<PAGE>

                                                                 Exhibit 10.04
 
THE OBLIGATIONS OF LASERMASTER CORPORATION HEREUNDER ARE SUBORDINATED TO CERTAIN
SENIOR INDEBTEDNESS TO THE EXTENT AND ON THE TERMS SET FORTH IN THAT CERTAIN
REPAYMENT, SUBORDINATION AND INTERCREDITOR AGREEMENT DATED AS OF JANUARY 17,
1996 BY AND AMONG LASERMASTER CORPORATION, LASERMASTER ASIA/PACIFIC, LTD.,
COLORMASTERS, INC., TIMEMASTERS, INC. AND GENERAL ELECTRIC CAPITAL CORPORATION,
AS AGENT, AS SUCH AGREEMENT IS FROM TIME TO TIME AMENDED.

THE CONVERSION RIGHT REPRESENTED BY THIS PROMISSORY NOTE AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2)
LASERMASTER TECHNOLOGIES, INC. RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF
SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
LASERMASTER TECHNOLOGIES, INC., THAT SUCH SECURITIES MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.


                                PROMISSORY NOTE


                                                        Minneapolis, Minnesota
$1,765,000.00                                                 January 17, 1996


     FOR VALUE RECEIVED, LaserMaster Corporation, a Minnesota corporation
("BORROWER"), promises to pay to the order of TimeMasters, Inc., a Minnesota
corporation, or its successors and permitted assigns (collectively, "HOLDER"),
the principal sum of One Million Seven Hundred Sixty Five Thousand and No/100
Dollars ($1,765,000.00) with interest thereon at the rate of one and three
quarters percent (1.75%) above the Prime Rate (as hereinafter defined) upon
demand. Until demand, interest shall be paid on the first day of each month,
commencing on February 1, 1996 and continuing on the same day of each subsequent
month.

     1.  LOAN AGREEMENT.  This Note is executed and delivered pursuant to a Loan
Agreement of even date herewith between Holder and Borrower (the "LOAN
AGREEMENT"). Capitalized terms utilized in this Note, and not separately defined
herein, shall have the meanings ascribed to such terms in the Loan Agreement.
The provisions of Section 4 of the Loan Agreement are, by this reference
thereto, incorporated into the body of this Note and made a part hereof by such
reference.

     2.  PRIME RATE DETERMINATION.  The term "PRIME RATE" as used in this
Promissory Note (the "NOTE") means an annual interest rate equal to the rate per
annum publicly announced by Norwest Bank, N.A. ("NORWEST") at its principal
office from time to time as being its prime rate.  The Prime Rate shall change
automatically, without notice and simultaneously with each change in such prime
rate announced by Norwest.  In the event that Norwest ceases to announce
<PAGE>
 

the term "Prime Rate" in setting a base rate of interest for commercial loans,
the Prime Rate herein shall be determined by reference to the rate announced in
substitution for such prime rate by Norwest as such base rate is designated by
Norwest.  A certificate of Holder as to such prime rate in effect on any day
shall, for the purposes hereof, be conclusive evidence of such prime rate in
effect on such date.  The rate of interest hereunder shall be calculated on the
basis of a 365-day year and shall be adjusted daily on the same day the Prime
Rate changes.

     3.  APPLICATION OF PAYMENTS; PREPAYMENT PRIVILEGE.  Each payment shall be
applied first in payment of interest, and the balance to unpaid principal,
except that, if there are at any time costs, expenses, late fees, advances or
other sums, including any interest thereon, for which Holder is entitled to
payment under this Note, Loan Agreement or any Security Document, then Holder
may, at its option, first apply all or part of any payments to such items.
Prepayment in full or in part may be made at any time without penalty.  Partial
prepayment shall not reduce the amount of payments required after the date of
such partial prepayment.

     4.  LATE CHARGES.  If any amount due hereunder is not paid within five (5)
business days of the date due, Borrower agrees to pay a late charge in order to
defray the expense incident to handling such delinquent payment, provided state
law does not proscribe such a charge.  Such charge shall be equal to the lesser
of four percent (4%) of the delinquent amount or the maximum amount which shall
be permitted by applicable state law, and shall be immediately due and payable,
and added to the principal balance, without notice or demand by Holder.

