================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

 X    Quarterly report pursuant to Section 13 or 15(d)of the Securities Exchange
---   Act of 1934

For the fiscal quarter ended:  June 30, 2004 or

      Transition report pursuant to Section 13 or 15(d) of the Securities
---   Exchange Act of 1934

For the transition period from ________________ to ________________

Commission file number:     0-25426
                         -------------

                        NATIONAL INSTRUMENTS CORPORATION
             (Exact name of registrant as specified in its charter)

                Delaware                                 74-1871327
----------------------------------------     -----------------------------------
    (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                 Identification Number)
     11500 North MoPac Expressway
             Austin, Texas                                 78759
----------------------------------------     -----------------------------------
    (address of principal executive                      (zip code)
               offices)

       Registrant's telephone number, including area code: (512) 338-9119
                           --------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes |X| No |_|

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                  Class                      Outstanding at August 4, 2004
     Common Stock - $0.01 par value                   78,811,495



<PAGE>
                                      
                        NATIONAL INSTRUMENTS CORPORATION


         INDEX


         PART I.  FINANCIAL INFORMATION                                 Page No.
                                                                        --------


Item 1   Financial Statements:

            Consolidated Balance Sheets (unaudited)
            June 30, 2004 and December 31, 2003............................3

            Consolidated Statements of Income (unaudited)
            Three months and six months ended June 30, 2004 and 2003.......4

            Consolidated Statements of Cash Flows (unaudited)
            Six months ended June 30, 2004 and 2003........................5

            Notes to Consolidated Financial Statements.....................6


Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations..............................11


Item 3   Quantitative and Qualitative Disclosures about Market Risk.......20


Item 4   Controls and Procedures..........................................20


         PART II.  OTHER INFORMATION


Item 1   Legal Proceedings................................................22


Item 2   Changes in Securities, Use of Proceeds and Issuer Purchases
         of Equity Securities............................................ 23


Item 4   Submission of Matters to a Vote of Security Holders..............23


Item 5   Other Information................................................23


Item 6   Exhibits and Reports on Form 8-K.................................24

         Signature........................................................25


<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1. Financial Statements

                        NATIONAL INSTRUMENTS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
                                   (unaudited)

                                                        June 30,    December 31,
                                                          2004          2003
                                                       -----------  ------------
Assets
Current assets:
   Cash and cash equivalents.......................    $   46,199   $    53,446
   Short-term investments..........................       145,708       141,227
   Accounts receivable, net........................        85,091        77,970
   Inventories, net................................        60,431        38,813
   Prepaid expenses and other current assets.......        14,961         9,742
   Deferred income tax, net........................        11,551         9,927
                                                       -----------  ------------
      Total current assets.........................       363,941       331,125
Property and equipment, net........................       150,462       151,612
Intangibles, net and other assets..................        42,721        42,414
                                                       -----------  ------------
      Total assets.................................    $  557,124   $   525,151
                                                       ===========  ============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable................................    $   35,102   $    29,567
   Accrued compensation............................        18,003        12,302
   Deferred revenue................................        10,031         8,148
   Accrued expenses and other liabilities..........        10,261        16,271
   Other taxes payable.............................         8,367         9,507
                                                       -----------  ------------
      Total current liabilities....................        81,764        75,795
Deferred income taxes..............................        10,391         9,904
                                                       -----------  ------------
      Total liabilities............................        92,155        85,699
                                                       -----------  ------------
Commitments and contingencies
Stockholders' equity:
   Preferred stock: par value $0.01; 5,000,000
   shares authorized; 0 and 0 shares issued and                
   outstanding, respectively.......................            --            --
   Common stock: par value $0.01; 180,000,000
   shares authorized; 78,757,349 and 78,269,235
   shares issued and outstanding, respectively.....           788           783
   Additional paid-in capital......................        98,707        95,070
   Retained earnings...............................       367,621       349,994
   Accumulated other comprehensive loss............        (2,147)       (6,395)
                                                       -----------  ------------
      Total stockholders' equity...................       464,969       439,452
                                                       -----------  ------------
      Total liabilities and stockholders' equity...    $  557,124   $   525,151
                                                       ===========  ============

    The accompanying notes are an integral part of these financial statements.


<PAGE>

                        NATIONAL INSTRUMENTS CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except per share data)
                                   (unaudited)


<TABLE>
<CAPTION>
                                            Three Months Ended       Six Months Ended
                                                  June 30,               June 30,
                                          ----------------------  ----------------------
                                             2004        2003        2004        2003
                                          ----------  ----------  ----------  ----------
<S>                                       <C>         <C>         <C>         <C>
Net sales..............................   $ 127,127   $ 100,165   $ 251,765   $ 199,338
Cost of sales..........................      33,325      27,150      64,895      53,163
                                          ----------  ----------  ----------  ----------
   Gross profit........................      93,802      73,015     186,870     146,175
                                          ----------  ----------  ----------  ----------
Operating expenses:
   Sales and marketing.................      47,048      38,124      93,745      76,669
   Research and development............      21,345      16,876      41,335      32,127
   General and administrative..........      10,401       9,201      20,437      20,240
                                          ----------  ----------  ----------  ----------
      Total operating expenses.........      78,794      64,201     155,517     129,036
                                          ----------  ----------  ----------  ----------

      Operating income.................      15,008       8,814      31,353      17,139

Other income (expense):
   Interest income, net................         717         620       1,430       1,306
   Net foreign exchange gain (loss)....        (743)        340        (746)        325
   Other income, net...................         165          98         212         119
                                          ----------  ----------  ----------  ----------
Income before income taxes.............      15,147       9,872      32,249      18,889
Provision for income taxes.............       3,787       2,468       8,062       4,722
                                          ----------  ----------  ----------  ----------

      Net income.......................   $  11,360   $   7,404   $  24,187   $  14,167
                                          ==========  ==========  ==========  ==========

Basic earnings per share...............   $    0.15   $    0.10   $    0.31   $    0.18
                                          ==========  ==========  ==========  ==========

Weighted average shares
   outstanding-basic...................      78,287      77,235      78,126      76,986
                                          ==========  ==========  ==========  ==========

Diluted earnings per share.............   $    0.14   $    0.09   $    0.30   $    0.18
                                          ==========  ==========  ==========  ==========

Weighted average shares                      81,994      80,450      81,955      80,180
   outstanding-diluted.................   ==========  ==========  ==========  ==========

Dividends declared per share...........   $    0.05   $      --   $    0.08   $      --
                                          ==========  ==========  ==========  ==========
</TABLE>


    The accompanying notes are an integral part of these financial statements.


<PAGE>

                        NATIONAL INSTRUMENTS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

                                                             Six Months Ended
                                                                 June 30,
                                                          ----------------------
                                                             2004        2003
                                                          ----------  ----------
Cash flow from operating activities:
   Net income...........................................  $  24,187   $  14,167
   Adjustments to reconcile net income to net cash
   provided by operating activities:
      Charges to income not requiring cash outlays:
        Depreciation and amortization...................     12,058      12,390
        Benefit from deferred income taxes..............     (1,137)       (965)
        Tax benefit from stock option plans.............      1,807       1,315
      Changes in operating assets and liabilities:
        Decrease (increase) in accounts receivable......     (7,121)      1,221
        Decrease (increase) in inventories..............    (21,618)      3,351
        Decrease (increase) in prepaid expense and   
        other assets....................................     (1,635)      2,511
        Increase (decrease) in current liabilities......      5,969      (6,978)
                                                          ----------  ----------
      Net cash provided by operating activities.........     12,510      27,012
                                                          ----------  ----------

Cash flow from investing activities:
   Capital expenditures.................................     (6,802)     (7,759)
   Capitalization of internally developed software......     (3,413)     (8,432)
   Additions to other intangibles.......................       (336)     (4,323)
   Purchases of short-term investments..................    (91,367)    (77,042)
   Sales and maturities of short-term investments.......     86,886      50,651
                                                          ----------  ----------
      Net cash used in investing activities.............    (15,032)    (46,905)
                                                          ----------  ----------

Cash flow from financing activities:
   Net proceeds from issuance of common stock under       
   employee plans.......................................      9,240       7,715
   Repurchase of common stock...........................     (7,405)         --
   Dividends paid.......................................     (6,560)         --
                                                          ----------  ----------
      Net cash provided by (used in) financing         
      activities........................................     (4,725)      7,715
                                                          ----------  ----------

Net decrease in cash and cash equivalents...............     (7,247)    (12,178)
Cash and cash equivalents at beginning of period........     53,446      40,240
                                                          ----------  ----------

Cash and cash equivalents at end of period..............  $  46,199   $  28,062
                                                          ==========  ==========

    The accompanying notes are an integral part of these financial statements.


<PAGE>

                        NATIONAL INSTRUMENTS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - Basis of Presentation

The accompanying  unaudited  consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended  December 31, 2003,  included in the Company's  annual report on Form
10-K,  filed with the  Securities  and  Exchange  Commission.  In the opinion of
management,  the  accompanying  consolidated  financial  statements  reflect all
adjustments  (consisting only of normal recurring items) considered necessary to
present fairly the financial  position of National  Instruments  Corporation and
its  consolidated  subsidiaries  at June 30, 2004 and December 31, 2003, and the
results of operations for the three-month  and six-month  periods ended June 30,
2004 and 2003, and the cash flows for the six-month  periods ended June 30, 2004
and 2003. Operating results for the three-month and six-month periods ended June
30, 2004 are not necessarily  indicative of the results that may be expected for
the year ending December 31, 2004.

Certain  prior year  amounts  have been  reclassified  to conform  with the 2004
presentation.


NOTE 2 - Earnings Per Share

Basic  earnings  per share  ("EPS") is computed  by  dividing  net income by the
weighted average number of common shares outstanding during each period. Diluted
EPS is computed by dividing net income by the weighted  average number of common
shares and common  share  equivalents  outstanding  (if  dilutive)  during  each
period.  Common share  equivalents  include stock options.  The number of common
share  equivalents  outstanding  relating to stock options is computed using the
treasury stock method.

The  reconciliation  of the denominators used to calculate basic EPS and diluted
EPS for the  three-month  and  six-month  periods  ended June 30, 2004 and 2003,
respectively, are as follows (in thousands):

                                         Three Months Ended   Six Months Ended
                                              June 30,            June 30,
                                         ------------------  ------------------
                                            (unaudited)         (unaudited)
                                           2004      2003      2004      2003
                                         --------  --------  --------  --------
Weighted average shares
 outstanding-basic....................    78,287    77,235    78,126    76,986
Plus: Common share equivalents
   Stock options......................     3,707     3,215     3,829     3,194
                                         --------  --------  --------  --------
Weighted average shares
 outstanding-diluted..................    81,994    80,450    81,955    80,180
                                         ========  ========  ========  ========

Stock options to acquire  1,616,000 and 2,346,000  shares for the quarters ended
June 30, 2004 and 2003, respectively, and 1,590,000 and 2,326,500 shares for the
six months  ended June 30,  2004 and 2003,  respectively,  were  excluded in the
computations  of diluted EPS because the effect of including  the stock  options
would have been anti-dilutive.


