Document:

NORWEST BANK MINNESOTA SOUTH,
NATIONAL ASSOCIATION                                              REVOLVING NOTE

$3,500,000.00                                                September 29, 1999

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 THREE MILLION FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($3,500,000.00) 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 on the unpaid balance at the annual interest
rate defined below. Absent manifest error the Bank's records will be conclusive
evidence of the principal and accrued interest owing hereunder.

INTEREST RATE. The principal balance outstanding under this Revolving Note will
bear interest at an annual rate equal to the Base Rate, floating. The Base Rate
is the "base" or "prime" rate of interest established by the Bank from time to
time at its principal office in Minneapolis, Minnesota.

INTEREST AFTER MATURITY. The unpaid principal balance and interest due under
this Revolving Note after maturity (whether this Revolving Note matures by
demand, acceleration or lapse of time) shall bear interest until paid at the
Base Rate plus 1.00%, floating.

REPAYMENT TERMS

Interest. Interest will be payable on the first day of each month, beginning
November 1, 1999.

Principal. Principal and any unpaid interest, shall be payable in a single
payment due on August 31, 2000.

ADDITIONAL TERMS AND CONDITIONS. This Revolving Note is issued pursuant to a
Second Amendment of even date amending a Term Loan and Credit Agreement between
the Bank and the Borrower dated July 31, 1998 (as amended, the "Agreement"), and
shall replace but not be deemed to satisfy the 1998 Revolving Note as defined in
the Agreement. The Agreement, and any amendments or substitutions, contains
additional terms and conditions, including default and acceleration provisions,
which are incorporated into this Revolving Note by reference. 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
Revolving Note is not paid as provided above. This Revolving 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 Revolving 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 Revolving Note.

WINLAND ELECTRONICS, INCORPORATED

By: /s/ W. K. Hankins

Its: CEO & CFONORWEST BANK MINNESOTA SOUTH,
NATIONAL ASSOCIATION                                                  TERM NOTE

$530,052.64                                                   September 29, 1999

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 Thirty Thousand
Fifty Two and 64/100 Dollars ($530.052.64), 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 8.25%.

REPAYMENT TERMS

Principal and Interest. Principal and interest shall be payable in successive
monthly installments of Five Thousand One Hundred Fifty and 00/100 Dollars
($5,150.00), beginning on November 1, 1999 and on the first day of each month
thereafter. The remaining principal balance, plus any accrued interest, shall be
fully due and payable on September 30, 2004.

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

ADDITIONAL TERMS AND CONDITIONS. This Term Note is issued pursuant to Second
Amendment to Term Loan and Credit Agreement of even date between the Bank and
the Borrower (as amended, the "Agreement"), and is given as a replacement for,
and not in satisfaction of, the 1998 Term Note as described in the Agreement,
and is secured by a mortgage dated May 7, 1996, which was filed for record on
May 15, 1996 in the Registrar of Titles as Document #6041, and in the office of
the County Recorder as Document #52580, as modified. 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. 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: CEO & CFOMORTGAGE

         This Mortgage is made this 7th day of May, 1996, between Winland
Electronics Incorporated, a Minnesota Corporation (herein called the
"Mortgagor"), and Norwest Bank Minnesota South, National Association (herein
called "Mortgagee").

         WITNESSETH, THAT, in consideration of the sum of Fifty Seven Thousand
Seven Hundred Twenty Five Dollars and 00/100 Dollars ($57,725.00), to him in
hand paid by the Mortgagee, the receipt whereof is hereby acknowledged, the
Mortgagor does hereby mortgage, grant, bargain, sell and convey unto the
Mortgagee, forever, all the tract(s) or parcel(s) of land (hereinafter called
the "Land"), located in the County of Blue Earth, and State of Minnesota
described as follows:

         Lots Four (4) and Five (5), Block Three (3), EXCEPT that part of Lot 5
         lying southerly of a line parallel with and distance 201.90 feet south
         of the North line of said Lot 5, Eastwood Industrial Centre, the 5
         perimeter corners of which subdivision are marked with Judicial
         Landmarks.

         SUBJECT TO:           Easements of Record AND
                               A Mortgage/SSA/FFS Filed for record as document
                               no. 49093 on August 12, 1994 in favor of the City
                               of Mankato in the amount of $1,935,000.00 and
                               Amendment to Mortgage dated 12/28/94 noting
                               additional $264,620.00 and filed as document no.
                               49815.

         TOGETHER With all the buildings and improvements now or hereafter
erected thereon, and all lighting, heating, ventilating, air-conditioning,
sprinkling and plumbing fixtures, water and power systems, engines and
machinery, boilers, ranges, ovens, dishwashers, carpeting, mirrors and mantels,
furnaces, oil burners, elevators and motors, refrigeration plants or units,
communication systems, dynamos, transformers, electrical equipment, storm and
screen windows, doors, awnings and shades and all other fixtures of every
description now or hereafter found or used upon the property above described or
appurtenant thereto, all of which, together with replacements and additions
thereto, shall be deemed fixtures and subject to the lien hereof, and together
with all hereditaments, easements, appurtenances, rents, issues, profits,
royalties and mineral, oil and gas rights now and hereafter pertaining to the
Land (all of the foregoing, together with said Land, are hereinafter referred to
as the "Mortgaged Property").

