The 2.5L engine in your Subaru is an "interference" engine. That means if the timing belt breaks, there is not enough clearance between the pistons and valves to prevent them from hitting each other and causing expensive damage.
I just checked the Subaru servide literature and could not find a recommended replacement interval for your timing belt. Subura only says the belt should be inspected every 30,000 miles and replaced if necessary.
On most other makes and models of cars, the recommended replacement interval for a timing belt ranges from 60,000 miles to 100,000 miles.
Subaru says a new belt costs $85, and the labor to install it is about 2.5 hours. If your mechanic charged $100 per hour, thats about $250 for labor plus parts. I don't see how he can justify $1200 to replace the timing belt. Maybe you should shop around for a better deal.
Although the job is expensive because of the labor required to replace the belt, I would recommend having it replaced. You belt has a LOT of miles on it, and at such high mileage the risk of breakage is high and will continue to go up.
If you do not plan to keep your car much longer, though, and are considering selling it or trading it in, then don't spend the money on a new timing belt. Let the next owner pay for that job.
Below is an illustration showing the timing belt on the engine:
If you do decide to have the belt replaced, I would also recommend replacing the water pump at the same time. The typical original equipment water pump usually starts to leak after 80,000 to 100,000 miles because the seals wear out. There should be little extra labor charge for this.
As for the exhasut leak, it could be a rusted out pipe connection or possibly the converter or muffler. Might cost $150 to $200 to replace the pipes or muffler.