Document:

AGREEMENT FOR LOAN OF MINNESOTA INVESTMENT FUND

THIS AGREEMENT is made and entered into as the 6th day of October, 1999, by and
between the City of Mankato, hereinafter called "City", and Winland Electronics,
Inc., hereinafter called "Developer";

WITNESS TO:
WHEREAS, the City has applied to the Minnesota Department of Trade and Economic
Development for a Minnesota Investment Fund Grant (MIF) and received preliminary
approval for said grant; and

WHEREAS, a Grant Agreement, hereinafter called "Grant Agreement," between the
Minnesota Department of Trade and Economic Development and the City has been
executed and which Grant Agreement requires that the Developer, Winland
Electronics, Inc., provide financing to complete the project and agree to loan
terms with the City for Minnesota Investment Funds used to assist in financing
the project; and

WHEREAS, all parties to this agreement agree to incorporate into this agreement
by reference said MIF Grant Agreement, Grant Number CDAP-99-0013-HFY99, as is
fully set forth herein word for word;

NOW, THEREFORE, it is agreed by and between the parties hereto as follows:

                                    ARTICLE 1
                                   Definitions

Section 1.1, Definitions. In this Agreement, unless a different meaning clearly
appears from the context:

"City" means the City of Mankato

"Developer" means Winland Electronics, Inc.

"Bank" means Norwest Bank Minnesota South., Mankato office.

"Development Property" means the real property described as Eastwood Industrial
Centre, Lot 4 & N201.9'.

"Grantor Agency" means Minnesota Department of Trade and Economic Development.

"State" means the State of Minnesota.

"Grantor Agreement" means Minnesota Department of Trade and Economic Development
Grant Agreement # CDAP-99-0013-H-FY99.

"MIF" means Minnesota Investment Fund.

"Collateral" means a second mortgage on the development property specified in
Section 4.3.

"Leverage Funds* means the funds provided by or for the account of the Developer
pursuant to Section 2.1.

"Project" means ________________________________________________ thereof, as
generally discussed in the application for MIF funding which resulted in the
Grant Agreement.

                                    ARTICLE 2
                             Financing for Projects

Section 2.1, Project Financing. The Developer shall secure from Norwest Bank
Minnesota South, financing necessary to complete the project.

Section 2.2, Developer's Equity and other Financing. The Developer shall commit
to $363,726 of other financing plus $100,000 of equity to be used for the
completion of the project development.

Section 2.3, MIF Loan. The Grantor Agency of the State has granted to the City
and the City shall loan to the Developer, MIF funds of an amount up to $150,000
according to the terms described in ARTICLE 3.

                                    ARTICLE 3
                          MIF Loan Terms and Conditions

Section 3.1, Basic Loan Terms. The principle amount of the loan of MIF funds by
the City to the Developer shall not exceed $150,000. The loan shall bear
interest at a rate of six (6%) percent per annum for ten (10) years. The loan
terms may not be modified without prior written approval from the Grantor
Agency.

Section 3.2, Prepayment. Prepayment of the loan may occur at any time during the
loan without penalty.

Section 3.3, Assignment. The Developer will not sell the property or assign its
rights or interests or any party therein or its right or interest in this Loan
Agreement, or any part thereof. In the event the Developer sells, conveys,
transfers, further mortgages or encumbers or disposes of the property, or any
part thereof, or any interest therein, or agrees so to do, the Developer shall
immediately pay on the Loan an amount equal to same. This shall be in addition
to any other remedies at law or equity available to the city.

Section 3.4, Termination. This agreement shall automatically terminate without
any notice to Developer (1) if the loan proceeds have not been disbursed to the
Developer prior to December 31, 1999; or if a petition is filed against the
Developer under the U.S. Bankruptcy Code, or if voluntary, such a petition is
not dismissed within sixty (60) business days following such petition.

                                    ARTICLE 4
                             Default and Collateral

Section 4.1, Default. The Developer shall b e in default under this agreement
upon the happening of any of the following events:

