<PAGE>

                                                                     Exhibit 4.2

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
         ANY STATE OF THE UNITED STATES (COLLECTIVELY, THE "ACTS"). THE
         SECURITIES MAY NOT BE SOLD, DISTRIBUTED, OFFERED, PLEDGED, ENCUMBERED,
         ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF THE FOLLOWING: (1)
         AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACTS
         COVERING THE TRANSACTION, (2) THE COMPANY RECEIVES AN OPINION OF
         COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
         IS NOT REQUIRED UNDER THE ACTS, OR (3) THE COMPANY OTHERWISE SATISFIES
         ITSELF THAT REGISTRATION IS NOT REQUIRED UNDER THE ACTS.
         NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
         CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
         ARRANGEMENT SECURED BY THE SECURITIES.

         THIS CONVERTIBLE NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN
         SUBORDINATION AGREEMENT, DATED AS OF FEBRUARY 4, 2004, BY AND BETWEEN
         LASALLE BUSINESS CREDIT, LLC AND TATE CAPITAL PARTNERS FUND, LLC. 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.

                            DELPHAX TECHNOLOGIES INC.

                        7% CONVERTIBLE SUBORDINATED NOTE
                              DUE: FEBRUARY 4, 2008

$3,000,000                                                      February 4, 2004

         For value received, the undersigned, Delphax Technologies Inc., a
Minnesota corporation (the "Company"), hereby promises to pay to the order of
Tate Capital Partners Fund, LLC ("Tate") (or his, her or its assignee so long as
such assignee is (i) an Investor named on the signature pages to the Purchase
Agreement (as hereinafter defined) or (ii) a partner or affiliate of Tate), at
its principal office in the City of Minnetonka, Minnesota, the principal sum of
Three Million Dollars and no cents ($3,000,000) (the "Face Amount") in lawful
money of the United States on February 4, 2008 (the "Maturity Date"), together
with interest thereon, as more fully provided below.

         This Convertible Subordinated Note (the "Convertible Note") shall bear
annual interest (the "PIK Interest") at a fixed rate of 7% of the unpaid Face
Amount, payable quarterly as of the

                                       -1-
<PAGE>

first business day of each calendar quarter in arrears only in shares of common
stock, par value $.10 per share (the "Common Stock"), of the Company (the "PIK
Interest Shares"), which number of shares shall be determined by dividing the
monetary value of the accrued interest due on the unpaid Face Amount for the
relevant quarterly period by the Initial Conversion Price (as hereinafter
defined). The Company agrees to provide notice to the Investors at least three
business days prior to the issuance of any PIK Interest Shares.

         This Convertible Note has been issued under the terms and provisions of
a Securities Purchase Agreement (the "Purchase Agreement"), dated as of the date
hereof, among the Company and the Investors named on the signature pages
thereto.

         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 Convertible Note, including any accrued but unpaid PIK Interest,
may be declared to be or shall become immediately due and payable as provided in
the Purchase Agreement.

         No pre-payment of any of the Face Amount of this Convertible Note may
be made except as provided in paragraph 8 hereof.

         This Convertible Note is subject to the following additional
provisions, terms and conditions:

         1.       RIGHT TO CONVERT.

         Subject to paragraph 3 hereof, the Face Amount of this Convertible Note
shall be convertible at the option of the Investor, in whole or in part, at any
time prior to the Maturity Date into such number of fully paid and
non-assessable shares of Common Stock of the Company as is determined by
dividing the Face Amount of this Convertible Note or the portion that is being
converted by the "Initial Conversion Price" of $3.20 per share. Until such time
as this Convertible Note is converted or paid off, the Initial Conversion Price
is subject to adjustment as hereinafter provided, except that if the Company
exercises its option to redeem the Convertible Note as provided for in paragraph
8 below (and payment is made or provided for on the proposed redemption date),
then only the portion of the Convertible Note that was not redeemed may be
converted.

         2.       CONVERSION PROCEDURE.

         (a)      Before any holder of this Convertible Note shall be entitled
to convert the same into shares of Common Stock, such holder shall surrender the
instrument or instruments therefor, duly endorsed, at the office of the Company
or its transfer agent, and shall give written notice to the Company at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. A Convertible Note so delivered shall be deemed
to have been converted on the day of surrender of this Convertible Note for
conversion in accordance with the foregoing provisions, and at such time the
rights of the holder of this Convertible Note to be converted, as such holder,
shall cease and such holder shall be treated for all purposes as the record
holder of

                                      -2-
<PAGE>

the Common Stock of the Company issuable upon conversion. Within five business
days of the conversion date, the Company or its transfer agent shall issue a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with, in the event this Convertible Note is
being converted in part only, a new Convertible Note representing the Face
Amount hereof which shall not have been converted.

         (b)      Upon receipt of a certificate or certificates for the number
of full shares of Common Stock issuable upon conversion as herein provided, this
Convertible Note shall no longer be deemed to be outstanding and all rights with
respect to this Convertible Note shall immediately cease and terminate other
than the right of the Investor to receive Common Stock (and, in the event of a
partial conversion, a new Convertible Note representing the Face Amount hereof
which shall not have been converted) in exchange therefor. This Convertible Note
shall then be cancelled.