         TO HAVE AND TO HOLD The Mortgaged Property unto the Mortgagee forever.

         PROVIDED, NEVERTHELESS, That if the Mortgagor (i) shall pay to the
Mortgagee the sum of Fifty Seven Thousand Seven Hundred Twenty Five and 00/100
Dollars ($57,725.00), together with interest, in accordance with the terms of
that certain promissory note of Mortgagor, of even date herewith, payable to the
Mortgagee, which note matures on May 31, 2001, and any extensions or renewals
thereof (such note and any such extension or renewal herein called the "Note"),
which Note is [X] a single or multiple advance note, the proceeds which may not
be readvanced following payment; or [ ] a revolving credit note under which
advances, payments and readvances may be made from time to time, and (ii) shall
also pay all other sums, with interest thereon, as may be advanced by the
Mortgagee in accordance with this Mortgage or the payment of which may now or
hereafter be secured by this Mortgage (the indebtedness evidenced by the Note
and all other such sums are hereinafter collectively referred to as the
"Indebtedness"), and (iii) shall also keep and perform all and singular the
covenants herein contained on the part of the Mortgagor to be kept and
performed, then, this Mortgage shall be null and void; otherwise this Mortgage
shall be and remain in full force and effect. The maximum principal amount which
at any one time may be outstanding on the Note, and secured by the Mortgage is
$57,725.00. This mortgage [ ] is [X] is not a purchase money mortgage.

         The Mortgagor covenants that the Mortgagor is lawfully seized of the
Mortgaged Property in fee simple and has the right to convey the Mortgaged
Property; that the Mortgaged Property is free from all liens and encumbrances
except as otherwise listed herein; that the Mortgagee shall quietly enjoy and
possess the Mortgaged Property; that the Mortgagor will warrant and defend the
title to the Mortgaged Property against all claims, whether now existing or
hereafter arising, not hereinbefore expressly excepted; and that al buildings
and improvements now or hereafter located on the Land are, or will be, located
entirely within the boundaries of the Land. The covenants and warranties of this
paragraph shall survive foreclosure of this Mortgage, and shall run with the
Land.

         The Mortgagor further covenants and agrees as follows:

1.       PAYMENT OF PRINCIPAL AND INTEREST AND COMPLIANCE WITH OTHER AGREEMENTS.
         The Mortgagor shall promptly pay when due the principal of and interest
         on the Note, prepayment charges, if any, provided in the Note, and all
         other indebtedness. The Mortgagor shall promptly and faithfully observe
         all of its obligations under the following agreements:

         and all of its obligations under any other agreement now in effect or
         hereafter made between the Mortgagor and Mortgagee.

2.       FUNDS FOR TAXES AND INSURANCE. If requested at any time or from time to
         time by the Mortgagee, the Mortgagor shall pay to the Mortgagee on the
         day monthly installments of principal and interest are payable under
         the Note, until the Note is paid in full, a sum (hereinafter called
         "Funds") equal to one-twelfth of the yearly taxes and assessments
         levied against the Mortgaged Property, plus one-twelfth of yearly
         premium installments on insurance required under paragraph 8 hereof,
         all as estimated initially and from time to time by the Mortgagee, to
         be applied by the Mortgagee to pay said taxes, assessments and
         insurance premiums. No earnings or interest shall be payable to the
         Mortgagor on the Funds. Such Funds shall not be, nor be deemed to be,
         trust funds, and the Mortgagee shall have the right to hold the Funds
         in any manner the Mortgagee elects and may comingle the Funds with
         other moneys held by the Mortgagee.

                  If the amount of the Funds held by the Mortgagee shall exceed
         at any time the amount deemed necessary by the Mortgagee to provide for
         the payment of taxes, assessments and insurance premiums as they fall
         due, such excess shall, at the option of the Mortgagee, either be
         promptly repaid to the Mortgagor or be credited to the Mortgagor on
         monthly installments of Funds subsequently payable. If the amount of
         the Funds held by the Mortgagee shall not be sufficient at any time to
         pay taxes, assessments and insurance premiums as they fall due, the
         Mortgagor shall pay to the Mortgagee any amount necessary to make up
         the deficiency upon notice from the Mortgagee to the Mortgagor
         requesting payment thereof, and the Mortgagee may apply such amounts in
         such order of application as the Mortgagee may determine. Upon the
         occurrence of any Event of Default, as defined in paragraph 16 hereof,
         the Mortgagee may apply on the Indebtedness secured hereby, in such
         order of application as the Mortgagee may determine, any Funds then in
         the Mortgagee's possession.

                  Upon payment in full of all Indebtedness secured by this
         Mortgage, the Mortgagee shall promptly remit to the Mortgagor any Funds
         held by the Mortgagee.

                  If, under paragraph 16 hereof, the Mortgaged Property is sold
         or the Mortgaged Property is otherwise acquired by the Mortgagee, the
         Mortgagee may apply any funds then held by the Mortgagee as a credit
         against any taxes or insurance premiums then due or against the
         Indebtedness secured by this Mortgage, in such order of application as
         the Mortgagee may determine.