NOTE 3 - Inventories, net

Inventories consist of the following (in thousands):

                                  June 30,     December 31,
                                    2004           2003
                                ---------------------------
                                        (unaudited)
                                ---------------------------
Raw materials                    $  27,237      $  17,513
Work-in-process                      3,322          1,625
Finished goods                      29,872         19,675
                                -----------    ------------
                                 $  60,431      $  38,813
                                ===========    ============


<PAGE>

NOTE 4 - Comprehensive Income

The Company's  comprehensive income is comprised of net income, foreign currency
translation and unrealized  gains and losses on forward and option contracts and
securities  available for sale.  Comprehensive  income for the  three-month  and
six-month periods ended June 30, 2004 and 2003 was as follows (in thousands):

                                          Three Months Ended   Six Months Ended
                                               June 30,            June 30,
                                          ------------------  ------------------
                                              (unaudited)         (unaudited)
                                            2004      2003      2004      2003
                                          --------  --------  --------  --------
Comprehensive income:
  Net income............................  $11,360   $ 7,404   $24,187   $14,167
                                                                      
  Foreign currency translation..........     (462)    1,555      (616)    2,165
  Unrealized gains (losses) on
    derivative instruments..............    3,768      (705)    5,289    (1,362)
  Unrealized losses on securities
    available for sale..................     (425)       33      (425)      (59)
                                          --------  --------  --------  --------
Total comprehensive income..............  $14,241   $ 8,287   $28,435   $14,911
                                          ========  ========  ========  ========


NOTE 5 - Stock-Based Compensation Plans

The Company has two active stock-based compensation plans and one inactive plan.
The two active  stock-based  compensation  plans are the 1994 Incentive Plan and
the  Employee  Stock  Purchase  Plan.  The Company  follows the  disclosure-only
provisions of SFAS No. 123, Accounting for Stock-Based Compensation,  as amended
by SFAS No. 148,  Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure.  As allowed by SFAS No.  123,  the  Company  continues  to apply the
provisions of Accounting  Principles Board Opinion No. 25,  Accounting for Stock
issued to Employees,  and related  interpretations  in accounting for its plans.
Accordingly,  compensation  cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's  stock at the date of the grant
over the amount an employee must pay to acquire the stock. No compensation  cost
has been recognized in the Company's  financial  statements for the stock option
plan and the stock  purchase  plan. If  compensation  cost for the Company's two
active stock-based compensation plans were determined based on the fair value at
the  grant  date for  awards  under  those  plans  consistent  with  the  method
established  by SFAS No. 123,  the  Company's  net income and earnings per share
would  approximate the pro-forma  amounts below (in thousands,  except per share
data):

                                          Three Months Ended   Six Months Ended
                                                June 30,            June 30,
                                          ------------------  ------------------
                                              (unaudited)         (unaudited)
                                            2004      2003      2004      2003
                                          --------  --------  --------  --------
Net income, as reported.............      $11,360   $ 7,404   $24,187   $14,167
                                                                    
Stock-based compensation included
 in reported net income, net of          
 related tax effects................           --        --        --        --
Total stock-based compensation
 expense determined under fair 
 value method for all awards,                 
 net of related tax effects.........       (2,992)   (3,935)   (5,515)   (6,671)
                                          --------  --------  --------  --------
Pro-forma net income................      $ 8,368   $ 3,469   $18,672   $ 7,496
                                          --------  --------  --------  --------

Earnings per share:
Basic - as reported.................      $  0.15   $  0.10   $  0.31   $  0.18
Basic - pro-forma...................      $  0.11   $  0.04   $  0.24   $  0.10
                                                                  
Diluted - as reported...............      $  0.14   $  0.09   $  0.30   $  0.18
Diluted - pro-forma.................      $  0.10   $  0.04   $  0.23   $  0.09


<PAGE>

NOTE 6 - Authorized Preferred Stock and Preferred Stock Purchase Rights Plan

National  Instruments  has 5,000,000  authorized  shares of preferred  stock. On
January 21,  2004,  the Board of Directors  of National  Instruments  designated
750,000 of these shares as Series A Participating Preferred Stock in conjunction
with its adoption of a Preferred Stock Rights Agreement (the "Rights Agreement")
and  declaration of a dividend of one preferred share purchase right (a "Right")
for each share of common  stock  outstanding  held as of May 10,  2004 or issued
thereafter. Each Right will entitle its holder to purchase one one-thousandth of
a share of National  Instruments'  Series A Participating  Preferred Stock at an
exercise price of $200, subject to adjustment, under certain circumstances.  The
Rights Agreement was not adopted in response to any effort to acquire control of
National Instruments.

The Rights only become  exercisable in certain limited  circumstances  following
the tenth day after a person or group announces acquisitions of or tender offers
for 20% or more of  National  Instruments'  common  stock.  In  addition,  if an
acquirer  (subject to certain  exclusions for certain  current  stockholders  of
National  Instruments,  an "Acquiring  Person")  obtains 20% or more of National
Instruments'  common  stock,  then each Right (other than the Rights owned by an
Acquiring Person or its affiliates) will entitle the holder to purchase, for the
exercise price, shares of National Instruments common stock having a value equal
to two times the  exercise  price.  Under  certain  circumstances,  the National
Instruments'  Board of  Directors  may redeem the Rights,  in whole,  but not in
part,  at a  purchase  price of $0.01  per  Right.  The  Rights  have no  voting
privileges  and  are  attached  to  and   automatically   traded  with  National
Instruments  common stock until the occurrence of specified trigger events.  The
Rights  will  expire  on the  earlier  of May 10,  2014 or the  exchange  or the
redemption of the Rights.


NOTE 7 - Commitments and Contingencies

The Company offers a one or two-year limited warranty on most hardware  products
and a 90-day warranty on software products, which is included in the sales price
of many of its products.  Provision is made for estimated  future warranty costs
at the time of sale.

The warranty reserve was as follows (in thousands):

                                                             Six Months Ended
                                                                 June 30,
                                                          ----------------------
                                                               (unaudited)
                                                             2004        2003
                                                          ----------  ----------
Balance at the beginning of the period.................   $    715    $    715
Accruals for warranties issued during the period.......        766         518
Settlements made (in cash or in kind) during the 
  period...............................................       (666)       (518)
Balance at the end of the period.......................   $    815    $    715

As of June 30,  2004,  the Company  has  outstanding  guarantees  for payment of
foreign leases, customs and foreign grants totaling approximately $4.6 million.

As of June 30, 2004, the Company has  non-cancelable  purchase  commitments with
various  suppliers of customized  inventory and  inventory  components  totaling
approximately $5.1 million over the next twelve months.


<PAGE>

NOTE 8 - Segment Information

While the Company sells its products to many different  markets,  its management
has chosen to organize  the  Company by  geographic  areas,  and as a result has
determined that it has one reportable segment. Substantially all of the interest
income,  interest  expense,  depreciation  and amortization is recorded in North
America.  Substantially all of the Company's goodwill is recorded in Europe. Net
sales,  operating  income  and  identifiable  assets,  classified  by the  major
geographic areas in which the Company operates, are as follows (in thousands):

                                    Three Months Ended       Six Months Ended
                                          June 30,               June 30,
                                  ----------------------  ----------------------
                                        (unaudited)            (unaudited)
                                     2004        2003        2004        2003
                                  ----------  ----------  ----------  ----------
Net sales:
Americas:
  Unaffiliated customer sales...  $  62,700   $  49,562   $ 120,107   $  96,220
  Geographic transfers..........     20,896      13,239      42,109      27,130
                                  ----------  ----------  ----------  ----------
                                     83,596      62,801     162,216     123,350
                                  ----------  ----------  ----------  ----------

Europe:
  Unaffiliated customer sales...     40,493      31,175      80,252      62,453
  Geographic transfers..........     18,754      11,814      32,869      23,017
                                  ----------  ----------  ----------  ----------
                                     59,247      42,989     113,121      85,470
                                  ----------  ----------  ----------  ----------
Asia Pacific:
  Unaffiliated customer sales...     23,934      19,428      51,406      40,665
                                  ----------  ----------  ----------  ----------
Eliminations....................    (39,650)    (25,053)    (74,978)    (50,147)
                                  ----------  ----------  ----------  ----------
                                  $ 127,127   $ 100,165   $ 251,765   $ 199,338
                                  ==========  ==========  ==========  ==========

                                    Three Months Ended       Six Months Ended
                                          June 30,               June 30,
                                  ----------------------  ----------------------
                                        (unaudited)            (unaudited)
                                     2004        2003        2004        2003
                                  ----------  ----------  ----------  ----------
Operating income:
Americas........................  $  16,460   $   9,337   $  29,175   $  15,236
Europe..........................     12,154       9,399      24,616      17,609
Asia Pacific....................      7,739       6,954      18,897      16,421
Unallocated:
Research and development      
 expenses.......................    (21,345)    (16,876)    (41,335)    (32,127)
                                  ----------  ----------  ----------  ----------
                                  $  15,008   $   8,814   $  31,353   $  17,139
                                  ==========  ==========  ==========  ==========

                                   June 30,   December 31,
                                     2004         2003
                                  ------------------------
                                        (unaudited)
                                  ------------------------
Identifiable assets:
Americas........................  $ 456,963   $  420,082
Europe..........................     69,572       77,963
Asia Pacific....................     30,589       27,106
                                  ----------  -----------
                                  $ 557,124   $  525,151
                                  ==========  ===========

Total sales  outside the United States for the quarter and six months ended June
30,  2004 were $70.1  million  and  $143.4  million,  respectively,  and for the
quarter  and six  months  ended  June 30,  2003 were  $55.3  million  and $112.1
million, respectively.


<PAGE>

NOTE 9 - Litigation

The Company has filed two complaints against The MathWorks,  Inc.  ("Defendant")
for patent infringement.  In both complaints,  the Company claimed the Defendant
infringes certain of its U.S. patents and the Defendant  challenged the validity
and  enforceability  of those  patents and asserts that it does not infringe the
claims of those patents.

The first  complaint was filed on January 25, 2001 in the U.S.  District  Court,
Eastern  District of Texas  (Marshall  Division).  On January 30, 2003, the jury
found infringement by the Defendant of three of the patents involved and awarded
the  Company  specified  damages.  On June 23,  2003,  the Court  entered  final
judgment  in favor of the Company in an amount of  approximately  $4 million and
entered an  injunction  against  Defendant's  sale of its  Simulink  and related
products.  The  Court  stayed  the  injunction  pending  appeal  of the case and
required the Defendant to pay a specified  royalty on its U.S. sales of the same
products during the pendency of appeal.  The initial judgement and the royalties
on the sales of infringing products through June 30, 2004 total $6.3 million and
are  escrowed.  On July 22, 2003,  Defendant  filed its Notice of Appeal and the
case is  currently  pending on appeal  before the U.S.  Court of Appeals for the
Federal  Circuit.  The final  judgment  has not been  recorded in the  financial
statements of the Company pending the disposition of the appeal.

The second  complaint  was filed  October 21,  2002,  also in the U.S.  District
Court, Eastern District of Texas (Marshall Division) and on August 27, 2003, the
complaint was dismissed by agreement of the parties.

On January 15, 2003,  SoftWIRE  Technology,  LLC  ("SoftWIRE")  and  Measurement
Computing  Corporation ("MCC") filed a complaint against the Company in the U.S.
District  Court for the  District of  Massachusetts  asking the court to declare
that SoftWIRE does not infringe  certain of the Company's U.S.  patents and that
such patents are invalid and  unenforceable.  On February 21, 2003,  the Company
filed a complaint against SoftWIRE and MCC in the U.S.  District Court,  Eastern
District  of Texas  (Marshall  Division)  claiming  that both  SoftWIRE  and MCC
infringe the same and certain other of the Company's U.S. patents.  SoftWIRE and
MCC challenge the validity and  enforceability  of these patents and assert that
they do not infringe any of these patents.  In the Eastern District action,  the
Company seeks monetary damages and injunction of the sale of certain products of
SoftWIRE and MCC as well as  attorney's  fees and costs.  By order of the Court,
the Eastern  District action was transferred to the U.S.  District Court for the
District of  Massachusetts  on May 9, 2003, and has been  consolidated  with the
previously-filed  SoftWIRE  action,  which also  includes  counterclaims  by the
Company that are the same in substance  as the  Company's  claims in the Eastern
District  action.  On June 12,  2003,  SoftWIRE  moved  for  leave to amend  its
complaint in order to allege that the Company  infringes  two U.S.  patents that
SoftWIRE  acquired by purchase on May 23, 2003.  On November 5, 2003,  the Court
granted SoftWIRE's motion to amend, thereby adding SoftWIRE's two patents to the
litigation.  With respect to those two SoftWIRE patents, SoftWIRE seeks monetary
damages and injunction of the sale of the Company's  LabVIEW software  products,
as well as  attorney's  fees and costs.  The Company  challenges  the  validity,
enforceability  and  alleged  infringement  of  those  patents  and  intends  to
vigorously  defend  against  SoftWIRE's  claims.  Discovery in the litigation is
underway.  During the fourth quarter of 2003,  the Company  accrued $3.8 million
related to its probable loss from this  contingency,  which  consists  solely of
anticipated  patent defense costs that are probable of being incurred.  However,
the  outcome  of any  litigation  is  inherently  uncertain  and there can be no
assurance as to the ultimate outcome of this matter or any other litigation. The
Company charged  approximately  $893,000  against this accrual during the second
quarter of 2004.  The Company has charged a total of $1.3  million  against this
accrual through June 30, 2004.


