Exhibit 10.5.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT, dated as of the 30th day of May, is by and between Delphax
Technologies, Inc. (“Company”), a Minnesota corporation, and Dieter Schilling
(“Executive”).

RECITALS

WHEREAS, the Company is currently the Company’s Vice President of Engineering
and Manufacturing, and the Company wishes to promote Executive to become the
President and Chief Executive Officer ("CEO”) of the Company; and

WHEREAS, Executive taking the CEO position will involve an increase in
Executive’s compensation and enhancement of Executive’s duties;

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and Executive’s promotion, the
mutual covenants set forth below, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company and Executive
agree as follows:

ARTICLE I.

DEFINITIONS

Capitalized terms used in the Agreement shall have their defined meaning
throughout the Agreement. The following terms shall have the meanings set forth
below, unless the context clearly requires otherwise.

“Agreement” means this Employment Agreement, as from time to time amended.

“Base Salary” means the total annual cash compensation payable on a regular
periodic basis, without regard to voluntary or mandatory deferrals.

“Beneficiary” means the person or persons designated in writing to the Company
by Executive to receive benefits payable after Executive’s death. In the absence
of such designation or in the event that all of the persons so designated
predecease Executive, Beneficiary means the executor, administrator or personal
representative of Executive’s estate.

“Board” means the Board of Directors of the Company.

“Cause” has the meaning set forth at paragraph 4.2 of this Agreement.

“Change in Control” means:

(a) the Company consummates a merger, consolidation, share exchange, division or
other reorganization of the Company with any corporation or entity (other than
an entity owned at least 80% by the Company) in which the Company is not the
surviving entity or 50% of the Company’s then existing Board is replaced; or

 

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(b) the Company consummates a sale or disposition (in one transaction or a
series of transactions) of assets of the Company, the total consideration of
which is greater than 51% of the total fair market value of the Company; or

(c) the shareholders of the Company consummate an agreement for the sale or
disposition (in one transaction or a series of transactions) of stock in the
Company, the total sale or disposition of which is greater than 51% of the total
common stock of the Company; or

(d) the Company adopts a plan of complete liquidation or winding-up of the
Company.

Such definition shall not include the sale of additional equity capital obtained
by the Company pursuant to the approval of a majority of the Board.

“Date of Termination” has the meaning set forth at paragraph 4.6(b) of this
Agreement.

“Disability” means the unwillingness or inability of Executive to perform
Executive’s duties under this Agreement because of incapacity due to physical or
mental illness, bodily injury or disease.

“Executive” means Dieter Schilling.

“Good Reason to Terminate Employment” means termination of employment that
involves any one or more of the following:

(a) An adverse change in Executive’s status or position as a result of a
substantial diminution in Executive’s duties, responsibilities or authority as
of the date of this Agreement;

(b) A reduction by the Company in Executive’s Base Salary as in effect as of the
date of commencement of this Agreement or as the same may be increased from time
to time;

(c) The failure by the Company to obtain from any Successor its assent to this
Agreement as contemplated by paragraph 6.1.

“Plan” means any plan, program, policy or arrangement sponsored, maintained or
contributed to by the Company to which the Company is a party or under which
employees of the Company are covered, including, without limitation, any
employee benefit plan, such as thrift, pension, profit sharing, deferred
compensation, medical, dental, disability, accident, life insurance, fringe
benefit, vacation, sick or parental leave, severance plan or policy or any other
agreement, plan, program, policy or arrangement intended to benefit employees or
executive officers of the Company.

“Successor” means any corporation, individual, group, association, partnership,
firm, venture, or other entity or person that, subsequent to the date thereof,
succeeds to the actual or practical ability to control, all or substantially all
of the Company's business and/or assets, directly or indirectly, by merger,
consolidation, purchase, liquidation, redemption, assignment, similar
corporation transaction, operation of law or otherwise.

 

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ARTICLE II

EMPLOYMENT, DUTIES AND TERM

2.1 Employment. Upon the terms and conditions set forth in this Agreement, the
Company hereby employs Executive, and Executive accepts such employment. Except
as expressly provided herein, termination of this Agreement by either party
shall also terminate Executive’s employment by the Company.

