both agenda items even if it
does not receive instructions from you

If your broker does not vote on either agenda item, the effect would be as
follows:

1. Election of Directors. Broker non-votes have no effect because only a
plurality of the votes cast is required to elect a director.

<PAGE>

2. Appointment of Independent Accountants. Broker non-votes would not be counted
either for or against this item, and would therefore have no effect.

HOW DO DIVIDEND REINVESTMENT PLAN PARTICIPANTS OR EMPLOYEES WITH
SHARES IN THE 401(K) PLAN VOTE BY PROXY?

If you are a stockholder of record and participate in the company's Dividend
Reinvestment Plan, or employee 401(k) plan, you will receive a proxy card
indicating all shares of common stock held in or credited to your accounts as of
the record date, if the account registrations are the same. You will receive a
separate mailing for accounts with different registrations.

Shares held in the company's 401(k) plan are voted by the plan trustee in
accordance with voting instructions received from plan participants using the
enclosed proxy card. The plan directs the trustee to vote shares for which no
instructions are received in the same proportion (for, against, abstain or
withheld) indicated by the voting instructions given by participants in the
plan.

WHO WILL COUNT THE VOTES?

First Chicago Trust Company, a division of EquiServe, will tabulate the votes
and act as Inspector of Election.

STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING

If a stockholder wants to submit a proposal for inclusion in the company's proxy
material for the 2000 annual meeting, which is scheduled to be held on Monday,
May 8, 2000, it must be received by the corporate secretary by December 4, 1999.
Also, under our Bylaws, a stockholder can present other business at an annual
meeting, including the nomination of candidates for director, only if written
notice of the business or candidates is received by the corporate secretary by
February 10, 2000. There are other procedural requirements in the Bylaws
pertaining to stockholder proposals and director nominations. Any stockholder
may obtain a copy of the Bylaws without charge by writing to the corporate
secretary.

WHICH STOCKHOLDERS OWN AT LEAST 5% OF PITNEY BOWES?

As of December 31, 1998, the only person or group known to the company to be the
beneficial owner of more than five percent of any class of the company's voting
securities is FMR Corp. The following information is based solely upon Schedule
13G filed by FMR Corp. with the Securities and Exchange Commission. FMR and its
operating subsidiaries beneficially own 41,017,038 shares (representing 15.044%)
of the company's outstanding common stock. Fidelity Management & Research
Company, a wholly owned subsidiary of FMR Corp., and a registered investment
advisor, exercised investment discretion over 38,040,520 of those shares. FMR
may be deemed to have sole dispositive power over shares held by the investment
companies managed by Fidelity Management & Research Company, but voting power
over such shares rests with each fund's board of directors. Edward C. Johnson,
3d and members of his family may be deemed to control FMR. Fidelity Management
Trust Company, a bank, and Fidelity International Limited, which are other
operating subsidiaries of FMR Corp., beneficially owned 2,967,618 and 8,900
shares, respectively. FMR Corp. has an office at 82 Devonshire Street, Boston,
MA 02109-3614.

HOW MUCH STOCK IS OWNED BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS?

The following table shows beneficial ownership of Pitney Bowes common stock by
directors, nominees and executive officers as of March 12, 1999. The seven named
executive officers are the Chief Executive Officer and the six officers who were
the highest paid in 1998. The directors and executive officers as a group (25
persons) are beneficial owners of less than 1% of the company's common stock and
$2.12 preference stock.

<PAGE>

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SECURITY OWNERSHIP
SHARES OPTIONS
DEEMED TO EXERCISABLE
TITLE OF BE BENEFICIALLY WITHIN
CLASS OF STOCK NAME OF BENEFICIAL OWNER OWNED (A) (B) (C) 60 DAYS (D)
------------ ----------------------------------- --------------- -----------
<S> <C> <C> <C>
Common Linda G. Alvarado 9,335 -
Common William E. Butler 10,901 -
Common Colin G. Campbell 11,200 -
Common Jessica P. Einhorn 200 -
Common Ernie Green 3,584 -
Common Herbert L. Henkel 1,000 -
Common Charles E. Hugel 9,600 -
Common James H. Keyes 2,400 -
Common Michael I. Roth 9,600 -
Common Phyllis Shapiro Sewell 15,600 -
Common Marc C. Breslawsky 201,903 408,064
Common Michael J. Critelli 213,944 175,932
Common Matthew S. Kissner 8,612 40,666
Common Murray D. Martin 12,894 72,332
Common John N.D. Moody 54,954 94,721
Common Murray L. Reichenstein 2,431 57,500
Common Dennis M. Roney 10,653 59,332
------- ----------------------------------- ------- -------
COMMON ALL EXECUTIVE OFFICERS, NOMINEES AND 622,087 1,158,124
DIRECTORS AS A GROUP (25)

</TABLE>
- ---------------------

(a) Some of the holdings shown include shares required to be reported as
beneficially owned by the directors or executive officers even though
beneficial ownership of certain of those shares has been disclaimed.
The number of common shares so reported are 1,600 in the case of Mr.
Campbell, 500 in the case of Mr. Breslawsky, and 2,100 in the case of
all executive officers and directors as a group.

(b) The shares beneficially owned by any director or executive officer,
or by all directors and executive officers as a group, represent in
each case less than one percent of the class.

(d) The executive officer has the right to acquire beneficial ownership
of this number of shares within 60 days of the record date for the
annual meeting (March 12, 1999) by exercising outstanding stock
options.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Directors and persons who are considered "officers" of the company for purposes
of Section 16(a) of the Securities Exchange Act of 1934 and greater than ten
percent stockholders ("Reporting Persons") are required to file reports with the
Securities and Exchange Commission showing their holdings of and transactions in
the company's securities. It is generally the practice of the company to file
the forms on behalf of its Reporting Persons who are directors or officers. The
company believes that all such forms have been timely filed for 1998, except
that a Form 4 was not timely filed relating to the exercise of an option to
purchase 2,834 shares of Pitney Bowes common stock by Matthew S. Kissner.

<PAGE>

STOCK PERFORMANCE GRAPH

The following graph compares the most recent five-year performance of Pitney
Bowes common stock with the Standard & Poor's ("S&P(R)") 500 Composite Index,
and a peer group index at December 31, 1998, over the same five-year period.

The peer group is comprised of the following companies: Bell & Howell, Danka
Business Systems (ADR), Harris Corporation, Ikon Office Solutions, Moore
Corporation Ltd., Pitney Bowes and Xerox Corporation. Total return for the group
is based on market capitalization, weighted for each year.

As with the peer group, the S&P 500 Composite Index is market-value weighted.
All information shown below is based upon data provided to the company by three
separate independent organizations, all of which have been licensed by Standard
& Poor's Corporation to use its official total return calculation.

The graph shows that on a total return basis, assuming reinvestment of all
dividends, $100 invested in the company's common stock on December 31, 1993
would have grown to $362 by December 31, 1998. By comparison, $100 invested in
the S&P 500 Composite Index would have grown to $294 by December 31, 1998. An
investment of $100 in the peer group in 1993 would have been worth $291 on
December 31, 1998.