NOTE 10 - Subsequent Event

The  Company's  Board of Directors  approved on July 27, 2004, a quarterly  cash
dividend of $0.05 per common share,  payable on August 30, 2004 to  shareholders
of record on August 9, 2004.


<PAGE>


I
tem 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

     This  Quarterly  Report on Form 10-Q  contains  forward-looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the  Securities  Exchange  Act  of  1934.  Any  statements  contained  herein
regarding  the  future  financial  performance  or  operations  of  the  Company
(including,  without  limitation,  statements  to the  effect  that the  Company
"believes,"  "expects,"  "plans,"  "may," "will,"  "projects,"  "continues,"  or
"estimates"  or  other  variations  thereof  or  comparable  terminology  or the
negative  thereof)  should  be  considered  forward-looking  statements.  Actual
results  could differ  materially  from those  projected in the  forward-looking
statements  as a result of a number of important  factors.  For a discussion  of
important factors that could affect the Company's  results,  please refer to the
Market Risk section,  the Factors Affecting the Company's Business and Prospects
section and financial  statement line item discussions  below.  Readers are also
encouraged  to refer to the  documents  regularly  filed by the Company with the
Securities  and Exchange  Commission,  including the Company's  Annual Report on
Form  10-K for  further  discussion  of the  Company's  business  and the  risks
attendant thereto.

Overview

     National   Instruments   designs,   develops,   manufactures   and  markets
instrumentation  and  automation  software and hardware for general  commercial,
industrial and scientific applications.  The Company offers hundreds of products
used to create virtual  instrumentation  systems for measurement and automation.
The Company has identified a large and diverse  market for test and  measurement
("T&M") and industrial  automation ("IA")  applications.  The Company's products
are  used  in a  variety  of  applications  from  research  and  development  to
production testing, monitoring and industrial control. In T&M applications,  the
Company's products can be used to monitor and control traditional instruments or
to create computer-based  instruments that can replace traditional  instruments.
In IA  applications,  the Company's  products can be used in the same ways as in
test and measurement and can also be used to integrate measurement functionality
with process  automation  capabilities.  The Company  sells to a large number of
customers in a wide variety of industries. No single customer accounted for more
than 3% of the Company's sales in 2003, 2002 or 2001.

     The Company has been  profitable in every year since 1990.  However,  there
can be no assurance  that the  Company's net sales will grow or that the Company
will remain  profitable in future  periods.  As a result,  the Company  believes
historical  results of operations  should not be relied upon as  indications  of
future performance.

Results of Operations

     The following table sets forth, for the periods  indicated,  the percentage
of  net  sales   represented  by  certain  items   reflected  in  the  Company's
consolidated statements of income:

                                    Three Months Ended       Six Months Ended
                                         June 30,                June 30,
                                  ----------------------  ----------------------
                                     2004        2003        2004        2003
                                  ----------  ----------  ----------  ----------
Net sales:
   Americas                           49.3%       49.5%       47.7%       48.3%
   Europe                             31.9        31.1        31.9        31.3
   Asia Pacific                       18.8        19.4        20.4        20.4
                                  ----------  ----------  ----------  ----------
   Consolidated net sales            100.0       100.0       100.0       100.0
Cost of sales                         26.2        27.1        25.8        26.7
                                  ----------  ----------  ----------  ----------
   Gross profit                       73.8        72.9        74.2        73.3
                                  ----------  ----------  ----------  ----------
Operating expenses:
   Sales and marketing                37.0        38.1        37.2        38.5
   Research and development           16.8        16.8        16.4        16.1
   General and administrative          8.2         9.2         8.1        10.1
                                  ----------  ----------  ----------  ----------
   Total operating expenses           62.0        64.1        61.7        64.7
                                  ----------  ----------  ----------  ----------
      Operating income                11.8         8.8        12.5         8.6
Other income (expense):
   Interest income, net                0.6         0.6         0.5         0.7
   Net foreign exchange gain
    (loss)                            (0.6)        0.3        (0.3)        0.2
   Other income, net                   0.1         0.1         0.1        --
                                  ----------  ----------  ----------  ----------
Income before income taxes            11.9         9.8        12.8         9.5
Provision for income taxes             3.0         2.4         3.2         2.4
                                  ----------  ----------  ----------  ----------
   Net income                          8.9%        7.4%        9.6%        7.1%
                                  ==========  ==========  ==========  ==========

<PAGE>

     Net Sales. Consolidated net sales increased by $27.0 million or 27% for the
three months ended June 30, 2004 to $127.1  million from $100.2  million for the
three months ended June 30, 2003,  and increased  $52.4 million or 26% to $251.8
million  for the six months  ended June 30,  2004 from  $199.3  million  for the
comparable  period in the prior year. The Company believes that the increases in
sales  for the  three  and  six  months  ended  June  30,  2004  were  primarily
attributable  to the  introduction of new and upgraded  products,  the continued
recovery in the global  economy,  the increase in unit volume from the increased
market acceptance of the Company's products in all regions,  and the strength of
the Euro. The increase in sales  attributable to the increase in unit volume was
partially  offset by the decrease in local currency  product pricing in Asia and
Europe.  Sales in the Americas in the second  quarter of 2004 increased 27% from
the second  quarter of 2003 and sales in the  Americas  for the six months ended
June 30, 2004 increased 25% from the six months ended June 30, 2003.

     Sales outside of the Americas,  as a percentage of  consolidated  sales for
the  quarter  ended  June 30,  2004,  increased  to 50.7%  from  50.5%  over the
comparable  2003  period as a result of  stronger  sales in Asia and a  stronger
Euro.  International  sales as a percentage  of  consolidated  sales for the six
months  ended June 30, 2004  increased  to 52.3% from 51.7% over the  comparable
2003 period due to stronger sales in Asia and a stronger  Euro.  Compared to the
corresponding  periods in 2003, the Company's European sales increased by 30% to
$40.5  million for the quarter  ended June 30, 2004 and  increased  29% to $80.3
million for the six months ended June 30, 2004. Sales in Asia Pacific  increased
by 23% to $23.9  million in the quarter ended June 30, 2004 compared to the same
period in 2003 and  increased 26% to $51.4 million for the six months ended June
30, 2004 compared to the same period in 2003. The Company  expects sales outside
of North America to continue to represent a significant  portion of its revenue.
The  Company  intends to  continue  to expand its  international  operations  by
increasing  its  presence  in  existing  markets,  adding a presence in some new
geographical markets and continuing the use of distributors to sell its products
in some countries.

     Sales by the Company's  direct sales offices in Europe and Asia Pacific are
denominated in local currencies, and accordingly,  the U.S. dollar equivalent of
these sales is affected by changes in foreign currency  exchange rates.  Between
the  second  quarter  of 2003 and the  second  quarter  of 2004,  net of hedging
results, the change in exchange rates had the effect of increasing the Company's
consolidated sales by 7%; increasing  European sales by 18% and increasing sales
in Asia Pacific by 5%. For 2004, year-to-date sales, net of hedging results, the
change in exchange rates had the effect of increasing the Company's consolidated
sales by 7%. The increases in sales in Europe and Asia as a result of the change
in exchange rates was partially offset by the decrease in local currency product
pricing in each  region.  Since most of the  Company's  international  operating
expenses are also incurred in local currencies, the change in exchange rates had
the effect of increasing  operating  expenses by $3.8 million,  or 2.5%, for the
six months  ended June 30, 2004 and by $1.5  million,  or 1.9%,  for the quarter
ended June 30, 2004 compared to the comparable prior year periods.

     Gross Profit.  As a percentage of sales,  gross profit increased to 74% for
the second quarter of 2004 from 73% for the second quarter of 2003 and increased
to 74% for the first six  months  of 2004 from 73% for the  comparable  period a
year ago.  Approximately  50% of the higher margin in the second quarter of 2004
is  attributable to favorable  foreign  currency  exchange rates.  The remaining
fraction of the higher margin is attributable to the favorable  impact of higher
sales volume.  Approximately 60% of the higher margin in the first six months of
2004 compared to the comparable  prior year period is  attributable to favorable
foreign currency exchange rates. The remaining  fraction of the higher margin is
attributable  to the favorable  impact of higher sales  volume.  There can be no
assurance  that the Company will maintain its  historical  margins.  The Company
believes its current manufacturing capacity is adequate to meet current needs.

     Sales and Marketing. Sales and marketing expenses for the second quarter of
2004 increased to $47.0 million, a 23% increase,  compared to the second quarter
of 2003 and increased 22% to $93.7 million for the first six months of 2004 from
the comparable 2003 period. Approximately 60% of the increases in these expenses
in the quarter and six months ended June 30, 2004 from the comparable prior year
periods were  attributable  to increases in  international  sales and  marketing
personnel  costs,  due to the  increase  in  international  sales and  marketing
personnel,  the increase in variable  compensation  from higher sales volume and
from the effects of the change in currency  exchange  rates,  with the remaining
fraction of increase  attributable to increases in  advertising,  tradeshows and
special events. As a percentage of net sales,  sales and marketing expenses were
37.0% and 38.1% for the three months ended June 30, 2004 and 2003, respectively,
and  37.2%  and  38.5%  for the  six  months  ended  June  30,  2004  and  2003,
respectively. The Company expects sales and marketing expenses in future periods
to increase in absolute dollars, and to fluctuate as a percentage of sales based
on recruiting,  initial marketing and advertising campaign costs associated with
major new product  releases and entry into new market  areas,  investment in web
sales and marketing  efforts,  increasing  product  demonstration  costs and the
timing of domestic and international conferences and trade shows.

<PAGE>

     Research and Development.  Research and development  expenses  increased to
$21.3 million for the quarter  ended June 30, 2004, a 26% increase,  compared to
$16.9  million for the three months ended June 30, 2003,  and  increased  29% to
$41.3  million for the six months ended June 30, 2004 from the  comparable  2003
period. As a percentage of net sales, research and development expenses remained
flat at 16.8% for the  quarter  ended June 30,  2004  compared  with the quarter
ended June 30,  2003,  and  increased to 16.4% for the six months ended June 30,
2004 from 16.1% for the  comparable  2003  period.  The increase in research and
development  costs as a percentage of sales in the  six-month  period ended June
30,  2004  versus  the prior year  period  was  primarily  due to  increases  in
personnel costs from the hiring of additional product development  engineers and
the decrease in the  capitalization of software  development  costs. The Company
plans to continue making a significant investment in research and development in
order to remain competitive and support revenue growth.

     The Company capitalizes  software  development costs in accordance with the
SFAS No. 86, Accounting for the Costs of Computer  Software to be Sold,  Leased,
or  Otherwise  Marketed.  The  Company  amortizes  such costs  over the  related
product's estimated economic useful life, generally three years,  beginning when
a product becomes available for general release.  Software  amortization expense
totaled $1.8  million and $1.2 million for the quarters  ended June 30, 2004 and
2003,  respectively,  and $3.7  million and $2.2  million  during the six months
ended  June  30,  2004  and  2003,  respectively.   Software  development  costs
capitalized  were $1.4 million and $3.9 million for the quarters  ended June 30,
2004 and 2003, respectively, and $3.4 million and $8.4 million for the first six
months of 2004 and 2003, respectively.