2.2 Duties. During the term of this Agreement, and excluding any periods of
vacation, sick, disability or other leave to which Executive is entitled,
Executive agrees to devote Executive’s full business attention and time to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to Executive hereunder, to use Executive’s
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the term of this Agreement, it shall not be a violation
of this Agreement for Executive to serve on corporate, civic or charitable
boards or committees, and manage personal investments, so long as such
activities do not significantly interfere with the performance of Executive’s
responsibilities as an officer of the Company in accordance with this Agreement.
Executive shall comply with the Company’s policies and procedures; provided,
that to the extent such policies and procedures are inconsistent with the
express provisions of this Agreement, the provisions of this Agreement shall
govern.

2.3 Certain Proprietary Information. If Executive possesses any proprietary
information of another person or entity as a result of prior employment or
relationship, Executive shall honor any legal obligation that Executive has with
that person or entity with respect to such proprietary information.

2.4 Employment At Will. Subject to the provisions of Article IV, Executive’s
employment with the Company shall be at will, meaning that the employment of
Executive under this Agreement shall commence the date of execution hereto and
continue until terminated by either Company or Executive for any reason or no
reason, whether with or without Cause, in accordance with the notice provisions
of Article IV.

2.5 Return of Property. Executive agrees that all property in Executive’s
possession belonging to the Company, including without limitation, all
documents, reports, manuals, memoranda, computer print-outs, customer lists,
credit cards, keys, identification, access cards, and all other property
relating in any way to the business of the Company are the exclusive property of
the Company, even if Executive authored, created or assisted in authoring or
creating such property. Executive shall return to the Company all such documents
and property immediately upon termination of employment or at such earlier time
as the Company may reasonably request.

 

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ARTICLE III.

COMPENSATION, BENEFITS AND EXPENSES

3.1 Base Salary. During the term of Executive’s employment under this Agreement,
the Company shall pay Executive in periodic installments on regular paydays a
Base Salary as follows:

(a) During the time that Executive is based in Canada, that number of Canadian
Dollars which (assuming a fixed exchange rate equal to the exchange rate that is
available to the Company on June 1, 2006 for purchasing Canadian Dollars) is
equivalent to an annual rate of Two Hundred Fifty Thousand U.S. Dollars (U.S.$
250,000), subject to such increases in Base Salary as may be approved by the
Company’s Board of Directors from time to time. As a matter of convenience for
the parties, Executive’s Base Salary shall be paid to Executive by the Company’s
Canadian subsidiary, acting as agent for the Company.

(b) After Executive has relocated to Minnesota, a Base Salary in U.S. Dollars
equivalent to an annual rate of Two Hundred Fifty Thousand U.S. Dollars (U.S.$
250,000), subject to such increases in Base Salary as may be approved by the
Company’s Board of Directors from time to time.

(c) The Company shall review Executive’s Base Salary annually. If Executive’s
Base Salary is modified from time to time during the term of Executive’s
employment under this Agreement, the modified amount shall become the Base
Salary for the remainder of Executive’s employment under this Agreement and for
as long thereafter as required pursuant to Article IV, subject to any subsequent
increases.

3.2 Bonus Compensation. Executive shall be eligible to participate in the
Management Bonus Plan maintained by the Company for senior officers, subject to
and on a basis consistent with the terms of such Plan or program and at the
discretion of the Board. For the fiscal year ending September 30, 2006,
Executive will be eligible for a bonus of up to 60% of his base salary, based on
the Company and Executive meeting their stated objectives.

3.3 Restricted Stock. The Company will issue and sell to Executive 15,000 shares
of restricted stock under the Company’s 2000 Stock Plan. Subject to the specific
terms of the restricted stock grant, the risk of forfeiture shall lapse at to
these shares in one-third annual increments on the first, second and third
anniversaries of the date hereof.

3.4 Other Compensation and Benefits. During the term of Executive’s employment
under this Agreement, the Company shall cause its Canadian subsidiary to
continue Executive’s entitlement to participate in the Plans (or Plans providing
Executive with al least substantially similar benefits) now provided by the
Canadian subsidiary, other than as a result of the normal expiration of any such
Plan in accordance with its terms as in effect as of the date of this Agreement
or the date as of which Executive first becomes entitled to participate in such
Plan.

3.5 Car Allowance. During the time that Executive is based in Canada, he shall
continue to receive his current car allowance payment of CAN$507.70 per pay
period. After Executive has relocated to Minnesota, he shall receive an
equivalent amount in US Dollars as a car allowance.

