<PAGE>
                                                                   EXHIBIT 10.42

                              TERM LOAN AGREEMENT



     THIS TERM LOAN AGREEMENT ("Agreement") is dated as of October 14, 2003,
between HEI, INC., a Minnesota corporation ("Borrower"), located at 1495
Steiger Lake Lane, Victoria, MN 55386 and COMMERCE BANK, a Minnesota state
banking corporation ("Lender"), located at 7650 Edinborough Way, Suite 150,
Edina, MN 55435.

                                  WITNESSETH:


     WHEREAS, Borrower has applied to Lender for a loan of $1,200,000.00
secured by the Property (as hereinafter defined), the proceeds of which are to
be used solely for the purpose of prepaying the Whitebox Subordinated Note and
to fund the Payment Reserve Account; and

     WHEREAS, Lender is willing to make such loan on the terms hereof;

     NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:

                                   ARTICLE I

                                  DEFINITIONS

     1.  Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:

     "Affiliate" shall include, with respect to any party, any Person which
directly or indirectly controls, is controlled by, or is under common control
with such party and, in addition, in the case of Borrower, each officer,
director, shareholder, joint venturer and partner of Borrower. A Person shall
be deemed to control another Person if the controlling Person owns 10% or more
of any class of voting stock of the controlled Person or possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.

     "Borrower" has the meaning set forth in the preamble hereto.

     "Debt" means (i) indebtedness for borrowed money or for the deferred
purchase price of property or services, (ii) obligations as lessee under leases
that have been or should be, in accordance with GAAP, recorded as capital
leases, including but not limited to that certain capital lease obligation of
Borrower to Lender evidenced by the certain Master Equipment Lease dated as of
October   , 2003 between Borrower, as lessee and Lender, as lessor, (iii)
obligations under direct of indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in (i) or (ii) above, and (vi) liabilities in
respect of unfunded vested benefits under plans covered by Title IV of ERISA.



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     "Debt Service Coverage Ratio" for any measurement period means a ratio the
numerator of which is (A)(i) the sum of (a) Borrower's after-tax net income (as
defined by GAAP); (b) depreciator, (c) amortization, and (d) interest expense
on Borrower's term debt; less (ii) any distributions or dividends paid to
shareholders and the denominator of which is (B) Borrower's aggregate payments
on Debt, including interest, on such Debt (including, without limitation, any
payments on capitalized leases allocable to principal and interest in
accordance with GAAP) scheduled to have been paid during such measurement
period.

     "Default" means any event, which, with the giving of notice or passage of
time or both, would constitute an Event of Default.

     "Event of Default" has the meaning set forth in Article 8.

     "GAAP" means generally accepted accounting principles, consistently
applied.

     "Improvements" means the approximate 45,408 square foot
office/manufacturing/warehouse facility know as the HEI, Inc. corporate office
and manufacturing facility located upon the Property at 1495 Steiger Lake Lane,
Victoria, MN 55386.

     "Lender" has the meaning set forth in the preamble hereto.

     "Loan Documents" means this Agreement and the other documents listed in
Section 2.1(a)-(d) hereof, and any other document that now or hereafter
evidences or secures the Obligations.

     "Loan Year" means a period commencing on November 1, 2003, or any
anniversary thereof and ending on the 365th, or in the case of a leap year, the
366th day thereafter.

     "Mortgage" has the meaning provided in Section 2.1(c) hereof.

     "Note" has the meaning provided in Section 2.1(b) hereof.

     "Obligations" means the indebtedness evidenced by the Note and all other
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower of any kind or nature, present or future, which arise under this
Agreement or any other Loan Document, whether or not evidenced by any note,
guaranty or other instrument, whether or not for the payment of money, whether
joint, several, or joint and several, direct or indirect (including those
acquired by assignment or purchase), absolute or contingent, due or to become
due, and however acquired. The term includes, but is not limited to, all
interest, fees, charges, expenses, attorneys' fees, and any other sum
chargeable to Borrower under this Agreement or any other Loan Document.

     "Payment Reserve Account" has the meaning provided in Section 6.9 hereof.

     "Person" means any natural person, corporation, firm, association,
government, governmental agency or other entity, whether acting in an
individual, fiduciary or other capacity.



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     "Project" means the Improvements and the Property.