     5.  LOCATION OF PAYMENTS.  Amounts due under this Note shall be paid in
lawful money of the United States of America to Holder at 6425 Beach Road, Eden
Prairie, Minnesota 55344 or in such other name and to such other address as
Holder may from time to time designate in writing.

     6.  EVENTS OF DEFAULT; ACCELERATION.  Upon the occurrence of an Event of
Default, this Note shall, at the election of Holder, become immediately due and
payable in full.  Lender shall provide notice of such election to Borrower
except in the case of a bankruptcy proceeding of any Obligor.

     7.  WAIVERS BY BORROWER.  Except as set forth in this Note, the Loan
Agreement or any of the Security Documents, Borrower hereby waives presentment,
demand for payment, notice of dishonor and any or all other notices or demands
in connection with the delivery, acceptance, performance, default, or
enforcement of this Note and hereby consents to and waives any defense relating
to (i) any extensions of time, renewals, discharges, releases, or other
indulgences which may be granted to any party to this Note, (ii) release,
substitution, addition or modification of the Loan Agreement or any Security
Document or any Obligor, and (iii) waivers, modifications, releases or other
indulgences that may be granted or consented to by Holder in respect of the time
of payment or any other provisions of this Note, the Loan Agreement or any of
the Security Documents.

     8.  ENFORCEMENT COSTS.  If, and as often as, the Holder shall take any
action (whether or not involving commencement of legal proceedings) for the
defense or enforcement of Holder's rights under this Note, the Loan Agreement or
any Security Document, including

                                      -2-
<PAGE>
 

without limitation the collection of the moneys due on this Note, there shall be
immediately due from Borrower, in addition to the unpaid principal and interest,
all costs and expenses of such action, including reasonable attorney's fees,
which costs and expenses shall be due when incurred by Holder and shall be added
to the principal balance of this Note as of the date so incurred, provided that
the amount so added to the principal balance shall, when taken together with the
then existing principal balance, not exceed $1,765,000.

     9.  NO WAIVER BY HOLDER.  No delay or omission on the part of Holder in
exercising any right under this Note, the Loan Agreement or any Security
Document shall operate as a waiver or release of any such right or of any other
right under this Note, the Loan Agreement or any Security Document.  No waiver,
release or amendment by Holder shall be effective unless made in a written
document signed by Holder.  No waiver by Holder of any right in a particular
instance shall operate as a waiver of such right in a separate or later
instance.  All amounts required to be paid by the terms of this Note, the Loan
Agreement and any Security Document shall be paid without set-off, recoupment or
abatement of any kind.  The rights and remedies of Holder under this Note, the
Loan Agreement and any Security Document shall be cumulative and shall not limit
other rights or remedies available at law or in equity, and such rights and
remedies may be exercised by Holder singularly or in any combination or order,
at the option of Holder.

     10.  NO USURY.  This Note, the Loan Agreement and the Security Documents
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to the Holder
for the use, forbearance, loaning or detention of the indebtedness evidenced
hereby exceed the maximum permissible under applicable law.  If from any
circumstances whatsoever, fulfillment of any provisions hereof shall involve
exceeding the maximum interest rate applicable by law to this Note, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
law; and, if from any circumstances, Holder should ever receive, purportedly as
interest, an amount which would exceed the highest lawful rate applicable to
this Note, such amount which would be in excess of such highest lawful rate
shall be applied to the reduction of the principal balance evidenced hereby and
not to the payment of interest.  This provision shall control every other
provision of this Note, the Loan Agreement and the Security Documents and shall
also be binding upon and available to any subsequent holder or endorsee of this
Note.

     11.  CONVERSION RIGHT.

          (a) At any time during which an Event of Default shall have occurred
     and be continuing or at any time on or after the date two (2) years from
     the date of this Note, Holder shall have the right to require LMT to
     convert up to $1,000,000.00 of the outstanding indebtedness evidenced by
     this Note (the "CONVERSION RIGHT") into shares of Common Stock of LMT, par
     value $.01 per share ("COMMON STOCK") (shares of Common Stock issuable upon
     exercise of the Conversion Right are referred to as the "CONVERSION
     SHARES") as provided for in this Section.

                                      -3-
<PAGE>
 

          (b) Upon exercise of the Conversion Right, LMT shall deliver to Holder
     that number of shares of Common Stock equal to the quotient obtained by
     dividing (x) the amount of indebtedness evidenced by this Note, which
     Holder elects to convert, as specified in the Conversion Notice (as
     hereinafter defined), by (y) the Conversion Price (as hereinafter defined).

          (c) The Conversion Right may be exercised by Holder on any business
     day by delivering a written notice of conversion (the "CONVERSION NOTICE")
     to LMT specifying the total amount of indebtedness evidenced by this Note
     (up to $1,000,000.00) with respect to which Holder is exercising the
     Conversion Right.

          (d) The "Conversion Price" shall be equal to the lesser of $5.875 per
     share of Common Stock (the "INITIAL CONVERSION PRICE") or the Fair Market
     Value of a share of Common Stock as of the date of the Conversion Notice.
     For such purposes, the "Fair Market Value" per share of Common Stock shall
     mean:

              (i) If the Common Stock is traded on an exchange or is quoted on
          NASDAQ National Market, then the average closing or last sale prices,
          respectively, reported for the ten (10) business days immediately
          preceding the date of the Conversion Notice, and

              (ii) If the Common Stock is not traded on an exchange or on NASDAQ
          National Market but is traded on the over-the-counter market, then the
          average closing bid and asked prices reported for the ten (10)
          business days immediately preceding the date of the Conversion Notice.

          (e) Upon receipt by Holder of the Conversion Shares, as herein
     provided, the amount of indebtedness evidenced by this Note shall
     automatically be reduced by the amount of the indebtedness set forth in the
     Conversion Notice and such reduced amount shall be deemed paid in full.

          (f) Notwithstanding the foregoing, the Conversion Right shall lapse
     and be of no further force and effect in the event that prior to its
     exercise all amounts evidenced by this Note have been indefeasibly paid in
     full.

     12.  CONVERSION SHARE CERTIFICATE.  Upon exercise of the Conversion Right,
Holder shall be deemed to be the holder of record of the Conversion Shares
issuable upon such exercise, notwithstanding that the transfer books of LMT
shall then be closed or certificates representing such Conversion Shares shall
not then have been actually delivered to Holder.  As soon as practicable after
such exercise of the Conversion Right, LMT shall issue and deliver to Holder a
certificate or certificates for the Conversion Shares issuable upon such
exercise, registered in the name of Holder or its designee.

     13.  RESTRICTIONS ON TRANSFER.


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<PAGE>

 
          (a) This Note may only be assigned as provided in the Loan Agreement.
     In addition, the Conversion Right may not be sold, transferred,
     hypothecated or otherwise assigned except (1) to persons who are related by
     blood or marriage to Melvin Masters, (2) to entities or persons which are
     affiliates of, related to, or controlled by Melvin Masters or TimeMasters,
     Inc. or (3) in connection with any bona fide pledge by any person or entity
     who is a permitted transferee, as described in clause (1) or (2) above, or
     otherwise. LMT shall be entitled to treat the registered holder of the
     Conversion Right as the owner in fact thereof for all purposes and shall
     not be bound to recognize any equitable or other claim to or interest in
     such Conversion Right on the part of any other person, and shall not be
     liable for any registration or transfer of the Conversion Right which is
     registered or to be registered in the name of a fiduciary or the nominee of
     a fiduciary unless made with the actual knowledge that a fiduciary or
     nominee is committing a breach of trust in requesting such registration or
     transfer, or with the knowledge of such facts that its participation
     therein amounts to bad faith. The Conversion Right shall be transferable
     only on the books of LMT upon delivery thereof duly endorsed by Holder or
     by its duly authorized attorney or representative, or accompanied by proper
     evidence of succession, assignment, or authority to transfer. In all cases
     of transfer by an attorney, executor, administrator, guardian, or other
     legal representative, duly authenticated evidence of his or its authority
     shall be produced. Notwithstanding the foregoing, LMT shall have no
     obligation to cause the Conversion Right to be transferred on its books to
     any person if, in the opinion of counsel to LMT, such transfer does not
     comply with the provisions of the Securities Act of 1933, as amended (the
     "ACT"), and the rules and regulations thereunder.

          (b) Holder acknowledges that it has been advised by LMT that neither
     this Note nor the Conversion Shares have been registered under the Act,
     that this Note is being or has been issued and the Conversion Shares may be
     issued on the basis of the statutory exemption provided by Section 4(2) of
     the Act or Regulation D promulgated thereunder, or both, relating to
     transactions by an issuer not involving any public offering. Holder
     acknowledges that it has been informed by LMT of, or is otherwise familiar
     with, the nature of the limitations imposed by the Act and the rules and
     regulations thereunder on the transfer of securities. In particular, Holder
     agrees that no sale, assignment or transfer of this Note or the Conversion
     Shares issuable upon exercise of the Conversion Right shall be valid or
     effective, and LMT shall not be required to give any effect to any such
     sale, assignment or transfer, unless (i) the sale, assignment or transfer
     of this Note or such Conversion Shares is registered under the Act, it
     being understood that neither this Note nor such Conversion Shares are
     currently registered for sale and that LMT has no obligation or intention
     to so register this Note or such Conversion Shares except as specifically
     provided herein, or (ii) this Note or such Conversion Shares are sold,
     assigned or transferred in accordance with all the requirements and
     limitations of Rule 144 under the Act, or (iii) such sale, assignment, or
     transfer is otherwise exempt from registration under the Act.

     14.  RESERVATION OF SHARES.  LMT shall at all times reserve and keep
available from its authorized and unissued Common Stock, solely for the purpose
of providing for the exercise of the rights to purchase all Conversion Shares
granted pursuant to the Conversion Right, such

                                      -5-
<PAGE>
 

number of shares of Common Stock as shall, from time to time, be sufficient
therefor.  LMT covenants that all shares of Common Stock issuable upon exercise
of this Conversion Right pursuant to exercise of the Conversion Right, shall be
validly issued, fully paid, nonassessable, and free of preemptive rights.

     15.  ADJUSTMENTS.  The Conversion Price shall be subject to adjustment from
time to time as hereinafter provided in this Section 15.

          (a) If LMT at any time divides the outstanding shares of its Common
     Stock into a greater number of shares (whether pursuant to a stock split,
     stock dividend or otherwise), and conversely, if the outstanding shares of
     its Common Stock are combined into a smaller number of shares, the Initial
     Conversion Price in effect immediately prior to such division or
     combination shall be proportionately adjusted to reflect the reduction or
     increase in the value of each such share of Common Stock.

          (b) If any capital reorganization or reclassification of the capital
     stock of LMT, or consolidation or merger of LMT with another corporation,
     or the sale of all or substantially all of its assets to another
     corporation shall be effected in such a way that holders of Common Stock
     shall be entitled to receive stock, securities or assets with respect to or
     in exchange for such Common Stock, then, as a condition of such
     reorganization, reclassification, consolidation, merger or sale, Holder
     shall have the right to receive upon the basis and upon the terms and
     conditions specified in this Note and in lieu of the Conversion Shares
     immediately theretofore receivable upon the exercise of the rights
     represented hereby, such shares of stock, other securities or assets as
     would have been issued or delivered to the holder of this Note if it had
     exercised the Conversion Right and had received such shares of Common Stock
     prior to such reorganization, reclassification, consolidation, merger or
     sale. LMT shall not effect any such consolidation, merger or sale, unless
     prior to the consummation thereof the successor corporation (if other than
     LMT) resulting from such consolidation or merger or the corporation
     purchasing such assets shall assume by written instrument executed and
     mailed to the registered holder of this Note at the last address of such
     holder appearing on the books of LMT, the obligation to deliver to such
     holder such shares of stock, securities or assets as, in accordance with
     the foregoing provisions, such holder may be entitled to purchase.