         3.       INITIAL CONVERSION PRICE ADJUSTMENTS OF CONVERTIBLE NOTE FOR
CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS.

         The Initial Conversion Price of the Convertible Note shall be subject
to adjustment from time to time as follows:

                  (i)      Upon each adjustment of the conversion price, the
         holder of this Convertible Note shall thereafter be entitled to receive
         the number of shares obtained by multiplying the conversion price in
         effect immediately prior to such adjustment by the number of shares
         issuable pursuant to conversion immediately prior to such adjustment,
         and dividing the product thereof by the conversion price resulting from
         such adjustment.

                  (ii)     Except for (a) options to purchase shares of Common
         Stock and the issuance of awards of Common Stock pursuant to key
         employee, director and consultant benefit plans adopted by the Company
         and except for shares of Common Stock issued upon the exercise of such
         options granted pursuant to such plans (provided that the aggregate
         number of shares thus awarded and covered by unexercised options and
         thus issued pursuant to such options shall not be in excess of 500,000
         shares (appropriately adjusted to reflect stock splits, stock
         dividends, reorganizations, consolidations and similar changes)); and
         (b) issuances of securities as set forth in Section 4.13(b)(ii) of the
         Purchase Agreement, if at any time during the first 12 months following
         the date of closing of the transactions contemplated by the Purchase
         Agreement, the Company shall issue or sell any shares of its Common
         Stock or Convertible Securities (as hereinafter defined) for a
         consideration per share less than the conversion price in effect
         immediately prior to the time of such issue or sale, then, forthwith
         upon such issue or sale, the conversion price shall be reduced to the
         price (calculated to the nearest cent) determined by dividing (A) an
         amount equal to the sum of (1) the number of shares of Common Stock
         outstanding immediately prior to such issue or sale multiplied by the
         conversion price then in effect, and (2) the consideration, if any,
         received by the Company upon such issue or sale, by (B) an

                                      -3-
<PAGE>

         amount equal to the sum of (1) the number of shares of Common Stock
         outstanding immediately prior to such issue or sale and (2) the number
         of shares of Common Stock thus issued or sold.

                  (iii)    For the purposes of paragraph (ii), the following
         provisions (A) to (E), inclusive, shall also be applicable:

                           (A)      In case at any time during the first 12
                  months following the date of closing of the transactions
                  contemplated by the Purchase Agreement, the Company shall
                  grant (whether directly or by assumption in a merger or
                  otherwise) any rights to subscribe for or to purchase, or any
                  options for the purchase of, (aa) Common Stock or (bb) any
                  obligations or any shares of stock of the Company which are
                  convertible into or exchangeable for Common Stock (any of such
                  obligations or shares of stock being hereinafter called
                  "Convertible Securities") whether or not such rights or
                  options or the right to convert or exchange any such
                  Convertible Securities are immediately exercisable, and the
                  price per share for which Common Stock is issuable upon the
                  exercise of such rights or options or upon conversion or
                  exchange of such Convertible Securities (determined by
                  dividing (aa) the total amount, if any, received or receivable
                  by the Company as consideration for the granting of such
                  rights or options, plus the minimum aggregate amount of
                  additional consideration payable to the Company upon the
                  exercise of such rights or options, plus, in the case of such
                  rights or options which relate to Convertible Securities, the
                  minimum aggregate amount of additional consideration, if any,
                  payable upon the issue or sale of such Convertible Securities
                  and upon the conversion or exchange thereof, by (bb) the total
                  maximum number of shares of Common Stock issuable upon the
                  exercise of such rights or options or upon the conversion or
                  exchange of all such Convertible Securities issuable upon the
                  exercise of such rights or options) shall be less than the
                  conversion price in effect immediately prior to the time of
                  the granting of such rights or options, then the total maximum
                  number of shares of Common Stock issuable upon the exercise of
                  such rights or options or upon conversion or exchange of the
                  total maximum amount of such Convertible Securities issuable
                  upon the exercise of such rights or options shall (as of the
                  date of granting of such rights or options) be deemed to have
                  been issued for such price per share. Except as provided in
                  paragraph (vi) below, no further adjustments of the conversion
                  price shall be made upon the actual issue of such Common Stock
                  or of such Convertible Securities upon exercise of such rights
                  or options or upon the actual issue of such Common Stock upon
                  conversion or exchange of such Convertible Securities.