3.       PAYMENT OF CHARGES AGAINST THE PREMISES. The Mortgagor also agrees to
         pay, before a penalty might attach for nonpayment thereof, all taxes
         and assessment and all other charges whatsoever levied upon or assessed
         or placed against the Mortgaged Property, by making payment directly to
         the payee thereof, or, if the Mortgagee so designates, by making
         payment in accordance with paragraph 2 hereof, and the Mortgagor will
         promptly deliver to the Mortgagee any official receipts received by the
         Mortgagor; to likewise pay all taxes, assessments and other charges,
         levied upon or assessed, placed or made against, or measured by, this
         Mortgage, or the recordation hereof, or the Indebtedness secured
         hereby, provided that the Mortgagor shall not be obligated to pay any
         such tax, assessment or charge if such payment would be contrary to law
         or would result in the payment of an unlawful rate of interest on the
         Indebtedness secured hereto. The Mortgagor shall promptly furnish to
         the Mortgagee all notices received by the Mortgagor of amounts due
         under this paragraph. In the event of the passage after the date of
         this Mortgage of any applicable law, creating or providing for any tax,
         assessment or charge which may not be lawfully paid by the Mortgagor,
         the Indebtedness secured hereby, together with interest due thereon,
         shall, at the option of the Mortgagee, become immediately due and
         payable.

4.       APPLICATION OF PAYMENTS. All payments received by the Mortgagee under
         the Note of this Mortgage shall be applied by the Mortgagee in such
         order of application as the Mortgagee may determine.

5.       LIENS. The Mortgagor shall keep the Mortgaged property free from all
         liens, whether prior or subordinate to this Mortgage, other than the
         lien of current real estate taxes and installments of official
         assessments with respect to which no penalty is yet payable; provided,
         that the Mortgagor shall not be required to discharge any lien so long
         as the Mortgagor shall agree to the payment of the obligations secured
         by such lien in a manner acceptable to the Mortgagee, or shall, in good
         faith, contest such lien by appropriate legal proceedings which shall
         operate to prevent the enforcement of the lien of forfeiture of the
         Mortgaged Property or any part thereof, and shall also give such
         reasonable security to Mortgagee as may be demanded by Mortgagee to
         insure compliance therewith.

6.       HAZARD INSURANCE. The Mortgagor shall keep the buildings and other
         improvements now existing or hereafter erected on the Land insured by
         insurance carriers satisfactory to the Mortgagee against loss by fire,
         hazards included in the term "extended coverage", and such other
         hazards, casualties and contingencies, including war damage insurance,
         as may be required by the Mortgagee, for the full replacement cost
         thereof and for such periods as may be required by the Mortgagee. The
         policy of such insurance shall be in a form acceptable to Mortgagee and
         shall not contain a defense based on coinsurance, and shall contain the
         standard provision that no act of the Mortgagor or of his agents or
         representatives will render the policy void as to the Mortgagee or
         affect the Mortgagee's right to recover in case of loss, and the policy
         or policies of insurance shall have loss payable provisions in favor of
         and in form acceptable to the Mortgagee. The Mortgagor shall pay all
         premiums on such insurance by making payment, when due, directly to the
         insurance carriers, or if the Mortgagee so designates, by making
         payment in accordance with paragraph 2 hereof. The mortgagee shall have
         the right to hold the policies and renewals thereof, and the Mortgagor
         shall promptly furnish to the Mortgagee all renewal notices and all
         paid premium receipts received by him. In no event shall the Mortgagee
         be held responsible for failure to pay for any insurance written or for
         any loss or damage growing out of a defect in any policy or growing out
         of any failure of any insurance company to pay for any loss or damage
         insured against or for failure by the Mortgagee to effect the insurance
         required hereunder. In the event of loss, the Mortgagor shall give
         prompt notice by mail to the insurance carrier and the Mortgagee, and
         the Mortgagee may make proof of loss if not made promptly by the
         Mortgagor. The Mortgagor and Mortgagee shall jointly adjust the
         insurance; provided, however, that it is not paid within 45 days
         following the damage or destruction it may be adjusted by the Mortgagee
         alone at any time after said 45 day period if, but only if, an Event of
         Default exists at the time of adjustment. The Mortgagee is authorized
         and empowered to collect and receive insurance proceeds, and to apply
         the insurance proceeds or any part thereof, at the sole discretion of
         the Mortgagee, to the restoration or repair of the Mortgaged Property
         damaged or to the reduction of the Indebtedness secured hereby, in such
         order of application as the Mortgagee may determine. Any such
         application to the principal of the Note shall not extend or postpone
         the due date of the monthly installments referred to in the Note or
         change the amount of such installments. All policies of insurance and
         any and all refunds of unearned premiums are hereby assigned to the
         Mortgagee as additional security for the payment of the Indebtedness
         secured hereby. In event of foreclosure of this Mortgage, all right,
         title and interest of the Mortgagor in and to any insurance policies
         then in force shall pass to the purchaser at the foreclosure sale. The
         Mortgagor shall not maintain or permit to be maintained any insurance
         of the type referred to in this paragraph 6 with respect to the
         Mortgaged Property other than the insurance required under this
         paragraph 6. Notwithstanding anything contained in this paragraph to
         the contrary, if this Mortgage is on a condominium or a town house and
         if there is a master insurance policy in force covering the common
         areas and facilities and all condominiums and town houses located in
         that development, then, until otherwise notified in writing by the
         Mortgagee, the Mortgagor shall have no obligation to maintain the
         insurance required hereunder. Whenever such insurance is in force
         (regardless of whether requested by the Mortgagee or not) the Mortgagor
         hereby authorizes the Mortgagee to cancel such insurance whenever the
         Mortgagee determines that such insurance does not adequately protect
         the Mortgagee's interest.