     General and  Administrative.  General and  administrative  expenses for the
second  quarter  ended June 30, 2004  increased  13% to $10.4  million from $9.2
million for the comparable prior year period.  For the first six months of 2004,
general and  administrative  expenses  increased 1% to $20.4  million from $20.2
million for the first six months of 2003. As a percentage of net sales,  general
and  administrative  expenses  decreased to 8.2% for the quarter  ended June 30,
2004 from 9.2% for the second  quarter  of 2003.  During the first six months of
2004, general and administrative  expenses decreased as a percentage of sales to
8.1% from 10.1% for the comparable  prior year period.  The increases in general
and administrative expenses in absolute terms for the quarter and the six months
ended June 30,  2004 from the  comparable  prior  year  periods  were  primarily
attributable to increases in personnel and insurance costs, and costs associated
with the upgrade of the Company's business applications suite to Oracle's latest
web-based release 11i. The decrease in general and administrative  expenses as a
percentage  of sales for the  quarter  ended  June 30,  2004 from the prior year
period was  primarily  attributable  to higher  sales  volume.  The  decrease in
general and administrative  expenses as a percentage of sales for the six months
ended June 30, 2004 from the comparable  prior year period was  attributable  to
decreased litigation costs of approximately $2.8 million associated with a legal
action by the  Company  brought  against  The  MathWorks,  Inc.  to enforce  the
Company's intellectual property.  (See Note 9 of Notes to Consolidated Financial
Statements.)  The Company  expects that general and  administrative  expenses in
future  periods  will  fluctuate  in  absolute  amounts and as a  percentage  of
revenue.

     Interest  Income,  Net. Net interest  income in the second  quarter of 2004
increased to $717,000 from $620,000 in the second quarter of 2003, and increased
to $1.4  million  for the first six  months  of 2004 from $1.3  million  for the
comparable 2003 period. The increases in interest income for the quarter and six
months  ended  June 30,  2004 were due to higher  yields on  increased  invested
funds.  The primary  source of  interest  income is from the  investment  of the
Company's cash.

     Net Foreign  Exchange  Gain  (Loss).  The Company  experienced  net foreign
exchange  losses of $743,000 in the second  quarter of 2004 compared to gains of
$340,000 in the second quarter of 2003. Net foreign  exchange losses of $746,000
were  recognized  for the first six months of 2004 compared to gains of $325,000
for the first six months of 2003.  These results are  attributable  to movements
between  the U.S.  dollar and the local  currencies  in  countries  in which the
Company's  sales  subsidiaries  are located.  The Company  recognizes  the local
currency as the functional currency of its international subsidiaries.

     The Company utilizes foreign currency forward contracts to hedge a majority
of its foreign currency-denominated  receivables in order to reduce its exposure
to significant foreign currency  fluctuations.  The Company typically limits the
duration of its "receivables" foreign currency forward contracts to 90 days.

     The Company also utilizes foreign  currency  forward  contracts and foreign
currency  purchased  option  contracts  in  order  to  reduce  its  exposure  to
fluctuations in future foreign currency cash flows. The Company  purchases these
contracts  for up to 100% of its  forecasted  cash flows in selected  currencies
(primarily  the euro,  yen and pound  sterling) and limits the duration of these
contracts to 40 months.  The foreign  currency  purchased  option  contracts are
purchased  "at-the-money"  or  "out-of-the-money."  As a result,  the  Company's
hedging  activities  only  partially  address  its  risks  in  foreign  currency
transactions,  and  there  can  be no  assurance  that  this  strategy  will  be
successful.  The Company does not invest in contracts for speculative  purposes.
The Company's hedging strategy decreased the foreign exchange losses by $427,000
during the quarter ended June 30, 2004, and reduced the foreign  exchange losses
by $227,000 for the six months ended June 30, 2004.

<PAGE>

     Provision  for Income Taxes.  The  provision  for income taxes  reflects an
effective  tax rate of 25% for the three and six months  ended June 30, 2004 and
25% for the three and six months ended June 30, 2003.  The  Company's  effective
tax rate is lower than the U.S.  federal  statutory  rate of 35%  primarily as a
result of the extraterritorial income exclusion, tax-exempt interest and reduced
tax rates in certain foreign jurisdictions.

Liquidity and Capital Resources

     The Company is currently financing its operations and capital  expenditures
through cash flow from  operations.  At June 30,  2004,  the Company had working
capital of  approximately  $282.2 million compared to $255.3 million at December
31, 2003.  Net cash provided by operating  activities  for the six month periods
ended  June  30,  2004  and  2003  totaled  $12.5  million  and  $27.0  million,
respectively.

     Accounts receivable  increased to $85.1 million at June 30, 2004 from $78.0
million at December 31, 2003. Days sales outstanding increased to 57 at June 30,
2004 compared to 56 at June 30, 2003.  Consolidated inventory balances increased
to $60.4 million at June 30, 2004 from $38.8  million at December 31, 2003.  The
increase in inventory was due to a planned  increase in safety stock  inventory.
Inventory  turns decreased to 2.2 for the quarter ended June 30, 2004 from turns
of 3.0 for the quarter ended June 30, 2003. Cash used in the first six months of
2004 for the purchase of property and equipment  totaled $6.8  million,  for the
capitalization of internally  developed software costs totaled $3.4 million, and
for additions to other intangibles totaled $336,000.  Cash used in the first six
months of 2003 for the purchase of property and equipment  totaled $7.8 million,
for the  capitalization  of  internally  developed  software  costs totaled $8.4
million, and for additions to other intangibles totaled $4.3 million.

     Cash provided by the issuance of common stock totaled $9.2 million and $7.7
million for the first six months of 2004 and 2003, respectively. The issuance of
common stock was  primarily  to employees  under the  Company's  Employee  Stock
Purchase Plan and 1994  Incentive  Plan.  Cash used for the repurchase of common
stock  totaled  $7.4  million  and $0 for the first six months of 2004 and 2003,
respectively. Cash used for the payment of dividends totaled $6.6 million and $0
for the first six months of 2004 and 2003, respectively.

     The Company currently expects to fund expenditures for capital requirements
as well as  liquidity  needs  created  by  changes  in  working  capital  from a
combination of available cash and short-term  investment balances and internally
generated  funds.  As of  June  30,  2004  and  2003,  the  Company  had no debt
outstanding.  The Company believes that its cash flow from  operations,  if any,
existing cash balances and short-term investments will be sufficient to meet its
cash  requirements  for at least the next twelve months.  Cash  requirements for
periods   beyond  the  next  twelve   months   will  depend  on  the   Company's
profitability,  its ability to manage working capital  requirements and its rate
of growth.

Financial Risk Management

     The Company's  international sales are subject to inherent risks, including
fluctuations in local  economies;  difficulties in staffing and managing foreign
operations;  greater  difficulty in accounts  receivable  collection;  costs and
risks of  localizing  products  for  foreign  countries;  unexpected  changes in
regulatory requirements,  tariffs and other trade barriers;  difficulties in the
repatriation of earnings and burdens of complying with a wide variety of foreign
laws.  The Company's  sales outside of North  America are  denominated  in local
currencies, and accordingly, the Company is subject to the risks associated with
fluctuations  in currency  rates.  In particular,  increases in the value of the
dollar  against  foreign  currencies  decrease the U.S.  dollar value of foreign
sales  requiring the Company either to increase its price in the local currency,
which could render the Company's  product  prices  noncompetitive,  or to suffer
reduced revenues and gross margins as measured in U.S.  dollars.  These dynamics
have  adversely  affected  revenue growth in  international  markets in previous
years.  The Company's  foreign  currency  hedging program  includes both foreign
currency forward and purchased option contracts to reduce the effect of exchange
rate  fluctuations.  However,  the hedging program will not eliminate all of the
Company's foreign exchange risks. (See "Net Foreign Exchange Gain (Loss)").

     The  marketplace  for the  Company's  products  dictates  that  many of the
Company's  products be shipped  very quickly  after an order is  received.  As a
result, the Company is required to maintain significant inventories.  Therefore,
inventory  obsolescence  is a risk for the Company  due to frequent  engineering
changes,  shifting customer demand,  the emergence of new industry standards and
rapid  technological  advances  including the introduction by the Company or its
competitors of products  embodying new technology.  While the Company  maintains
valuation   allowances  for  excess  and  obsolete  inventories  and  management
continues to monitor the adequacy of such valuation allowances,  there can be no
assurance that such valuation allowances will be sufficient.

<PAGE>

     The Company has no debt or  off-balance  sheet debt. At June 30, 2004,  the
Company  did not have any  relationships  with any  unconsolidated  entities  or
financial partnerships, such as entities often referred to as structured finance
entities,  which would have been  established  for the  purpose of  facilitating
off-balance  sheet  arrangements.  As such,  the  Company is not  exposed to any
financing, liquidity, market or credit risk that could arise if the Company were
engaged in such relationships.

Market Risk

     The Company is exposed to a variety of risks,  including  foreign  currency
fluctuations and changes in the market value of its  investments.  In the normal
course of business,  the Company employs established  policies and procedures to
manage its exposure to  fluctuations  in foreign  currency values and changes in
the market value of its investments.

     Foreign Currency Hedging  Activities.  The Company's  objective in managing
its exposure to foreign  currency  exchange rate  fluctuations  is to reduce the
impact of adverse  fluctuations in such exchange rates on the Company's earnings
and cash flow.  Accordingly,  the Company  utilizes  purchased  foreign currency
option  contracts  and forward  contracts to hedge its  exposure on  anticipated
transactions and firm commitments. The principal currencies hedged are the euro,
British  pound and  Japanese  yen.  The Company  monitors  its foreign  exchange
exposures regularly to ensure the overall  effectiveness of its foreign currency
hedge  positions.  However,  there can be no  assurance  the  Company's  foreign
currency hedging activities will substantially offset the impact of fluctuations
in currency exchanges rates on its results of operations and financial position.
Based on the foreign  exchange  instruments  outstanding  at June 30,  2004,  an
adverse  change  (defined  as 20% in the Asian  currencies  and 10% in all other
currencies)  in exchange  rates would result in a decline in the aggregate  fair
market value of all  instruments  outstanding  of  approximately  $8.1  million.
However,  as the  Company  utilizes  foreign  currency  instruments  for hedging
anticipated and firmly committed  transactions,  management believes that a loss
in fair value for those instruments will be substantially offset by increases in
the value of the underlying exposure.

     Short-term  Investments.  The fair value of the  Company's  investments  in
marketable  securities  at June 30, 2004 was $145.7  million.  Investments  with
maturities  beyond one year are  classified as short-term  based on their highly
liquid nature and because such marketable securities represent the investment of
cash that is available for current operations.  The Company's  investment policy
is to manage its investment  portfolio to preserve principal and liquidity while
maximizing the return on the investment portfolio through the full investment of
available funds. The Company diversifies its marketable  securities portfolio by
investing  in  multiple  types of  investment-grade  securities.  The  Company's
investment  portfolio  is  primarily  invested  in  securities  with at least an
investment grade rating to minimize  interest rate and credit risk as well as to
provide for an  immediate  source of funds.  Based on the  Company's  investment
portfolio  and interest  rates at June 30,  2004, a 100 basis point  increase or
decrease  in  interest   rates  would  result  in  a  decrease  or  increase  of
approximately  $730,000,  respectively,  in the  fair  value  of the  investment
portfolio.  Although  changes in interest rates may affect the fair value of the
investment  portfolio and cause unrealized gains or losses, such gains or losses
would not be realized unless the investments are sold.

Factors Affecting the Company's Business and Prospects

     U.S./Global  Economic Changes.  As occurred in recent years, the markets in
which the Company does business could again experience the negative effects of a
slowdown in the U.S., and/or global economies.  Additionally,  the Company could
be impacted by the effects of any  recurrence of the SARS virus,  either through
increased  difficulty or costs of the export of products into affected  regions,
the import of components used in the Company's  products from affected  regions,
and/or the  effects  the virus or costs to contain the virus have on the economy
in regions in which the Company does business, particularly Asia, which has been
the highest growth region of the Company over the past three years.  The Company
could also be subject to or  impacted  by acts of  terrorism  and/or the effects
that war or continued U.S.  military action would have on the U.S. and/or global
economies. The worsening of the U.S. or global economies could result in reduced
purchasing  and capital  spending  in any of the  markets  served by the Company
which could have a material adverse effect on the Company's operating results.

