Guarantee And Collateral Agreement

EXECUTION COPY


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GUARANTEE AND COLLATERAL AGREEMENT


made by


AXIOHM TRANSACTION SOLUTIONS, INC.


and certain of its Subsidiaries


in favor of


LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent


Dated as of October 2, 1997


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TABLE OF CONTENTS


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SECTION 1. DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . 5


SECTION 2. GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Right of Contribution. . . . . . . . . . . . . . . . . . . . . . . 6
2.3 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Amendments, etc. with respect to the Borrower Obligations. . . . . 6
2.5 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . 7
2.6 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


SECTION 3. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . 8


SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 8
4.1 Representations in Credit Agreement. . . . . . . . . . . . . . . . 9
4.2 Title; No Other Liens. . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Perfected First Priority Liens . . . . . . . . . . . . . . . . . . 9
4.4 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Inventory and Equipment. . . . . . . . . . . . . . . . . . . . . . 9
4.6 Farm Products. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 10


SECTION 5. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Covenants in Credit Agreement. . . . . . . . . . . . . . . . . . . 11
5.2 Delivery of Instruments and Chattel Paper. . . . . . . . . . . . . 11
5.3 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . 11
5.4 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Maintenance of Perfected Security Interest; Further
Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Changes in Locations, Name, etc. . . . . . . . . . . . . . . . . . 12
5.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 13


SECTION 6. REMEDIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Certain Matters Relating to Receivables. . . . . . . . . . . . . . 15
6.2 Communications with Obligors; Grantors Remain Liable . . . . . . . 15
6.3 Pledged Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Proceeds to be Turned Over to Administrative Agent . . . . . . . . 17
6.5 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . 17
6.6 Code and Other Remedies. . . . . . . . . . . . . . . . . . . . . . 17
6.7 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 18


6.8 Waiver; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . 19


SECTION 7. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . 19
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. . . . 19
7.2 Duty of Administrative Agent . . . . . . . . . . . . . . . . . . . 21
7.3 Execution of Financing Statements. . . . . . . . . . . . . . . . . 21
7.4 Authority of Administrative Agent. . . . . . . . . . . . . . . . . 21


SECTION 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Amendments in Writing. . . . . . . . . . . . . . . . . . . . . . . 21
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 No Waiver by Course of Conduct; Cumulative Remedies. . . . . . . . 21
8.4 Enforcement Expenses; Indemnification. . . . . . . . . . . . . . . 22
8.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 22
8.6 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . 23
8.13 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . 24
8.14 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 24
8.15 Additional Grantors . . . . . . . . . . . . . . . . . . . . . . . 24
8.16 Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24


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GUARANTEE AND COLLATERAL AGREEMENT


GUARANTEE AND COLLATERAL AGREEMENT, dated as of October 2, 1997, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the "GRANTORS"), in favor of LEHMAN COMMERCIAL PAPER INC., as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") for the banks and other financial institutions (the "LENDERS") from time to time parties to the Credit Agreement, dated as of October 2, 1997 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among AXIOHM TRANSACTION SOLUTIONS, INC. (the "BORROWER"), the Lenders, LEHMAN BROTHERS INC., as Arranger, LEHMAN COMMERCIAL PAPER INC., as Syndication Agent and Administrative Agent.


W I T N E S S E T H:
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WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;


WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Grantor;


WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrower to make valuable transfers to one or more of the other Grantors in connection with the operation of their respective businesses;


WHEREAS, the Borrower and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; and


WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the Lenders;


NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby agrees with the Administrative Agent, for the ratable benefit of the Lenders, as follows:


SECTION 1. DEFINED TERMS


1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, Instruments and Inventory.


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(b) The following terms shall have the following meanings:


"AGREEMENT": this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.


"BORROWER OBLIGATIONS": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and
all other obligations and liabilities of the Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans and Reimbursement
Obligations and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding,
relating to the Borrower, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding) to the Administrative
Agent or any Lender (or, in the case of any Hedge Agreement referred to
below, any Affiliate of any Lender), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
this Agreement, the other Loan Documents, any Letter of Credit or any Hedge
Agreement entered into by the Borrower with any Lender (or any Affiliate of
any Lender) or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to
the Administrative Agent or to the Lenders that are required to be paid by
the Borrower pursuant to the terms of any of the foregoing agreements).