         (a) nonpayment, when due, of any amount payable on MIF loan or failure
to observe or perform any terms thereof; provided such nonpayment is not
remedied within ten (10) business days after written notice thereof by either
the Developer or the City,
         (b) if Developer is in breach of any material respect of any obligation
or agreement of the Developer under this agreement, provided Developer remains
in breach in any material respect for thirty (30) business days after written
notice thereof to the Developer by the City; provided, however, that if such
breach shall reasonably be incapable of being cured within such thirty (30)
business days after notice, and if Developer commences and diligently prosecutes
the appropriate steps to cure such breach, no default shall exist so long as
Developer is proceeding to cure such breach;
         (c) if any material covenant, warranty or representation of Developer
shall prove to be untrue in any material respect, provided such covenant,
warranty or representation of Developer remains untrue in any material respect
for thirty (30) business days after written notice thereof to the Developer the
City; provided, however, that if such untruth shall reasonably be incapable of
being corrected within such thirty (30) business days after notice, and if
Developer commences and diligently prosecutes the appropriate steps to correct
such untruth, no default shall exist so long as Developer is so proceeding to
correct such untruth;
         (d) if the Developer becomes insolvent or generally unable to pay debts
as they mature or makes an assignment for the benefit of creditors, provided
such insolvency or general inability to pay is not remedied within sixty (60)
business days after written notice thereof by either Developer or the City;
         (e) entry of a final judgment against Developer where such judgment the
City reasonably deems will have a material, adverse impact on Developer's
ability to comply with its obligations under this agreement;
         (f) transfer by the Developer, of any part of the Collateral to any
entity other than a wholly-owned subsidiary of Developer provided such is not
approved in writing by the City, which approval will not be unreasonably
withheld;
         (g) merger or consolidation where such merger or consolidation is not
approved in writing by the City, which approval will not be unreasonably
withheld; or
         (h) loss, theft, substantial damage, destruction or encumbrance of any
of the Collateral, provided that such is not remedied within sixty (60) business
days after written notice thereof by either Developer of the City (including,
without limitation, by a pledge of insurance proceeds or by substitute
Collateral satisfactory to the City);

Section 4.2, Remedies Upon Default.
         (a) In the event of a default and the failure to cure it in the time
allotted therefor to commence and diligently proceed to cure such default if
reasonably incapable of being cured within the time allotted therefor), the City
shall have the right as its option and without demand or notice, to declare all
or part of the loan (as described in Section 3.1) immediately due and payable,
and in addition to the rights and remedies granted hereby, the City shall have
all of the rights and remedies under the Uniform Commercial Code or any
applicable law.
         (b) Developer agrees in the event of a default and the failure to cure
it in the time allotted therefor, to make the Collateral available to the City.
In the event of any lawsuit under this agreement reasonable attorney's fees and
costs will be awarded to the prevailing party. If any notice of sale,
disposition or other intended action by the City is required by law to be given
to Developer, such notice shall be deemed reasonably and properly given if
mailed to Developer at the Development Property or at such other address of
Developer as may be shown on the City's records, at least fifteen (15) days
before such sale, disposition or other intended action. Waiver of and default
hereunder by the City shall not be waived of any other default, or of the same
default, on a later occasion. No delays or failure by the City to exercise any
right or remedy shall be a waiver of such right or remedy shall preclude other
or further exercise thereof of the exercise of any other right or remedy at any
other time.

Section 4.3, Collateral. The Developer shall grant to the City a second mortgage
on the development property.

                                    ARTICLE 5
                          Loan Disbursement Provisions

Section 5.1, Payment Requisition Documentation and Format. Loan disbursements
shall be for the construction of the addition to the existing building and in
the amount of $150,000. The loan funds may be disbursed to the Developer only
after the City has received from the Developer invoices for construction costs
and only on a cost-sharing ratio of 30% loan funds to 70% other funds.

Section 5.2, Provision for Evidentiary materials. No disbursements of loan funds
shall be made until all evidentiary materials required by the Grantor Agency
have been submitted and approved by the Grantor Agency.

Section 5.3, Project Time Frame (Schedule). The time frame outlined in the MIF
application pertaining to the Project shall be met by the Developer.

Section 5.4, Permanent Loan Terms. The permanent MIF loan of $150,000 shall be
for a term of ten (10) years, commencing not later than ___________, 19____. The
interest rate shall be six (6) percent per annum for the 120 months of the Loan
period. Monthly installments will be made in the amount of $1665.31 for 120
months. In the event that less than $150,000 of loan funds are not drawn down by
December 31, 1999 a revised amortization schedule shall be prepared to reflect
the lower monthly payments.

Section 5.5, Leverage Funds. The leveraged funds described in the MIF
application must be used for the same purposes and under the same terms, rates,
and conditions as specified unless prior written consent is received from the
Grantor Agency.

                                    ARTICLE 6
                       Provision Of Evidentiary Materials

Section 6.1, Provision of Evidentiary Materials. The Developer shall agree to
provide to the City all evidentiary materials according to the format and
timetable cited in the Grant Agreement. The City will forward said materials to
the Grantor Agency and assist in expediting reviews leading to a release of MIF
funds.

Section 6.2, Documentation of Use of Funds. The Developer must provide the City
with necessary documentation that the MIF loan proceeds and leveraged funds have
been used for the items and purposes stated in the MIF application, prior to
submitting the final progress report and requesting grant closeout from the
Grantor Agency.

                                    ARTICLE 7
                                Nondiscrimination

Section 7.1, Employment objective. The Developer agrees to take affirmative
action to ensure that 23 new permanent jobs will be created by the Project all
paying $8.00 and more hourly (excluding benefits). The Developer agrees to pay
benefits of $.75 per hour and more for the positions created. If those jobs are
not created by the Grantee's target date of June 30, 2001, the Developer will be
required to return to the City all or a proportional share of the grant funds
provided for job creation.

