Norwest Bank Minnesota South,
  National Association                                           Term Note

$500,000.00                                                   October 21, 1996

FOR VALUE RECEIVED, Winland Electronics,  Incorporated (the "Borrower") promises
to pay to the order of Norwest Bank Minnesota South,  National  Association (the
"Bank"), at its principal office or such other address as the Bank or holder may
designate  from time to time,  the  principal  sum of Five Hundred  Thousand and
00/100  Dollars  ($500,000.00),  or the amount shown on the Bank's records to be
outstanding,  plus interest (calculated on the basis of actual days elapsed in a
360-day year)  accruing each day on the unpaid  principal  balance at the annual
interest rate defined below.  Absent manifest error, the Bank's records shall be
conclusive evidence of the principal and accrued interest owing hereunder.

INTEREST RATE. The principal balance outstanding under this Term Note shall bear
interest  at an annual rate equal to the Base Rate plus  0.75%,  floating.  Base
Rate means the rate of interest established by Norwest Bank Minnesota,  National
Association  from time to time as its "base" or "prime"  rate of interest at its
principal office in Minneapolis, Minnesota.

REPAYMENT TERMS

Principal  and Interest.  Principal and interest  shall be payable in successive
monthly  installments  of  Eight  Thousand  Three  Hundred  Thirty-Four  Dollars
($8,334.00),  beginning on November 10, 1996. The remaining  principal  balance,
plus any accrued interest, shall be fully due and payable on October 7, 2001.

Changes in Payment  Amount.  Following an increase in the interest rate and upon
at least 15 days  advance  written  notice to the  Borrower,  the  Bank,  in its
discretion,  may increase the Borrower's monthly payment in an amount sufficient
to insure  that this Term Note will fully  amortize  over the  remainder  of the
original  60-month  period used to calculate the original  amortization  of this
Term Note.

Application  of Payments.  Each payment  shall be applied as scheduled or as the
Bank in its discretion deems appropriate.

PREPAYMENT.  The  Borrower  may prepay  this Term Note in full or in part at any
time. Each  prepayment  shall be applied as scheduled or as the Bank in its sole
discretion may deem  appropriate.  Such prepayment shall not excuse the Borrower
from making  subsequent  payments as scheduled  above until the  indebtedness is
paid in full.

ADDITIONAL  TERMS AND CONDITIONS.  This Term Note is issued pursuant to a Credit
Agreement  dated January 31, 1996 and a First Amendment of even date between the
Bank and the Borrower (as amended,  the  "Agreement").  The  Agreement,  and any
amendments or substitutions, contains additional terms and conditions, including
default and acceleration provisions,  which are incorporated into this Term Note
by reference.


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Capitalized  terms not expressly  defined  herein shall have the meanings  given
them in the  Agreement.  The  Borrower  agrees to pay all  costs of  collection,
including reasonable  attorneys' fees and legal expenses incurred by the Bank if
this Term Note is not paid as provided  above.  This Term Note shall be governed
by the substantive laws of the State of Minnesota.

WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR.  Borrower and any other person who
signs,  guarantees  or endorses  this Term Note,  to the extent  allowed by law,
hereby waives presentment,  demand for payment, notice of dishonor, protest, and
any notice relating to the acceleration of the maturity of this Term Note.

WINLAND ELECTRONICS, INCORPORATED

By /s/ W. K. Hankins
Its President and CEO