7.       PRESERVATION AND MAINTENANCE OF MORTGAGED PROPERTY. The Mortgagor shall
         keep the buildings and other improvements now or hereafter erected on
         the Land in good repair and condition, ordinary depreciation excepted,
         and shall provide all utility services necessary for the operation and
         preservation of the Mortgaged Property. The Mortgagor shall commit or
         permit no waste and unless the Mortgaged Property primarily consists of
         a single family dwelling or a duplex or other similar residential
         dwelling designed to be inhabited by no more than one or two families,
         shall not alter the design or structural character of any building now
         or hereafter erected on the Land without the prior written consent of
         the Mortgagee and in no event shall the Mortgagor do any act or thing
         which would unduly impair or depreciate the value of the Mortgaged
         Property. The Mortgagor shall not abandon the Mortgaged Property. The
         Mortgagor shall comply with all present and future laws, ordinances,
         regulations and requirements of any governmental body applicable to the
         Mortgaged Property and to the occupancy and operation thereof. If this
         Mortgage is on a condominium, the Mortgagor shall perform all of the
         Mortgagor's obligations under the Apartment Ownership Act of the State
         of Minnesota, the declaration of condominium, the by-laws and the
         regulations, if any, issued in accordance with the declaration or
         by-laws, or both. If this Mortgage is on a town house, the Mortgagor
         shall perform all of the Mortgagor's obligations under any and all
         applicable restrictions, articles of incorporation, by-laws and other
         documents pertaining to the town house development.

8.       INSPECTION. The Mortgagee, or its agents, shall have the right at all
         reasonable times to enter upon the Mortgaged Property for the purposes
         of inspection without thereby becoming liable to the Mortgagor or any
         person in possession holding under the Mortgagor.

9.       PROTECTION OF MORTGAGEE'S SECURITY. If the Mortgagor fails to perform
         any of the covenants and agreements contained in this Mortgage or if
         any action or proceeding is commenced which does or may adversely
         affect the Mortgaged Property or the interest of the Mortgagor or
         Mortgagee therein, or the title of the Mortgagor thereto, then the
         Mortgagee, at the Mortgagee's option, may perform such covenants and
         agreements, defend against and/or investigate such action or
         proceeding, and take such other action as the Mortgagee deems necessary
         to protect the Mortgagee's interest. The Mortgagee shall be the sole
         judge of the legality, validity and priority of any claims, liens,
         encumbrances, taxes, assessments, charges and premiums paid by it and
         of the amount necessary to be paid in satisfaction thereof. In the
         event that, after damage to or destruction of the Mortgaged Property or
         condemnation of a portion of the Mortgaged Property or a sale under
         threat thereof, the Mortgagee elects to restore the Mortgaged Property,
         and the insurance, sale or condemnation proceeds, as the case may be,
         which are paid to the Mortgagee are not sufficient to pay for such
         restoration, the Mortgagee may effect the restoration in such manner as
         it determines, and the cost thereof in excess of such proceeds,
         together with interest thereon from the date of disbursement at the
         rate provided in the Note (unless payment of interest at such rate
         would be contrary to applicable law, in which event such amounts shall
         bear interest at the highest rate permitted by applicable law) shall
         become an additional amount secured hereunder, and shall be immediately
         due and payable. Any amounts disbursed or incurred by the Mortgagee
         pursuant to this paragraph 9, including, but not limited to, reasonable
         attorney's fees, with interest thereon, shall become additional
         Indebtedness of the Mortgagor secured by this Mortgage. The Mortgagee
         is hereby given the irrevocable power of attorney (which power is
         coupled with an interest and given for security and is irrevocable) to
         enter upon the Mortgaged Property as the Mortgagor's agent and in the
         Mortgagor's name to perform any and all covenants and agreements to be
         performed by the Mortgagor as herein provided. All amounts disbursed or
         incurred by the Mortgagee pursuant to this paragraph 9 shall be payable
         upon demand, and shall bear interest from the date of disbursement or
         the date incurred at the rate stated in the Note, unless payment of
         interest at such rate would be contrary to applicable law, in which
         event such amounts shall bear interest at the highest rate permitted by
         applicable law. The Mortgagee shall, at its option be subrogated to any
         encumbrance, lien, claim or demand, and to all the rights and
         securities for payment thereof, paid or discharged with the principal
         sum secured hereby or by the Mortgagee under the provisions hereof, and
         any such subrogation rights shall be additional and cumulative security
         for this Mortgage. Nothing contained in this paragraph 9 shall require
         the Mortgagee to incur any expense or do any act hereunder, and the
         Mortgagee shall not be liable to the Mortgagor for any damages or
         claims arising out of action taken by the Mortgagee pursuant to this
         paragraph 9.