          (c) If LMT takes any other action, or if any other event occurs, which
     should result in an adjustment in the number of Conversion Shares subject
     to the Conversion Right in order to fairly protect the rights of Holder, an
     appropriate adjustment shall be made by LMT.

          (d) Upon each adjustment, Holder shall thereafter be entitled to
     receive from such adjustment, the number of shares obtained by multiplying
     the Fair Market Value in effect immediately prior to such adjustment by the
     number of shares purchasable pursuant hereto immediately prior to such
     adjustment and dividing the product thereof by the Fair Market Value
     resulting from such adjustment.

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<PAGE>

 
          (e) Upon any adjustment, LMT shall give written notice thereof, by
     first class mail, postage prepaid, addressed to Holder at the address of
     such Holder as shown on the books of LMT, which notice shall state the
     nature of and reason for the adjustment and the increase or decrease, if
     any, in the number of Conversion Shares or the Fair Market Value, setting
     forth in reasonable detail the method of calculation and the facts upon
     which such calculation is based.

     16.  TAXES.  The issuance of any shares or other securities upon the
exercise of the Conversion Right, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to Holder for any tax or other charge in respect of such issuance.  LMT
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of Holder and LMT shall not be required to issue or deliver any
such certificate unless and until the person or persons requesting the issue
thereof shall have paid to LMT the amount of such tax or shall have established
to the satisfaction of LMT that such tax has been paid.

     17.  REGISTRATION RIGHTS REGARDING CONVERSION SHARES.

          (a) If, at any time on and after the date the Conversion Right has
     been exercised by Holder, as herein provided, and continuing until two
     years following such date (the "REGISTRATION PERIOD"), LMT shall file a
     registration statement (other than on Form S-4, Form S-8, or any successor
     form) with the Securities and Exchange Commission (the "COMMISSION"), LMT
     shall give all the then holders of the Conversion Shares (the "ELIGIBLE
     HOLDERS") at least 20 days prior written notice of the filing of such
     registration statement. If requested by any Eligible Holder in writing
     within 15 days after receipt of any such notice, LMT shall, at LMT's sole
     expense (other than the SEC filing fees with respect to the securities of
     the Eligible Holder and the fees and disbursements of counsel and any
     accountants for the Eligible Holder and the underwriting discounts, if any,
     payable in respect of the securities sold by any Eligible Holder), cause
     all such shares of Common Stock that are acquired by Eligible Holder upon
     the exercise of the Conversion Right and with respect to which Eligible
     Holder has requested registration, to be included in such registration
     statement, all to the extent requisite to permit the sale or other
     disposition by such Eligible Holder of the shares to be so registered;
     provided, however, that nothing herein shall prevent LMT from, at any time,
     abandoning or delaying any such registration initiated by it; provided
     further, that LMT shall not be required to include in any such registration
     statement any Conversion Shares of an Eligible Holder if all such
     Conversion Shares could be sold by such Eligible Holder under Rule 144 in a
     three month period. If any such registration shall be underwritten in whole
     or in part, LMT may require that the shares requested for inclusion by
     Eligible Holders pursuant to this Section be included in the underwriting
     on the same terms and conditions as the securities otherwise being sold
     through the underwriters. In the event that in the good faith judgment of
     the managing underwriter of such public offering the inclusion of all of
     the shares originally covered by a request for registration made by
     Eligible Holders would reduce the number of shares to be offered by LMT or
     interfere with the successful marketing of the shares of stock offered by
     LMT, the number of shares owned by Eligible Holders and otherwise to be
     included in the underwritten public

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<PAGE>
 

     offering may be reduced; provided, however, that such reduction shall be
     made among all other persons (other than LMT and the holders of "Warrant
     Shares" under the Warrant) who are participating in such offering before
     reduction is made in the shares proposed to be included by the Eligible
     Holders.