     Budgets.  The Company has  established  an operating  budget for 2004.  The
Company's spending for the remainder of the year could exceed this budget due to
a number of factors,  including:  additional marketing costs for conferences and
tradeshows;   increased  costs  from  the  over-hiring  of  product  development
engineers or other  personnel;  increased  manufacturing  costs  resulting  from
component supply shortages and/or component price fluctuations and/or additional
expenses  related to  intellectual  property  litigation.  Any future  decreased
demand for the Company's  products  could result in decreased  revenue and could
require the Company to revise its budget and reduce expenditures.  Exceeding the
established  operating  budget or failing to reduce  expenditures in response to
any decrease in revenue  could have a material  adverse  effect on the Company's
operating results.

<PAGE>

     Risk of  Component  Shortages.  As has  occurred  in the past and as may be
expected to occur in the future,  supply  shortages  of  components  used in our
products, including sole source components, can result in significant additional
costs and  inefficiencies  in  manufacturing.  If the Company is unsuccessful in
resolving any such component shortages,  it will experience a significant impact
on the timing of revenue and/or an increase in  manufacturing  costs,  either of
which would have a material adverse impact on the Company's operating results.

     Fluctuations  in  Quarterly  Results.  The  Company's  quarterly  operating
results  have  fluctuated  in the past and may  fluctuate  significantly  in the
future due to a number of  factors,  including:  changes in the mix of  products
sold; the availability and pricing of components from third parties  (especially
sole sources);  the timing of orders;  level of pricing of international  sales;
fluctuations in foreign  currency  exchange rates; the difficulty in maintaining
margins,  including the higher margins  traditionally  achieved in international
sales;  and  changes in pricing  policies by the  Company,  its  competitors  or
suppliers.  Specifically,  if the local  currencies  in which the Company  sells
weaken against the U.S. dollar,  and if the local sales prices cannot be raised,
the Company will experience a deterioration of its gross and net profit margins.
If the U.S. dollar  strengthens in the future,  it could have a material adverse
effect on gross and net profit margins.

     As has  occurred in the past and as may be expected to occur in the future,
new software  products of the Company or new operating  systems of third parties
on which the Company's products are based, often contain bugs or errors that can
result in reduced  sales and/or cause the  Company's  support costs to increase,
either of which could have a material adverse impact on the Company's  operating
results.  Furthermore,  the Company has  significant  revenues from customers in
industries such as semiconductors, automated test equipment, telecommunications,
aerospace,  defense and  automotive  which are cyclical in nature.  Downturns in
these industries could have a material adverse effect on the Company's operating
results.

     In  recent  years,  the  Company's  revenues  have  been  characterized  by
seasonality,  with revenues  typically being  relatively  constant in the first,
second and third  quarters,  growing in the fourth quarter and being  relatively
flat or declining  from the fourth  quarter of the year to the first  quarter of
the following year. The Company's  results of operations in the third quarter of
2004 may be adversely affected by lower sales levels in Europe,  which typically
occur during the summer  months.  The Company  believes the  seasonality  of its
revenue results from the international mix of its revenue and the variability of
the  budgeting  and  purchasing   cycles  of  its  customers   throughout   each
international  region.  In addition,  total operating  expenses have in the past
tended to be higher  in the  second  and third  quarters  of each  year,  due to
recruiting and increased intern personnel expenses.

     New  Product  Introductions  and  Market  Acceptance.  The  market  for the
Company's  products is characterized  by rapid  technological  change,  evolving
industry  standards,   changes  in  customer  needs  and  frequent  new  product
introductions, and is therefore highly dependent upon timely product innovation.
The Company's  success is dependent on its ability to  successfully  develop and
introduce  new and  enhanced  products  on a timely  basis to replace  declining
revenues  from older  products,  and on increasing  penetration  in domestic and
international  markets.  In the past,  the Company has  experienced  significant
delays between the announcement and the commercial availability of new products.
Any  significant  delay in releasing new products could have a material  adverse
effect on the ultimate success of a product and other related products and could
impede  continued  sales of  predecessor  products,  any of which  could  have a
material  adverse  effect on the Company's  operating  results.  There can be no
assurance  that the Company will be able to introduce new products in accordance
with announced  release dates,  that new products will achieve market acceptance
or that  any such  acceptance  will be  sustained  for any  significant  period.
Failure of new  products to achieve or sustain  market  acceptance  could have a
material adverse effect on the Company's operating results.  Moreover, there can
be no assurance that the Company's international sales will continue at existing
levels or grow in  accordance  with the  Company's  efforts to increase  foreign
market penetration.

     Risks Associated with the Company's Web Site. The Company devotes resources
to  maintain  its Web site as a key  marketing  and sales  tool and  expects  to
continue to do so in the future. There can be no assurance that the Company will
be successful in its attempt to leverage the Web to increase sales.  The Company
hosts its Web site internally. Any failure to successfully maintain the Web site
could have a significant adverse impact on the Company's operating results.

<PAGE>

     Operation  in  Intensely  Competitive  Markets.  The  markets  in which the
Company  operates  are  characterized  by  intense   competition  from  numerous
competitors,  some of which  are  divisions  of large  corporations  having  far
greater  resources  than the  Company,  and the Company  expects to face further
competition  from new market entrants in the future. A key competitor is Agilent
Technologies  Inc.  ("Agilent").  Agilent  offers  its own  line  of  instrument
controllers,   and  also  offers  hardware  and  software  add-on  products  for
third-party  desktop  computers and  workstations  that provide  solutions  that
directly compete with the Company's virtual instrumentation products. Agilent is
aggressively  advertising and marketing  products that are competitive  with the
Company's products.  Because of Agilent's strong position in the instrumentation
business,  changes in its marketing  strategy or product  offerings could have a
material adverse effect on the Company's operating results.

     The  Company  believes  its  ability to compete  successfully  depends on a
number of factors  both within and outside its control,  including:  new product
introductions by competitors;  product pricing; quality and performance; success
in  developing  new  products;  adequate  manufacturing  capacity  and supply of
components and materials; efficiency of manufacturing operations;  effectiveness
of sales and marketing  resources and strategies;  strategic  relationships with
other suppliers;  timing of new product introductions by the Company; protection
of the  Company's  products by  effective  use of  intellectual  property  laws;
general market and economic  conditions;  and government  actions throughout the
world.  There  can be no  assurance  that the  Company  will be able to  compete
successfully in the future.

     Management  Information  Systems.  The  Company  relies  on  three  primary
regional centers for its management information systems. As with any information
system,  unforeseen issues may arise that could affect  management's  ability to
receive adequate, accurate and timely financial information, which in turn could
inhibit effective and timely decisions.  Furthermore, it is possible that one or
more of the Company's  three  regional  information  systems could  experience a
complete  or partial  shutdown.  If such a shutdown  occurred  near the end of a
quarter it could impact the Company's product shipments and revenues, as product
distribution  is heavily  dependent  on the  integrated  management  information
systems in each region. Accordingly,  operating results in that quarter would be
adversely  impacted.  The Company is working to achieve more  reliable  regional
management  information  systems to control  costs and  improve  its  ability to
deliver its products in substantially  all of its direct markets  worldwide.  No
assurance  can be given  that the  Company's  efforts  will be  successful.  The
failure to receive  adequate,  accurate and timely financial  information  could
inhibit management's ability to make effective and timely decisions.

     During the quarter ending March 31, 2005, the Company will be upgrading its
European business  applications suite to Oracle's latest web-based release, 11i.
There can be no  assurance  that the Company  will not  experience  difficulties
implementing the new system.  Difficulties or delays in the  implementation  may
interrupt  normal Company  operations,  including the ability to provide quotes,
process orders,  ship products,  provide  services and support to its customers,
bill and track its customers,  fulfill contractual obligations and otherwise run
its business.  Any disruptions occurring in the implementation of the system may
have a material adverse effect on the Company's operating results.

     Risks  Associated  with  International  Operations  and Foreign  Economies.
International  sales are subject to inherent  risks,  including  fluctuations in
local  economies,  difficulties  in staffing  and managing  foreign  operations,
greater  difficulty  in  accounts  receivable  collection,  costs  and  risks of
localizing  products for foreign  countries,  unexpected  changes in  regulatory
requirements, tariffs and other trade barriers, difficulties in the repatriation
of earnings  and the burdens of complying  with a wide variety of foreign  laws.
The Company must also comply with various import and export regulations. Failure
to comply with these  regulations  could result in fines and/or  termination  of
import and export privileges,  which could have a material adverse effect on the
Company's operating results.  Additionally,  the regulatory  environment in some
countries is very  restrictive as their  governments  try to protect their local
economy and value of their local currency against the U.S. dollar. Sales made by
the  Company's  international  direct  sales  offices are  denominated  in local
currencies,  and  accordingly,  the U.S.  dollar  equivalent  of these  sales is
affected by changes in the foreign currency  exchange rates.  Between the second
quarter of 2004 and the  second  quarter of 2003,  net of hedging  results,  the
change in exchange rates had the effect of increasing the Company's consolidated
sales by $6.2 million, or 7%, compared to the second quarter of 2003. Since most
of the  Company's  international  operating  expenses are also incurred in local
currencies, the change in exchanges rates had the effect of increasing operating
expenses by $1.5  million for the  quarter  ended June 30, 2004  compared to the
comparable prior year period. If the U.S. dollar weakens in the future, it could
result in the Company  having to reduce prices locally in order for its products
to remain competitive in the local  marketplace.  If the U.S. dollar strengthens
in the future, and the Company is unable to successfully raise its international
selling  prices,  it could  have a  material  adverse  effect  on the  Company's
operating results.

<PAGE>

     Expansion of  Manufacturing  Capacity.  During 2001, the Company  completed
construction  of a second  manufacturing  facility.  This facility is located in
Hungary and became  operational  in the fourth  quarter of 2001.  This  facility
sources a significant  portion of the Company's sales.  Currently the Company is
continuing to develop and implement information systems to support the operation
of this  facility.  This  facility and its  operation  are also subject to risks
associated   with  a  new   manufacturing   facility  and  with  doing  business
internationally,  including difficulty in managing manufacturing operations in a
foreign  country,  difficulty  in  achieving  or  maintaining  product  quality,
interruption  to  transportation  flows for  delivery  of  components  to us and
finished  goods to our  customers,  and changes in the  country's  political  or
economic  conditions.  No assurance can be given that the Company's efforts will
be successful.  Accordingly, any failure to deal with these factors could result
in interruption in the facility's operation or delays in expanding its capacity,
either of which could have a material adverse effect on the Company's  operating
results.

     Income Tax Rate.  The  Company  established  a  manufacturing  facility  in
Hungary in 2001. As a result of certain foreign investment  incentives available
under  Hungarian  law,  the profit from the  Company's  Hungarian  operation  is
currently  exempt from income tax.  These  benefits  may not be available in the
future due to changes in  Hungary's  political  condition  and/or tax laws.  The
reduction or elimination of these foreign investment  incentives would result in
the reduction or  elimination  of certain tax benefits  thereby  increasing  the
Company's  future effective income tax rate, which could have a material adverse
effect on the Company's operating results.

     The  Company   receives  a   substantial   income  tax  benefit   from  the
extraterritorial  income exemption ("ETI") under U.S. law. The ETI rules provide
that a percentage of the profits from products and intangibles exported from the
U.S. are exempt from U.S.  tax.  This benefit may not be available in the future
as ETI has been ruled an illegal export subsidy by the World Trade Organization.
The  repeal  of the ETI  would  result in the  elimination  of this tax  benefit
thereby  increasing the Company's  future effective income tax rate, which could
have a material adverse effect on the Company's operating results.