[TABLE BELOW REPRESENTS PLOT FOR CHART IN THE PRINTED FORM]

Pitney Bowes Inc. S&P 500 Peer Group
1993 100 100 100
1994 79 101 102
1995 120 139 146
1996 144 171 170
1997 242 229 213
1998 362 294 291

Based on an initial investment of $100 on December 31, 1993, with reinvestment
of dividends.

<PAGE>

ELECTION OF DIRECTORS

The board of directors has ten members. The board is divided into three classes
whose terms of office end in successive years.

Ms. Alvarado, Mr. Breslawsky, and Mr. Green were elected last year to three-year
terms expiring in 2001. Mr. Hugel, who was also elected to a three-year term
expiring in 2001, will be retiring from the board as of May 10, 1999, having
attained director's retirement age.

Mr. Butler, Mr. Campbell, and Mr. Keyes were elected to terms expiring in 2000.

The Governance Committee recommended to the board of directors, and the board
approved, the nomination of Mr. Critelli, Mr. Henkel, Mr. Roth, and Mrs. Sewell
for election to three-year terms expiring at the 2002 Annual Meeting. The board
also approved an increase in the size of the board of directors to eleven, with
effect as of May 10, 1999. The board appointed Ms. Einhorn to fill the resulting
vacancy, subject to stockholder approval, for a term expiring in 2000.
Information about each nominee for director and each incumbent director,
including the nominee's or incumbent's age as of February 28, 1999, is set forth
below. Unless otherwise indicated, each nominee or incumbent has held his or her
present position for at least five years.

Should you choose not to vote for a nominee, you may list on the proxy the name
of the nominee for whom you choose not to vote and mark your proxy under
Proposal No. 1 for all other nominees, or vote your shares by telephone or
computer as described on the proxy voting instruction card. Should any nominee
become unable to accept nomination or election as a director (which is not now
anticipated), the persons named in the enclosed proxy will vote for such
substitute nominee as may be selected by the board of directors, unless the size
of the board is reduced.

NOMINEES FOR ELECTION
TO TERMS EXPIRING AT THE 2002 ANNUAL MEETING

[PICTURE OMITTED]

MICHAEL J. CRITELLI, 50, chairman and chief executive officer, since 1997, of
Pitney Bowes Inc. Formerly vice chairman and chief executive officer, 1996, and
vice chairman, 1994-1996, of Pitney Bowes Inc., and president of Pitney Bowes
Financial Services, 1993-1994. Director since 1994. (Also a director of Eaton
Corporation.)

[PICTURE OMITTED]

HERBERT L. HENKEL, 50, president and chief operating officer, as of April 5,
1999, of Ingersoll-Rand Company, a manufacturer of industrial products and
components. Formerly president and chief operating officer of Textron Inc.
(1999), executive vice president and chief operating officer (1998-1999),
Textron Inc., president of Textron Industrial Products (1995-1998), and group
vice president responsible for Textron's industrial segment (1993-1995). (Also
a director of Killmorgen Corporation and, effective April 5, 1999,
Ingersoll-Rand Company.)

[PICTURE OMITTED]

MICHAEL I. ROTH, 53, chairman and chief executive officer of The MONY Group Inc.
(formerly Mutual of New York). Formerly chairman, president and chief executive
officer, 1993-1994, with Mutual of New York. Director since 1995. (Also a
director of Promus Hotel Corporation.)

[PICTURE OMITTED]

PHYLLIS SHAPIRO SEWELL, 68, retired senior vice president of Federated
Department Stores, Inc. Director since 1987. (Also a director of Lee
Enterprises, Inc. and Sysco Corporation.)

<PAGE>

INCUMBENT DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING*

[PICTURE OMITTED]

WILLIAM E. BUTLER, 67, retired chairman and chief executive officer of Eaton
Corporation, a manufacturer of engineered products serving the automotive,
industrial, commercial, and military markets. Director since 1991. (Also a
director of Applied Industrial Technologies, Inc., BorgWarner Automotive, Ferro
Corporation, The Goodyear Tire and Rubber Co., and U. S. Industries, Inc.)

[PICTURE OMITTED]

COLIN G. CAMPBELL, 63, president of Rockefeller Brothers Fund, a philanthropic
organization. Director since 1977. (Also director of HSB Group, Sysco
Corporation, and Rockefeller Financial Services.)

[PICTURE OMITTED]

JESSICA P. EINHORN, 51, Visiting Fellow, since September 1998, at the
International Monetary Fund. Formerly Managing Director for Finance and Resource
Mobilization, 1996-1998, and Vice President and Treasurer, 1992-1996, with The
World Bank.

* Ms. Einhorn has been appointed a director as of May 10, 1999, subject to
stockholder approval.

JAMES H. KEYES, 58, chairman and chief executive officer, since 1993, of Johnson
Controls, Inc., a supplier of automated building controls, and automotive
seating, interiors and batteries. Formerly president and chief executive
officer, 1988-1993, of Johnson Controls, Inc. Director since 1998. (Also a
director of LSI Logic Corporation and Federal Reserve Bank of Chicago.)

INCUMBENT DIRECTORS WHOSE TERMS EXPIRE AT THE 2001 ANNUAL MEETING

[PICTURE OMITTED]

LINDA G. ALVARADO, 47, president of Alvarado Construction, Inc., a Denver-based
commercial and industrial general contractor. Director since 1992. (Also a
director of Cyprus Amax Minerals Company, Engelhard Corp., and U.S. West
Communications.)

[PICTURE OMITTED]

MARC C. BRESLAWSKY, 56, president and chief operating officer, since 1996, of
Pitney Bowes Inc. Formerly vice chairman of Pitney Bowes Inc., 1994-1996, and
president of Pitney Bowes Office Systems, 1990-1994. Director since 1994. (Also
a director of C. R. Bard, Inc. and United Illuminating Company.)

[PICTURE OMITTED]

ERNIE GREEN, 60, president and chief executive officer of Ernie Green
Industries, Inc., a manufacturer of automotive components. Director since 1997.
(Also a director of Dayton Power & Light, Inc., Eaton Corporation, and Gradall
Industries, Inc.)

<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

The board met eight times in 1998 and each director attended at least 75 percent
of the total number of board meetings and meetings held by the board committees
on which he or she served during 1998.

Members of the board serve on one or more of the six committees described below.
Except for Mr. Critelli, who is a member of the Executive Committee, directors
who are also employees of the company do not serve on board committees.

The AUDIT COMMITTEE, which met three times in 1998, monitors the financial
reporting standards and practices of the company and the company's internal
financial controls to ensure compliance with the policies and objectives
established by the board of directors. The committee recommends to the board for
stockholder approval an independent accounting firm to conduct the annual audit,
and discusses with the company's independent accountants the scope of their
examinations, with particular attention to areas where either the committee or
the independent accountants believe special emphasis should be directed. The
committee reviews the annual financial statements and independent accountants'
report, invites the accountants' recommendations on internal controls and on
other matters, and reviews the evaluation given and corrective action taken by
management. It reviews the independence of the accountants and their fees. It
also reviews the company's internal accounting controls and the scope and
results of the company's internal auditing activities, and submits reports and
proposals on these matters to the board. Members are Charles E. Hugel (Chair),
Linda G. Alvarado, Ernie Green, and Michael I. Roth.