          (b) If, at any time, during the Registration Period, but on two
     occasions only, LMT shall receive a written request, from Eligible Holders
     who in the aggregate own a majority of the total number of Conversion
     Shares ("MAJORITY HOLDERS") to register the sale of all or part of such
     Conversion Shares, LMT shall, as promptly as practicable, prepare and file
     with the Commission a registration statement sufficient to permit the
     public offering and sale of the Conversion Shares through the facilities of
     all appropriate securities exchanges and the over-the-counter market, and
     will use its best efforts through its officers, directors, auditors, and
     counsel to cause such registration statement to become effective as
     promptly as practicable; and LMT shall be obligated to pay all expenses
     incurred in connection with such registration (other than SEC filing fees
     with respect to the securities of the Eligible Holders and the fees and
     disbursements of counsel for the Eligible Holders and underwriting
     discounts, if any, payable in respect of the Conversion Shares sold by the
     Eligible Holders). LMT shall not be obligated to effect any registration of
     its securities pursuant to this Section 17(b) (i) within six months after
     the effective date of a previous registration statement prepared and filed
     in accordance with Sections 17(a) (in which Conversion Shares could have
     been included) or 17(b), (ii) with respect to any Conversion Shares of an
     Eligible Holder if all such Conversion Shares could be sold by such
     Eligible Holder under Rule 144 during a three-month period, or (iii) at any
     time during which, in the reasonable judgment of the Board of Directors of
     LMT, such filing would interfere with a transaction then contemplated by
     LMT; provided, however, that LMT shall not be able to delay filing of such
     registration statement pursuant to clause (iii) for a period exceeding one
     hundred ten (110) days. Within ten business days after receiving any
     request contemplated by this Section 17(b), LMT shall give written notice
     to all the other Eligible Holders, advising each of them that LMT is
     proceeding with such registration and offering to include therein all or
     any portion of any such other Eligible Holder's registrable securities,
     provided that LMT receives a written request to do so from such Eligible
     Holder within 30 days after receipt by him or it of LMT's notice.

          (c) In the event of a registration pursuant to the provisions of this
     Section 17, LMT shall use its best efforts to cause the Eligible Holders'
     Conversion Shares so registered to be registered or qualified for sale
     under the securities or blue sky laws of such jurisdictions as Holder or
     such Eligible Holders may reasonably request; provided, however, that LMT
     shall not by reason of this Section 17(c) be required to qualify to do
     business in any state in which it is not otherwise required to qualify to
     do business or to file a general consent to service process.

          (d) LMT shall keep effective any registration or qualification
     contemplated by this Section 17 and shall from time to time amend or
     supplement each applicable registration statement, preliminary prospectus,
     final prospectus, application, document, and communication for such period
     of time as shall be required to permit the Eligible

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<PAGE>
 

     Holders to complete the offer and sale of the Conversion Shares covered
     thereby or until the date on which all Conversion Shares can be sold
     pursuant to Rule 144 under the Act in a period of three months.

          (e) In the event of a registration pursuant to the provisions of this
     Section 17, LMT shall furnish to each Eligible Holder such number of copies
     of the registration statement and of each amendment and supplement thereto
     (in each case, including all exhibits), such reasonable number of copies of
     each prospectus contained in such registration statement and each
     supplement or amendment thereto (including each preliminary prospectus),
     all of which shall conform to the requirements of the Act and the rules and
     regulations thereunder, and such other documents, as any Eligible Holder
     may reasonably request to facilitate the disposition of the Conversion
     Shares included in such registration.