Section 7.2, Minnesota Statute 116J.991. Minnesota Statute 116J.991 requires
that a business receiving state assistance for economic development or job
growth purposes must create a net increase in jobs in Minnesota within two years
of receiving the assistance. The law also requires that the government agency
providing the assistance must establish wage level and job creation goals to be
met by the business receiving the assistance. If Winland Electronics, Inc. fails
to meet the wage level and job creation goals as set forth in Special Condition
10 of the Agreement, the business must repay the assistance to the Grantee.

Section 7.3, Employment Documentation. The Developer shall complete and provide
to the City notification of employment semiannually of hiring each new employee.
This notification requirement will not be necessary after June 30, 2001 provided
the employment objective set forth in Section 7.1 has been met.

Section 7.4, Job Creation Documentation. The Grantee must include job creation
information in each semi-annual progress report. This information shall be
provided by the Developer and must include:
         (a)      permanent full-time equivalent jobs created;
         (b)      job title per job,
         (c)      date employees hired,
         (d)      hourly value of wages paid,
         (e)      value of benefits paid; and
         (f)      type of benefits provided (i.e. life, dental, health insurance
                  and retirement).

                                    ARTICLE 8
         Provision of Monitoring information Related To Project Progress

Section 8.1, Provisions of Progress Information. The developer shall agree to
provide to the City information for incorporation into progress reports, as
required by the Grantor Agency and as needed by the City, to monitor project
implementation for compliance with grantor and local guidelines.

                                    ARTICLE 9
                                Nondiscrimination

Section 9.1, Nondiscrimination. The provisions of Minnesota Statutes, Section
181.59, which relate to civil rights and discrimination, shall be considered a
part of this Agreement as though wholly set forth herein.

                                   ARTICLE 10
            Developer's Acknowledgments, Representation, and Warrants

Section 10.1, Acknowledgments. The Developer acknowledges that the City, in
order to obtain funds for part of the City's activities in connection with the
Project, has applied for a Minnesota investment Fund Grant (MIF) (the "Grant")
to the Commissioner of the Minnesota Department of Trade and Economic
Development (the "Commissioner") under the Minnesota Investment Fund Program,
Business and Community Development Division, and the City will be entering into
the Grant Agreement with the Commissioner setting forth the terms, conditions,
and requirements as to the Grant. The Developer further acknowledges that the
Developer has made certain representations and statements as to those activities
of the Project to be carried out and completed by the Developer which were
contained in and made part of the application for the Grant and that the
Developer is designated and identified under the Grant Agreement.

A copy of the Grant Agreement shall be on file in the office of the Deputy City
Manager, City of Mankato. In the event any provision of this Agreement relating
to the Developer's obligations hereunder shall be inconsistent with the
provisions of the Grant Agreement relating to the Developer's activities
thereunder, the provisions of the Grant Agreement shall prevail.

The Developer acknowledges that nothing contained in the Grant Agreement of this
Agreement, nor any act of the Commissioner or the City shall be deemed or
construed to create any relationship or third-party beneficiary, principal and
agent, limited or general partnership, or joint venture, or of any association
or relationship involving the commissioner.

Section 10.2, Representations and warranties. Developer warrants and represents,
in connection with the Grant and for the benefit of the Commissioner and the
City, that:
         (a) Representations, statements, and other matters provided by the
Developer relating to those activities of the Project to be Completed by the
Developer, which were contained in the application for the Grant, were true and
complete in all material respects as of the date of submission to the City and
that such representations, statements, and other matters are true as of the date
of this Agreement and there are no adverse material changes in the financial
condition of the business or its shareholders.
         (b) To the best of the Developer's knowledge, no member, officer, or
employee of the City or its designers or agents, no consultant, member of the
governing body of the City, and no other public official of the City, who
exercises or has exercised any functions or responsibilities with respect to the
Project during his or her tenure shall have any interest, direct or indirect, in
any contract or subcontract, or the proceeds thereof, for work to be performed
in connection with the Project or in any activity, or benefit therefrom, which
is part of this Project.
         (c) The Developer acknowledges that the Commissioner, in selecting the
city as recipient of the Grant, relied in material part upon the assured
completion of the Project to be carried out by the Developer, and the Developer
assures the City that said Project will be carried out by the Developer.
         (d) The Developer warrants that to the best of its knowledge, it has
obtained all federal, state, and local governmental approvals, reviews, and
permits required by law to be obtained in connection with the Project.
         (e) The Developer warrants that it shall keep and maintain books,
records, and other documents relating directly to the leveraged funds and that
any duly authorized representative of the Commissioner shall, at all reasonable
times, have access to and the right to inspect, copy , audit, and examine all
such books, records, and other documents of the Developer until the completion
of all closeout procedures respecting the MIF grant and the final settlement and
conclusion of all issues arising out of the grant.
         (f) The Developer warrant that no transfer of MIF loan proceeds by the
City to the Developer shall be or be deemed an assignment of the loan proceeds
and the Developer shall neither succeed to any rights, benefits, or advantages
of the City under the Grant Agreement, nor attain any right, privileges,
authorities, or interest in or under the Grant Agreement.
         (g) The Developer warrant that it has fully complied with all
applicable state and federal laws pertaining to its business and will continue
said compliance throughout the terms of this Agreement. If at any time notice of
noncompliance is received by the Developer, he agrees to take any necessary
action to comply with the State or Federal law in question.

                                   ARTICLE 11
                            Other Special Conditions

Section 11.1, Antitrust. Developer hereby assigns to the State of Minnesota any
and all claims for overcharges as to goods and/or services provided in
connection with this contract resulting from antitrust violations which arise
under the antitrust laws of the United States and the antitrust laws of the
State of Minnesota.

Section 11.2, Workers Compensation Insurance. The Developer has obtained
worker's compensation insurance as required by Minnesota Statutes, 1982, Section
176.181, Subd. 2. Developer's workers' compensation insurance information is as
follows:

         (a)      Company Name:  ________________________
         (b)      Policy Number: ________________________
         (c)      Local Agent:   ________________________

Section  11.3, The Developer must comply with Minnesota Statues, Section
         290.9705 by either;
         (a) Depositing with the State, eight percent of every payment made to
non-Minnesota construction contractors, where the contract exceeds $100, 000;
or,
         (b) Receiving a waiver from this requirement from the Minnesota
Department of Revenue.

Section 11.4, Prevailing Wage Rate. Minnesota Statutes, Section 116J.871 applies
to this project. This statute requires of recipients of state assistance to pay
the prevailing wage rate to laborers and mechanics at the project site. The
recipient or person benefiting from the financial assistance must certify to the
Commissioner of Labor and Industry that laborers and mechanics assigned
prevailing wage rate is a misdemeanor and is punishable by a fine of not more
than $700, or imprisonment for not more than 90 days or both. Each day a
violation of this subdivision continues is a separate offense. If a subrecipient
is in noncompliance with prevailing wage rate requirements, the Grantee must
withhold payment of grant/loan funds to subrecipient until the Minnesota
Commission of Labor and Industry indicates that the subrecipient is in
compliance with the prevailing wage requirements.

Section 11.5, Business with the State of Minnesota-State Tax Laws. Notice to
Developer. You are required by Minnesota Statutes, 1982, Section 2790.66, to
provide your Minnesota tax identification number if you do business with the
State of Minnesota. This information may be used in the enforcement of Federal
and State tax laws. Supplying these numbers could result in an action to require
you to file State tax returns and pay delinquent State tax liabilities. This
contract will not be approved unless these numbers are provided. These numbers
will be available to Federal and State tax authorities and State personnel
involved in the payment of State obligations.

Winland Electronics, Inc.
Minnesota Tax ID:                   8023649
Federal Employer ID:                41-6005344

IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in
its name and behalf and the Developer and Formative has caused this Agreement to
be duly executed in its name and behalf as of the date first above written.

Subscribed and sworn to before                    City of Mankato

/s/ Jodi Tuchek

me, a Notary Public, on this
5th day of October,                               By /s/ illegible
1999, My Commission expires
on 1-31-2005                                      Position  Deputy City Manager

Subscribed and sworn to before                    DEVELOPER  W. K. Hankins
me, a Notary Public, on this
5th day of October,                               By /s/ W. K. Hankins
1999, My Commission expires on
1-31-2005                                         Position CEO & ChairmanAGREEMENT FOR LOAN OF
                     SMALL CITIES DEVELOPMENT PROGRAM FUNDS

                                     PARTIES

         THIS AGREEMENT is made and entered into the 5th day of October, 1994,
and renewed this 14th day of December 1999 by and between the CITY OF MANKATO
(hereinafter called "City") and WINLAND ELECTRONICS, INC. (hereinafter called
"Developer");

                                   BACKGROUND

         City has applied to the Minnesota Department of Trade and Economic
Development for a Small Cities Development Program Grant and has received
approval for said grant;

         A Grant Agreement (hereinafter called "Grant Agreement") between the
Minnesota Department of Trade and Economic Development and the City has been
executed which Grant Agreement requires that the Developer secure sufficient
private financing and agree to loan terms with the City for Small Cities
Development Grant funds used to assist in financing the Project;

         All parties to this Agreement agree to incorporate into this Agreement
by reference said SCDP Grant Agreement, Grant No. CDAP 94-0105-H-FY95, as is
fully set forth herein word for word;

                                    AGREEMENT

         It is agreed by and between the parties hereto as follows:

                                    ARTICLE I

                                   Definitions

         In this Agreement, unless a different meaning clearly appears from the
context:

         "City" means City of Mankato.

