Norwest Bank Minnesota South,
National Association                                           First Amendment

This First  Amendment  (the "First  Amendment")  dated as of October 21, 1996 is
between  Norwest Bank Minnesota  South,  National  Association  (the "Bank") and
Winland Electronics, Incorporated (the "Borrower").

BACKGROUND

The  Borrower and the Bank entered  into a credit  agreement  (the  "Agreement")
dated  January 31, 1996,  pursuant to which the Bank  extended to the Borrower a
$2,000,000.00  revolving line of credit (the "Line").  Borrowings under the Line
are  evidenced  by a revolving  note dated the same date as the  Agreement  (the
"January 1996 Revolving Note").

The Borrower has requested that the Bank increase the Line to $3,500,000.00  and
provide it with a new $500,000.0 term loan to be used to payoff a portion of the
outstanding  balance of the Line.  The Bank is willing to grant  these  requests
subject to the terms and conditions of this First Amendment.  Capitalized  terms
not otherwise  defined in this First Amendment shall have the meaning given them
in the Agreement.

In  consideration  of the  premises,  the Bank and the  Borrower  agree that the
Agreement is hereby amended as follows:

1.       Section 1.1 of the  Agreement  is hereby  deleted in its  entirety  and
         restated as follows:

         1.1 Line of Credit Amount.  during the Line Availability Period defined
         below,  the Bank  agrees to  provide a  conditional  revolving  line of
         credit (the "Line") to the Borrower. Outstanding amounts under the Line
         will not, at any one time,  exceed the lesser of 1) the Borrowing  Base
         less the amount of principal  and interest  outstanding  under the Term
         Loan  or  2)  Three   Million   Five   Hundred   and   00/100   Dollars
         ($3,500,000.00).  The Borrowing  Base is defined in Exhibit A-1 of this
         Agreement.  This is a  conditional  revolving  line of credit  and each
         advance under the Line, if made,  will be at the sole discretion of the
         Bank.

2.       Section 1.4 of the  Agreement  is hereby  deleted in its  entirety  and
         restated as follows:

         1.4  Mandatory  Prepayment.  If at any time the  principal  outstanding
         under the Revolving  Note exceeds the lesser of 1) the  Borrowing  Base
         less the amount of principal  and interest  outstanding  under the Term
         Loan or 2)  $3,500,000.00,  the Borrower  must  immediately  prepay the
         Revolving Note to eliminate the excess.

3.       A new Section 1A of the Agreement shall be added as follows:

         1A.      TERM LOAN

         1A.1 Term Loan  Amount.  The Bank  agrees to provide a term loan to the
         Borrower  in the amount of Five  Hundred  Thousand  and 00/100  Dollars
         ($500,000.00) (the "Term Loan"), provided that all conditions precedent
         described in this  Agreement have been met and that the Borrower is not
         otherwise in default as of the date of  disbursement.  The Term Loan is
         available in one disbursement on the date of this First Amendment.


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         1A.2 The Term Note.  The  Borrower's  obligation to repay  outstandings
         under the Term Loan shall be evidenced by a promissory  note (the "Term
         Note") dated as of the date of this First Amendment.  Reference is made
         to the Term Note for terms  relating to interest  rate,  repayment  and
         other conditions governing the Term Loan.

4.       Section  7.2(a) of the Agreement is hereby  deleted in its entirety and
         restated as follows:

(a)      Tangible  Net  Worth.  Maintain  a  positive  Tangible  Net Worth as of
         December  31,  1996 that is no less than the  Borrower's  Tangible  Net
         Worth as of December 31, 1995.

         "Tangible Net Worth" means total assets less total liabilities and less
         the  following  types  of  assets:  (1)  leasehold  improvements;   (2)
         receivables   and  other   investments  in  or  amounts  due  from  any
         shareholder,  director,  officer,  employee  or other  person or entity
         related to or  affiliated  with the Borrower;  (3)  goodwill,  patents,
         copyrights,  mailing lists, trade names, trademarks,  servicing rights,
         organizational  and franchise costs, bond underwriting  costs and other
         like assets properly classified as intangible.

5.       Section  7.2(b) of the Agreement is hereby  deleted in its entirety and
         restated as follows:

         (b) Total Liabilities to Tangible Net Worth Ratio.  Maintain a ratio of
         total  liabilities  to Tangible Net Worth equal to or less than 3.00 to
         1.0 as of December 31, 1996.

6. Simultaneously with the execution of this First Amendment, the Borrower shall
execute and deliver to the Bank a revolving note (the "Revolving  Note") in form
and content  acceptable to the Bank,  which shall replace,  but not be deemed to
satisfy,  the January 1996 Revolving  Note. The initial balance of the Revolving
Note shall be the balance of the January 1996  Revolving  Note as of the date of
this First  Amendment.  Each  reference in the Agreement to the  Revolving  Note
shall be  deemed  to refer to the  Revolving  Note  dated as of the date of this
First Amendment.