The CORPORATE RESPONSIBILITY COMMITTEE, which met four times in 1998, oversees
the company's law and ethics compliance programs, and monitors the company's
policies and programs concerning stockholders, customers, employees, and the
communities in which the company operates. The policies and programs that the
committee monitors include employee relations, investor relations, environmental
protection, customer satisfaction, postal and governmental relations, employee
safety and product safety. Members are Linda G.Alvarado (Chair), Ernie Green,
James H. Keyes, and Phyllis Shapiro Sewell.

The EXECUTIVE COMMITTEE, which did not meet in 1998, can act, to the extent
permitted by Delaware corporation law and the company's Restated Certificate of
Incorporation and its Bylaws, on all matters concerning management of the
business which may arise between scheduled board of directors meetings, unless
otherwise limited by the committee's charter. Mr. Critelli (Chair) is a member
for the full twelve-month term; each of the non-employee directors serves a
four-month term.

The EXECUTIVE COMPENSATION COMMITTEE, which met six times in 1998, oversees the
company's executive compensation program, including establishing the company's
executive compensation policies and undertaking an annual review of all
components of compensation to ensure that the company's objectives are
appropriately achieved. The committee is also responsible for certain
administrative aspects of the company's compensation plans (see "Executive
Officer Compensation" beginning on page 10) and the 1996 Pitney Bowes Employee
Stock Purchase Plan, and recommends changes in such plans. It also establishes
performance targets, and grants, or recommends for grant, incentives in the
forms permitted under the Pitney Bowes Key Employees' Incentive Plan, and
grants, or recommends for grant, incentives under the Pitney Bowes 1991 Stock
Plan. Grants to long-term incentive eligible employees, as described on page 15,
are recommended by the Executive Compensation Committee and approved by the
independent directors of the board. All other grants are approved by the
Executive Compensation Committee. Members are Phyllis Shapiro Sewell (Chair),
William E. Butler, Colin G. Campbell and James H. Keyes.

The FINANCE COMMITTEE, which met five times in 1998, reviews the company's
financial condition and evaluates significant financial policies, oversees the
company's retirement plans, advises management and recommends financial action
to the board. The committee's duties include monitoring the company's current
and projected financial condition and reviewing and approving major investment
decisions, and oversight of the financial operations of the company's
retirement, savings, and post-retirement benefit plans and retirement funds to
ensure that plan liabilities are adequately funded and plan assets are prudently
managed. The committee recommends for approval by the board the establish-

<PAGE>

ment of new plans and any amendments that materially affect cost, benefit
coverages, or liabilities of the plans. Members are William E. Butler (Chair),
Colin G. Campbell, Charles E. Hugel, and Michael I. Roth.

The GOVERNANCE COMMITTEE, which met six times in 1998, recommends nominees for
election to the board of directors, recommends membership and duties of the
board committees, reviews officers' potential for growth, and, with the chief
executive officer, is responsible for succession planning and ensuring
management continuity. The committee reviews and evaluates the effectiveness of
corporate administration and its governing documents, and reviews and monitors
company programs and policies relating to directors. Members are Colin G.
Campbell (Chair), William E. Butler, Charles E. Hugel, and Phyllis Shapiro
Sewell.

DIRECTORS' COMPENSATION

DIRECTORS' FEES. Each director who is not an employee of the company receives an
annual fee of $30,000 and $1,100 for each board and committee meeting attended.
Committee chairs receive an additional $400 for each committee meeting that they
chair. Directors who are employees of the company receive no additional
compensation for serving as a director of the company. All directors are
reimbursed for their out-of-pocket expenses incurred in attending board and
committee meetings.

DIRECTORS' STOCK PLAN. Under the Directors' Stock Plan, each director who is not
an employee of the company receives an annual award of 1,400 shares of
restricted stock. Accordingly, over 50 percent of the directors' overall
compensation is comprised of Pitney Bowes common stock. The shares carry full
voting and dividend rights but may not be transferred or alienated until the
later of (1) termination of service as a director, or, if earlier, the date of a
change of control, or (2) the expiration of the six-month period following the
grant of such shares. Since the approval of the Directors' Stock Plan by
stockholders in 1991, the common stock of the company has twice undergone a
two-for-one split, in 1992 and 1997, respectively. In addition, the annual grant
was increased in 1997 in connection with the discontinuation of the Directors'
Retirement Plan, as described below. On May 11, 1998, an aggregate of 11,200
restricted shares was awarded, with each of the eight non-employee directors
then serving receiving 1,400 shares of restricted common stock. Ownership of
shares granted under the Directors' Stock Plan is reflected in the table on page
4 showing security ownership of executive officers and directors.

DIRECTORS' DEFERRED INCENTIVE SAVINGS PLAN. The company maintains a Directors'
Deferred Incentive Savings Plan under which directors may defer all or part of
the cash portion of their compensation in any combination of several publicly
sponsored mutual funds, a treasury bill-based rate of return, or may invest in
options to purchase common stock of the company. The number of options granted
is calculated by dividing the cash amount deferred by the individual director by
the fair market value of the shares on the date of the option grant, and
multiplying that quotient by two.

DIRECTORS' RETIREMENT PLAN. The company's Directors' Retirement Plan was
discontinued and benefits previously earned by directors were frozen as of May
12, 1997. Under this plan, there is no benefit paid to a director who served for
less than five years as of May 12, 1997. A director who had met the five-year
minimum vesting requirement as of May 12, 1997 will receive an annual retirement
benefit calculated as 50 percent of the director's retainer in effect at the
time of such director's retirement, and a director with more than five years of
service at retirement will receive an additional 10 percent of such retainer for
each year of service over five, to a maximum of 100 percent of such retainer for
ten or more years of service. The annual retainer fee in effect as of May 12,
1997 was $30,000. The annual retirement benefit is paid for life to a director
who (i) leaves the board at or after age 60, or (ii) leaves the board prior to
age 60 but defers commencement of receipt of benefits until age 60. A director
who leaves the board and who elects receipt of benefits before age 60 will
receive the annual retirement benefit only during a period equal to the number
of years that the director had served on the board as of May 12, 1997.

<PAGE>

EXECUTIVE OFFICER COMPENSATION The Executive Compensation Committee (the
"Committee"), which is composed of four independent (non-employee) directors,
oversees the company's executive compensation programs and establishes its
executive compensation policies. ( A description of the Committee's duties
appears on page 8.) The Committee reports on executive compensation to all of
the independent directors of the board (the "Independent Directors") and makes
recommendations to the Independent Directors regarding specific executive
officer compensation matters with respect to which the Independent Directors
have final approval. (See "Report on Executive Compensation by the Independent
Directors' beginning on page 14.)

SUMMARY COMPENSATION TABLE. The following table (Table I) shows all compensation
paid or granted, during or with respect to the 1998 fiscal year and the two
previous fiscal years, to the chief executive officer and to the six other
highest paid executive officers for services rendered to the company and its
subsidiaries during 1998. (Persons in this group are referred to herein
individually as a "Named Executive Officer" and collectively as the "Named
Executive Officers", and the titles listed are the titles held as of the end of
the 1998 fiscal year.)

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE I
SUMMARY COMPENSATION TABLE LONG-TERM

ANNUAL COMPENSATION COMPENSATION
-------------------------------- -----------------
GRANTS PAYOUTS
------ --------
LONG-TERM
INCENTIVE
PBC OTHER ANNUAL PLAN ALL OTHER
SALARY INCENTIVE COMPENSATION STOCK PAYOUTS COMPENSATION
($) ($) ($) OPTIONS ($)(1) ($)(2)
NAME AND PRINCIPAL POSITION YEAR (000) (000) (000) (#) (000) (000)
- --------------------------------- ---- --------- -------- ------------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>

Michael J. Critelli................... 98 791.7 1,200.0 __ 140,000 1,511.5 115.1
Chairman and Chief Executive 97 693.8 1,100.0 __ 120,000 1,093.8 48.1
Officer 96 592.7 730.0 __ 60,000 881.3 3.8

Marc C. Breslawsky ................... 98 718.8 950.0 __ 120,000 1,511.5 94.5
President and Chief Operating 97 645.8 850.0 __ 110,000 1,093.8 43.4
Officer 96 577.1 710.0 __ 60,000 881.3 3.8

John N. D. Moody...................... 98 411.7 453.0 __ 50,000 558.2 57.9
President, U.S. Mailing 97 372.2 400.0 __ 36,000 520.0 39.1
Systems 96 341.0 285.0 __ 12,000 367.1 3.8

Murray L. Reichenstein................ 98 414.7 331.8 __ 36,000 377.3 51.5
Vice President and 97 400.0 290.0 __ 36,000 -0- 1.6
Chief Financial Officer 96 100.0 65.0 __ 26,000 -0- -0-

Matthew S. Kissner.................... 98 334.9 341.1 __ 50,000 344.3 47.1
President, Pitney Bowes 97 305.6 320.0 __ 36,000 302.2 24.7
Financial Services 96 234.1 168.6 __ 8,000 -0- 3.8

Murray D. Martin...................... 98 360.0 316.0 __ 36,000 286.8 46.0
President, Pitney Bowes 97 268.3 214.7 __ 50,000 253.5 27.0
International 96 250.0 140.0 __ 8,000 184.4 3.8

Dennis M. Roney....................... 98 337.0 339.0 __ 50,000 286.8 40.3
President, Office Systems 97 272.9 218.4 __ 36,000 253.5 36.5
96 250.0 180.0 __ 8,000 173.7 3.8
</TABLE>

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

(1) The value shown for 1998 is the aggregate of the value of the payout of Cash
Incentive Units ("CIUs") and the December 31, 1998, market value of
restricted stock granted during 1996 to each of the Named Executive
Officers. Payout under the CIUs was based on the magnitude of achievement
against the financial performance criteria over the three-year period ending
December 31, 1998. (See footnote 1 to Table IV on page 14.) The restrictions
on the stock were released due to the attainment of the three-year
performance objective. Following the release of this restricted stock, no
further shares of restricted stock are held by any Executive Officers.

(2) Amounts shown for 1998 include, respectively, contributions to the Pitney
Bowes 401(k) Plan (a tax-qualified plan under Internal Revenue Code Section
401(k)) and the Pitney Bowes Restoration Plan (a non-qualified deferred
compensation matching program), and an allowance for financial counseling,
including income taxes payable with respect to such allowance, for each of
the Named Executive Officers as follows: Mr. Critelli, $8,960, $96,973, and
$9,183; Mr. Breslawsky, $8,960, $78,890, and $6,621; Mr. Moody, $9,600,
$39,100, and $9,183; Mr. Reichenstein, $8,960, $30,501, and $12,025; Mr.
Kissner, $9,600, $29,897, and $7,627; Mr. Martin, $8,960, $23,223, and
$13,829; and Mr. Roney, $8,960, $22,142, and $9,183.
- --------------------------------------------------------------------------------

<PAGE>

Shown in Table II below is information regarding options granted in 1998 to the
Named Executive Officers.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
TABLE II
STOCK OPTION GRANTS IN 1998

NET POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATES
PERCENTAGE OF OF STOCK PRICE
OPTIONS TOTAL OPTIONS APPRECIATION FOR
GRANTED GRANTED TO EXERCISE OR OPTION TERM (2)
-------------------
IN 1998 EMPLOYEES BASE PRICE 5% ($) 10% ($)
NAME (#) IN 1998 ($/SHARE)(1) EXPIRATION DATE (000) (000)
----------------------------- --------- --------- ------------ --------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>

Michael J. Critelli........... 140,000 4.80% 45.3125 Feb. 8, 2008 3,990.0 10,110.8
Marc C. Breslawsky . 120,000 4.11% 45.3125 Feb. 8, 2008 3,420.0 8,666.4
John N. D. Moody 50,000 1.71% 45.3125 Feb. 8, 2008 1,425.0 3,611.0

Murray L. Reichenstein .. 36,000 1.23% 45.3125 Feb. 8, 2008 1,026.0 2,599.9
Matthew S. Kissner 50,000 1.71% 45.3125 Feb. 8, 2008 1,425.0 3,611.0

Murray D. Martin.............. 36,000 1.23% 45.3125 Feb. 8, 2008 1,026.0 2,599.9
Dennis M. Roney .............. 50,000 1.71% 45.3125 Feb. 8, 2008 1,425.0 3,611.0
4,750 .16% 45.3125 Feb. 8, 2002 135.4 343.0
</TABLE>
- ---------------------

(1) The exercise price for each option equals the market price of a share of the
company's common stock on the date of grant. Except for options granted in
connection with the Deferred Incentive Savings Plan (the "DISP"), all
options become exercisable in installments over a three-year period:
one-third after the first year, an additional one-third after the second
year, and the remaining one-third after the third year. The 4,750 options
granted to Mr. Roney as a result of his investment election under the DISP
all become exercisable three years after the date of grant. The expiration
date for options granted in connection with the DISP is based on the
deferral period elected by the executive.

(2) The 5 and 10 percent growth rates, which are specified by the Securities and
Exchange Commission, illustrate that the potential future value of the
options to the Named Executive Officer is linked directly to the future
growth of the price of the company's common stock. Because the exercise
price for options granted equaled the market price of the common stock on
the date of grant, no gain to the Named Executive Officer is possible
without an increase in the stock price, which would benefit the company's
stockholders as a whole. The 5 and 10 percent growth rates are intended for
illustration only and are not intended to be predictive of future growth;
the actual value, if any, that may be realized by any Named Executive
Officer will depend on the market price of the common stock on the date of
exercise.
- --------------------------------------------------------------------------------

<PAGE>

Shown in Table III below is information regarding the exercise of options in
1998 by the Named Executive Officers and information regarding their total
outstanding options as of December 31, 1998.

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

TABLE III

OPTIONS EXERCISED IN 1998 AND 1998 YEAR-END OPTION VALUES

NUMBER OF
SHARES SECURITIES UNDERLYING NET VALUE OF
ACQUIRED NET VALUE UNEXERCISED OPTIONS UNEXERCISED IN-THE-MONEY
ON EXERCISE REALIZED AT YEAR-END (#) (1) OPTIONS AT YEAR-END ($) (2)
------------------------ -------------------------

NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Critelli 55,658 1,615,702 108,280 240,002 4,530,745 6,676,333
Marc C. Breslawsky 23,200 843,537 318,064 213,336 15,373,982 6,016,358
John N. D. Moody 27,048 978,347 69,868 78,000 3,325,994 2,085,375
Murray L. Reichenstein N N 33,500 64,500 1,279,500 1,804,500
Matthew S. Kissner 2,834 108,914 13,667 76,667 481,551 2,443,268
Murray D. Martin N N 50,998 72,002 2,141,933 2,082,663
Dennis M. Roney 1,600 70,600 33,332 87,470 1,373,819 2,200,288

</TABLE>
- ---------------------

(1) These columns show the aggregate totals of options granted during the period
1989 through 1998. The number of shares subject to the options has been
adjusted to reflect the two-for-one stock splits effected in 1992 and 1997.
All options granted prior to 1993 become exercisable in installments over a
three-year period, 25 percent after the first year, an additional 25 percent
after the second year, and the remaining 50 percent after the third year;
and options granted during and after 1993 become exercisable one-third after
the first year, an additional one-third after the second year, and the
remaining one-third after the third year.

(2) These values are based on $66.0625 per share, the market price of a share of
common stock as of December 31, 1998, net of exercise prices, which range
from $11.625 to $45.3125 per share (adjusted to reflect the 1992 and 1997
stock splits). In all cases, the exercise price equaled the market price of
a share at the date of grant.

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

Table IV, which follows, shows detailed information regarding long-term
incentives other than options granted under the Key Employees' Incentive Plan in
1998. Long-term incentives are contingent upon the attainment of one or more
specified performance objectives. The company is obligated, under the terms of
these incentives, to make the specified payments, if any, only to the extent
that the stated performance objectives are achieved. In 1998, a committee of the
board of directors, consisting solely of all non-employee directors, granted
Cash Incentive Units ("CIUs"), as long-term incentives. CIUs represent a
defeasible right to receive cash, the receipt and amount of which are contingent
upon the extent to which specified performance objectives are attained during
the related three-year period. No grants of restricted stock were made in 1998.

<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

TABLE IV
1998 LONG-TERM INCENTIVE GRANTS
PERFORMANCE OR OTHER ESTIMATED FUTURE PAYOUTS
---------------------------------------------
THRESHOLD TARGET MAXIMUM
NUMBER OF PERIOD UNTIL ----------- -------------- ----------
CASH INCENTIVE MATURATION OR CIU ($) CIU ($) CIU ($)
NAME UNITS (1) PAYOUT (1) (000) (000) (000)
----------------------- -------- ----------------- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Michael J. Critelli 650,000 December 31, 2000 4.9 650 1,300
Marc C. Breslawsky 600,000 December 31, 2000 4.5 600 1,200
John N. D. Moody 260,000 December 31, 2000 2.0 260 520
Murray L. Reichenstein 260,000 December 31, 2000 2.0 260 520
Matthew S. Kissner 260,000 December 31, 2000 2.0 260 520
Murray D. Martin 260,000 December 31, 2000 2.0 260 520
Dennis M. Roney 260,000 December 31, 2000 2.0 260 520

</TABLE>
- ---------------------

(1) CIUs granted under the Pitney Bowes Key Employees' Incentive Plan ("KEIP')
represent a defeasible right to receive cash payments if certain earnings
per share and return on stockholders' equity performance criteria are
achieved over the three-year period ending December 31, 2000. CIUs that will
mature on December 31, 2000 will pay $0/CIU if the threshold performance
levels are not met. The CIUs will have a value of $.0075 to $2.00 per unit
if the threshold earnings per share and return on stockholders' equity
performance criteria are met or exceeded, depending on the actual magnitude
of achievement.

REPORT ON EXECUTIVE COMPENSATION BY THE INDEPENDENT DIRECTORS

INTRODUCTION

The executive compensation policies and programs of the company are the
responsibility of the Executive Compensation Committee (the "Committee"), which
consists of four independent directors. The Committee, in turn, recommends
certain policies, programs and specific actions to all of the independent
directors of the board (the "Independent Directors") for final approval.

The Committee submits its recommendations for the compensation of the most
highly compensated executives (referred to herein as "Key Executives"), to the
Independent Directors. This includes the compensation of the Named Executive
Officers presented in the preceding compensation tables (see Tables I through IV
on pages 11 to 14 above). The Committee also establishes the compensation
policies for and reviews incentive awards and stock options granted to senior
executives other than the Key Executives (referred to herein as "Executives").

The four main objectives of the executive compensation program are:

(1) To provide total compensation which is competitive when compared to various
markets in which the company competes for executive talent;

(2) To place a portion of annual compensation at risk subject to performance
against objectives;

(3) To divide total compensation between annual and long-term components with a
significant long-term performance related component; and

(4) To align annual and long-term compensation with stockholder interests.

The Committee believes that stock ownership by management is a crucial tool for
focusing management on the enhancement of the company's share-

<PAGE>

holder value. Thus, the Committee views stock options and other equity-related
arrangements as a key element of the executive compensation program. Beginning
in 1997 the company implemented a Stock Ownership Policy, which requires
designated executives to own a significant amount of company stock. Over a
five-year period, covered executives must purchase and hold a sufficient number
of shares of company stock so as to own shares of value equal to or exceeding a
pre-established multiple of their respective base salaries.

For 1998, the Committee considered all features of the executive compensation
program and determined that the individual components in the aggregate continue
to meet the objectives of the program. This review included consideration and
discussion of material prepared by the company's primary executive compensation
consulting firm and other such firms, and covered the competitiveness of base
salary, total annual compensation, total long-term compensation, and executive
benefits and perquisites. The Committee believes that the company competes in a
larger marketplace for executive talent than just those companies in the
company's peer group. Therefore, the company's compensation program was compared
to a broad sample principally comprised of Fortune 500 companies. This included
some but not all of the companies in the peer group and included other companies
not in the peer group referenced in the performance graph shown on page 5.

During 1998, two new features were added to the overall compensation program.
The Deferred Incentive Savings Plan was amended to permit income tax deferral of
gains associated with stock option exercises. This feature strengthens the link
between executives who choose to defer gains on option exercise and shareholders
since stock option gains deferred under this feature must remain invested in
units equivalent in value to company shares. The Pitney Bowes 1991 Stock Plan
was also amended during 1998 to permit retirees to exercise stock options during
the full term remaining on options received as an active employee. This change
was made in recognition of the impact that all option holders can have on the
long-term success of the company.