         "Collateral" means a mortgage on the Development Property.
         "Developer" means Winland Electronics, Inc.

         "Development Property" means the real property described as Lots 4 and
5, Block 3, Eastwood Industrial Centre, except that part of Lot 5, Block Three,
Eastwood Industrial Centre, according to the plat thereof on file and of record
with the Blue Earth County Recorder, lying southerly of a line parallel with the
distant 201.90 fee south of the north line of said Lot 5, Blue Earth County,
Minnesota.

         "Grantor Agency" means Minnesota Department of Trade and Economic
Development.

         "Grant Agreement" means Minnesota Department of Trade and Economic
Development Grant Agreement No. CDAP 94-0105-H-FY95.

         "Lender" means the City of Mankato, which has made a separate loan to
the Developer in the amount of $1,699,620.00.

         "Leverage Funds" means the funds provided by or for the account of the
Developer pursuant to Article 2.

         "Project" means the loan of SCDP grant funds to Developer to assist in
the construction of a 52,800 square foot commercial building in the City of
Mankato's Eastwood Industrial Centre.

         "State" means the State of Minnesota.

         "SCDP" means Minnesota Small Cities Development Program.

                                    ARTICLE 2

                              Financing for Project

         Developer has secured from City a commitment for funds, which, when
added to the funds to be provided under the SCDP, will enable Developer to
complete the Project. Specifically, Developer estimates that the completion of
the Project, including furniture, equipment, land acquisition, engineering, and
all contingencies, will cost $3,060,893.00. This sum shall come from the
following sources:

         (1)      SCDP grant to City, which City will loan to Developer, in the
                  sum of $500,000.00.
         (2)      A loan directly from the City to Developer in the sum of
                  $1,699,620.00.
         (3)      Southeastern Minnesota Initiative Fund loan in the sum of
                  $100,000.00.
         (4)      Tax Increment Financing in the sum of $235,380.00
         (5)      Developer Funds or Bank Financing in the sum of $525,893.00.

                                    ARTICLE 3

                         SCDP Loan Terms and Conditions

         1. Original Loan Terms. The principal amount of the loan of SCDP funds
by the City to the Developer shall not exceed $500,000.00. The loan shall bear
interest at a rate of four (4) percent per annum. Payments shall be monthly and
shall be in a sum that would result in amortization of the loan over a period of
twenty years. A balloon payment of all amounts then owing, however, will be due
and payable at the end of five years. The loan terms may not be modified without
prior written approval from the Grantor Agency.

         2. Prepayment. Prepayment of the loan may occur at any time during the
loan without penalty.

         3. Assignment. The Developer will not sell the property or assign its
rights or interests therein or its interest in this Loan Agreement, or any part
thereof In the event the Developer sells, conveys, transfers, further mortgages
or encumbers or disposes of the property, or any part thereof, or any interest
therein, or agrees so to do, the Developer shall immediately pay all outstanding
principal and accrued interest. This shall be in addition to any other remedies
at law or equity available to the City.

         4. Termination. This Agreement shall automatically terminate without
any notice to Developer (1) if the loan proceeds have not been disbursed to the
Developer prior to December 31, 1994, or such later date as may be agreed upon
between and among Borrower, Lender and Contractor; or (2) if a petition is filed
by or against the Developer under the U.S. Bankruptcy Code, or if voluntary,
such a petition is not dismissed within sixty (60) business days following such
petition.

         5. Davis-Bacon. The $500,000 loan is for construction. A wage decision
must be requested from the Grantor, as Davis-Bacon Labor Standards provisions
would apply. If any of the equipment items financed in whole or in part with
SCDP funds require more than an incidental amount of installation work, a wage
decision must be requested from the Grantor, as Davis-Bacon Labor Standards
provisions would apply to the total project. The following factors should be
considered in determining whether the amount of the installation activity is
more than incidental:

                  (a) the cost of the equipment itself, compared to the cost of
         its installation;

                  (b) the existence of a high absolute cost of installation
         (even if the equipment costs much more);

                  (c) the necessity for structural modification to house the
         equipment or widening of entrances to accommodate its installation; and

                  (d) the necessity for upgrading electrical wiring, etc.

         6. Non-Minnesota Construction Contracts. The Developer must comply with
Minnesota Statute, 1989, ss.290.9705, by either:

                  (a) depositing with the State eight (8) percent of every
         payment made to non-Minnesota construction contractors where the
         contract exceeds $100,000; or

                  (b) receiving an exemption from this requirement from the
         Minnesota Department of Revenue.