     "Property" means the real property located in the County of Carver, State
of Minnesota, legally described on Exhibit A attached hereto and made a part
hereof.

     "Title Company" means Stewart Title Company.

     "Whitebox Subordinated Note" means that certain Subordinated Promissory
Note issued by Borrower to Colorado MEDtech, Inc. in the original principal
amount of $2,600,000.00 dated as of January 24, 2003, and assigned to Whitebox
Hedged High Yield Partners on or about May 8, 2003.

                                   ARTICLE II

                                 LOAN DOCUMENTS


     2.  Documents Delivered Herewith. Prior to or contemporaneously with the
execution of this Agreement, Borrower has delivered to Lender the following
documents and/or instructions:

     2.1 The Loan Documents:

          (a) This Agreement properly executed and delivered on behalf of
              Borrower;

          (b) Promissory Note (the "Note") properly executed and delivered on
              behalf of Borrower in the amount of $1,200,000.00, made payable by
              Borrower to Lender's order;

          (c) Combination Mortgage, Security Agreement, Assignment of Rents and
              Fixture Financing Statement (the "Mortgage") in a form
              satisfactory to Lender executed by Borrower securing the Note and
              creating a lien upon the Property and the Project subject only to
              those encumbrances shown on Exhibit B hereto; and

          (d) UCC-1 Financing Statement.

     2.2 The Title Documents:

          (a) A title binder, in form and substance satisfactory to Lender,
              issued by Gibraltar Title Agency, LLC on behalf of Stewart Title
              Company, at Borrower's expense, with such title binder
              constituting a commitment by such title company to issue a
              mortgagee's title policy or policies in favor of Lender as
              mortgagee under the Mortgage in the amount of $1,200,000.00 that:

              (i) specifically insures that the Mortgage is a first lien on the
                  Project, subject only to those encumbrances shown on Exhibit
                  B of the Mortgage; and



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<PAGE>



              (ii) contains a comprehensive endorsement, a usury endorsement, a
                   zoning endorsement, and such other endorsements as Lender may
                   require in form satisfactory to Lender.

          (b) Evidence of payment of all required real estate taxes and special
              assessments, mortgage registration tax, title insurance premiums
              and costs and recording fees.

     2.3 The Project Documents:

          (a) A FIRREA complying appraisal of the Project, showing an appraised
              value of not less than $2,200,000 and otherwise satisfactory to
              Lender, receipt and acceptance of which is hereby acknowledged;
              and

          (b) A Phase I environmental report in form and content acceptable to
              Lender in its sole and absolute discretion, showing no substantial
              environmental hazards on the Project, receipt and acceptance of
              which is hereby acknowledged; and

          (c) Evidence satisfactory to Lender of policies of insurance coverage
              on the Property and the Project in the amount required by the
              Mortgage;

          (d) A policy of flood insurance naming Lender as additional insured,
              covering the Property and the Improvements in the maximum amount
              available, or evidence satisfactory to Lender that the Property
              and Improvements are not located within a designated flood plain;

          (e) A letter from the appropriate governmental entity stating the
              zoning classification which is applicable to the Property and
              stating that the use of the Project is a permitted use under such
              zoning classification; and

     2.4 The Organization Documents:

          (a) A copy of the Articles of Incorporation of Borrower and all
              amendments thereto, certified by the Secretary of Borrower to be
              true, correct and complete;

          (b) A copy of the Bylaws of Borrower, certified by an officer of
              Borrower to be true, correct and complete;

          (c) A resolution of Borrower in form reasonably satisfactory to Lender
              regarding the execution by Borrower of the Loan Documents and all
              other documents or instruments required to be executed and
              delivered in connection herewith and the performance of the
              covenants and agreements required hereby; and, together with a
              certificate executed by the Secretary of Borrower indicating


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<PAGE>



              the names and titles of persons authorized to execute the Loan
              Documents and other documents required hereunder;

          (d) Certificate of Good Standing of recent date for Borrower issued by
              the Secretary of State of Minnesota; and

          (e) An opinion of counsel for Borrower with respect to certain matters
              relating to the transactions contemplated by this Agreement.

                                  ARTICLE III

                                   TERM LOAN


     3.1.  Commitment for Term Loan. Subject to the terms and conditions hereof
and of the Loan Documents and the other documents delivered herewith, Lender
hereby lends to Borrower and Borrower hereby borrows from Lender, the amount of
$1,200,000.00 (the "Loan").

