Exhibit 10.5

THE INDEBTEDNESS EVIDENCED HEREBY HAS BEEN SUBORDINATED IN FAVOR OF HARLAND
CLARKE CORP., SUCCESSOR TO WELLS FARGO BANK, NATIONAL ASSOCIATION (ACTING
THROUGH ITS WELLS FARGO BUSINESS CREDIT OPERATING DIVISION), AND SCANTRON CANADA
LTD., SUCCESSOR TO WELLS FARGO FINANCIAL CORPORATION CANADA, PURSUANT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED AS OF SEPTEMBER 10, 2007, AS AMENDED.
THE RIGHTS AND INTERESTS OF ANY HOLDER, TRANSFEREE OR PARTY CLAIMING ANY
INTEREST UNDER OR AS A RESULT OF THIS INSTRUMENT, ARE SUBJECT TO ALL TERMS OF
THE REFERENCED AGREEMENT

DELPHAX TECHNOLOGIES CANADA LIMITED

12% AMENDED AND RESTATED SECURED SUBORDINATED NOTE
Due: September 10, 2012

$7,000,000

 

November 26, 2008

For value received, the undersigned, Delphax Technologies Canada Limited, a
corporation duly incorporated under the laws of the Province of Ontario (the
"Company"), hereby promises to pay to the order of Harland Clarke Corp.
("Harland Clarke"), at its principal office in the City of San Antonio, Texas,
the principal sum of Seven Million dollars and no cents ($7,000,000) (the "Face
Amount") in lawful money of the United States on September 10, 2012 (the
"Maturity Date"), together with interest thereon, as more fully provided below.

This 12% Secured Subordinated Note (the "Note") shall bear annual interest at a
fixed rate of 12% per annum of the unpaid Face Amount, payable quarterly in
arrears in lawful money of the United States on the first business day of each
calendar quarter; provided, however, that the Company may elect to pay interest
at the rate of 9% in cash (in lawful money of the United States) and interest at
the rate of 3% (the "PIK Interest Portion") by delivery of shares of Common
Stock, par value $.l0 per share, of Delphax Technologies, Inc., a Minnesota
corporation ("Parent"), which number of shares shall be determined by dividing
the monetary value of the PIK Interest Portion of the accrued interest due on
the unpaid Face Amount for the relevant quarterly period by the Market Price of
the Common Stock as of the interest payment date unless at the time of such
interest payment (a) during any period that Parent is not a publicly traded
company, Harland Clarke is already the owner of 19.9% of the then outstanding
Common Stock (or delivery of shares in accordance with the terms of this
provision would cause Harland Clarke to own more than 19.9% of Parent's then
outstanding Common Stock), or (b) during any period that Parent is a publicly
traded company, Harland Clarke is already the owner of 4.99% of the then
outstanding Common Stock (or delivery of shares in accordance with the terms of
this provision would cause Harland Clarke to own more than 4.99% of Parent's
then outstanding Common Stock), .

"Market Price" shall mean, if the Common Stock is traded on a securities
exchange or on the NASDAQ National Market, the average of the closing prices of
the Common Stock on such exchange or the NASDAQ National Market on the 20
trading days ending on the trading day prior to the date of determination, or,
if the Common Stock is otherwise traded in the over-the-counter market, the
average of the closing bid prices on the 20 trading days ending on the trading
day prior to the date of determination. If at any time the Common Stock is not
traded on an exchange or the NASDAQ National Market, or otherwise traded in the
over-the-counter market, the Market Price shall be deemed to be the higher of
the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of Delphax
as of the last day of any month ending within 60 days preceding the date as of
which the determination is to be made, or the fair value thereof determined in
good faith by the Board of Directors of Delphax as of a date which is within 15
days of the date as of which the determination is to be made.

This Note has been issued under the terms and provisions of a Securities
Purchase Agreement (the "Purchase Agreement"), dated as of March 26, 2007, among
the Company, Parent, and Harland Clarke, as successor in interest to the
Investors named on the signature pages thereto. Capitalized terms used herein
and not otherwise defined have the meanings set forth in the Purchase Agreement.