ANNUAL COMPENSATION

BASE SALARY. In general, the company establishes base pay for Executives at
levels that it believes to be, in the aggregate, comparable to base pay at
competitor companies. The determination of an individual Named Executive
Officer's base pay is based on the executive's level of experience, individual
performance against annually established financial and non-financial unit and
individual objectives, and competitive market rates for similar positions.

PERFORMANCE BASED COMPENSATION "PBC" INCENTIVES. All Executives, including the
Named Executive Officers, are eligible for PBC Incentives for achieving
significant financial objectives as well as challenging human resource and
operational objectives. PBC Incentives for Executives are expressed as a
percentage of base salary ranging from 0% to two times a pre-established target
award.

PBC Incentives are paid at target percentage amounts for performance that meets
challenging objectives established at the beginning of the year. Maximum amounts
are paid for performance that is exceptional. Reduced amounts are paid for
performance between a threshold performance level and the target; however, no
amount is paid for performance that falls below threshold expectations. The
consideration of the recommended PBC Incentives follows a detailed discussion of
the company's and the individual executive's performance for that year against
objectives established at the beginning of the fiscal year.

LONG-TERM INCENTIVES

The company currently utilizes two principal types of long-term incentives: Cash
Incentive Units ("CIUs") and stock options. The Committee uses these
performance-driven components to link executive compensation to internal company
performance and to external market performance of the company's stock price.

The potential value of CIUs is contingent upon the attainment of one or more
specified long-term financial performance objectives, such as earnings per share
and return on stockholder equity.

<PAGE>

Amounts are paid, or rights given, only to the extent that challenging
pre-established performance objectives are achieved. CIUs are granted only to
Key Executives. Stock options are granted to Executives with an exercise price
equal to the market price of the stock on the date of grant. The potential
future value of stock options is dependent solely upon the future increase in
the price of the company's stock.

CASH INCENTIVE UNITS. The amount paid pursuant to CIUs is linked to the
attainment of certain earnings per share growth and rates of return on
stockholder equity over a three-year period.

For performance cycles beginning after 1996, if the company's performance on the
two financial measures equals the target pre-established growth rate objectives,
CIUs pay at a rate of $1.00 per CIU. For performance below the growth rate
targets, the CIUs pay at a proportionate rate per CIU, with payment decreasing
to zero if the performance falls below a threshold earnings per share growth
rate. Payment reaches a maximum payout of $2.00 per CIU ($1.5625 for cycles
beginning prior to 1997) when the performance equals or exceeds a maximum growth
rate objective.

For the three-year performance period ending on December 31, 1998, the payout of
previously granted CIUs was at the maximum value of $1.5625 for all participants
because the maximum financial growth rate objectives established in 1996 were
exceeded.

STOCK OPTIONS. The level of stock option grants is established by taking into
consideration the individual's position, level, and performance as well as the
competitive level of option grants for comparably situated executives. The
exercise price of option grants is equal to 100 percent of the market price of
the company's common stock on the grant date. Options have a ten-year exercise
period, and typically become exercisable in installments during the first three
years following their grant.

RESTRICTED STOCK. Restricted stock for the 1996-1998 performance period was
released to Key Executives employed by the company at the end of the performance
period based on the attainment of the growth in compound earnings per share
performance objective. The 1996 awards were the only remaining restricted stock
awards granted under the 1991 Stock Plan. No grants of restricted stock were
made during 1997 and 1998. Annual grants of restricted stock are not presently
part of the company's executive compensation program. However, grants of
restricted stock may occur in the future as warranted by changing competitive
conditions.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

The chief executive officer's compensation is based on the same objectives and
policies applicable to all Key Executives, and includes base salary, PBC
Incentives, Cash Incentive Units and stock option grants.

The Committee meets annually without the CEO and evaluates his performance
compared with previously established financial and non-financial goals. The
Committee reaches a consensus and makes the appropriate compensation adjustment
recommendations to the Independent Directors for their approval. This meeting is
an executive session of Independent Directors only.

As of February 1, 1998, Mr. Critelli's annual base salary was increased from
$700,000 to $800,000, a 14.3 percent increase. The Committee recommended this
increase following review and discussion of competitive compensation data for
CEO positions, the significant shortfall between his then current base salary
and the median for the comparators, and recognition of Mr. Critelli's highly
successful 1997 accomplishments against various corporate objectives. Mr.
Critelli's PBC Incentive payout for 1998 was $1,200,000. The payout was based on
the company attaining its revenue, earnings per share, and cash from operations
financial objectives and Mr. Critelli's exceptional achievement against several
challenging operational and human resource objectives of short-term and
long-term significance to the company. This represented a 9.09 percent increase
over his 1997 PBC Incentive. In February 1998, Mr. Critelli was awarded 650,000
CIUs that are subject to the attainment of cumulative earnings per share and
return on stockholder equity objectives to be measured over the three-year
performance period ending December 31, 2000. Mr. Critelli was also granted stock
options in February 1998 to purchase 140,000 shares of company

<PAGE>

common stock. These awards were recommended by the Committee and approved by the
Independent Directors based on the size of prior awards, competitive award
levels granted by comparator companies, and the assessment that Mr. Critelli had
made, and continues to make, significant contributions to the overall success of
the company. For the three-year performance period ending on December 31, 1998,
the restrictions on 9,600 and 2,400 restricted shares granted under the 1991
Stock Plan to Mr. Critelli on February 12, 1996 and April 8, 1996 respectively
were released, as the Independent Directors determined that the previously
established performance objective had been exceeded.

DEDUCTIBILITY OF COMPENSATION UNDER INTERNAL REVENUE CODE SECTION 162 (M)

Publicly traded corporations generally are not permitted to deduct compensation
in excess of $1 million paid to certain top executives unless the compensation
qualifies for an exception as "performance-based compensation." The company
believes it has complied, and in the future generally intends to comply with the
requirements for full deductibility wherever possible. The company will,
however, weigh the benefits of compliance with Section 162(m) against the
burdens thereof, and reserves the right to pay compensation that may not be
fully deductible if it determines that it is in the company's best interest to
do so. In this regard, it is the company's expectation that compensation under
applicable incentive programs will normally be performance-based compensation
and thus qualify for deductibility under Section 162(m).

Linda G. Alvarado Charles E. Hugel
William E. Butler James H. Keyes
Colin G. Campbell Michael I. Roth
Ernie Green Phyllis Shapiro Sewell

SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS

The incentive plans described above (see "Executive Officer Compensation"
beginning on page 10), the Pitney Bowes Severance Plan, and Senior Executive
Severance Policy provide for a period of continued income and continued benefit
under grants made pursuant to such incentive plans to employees who are
terminated by certain actions of the company. These provisions are also intended
to encourage all employees, including the Named Executive Officers, to continue
to carry out their duties in the event of the possibility of a Change of
Control. "Change of Control" is defined in the Severance Plan, Senior Executive
Severance Policy, and in the incentive plans as the acquisition of 20 percent of
the company's common stock or 20 percent or more of the combined voting power of
all voting securities by an individual, entity or group, or a change of more
than a majority of the board other than by approval of the then-current board,
or approval by the stockholders of a reorganization, merger, or dissolution of
the company.