3.6 Paid Time Off. For the 2006 calendar year and each subsequent calendar year
that begins during Executive’s employment under this Agreement, Executive shall
be entitled to Paid Time Off (vacation and sick days), which will accrue at the
rate of 280 hours per year. Executive will also be entitled to all office
holidays.

 

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3.7 Business and Professional Expenses. During Executive’s employment under this
Agreement, the Company shall reimburse Executive for ordinary and necessary
business expenses incurred by executive in performing Executive’s duties as an
executive officer of the Company, including, without limitation, travel and
lodging while away from home on business directly related to the Company, dues
and expenses incurred by Executive for professional membership and
participation, and similar items. Expenses must be included as part of the
Company’s budget and must be approved by the treasurer or other executive
officer of the Company. The cost of these activities shall be reimbursed to
Executive upon proper presentation and substantiation to the Company of the
expense.

3.8 Financial and Tax Planning Expenses. Each calendar year, Executive shall be
entitled to reimbursement up to $1,500 for expenses related to the cost of
personal financial planning and tax preparation. The cost of these activities
shall be reimbursed to Executive upon proper presentation and substantiation to
the Company of the expense.

3.9 Relocation. In connection with Executive’s relocation from Canada to
Minnesota, the Company shall reimburse Executive for his reasonable
out-of-pocket costs incurred for travel, moving his household property and such
other re-location expenses as are approved by the Company in its discretion.

ARTICLE IV.

TERMINATION

4.1 Termination. Subject to the respective continuing obligations of the parties
pursuant to Article V, this Article sets forth the terms for termination of
Executive’s employment under this Agreement.

4.2 Termination by the Company for Cause. The Company may terminate Executive’s
employment under this Agreement immediately for Cause. For purposes of this
Agreement, “Cause” means:

(a) an act or acts of personal dishonesty taken by Executive or any action not
approved in this Agreement (including, but not limited to, Executive’s
appropriation or attempted appropriation of a material business opportunity of
Company), intended to result in personal enrichment or profit for Executive at
the expense of the Company;

(b) the gross neglect or willful failure or refusal of Executive to perform
Executive’s duties and obligations under paragraph 2.2 (other than as a result
of total or partial incapacity due to physical or mental illness), including any
(i) breach of Executive’s fiduciary duties to the Company; (ii) financial
misstatements; (iii) regulatory or accounting violations; and/or (iv) breach of
the Company’s Code of Conduct;

(c) the engaging by Executive in misconduct that is materially and demonstrably
injurious to the Company, monetarily or otherwise;

 

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(d) perpetration of an intentional and knowing fraud against or affecting the
Company or any customer, supplier, client, agent, or executive thereof;

(e) any willful or intentional act that is demonstrably and materially injurious
to the reputation, business, financial condition or business relationships of
Company, or to Executive’s reputation or business relationships;

(f) conviction (including conviction on a nolo contendre plea) of a felony or
any crime involving fraud, dishonesty or moral turpitude; or

(g) he breach of any covenant set forth in Article V below.

4.3 Termination in the Event of Death or Disability. Executive’s employment
under this Agreement shall terminate in the event of Executive’s death or
Disability that prevents Executive from performing the essential functions of
his employment for more than twelve (12) weeks. The Company and Executive agree
that the identification of the 12 week period in this clause is as a result of
their respective, considered and mutual agreement that the nature of the
position held by the Executive and its various obligations and duties mean that
it would be an undue hardship to the Company for it to be without the services
of an officer performing the duties of Executive as anticipated by this
Agreement on a permanent basis for a period in excess of 12 consecutive weeks.

4.4 Termination by Executive for Good Reason. Executive may terminate his
employment under this Agreement for Good Reason.

4.5 Termination by Either Party. Either party may terminate Executive’s
employment under this Agreement by giving written notice to the other.

4.6 Notice of Termination; Date of Termination. The provisions of this paragraph
4.6 shall apply in connection with any termination of Executive's employment
under this Agreement pursuant to this Article IV:

(a) For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provisions in this
Agreement relied upon and if for Cause, death or Disability, shall set forth in
reasonable detail the facts and circumstances for such termination. Any
purported termination by the Company or by Executive pursuant to this Article IV
(other than a termination because of death) shall be communicated by written
Notice of Termination to the other party hereto.