          (f) In the event of a registration pursuant to the provisions this
     Section 17, LMT shall furnish each Eligible Holder of any Conversion Shares
     so registered with an opinion of its counsel (reasonably acceptable to the
     Eligible Holders) to the effect that (i) the registration statement has
     become effective under the Act and no order suspending the effectiveness of
     the registration statement, preventing or suspending the use of the
     registration statement, any preliminary prospectus, any final prospectus,
     or any amendment or supplement thereto has been issued, nor to the best
     knowledge of such counsel has the Commission or any securities or blue sky
     authority of any jurisdiction instituted or threatened to institute any
     proceedings with respect to such an order, (ii) each document, if any,
     incorporated by reference in the registration statement and the prospectus
     included therein (except for financial statements and related schedules, as
     to which such counsel need express no opinion) complied as to form when
     filed with the Commission in all material respects with the Securities
     Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
     regulations of the Commission thereunder, (iii) the registration statement
     and the prospectus included therein and any supplements or amendments
     thereto (except for financial statements and related schedules, as to which
     such counsel need express no opinion) comply as to form in all material
     respects with the Act and the rules and regulations of the Commission
     thereunder, and (iv) such counsel believes that (except for financial
     statements and related schedules, as to which such counsel need express no
     belief) such registration statement and the prospectus included therein at
     the time such registration statement became effective did not contain any
     untrue statement of a material fact or omit to state a material fact
     required to be stated therein or necessary to make the statements therein,
     in light of the circumstances under which they were made, not misleading
     and the prospectus, as amended or supplemented, if applicable, does not
     contain any untrue statement of a material fact or omit to state a material
     fact necessary in order to make the statements therein, in light of the
     circumstances under which they were made, not misleading. Such opinion
     shall also state the jurisdictions in which the Conversion Shares have been
     registered or qualified for sale pursuant to the provisions of this Section
     17. LMT shall also furnish to each Eligible Holder a cold comfort letter
     from the independent certified public accountants of LMT in customary form
     and substance if

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<PAGE>

 
     such cold comfort letter is to be provided to any other person in
     connection with the registration.

          (g) In the event of a registration pursuant to the provision of this
     Section 17, LMT and the Eligible Holders shall enter into a cross-indemnity
     agreement and a contribution agreement, each in customary form, with each
     underwriter, if any, and, if requested, enter into an underwriting
     agreement containing conventional representations, warranties, allocation
     of expenses, and customary closing conditions, including, without
     limitation, opinions of counsel and accountants' cold comfort letters, with
     any underwriter who acquires any Conversion Shares.

          (h) LMT agrees that, after the completion of such public offering and
     until all the Conversion Shares have been sold under a registration
     statement or pursuant to Rule 144 under the Act, it shall keep current in
     filing all reports, statements and other materials required to be filed
     with the Commission to permit holders of the Conversion Shares to sell such
     securities under Rule 144.

     18.  INDEMNIFICATION REGARDING REGISTRATION OF CONVERSION SHARES.

          (a) Subject to the conditions set forth below, LMT agrees to indemnify
     and hold harmless each Eligible Holder, its officers, directors, partners,
     trustees, employees, agents, and counsel, and each person, if any, who
     controls any such person within the meaning of Section 15 of the Act or
     Section 20(a) of the Exchange Act, from and against any and all loss,
     liability, charge, claim, damage, and expense whatsoever (which shall
     include, for all purposes of this Section 18(a), without limitation,
     attorneys' fees and any and all expense whatsoever incurred in
     investigating, preparing, or defending against any litigation, commenced or
     threatened, or any claim whatsoever, and any and all amounts paid in
     settlement of any claim or litigation), as and when incurred, arising out
     of, based upon, or in connection with (A) any untrue statement or alleged
     untrue statement of a material fact contained (i) in any registration
     statement, preliminary prospectus, or final prospectus (as from time to
     time amended and supplemented), or any amendment or supplement thereto,
     relating to the sale of any of the Conversion Shares, or (ii) in any
     application or other document or communication (in this Section 18
     collectively called an "application") executed by or on behalf of LMT or
     based upon written information furnished by or on behalf of LMT filed in
     any jurisdiction in order to register or qualify any of the Conversion
     Shares under the securities or blue sky laws thereof or filed with the
     Commission or any securities exchange; or (B) any omission or alleged
     omission to state a material fact required to be stated therein or
     necessary to make the statements therein not misleading, unless such
     statement or omission was made in reliance upon and in conformity with
     written information furnished to LMT with respect to such Eligible Holder
     by or on behalf of such person expressly for inclusion in any registration
     statement, preliminary prospectus, or final prospectus, or any amendment or
     supplement thereto, or in any application, as the case may be. The
     foregoing agreement to indemnify shall be in addition to any liability LMT
     may otherwise have, including liabilities arising under this Note, the Loan
     Agreement and the Security Documents.