"COLLATERAL": as defined in Section 3.


"COLLATERAL ACCOUNT": any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.


"COPYRIGHTS": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in SCHEDULE 6), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.


"COPYRIGHT LICENSES": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
SCHEDULE 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.


"EXCLUDED ASSETS": (i) shares of Axiohm S.A., Dardel and Axiohm-Inv
and (ii) any assets of Axiohm S.A., Dardel or Axiohm-Inv other than (A) any
Pledged Securities (including, without limitation, the common stock of
Axiohm-IPB) and (B) any assets of the types described in clauses (a)
through (l) of Section 3 in which a security interest may be perfected by
filing a financing statement under the Uniform Commercial Code in effect in
any state in the United States, it being understood that the grant by
Axiohm S.A. of a security interest in certain assets of Axiohm S.A.
excluded by this clause is being effected pursuant to


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the French Security Documents, and that the shares forming stock capital
of Axiohm S.A., Dardel and Axiohm-Inv are pledged under the French
Pledge Agreements.


"GENERAL INTANGIBLES": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to
such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); PROVIDED, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.


"GUARANTOR OBLIGATIONS": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Loan Document to which such
Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).


"GUARANTORS": the collective reference to each Grantor other than the
Borrower.


"HEDGE AGREEMENTS": as to any Person, all interest rate swaps, caps
or collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.


"INTELLECTUAL PROPERTY": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.


"INTERCOMPANY NOTE": any promissory note evidencing loans made by any
Grantor to the Borrower or any of its Subsidiaries.


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"INVESTMENT PROPERTY": all "investment property" as such term is
defined in Section 9-115 of the New York UCC as enacted by the New York
Assembly and signed by the Governor of New York and to be in effect on
October 10, 1997.


"ISSUERS": the collective reference to each issuer of a Pledged
Security.


"NEW YORK UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.


"OBLIGATIONS": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.


"PATENTS": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in SCHEDULE
6, and (iii) all rights to obtain any reissues or extensions of the
foregoing.


"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in SCHEDULE 6.


"PLEDGED NOTES": all promissory notes listed on SCHEDULE 2, if any,
all Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business).


"PLEDGED SECURITIES": the collective reference to the Pledged Notes
and the Pledged Stock.


"PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect.


"PROCEEDS": all "proceeds" as such term is defined in Section 9-
306(1) of the Uniform Commercial Code in effect in the State of New York on
the date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.


"RECEIVABLE": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).


"SECURITIES ACT": the Securities Act of 1933, as amended.


"TRADEMARKS": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source


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or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith,
whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any
other country or any political subdivision thereof, or otherwise, and
all common-law rights related thereto, including, without limitation,
any of the foregoing referred to in SCHEDULE 6, and (ii) the right to
obtain all renewals thereof.


"TRADEMARK LICENSE": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing referred to
in SCHEDULE 6.


1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.


(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.


(c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof.


SECTION 2. GUARANTEE


2.1 GUARANTEE. (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations.


(b) Anything herein or in any other Loan Document to the contrary notwithstanding, (i) the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount that would render such Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2) and (ii) the maximum liability of Axiohm S.A., Dardel and Axiohm-Inv hereunder and under the other Loan Documents is expressly limited to a maximum amount equal to, from time to time, 70% of their net assets as provided by their latest audited balance sheet as at the date of any demand of payment under this Agreement.


(c) Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any Lender hereunder.


(d) Subject to Section 8.16(c), the guarantee contained in this Section 2 shall remain in full force and effect until all the Borrower Obligations shall have been satisfied by payment in full, no Letter of Credit shall be outstanding (unless such Letter of Credit has been cash collateralized in full to the satisfaction of the Administrative Agent and the Lenders) and the Commitments shall be terminated,


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notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Borrower Obligations.


(e) No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments are terminated.


2.2 RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guaranteed by such Guarantor hereunder.


2.3 NO SUBROGATION. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Borrower on account of the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding, (unless such Letter of Credit has been cash collateralized in full to the satisfaction of the Administrative Agent and the Lenders) and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.


2.4 AMENDMENTS, ETC. WITH RESPECT TO THE BORROWER OBLIGATIONS. Each Guarantor shall remain obligated hereund ...