(b) For purposes of this Agreement, “Date of Termination” shall mean: (1) if
Executive’s employment is terminated due to death, the last day of the month
first following the month during which Executive’s death occurs; (2) if
Executive’s employment is to be terminated for Disability, thirty (30) calendar
days after Notice of Termination is given; (3) if Executive’s employment is
terminated by the Company for Cause or by Executive for any reason, the date
specified in the Notice of Termination which in no event shall be a date more
than thirty (30) calendar days after the date of such notice; or (4) if
Executive’s employment is terminated for any other reason, the date specified in
the

 

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Notice of Termination, which in no event shall be a date earlier than thirty
(30) calendar days after the date on which a Notice of Termination is given,
unless an earlier date has been expressly agreed to by Executive in writing
either in advance of, or after, receiving such Notice of Termination.

4.7 Compensation upon Termination, Death or During Disability.

(a) During any period that Executive fails to perform Executive’s duties
hereunder as a result of incapacity due to physical or mental illness, Executive
shall not continue to receive Base Salary, but would be eligible to utilize any
accrued PTO and could be eligible for the long-term disability plan. However,
Executive shall continue to receive any other compensation and benefits to which
Executive would otherwise be entitled under this Agreement and any Plan until
Executive’s Date of Termination.

(b) If Executive’s employment under this Agreement is terminated on account of
death, the Company shall pay to Executive his Base Salary as in effect until the
Date of Termination, together with any other unpaid and pro rata amounts to
which Executive is entitled as of the Date of Termination pursuant to Article
III hereof, including, without limitation, amounts which Executive is entitled
under any Plan in accordance with the terms of such Plan.

(c) If Executive’s employment under this Agreement is terminated by the Company
for Cause or by Executive for any reason other than because of Good Reason, the
Company shall pay Executive the Base Salary through the Date of Termination and
any amounts to which the Executive is entitled under any Plan in accordance with
the terms of such Plan.

(d) If Executive’s employment under this Agreement is terminated by the Company
involuntarily for reasons other than Cause, or by Executive for Good Reason, the
Company shall provide Executive with the payments and benefits as follows:

(1) continue to pay any amounts due to Executive for Base Salary in accordance
with paragraphs 3.1 and 4.7(g) at the annual rate in effect thereunder
immediately prior to the Date of Termination (but determined without regard to
any purported reduction in Base Salary which gave rise to such termination of
employment, if any) for the period commencing on the Date of Termination and
ending twelve (12) months after the Date of Termination (the “Severance
Period”); and

(2) reimbursement of the COBRA premiums Executive actually incurs for health and
dental continuation coverage, up to a maximum period of twelve months.

Executive shall not be required to mitigate the Company’s payment obligations
pursuant to this paragraph 4.7(d) by making any efforts to secure other
employment, and any compensation which Executive receives from other employment
during the Severance Period shall not reduce the Company’s payments pursuant to
this paragraph 4.7(d).

(e) If there is a Change in Control, and within one year thereafter Executive is
terminated by the Company involuntarily for reasons other than Cause, or
Executive terminates his employment hereunder because of Good Reason, the
Company shall pay Executive Base Salary in

 

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accordance with paragraphs 3.1 and 4.7(g) at the annual rate in effect
thereunder immediately prior to the Date of Termination (but determined without
regard to any purported reduction in Base Salary which gave rise to such
termination of employment, if any) for the period commencing on the Date of
Termination and ending two (2) years after the Date of Termination (“Change in
Control Severance Period”). Executive shall not be required to mitigate the
Company’s payment obligations pursuant to this paragraph 4.7(e) by making any
efforts to secure other employment. However, if Executive obtains other
employment at an annual salary of $100,000 or more during the Change in Control
Severance Period, then the subsequent severance payments made by the Company to
the Executive during the four quarters of the second year of the Change in
Control Severance Period shall be reduced to 80% during the first quarter, 60%
during the second quarter, 40% during the third quarter, and 20% during the
fourth quarter, of Executive’s Base Salary on the Date of Termination (without
regard to any purported reduction in Base Salary which gave rise to such
termination).

During the first year of the Change in Control Severance Period only, the
Company shall provide Executive with reimbursement of the COBRA premiums he
actually incurs for health and dental continuation coverage, up to a maximum
period of twelve months.

(f) If Executive is entitled to receive any severance payments under section
4.7(d) or 4.7(e), he shall only receive such payments if he properly executes a
standard waiver and release of claims agreement beforehand.