     3.2.  Use of Proceeds. The proceeds of the Loan shall be used solely by
Borrower to fund a portion of the prepayment of the Whitebox Subordinated Note
and to fund the Payment Reserve Account.

                                   ARTICLE IV

                             CONDITIONS OF LENDING


     4.1   Conditions Precedent to Term Loan Advance. Lender shall have no
obligation to make the Loan unless on or before the date of disbursement,
Lender shall have received the following or confirmation of completion of the
following events:

          (a) The documents for the Loan set forth in Article II of this
              Agreement properly executed and delivered to Lender;

          (b) Establishment of the Payment Reserve Account by Borrower;

          (c) Payment of the loan commitment fee in the amount of $12,000.00;
              and

          (d) Evidence satisfactory to Lender that the Whitebox Subordinated
              Note has been paid in full, or will be paid in full from the
              proceeds of the Note together with Borrower's funds from other
              sources.

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES


     5.   Representations and Warranties. In order to induce Lender to enter
into this Agreement, Borrower hereby represents and warrants that:


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     5.1  Organization and Good Standing. Borrower is a duly organized and
validly existing Minnesota corporation, in good standing and qualified and
licensed to do business under the laws of the State of Minnesota.

     5.2  Authority. Borrower has full power, right and authority to execute
and deliver the Loan Documents and the other documents required hereby, to
borrow the funds herein provided for, and to perform and observe each and all
of the matters and things provided for in said documents. The execution and
delivery of the Loan Documents and such other documents as are required hereby
and the performance or observance of the terms hereof and thereof have been
duly authorized by all necessary action of the board of directors of Borrower.

     5.3  Binding Obligation. This Agreement is, and the other Loan Documents
when delivered hereunder will be, legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective terms.

     5.4  Ownership of Property. Borrower is the owner of the Property in fee
simple and of all personal property described in the Mortgage and has no
knowledge of any unrecorded claims, liens, and encumbrances against the
Property or such personal property.

     5.5  Compliance with Laws. The Improvements have been approved, to the
extent required by any applicable law, statute, including, without limitation,
the ADA, ordinance, regulation, or effective restrictive covenant, by all
federal, state, regional and local authorities, and the anticipated use of the
Property and the Project comply with all applicable zoning and environmental
ordinances, regulations and restrictive covenants affecting the Property and
the Project and all requirements for such use have been satisfied. No violation
of any law, ordinance, regulation or requirement exists with respect to the
Property or the Project.

     5.6  ERISA. No plan (as that term is defined in the Employee Retirement
Income Security Act of 1974 ("ERISA")) of the Borrower (a "Plan") that is
subject to Part 3 of Subtitle B of Title 1 of ERISA had an accumulated funding
deficiency (as such term is defined in ERISA) as of the last day of the most
recent fiscal year of such Plan ended prior to the date hereof, or would have
had such an accumulated funding deficiency on such date if such year were the
first year of such Plan, and no material liability to the Pension Benefit
Guaranty Corporation has been, or is expected by the Borrower to be, incurred
with respect to any such Plan. No Reportable Event (as defined in ERISA) has
occurred and it continuing in respect to any such Plan.

     5.7  Litigation. Except as set forth on Schedule 5.7, there are no
actions, suits or proceedings pending, or to the knowledge of Borrower
threatened, against or affecting it in an amount in excess of $100,000, or
against or affecting the Property or the Project, or involving the validity or
enforceability of the Mortgage or the priority of the lien thereof, at law or
in equity, except actions, suits and proceedings fully covered by insurance; and



                                      -6-

<PAGE>


Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or any governmental authority.

     5.8  Compliance with Agreements. The consummation of the transaction
contemplated hereby and performance of the Loan Documents will not result in
any breach of, or constitute a default under, any mortgage, deed of trust,
lease, bank loan or credit agreement, corporate agreement, corporate charter,
by-law or other instrument to which Borrower is a party or by which it may be
bound or affected.

     5.9  Absence of Defaults. No Default or Event of Default has occurred and
is continuing as of the date hereof hereunder or under the Existing Loan
Documents.

     5.10 Availability of Utilities. All utility services necessary for the
operation of the Improvements for their intended purpose are available to the
Project, including water, storm and sanitary sewer, drainage, gas, electric and
telephone facilities.

     5.11 Accuracy of Financial Information. All financial statements of
Borrower heretofore delivered to Lender, are true and correct in all respects,
have been prepared in accordance with GAAP, and fairly present the respective
financial conditions of the subjects thereof as of the respective dates
thereof; no materially adverse change has occurred in the financial conditions
reflected therein since the respective dates thereof, and no additional
borrowings have been made by Borrower since the date thereof other than the
borrowing contemplated hereby.

     5.12 Survival of Representations. All representations and warranties
contained in this Article 3 shall survive the delivery of the Loan Documents,
the making of the Loan, and no investigation at any time made by or on behalf
of Lender shall diminish its rights to rely thereon.

                                   ARTICLE VI

                       AFFIRMATIVE COVENANTS OF BORROWER


  6.   Affirmative Covenants. To further induce Lender to make the requested
loan, Borrower hereby covenants and agrees that it will:

     6.1. Maintenance of Insurance. At all times, insure the Property and the
Improvements in the manner set forth in Section 2.01 of the Mortgage, and from
time to time, upon Lender's request, furnish it evidence of such coverage in
form satisfactory to Lender and its counsel.

     6.1. Payment of Taxes, etc. Promptly pay and discharge all taxes,
assessments and other governmental charges imposed upon it or upon its income
and profits or upon the Project, and any and all claims for labor, material or
supplies or rental charges or charges of any other kind which, if unpaid,
might by law become a lien or charge upon any of its property, except as
Borrower shall contest in good faith and by appropriate proceedings,


                                      -7-

<PAGE>



providing such reserves as appropriate by GAAP. Borrower shall make all
required withholding deposits.

     6.3  Maintenance of Properties. Maintain all of its properties in good
repair, working order and condition, ordinary wear and tear excepted, and from
time to time make or cause to be made all needful renewals, replacements and
repairs so that at all times Borrower's business can be conducted efficiently.

     6.4  Accounting Records. Keep true and complete and accurate books of
record and account in accordance with sound accounting principles, and allow
Lender upon Lender's request to examine and take extracts from the books and
records of Borrower.

     6.5  Financial Information. Furnish to Lender:

          (a) As soon as available and in any event within ninety (90) days
              after the close of each of its fiscal years, a copy of the annual
              financial statements of Borrower, including balance sheet, related
              statements of earnings, stockholders' equity and statements of
              cash flow for such year, prepared in accordance with GAAP, and
              reviewed by an independent certified public accountant of
              recognized standing selected by Borrower and acceptable to Lender;

          (b) Within forty-five (45) days after the end of Borrower's fiscal
              quarters, financial statements of Borrower as of the end of each
              such calendar quarter which statements have been prepared in
              accordance with GAAP and certified by Borrower's chief financial
              officer; and

          (c) From time to time such other information pertaining to Borrower
              and its properties and financial condition as Lender may
              reasonably request.

Provision of the foregoing, as between Borrower and Lender, shall be at the
sole cost and expense of Borrower.

     6.6  Conduct of Business. Conduct the same general type of business as it
presently conducts, maintain its existence, and continue its compliance with
all valid, applicable statutes, laws, rules and regulations.

     6.7  Right of Inspection. Permit any person designated by Lender to visit
and inspect any of the properties, partnership books and financial records of
Borrower to discuss its affairs, finances and accounts with the officers of
Borrower, all at such reasonable times and as often as Lender may reasonably
request.

     6.8  Notices. As soon as practicable, but in no event later than five (5)
business days after Borrower obtains knowledge thereof, give notice to Lender
of:


                                      -8-
<PAGE>


          (a) the commencement of any uninsured litigation relating to Borrower
              in which the damages claimed exceed $50,000.00 or relate to the
              Property or the Improvements or the operation thereof;

          (b) the commencement of any material arbitration or governmental
              investigation or proceeding not previously disclosed by Borrower
              to Lender which has been instituted or, to the knowledge of
              Borrower, is threatened against Borrower or to which any property
              of Borrower is subject which, if determined adversely to Borrower,
              would have a material adverse effect upon Borrower;

          (c) any adverse development which occurs in any litigation,
              arbitration or government investigation or proceeding previously
              disclosed by Borrower to Lender which, if determined adversely to
              Borrower, would have a material adverse effect upon Borrower; or

          (d) any Default or Event of Default.

     6.9  Payment Reserve Account. On the date hereof, establish an account
with Lender (the "Payment Reserve Account") in the amount of $100,000.00, which
account shall bear interest at a rate not less than the average yield of United
States Treasury obligations adjusted to a constant maturity of 30 days as
published in the Federal Reserve Board Release H.15 on the first business day
of each month. At any time after the occurrence and during the continuation of
any Event of Default, Lender may, at any time or from time to time, apply funds
in the Payment Reserve Account to cure any Event of Default hereunder, without
waiving such Event of Default, or any default, whether or not declared, under
any other Loan Document or to the payment of any amounts, in such order as
Lender may elect, as shall have become or shall become due and payable by
Borrower under this Agreement or any other Loan Document. If Lender so applies
funds in the Payment Reserve Account as provided in the preceding sentence,
Borrower shall pay to Lender, within ten (10) days after demand therefor, an
amount equal to the amount so applied in order to restore the funds in the
Payment Reserve Account to $100,000.00. Borrower's failure to restore the funds
in the Account to $100,000.00 as provided in this Section 6.9 shall be deemed
an Event of Default hereunder and shall entitle Lender to the exercise of all
of Lender's rights and remedies under the Loan Documents. No Person, including,
without limitation, Borrower, shall have any right to withdraw any of the funds
held in the Payment Reserve Account, except that upon payment of all amounts
payable by Borrower to Lender under this Agreement or under any other Loan
Document, any funds remaining in the Payment Reserve Account shall be returned
by Lender to Borrower or paid to whomever may be legally entitled thereto.

Notwithstanding the foregoing, provided that there is not then an Event of
Default (as defined in the Mortgage) which has occurred and is continuing under
the Loan, the amount held by Lender in the Payment Reserve Account will be
released by Lender to Borrower upon the earlier of (i) Borrower reporting four
consecutive fiscal quarterly periods of positive pre-tax earnings, (ii)
Borrower successfully raises additional capital of a least $7,500,000, or


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          (iii) the last day of the second Loan Year.

              6.10  Debt Service Coverage Ratio. Beginning as of Borrower's
          fiscal quarter ended February 28, 2005, and at all times thereafter
          during the term of the loan, maintain a Debt Service Coverage Ratio
          equal to or greater than 1.20:1, which ratio shall be calculated based
          on Borrower's 10-Q and 10-K Reporting and measured as of the last day
          of each fiscal quarter of Borrower for the immediately preceding
          twelve-month period.

                                  ARTICLE VII

                         NEGATIVE COVENANTS OF BORROWER


     7.  Negative Covenants. Borrower covenants and agrees that for so long as
it is indebted to Lender, it will not, without Lender's prior written consent:

               7.1  Liens. Create or suffer to exist any mortgage, pledge, lien,
          security interest or other lien or encumbrance of any kind, of or upon
          the Property or the Improvements, or of or upon the income or profits
          therefrom, except (i) those encumbrances made in favor of Lender, and
          (ii) a junior mortgage in the amount of $1,000,000.00 on the Property
          and Improvements in favor of Lender to secure a separate equipment
          lease financing transaction.

               7.2  Defaults. Default upon or fail to pay any contract or fail
          to pay any of its debts or obligations as the same mature.

               7.3  Leases of the Property. Enter into any oral or written
          leases of the Property or the Improvements without the prior written
          consent of Lender.

               7.4  Dividends, Distributions, etc. Pay any dividend or make any
          distribution of assets to shareholders of Borrower or any Affiliate of
          Borrower.

               7.5  Consolidation, Merger, Sale of Assets; etc. Consolidate with
          or merge into or with any other Person, or sell (other than sales in
          the ordinary course of business), transfer, lease or otherwise dispose
          of all or a substantial part of its assets.

                                  ARTICLE VIII

                                    DEFAULT

               8.1  Events of Default. The occurrence of any of the following
          events shall constitute an "Event of Default":

              (a)  If Borrower (i) fails to pay when due or, if payable on
                   demand, upon demand, any principal of the Note, or prepayment
                   premium (if applicable), or (ii) fails to pay when due or, if
                   payable on demand, upon demand, any interest on the Note or
                   fees under this Agreement, and, in the case of a default
                   under this clause such default continues for ten (10) days;
                   or


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<PAGE>


               (b) If Borrower defaults in the due performance and observance of
                   any covenants set forth in this Agreement, the Mortgage, or
                   any other Loan Document and such default or breach shall
                   continue for a period of thirty (30) days after written
                   notice thereof to Borrower by Lender; or

               (c) If any financial statement, certificate, representation, or
                   warranty made by or on behalf of Borrower shall prove to have
                   been incorrect in any material respect or any representation
                   made herein is untrue when made or becomes untrue with the
                   passage of time; or

               (d) If Borrower (i) becomes insolvent or fails to pay its debts
                   generally as they become due, (ii) suspends business, (iii)
                   makes a general assignment for the benefit of creditors, (iv)
                   admits in writing its inability to pay its debts generally as
                   they mature, (v) files a petition in bankruptcy or a petition
                   or answer seeking liquidation of it or a reorganization,
                   arrangement with creditors or other similar relief under the
                   Federal bankruptcy laws or under any other applicable law of
                   the United States of America or any state thereof, whether
                   now or hereafter in effect, (vi) petitions for or applies to
                   any tribunal for, or consents to the appointment of a
                   trustee, custodian, liquidator, receiver or similar official
                   for it or for a substantial part of its property, (vii) is
                   adjudicated a bankrupt or has an involuntary petition in
                   bankruptcy, or a case commenced against it under the Federal
                   bankruptcy laws, as now or hereafter in effect, and an order
                   for relief entered therein, (viii) takes any action for the
                   purpose of effecting or consenting to any of the foregoing,
                   or (ix) has an order, judgment or decree entered appointing
                   without such entity's consent, a trustee, custodian,
                   liquidator, receiver or similar official for it or for a
                   substantial part of its property, or approving a petition in
                   any such proceeding or approving a petition filed or case
                   commenced against it seeking liquidation of it or a
                   reorganization, arrangement with creditors or other similar
                   relief under the Federal bankruptcy laws or under any other
                   applicable law of the United States of America or any State
                   thereof, whether now or hereafter in effect, which order,
                   judgment or decree shall not be vacated or set aside or
                   stayed within 60 days from the date of entry; or

               (e) If Borrower fails to pay any Debt (but excluding Debt
                   evidenced by the Note) of the Borrower, or any interest
                   thereon, when due (whether by scheduled maturity, required
                   prepayment, acceleration, demand or otherwise) and such
                   failure shall continue after the applicable grace period, if
                   any, specified in the agreement or instrument relating to
                   such Debt; or any other default under any agreement or
                   instrument relating to such Debt, or any such Debt shall be
                   declared to be due and payable or required to be prepaid
                   (other than by scheduled required prepayment), prior to the
                   stated maturity thereof; or

               (f) If judgment for the payment of money in excess of $100,000.00
                   is entered against Borrower and is not stayed, vacated,
                   bonded, paid, discharged or appealed in good faith within 60
                   day after the entry thereof; or



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<PAGE>


     8.2 Rights and Remedies. If any Event of Default shall occur and be
continuing, Lender may, at its option (in addition to Lender's rights under the
Note, Mortgage, or any other Loan Document), exercise any or all of the
following rights and remedies:

          (a) Declare the Note, all interest thereon, and all other obligations
              under, or pursuant to, any Loan Document to be immediately due and
              payable, and upon such declaration such Note, interest and other
              obligations shall immediately be due and payable, without
              presentment, demand, protest or any notice of any kind, all of
              which are expressly waived; and/or

          (b) Exercise any right or remedy specified herein and in the other
              Loan Documents, including (without limiting the generality of the
              foregoing) the right to foreclose the Mortgage or any other right
              or remedy available to a mortgagee at law or in equity; and/or

          (c) Exercise any other right or remedy available to Lender at law, in
              equity or under statute; and/or

          (d) Cure the event of default on behalf of Borrower, and, in doing so,
              may enter upon the Project, and may expend such sums as it may
              reasonably deem desirable, including attorneys' fees, all of which
              shall be deemed to be advances hereunder, even though causing the
              Loan to exceed the face amount of the Note, shall bear interest at
              the Default Rate (as defined in the Note) and shall be payable by
              Borrower on demand.

                                   ARTICLE IX

                                 MISCELLANEOUS

     9.1  No Waiver; Cumulative Remedies. No failure or delay on the part of
Lender in exercising any right or remedy under, or pursuant to, any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy or power preclude other or further exercise
thereof, or the exercise of any other right, remedy or power. The remedies in
the Loan Documents are cumulative and are not exclusive of any remedies
provided by law.

     9.2  Amendments and Waivers. No amendment, change, waiver or modification
of this Agreement or any Loan Document shall be valid unless the same is in
writing and is signed by Lender, and no waiver by Lender of any breach or
default by Borrower of any of its obligations, agreements or covenants under
this Agreement or any Loan Document shall be deemed to be a waiver of any
subsequent breach of the same or any other obligation, agreement or covenants,
nor shall any forbearance by Lender to seek or enforce a remedy of such breach
be deemed a waiver of its rights and remedies with respect to such breach.

     9.3  Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by or on behalf of Borrower in
connection with the transactions contemplated hereby shall survive the
execution and delivery of this Agreement and the advances


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<PAGE>



hereunder. All statements contained in any certificate or other instrument
delivered by or on behalf of Borrower pursuant thereto or in connection with
the transactions contemplated hereby shall constitute representations and
warranties by Borrower.

     9.4  Notices. All notices and other communications provided under this
Agreement shall be in writing (including telecopier communication) and mailed,
telecopied or delivered, if to Borrower, at its address stated in the preamble
hereof, Attention: CEO & CFO; and if to Lender, at its address stated in the
preamble hereof, Attention: James E. Senske; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other party. Any such notice shall be deemed effective (a) upon personal
delivery; (b) upon the third business day (as hereinafter defined) after the
placing thereof in the United States mail, postage prepaid, certified or
registered mail; or (c) upon the business day succeeding the day in which said
notice is deposited with a national overnight air carrier, fees prepaid.

     9.5  Costs and Expenses. Borrower agrees to pay on demand all reasonable
costs, expenses and disbursements of Lender in connection with Borrower's
application for the Loan, the preparation of the Loan Documents and closing of
the Loan, including reasonable attorneys' fees and legal expenses as well as all
costs and expenses of Lender in connection with Lender's enforcement of the
obligations of Borrower hereunder or under the Note or any other Loan Documents,
whether or not suit is commenced including, without limitation, reasonable
attorneys' fees and legal expenses in connection with any appeal of a lower
court's order or judgment. The obligations of Borrower under this Section 9.5
shall survive any termination of this Agreement.

     9.6  Right of Set-off. Upon the occurrence and during the continuance of
any Event of Default, Lender is hereby authorized at any time, and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by Lender to or for the credit or
the account of Borrower against any and all of the obligations of Borrower, now
or hereafter existing under any Loan Document, irrespective of whether or not
Lender shall have made any demand under any Loan Document and although such
obligations may be unmatured. Lender agrees promptly to notify Borrower after
any such set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
Lender under this Section 9.6 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that Lender may have.

     9.7  Governing Law. This Agreement and all other Loan Documents shall be
governed by, interpreted, and construed in accordance with the laws of the State
of Minnesota. Any term used in this Agreement and not otherwise defined shall
have the definition given that term in Uniform Commercial Code as in effect in
the State of Minnesota from time to time, and such definition automatically
shall change on the effective date of any amendment to the Uniform Commercial
Code that changes such definition. If any term in this Agreement shall be held
to be illegal or unenforceable the remaining portions of this Agreement shall
not be affected, and this Agreement shall be construed and enforced as if this
Agreement did not contain the term held to be illegal or enforceable The
Borrower hereby irrevocably submits to the jurisdiction of the Minnesota
District Court, Fourth District, and the Federal District Court, District of
Minnesota, Fourth Division,


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<PAGE>


over any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of such action or proceeding may be heard and
determined in any such court.

     9.8  Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the parties hereto
except that Borrower's rights hereunder are not assignable.

     9.9  Execution in Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be an original,
but all of which shall constitute one agreement.

     9.10 Headings. Section headings contained in this Agreement are for
convenience only and shall not be used in construing any provision of this
Agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the date and year first above written.


                                           HEI, INC.


                                           By:   /s/ Douglas J. Nesbit
                                               ---------------------------------
                                               Its: Chief Financial Officer



                                           COMMERCE BANK


                                           By:   /s/ Jim E. Senske
                                               ---------------------------------
                                               Its:  President




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