         7. Lobbying. The Developer must not use SCDP funds to pay any person
for influencing or attempting to influence an officer or employee of a federal
agency, a member of Congress, an officer or employee of Congress, or any
employee of a member of Congress in connection with the awarding of any federal
contract, the making of a federal grant, the making of a federal loan, the
entering into of any cooperative agreement, and the extension, continuation,
renewal, amendment, or modification of any federal contract, grant, loan, or
cooperative agreement. If the grantee uses non-federal funds to conduct any of
the aforementioned activities, the grantee must complete and submit Standard
Form LLL, "Disclosure Form to Report Lobbying."

                                    ARTICLE 4

                             Default and Collateral

         1. Default. The Developer shall be in default under this Agreement upon
the happening of any of the following events:

                  (a) nonpayment, when due, of any amount payable on SCDP loan
         or failure to observe, or perform any terms thereof-, provided such
         nonpayment is not remedied within ten (10) business days after written
         notice thereof by either the Developer or the City;

                  (b) if Developer is in breach of any material respect of any
         obligation or agreement of the Developer under this Agreement, provided
         Developer remains in breach in any material respect for thirty (30)
         business days after written notice thereof to the Developer by the
         City; provided, however, that if such breach shall reasonably be
         incapable of being cured within such thirty (30) business days after
         notice, and if Developer commences and diligently prosecutes the
         appropriate steps to cure such breach, no default shall exist so long
         as Developer is proceeding to cure such breach;

                  (c) if any material covenant, warranty or representation of
         Developer shall prove to be untrue in any material respect, provided
         such covenant, warranty or representation of Developer remains untrue
         in any material respect for thirty (30) business days after written
         notice thereof to the Developer by the City; provided, however, that if
         such untruth shall reasonable be incapable of being corrected within
         such thirty (30) business days after notice, and if Developer commences
         and diligently prosecutes the appropriate steps to correct such
         untruth, no default shall exist so long as Developer is so proceeding
         to correct such untruth;

                  (d) if the Developer becomes insolvent or generally unable to
         pay debts as they mature or makes an assignment for the benefit of
         creditors, provided such insolvency or general inability to pay is not
         remedied within sixty (60) business days after written notice thereof
         by either Developer or the City;

                  (e) entry of a final judgment against Developer which such
         judgment the City reasonably deems will have a material, adverse impact
         on Developer's ability to comply with its obligations under this
         Agreement;

                  (f) transfer by the Developer of any part of the Collateral to
         any entity other than a wholly-owned subsidiary of Developer provided
         such is not approved in writing by the City;

                  (g) merger or consolidation where such merger or consolidation
         is not approved in writing by the City, which approval will not be
         unreasonably withheld; or

                  (h) loss, theft, substantial damage, destruction or
         encumbrance of any of the Collateral, provided that such is not
         remedied within sixty (60) business days after written notice thereof
         by either Developer or the City (including, without limitation, by a
         pledge of insurance proceeds or by substitute Collateral satisfactory
         to the City).

         2.       Remedies Upon Default.

                  (a) In the event of a default and the failure to cure it in
         the time allotted thereof (or to commence and diligently proceed to
         cure such default if reasonable incapable of being cured within the
         time allotted thereof), the City shall have the right at its option and
         without demand or notice, to declare all or any part of the loan
         immediately due and payable, and in addition to the rights and remedies
         granted hereby, the City shall have all of the rights and remedies
         under the Uniform Commercial Code or any applicable law.

                  (b) Developer agrees in the event of a default and the failure
         to cure it in the time allotted therefor, to make the Collateral
         available to the City. In the event of any lawsuit under this
         Agreement, reasonable attorney's fees and costs will be awarded to the
         prevailing party. If any notice of sale, disposition or other intended
         action by the City is required by law to be given to Developer at the
         it shall be given not less than fifteen (15) days before such sale,
         disposition or other intended action. Waiver of and default hereunder
         by the City shall not be a waiver of any other default or of the same
         default on a later occasion. No delays or failure by the City to
         exercise any right or remedy shall be a waiver of such right or remedy
         and no single or partial exercise by the City of any right or remedy
         shall preclude other or further exercise thereof of the exercise of any
         other right or remedy at any other time.

         3. Collateral. The Developer shall grant to the City a mortgage on the
Development Property according to the terms of the mortgage instrument between
the Developer and the City.

                                    ARTICLE 5

                          Loan Disbursement Provisions

         1. Payment Requisition Documentation and Format. Loan disbursements
shall be for construction costs in the amount of $500,000.00 from SCDP funds.
The loan funds for construction may be disbursed to the Developer only after the
City has received from the Developer invoices for construction costs and only on
a cost-sharing ration of 16.34% loan funds to 83.66% other funds.

         2. Provision of Evidentiary Materials. No disbursements of loan funds
shall be made until all evidentiary materials required by the Grantor Agency
have been submitted and approved by the Grantor Agency.