7. The Revolving Note and the Term Note shall collectively be referred to in the
Agreement as the "Notes".  Each  reference in Section 8 of the  Agreement to the
"Revolving Note" shall be amended to refer to the "Notes".

8. Amended  Exhibits A-1 and A-2 attached hereto shall replace  Exhibits A-1 and
A-2 to the Agreement.

9.       The Borrower hereby represents and warrants to the Bank as follows:

                  A. The Agreement as amended by this First Amendment remains in
         full force and effect.

                  B. The  Borrower  has no  knowledge  of any default  under the
         terms of the Agreement or the Revolving Note, or of any event that with
         notice or the lapse of time or both would  constitute  a default  under
         the Agreement or any such notes.

                  C. The  execution,  delivery  and  performance  of this  First
         Amendment,  the  Revolving  Note  and the  Term  Note  are  within  its
         corporate   powers,   have  been  duly   authorized   and  are  not  in
         contravention  of law or  the  terms  of  the  Borrower's  articles  of
         incorporation  or by-laws,  or of any undertaking to which the Borrower
         is a part or by which it is bound.

                  D. The resolutions  set forth in the Corporate  Certificate of
         Authority  dated  October 25, 1991 and delivered by the Borrower to the
         Bank have not been amended or  rescinded,  and remain in full force and
         effect.

10. Except as modified by this First Amendment,  the Agreement remains unchanged
and in full force and effect.

IN WITNESS WHEREOF,  the Bank and Borrower have executed this First Amendment as
of the date and year first above written.

NORWEST BANK MINNESOTA,
  NATIONAL ASSOCIATION                 WINLAND ELECTRONICS, INCORPORATED

By /s/ Michael L. King                 By /s/ W. K. Hankins
Its: Vice President                    Its: President and CEO



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                               AMENDED EXHIBIT A-1

                            BORROWING BASE DEFINITION


"Borrowing  Base"  means  the sum of 80% of  Eligible  Accounts  Receivable  (as
defined below) plus 60% of Eligible inventory (as defined below).

Eligible  Accounts  Receivable means all accounts  receivable except those which
are:

        1) Greater Than 90 days past the invoice date.
        2) Due from an account  debtor,  10% or more of whose  accounts owed to
        the Borrower are more than 90 days past the invoice date.
        3) Subject to offset or dispute.
        4) Due from an account debtor who is subject to any bankruptcy
        proceeding.
        5) Owed by a shareholder, subsidiary, affiliate, officer or employee of
        the Borrower.
        6) Not subject to a perfected first lien security interest in favor of
        the Bank.
        7) Due from an account debtor located outside the United States and not
        supported by a standby letter of credit acceptable to the Bank.
        8) Due from a unit of government, whether foreign or domestic.
        9) Otherwise deemed ineligible by the Bank in its reasonable discretion.

Eligible inventory means all inventory of the Borrower,  at the lower of cost or
market  as  determined  by  generally  accepted  accounting  principals,  except
inventory which is:

        1) In transit; or located at any warehouse not approved by the Bank.
        2) Covered by a warehouse receipt, bill of lading or other document of 
        title.
        3)On consignment to or from any other person or subject to any bailment.
        4) Damaged, obsolete or not salable in the Borrower's ordinary course of
        business.
        5) Subject to a perfected first lien security interest in favor of any 
        third party.
        6) Supplies or parts inventory.
        7) Otherwise deemed ineligible by the Bank in its reasonable discretion.




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                               AMENDED EXHIBIT A-2

                        WINLAND ELECTRONICS, INCORPORATED

                           BORROWING BASE CERTIFICATE

To:      Norwest Bank Minnesota South,
           National Association
         Second and Hickory Street
         Mankato, Minnesota  56002-0168
           (the "Bank")

Winland Electronics,  Incorporated (the "Borrower") certifies that the following
computation  of the  Borrowing  Base was performed as of  __________________  in
accordance with the Borrowing Base  definitions set forth in Amended Exhibit A-1
to the Credit  Agreement  between the Bank and the  Borrower  dated  January 31,
1996, as amended by a First Amendment dated October 21, 1996.

Total Accounts Receivable                             $

  Less:           1) Greater than 90 days in age      $

                  2) Other ineligibles                $

Eligible Accounts Receivable                          $

80% of Eligible Accounts Receivable                               $

Total Inventory                                       $

         Less: Ineligible Inventory                   $

Eligible Inventory                                    $

         60% of Eligible Inventory                                $

         Total Borrowing Base                                     $

         Less balance of Term Loan                                $

         Less Total Line Outstandings                             $

         Excess (Deficit)                                         $


WINLAND ELECTRONICS, INCORPORATED

By:

Its: