AGREEMENT

     THIS AGREEMENT is entered into this 9th day of May, 1996 by and between
North Atlantic Technologies, Inc. ("NAT") and Willis D. Heim ("Heim"). 

                                 R E C I T A L S

     A. NAT and Heim are parties to an Agreement dated October 25, 1993, and
Accommodation Security Agreement dated April 13, 1990 and an Agreement dated
March 21, 1990.

     B. NAT's obligations to Heim are secured by an attached and perfected
security interest in all of NAT's inventory, accounts, equipment, general
intangibles, certain patents, proceeds and products thereof.

     C. On February 1, 1996, NAT filed a petition for relief under Chapter 11 of
Title 11 of the United States Code. Pursuant to an Order dated April 19, 1996
confirming NAT's Plan of Reorganization dated March 8, 1996, NAT was restored to
its property and assets pursuant to 11 U.S.C.U1141.

     D. As of February 1, 1996 NAT was indebted to First Bank National
Association on a line of credit in the approximate amount of $1,450,000 which
includes $100,000 in certain letters of credit outstanding.

     E. NAT's obligations to the bank under the line of credit are guaranteed by
Heim.

     F. The confirmed NAT Plan of Reorganization restructures the debt to First
Bank. The claim is paid by a term note of $500,000 plus interest at a rate of
175 basis points above the Bank's One-Month Reserve Adjusted Certificate of
Deposit Rate amortized over five years (the "Term Note"). The balance will
remain as a line of credit which will be increased by $200,000 (the "Line of
Credit").

     G. Heim has agreed to guarantee this restructured obligation with the Bank.
Heim and NAT have agreed to amend and restate the terms of their original
agreements to adapt to the terms of the confirmed Plan.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein the parties hereto agree as follows:

     1. Credit extended by First Bank. For the purpose of this Agreement, the
First Bank Credit shall be the credit extended by the Bank under its Amended and
Restated Credit Agreement entered into following confirmation of NAT's Plan of
Reorganization consisting of a revolving line of credit in the initial amount of
$1,150,000 and a Term Note of $500,000. The Line of Credit extends to June 1,
1997 and the Term Note has a term of five years.

     2. Guarantee by Heim. Heim will guarantee the First Bank Credit subject to
the terms and conditions of this Agreement. NAT agrees to reimburse Heim for any
amount he is required to pay on his guarantee, with interest at the rate or
rates provided in the First Bank Credit together with his costs and expenses,
including reasonable attorneys' fees.

     3. Monthly Fee. On or before the due date of each monthly interest payment
owed to the Bank under the Bank Line of Credit NAT will pay Heim an amount equal
to 30% of the amount of interest payable to the Bank.

     4. Initial Fee. Promptly following the date of establishment of the line of
credit NAT will pay to Heim a cash commitment fee of 4% of the maximum amount of
the commitment available on that date, $1,150,000. The amount of $46,000 will be
payable by a promissory note in the form annexed hereto as Exhibit A which shall
mature 90 days after the Effective Date of the Plan of Reorganization.

     5. Term Note Interest Differential. In the event that the interest rate
under the Term Note is less than 12% per annum, NAT will pay to Heim at the end
of each month an amount equal to the difference between the interest payable to
the Bank for that month on the unpaid principal amount of the Term Note and 1%
of such unpaid balance. This fee will be paid so long as the Term Note, or any
extensions, modifications or renewals of it, remain outstanding.

     6. Collateral. As collateral security for the guarantee to First Bank, NAT
continues and reaffirms its grant to Heim of a security interest in certain
assets of NAT under the terms of the Accommodation Security Agreement dated
April 13, 1990 and of the Patent Assignments dated November 7, 1990 regarding
Patent Nos. 4,596,285, 4,442,886 and 4,308,905, respectively.

     7. Renewal of First Bank Line of Credit. Any renewals to the Line of Credit
which First Bank may grant in its discretion, which Heim may consent to
guarantee in his discretion, will be subject to an additional 4% annual fee
payable in cash at the time of the renewal or extension.

     8. Financial Statements. NAT will furnish Heim with all financial
statements it furnishes to the Bank, a weekly cash flow projection report and
with all of its management reports to the Board of Directors at the time such
reports are furnished to the members of the Board. Heim acknowledges that this
information is confidential and proprietary to NAT and is not generally
available to persons other than NAT management, its Board of Directors, and
other selected representatives and agents of NAT. Accordingly, Heim agrees that
such information will not be (a) distributed in either the original or
reproduced form other than to his legal and financial advisers, (b) disclosed to
any other third party in whole or in part in any manner, or (c) used by Heim or
any other person for any purpose other than the relationship which is the
subject of this agreement. In any disclosures to Heim's legal or financial
advisers the advisers must similarly agree to maintain the confidentiality of
the information.

     9. Legal Fees and Expenses. Upon establishment of the First Bank Credit,
NAT will reimburse Heim for all reasonable legal fees and expenses and for all
charges made by the Bank (including legal fees and expenses incurred by the
Bank) and incurred by Heim in connection with the negotiation and execution of
and the transactions contemplated by this Agreement as well as incurred in
connection with the Chapter 11 proceeding of NAT. Such reimbursement will be
made promptly upon the submission by Heim to NAT of reasonable evidence of legal
fees and expenses so incurred.

     10. Miscellaneous. This Agreement is binding upon the parties hereto, their
respective assessors, assigns, heirs, and legal representatives. This Agreement
shall be governed by the laws of the State of Minnesota.

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

                         NORTH ATLANTIC TECHNOLOGIES, INC.

                         By   /s/Bruce A. Watson, Its President

                         /s/Willis D. Heim