10.      CONTAMINANTS. Mortgagor warrants and represents that there are not now,
         nor, to the best of Mortgagor's knowledge after reasonable
         investigation, have there ever been and, without the Mortgagor
         obtaining Mortgagee's consent and all requisite permits and approvals,
         there will not in the future be Contaminants stored, handled, or
         disposed of on the Property which would require cleanup, removal or
         other remedial action under any environmental laws. Contaminants shall
         mean materials, substances and compounds prohibited or regulated under
         any environmental laws. Mortgagor will immediately notify the
         Mortgagee, in writing, of any, (i) investigation, inquiry, claim or
         action by any governmental authority or other party, against the
         Mortgagor regarding any environmental laws, (ii) Contaminants on the
         Property which would require cleanup, removal or other remedial action
         under any environmental laws. Upon the Mortgagee's request, Mortgagor
         will periodically provide environmental assessments or compliance
         audits and agrees to permit environmental inspections and testing of
         the Property by the Mortgagee or its agents, at the Mortgagor's
         expense. If the Property is used for residential purposes, the
         preceding shall not apply to the presence, use, or storage on the
         Property of small quantities of Contaminants that are generally
         recognized to be appropriate to normal residential uses and to
         maintenance of the Property.

11.      CONDEMNATION. The Mortgagor hereby irrevocably assigns to the Mortgagee
         any award or payment which becomes payable by reason of any taking of
         the Mortgaged Property, or any part thereof, either temporarily or
         permanently, in or by condemnation or other eminent domain proceedings
         or by reason of sale under threat thereof, or in anticipation of the
         exercise of the right of condemnation or other eminent domain
         proceedings. The Mortgagor will not enter into any agreement permitting
         or consenting to the taking of the Mortgaged Property or any part
         thereof or providing for the conveyance thereof in lieu of
         condemnation, with anyone authorized to acquire the same in
         condemnation or by eminent domain unless the Mortgagee shall have first
         consented thereto in writing. In the event of any such taking, any
         awards shall be adjusted jointly by the Mortgagor and the Mortgagee;
         provided, however, any award not adjusted or paid within 30 days after
         such taking may be adjusted solely by the Mortgagee at any time after
         said 30 day period if, and only if, an Event of Default exists at the
         time of adjustment. The Mortgagor will file or prosecute in good faith
         and with due diligence what would otherwise be its claim in any such
         award or payment and cause the same to be collected and paid over to
         the Mortgagee, and the Mortgagor irrevocably authorizes and empowers
         the Mortgagee (which power is coupled with an interest and given for
         security and is irrevocable), in the name of the Mortgagor or
         otherwise, to file and prosecute any such claim and to collect, receipt
         for and retain the same. The proceeds of the award or payment may,
         after deducting all reasonable costs and expenses which may have been
         incurred by the Mortgagee in the collection thereof, at the sole
         discretion of the Mortgagee, be released to the Mortgagor, applied to
         restoration of the Mortgaged Property or applied to the payment of the
         Indebtedness secured hereby, in such order of application as the
         Mortgagee may determine. Any such application to principal of the Note
         shall not extend or postpone the due date of the monthly installments
         referred to in the Note or change the amount of such installments.

12.      FORBEARANCE BY MORTGAGEE NOT A WAIVER. Any delay by the Mortgagee in
         exercising any right or remedy hereunder or otherwise afforded by law
         or equity shall not be a waiver of or preclude the exercise of such
         right or remedy of any other right or remedy hereunder or at law or
         equity. The failure of the Mortgagee to exercise any option to
         accelerate maturity of the Indebtedness secured by this Mortgage, the
         forbearance by the Mortgagee before or after the exercise of such
         option, or the withdrawal or abandonment of proceedings provided for by
         this Mortgage shall not be a waiver of the right to exercise such
         option or to accelerate the maturity of such Indebtedness by reason of
         any past, present or future event which would permit acceleration under
         paragraph 16 hereof. The procurement of insurance or the payment of
         taxes or other liens or charges by the Mortgagee shall not be a waiver
         of the Mortgagee's right to accelerate the maturity of the Indebtedness
         hereby secured. The Mortgagee's receipt of any awards, proceeds or
         damages under paragraphs 6 and 10 hereof shall not operate to cure or
         waive default by the Mortgagor under paragraph 16 hereof.

13.      MORTGAGEE'S REMEDIES CUMULATIVE. All remedies of the Mortgagee are
         distinct and cumulative to any other right or remedy under this
         Mortgagee or afforded by law or equity, and may be exercised
         concurrently or independently, and as often as the occasion therefor
         arises.

14.      SUCCESSORS AND ASSIGNS BOUND; NUMBER; GENDER; JOINT AND SEVERAL
         LIABILITY; CAPTIONS. The covenants and agreements herein contained
         shall bind, and the rights hereunder shall inure to, the respective
         heirs, legal representatives, successors and assigns of the Mortgagee
         and the Mortgagor. Wherever used, the singular number shall include the
         plural, the plural the singular, and the use of any gender shall be
         applicable to all genders. All covenants and agreements of the
         Mortgagor shall be joint and several; provided, however, that nothing
         contained in this Mortgage shall in any way obligate Mortgagor's spouse
         to pay the Note or the other indebtedness unless such spouse also signs
         the Note. The captions and headings of the paragraphs of this Mortgage
         are for convenience only and are not to be used to interpret or define
         the provisions hereof.