     Products Dependent on Certain  Industries.  Sales of the Company's products
are   dependent   on   customers  in  certain   industries,   particularly   the
telecommunications, semiconductor, automotive, automated test equipment, defense
and aerospace industries.  As experienced in the past, and as may be expected to
occur in the future, downturns characterized by diminished product demand in any
one or more of these  industries  could result in decreased  sales,  which could
have a material adverse effect on the Company's operating results.

     Dependence  on Key  Suppliers.  The Company's  manufacturing  processes use
large volumes of high-quality  components and subassemblies  supplied by outside
sources.  Several of these  components  are  available  through  sole or limited
sources.   Sole-source  components  purchased  by  the  Company  include  custom
application-specific  integrated  circuits  ("ASICs") and other components.  The
Company has in the past  experienced  delays and quality  problems in connection
with sole-source  components,  and there can be no assurance that these problems
will not recur in the future.  Accordingly,  the failure to receive  sole-source
components  from  suppliers  could  result in a material  adverse  effect on the
Company's revenues and operating results.

     Stock-based  Compensation  Plans.  The Company  has two active  stock-based
compensation   plans  and  one  inactive  plan.   The  two  active   stock-based
compensation  plans are the 1994  Incentive Plan and the Employee Stock Purchase
Plan. The Company  currently  adheres to the disclosure  only provisions of SFAS
No. 123, as amended by SFAS No. 148,  Accounting for Stock-Based  Compensation -
Transition and Disclosure, and as such, no compensation cost has been recognized
in the Company's  financial  statements  for the stock option plan and the stock
purchase plan. The Company is currently monitoring the recent proposal requiring
changes in the accounting  treatment for stock options.  The Company will comply
with any changes in the accounting of stock options required by the FASB and the
Securities and Exchange Commission.


<PAGE>

     Provisions in Our Charter  Documents  and Delaware Law and Our  Stockholder
Rights  Plan May Delay or  Prevent an  Acquisition  of Us.  Our  certificate  of
incorporation and bylaws and Delaware law contain  provisions that could make it
more  difficult for a third party to acquire us without the consent of our Board
of  Directors.  These  provisions  include  a  classified  Board  of  Directors,
prohibition  of   stockholder   action  by  written   consent,   prohibition  of
stockholders to call special meetings and the requirement that the holders of at
least 80% of our shares approve any business  combination not otherwise approved
by  two-thirds  of the  Board  of  Directors.  Delaware  law also  imposes  some
restrictions  on  mergers  and other  business  combinations  between us and any
holder of 15% or more of our outstanding common stock. In addition, our Board of
Directors has the right to issue preferred stock without  stockholder  approval,
which  could be used to  dilute  the  stock  ownership  of a  potential  hostile
acquirer.  Our Board of  Directors  adopted a new  stockholders  rights  plan on
January 21, 2004, pursuant to which we declared a dividend of one right for each
share of our common  stock  outstanding  as of May 10,  2004.  This  rights plan
replaced a similar  rights plan that had been in effect since our initial public
offering  in 1995.  Unless  redeemed  by us prior  to the  time the  rights  are
exercised,  upon the occurrence of certain  events,  the rights will entitle the
holders to receive upon  exercise  thereof  shares of our  preferred  stock,  or
shares of an acquiring  entity,  having a value equal to twice the  then-current
exercise price of the right. The issuance of the rights could have the effect of
delaying or preventing a change of control of us.

     Proprietary  Rights and  Intellectual  Property  Litigation.  The Company's
success  depends  on its  ability  to  obtain  and  maintain  patents  and other
proprietary rights relative to the technologies used in its principal  products.
Despite the Company's  efforts to protect its proprietary  rights,  unauthorized
parties  may have in the past  infringed  or violated  certain of the  Company's
intellectual  property  rights.  The  Company  from  time  to  time  engages  in
litigation  to protect its  intellectual  property  rights.  In  monitoring  and
policing  its  intellectual  property  rights,  the  Company has been and may be
required to spend  significant  resources.  The Company from time to time may be
notified that it is infringing certain patent or intellectual property rights of
others.  There can be no assurance  that the SoftWIRE case and/or other existing
litigation,  or any other  intellectual  property  litigation  initiated  in the
future,  will not cause significant  litigation expense,  liability,  injunction
against  some  of  the  Company's  products,  and a  diversion  of  management's
attention,  any of which may have a  material  adverse  effect on the  Company's
operating results.

     Recently  Enacted  and  Proposed  Changes in  Securities  Laws and  Related
Regulations Could Result in Increased Costs to Us. Recently enacted and proposed
changes in the laws and regulations  affecting public  companies,  including the
provisions  of the  Sarbanes-Oxley  Act of 2002 and  recent  rules  enacted  and
proposed by the SEC, Nasdaq and the NYSE, are resulting in increased costs to us
as we respond to their requirements. In particular,  complying with the internal
control  audit  requirements  of  Sarbanes-Oxley  Section  404  will  result  in
increased internal efforts and higher fees from our independent accounting firm.
The current estimate of our total cost of both the additional  internal resource
requirement and the additional external cost to implement these new and proposed
rules,  including  Sarbanes-Oxley  Section 404, is  approximately  $1.0 million.
However,  any internal controls that need to be implemented or improved in order
to comply with these new rules,  and/or any changes to the  requirements,  could
result in the Company  exceeding its current  internal  resource and/or external
cost  estimates.  If the amount of the costs we incur increases or the timing of
such  costs  that we may  incur as we  implement  these new and  proposed  rules
changes,  it could have a material  adverse  impact on the  Company's  operating
results.  The new rules could make it more  difficult  for us to obtain  certain
types of insurance,  including director and officer liability insurance,  and we
may  be  forced  to  accept   reduced   policy  limits  and  coverage  or  incur
substantially higher costs to obtain the same or similar coverage. The impact of
these  events  could also make it more  difficult  for us to attract  and retain
qualified persons to serve on our Board of Directors, on committees of our Board
of Directors, or as executive officers.


<PAGE>

     Dependence on Key Management and Technical Personnel. The Company's success
depends to a  significant  degree upon the  continued  contributions  of its key
management,   sales,   marketing,   research  and  development  and  operational
personnel,  including Dr. Truchard,  the Company's  Chairman and Chief Executive
Officer, and other members of senior management and key technical personnel. The
Company  has no  agreements  providing  for  the  employment  of any of its  key
employees for any fixed term and the  Company's  key  employees may  voluntarily
terminate  their  employment  with  the  Company  at any  time.  The loss of the
services of one or more of the  Company's key employees in the future could have
a material adverse effect on the Company's  operating results.  The Company also
believes  its future  success will depend upon its ability to attract and retain
additional  highly  skilled  management,   technical,  marketing,  research  and
development,  and  operational  personnel with  experience in managing large and
rapidly  changing  companies,  as well as training,  motivating and  supervising
employees.  In addition,  the recruiting  environment for software  engineering,
sales and other technical  professionals  is very  competitive.  Competition for
qualified software engineers is particularly  intense and is likely to result in
increased  personnel  costs.  Failure to attract  or retain  qualified  software
engineers could have an adverse effect on the Company's  operating results.  The
Company also recruits and employs foreign  nationals to achieve its hiring goals
primarily for engineering and software positions. There can be no guarantee that
the Company will continue to be able to recruit foreign nationals at the current
rate. These factors further intensify  competition for key personnel,  and there
can be no  assurance  that the  Company  will be  successful  in  retaining  its
existing key personnel or attracting  and retaining  additional  key  personnel.
Failure to attract and retain a sufficient number of the Company's key personnel
could have a material adverse effect on the Company's operating results.

     Risk of Product  Liability Claims.  The Company's  products are designed to
provide  information  upon which the users may rely.  The  Company  attempts  to
assure the quality and accuracy of the processes contained in its products,  and
to limit its product  liability  exposure  through  contractual  limitations  on
liability,  including  disclaimers in its "shrink wrap" license  agreements with
end-users.  If future products contain errors that produce  incorrect results on
which  users  rely,  customer  acceptance  of the  Company's  products  could be
adversely  affected.  Further,  the Company could be subject to liability claims
that could have a material adverse effect on the Company's  operating results or
financial position.  Although the Company maintains liability  insurance,  there
can be no assurance that such insurance or the  contractual  provisions  used by
the Company to limit its liability will be sufficient.


I
tem 3.  Quantitative and Qualitative Disclosures About Market Risk

     Response to this item is included in "Item 2 - Management's  Discussion and
Analysis of Financial Conditions and Results of Operations - Market Risk" above.



Item 4.  Controls and Procedures

     The Company's Chief Executive Officer and Chief Financial Officer, based on
the evaluation of the Company's  disclosure  controls and procedures (as defined
in Rules  13a-15(e)  and  15d-15(e) of the  Securities  Exchange Act of 1934, as
amended) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of June 30,
2004, have concluded that the Company's  disclosure controls and procedures were
effective  to  ensure  the  timely  collection,  evaluation  and  disclosure  of
information  relating  to the  Company  that  would  potentially  be  subject to
disclosure under the Securities Exchange Act of 1934, as amended,  and the rules
and regulations promulgated thereunder.  During the quarter ended June 30, 2004,
there  were  no  changes  in the  Company's  internal  controls  over  financial
reporting identified in connection with the evaluation required by paragraph (d)
of the Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably
likely to materially affect, the internal controls over financial reporting.


<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

     The  Company  has  filed  two  complaints   against  The  MathWorks,   Inc.
("Defendant") for patent infringement.  In both complaints,  the Company claimed
the Defendant infringes certain of its U.S. patents and the Defendant challenged
the validity and  enforceability  of those  patents and asserts that it does not
infringe the claims of those patents.

     The first  complaint  was filed on January  25,  2001 in the U.S.  District
Court, Eastern District of Texas (Marshall  Division).  On January 30, 2003, the
jury found  infringement  by the Defendant of three of the patents  involved and
awarded the Company specified damages. On June 23, 2003, the Court entered final
judgment  in favor of the Company in an amount of  approximately  $4 million and
entered an  injunction  against  Defendant's  sale of its  Simulink  and related
products.  The  Court  stayed  the  injunction  pending  appeal  of the case and
required the Defendant to pay a specified  royalty on its U.S. sales of the same
products during the pendency of appeal.  The initial judgement and the royalties
on the sales of infringing products through June 30, 2004 total $6.3 million and
are  escrowed.  On July 22, 2003,  Defendant  filed its Notice of Appeal and the
case is  currently  pending on appeal  before the U.S.  Court of Appeals for the
Federal  Circuit.  The final  judgment  has not been  recorded in the  financial
statements of the Company pending the disposition of the appeal.

     The second complaint was filed October 21, 2002, also in the U.S.  District
Court, Eastern District of Texas (Marshall Division) and on August 27, 2003, the
complaint was dismissed by agreement of the parties.