(g) If and to the extent that any payment to be paid to Executive under this
paragraph 4.7 is governed by U.S. Internal Revenue Code Section 409A and if
Executive is a specified employee under Code Section 409A, any payments required
to be paid to Executive will begin six (6) months from the Date of Termination
of employment, or the first date on which such payment (or any part thereof)
would not be subject to the limitation or deductibility under Code
Section 162(m). In the event that such payment is so delayed, the amount of the
first payment shall be increased for interest earned on the delayed payment
based upon interest for the period of delay, compounded annually, equal to the
prime rate (as published in the Wall Street Journal) in effect as of the date
the payment should otherwise have been provided. Further, in the event that such
payment is so delayed, the first payment (representing the first six months (or
less) of accrued payment due Executive) will be paid to Executive in a lump sum
and any remaining payments due thereafter will be paid to Executive in
substantially equal regular periodic payments biweekly.

(h) If any of the Company’s financial statements are required to be restated
because of errors, omissions or fraud for which Executive is responsible, the
Company’s Board of Directors may in its sole discretion, but acting in good
faith, direct that the Company recover all or a part of any bonus or incentive
payment paid to Executive as a result of, or any increase in Executive’s Base
Salary that resulted from, the financial results that were negatively affected
by such restatement. The amount to be recovered from Executive shall be the
amount by which the severance or bonus payment or increase in Base Salary
exceeded the amount of such bonus or incentive payment or increase in Base
Salary that would have been payable to Executive had the financial statements
been initially filed as restated. In no event shall the amount to be recovered
by the Company be less than the amount required to be repaid or recovered as a
matter of law. The Board shall determine whether the Company shall effect such
recovery (i) by seeking repayment from the Executive; (ii) by reducing (subject
to applicable law and the terms and conditions of the applicable plan, program
or arrangement) the amount that would otherwise be payable

 

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to Executive under any compensatory plan, program or arrangement maintained by
the Company or any of its affiliates; (iii) by withholding payment of future
increases in compensation (including the payment of any discretionary bonus
amount) or grants of compensatory awards that would otherwise have been made on
accordance with the Company’s otherwise applicable compensation practices; or
(iv) any combination of the foregoing.

(i) The Company reserves the right to specify in the Management Bonus Plan, or
by amendment to this Agreement to any severance provision, that Executive’s
rights, payments and benefits with respect to the Management Bonus Plan or any
severance payments shall be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of certain specified events, in addition to any
otherwise applicable vesting or performance conditions. Such events shall
include, but not be limited to, termination of employment or services under
certain or all circumstances, violation of material Company policies, breach of
noncompetition, confidentiality, nonsolicitation, noninterference, corporate
property protection, or other agreement that may apply to the Executive, or
other conduct by the Executive that the Company determines is detrimental to the
business or reputation of the Company and its subsidiaries, if any.

ARTICLE V.

RESTRICTIVE COVENANTS

5.1 Non-Compete/Non-Solicitation. In consideration of this Agreement, the
undersigned Executive does hereby acknowledge and agree that he will not at any
time during employment with the Company, or thereafter for a period of two
(2) years, directly or indirectly:

(a) anywhere in the world, own an interest in, organize, conspire, join,
operate, control or participate in or be connected as an officer, employee,
agent, independent contractor, consultant, partner, shareholder or principal,
with any corporation, limited liability company, partnership, proprietorship,
association, or other entity or person engaged in developing, producing,
designing, providing, soliciting orders for, selling, distributing or marketing
products or services that directly or indirectly competes with any of the
Company’s products, services or business;

(b) induce any employee of the Company to leave the employ of the Company or any
consultant or other independent contractor for the Company to change or
terminate any relationship between that person and the Company;

(c) contract, solicit, market or accept employment from any customer, firm or
organization or any affiliate of that entity that does business with the Company
during Executive’s employment; and

(d) induce or attempt to induce any customer, firm or organization or any
affiliate of that entity to sever its relationship with the Company.

 

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5.2 Confidential Information

(a) “Confidential Information” means any information or compilation of
information which is proprietary to the Company or proprietary to others and
entrusted to the Company, and which relates to its existing or reasonably
foreseeable business, including, but not limited to, trade secrets and
information contained in or relating to product designs, business plans and to
business as conducted or anticipated to be conducted, information concerning
research, development, manufacturing methods, processes, techniques, tooling,
sales techniques, marketing plans or proposals, existing or potential customer
lists and all other customer information. Information shall be treated as
Confidential Information irrespective of its source, whether or not originated
by Executive and without regard to the manner in which Executive obtains access
to it, and whether such information is expressly identified as being
“confidential” or a “trade secret.”