15.      NOTICE. Any notice from the Mortgagee to the Mortgagor under this
         Mortgage shall be deemed to have been given by the Mortgagee and
         received by the Mortgagor, when mailed by certified mail by the
         Mortgagee to the Mortgagor at the Mortgaged Property or at such other
         address as the Mortgagor may designate to the Mortgagee. Any notice
         from the Mortgagor to the Mortgagee under this Mortgage shall be deemed
         to have been given by the Mortgagor and received by the Mortgagee when
         received by the Mortgagee at the Mortgagee's address stated above, or
         at such other address as the Mortgagee may designate to the Mortgagor.

16.      GOVERNING LAW; SEVERABILITY. This Mortgage shall be governed by the
         laws of the State of Minnesota. In the event that any provision or
         clause of this Mortgage conflicts with applicable law, such conflict
         shall not affect other provisions of the Mortgage which can be given
         effect without the conflicting provisions, and to this end the
         provisions of the Mortgage are declared to be severable. In the event
         that any applicable law in effect on the date hereof limiting the
         amount of interest or other item which may be lawfully charged against
         the Mortgagor is interpreted in a manner such that any payment provided
         for in this Mortgage or in the Note, whether considered separately or
         together with other payments that are considered a part of this
         Mortgage and Note transaction, violates such law, and Mortgagor is
         entitled to the benefit of such law, such payment is hereby reduced to
         the extent necessary to eliminate such violation.

17.      DEFAULT; ACCELERATION AND FORECLOSURE. Each of the following
         occurrences shall constitute an event of default hereunder (herein
         called an "Event of Default"):

         (a)      The Mortgagor shall fail to pay when due any amount payable
                  under the Note or any other Indebtedness secured by this
                  Mortgage and the continuance thereof for 10 calendar days;

         (b)      The Mortgagor shall fail duly to perform or observe any of the
                  other covenants contained in this Mortgage or in the Note and
                  the continuance thereof for 10 calendar days;

         (c)      The Mortgagor shall be dissolved or its corporate existence
                  shall be terminated, or it shall become insolvent (however
                  evidenced) or commit any act of bankruptcy or make a general
                  assignment for the benefit of creditors, or if any proceeding
                  is instituted by or against the Mortgagor for any relief under
                  any bankruptcy or insolvency laws, or if a receiver is
                  appointed of or a writ or order of attachment or garnishment
                  is made or issued, or if any proceeding or procedure is
                  commenced or any remedy supplementary to or in enforcement of
                  a judgment is employed against, or with respect to any
                  property of, the Mortgagor;

         (d)      Any representation or warranty made by the Mortgagor herein is
                  untrue or misleading in any material respect; or

         (e)      The Mortgagor shall sell or transfer, or agree to sell or
                  transfer all or any part of the Mortgaged Property or interest
                  therein.

         Upon the occurrence of an Event of Default or at any time thereafter
         until such Event of Default is cured to the satisfaction of the
         Mortgagee, the Mortgagee may, at its option, exercise either or both of
         the following rights and remedies (and any other rights and remedies
         available to it):

         (a)      The Mortgagee may declare immediately due and payable all
                  Indebtedness secured by this Mortgage, and the same shall
                  thereupon be immediately due and payable without presentment
                  or other demand, protest, notice of dishonor or any other
                  notice of any kind, all of which are hereby expressly waived.
                  Receipt of partial payment of the Indebtedness after the
                  Mortgagee has exercised its right under this subsection 16(a)
                  shall not operate as a waiver of such right.

         (b)      The Mortgagor hereby authorizes and empowers the Mortgagee to
                  foreclose this Mortgage by action or advertisement, pursuant
                  to the statutes of Minnesota in such case made and provided,
                  power being herein expressly granted to sell the Mortgaged
                  Property at public auction and to convey the same to the
                  purchaser, and out of the proceeds arising from such sale, to
                  pay all Indebtedness secured hereby with interest, and all
                  legal costs and charges of such foreclosure and the maximum
                  attorney's fees permitted by law, which costs, charges and
                  fees the Mortgagor herein agrees to pay.

18.      MISCELLANEOUS RIGHTS OF MORTGAGEE. The Mortgagee may at any time and
         from time to time, without notice, release any person liable for
         payment of any Indebtedness secured hereby, extend the time or agree to
         alter the terms of payment of any of the Indebtedness, accept
         additional security of any kind, release any property securing the
         Indebtedness, consent to the making of any plat or map of the Mortgaged
         Property or the creation of any easement thereon or any covenants
         restricting use of occupancy thereof, or alter or amend the terms of
         this Mortgage in any way. No such release, modification, addition or
         change shall affect the liability of any person other than the person
         so released for payment of any Indebtedness secured hereby, nor affect
         the priority and first lien status of this Mortgage upon any property
         not so released. Any personal property remaining upon the Mortgaged
         Property, after such Mortgaged Property has been possessed or occupied
         by the Mortgagee or its agent following foreclosure of this Mortgage or
         under any deed in lieu of foreclosure, shall be conclusively presumed
         to have been abandoned by the Mortgagor or any other former owner
         thereof; and the Mortgagee shall not in any way incur any liability or
         obligation to said Mortgagor of former owner by reason of any action
         which the Mortgagee in its sole discretion chooses to take with respect
         to said personal property; provided, however, that in no event shall
         the Mortgagee be required to take any affirmative action in preserving,
         protecting or otherwise overseeing the deployment or storage of said
         personal property, nor shall the Mortgagee incur any liability to the
         Mortgagor or former owner of said personal property because of failure
         to take any such affirmative action with respect to said personal
         property.