                                      -4-
<PAGE>

                           (B)      In case the Company shall issue or sell
                  (whether directly or by assumption in a merger or otherwise),
                  during the first 12 months following the date of closing of
                  the transactions contemplated by the Purchase Agreement, any
                  Convertible Securities, whether or not the rights to exchange
                  or convert thereunder are immediately exercisable, and the
                  price per share for which Common Stock is issuable upon such
                  conversion or exchange (determined by dividing (aa) the total
                  amount received or receivable by the Company as consideration
                  for the issue or sale of such Convertible Securities, plus the
                  minimum aggregate amount of additional consideration, if any,
                  payable to the Company upon the conversion or exchange
                  thereof, by (bb) the total maximum number of shares of Common
                  Stock issuable upon the conversion or exchange of all such
                  Convertible Securities) shall be less than the conversion
                  price in effect immediately prior to the time of such issue or
                  sale, then the total maximum number of shares of Common Stock
                  issuable upon conversion or exchange of all such Convertible
                  Securities shall (as of the date of the issue or sale of such
                  Convertible Securities) be deemed to be outstanding and to
                  have been issued for such price per share, provided that (x)
                  except as provided in paragraph (vi) below, no further
                  adjustments of the conversion price shall be made upon the
                  actual issue of such Common Stock upon conversion or exchange
                  of such Convertible Securities, and (y) if any such issue or
                  sale of such Convertible Securities is made upon exercise of
                  any rights to subscribe for or to purchase or any option to
                  purchase any such Convertible Securities for which adjustments
                  of the conversion price have been or are to be made pursuant
                  to other provisions of this paragraph (iii), no further
                  adjustment of the conversion price shall be made by reason of
                  such issue or sale.

                           (C)      In case any shares of Common Stock or
                  Convertible Securities or any rights or options to purchase
                  any such Common Stock or Convertible Securities shall be
                  issued or sold for cash during the first 12 months following
                  the date of closing of the transactions contemplated by the
                  Purchase Agreement, the consideration received therefor shall
                  be deemed to be the amount received by the Company therefor,
                  without deduction therefrom of any expenses incurred or any
                  underwriting commissions, discounts or concessions paid or
                  allowed by the Company in connection therewith. In case any
                  shares of Common Stock or Convertible Securities or any rights
                  or options to purchase any such Common Stock or Convertible
                  Securities shall be issued or sold for a consideration other
                  than cash, the amount of the consideration other than cash
                  received by the Company shall be deemed to be the

                                      -5-
<PAGE>

                  fair value of such consideration as determined in good faith
                  by the Board of Directors of the Company, without deducting
                  therefrom of any expenses incurred or any underwriting
                  commissions, discounts or concessions paid or allowed by the
                  Company in connection therewith. In case any shares of Common
                  Stock or Convertible Securities or any rights or options to
                  purchase such Common Stock or Convertible Securities shall be
                  issued in connection with any merger or consolidation in which
                  the Company is the surviving corporation, the amount of
                  consideration therefor shall be deemed to be the fair value as
                  determined in good faith by the Board of Directors of the
                  Company of such portion of the assets and business of the
                  non-surviving corporation or corporations as such Board shall
                  determine to be attributable to such Common Stock, Convertible
                  Securities, rights or options, as the case may be. In the
                  event of any consolidation or merger of the Company in which
                  the Company is not the surviving corporation or in the event
                  of any sale of all or substantially all of the assets of the
                  Company for stock or other securities of any other
                  corporation, the Company shall be deemed to have issued a
                  number of shares of its Common Stock for stock or securities
                  of the other corporation computed on the basis of the actual
                  exchange ratio on which the transaction was predicated and for
                  a consideration equal to the fair market value on the date of
                  such transaction of such stock or securities of the other
                  corporation, and if any such calculation results in adjustment
                  of the conversion price, the determination of the number of
                  shares of Common Stock issuable upon conversion immediately
                  prior to such merger, conversion or sale, for purposes of
                  paragraph (vii) below, shall be made after giving effect to
                  such adjustment of the conversion price.

                           (D)      In case the Company shall, during the first
                  12 months following the date of closing of the transactions
                  contemplated by the Purchase Agreement, take a record of the
                  holders of its Common Stock for the purpose of entitling them
                  (aa) to receive a dividend or other distribution payable in
                  Common Stock or in Convertible Securities, or in any rights or
                  options to purchase any Common Stock or Convertible
                  Securities, or (bb) to subscribe for or purchase Common Stock
                  or Convertible Securities, then such record date shall be
                  deemed to be the date of the issue or sale of the shares of
                  Common Stock deemed to have been issued or sold upon the
                  declaration of such dividend or the making of such other
                  distribution or the date of the granting of such rights of
                  subscription or purchase, as the case may be.

                           (E)      The number of shares of Common Stock
                  outstanding at any given time shall not include shares owned
                  or

                                      -6-
<PAGE>

                  held by or for the account of the Company, and the disposition
                  of any such shares shall be considered an issue or sale of
                  Common Stock for the purposes of this paragraph (iii).