         3. Project Time Frame (Schedule). The time frame outlined in the SCDP
application pertaining to the Project shall be met by the Developer.

         4. Permanent Loan Terms. The permanent SCDP loan of $500,000.00 shall
be for a term of ten (10) years, but with payments in a sum that would amortize
the loan over fifteen (15) years, with a balloon payment due at the end of ten
(10) years, commencing not later than January 1, 1995. The interest rate shall
be four (4) percent per annum for the 120 months of the loan period.

         5. Loan Repayment Schedule. Repayment of the principal sum together
with accrued interest, shall be made in monthly installments, commencing January
1, 1995, in the amount of $3,029.90, and shall continue to be made in the amount
of $3,029.90 on the first day of each month thereafter until February 1, 2000,
when the payment shall increase to $3,698.44 on the first day of each month
beginning in February 2000, and continuing until January 1, 2005, at which time
the entire outstanding principal balance, along with interest accrued thereon
until the date of payment shall become due and payable in full. Developer
understands that this will be a balloon payment. The total monthly payment
amount due from Developer to Lender will include the amount necessary to
amortize the additional loan amount being provided by Lender of $1,699,620.00
and renegotiated at an outstanding principal balance of $1,321,913.59.

         6. Leveraged Funds. The leveraged funds described in the SCDP
application must be used for the same purposes and under the same terms, rates,
and conditions as specified unless prior written consent is received from the
Grantor Agency.

                                    ARTICLE 6

                  Provision of Evidentiary Material Requirement

         1. Provision of Evidentiary Materials. The Developer shall agree to
provide to the City all evidentiary materials according to the format and
timetable cited in the Grant Agreement. The City will for-ward said materials to
the Grantor Agency and assist in expediting reviews leading to a release of SCDP
funds.

         2. Documentation of Use of Funds. The Developer must provide the City
with necessary documentation that the SCDP loan proceeds and leveraged funds
have been used for the items and purposes stated in the SCDP application, prior
to submitting the final progress report and requesting grant closeout from the
Grantor Agency.

         3. The Developer must document that equipment items purchased with SCDP
loan funds are of reasonable cost, in accordance with OMB Circular A-87.

                                    ARTICLE 7

                         Provision of New Permanent Jobs

         1. Employment Objective. The Developer agrees to take affirmative
action to ensure that 85 new permanent jobs will be created by the Project, of
which, at a minimum, 51% shall be held by low and moderate income individuals.
The Developer agrees that the above job requirements shall be completed December
31, 1996. These requirements were completed as of the December 14 , 1999,
renegotiation.

         2. Employment Documentation. The Developer shall complete and provide
to the City notification of employment semi-annually of hiring each new
employee. This notification requirement will not be necessary after December 31,
1996, provided the employment objective set forth above has been met. In
addition, the Developer agrees to provide verification that jobs are available
to persons of low and moderate income by documenting that once the jobs are
filled, at least 51% of the persons hired are of low and moderate income
families, as per Section 8 income guidelines.

         3. Job Creation Documentation. The grantee must include job creation
information in each semi-annual progress report. This information shall be
provided by the Developer and must include:

                  (a)      jobs created
                  (b)      job title per job
                  (c)      date employees hired

         4. First Source Employment Referral Agreement. Developer agrees to list
any vacant or new positions with the job services of the Commissioner of Job
Services or a local service unit operated by a county or counties operating
under a joint powers agreement, one or more cities of the first class operating
under a joint powers agreement, or a city of the first class.

                                    ARTICLE 8

         Provision of Monitoring Information Related to Project Progress

         The Developer shall agree to provide to the City information for
incorporation into progress reports, as required by the Grantor Agency and as
needed by the City, to monitor Project implementation for compliance with
grantor and local guidelines.

                                    ARTICLE 9

                                Nondiscrimination

         The provisions of Minnesota Statutes, Section 181.59, which relate to
civil rights and discrimination, shall be considered a part of this Agreement as
though wholly set forth herein.

                                   ARTICLE 10

           Developer's Acknowledgments, Representations, and Warrants

         1. Acknowledgements. The Developer acknowledges that the City, in order
to obtain funds for part of the City's activities in connection with the
Project, has applied for a Small Cities Development Program Grant (the "Grant")
to the Commissioner of the Minnesota Department of Trade and Economic
Development (the "Commissioner") under the Small Cities Development Program,
Community Development Division, and that the City will be entering into the
Grant Agreement with the Commissioner setting forth the terms, conditions, and
requirements as to the Grant.

         The Developer further acknowledges that the Developer has made certain
representations and statements as to those activities of the Project to be
carried out and completed by the Developer which were contained in and made part
of the application for the Grant and that the Developer is designated and
identified under the Grant Agreement.