19.      ADDITIONAL LOANS AND MODIFICATIONS. In addition to the payment of the
         Indebtedness secured hereby, this Mortgage shall also secure the
         payment of all other advances heretofore or at any time hereafter made
         to the Mortgagor by the Mortgagee and the payment of all other
         Indebtedness of every type and description now or hereafter owing by
         the Mortgagor to the Mortgagee, unless (in the case of such advance of
         Indebtedness) the Mortgagee agrees otherwise in writing. Nothing herein
         contained shall imply any obligation on the part of any holder of the
         Note to make any such additional loan. All those claiming by, through
         or under Mortgagor consent to any extensions or increases in the
         interest rate or principal amount of this Mortgage Indebtedness agreed
         to by the Mortgagee and Mortgagor, their successors and assigns.

20.      ADDITIONAL COVENANTS. The Mortgagor further covenants and agrees as
         follows:

21.      Mortgagor waives all right of homestead exemption in the Land.

         IN WITNESS WHEREOF, The Mortgagor has duly executed this Mortgage as of
the day and year first-above written:

                                    Winland Electronics Incorporated

                                    /s/ W. K. Hankins
                                    President

This instrument was drafted by: Tax statements for the real property described
in this instrument should be sent to:

Norwest Bank Minnesota South,
National Association                           Winland Electronics Incorporated
Bank name                                      Name
P.O. Box 168                                   1950 Excel Drive
Bank address                                   Address
Mankato, MN  56002-0168                        Mankato, MN  56001
City, State and Zip                            City, State and Zip
                                               41-0992135
                                               Tax Identification No.

STATE OF MINNESOTA
                     SS.
COUNTY OF

         The foregoing instrument was acknowledged before me this _____ day of
____________, _____, by _______________________

                                    Notary Public, _____________
                                    County _________
                                    My Commission expires: ____________, ____

STATE OF MINNESOTA
                      SS.
COUNTY OF  Blue Earth

         The foregoing instrument was acknowledged before me this 7th day of
May, 1996, by and W. Kirk Hankins, the President and of Winland Electronics,
Inc., a Minnesota corporation, on behalf of the corporation.

                                           Christine M. Mallak

                                    Notary Public, Blue Earth County Minnesota
                                    My Commission expires: January 31 , 2000

OFFICE OF REGISTER OF DEEDS, STATE OF MINNESOTA   _____________, _____ No. ____

County of                                    Registration tax hereon of

I hereby certify that the within Mortgage      ___________________ Dollars paid.

was filed in this office for record on
the ____ day of _________, ______,              _______________________________
at _________ o'clock _____ M., and              County Treasurer
was duly recorded in Book _____             By___________________________ Deputy
of Mortgages, page ____.
                                              Countersigned:

________________________________            _________________________________
Registrar of Deeds                             County Auditor

By ______________________  _____ Deputy     By_______ __________________ Deputy

<PAGE>

            (The above space is reserved for recording purposes only)

                         MORTGAGE MODIFICATION AGREEMENT
                       (Amending Mortgage of May 7, 1996)

         THIS AGREEMENT is made as of July 31, 1998, between Norwest Bank
Minnesota South, National Association, having its office at Second and Hickory
Streets, Mankato, Minnesota 56002 (the "Mortgage"), and Winland Electronics,
Incorporated, a Minnesota corporation, having its office at 1950 Excel Drive,
Mankato, Minnesota 56001 (the "Mortgagor").

                                    RECITALS

         A. The Mortgagee is the holder of the promissory note dated April 29,
1996, made by the Mortgagor and payable to the order of the Mortgagee in the
original principal amount of $57,725.00 (the "1996 Term Note"). The 1996 Term
Note provides for principal and interest to be payable together in installments
with the last installment due and payable on May 31, 2001.

         B. As of the date hereof, the unpaid principal balance of the Note is
$53,368.75.

         C. To secure payment of the 1996 Term Note, the Mortgagor executed and
delivered a mortgage to the Mortgagee, dated May 7, 1996, subjecting to the lien
thereof certain real estate located in Blue Earth County, Minnesota (the
"Mortgage"), more particularly described in the Mortgage. Capitalized terms not
otherwise defined herein shall have the meaning given them in the Mortgage.

         D. The Mortgage was filed for record on May 15, 1996, in the office of
the Registrar of Titles of the above-named county as Document Number 6041, and
in the office of the County Recorder of the above-named county as Document
Number 52580.