(b) Executive agrees, for so long as he remains employed by the Company and at
all times thereafter, to hold in strictest confidence and to never disclose,
furnish, communicate, make accessible to any person or use in any way for
Executive’s own or another's benefit, any Confidential Information or permit the
same to be used in competition with the Company, except as permitted or directed
by the Company, as long as such information is not generally known or readily
discoverable by proper means or such person is not authorized to receive such
information. Executive acknowledges that the Confidential Information
constitutes a unique and valuable asset of the Company and represents a
substantial investment of time and expense by the Company, and that any
disclosure or otherwise of such Confidential Information other than for the sole
benefit of the Company would be wrongful and would cause irreparable harm to the
Company. Executive agrees to refrain from such acts and omissions that would
reduce the value of the Confidential Information to the Company.

(c) Upon termination of employment, Executive shall promptly return to the
Company all products and copies of product literature and materials and all
documents or copies and extracts thereof in Executive’s possession or under
Executive’s control, thereof containing any Confidential Information of the
Company, including, but not limited to all records, manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, data, tables,
calculations or copies thereof which are the property of the Company or which
relate in any way to the business products, practices or techniques of the
Company, and all other property, proprietary and Confidential Information of the
Company.

5.3 Inventions.

(a) Executive shall promptly disclose to the Company in writing all Inventions
(defined as ideas, developments, improvements and discoveries, whether or not
such are patentable, copyrightable or protectable under any statutory or
regulatory scheme, and whether or not in writing or reduced to practice) and
Works of Authorship (defined as writings, drawings, software, and any other
works of authorship, whether or not such are copyrightable) which are conceived,
made, discovered, written or created by Executive alone or jointly with another
person, group, or entity, whether during the normal hours of Executive’s
employment at the Company or on Executive’s own time during the term of this
Agreement and for one (1) year after termination of this Agreement. Executive
shall make all disclosures to the Company in a written report setting forth in
detail the structures, procedures and methodology employed and the results
achieved.

 

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Executive, by signing this Agreement, to the extent that he has the legal right
to do so, hereby assigns and agrees to assign all rights, title and interests to
all such Inventions and Works of Authorship described above to the Company and
hereby acknowledges that any and all of said Inventions and Works of Authorship
are the property of the Company.

Executive shall give the Company all the assistance it reasonably requires in
order for Company to perfect, protect, and use its rights to Inventions and
Works of Authorship. Executive shall sign all such documents, take all such
actions and supply all such information that the Company deems necessary or
desirable in order to transfer or record the transfer of Executive’s entire
right, title and interest in such Inventions and Works of Authorship; and in
order to enable the Company to obtain exclusive patent, copyright, or other
legal protection for Inventions and Works of Authorship. The Company shall bear
all expenses in this regard.

(b) Notice: Minnesota law exempts from this section 5.3 “an invention for which
no equipment, supplies, facility or trade secret information of the employer was
used and which was developed entirely on the employee’s own time, and (1) which
does not relate (a) directly to the business of the employer or (b) to the
employer’s actual or demonstrably anticipated research or development, or
(2) which does not result from any work performed by the employee for the
employer.” For purposes of this paragraph, the term “inventions” is acknowledged
to include Works of Authorship.

5.4 Enforcement. Executive agrees that the terms of this Article V specifically
survive the termination (for any reason) of Executive’s employment with the
Company. Executive acknowledges and agrees that failure to perform under this
Article V would cause irreparable injury to the Company and cause damages to the
Company that would be difficult or impossible to ascertain or quantify. The
Company, individually or collectively, shall have the right to enforce covenants
contained hereof by specific performance and preliminary, temporary and
permanent injunctive relief against Executive and any other person concerned
thereby. Damages, specific performance and injunctive relief are all proper
modes of relief and shall not be considered alternative remedies. Accordingly,
without limiting any remedies that may be available with respect to any breach
of this Article V, Executive consents to the entry of an injunction to restrain
any breach of the foregoing provisions in addition to any other relief afforded
by law without requiring the Company to obtain a bond.

5.5 Severability. If, but only to the extent that, any provision of this Article
V is declared or found to be unenforceable, then both parties will be relieved
of all obligations arising under such provision to the extent necessary. If
possible, another provision that is enforceable and achieves substantially the
same objective will be substituted. If the remainder of this Article is not
affected by such declaration or finding and is capable of substantial
performance, then the remainder will be enforced to the extent permitted by law.