         A copy of the Grant Agreement shall be on file in the offices of the
City's Community Development Department. In the event any provision of this
Agreement relating to the Developer's obligations hereunder shall be
inconsistent with the provisions of the Grant Agreement relating to the
Developer's activities thereunder, the provisions of the Grant Agreement shall
prevail.

         The Developer acknowledges that nothing contained in the Grant
Agreement or this Agreement, nor any act of the Commissioner or the City shall
be deemed or construed to create any relationship or third-party beneficiary,
principal and agent, limited or general partnership, or joint venture, or of any
association or relationship involving the Commissioner.

         2. Representations and Warranties. Developer warrants and represents,
in connection with the Grant and for the benefit of the Commissioner and the
City, that:

                  (a) The representations, statements, and other matters
         provided by the Developer relating to those activities of the Project
         to be completed by the Developer, which were contained in the
         application for the Grant, were true and complete in all material
         respects as of the date of submission to the City and that such
         representations, statements, and other matters are true as of the date
         of this Agreement.

                  (b) To the best of the Developer's knowledge, no member,
         officer, or employee of the City or its designees or agents, no
         consultant, member of the governing body of the City, and no other
         public official of the City, who exercises or has exercised any
         functions or responsibilities with respect to the Project during his or
         her tenure shall have any interest, direct or indirect, in any contract
         or subcontract, or the proceeds thereof, for work to be performed in
         connection with the Project or in any activity, or benefit therefrom,
         which is part of this Project.

                  (c) The Developer acknowledges that the Commissioner, in
         selecting the City as recipient of the Grant, relied in material part
         upon the assured completion of the Project to be carried out by the
         Developer, and the Developer assures the City that said Project will be
         carried out by the Developer.

                  (d) The Developer warrants that to the best of its knowledge,
         it has obtained all federal, state, and local governmental approvals,
         reviews, and permits required by law to be obtained in connection with
         the Project.

                  (e) The Developer warrants that it shall keep and maintain
         books, records, and other documents relating directly to the receipt
         and disbursements of SCDP loan proceeds and that any duly authorized
         representative of the Commissioner shall, at all reasonable times, have
         access to and the right to inspect, copy, audit, and examine all such
         books, records, and other documents of the Developer until the
         completion of all closeout procedures respecting the SCDP loan and the
         final settlement and conclusion of all issues arising out of this loan.

                  (f) The Developer warrants that no transfer of SCDP loan
         proceeds by the City to the Developer shall be or be deemed an
         assignment of the loan proceeds and the Developer shall neither succeed
         to any rights, benefits, or advantages of the City under the Grant
         Agreement, nor attain any right, privileges, authorities, or interests
         in or under the Grant Agreement.

                  (g) The Developer warrants that it has fully complied with all
         applicable state and federal laws pertaining to its business and will
         continue said compliance throughout the terms of this Agreement. If, at
         any time, notice of noncompliance is received by the Developer, it
         agrees to take any necessary action to comply with the State or Federal
         law in question.

                                   ARTICLE 11

                            Other Special Conditions

         1. Antitrust. Developer hereby assigns to the State of Minnesota any
and all claims for overcharges as to goods and/or services provided in
connection with this contract resulting from antitrust violations which arise
under the antitrust laws of the United States and the antitrust laws of the
State of Minnesota.

         2. Workers' Compensation Insurance. Developer has obtained workers'
compensation insurance as required by Minnesota Statutes, 1982, Section 176.181,
Subd. 2. Developer's workers' compensation insurance information is as follows:

               (a)      Company Name: State Fund Mutual
               (b)      Policy Number: 002789.209
               (c)      Local Agency: Jack Hero, 7500 Flying Cloud Drive, #835,
                                      Eden Prairie, MN 55344

         3. Business With the State of Minnesota/State Tax Laws. Notice to
Developer. You are required by Minnesota Statutes, 1982, Section 270.66, to
provide your Minnesota tax identification number if you do business with the
State of Minnesota. This information may be used in the enforcement of Federal
and State tax laws. Supplying these numbers could result in an action to require
you to file State tax returns and pay delinquent State tax liabilities. This
contract will not be approved unless these numbers are provided. These numbers
will be available to Federal and State tax authorities and State personnel
involved in the payment of State obligations.

         Minnesota Tax ID:          6997761
         Federal Employer ID:       41-0992135

         IN WITNESS WHEREOF, the City has caused this Agreement to be duly
executed in its name and behalf and the Developer has caused this Agreement to
be duly executed in its name and behalf as of the date first above written.

Subscribed and sworn to before me CITY OF MANKATO, MINNESOTA, this 14th day of
December, 1999.

/s/ Ranae Distad                              By: /s/
Notary Public                                 Its City Manager

Subscribed and sworn to before me WINLAND ELECTRONICS, INC. this 14th day of
December, 1999.

/s/ Jodi Tuchek                               By: /s/ W. K. Hankins
Notary Public                                 Its Chairman and CEO

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