         E. The Mortgagor has now asked the Mortgagee to increase the amount of
the 1996 Term Note to $168,368.75, and to extend the maturity date to July 31,
2003. This proposed change is acceptable to the Mortgagor and the Mortgagee. The
Mortgagor acknowledges that the Note and Mortgage are the legal and binding
obligations of the Mortgagor, free of any claim, defense or offset.

         Accordingly, in consideration of the premises and other good and
valuable consideration, each paid to the other, the parties hereto agree as
follows:

         1. The Note, as described in the Mortgage, shall be amended to refer to
the promissory note of even date given by the Mortgagor to the Mortgagee in the
principal amount of $168,368.75, which is given as replacement for, and not in
satisfaction of, the 1996 Term Note, and all replacements, refinancings and
renewals thereof, which Note shall have a maturity date of July 31, 2003.

         2. Except as expressly amended herein, the Mortgage shall remain in
full force and effect in accordance with their original terms.

         3. The Mortgage hereby restates and reaffirms all of the
representations and covenants set forth in the Mortgage as if said
representations and covenants were fully set forth herein.

         4. The Mortgagor hereby agrees to execute such other further
agreements, documents and instruments as are deemed necessary or advisable by
the Mortgagee from time to time in order to effectuate the purpose of the
foregoing.

         IN WITNESS WHEREOF, the Mortgagor and the Mortgagee have executed this
Agreement this 31st day of July, 1998.

                                          NORWEST BANK MINNESOTA SOUTH,
                                            NATIONAL ASSOCIATION

                                          By:  /s/ Scott Ordahl

                                          Its:  ______________________

                                          WINLAND ELECTRONICS INCORPORATED,
                                          a Minnesota corporation

                                          By:  /s/ W. K. Hankins

                                          Its:  ______________________

<PAGE>

            (The above space is reserved for recording purposes only)
===============================================================================

                                NOTE AND MORTGAGE
                             MODIFICATION AGREEMENT
                        (Amending Mortgage of May 7, 1996

         THIS NOTE AND MORTGAGE MODIFICATION (the "Agreement") is made as of
September 29, 1999, between Norwest Bank Minnesota South, National Association
(the "Mortgage"), having its office at Second and Hickory Streets, Mankato,
Minnesota 56002, and Winland Electronics Incorporated, a Minnesota corporation,
having its office at 1950 Excel Drive, Mankato, Minnesota 56001 (the
"Mortgagor").

                                    RECITALS

         A. The Mortgage has previously loaned the Mortgagor the sum $168,368.75
(the "Term Loan"), which Term Loan is evidenced by a promissory note dated July
31, 1998, made by the Mortgagor and payable to the order of the Mortgagee in the
original principal amount of $168,368.75 ("Note"). The Note provides for
principal and interest to be payable together in installments with the last
installment due and payable on July 31, 2003.

         B. Immediately prior to the execution of this Agreement, the unpaid
principal balance of the Note was $166,326.64.

         C. To secure payment of the Note, the Mortgagor previously delivered a
mortgage to the Mortgagee, dated May 7, 1996, subjecting to the lien thereof
certain real estate located in Blue earth County, Minnesota (the "Mortgage"),
more particularly described in the Mortgage.

         D. The Mortgage was filed for record on May 15, 1996, in the office of
the Registrar of Titles of the above-named county as Document Number 6041, and
in the office of the County Recorder of the above-named county as Document
Number 52580.

         E. The Mortgagor has now asked the Mortgagee to increase the Term Loan
by lending it an additional $363,726.00, which obligation continues to be
evidenced by the Note.

         Accordingly, in consideration of the premises and other good and
valuable consideration, each paid to the other, the parties hereto agree as
follows:

         1. The Mortgagee shall, simultaneously with the execution of this
Agreement, loan and deliver to the Mortgagor, the sum of $363,726.00, and the
principal amount of the Note, following the increase of the Term Loan, shall be
amended to reflect a total principal obligation of $530,052.64, with accrued
interest of $1,131.87.

         2. The Note is hereby amended to reflect that, effective as of the date
of this Agreement, the unpaid principal balance of the Note shall bear interest
at an annual fixed rate of 8.25%, calculated on actual days elapsed in a year of
360 days.

         3. The Mortgage is hereby amended to reflect the above-described
amendment to the Note.

         4. Except as expressly amended herein, the Note and Mortgage shall
remain in full force and effect in accordance with their original terms.

         5. The Mortgagor hereby restates and reaffirms all of the
representations and covenants set forth in the Note and Mortgage as if said
representations and covenants were fully set forth herein.

         6. The Mortgagor hereby agrees to execute such other further
agreements, documents and instruments as are deemed necessary or advisable by
the Bank from time to time in order to effectuate the purposes of the foregoing.

         IN WITNESS WHEREOF, the Mortgagor and the Mortgagee have executed this
Agreement this 29th day of September, 1999.

WINLAND ELECTRONICS,
   INCORPORATED                              NORWEST BANK MINNESOTA SOUTH,
   a Minnesota corporation                      NATIONAL ASSOCIATION

By:      /s/ W. K. Hankins                   By:      /s/ Scott Ordall

Its:     CEO & CFO                           Its:     Vice President

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