     On January 15, 2003, SoftWIRE Technology,  LLC ("SoftWIRE") and Measurement
Computing  Corporation ("MCC") filed a complaint against the Company in the U.S.
District  Court for the  District of  Massachusetts  asking the court to declare
that SoftWIRE does not infringe  certain of the Company's U.S.  patents and that
such patents are invalid and  unenforceable.  On February 21, 2003,  the Company
filed a complaint against SoftWIRE and MCC in the U.S.  District Court,  Eastern
District  of Texas  (Marshall  Division)  claiming  that both  SoftWIRE  and MCC
infringe the same and certain other of the Company's U.S. patents.  SoftWIRE and
MCC challenge the validity and  enforceability  of these patents and assert that
they do not infringe any of these patents.  In the Eastern District action,  the
Company seeks monetary damages and injunction of the sale of certain products of
SoftWIRE and MCC as well as  attorney's  fees and costs.  By order of the Court,
the Eastern  District action was transferred to the U.S.  District Court for the
District of  Massachusetts  on May 9, 2003, and has been  consolidated  with the
previously-filed  SoftWIRE  action,  which also  includes  counterclaims  by the
Company that are the same in substance  as the  Company's  claims in the Eastern
District  action.  On June 12,  2003,  SoftWIRE  moved  for  leave to amend  its
complaint in order to allege that the Company  infringes  two U.S.  patents that
SoftWIRE  acquired by purchase on May 23, 2003.  On November 5, 2003,  the Court
granted SoftWIRE's motion to amend, thereby adding SoftWIRE's two patents to the
litigation.  With respect to those two SoftWIRE patents, SoftWIRE seeks monetary
damages and injunction of the sale of the Company's  LabVIEW software  products,
as well as  attorney's  fees and costs.  The Company  challenges  the  validity,
enforceability  and  alleged  infringement  of  those  patents  and  intends  to
vigorously  defend  against  SoftWIRE's  claims.  Discovery in the litigation is
underway.  During the fourth quarter of 2003,  the Company  accrued $3.8 million
related to its probable loss from this  contingency,  which  consists  solely of
anticipated  patent defense costs that are probable of being incurred.  However,
the  outcome  of any  litigation  is  inherently  uncertain  and there can be no
assurance as to the ultimate outcome of this matter or any other litigation. The
Company charged  approximately  $893,000  against this accrual during the second
quarter of 2004.  The Company has charged a total of $1.3  million  against this
accrual through June 30, 2004.


<PAGE>


ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
SECURITIES

                                                                 Maximum number
                                             Total number of     of shares that
                                            shares purchased      may yet be
                      Total      Average      as part of a      purchased under
                    number of   price paid  publicly announced    the plan or
      Period          shares    per share    plan or program        program
------------------  ----------  ----------  ------------------  ----------------
April 1, 2004 to
  April 30, 2004        --          --              --              3,000,000
May 1, 2004 to
  May 31, 2004        234,250    $ 31.61          234,250           2,765,570
June 1, 2004 to
  June 30, 2004         --          --              --              2,765,570
                    ----------  ----------  ------------------  ----------------
Total                 234,250    $ 31.61          234,250           2,765,750
                    ==========              ==================

     The  Company's  share  repurchase  plan was  announced on October 17, 2002.
Under the plan,  the Company has  authorization  to  repurchase  up to 3,000,000
shares of National Instruments stock. The plan has no expiration date.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a)  The annual meeting of stockholders was held on May 11, 2004.

     (b)  The following directors were elected at the meeting to serve a term of
          three years:

                  James J. Truchard
                  Charles J. Roesslein

          The  following directors are continuing to serve their terms:

                  Jeffrey L. Kodosky
                  Donald M. Carlton
                  Ben G. Streetman
                  R. Gary Daniels

     (c)  The  matters  voted upon at the meeting and results of the voting with
          respect to those matters were as follows:


          (1)  Election of directors:        For                Abstain

                  James J. Truchard       68,696,207           5,261,283
                  Charles J. Roesslein    67,591,196           6,366,294

          (2)  The Company's stockholders approved the amendment and restatement
               of the Company's  1994  Incentive  Plan to increase the number of
               shares  reserved for issuance  thereunder by 750,000 shares to an
               aggregate of 16,950,000 shares and to extend the termination date
               of the  plan by one  year to  2005,  with  [60,044,423]  votes in
               favor, [7,334,392] votes against and [423,898] votes abstaining.

     The foregoing  matters are described in detail in the Company's  definitive
proxy statement dated April 5, 2004.



ITEM 5. OTHER INFORMATION

     From time to time the  Company's  directors,  executive  officers and other
insiders may adopt stock trading plans pursuant to Rule 10b5-1(c) promulgated by
the Securities  and Exchange  Commission  under the  Securities  Exchange Act of
1934,  as amended.  Jeffrey L. Kodosky and James J.  Truchard have made periodic
sales of the Company's stock pursuant to such plans.


<PAGE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits.

    3.1(2)  Certificate of Incorporation, as amended, of the Company.

    3.2(2)  Amended and Restated Bylaws of the Company.

    3.3(4)  Certificate of Designation of Rights, Preferences and Privileges of
            Series A Participating Preferred Stock of the Company.

    4.1(1)  Specimen of Common Stock certificate of the Company.

    4.2(3)  Rights Agreement dated as of January 21, 2004, between the Company
            and EquiServe Trust Company, N.A.

    10.1(1) Form of Indemnification Agreement.

    10.2    1994 Incentive Plan, as amended.*

    10.3(1) 1994 Employee Stock Purchase Plan.*

    31.1    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
            Section 1350, as Adopted Pursuant to Section 302 of the 
            Sarbanes-Oxley Act of 2002.

    31.2    Certification of Chief Financial Officer Pursuant to 18 U.S.C. 
            Section 1350, as Adopted Pursuant to Section 302 of the  
            Sarbanes-Oxley Act of 2002.

    32.1    Certification of Chief Executive Officer and Chief Financial Officer
            Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 
            906 of the Sarbanes-Oxley Act of 2002.

    (1)     Incorporated by reference to the Company's Registration Statement on
            Form S-1 (Reg. No. 33-88386) declared effective March 13, 1995.

    (2)     Incorporated by reference to the same-numbered exhibit filed with 
            the Company's Annual Report on Form 10-K for the fiscal year ended 
            December 31, 2003.

    (3)     Incorporated by reference to exhibit 4.1 filed with the Company's 
            Current Report on Form 8-K filed on January 28, 2004.

    (4)     Incorporated by reference to the same-numbered exhibit filed with 
            the Company's Form 8-A on April 27, 2004.

     *      Management Contract or Compensatory Plan or Arrangement.

b) Reports on Form 8-K.

     In  connection  with the Company's  earnings  press release for the quarter
     ended March 31, 2004, the Company furnished a Current Report on Form 8-K on
     April 28, 2004.


<PAGE>


                                    SIGNATURE


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                    NATIONAL INSTRUMENTS CORPORATION
                                    Registrant




                               BY:  /s/ Alex Davern
                                    Alex Davern
                                    Chief Financial Officer and Treasurer
                                    (principal financial and accounting officer)





Dated:  August 5, 2004





                                                                    EXHIBIT 10.2


                        NATIONAL INSTRUMENTS CORPORATION

                              AMENDED AND RESTATED
                               1994 INCENTIVE PLAN

                      (as last amended on January 21, 2004)

                            SCOPE AND PURPOSE OF PLAN

     National    Instruments    Corporation,    a    Delaware    corporation(the
"Corporation"), has adopted this 1994 Incentive Plan (the "Plan") to provide for
the granting of:

     (a)  Incentive  Options  (hereafter   defined)  to  certain  Key  Employees
          (hereafter defined);

     (b)  Nonstatutory  Options  (hereafter  defined) to certain Key  Employees,
          Non-Employee Directors (hereafter defined) and other persons;

     (c)  Restricted Stock Awards  (hereafter  defined) to certain Key Employees
          and other persons; and

     (d)  Stock Appreciation Rights (hereafter defined) to certain Key Employees
          and other persons.

     The purpose of the Plan is to provide an incentive  for Key  Employees  and
directors of the Corporation and its Subsidiaries (hereafter defined) to aid the
Corporation in attracting  able persons to enter the service of the  Corporation
and its Subsidiaries, to extend to them the opportunity to acquire a proprietary
interest in the  Corporation  so that they will apply their best efforts for the
benefit of the  Corporation,  and to remain in the service of the Corporation or
its Subsidiaries.


SECTION 1.  DEFINITIONS


     1.1 "Acquiring Person" means any Person, the Corporation, any Subsidiary of
the Corporation, any employee benefit plan of the Corporation or of a Subsidiary
of the  Corporation  or of a  corporation  owned  directly or  indirectly by the
stockholders of the Corporation in  substantially  the same proportions as their
ownership of Stock of the Corporation, or any trustee or other fiduciary holding
securities  under an employee benefit plan of the Corporation or of a Subsidiary
of the  Corporation  or of a  corporation  owned  directly or  indirectly by the
stockholders of the Corporation in  substantially  the same proportions as their
ownership of Stock of the Corporation.

     1.2 "Affiliate"  means (a) any  Person who is  directly or  indirectly  the
beneficial owner of at least 10% of the voting power of the Voting Securities or
(b) any Person  controlling,  controlled  by, or under  common  control with the
Corporation or any Person contemplated in clause (a) of this Subsection 1.2.

     1.3 "Applicable Laws" means the requirements relating to the administration
of stock option plans under U.S. state corporate  laws,  U.S.  federal and state
securities  laws, the Code, any stock exchange or quotation  system on which the
Common Stock is listed or quoted and the applicable  laws of any foreign country
or jurisdiction where Options are, or will be, granted under the Plan.

     1.4 "Award" means the grant of any form of Option,  Restricted Stock Award,
or Stock  Appreciation Right under the Plan,  whether granted  individually,  in
combination,  or in tandem, to a Holder pursuant to the terms,  conditions,  and
limitations  that the Committee may establish in order to fulfill the objectives
of the Plan.

     1.5 "Award Agreement" means the written or electronic agreement between the
Corporation and a Holder  evidencing the terms,  conditions,  and limitations of
the Award granted to that Holder.

     1.6 "Board of Directors" means the board of directors of the Corporation.

     1.7  "Business  Day"  means  any day that is a market  trading  day for the
National Association of Securities Dealers,  Inc. Automated Quotation ("NASDAQ")
National Market System.

<PAGE>

     1.8 "Change in Control" means the event that is deemed to have occurred if:

          (a) any  Acquiring  Person is or becomes  the  "beneficial  owner" (as
     defined in Rule 13d-3 under the Exchange Act),  directly or indirectly,  of
     securities  of the  Corporation  representing  fifty percent or more of the
     combined  voting power of the then  outstanding  Voting  Securities  of the
     Corporation; or

          (b) members of the Incumbent  Board cease for any reason to constitute
     at least a majority of the Board of Directors; or

          (c) a public announcement is made of a tender or exchange offer by any
     Acquiring  Person  for  fifty  percent  or more of the  outstanding  Voting
     Securities of the Corporation, and the Board of Directors approves or fails
     to oppose that tender or exchange offer in its statements in Schedule 14D-9
     under the Exchange Act; or

          (d)  the   stockholders  of  the  Corporation   approve  a  merger  or
     consolidation of the Corporation with any other  corporation or partnership
     (or, if no such approval is required,  the consummation of such a merger or
     consolidation  of the  Corporation),  other than a merger or  consolidation
     that would result in the ownership of Voting  Securities of the Corporation
     outstanding  immediately  before the  consummation  thereof  continuing  to
     represent  (either by  remaining  outstanding  or by being  converted  into
     Voting  Securities of the surviving  entity or of a parent of the surviving
     entity) a majority of the combined voting power of the Voting Securities of
     the surviving  entity (or its parent)  outstanding  immediately  after that
     merger or consolidation; or

          (e) the  stockholders  of the  Corporation  approve a plan of complete
     liquidation of the  Corporation or an agreement for the sale or disposition
     by the Corporation of all or  substantially  all the  Corporation's  assets
     (or,  if  no  such  approval  is  required,  the  consummation  of  such  a
     liquidation,  sale, or disposition in one  transaction or series of related
     transactions)  other than a  liquidation,  sale, or  disposition  of all or
     substantially all the  Corporation's  assets in one transaction or a series
     of related  transactions  to a corporation  owned directly or indirectly by
     the stockholders of the Corporation in  substantially  the same proportions
     as their ownership of Stock of the Corporation.

     Notwithstanding the foregoing, the merger of the Corporation's  predecessor
with and into the  Corporation  in June 1994  shall not  constitute  a Change in
Control.

     1.9 "Code" means the Internal Revenue Code of 1986, as amended.

     1.10 "Committee"  means the Committee  designated by the Board of Directors
to administer this Plan as described under Section 3.

     1.11 "Convertible  Securities"  means evidences of indebtedness,  shares of
capital stock, or other securities that are convertible into or exchangeable for
shares of Stock,  either  immediately or upon the arrival of a specified date or
the happening of a specified event.