Upon the occurrence of any one or more of the Events of Default specified in
Article VIII of the Purchase Agreement, all amounts then remaining unpaid on
this Note, including any accrued but unpaid interest, may be declared to be or
shall become immediately due and payable as provided in the Purchase Agreement.

No pre-payment by the Company of any of the Face Amount of this Note may be made
except as provided in paragraph 1 hereof.

All payments hereunder shall be made free and clear of and without reduction for
any taxes as set forth in Section 1.7 of the Purchase Agreement. This Note is
subject to the following additional provisions, terms and conditions:

Prepayment Upon Change in Control.

The Company shall give the holder of this Note written notice of an impending
transaction that would constitute a Change of Control (as hereinafter defined)
not later than 20 days prior to the shareholders' meeting called to approve such
transaction, or 20 days prior to the closing of such transaction, whichever is
earlier, and shall also notify such holder in writing of the final approval of
such transaction. The first of such notices shall give the proposed effective
date of the transaction (the "Effective Date"), shall describe the material
terms and conditions of the transaction and of this paragraph 1(a), and shall
contain an offer by the Company to prepay this Note at 120% of the outstanding
unpaid Face Amount, plus all unpaid interest accrued thereon to the prepayment
date (the "Change of Control Prepayment Offer"). The Company shall thereafter
give such holder prompt notice of any material changes to such terms and
conditions. Notwithstanding anything to the contrary herein, the outstanding
Face Amount of this Note may not be prepaid by the Company following the
delivery of the first notice delivered pursuant to this paragraph 1(a) except in
an amount equal to 120% of the outstanding unpaid Face Amount, plus all unpaid
interest accrued thereon to the prepayment date. The Change of Control
transaction shall in no event take place sooner than 20

days after the mailing by the Company of the first notice provided for herein or
sooner than 10 days after the mailing by the Company of any notice of material
changes provided for herein.

Any election by the holder of this Note to accept the Change in Control
Prepayment Offer shall be made by the holder hereof giving written notice
thereof to the Company at least 5 days before the Effective Date. Upon receipt
of such notice, the Company shall, on the Effective Date, prepay this Note in
whole (but not in part) at 120% of the outstanding unpaid Face Amount, plus all
unpaid interest accrued thereon to the Effective Date.

For purposes of this Note, a "Change in Control" shall be deemed to occur if any
of the following occur:

Approval by the shareholders of Parent of a reorganization, merger or
consolidation of Parent or a statutory exchange of outstanding securities
entitled to vote generally in the election of directors ("Voting Securities") of
Parent, unless, immediately following such reorganization, merger, consolidation
or exchange, all or substantially all of the persons who were the beneficial
owners, respectively, of Voting Securities and shares of Parent immediately
prior to such reorganization, merger, consolidation or exchange beneficially
own, directly or indirectly, more than 50% of, respectively, the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors and the then outstanding shares of common stock, as
the case may be, of the corporation that is the issuer of such securities held
by the shareholders of Parent after such reorganization, merger, consolidation
or exchange in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, consolidation or exchange, of
the Voting Securities and shares of Parent, as the case may be;

Approval by the shareholders of Parent of (x) a complete liquidation or
dissolution of Parent or (y) the sale or other disposition of all or
substantially all of the assets of Parent (in one or a series of transactions),
where such sale or other disposition includes at least a majority of the shares
of the Company held by Parent; or

Approval by the shareholders of the Company of (x) a complete liquidation or
dissolution of the Company, or (y) the sale or other disposition of all or
substantially all the assets of the Company (in one or a series of
transactions).

In the event that the holder hereof fails to accept the Change in Control
Prepayment Offer as provided for herein at least 5 days before the Effective
Date, then the Change in Control Prepayment Offer shall be deemed to be null and
void, and the holder hereof shall be deemed to have irrevocably waived its right
to accept the Change in Control Prepayment Offer and the Change in Control
Prepayment Offer shall be of no further force or effect.

Ranking; Subordination.