                  (iv)     In case the Company shall (A) declare a dividend upon
         the Common Stock payable in Common Stock (other than a dividend
         declared to effect a subdivision of the outstanding shares of Common
         Stock, as described in paragraph (v) below) or Convertible Securities,
         or in any rights or options to purchase Common Stock or Convertible
         Securities, or (B) declare any other dividend or make any other
         distribution upon the Common Stock payable otherwise than out of
         earnings or earned surplus, then thereafter the holder of this
         Convertible Note upon the conversion hereof will be entitled to receive
         the number of shares of Common Stock to which such holder shall be
         entitled upon such conversion, and, in addition and without further
         payment therefor, (1) each dividend described in clause (A) above and
         (2) each dividend or distribution described in clause (B) above which
         such holder would have received by way of dividends or distributions if
         continuously since such holder became the record holder of this
         Convertible Note such holder (A) had been the record holder of the
         number of shares of Common Stock then received, and (B) had retained
         all dividends or distributions in stock or securities (including Common
         Stock or Convertible Securities, and any rights or options to purchase
         any Common Stock or Convertible Securities) payable in respect of such
         Common Stock or in respect of any stock or securities paid as dividends
         or distributions and originating directly or indirectly from such
         Common Stock. For the purposes of the foregoing, a dividend or
         distribution other than in cash shall be considered payable out of
         earnings or earned surplus only to the extent that such earnings or
         earned surplus are charged an amount equal to the fair value of such
         dividend or distribution as determined by the Board of Directors of the
         Company.

                  (v)      In case the Company shall at any time subdivide its
         outstanding shares of Common Stock into a greater number of shares, the
         conversion price in effect immediately prior to such subdivision shall
         be proportionately reduced, and conversely, in case the outstanding
         shares of Common Stock of the Company shall be combined into a smaller
         number of shares, the conversion price in effect immediately prior to
         such combination shall be proportionately increased.

                  (vi)     If (A) the purchase price provided for in any right
         or option referred to in clause (A) of paragraph (iii), or (B) the
         additional consideration, if any, payable upon the conversion or
         exchange of Convertible Securities referred to in clause (A) or clause
         (B) of paragraph (iii), or (C) the rate at which any Convertible
         Securities referred to in clause (A) or clause (B) of paragraph (iii)
         are convertible into or exchangeable for Common Stock shall change at
         any time (other than under or by reason of provisions designed to
         protect against dilution), the conversion price then in effect shall
         forthwith be increased or decreased to such conversion price which
         would have obtained had the adjustments made upon the issuance of such
         rights, options or Convertible Securities been made upon the

                                      -7-
<PAGE>

         basis of (A) the issuance of the number of shares of Common Stock
         theretofore actually delivered upon the exercise of such options or
         rights or upon the conversion or exchange of such Convertible
         Securities, and the total consideration received therefor, and (B) the
         issuance at the time of such change of any such options, rights or
         Convertible Securities then still outstanding for the consideration, if
         any, received by the Company therefor and to be received on the basis
         of such changed price; and on the expiration of any such option or
         right or the termination of any such right to convert or exchange such
         Convertible Securities, the conversion price then in effect hereunder
         shall forthwith be increased to such conversion price which would have
         obtained had the adjustments made upon the issuance of such rights or
         options or Convertible Securities been made upon the basis of the
         issuance of the shares of Common Stock theretofore actually delivered
         (and the total consideration received therefor) upon the exercise of
         such rights or options or upon the conversion or exchange of such
         Convertible Securities. If the purchase price provided for in any such
         right or option referred to in clause (A) of paragraph (iii) or the
         rate at which any Convertible Securities referred to in clause (A) or
         clause (B) of paragraph (iii) are convertible into or exchangeable for
         Common Stock shall decrease at any time under or by reason of
         provisions with respect thereto designed to protect against dilution,
         then in case of the delivery of Common Stock upon the exercise of any
         such right or option or upon conversion or exchange of any such
         Convertible Security, the conversion price then in effect hereunder
         shall forthwith be decreased to such conversion price as would have
         obtained had the adjustments made upon the issuance of such right,
         option or Convertible Securities been made upon the basis of the
         issuance of (and the total consideration received for) the shares of
         Common Stock delivered as aforesaid.

                  (vii)    If any capital reorganization or reclassification of
         the capital stock of the Company, or consolidation or merger of the
         Company 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 Common Stock,
         then, as a condition of such reorganization, reclassification,
         consolidation, merger or sale, lawful and adequate provision shall be
         made whereby the holder hereof shall thereafter have the right to
         purchase and receive, upon the basis and upon the terms and conditions
         specified in this Convertible Note and in lieu of the shares of the
         Common Stock of the Company immediately theretofore receivable upon
         conversion hereof, such shares of stock, securities or assets as may be
         issued or payable with respect to or in exchange for a number of
         outstanding shares of such Common Stock equal to the number of shares
         of such stock immediately theretofore receivable upon conversion hereof
         had such reorganization, reclassification, consolidation, merger or
         sale not taken place, and in any such case appropriate provision shall
         be made with respect to the rights and interests of the holder of this
         Convertible Note to the end that the provisions hereof (including
         without limitation provisions for adjustments of the conversion price
         and of the number of shares issuable upon the conversion of this
         Convertible

                                      -8-
<PAGE>

         Note) shall thereafter be applicable, as nearly as may be, in relation
         to any shares of stock, securities or assets thereafter deliverable
         upon the conversion hereof. The Company shall not effect any such
         consolidation, merger or sale, unless prior to the consummation thereof
         the successor corporation (if other than the Company) resulting from
         such consolidation or merger or the corporation purchasing such assets
         shall assume, by written instrument executed and mailed to the
         registered holder hereof at the last address of such holder appearing
         on the books of the Company, 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 receive.

                  (viii)   Upon any adjustment of the conversion price, then and
         in each such case the Company shall give written notice thereof, by
         first-class mail, postage prepaid, addressed to the registered holder
         of this Convertible Note at the address of such holder as shown on the
         books of the Company, which notice shall state the conversion price
         resulting from such adjustment and the increase or decrease, if any, in
         the number of shares receivable at such price upon the conversion of
         this Convertible Note, setting forth in reasonable detail the method of
         calculation and the facts upon which such calculation is based.

                  (ix)     In case any time:

                           (1)      the Company shall declare any cash dividend
                  on its Common Stock at a rate in excess of the rate of the
                  last cash dividend theretofore paid;

                           (2)      the Company shall pay any dividend payable
                  in stock upon its Common Stock or make any distribution (other
                  than regular cash dividends) to the holders of its Common
                  Stock;

                           (3)      the Company shall offer for subscription pro
                  rata to the holders of its Common Stock any additional shares
                  of stock of any class or other rights;

                           (4)      there shall be any capital reorganization,
                  or reclassification of the capital stock of the Company, or
                  consolidation or merger of the Company with, or sale of all or
                  substantially all of its assets to, another corporation; or

                           (5)      there shall be a voluntary or involuntary
                  dissolution, liquidation or winding up of the Company;

         then, in any one or more of said cases, the Company shall give written
         notice, by first-class mail, postage prepaid, addressed to the
         registered holder of this Convertible Note at the address of such
         holder as shown on the books of the Company, of the date on which (aa)
         the books of the Company shall close or a

                                      -9-
<PAGE>

         record shall be taken for such dividend, distribution or subscription
         rights, or (bb) such reorganization, reclassification, consolidation,
         merger, sale, dissolution, liquidation or winding up shall take place,
         as the case may be. Such notice shall also specify the date as of which
         the holders of Common Stock of record shall participate in such
         dividend, distribution or subscription rights, or shall be entitled to
         exchange their Common Stock for securities or other property
         deliverable upon such reorganization, reclassification, consolidation,
         merger, sale, dissolution, liquidation or winding up, as the case may
         be. Such written notice shall be given at least 20 days prior to the
         action in question and not less than 20 days prior to the record date
         or the date on which the Company's transfer books are closed in respect
         thereto.

                  (x)      No fractional shares of Common Stock shall be issued
         upon the conversion of this Convertible Note, but, instead of any
         fraction of a share which would otherwise be issuable, the Company
         shall pay a cash adjustment in respect of such fraction in an amount
         equal to the same fraction of the market price per share of Common
         Stock as of the close of business on the date of the notice required by
         paragraph (b) above. "Market price" for purposes of this paragraph (x)
         shall mean, if the Common Stock is traded on a securities exchange or
         on the NASDAQ National Market System, the closing price of the Common
         Stock on such exchange or the NASDAQ National Market System, or, if the
         Common Stock is otherwise traded in the over-the-counter market, the
         closing bid price, in each case averaged over a period of 20
         consecutive business days prior to the date as of which "market price"
         is being determined. If at any time the Common Stock is not traded on
         an exchange or the NASDAQ National Market System, or otherwise traded
         in the over-the-counter market, the "market price" shall be deemed to
         be the higher of (i) the book value thereof as determined by any firm
         of independent public accountants of recognized standing selected by
         the Board of Directors of the Company 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 (ii) the fair value thereof determined in good faith
         by the Board of Directors of the Company as of a date which is within
         15 days of the date as of which the determination is to be made.

                  (xi)     As used herein, the term "Common Stock" shall mean
         and include the Company's presently authorized Common Stock and shall
         also include any capital stock of any class of the Company hereafter
         authorized which shall not be limited to a fixed sum or percentage in
         respect of the rights of the holders thereof to participate in
         dividends or in the distribution of assets upon the voluntary or
         involuntary liquidation, dissolution or winding up of the Company;
         provided that the shares issuable upon conversion of this Convertible
         Note shall include shares designated as Common Stock of the Company on
         the date of original issue of this Convertible Note or, in the case of
         any reclassification of the outstanding shares thereof, the stock,
         securities or assets provided for in paragraph (vii) above.

                                      -10-
<PAGE>

                  (xii)    Notwithstanding anything to the contrary contained in
         this Convertible Note, the payment of the PIK Interest Shares by the
         Company to holders of the Company's 7% convertible subordinated notes
         issued pursuant to the Purchase Agreement shall not trigger any of the
         anti-dilution provisions specified under this paragraph 3.

                  (xiii)   If any event occurs as to which in the opinion of the
         Board of Directors of the Company the other provisions of this
         paragraph 3 are not strictly applicable or if strictly applicable would
         not fairly protect the rights of the holder of this Convertible Note or
         of Common Stock in accordance with the essential intent and principles
         of such provisions, then the Board of Directors shall make an
         adjustment in the application of such provisions, in accordance with
         such essential intent and principles, so as to protect such rights as
         aforesaid.

         4.       CHANGE IN CONTROL PUT OPTION.

         (a)      In the event of a Change in Control (as hereinafter defined)
of the Company, the holder hereof shall have the option (the "Change in Control
Put Option") to require that this Convertible Note be redeemed by the Company in
whole (but not in part), at 120% of the outstanding unpaid Face Amount, plus all
unpaid PIK Interest accrued thereon to the redemption date.

         The Company shall give the holder of this Convertible Note written
notice of such impending transaction not later than 20 days prior to the
shareholders' meeting of the Company 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") and shall describe the material terms and
conditions of the transaction and of this paragraph 4(a) (including, without
limiting the generality of the foregoing, a description of the value of the
consideration, if any, being offered to the holders of the outstanding
securities of the Company), and 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 Convertible Note may not be pre-paid following the delivery of the first
notice delivered pursuant to this Section 4(a) except in an amount equal to 120%
of the then unpaid Face Amount. The 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.

                                      -11-
<PAGE>

         Any election to exercise the Change in Control Put Option shall be made
by the holder hereof giving written notice thereof to the Company at least two
days before the Effective Date (if no such notice is given, the provisions of
paragraph 3(vii) shall apply). Upon receipt of such notice, the Company shall,
on the Effective Date, redeem this Convertible Note in whole (but not in part)
at 120% of the outstanding unpaid Face Amount, plus all unpaid PIK Interest
accrued thereon to the Effective Date.

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

                  (i)      Approval by the shareholders of the Company of a
         reorganization, merger or consolidation of the Company or a statutory
         exchange of outstanding securities entitled to vote generally in the
         election of directors ("Voting Securities") of the Company, 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 the
         Company 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 the Company 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 the
         Company, as the case may be; or

                  (ii)     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 of the assets of the
         Company (in one or a series of transactions), other than to an entity
         with respect to which, immediately following such sale or other
         disposition, more than 50% of, respectively, the combined voting power
         of the then outstanding voting securities of such entity entitled to
         vote generally in the election of directors and the then outstanding
         shares of common stock of such entity is then beneficially owned,
         directly or indirectly, by all or substantially all of the persons who
         were the beneficial owners, respectively, of the Voting Securities and
         shares of the Company immediately prior to such sale or other
         disposition in substantially the same proportions as their ownership,
         immediately prior to such sale or other disposition, of the Voting
         Securities and shares of the Company, as the case may be.

         (b)      Nothing hereinabove set forth in this paragraph 5 shall affect
in any way the right of the holder of this Convertible Note to convert this
Convertible Note at any time and from time to time in accordance with paragraph
1 hereof.

                                      -12-
<PAGE>

         (c)      In the event that the holder hereof fails to exercise its
Change in Control Put Option as provided for herein within 20 days after the
Effective Date, then the Change in Control Put Option shall be deemed to be null
and void, and the holder hereof shall be deemed to have irrevocably waived its
right to exercise the Change in Control Put Option and the Change in Control Put
Option shall be of no further force or effect.

         5.       RANKING; SUBORDINATION.

         (a)      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 Convertible Note shall be
(1) subordinate and junior in right of payment, to the extent and in the manner
hereinafter set forth, to the Company's current and future obligations to banks
and institutional lenders ("Senior Debt"), a list of the existing Senior Debt
outstanding as of the date hereof is attached hereto as SCHEDULE 5(A)(1); (2) on
par in right of payment with all of the Company's 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 5(A)(2); and (3) senior in right of payment to all
of the Company's future Indebtedness for Borrowed Money except Senior Debt.

         (b)      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 Convertible Note is entitled to receive
any payment on account of principal or interest on this Convertible 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 Convertible
Note upon the Senior Debt and the holders thereof with respect to the
indebtedness evidenced by this Convertible 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 the Company and shares of Common
Stock of the Company issuable upon conversion of the Convertible Note) that may
be payable or deliverable in any such proceedings in respect of this Convertible
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 Convertible Note, except securities which
are subordinate in right of payment to the payment of the Senior Debt.

         (c)      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
Convertible Note (excepting only interest payments in the form of equity
securities of the Company and shares of Common Stock

                                      -13-
<PAGE>

of the Company issuable upon conversion of the Convertible Note), unless within
three months after the happening of such event of default, the maturity of such
Senior Debt shall not have been accelerated.

         (d)      In the event the holder hereof receives any payment or
property on this Convertible 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.

         (e)      Upon the payment in full of all Senior Debt, the holder of
this Convertible 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 Convertible 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 Convertible Note would be entitled except for the
subordination provisions of this Convertible Note shall, as between the Company,
its creditors other than the holders of Senior Debt, and the holder of this
Convertible Note, be deemed to be a payment by the Company to or on account of
Senior Debt.