The Pitney Bowes Severance Plan dated December 12, 1988, as amended, provides
for the payment of severance to employees, including the Named Executive
Officers, whose employment with the company or any of its United States
subsidiaries is terminated under certain circumstances (exclusive of a Change of
Control). Severance will consist of a minimum of one week of pay for each full
year of service (a fraction thereof for a partial year of service), with a
minimum of two weeks' pay, and a maximum of two years' pay. The Severance Plan
also provides that employees (exclusive of executives covered under the Senior
Executive Severance Policy) whose employment is terminated or whose position,
authority, pay or benefits are diminished within two years after a Change of
Control will be entitled to severance pay on the basis of their position levels
and seniority.

The Senior Executive Severance Policy, which was adopted by the board of
directors in December, 1995, provides for the payment of severance to certain
senior executive employees, including the Named Executive Officers, whose
employment with the company is terminated within two years after a Change of
Control. The Senior Executive Severance Policy provides that a covered employee
whose employment is terminated, whose position, authority, pay or benefits are
diminished or who is relocated within two years after a Change of Control, or
who voluntarily terminates employment during the

<PAGE>

30-day period immediately following the first anniversary of the date of the
Change of Control, will be entitled to, among other things, severance pay in an
amount equal to two times the sum of the employee's annual base salary and
highest annual PBC Incentive received in any of the three years preceding
termination, and the continuation of certain welfare benefits for up to two
years following termination of employment.

The 1979 Plan and the 1991 Plan each provide that, in the event of a Change of
Control, outstanding options granted under the plans to any employee will become
immediately and fully exercisable. The 1991 Plan also provides that, in the
event of a Change of Control, other outstanding stock-based incentives granted
pursuant to the plan will become fully vested, with all performance objectives
deemed fully satisfied except for transfer restrictions required for exempt
treatment under Section 16 of the Securities Exchange Act of 1934, as amended,
or any other applicable law.

Also, the KEIP provides that in the event of a Change of Control, Executives,
including the Named Executive Officers, will have a vested right to PBC
Incentives with respect to the year in which such Change of Control occurs and
to CIUs which are then outstanding (for Key Executives) (in amounts to be
determined by the Independent Directors as specified in the plan on the basis of
relevant past performance of the individual executive, of his or her division
and of Pitney Bowes, as applicable). Such PBC Incentives and CIU payments would
be made shortly after the Change of Control, discounted to present value at the
prime rate then in effect.

If any of these benefits, either alone or together with any other payments or
benefits provided to covered senior executive employees, including a Named
Executive Officer, would constitute an "excess parachute payment" subject to the
20 percent excise tax under certain provisions of the Internal Revenue Code, the
Senior Executive Severance Policy provides that an additional payment would be
made to each affected covered employee so that such excise tax is reimbursed on
a net after-tax basis.

It is possible that no payments will ever be made pursuant to the foregoing;
therefore, it is not possible to estimate the amount of any payments that may
become due to any individual under the Senior Executive Severance Policy or
either of the incentive plans in the event of a Change of Control.

PENSION BENEFITS

Effective September 1,1997, the company revised the Pension Plan such that the
benefit payable under the Pension Plan is no longer a function solely of years
of service and final average earnings. Under the revised formula, employees
receive annual credits of a percentage of their earnings. The annual percentage
ranges from 2% to 10% and increases as the sum of age and years of service
increases. "Earnings" for purposes of the plan, means the average of the five
highest consecutive annual pay amounts during a participant's service with the
company.

In connection with the adoption of revisions to the Pension Plan, various
participants, including certain of the Named Executive Officers, will be
eligible for certain "grandfather" and transition provisions that are intended
to avoid undue impairment of any participant's pension as a result of the new
formula. Certain long-service participants may be entitled to receive their
benefit computed under the old formula, if greater than that computed under the
new formula.

The annual pension benefit to which each of the Named Executive Officers would
be entitled had he retired on December 31, 1998 (disregarding any limitation on
vesting) expressed as a life annuity beginning at age 65 is as follows: Mr.
Critelli: $365,167; Mr. Breslawsky: $338,808; Mr. Moody: $260,832; Mr.
Reichenstein: $8,339: Mr. Kissner: $22,877; Mr. Martin: $70,774; and Mr. Roney
$109,835.

APPROVAL OF APPOINTMENT OF PITNEY BOWES' INDEPENDENT ACCOUNTANTS

The Audit Committee of the board has recommended, and the board has approved for
vote by stockholders, the continuation of PricewaterhouseCoopers LLP as the
independent accountants for Pitney Bowes for 1999.

<PAGE>

PricewaterhouseCoopers LLP has served in this capacity continuously since 1934.
PricewaterhouseCoopers LLP has no direct or indirect financial interest in
Pitney Bowes or any of its subsidiaries.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR 1999.

ADDITIONAL INFORMATION

SOLICITATION OF PROXIES

In addition to the use of the mails, proxies may be solicited by the directors,
officers, and employees of Pitney Bowes without additional compensation by
personal interview, by telephone, or by telegram. Arrangements may also be made
with brokerage firms and other custodians, nominees, and fiduciaries for the
forwarding of solicitation material to the beneficial owners of Pitney Bowes
common and $2.12 preference stock held of record, and Pitney Bowes will
reimburse such brokers, custodians, nominees, and fiduciaries for reasonable
out-of-pocket expenses incurred. Pitney Bowes has retained Georgeson & Company
Inc. to aid in the solicitation of proxies. The anticipated fee of such firm is
$8,500 plus out-of-pocket costs and expenses. The cost of solicitation will be
borne entirely by Pitney Bowes.

OTHER MATTERS

Management knows of no other matters which may be presented for consideration at
the meeting. However, if any other matters properly come before the meeting, it
is the intention of the individuals named in the enclosed proxy to vote in
accordance with their judgment.

ANNUAL REPORT

The annual report, including financial statements, for the year ended December
31, 1998, was distributed by mail several days prior to the distribution of this
notice and proxy statement.

By order of the board of directors.

Amy C. Corn
Corporate Secretary and
Senior Associate General Counsel

<PAGE>

[logo omitted] PITNEY BOWES
STAMFORD FACILITIES
1 MAIN PLANT WALTER H. WHEELER JR. DR.
2 BARRY PLACE 23 BARRY PLACE
3 WORLD HEADQUARTERS 1 ELMCROFT RD.

[Street Map Omitted]

DIRECTIONS:

NORTHBOUND ON I-95

Please take Exit 7 (Greenwich Avenue) and proceed through the first intersection
to next traffic light, where you should turn right onto Washington Boulevard.
Continue 1/2 mile to stop sign. Turn left onto South Pacific Street and take
immediate right onto Dyke Lane. At the end of Dyke Lane, turn left onto Elmcroft
Road. Please park where indicated.