The Company agrees, and the holder hereof by such holder's acceptance hereof
likewise agrees, that anything herein to the contrary notwithstanding, the
indebtedness evidenced by this Note and the Guaranty shall be subordinate and
junior in right of payment, to the extent and in the manner hereinafter set
forth, to the Company's and the Parent's current Senior Debt in an aggregate
principal amount not to exceed $14,500,000, a list of the existing Senior Debt
outstanding as of the date hereof is attached hereto as Schedule 2(a)(l); on par
in right of payment with the other Notes and all of the Company's and Parent's
other Indebtedness for Borrowed Money (as defined in the Purchase Agreement)
outstanding as of the date hereof, other than Senior Debt (the "Parity Debt"), a
list of the Parity Debt is attached hereto as Schedule 2(a)(2); and senior in
right of payment to all of the Company's future Indebtedness for Borrowed Money,
except Senior Debt, any additional Notes, and indebtedness permitted by Section
4.19(iii) of the Purchase Agreement.

In the event of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, readjustment, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its creditors, as such, or
to its property, or in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, then the holders of Senior Debt shall be entitled to
receive payment in full of all principal and interest on all Senior Debt before
the holder of this Note is entitled to receive any payment on account of
principal or interest on this Note, and to that end (but subject to the power of
a court of competent jurisdiction to make other equitable provisions reflecting
the rights conferred in this Note upon the Senior Debt and the holders thereof
with respect to the indebtedness evidenced by this Note and the holder thereof
by a lawful plan of reorganization under applicable bankruptcy law) the holders
of Senior Debt shall be entitled to receive by application in payment thereof
any payment or distribution of cash, property or securities (excepting only
interest payments in the form of equity securities of Parent) that may be
payable or deliverable in any such proceedings in respect of this Note,
including any such payment or distribution which may be payable or deliverable
by virtue of the provisions of any indebtedness which is subordinate and junior
in right of payment to this Note, except securities which are subordinate in
right of payment to the payment of the Senior Debt.

If there occurs a default in the payment of or in the performance of any other
terms or obligations of any or all such Senior Debt, or in the instrument under
which any Senior Debt is outstanding, permitting the holder of such Senior Debt
to accelerate the maturity thereof, then, unless and until such event of default
shall have been cured or waived or shall have ceased to exist, or all Senior
Debt shall have been satisfied, no payment shall be made in respect of the
principal of or interest on the indebtedness evidenced by this Note (excepting
only interest payments in the form of equity securities of Parent), unless
within three months after the happening of such event of default, the maturity
of such Senior Debt shall not have been accelerated.

In the event the holder hereof receives any payment or property on this Note in
violation of the terms hereof, the holder hereof will hold the same in trust
for, and forthwith pay over or deliver the same to, the holders of the Senior
Debt to be applied pro rata on such Senior Debt whether or not the same then be
due. If holders of Senior Debt shall receive any payment or distribution of
cash, property or securities after the payment in full in cash of all Senior
Debt, the Company shall cause the holders of Senior Debt to hold the same in
trust for, and forthwith pay over or deliver the same to, the party or parties
legally entitled thereto.

Upon the payment in full of all Senior Debt, the holder of this Note shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of assets of the Company applicable to the Senior Debt until the
principal and interest on this Note shall be paid in full; and for the purposes
of such subrogation, no payments or distributions to the holders of Senior Debt
of any cash, property or securities to which the holders of this Note would be
entitled except for the subordination provisions of this Note shall, as between
the Company, its creditors other than the holders of Senior Debt, and the holder
of this Note, be deemed to be a payment by the Company to or on account of
Senior Debt.

No present or future holder of Senior Debt shall be prejudiced in such holder's
right to enforce the subordination of this Note by any act or failure to act on
the part of the Company or the holder of this Note. The foregoing provisions as
to subordination are solely for the purpose of defining the relative rights of
the holders of the Senior Debt on the one hand, and the holder of this Note on
the other hand, and none of such provisions shall impair, as between the Company
and the holder of this Note, the obligation of the Company, which is
unconditional and absolute, to pay to the holder of this Note the principal and
interest thereon, in accordance with the terms hereof, nor shall any such
provisions prevent any holder of this Note from exercising all remedies
otherwise permitted by applicable law or under the terms of this Note or the
Purchase Agreement upon default thereunder, subject to the rights, if any, under
the foregoing provisions, of holders of Senior Debt to receive cash, property or
securities otherwise payable or deliverable to the holder of this Note.