5.6 Terminologies. For purposes of this Article V, the term “Company” shall
include the Company and its subsidiaries.

 

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ARTICLE VI.

GENERAL PROVISIONS

6.1 Successor and Assigns. This Agreement shall be binding upon and inure to the
benefit of any Successor of the Company, and any such Successor shall absolutely
and unconditionally assume all of the Company’s obligations hereunder. Upon
Executive’s written request, the Company will seek to have any Successor, by
agreement in form and substance satisfactory to Executive, assent to the
fulfillment by the Company of their obligations under this Agreement.

6.2 Disputes. Any dispute, controversy or claim for damages arising under or in
connection with this Agreement shall, in Executive’s sole discretion, be settled
exclusively by such judicial remedies as Executive may seek to pursue or by
arbitration in Minneapolis, Minnesota by a panel of three (3) arbitrators in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction. The parties shall each bear their own costs and expenses,
including attorney’s fees, arising in connection with any arbitration proceeding
pursuant to this paragraph 6.2. The Company shall be entitled to seek an
injunction or restraining order in a court of competent jurisdiction to enforce
the provisions of Article V.

6.3 Notices. All notices, request and demands given to or made pursuant hereto
shall, except as otherwise specified herein, be in writing and be personally
delivered or mailed postage prepaid, registered or certified U.S., as the case
may require, to any party as its address set forth on the last page of this
Agreement. Either party may, by notice hereunder, designate a changed address.
Any notice hereunder shall be deemed effectively given and received: (a) if
personally delivered, upon delivery; or (b) if mailed, on the registered date or
the date stamped on the certified mail receipt.

6.4 Withholding. To the extent required by any applicable law, including,
without limitation, any federal or state income tax or excise tax law or laws,
the Federal Insurance Contributions Act, the Federal Unemployment Tax Act or any
comparable federal, state or local laws, the Company retains the right to
withhold such portion of any amount or amounts payable to Executive under this
Agreement as the Company deems necessary.

6.5 Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.

6.6 Governing Law. The validity, interpretation, construction, performance,
enforcement and remedies of or relating to this Agreement, and the rights and
obligations of the parties hereunder, shall be governed by the substantive laws
of the state of Minnesota (without regard to the conflict of laws rules or
statutes of any jurisdiction).

6.7 Construction. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

6.8 Waivers. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise or any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy granted hereby or by any related document or by law.

 

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6.9 Modification. This Agreement may not be modified or amended except by
written instrument signed by the parties hereto.

6.10 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the matters herein
agreed upon. This Agreement replaces in full all prior agreements or
understandings of the parties hereto. Any and all other such prior agreements or
understandings are hereby rescinded by mutual agreement.

6.11 Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one (1) and the same instrument.

6.12 Survival. The parties expressly acknowledge and agree that the provisions
of this Agreement, specifically including, but not limited to, Article V, which
by their express or implied terms extend beyond the termination of Executive’s
employment hereunder shall continue in full force and effect notwithstanding
Executive’s termination of employment hereunder or the termination of this
Agreement, respectively.

6.13 Indemnification. The Company indemnifies, holds harmless, and will defend
the Executive against clams against Executive arising out of Executive’s
performance of the duties of the Executive’s employment by the Company, to the
full extent permitted by law, but not with respect to claims successfully
prosecuted against the Executive for fraudulent, grossly negligent, or criminal
acts.

6.14 Legal Advice. The Executive confirms that, prior to his execution of this
Agreement, he had a reasonable opportunity to seek and obtain independent legal
advice as to the entitlements, obligations and covenants set out in this
Agreement and that the Agreement is binding upon him.

IN WITNESS WHEREOF, the parties hereto have caused this Executive Employment
Agreement to be duly executed and delivered as of the day and year first above
written.

 

EXECUTIVE:     DELPHAX TECHNOLOGIES INC.

/s/ Dieter P. Schilling

    By:  

/s/ Earl W. Rogers

Dieter Schilling     Title:   CHAIRMAN COMPENSATION       COMMITTEE/BOARD
Address:     Address: 1065 Summit Ridge Drive     Delphax Technologies Inc.
Oakville, Ontario L6M 3K9     6100 West 110th Street Canada     Bloomington, MN
55438

 

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