SOUTHBOUND ON I-95

Please take Exit 7 (Atlantic Street). At the second traffic light, turn left
onto Atlantic Street and continue through third traffic light to stop sign and
turn left onto Washington Boulevard. At next stop sign turn left onto South
Pacific Street and take immediate right onto Dyke Lane. At the end of Dyke Lane,
turn left onto Elmcroft Road. Please park where indicated.

FROM THE MERRITT PARKWAY

Please take Exit 34 (Long Ridge Road). Turn south onto Long Ridge Road. Follow
Long Ridge Road for approximately 2 miles to Cold Spring Road and turn right
onto Cold Spring Road. Bear left onto Washington Boulevard and follow to the end
(approximately 2 miles). At stop sign make a left turn onto South Pacific Street
and take an immediate right onto Dyke Lane. At the end of Dyke Lane, turn left
onto Elmcroft Road. Please park where indicated.

<PAGE>

PLEASE MARK YOUR 3509
[X] VOTE AS IN THIS
EXAMPLE.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR ITEM 2.
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ITEM 1.
- --------------------------------------------------------------------------------

FOR WITHHELD Nominees:
Item 1. Election of // // 01. Michael J. Critelli 04. MICHAEL I. ROTH
Directors 02. Jessica P. Einhorn 05. PHYLLIS SHAPIRO SEWELL
03. Herbert L. Henkel
</TABLE>

(Write a nominee's name on the space provided below to withhold authority to
vote for that individual nominee.)

- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ITEM 2.
- --------------------------------------------------------------------------------
Item 2--Appointment of FOR WITHHELD ABSTAIN
PricewaterhouseCoopers // // //
LLP as independent
accountants for 1999.

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

SPECIAL ACTION

Discontinue Annual
Report Mailing for this Account //

NOTE: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.

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

- --------------------------------------------------------------------
SIGNATURE (S) DATE
- --------------------------------------------------------------------------------
S FOLD AND DETACH HERE S

PITNEY BOWES INC.

Dear Stockholder:

Pitney Bowes Inc. encourages you to take advantage of new and convenient
ways by which you can vote your shares. You can vote your shares electronically
through the Internet or the telephone. This eliminates the need to return the
proxy card.

To vote your shares electronically you must use the control number printed
in the box above, just below the perforation. The series of numbers that appear
in the box above must be used to access the system.

1. To vote over the Internet:

o Log on to the Internet and go to the web site
http://www.vote-by-net.com

2. To vote over the telephone 24 hours a day, 7 days a week:

o On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683) from
the U.S. and Canada.

o Outside the U.S. and Canada call 201-324-0377.

Your telephone or Internet vote authorizes the named proxies in the same
manner as if you marked, signed, dated and returned the proxy card.

If you choose to vote your shares via telephone or Internet, there is no
need for you to mail back your proxy card.

YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.

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

<PAGE>

P
R
O
X
Y

PROXY SOLICITED ON BEHALF OF PITNEY BOWES BOARD OF DIRECTORS
DIRECTION TO MERRILL LYNCH TRUST COMPANY, TRUSTEE
ANNUAL MEETING OF STOCKHOLDERS MAY 10, 1999

Michael J. Critelli, Murray L. Reichenstein, Amy C. Corn, or any of them, with
power of substitution, are hereby appointed proxies of the undersigned to vote
all common stock and $2.12 convertible preference stock of Pitney Bowes Inc.
owned by the undersigned at the annual meeting of stockholders to be held in
Stamford, Connecticut, on May 10, 1999, including any continuation of the
meeting caused by any adjournment, or any postponement of the meeting, upon such
business as may properly come before the meeting, including the items as
specified on the reverse side.

THE UNDERSIGNED, IF A PARTICIPANT IN THE PITNEY BOWES INC. DEFERRED INVESTMENT
PLAN (THE OPLANO), DIRECTS MERRILL LYNCH TRUST COMPANY, TRUSTEE, TO VOTE ALL
PITNEY BOWES COMMON STOCK ALLOCATED TO HIS OR HER ACCOUNT, AS INDICATED ON THE
REVERSE SIDE, AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD IN STAMFORD,
CONNECTICUT, ON MAY 10, 1999, INCLUDING ANY CONTINUATION OF THE MEETING CAUSED
BY ANY ADJOURNMENT, OR ANY POSTPONEMENT OF THE MEETING, UPON SUCH BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING, INCLUDING ITEMS AS SPECIFIED ON THE
REVERSE SIDE.

ALL SHARES OF $2.12 CONVERTIBLE PREFERENCE STOCK AND COMMON STOCK REGISTERED IN
YOUR NAME, HELD FOR YOUR BENEFIT IN THE DIVIDEND REINVESTMENT PLAN AND/OR HELD
FOR YOUR BENEFIT IN THE DEFERRED INVESTMENT PLAN ARE SHOWN ON THIS CARD. THE
SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN
BY THE STOCKHOLDER. IF A PROPERLY SIGNED PROXY IS RETURNED WITHOUT CHOICES
MARKED, AND IF NOT OTHERWISE DIRECTED, THE SHARES REPRESENTED BY THIS PROXY
REGISTERED IN YOUR NAME AND/OR HELD FOR YOUR BENEFIT IN THE DIVIDEND
REINVESTMENT PLAN WILL BE VOTED FOR ITEMS 1 AND 2. IF A PROPERLY SIGNED
DIRECTION CARD REGARDING DEFERRED INVESTMENT PLAN SHARES IS RETURNED WITHOUT
CHOICES MARKED, AND IF NOT OTHERWISE DIRECTED, THE SHARES REPRESENTED BY THIS
VOTING DIRECTION CARD WILL BE VOTED, WITH RESPECT TO ITEMS 1 AND 2, IN THE SAME
PROPORTION INDICATED BY THE VOTING INSTRUCTIONS GIVEN BY PARTICIPANTS IN THE
PLAN.

IN THEIR DISCRETION, THE PROXIES AND/OR THE TRUSTEE, AS THE CASE MAY BE, ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING, INCLUDING ANY CONTINUATION OF THE MEETING CAUSED BY ANY ADJOURNMENT, OR
ANY POSTPONEMENT OF THE MEETING.

PLEASE MARK, DATE AND SIGN, AND RETURN PROMPTLY THIS PROXY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE U.S.A., OR VOTE VIA
TELEPHONE OR INTERNET AS DESCRIBED BELOW. (CONTINUED, AND TO BE SIGNED, ON THE
OTHER SIDE)

-----------
SEE REVERSE
SIDE
-----------

- --------------------------------------------------------------------------------
S FOLD AND DETACH HERE S

[LOGO] PITNEY BOWES

YOUR VOTE IS IMPORTANT!

YOU CAN VOTE IN ONE OF THREE WAYS:

1. LOG ON THE INTERNET AND GO TO THE WEB SITE HTTP://WWW.VOTE-BY-NET.COM

2. CALL TOLL FREE 1-800-OK2-VOTE (1-800-652-8683) FROM THE U.S. AND CANADA OR
DIAL 201-324-0377 FROM OTHER COUNTRIES ON A TOUCH TONE TELEPHONE.

3. MARK, SIGN AND DATE YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.