         (f)      No present or future holder of Senior Debt shall be prejudiced
in such holder's right to enforce the subordination of this Convertible Note by
any act or failure to act on the part of the Company or the holder of this
Convertible 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 Convertible Note on the other hand, and
none of such provisions shall impair, as between the Company and the holder of
this Convertible Note, the obligation of the Company, which is unconditional and
absolute, to pay to the holder of this Convertible Note the principal and
interest thereon, in accordance with the terms hereof, nor shall any such
provisions prevent any holder of this Convertible Note from exercising all
remedies otherwise permitted by applicable law or under the terms of this
Convertible 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 Convertible Note.

         (g)      The Company covenants and agrees that so long as this
Convertible 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 Section 5(g) shall not apply to (a) any indebtedness,
liabilities or obligations of the Company to the holder; (b) any indebtedness,

                                      -14-
<PAGE>

liabilities or obligations of the Company specified in Schedule 5(a)(1) and
Schedule 5(a)(2); (c) any refinancing of any of the indebtedness, liabilities or
obligations of the Company specified in Schedule 5(a)(1) (provided, however that
such refinancing is completed with a commercial bank or other investment grade
lending institution 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 Convertible Note); (d) any
indebtedness, liabilities or obligations incurred by the Company in the future
to a commercial bank or other investment grade lending institution, 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 Convertible
Note; and (e) indebtedness, liabilities or obligations incurred by the Company
in the ordinary course of business.

         (h)      This Convertible Note is subject to the terms of that certain
Subordination Agreement, dated as of February 4, 2004, by and between LaSalle
Business Credit, LLC and the Investor (the "Subordination Agreement"). To the
extent there is any conflict between the provisions of this paragraph 5 and the
Subordination Agreement, the Subordination Agreement 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.

         6.       REGISTRATION RIGHTS. The Company covenants and agrees that the
holder of this Convertible Note shall have the rights of an Investor under the
Purchase Agreement and Registration Rights Agreement, each dated as of the date
hereof among the Company and the Investors named on the signature pages thereto.

         7.       RESTRICTIONS UPON CONVERSION.

         (a)      No Investor shall have the right to exercise this Convertible
Note, to the extent that after giving effect to such exercise, such Investor
(together with its affiliates) would beneficially own in excess of 4.99% of the
shares of the Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by such Investor and its affiliates shall
include the number of shares of Common Stock issuable upon conversion of this
Convertible Note with respect to which the determination of such sentence is
being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unconverted portion of this Convertible Note
beneficially owned by such Investor and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Investor and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Convertible Note, in determining the number of
outstanding shares of Common Stock an Investor may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Quarterly Report on Form 10-Q, Annual Report on

                                      -15-
<PAGE>

Form 10-K or other public filing with the SEC, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company
or its transfer agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Investor, the Company shall, within three business days, confirm orally or in
writing to the Investor the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities of
the Company by the Investor and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The restriction
described in this paragraph 7 may be revoked upon 60 days prior written notice
by the Investor to the Company.

         (b)      If the Company has not obtained Shareholder Approval (as
defined below), if required by the applicable rules and regulations of the
Nasdaq National Market (or any successor entity), then the Company may not issue
upon conversion of the Convertible Notes and payment of PIK Interest issued and
outstanding under the Purchase Agreement, in the aggregate, in excess of 19.999%
of the number of shares of Common Stock outstanding on the trading day
immediately preceding the date hereof (the "Original Issue Date") (such number
of shares, the "Issuable Maximum"). Each Investor shall be entitled to a portion
of the Issuable Maximum equal to the quotient obtained by dividing (x) the
aggregate principal amount of the Convertible Note(s) issued and sold to such
Investor on the Original Issue Date by (y) the aggregate principal amount of all
Convertible Notes issued and sold by the Company on the Original Issue Date. If
any Investor shall no longer hold the Convertible Note(s), then such Investor's
remaining portion of the Issuable Maximum shall be allocated pro-rata among the
remaining Investors. If on any conversion date: (A) the applicable conversion
price then in effect is such that the shares issuable under this Convertible
Note on any conversion date together with the aggregate number of shares of
Common Stock that would then be issuable upon conversion in full of all then
outstanding Convertible Notes would exceed the Issuable Maximum, and (B) the
Company's shareholders shall have previously disapproved the transactions
contemplated by the Purchase Agreement, as may be required by the applicable
rules and regulations of the Nasdaq National Market (or any successor entity),
if any (the "Shareholder Approval"), then the Company shall issue to the
Investor requesting a conversion a number of shares of Common Stock equal to
such Investor's pro-rata portion (which shall be calculated pursuant to the
terms hereof) of the Issuable Maximum and, with respect to the remainder of the
aggregate principal amount of the Convertible Notes (including any accrued
interest) then held by such Investor for which a conversion in accordance with
the applicable conversion price would result in an issuance of shares of Common
Stock in excess of such Investor's pro-rata portion (which shall be calculated
pursuant to the terms hereof) of the Issuable Maximum (the "Excess Principal"),
the Company shall be prohibited from converting such Excess Principal, and shall
notify the Investor of the reason therefor. This Convertible Note shall
thereafter be unconvertible until and unless Shareholder Approval is
subsequently obtained or is otherwise not required, but this Convertible Note
shall otherwise remain in full force and effect. The Company and the Investor
understand and agree that shares of Common Stock issued to and then held by the
Investor as a result of conversions of Convertible Notes shall not be entitled
to cast votes on any resolution to obtain Shareholder Approval pursuant hereto.
For clarity, the failure of the Company to actually obtain Shareholder Approval
shall not be a breach of covenant or an event of default under this

                                      -16-
<PAGE>

Convertible Note or an Event of Default under the Purchase Agreement, provided,
that any issuance of securities which results in an adjustment to the Initial
Conversion Price (other than pursuant to Section 3(ii)) without the Company
having previously sought Shareholder Approval as set forth in the Purchase
Agreement shall be a breach of covenant in the Purchase Agreement and an event
of default under this Section 7.