The Company covenants and agrees that so long as this Note remains outstanding,
or any liabilities (whether direct or contingent, liquidated or unliquidated) of
the Company to the holder hereof remain outstanding, and until payment in full
of all obligations of the Company to such holder, the Company will not, create,
incur, assume or permit to exist any indebtedness or liabilities resulting from
borrowings, loans or advances, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several ("Future Debt"), unless
the Company causes each holder of the Future Debt to execute a subordination
agreement in the form acceptable to the holder hereof. This paragraph 2(g) shall
not apply to any indebtedness, liabilities or obligations of the Company to the
holder; (b) any indebtedness, liabilities or obligations of the Company
specified in Schedule 2(a)(l) or Schedule 2(a)(2); (c) any refinancing of any of
the indebtedness, liabilities or obligations of the Company specified in
Schedule 2(a)(l) (provided, however that such refinancing is completed with a
commercial bank or other commercial lender and does not prejudice the rights of
the holder hereof to exercise and the Company to timely pay in cash the Call
Option, the Change in Control Put Option or to be paid at the term of this
Note); (d) any Senior Debt incurred by the Company in the future to a commercial
bank or other commercial lender subject to the limitations in Section 4.19 of
the Purchase Agreement, which indebtedness, liabilities or obligations do not
prejudice the rights of the holder hereof to exercise and the Company to timely
pay in cash the Call Option, the Change in Control Put Option or to be paid at
the term of this Note; and (e) indebtedness, liabilities or obligations incurred
by the Company in the ordinary course of business subject to the limitations in
Section 4.19 of the Purchase Agreement.

This Note is subject to the terms of the Subordination Agreements described in
the caption on the first page hereof. To the extent there is any conflict
between the provisions of this paragraph 2 and the Subordination Agreements, the
Subordination Agreements shall control. ANY TRANSFEREE OR ASSIGNEE OF THE HOLDER
OF THIS NOTE WILL BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF SUCH
SUBORDINATION AGREEMENT UPON ANY SUCH TRANSFER OR ASSIGNMENT.

Notwithstanding anything to the contrary in this paragraph 2, the Company may
pay interest in the form of Delphax Common Stock as permitted hereunder.

Other Agreements

. The Company covenants and agrees that the holder of this Note shall have the
rights of an Investor under the Purchase Agreement. This Note is secured by the
Security Documents referred to in the Purchase Agreement and guaranteed by
Delphax pursuant to the Guaranty.

Amendment and Restatement

.

This Note is given in substitution and exchange for the 12% Secured Subordinated
Note dated September 10, 2007 in the original principal amount of $7,000,000.00
given by the Company in favor of Whitebox Delphax, Ltd. and any prior
restatements thereof (collectively, the "Old Note"), and shall not be deemed a
novation or to have paid, terminated, extinguished or discharged the
undersigned's indebtedness evidenced by the Old Note, all of which indebtedness
shall continue under and be evidenced and governed by this Note, nor shall it be
deemed a waiver of or to have waived any defaults under the Old Note. The Old
Note is amended and restated in its entirety by this Note. Any reference in any
other document or instrument (including but not limited to the Purchase
Agreement) to the Old Note shall constitute a reference to this Note.

Governing Law

.

This Note shall be governed and construed according to the laws of the State of
Minnesota without giving effect to the choice of law provisions thereof.

 

DELPHAX TECHNOLOGIES CANADA LIMITED

     

/s/ Gregory S. Furness

 

By: Gregory S. Furness

 

Its: Vice President and CFO

 

Schedule 2(a)(1) to 12% Secured Subordinated Note - Senior Debt

Indebtedness to Harland Clarke Corp. (as successor in interest to Wells Fargo
Bank, National Association, acting through its Wells Fargo Business Finance
operating division) and Indebtedness to Scantron Canada Ltd. (as successor in
interest to Wells Fargo Financial Corporation Canada) in an aggregate principal
amount not to exceed $14,500,000

Schedule 2(a)(2) to 12% Secured Subordinated Note - Parity Debt

None