                                     -10-
<PAGE>
 
          (b) Eligible Holders agree to indemnify and hold harmless LMT and any
     underwriter, and each of their respective officers, directors, partners,
     trustees, employees, agents and counsel, and each person who controls any
     such person within the meaning of Section 15 of the Act or Section 20(a) of
     the Exchange Act, from and against any and all loss, damage, liability,
     cost or expense whatsoever (which shall include, for all purposes of this
     Section 18(b), without limitation, attorneys' fees and any and all expenses
     whatsoever incurred in investigating, preparing, or defending against
     litigation, commenced or threatened, or any claim whatsoever, and any and
     all amounts paid in settlement of any claim or litigation) as and when
     incurred, arising out of, based upon, or in connection with (A) any untrue
     or alleged untrue statement of any material fact contained in (i) any
     registration statement, any prospectus contained therein or any amendment
     or supplement thereto relating to sale of the Conversion Shares, or (ii) in
     any application; or (B) arising out of, or based upon the omission or the
     alleged omission to state in any such registration statement, prospectus or
     application a material fact required to be stated therein or necessary to
     make the statements therein, in light of the circumstances in which they
     were made, not misleading, in each case to the extent, but only to the
     extent, that such untrue statement or alleged untrue statement or omission
     or alleged omission was so made in reliance upon and in strict conformity
     with written information furnished by Eligible Holders.

     19.  LEGEND.  Unless registered pursuant to the provisions of Section 17
hereof, the Conversion Shares issued upon exercise of the Conversion Right shall
be subject to a stop transfer order and the certificate or certificates
evidencing such Conversion Shares shall bear the following legend:

          "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
     SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
     OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
     REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND
     ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
     OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
     OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
     MAYBE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
     CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
     APPLICABLE STATE SECURITIES LAWS."

     20.  NO SHAREHOLDER RIGHTS.  Holder shall not have solely on account of the
Conversion Right, any rights of a shareholder of LMT, either at law or in
equity, or to any notice of meetings of shareholders or of any other proceedings
of LMT, except as provided in this Note, the Loan Agreement or the Security
Documents.

     21.  GOVERNING LAW.  This Note has been negotiated and consummated in the
State of Minnesota and shall be construed in accordance with the laws of the
State of Minnesota applicable to contracts made and performed within such State,
without regard to principles

                                     -11-
<PAGE>
 

governing conflicts of law.

     22.  JURISDICTION.  Borrower and LMT irrevocably consent to the
jurisdiction of the courts of the State of Minnesota and of any federal court
located in such State in connection with any action or proceeding arising out of
or relating to this Note, any document or instrument delivered pursuant to, in
connection with or simultaneously with this Note, or a breach of this Note or
any such document or instrument.

     23.  MISCELLANEOUS.  This Note may not be modified orally, but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.  Time is of the essence
hereof.

     24.  ORIGINAL NOTE RENEWAL.  This Note has been executed and delivered as a
renewal of the Original Note in accordance with the terms and conditions of an
endorsement affixed to the Original Note.


                              LASERMASTER CORPORATION,
                              a Minnesota corporation



                              By /s/ Robert J. Wenzel
                                 -------------------------
                                 Its President
                                 -------------------------


                                     -12-
<PAGE>
 

                                CONSENT OF LMT
                                --------------

     The undersigned consents and agrees to be bound to the provisions of
Sections 11 through 24 of the foregoing Note as of the date first above written.
The undersigned has executed and delivered to Lender a Guaranty of even date
herewith by which the undersigned has guaranteed the "Obligations," as such term
is defined in such Guaranty, and by reason of its signature below, the
undersigned shall not be, and shall not deemed, a co-maker, acknowledgement
party, or endorser of the foregoing Note.


                               LASERMASTER TECHNOLOGIES, INC.,
                               a Minnesota corporation



                               By /s/ Robert J. Wenzel
                                  ---------------------------
                                  Its COO
                                      -----------------------


                                     -13-