         8.       COMPANY CALL OPTION.

         (a)      At any time after the second anniversary of the date hereof,
the Company shall have the option (the "Call Option") to redeem, in its sole and
absolute discretion (in whole or in part), this Convertible Note at 120% of the
outstanding unpaid Face Amount of the Convertible Note (the "Redemption Amount")
if the following conditions are met:

                  (i)      the Company has filed and caused to become effective
         and stay continuously effective a registration statement covering the
         aggregate number of shares of Common Stock issued or issuable with
         respect to the Convertible Note and the Warrant issued pursuant to the
         Purchase Agreement; provided, however, that, this condition shall not
         apply if all of the shares of Common Stock issued or issuable with
         respect to the Convertible Note and Warrant can be resold pursuant to
         Rule 144(k) of the Securities Act of 1933, as amended;

                  (ii)     the Company gives written irrevocable notice to the
         holder hereof of its intent to redeem the Convertible Note (the date of
         such notice shall hereinafter be referred to as the "Notice Date") not
         later than 20 days prior to the date fixed by the Company to redeem the
         Convertible Note (the "Call Option Redemption Date");

                  (iii)    the closing price of a share of Common Stock, as
         reported on the Nasdaq National Market, has been, on average, for the
         15 consecutive trading days prior to the Notice Date, at least $7 per
         share;

                  (iv)     there has not been a continuing Event of Default (as
         defined in the Purchase Agreement) for a period of 30 days prior to the
         Notice Date and continuing through the Call Option Redemption Date; and

                  (v)      the Issuable Maximum has not been reached.

         The Redemption Amount and any unpaid PIK Interest accrued thereon as of
the Call Option Redemption Date shall become due and payable on the Call Option
Redemption Date.

         (b)      Nothing hereinabove set forth shall affect in any way the
right of the holder of this Convertible Note to convert this Convertible Note at
any time and from time to time in accordance with paragraph 1 hereof.

                                      -17-
<PAGE>

         9.       MISCELLANEOUS.

         (a)      The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Convertible Note, but will at all times in good faith assist in the carrying out
of all such items and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder hereof against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company will not increase the par value of any shares of stock receivable on the
conversion of this Convertible Note above the amount payable therefor on such
conversion.

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

                            [signature page follows]

                                      -18-
<PAGE>

                                              DELPHAX TECHNOLOGIES INC.

                                              By /S/ ROBERT M. BARNISKIS
                                                 -------------------------------
                                                 Robert M. Barniskis
                                                 Vice President, Chief Financial
                                                 Officer and Secretary

                      [signature page to convertible note]

                                      -19-
<PAGE>

                           [FORM OF CONVERSION NOTICE]

         The undersigned owner of this 7% Convertible Subordinated Note due
February 4, 2008 (the "Convertible Note") issued by Delphax Technologies Inc.
(the "Company") hereby irrevocably exercises its option to convert $____________
principal amount of the Convertible Note into shares of the common stock, $.10
par value, of Delphax Technologies Inc. ("Common Stock"), in accordance with the
terms of the Convertible Note. The undersigned hereby instructs the Company to
convert the portion of the Convertible Note specified above into shares of
Common Stock issued at the conversion price in accordance with the provisions of
Paragraph 3 of the Convertible Note. The undersigned directs that the Common
Stock issuable and certificates therefor deliverable upon conversion, the
Convertible Note recertificated in the principal amount, if any, not being
surrendered for conversion hereby, together with any check in payment for
fractional Common Stock, be issued in the name of and delivered to the
undersigned unless a different name has been indicated below. All capitalized
terms used and not defined herein have the respective meanings assigned to them
in the Convertible Note.

         By delivering this conversion notice, the undersigned owner represents
and warrants (place "X" next to applicable provision):

[__]     1.       that it does not now, nor after giving effect to this
                  conversion will it, beneficially own in excess of 4.99% of the
                  outstanding shares of Common Stock of the Company, calculated
                  pursuant to the provisions of Paragraph 7(a) of the
                  Convertible Note; or

[__]     2.       that it has provided, at least 60 days prior to the date of
                  this conversion notice, notice to the Company of its
                  revocation of the application of Paragraph 7(a) of the
                  Convertible Note.

Date _______________

Signature: _____________________________________________________________________
                           [Name]
Address:
________________________________________________________________________________

________________________________________________________________________________

                                      -20-