     1.12 "Corporation"  has the  meaning  given to it in the second  paragraph
under "Scope and Purpose of Plan."

     1.13 "Date of Grant" has the meaning given it in Subsection 4.3.

     1.14 "Disability" has the meaning given it in Subsection 10.3.

     1.15 "Disinterested   Person"   has  the   meaning   given   it  in  Rule
16b-3(c)(2)(i).

     1.16 "Earnings" for any Fiscal Year shall mean the operating  income of the
Corporation on a consolidated  basis before taxes,  interest,  foreign  currency
exchange gains or losses,  other gains or losses and other  extraordinary  items
for such  Fiscal  Year.  By way of example,  Earnings  for the Fiscal Year ended
December 31, 1993 were $17,300,000.

     1.17  "Earnings  Attainment"  for any  Fiscal  Year means a  fraction,  the
numerator of which shall be the  percentage  which  Earnings  constitutes of Net
Sales for such Fiscal Year,  and the  denominator  of which shall be 18%. In the
event that  there  shall be no  Earnings  for such  Fiscal  Year,  the  Earnings
Attainment  for such Fiscal Year shall be zero.  Notwithstanding  the foregoing,
the  Earnings  Attainment  for any Fiscal  Year shall not exceed  one. By way of
example, the Earnings Attainment for the Fiscal Year ended December 31, 1993 was
91/100.

     1.18 "Effective Date" means May 9, 1994.

<PAGE>

     1.19  "Eligible  Individuals"  means (a) Key  Employees,  (b)  Non-Employee
Directors,  and (c) any other Person that the  Committee  designates as eligible
for an Award (other than for Incentive Options) because the Person performs,  or
has performed,  valuable services for the Corporation or any of its Subsidiaries
(other than  services in  connection  with the offer or sale of  securities in a
capital-raising  transaction) and the Committee determines that the Person has a
direct and significant effect on the financial development of the Corporation or
any of its Subsidiaries.

     1.20  "Employee"  means any  employee of the  Corporation  or of any of its
Subsidiaries,  including  officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.

     1.21 "Exchange Act" means the Securities Exchange Act of 1934 and the rules
and  regulations  promulgated  thereunder,  or any  successor  law, as it may be
amended from time to time.

     1.22 "Exercise Notice" has the meaning given it in Subsection 5.5.

     1.23 "Exercise Price" has the meaning given it in Subsection 5.4.

     1.24 "Fair Market Value" means, for a particular day:

          (a) If shares of Stock of the same  class are  listed or  admitted  to
     unlisted trading privileges on any national or regional securities exchange
     at the date of  determining  the Fair Market Value,  then the last reported
     sale price, regular way, on the composite tape of that exchange on the last
     Business Day before the date in question or, if no such sale takes place on
     that Business Day, the average of the closing bid and asked prices, regular
     way, in either case as reported in the principal  consolidated  transaction
     reporting system with respect to securities  listed or admitted to unlisted
     trading privileges on that securities exchange; or

          (b) If shares of Stock of the same class are not listed or admitted to
     unlisted  trading  privileges as provided in  Subsection  1.24(a) and sales
     prices for shares of Stock of the same class in the over-the-counter market
     are  reported by the NASDAQ  National  Market  System (or such other system
     then in use) at the date of  determining  the Fair Market  Value,  then the
     last  reported  sales price so reported on the last Business Day before the
     date in question or, if no such sale takes place on that  Business Day, the
     average of the high bid and low asked prices so reported; or

          (c) If shares of Stock of the same class are not listed or admitted to
     unlisted  trading  privileges as provided in  Subsection  1.24(a) and sales
     prices for shares of Stock of the same class are not reported by the NASDAQ
     National  Market  System (or a similar  system  then in use) as provided in
     Subsection 1.24(b),  and if bid and asked prices for shares of Stock of the
     same class in the  over-the-counter  market are  reported by NASDAQ (or, if
     not so reported, by the National Quotation Bureau Incorporated) at the date
     of determining the Fair Market Value,  then the average of the high bid and
     low asked prices on the last Business Day before the date in question; or

          (d) If shares of Stock of the same class are not listed or admitted to
     unlisted  trading  privileges as provided in  Subsection  1.24(a) and sales
     prices or bid and asked prices  therefor are not reported by NASDAQ (or the
     National  Quotation Bureau  Incorporated) as provided in Subsection 1.24(b)
     or  Subsection  1.24(c) at the date of  determining  the Fair Market Value,
     then  the  value   determined  in  good  faith  by  the  Committee,   which
     determination shall be conclusive for all purposes; or

          (e) If shares of Stock of the same  class are  listed or  admitted  to
     unlisted  trading  privileges  as provided in  Subsection  1.24(a) or sales
     prices or bid and asked  prices  therefor  are  reported  by NASDAQ (or the
     National  Quotation Bureau  Incorporated) as provided in Subsection 1.24(b)
     or Subsection 1.24(c) at the date of determining the Fair Market Value, but
     the volume of trading is so low that the Board of Directors  determines  in
     good faith that such  prices  are not  indicative  of the fair value of the
     Stock,  then the value  determined  in good faith by the  Committee,  which
     determination  shall be  conclusive  for all purposes  notwithstanding  the
     provisions of Subsections 1.24(a), (b), or (c).

     For purposes of valuing Incentive  Options,  the Fair Market Value of Stock
shall be determined  without regard to any  restriction  other than one that, by
its terms,  will never  lapse.  For purposes of the  redemption  provided for in
Subsection  9.3(d)(v),  Fair  Market  Value  shall have the meaning and shall be
determined  as set forth above;  provided,  however,  that the  Committee,  with
respect to any such redemption,  shall have the right to determine that the Fair
Market Value for purposes of the redemption  should be an amount measured by the
value of the shares of Stock,  other  securities,  cash,  or property  otherwise
being   received  by  holders  of  shares  of  Stock  in  connection   with  the
Restructuring and upon that determination the Committee shall have the power and
authority to determine  Fair Market Value for purposes of the  redemption  based
upon the value of such shares of stock, other securities, cash, or property. Any
such  determination  by the  Committee,  as  evidenced  by a  resolution  of the
Committee, shall be conclusive for all purposes.

<PAGE>

     1.25  "Fiscal  Year"  means the fiscal  year of the  Corporation  ending on
December 31 of each year.

     1.26 "Holder" means an Eligible Individual to whom an outstanding Award has
been granted.

     1.27 "Incumbent Board" means the individuals who, as of the Effective Date,
constitute  the  Board of  Directors  and any  other  individual  who  becomes a
director of the Corporation after that date and whose election or appointment by
the  Board  of  Directors  or  nomination  for  election  by  the  Corporation's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board.

     1.28  "Incentive  Option" means an incentive  stock option as defined under
Section 422 of the Code and regulations thereunder.

     1.29 "Key  Employee"  means any Employee whom the  Committee  identifies as
having a direct and significant  effect on the performance of the Corporation or
any of its Subsidiaries.

     1.30  "Net  Sales"  for any  Fiscal  Year  shall  mean the net sales of the
Corporation on a consolidated basis for such Fiscal Year. By way of example, the
Net Sales for the Fiscal Years ended  December 31, 1992 and 1993,  respectively,
were $82,826,000 and $105,528,000.

     1.31 "Non-Employee  Director" means a director of the Corporation who while
a director is not an Employee.

     1.32  "Nonstatutory  Option" means a stock option that does not satisfy the
requirements  of Section  422 of the Code or that is  designated  at the Date of
Grant  or in the  applicable  Award  Agreement  to be an  option  other  than an
Incentive Option.

     1.33 "Non-Surviving  Event" means an event of Restructuring as described in
either Subsection 1.39(b) or Subsection 1.39(c).

     1.34 "Normal Retirement" means the separation of the Holder from employment
with the Corporation and its Subsidiaries with the right to receive an immediate
benefit  under a retirement  plan approved by the  Corporation.  If no such plan
exists,  Normal  Retirement  shall mean separation of the Holder from employment
with the Corporation and its Subsidiaries at age 62 or later.

     1.35 "Option" means either an Incentive Option or a Nonstatutory Option, or
both.

     1.36  "Person"  means  any  person  or  entity  of any  nature  whatsoever,
specifically including (but not limited to) an individual,  a firm, a company, a
corporation,  a partnership,  a trust, or other entity. A Person,  together with
that Person's  affiliates and associates (as  "affiliate"  and  "associate"  are
defined in Rule 12b-2 under the  Exchange  Act for  purposes of this  definition
only),  and any Persons  acting as a  partnership,  limited  partnership,  joint
venture,  association,  syndicate,  or  other  group  (whether  or not  formally
organized),  or otherwise  acting  jointly or in concert or in a coordinated  or
consciously  parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of the
Corporation with that Person, shall be deemed a single "Person."

     1.37 "Plan"  means the  Corporation's  1994  Incentive  Plan,  as it may be
amended from time to time.

     1.38 "Restricted  Stock" means Stock that is  nontransferable or subject to
substantial risk of forfeiture until specific conditions are met.

     1.39 "Restricted Stock Award" means the grant or purchase, on the terms and
conditions  of  Section  7  or  that  the  Committee  otherwise  determines,  of
Restricted Stock.

     1.40  "Restructuring"  means  the  occurrence  of any  one or  more  of the
following:

          (a) The merger or  consolidation  of the Corporation  with any Person,
     whether   effected  as  a  single   transaction  or  a  series  of  related
     transactions,  with the  Corporation  remaining the continuing or surviving
     entity of that merger or consolidation and the Stock remaining  outstanding
     and not changed  into or  exchanged  for stock or other  securities  of any
     other Person or of the Corporation, cash, or other property;

          (b) The merger or  consolidation  of the Corporation  with any Person,
     whether   effected  as  a  single   transaction  or  a  series  of  related
     transactions,  with  (i)  the  Corporation  not  being  the  continuing  or
     surviving  entity of that merger or  consolidation  or (ii) the Corporation
     remaining   the   continuing   or  surviving   entity  of  that  merger  or
     consolidation  but all or a part of the  outstanding  shares  of Stock  are
     changed into or exchanged for stock or other securities of any other Person
     or the Corporation, cash, or other property; or

<PAGE>

          (c) The transfer,  directly or indirectly, of all or substantially all
     of the assets of the Corporation  (whether by sale, merger,  consolidation,
     liquidation,  or  otherwise)  to any Person,  whether  effected as a single
     transaction or a series of related transactions.

     1.41 "Rule 16b-3" means Rule 16b-3 under  Section 16(b) of the Exchange Act
as adopted in  Exchange  Act  Release  No.  34-29131  (April 26,  1991),  or any
successor rule, as it may be amended from time to time.

     1.42 "Sales Attainment" for any Fiscal Year means a fraction, the numerator
of which shall equal the  percentage  increase in Net Sales for such Fiscal Year
over  the  Net  Sales  for  the  immediately  preceding  Fiscal  Year,  and  the
denominator  of which shall be 40%. In the event that there shall be no increase
in the Net Sales for such  Fiscal  Year from that of the  immediately  preceding
Fiscal  Year,  the  Sales  Attainment  for  such  Fiscal  Year  shall  be  zero.
Notwithstanding  the foregoing,  in no event shall the Sales  Attainment for any
Fiscal Year exceed one. By way of example,  the Sales  Attainment for the Fiscal
Year ended December 31, 1993 was 69/100.

     1.43  "Securities  Act" means the  Securities Act of 1933 and the rules and
regulations promulgated  thereunder,  or any successor law, as it may be amended
from time to time.

     1.44  "Stock"  means the common  stock,  par value  $.01 per share,  of the
Corporation  or any  other  securities  that are  substituted  for the  Stock as
provided in Section 9.

     1.45 "Stock  Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over, as  appropriate,  the Exercise Price of a related Option
or the  Fair  Market  Value of the  Stock  on the  Date of  Grant  of the  Stock
Appreciation Right.

     1.46 "Subsidiary"  means, with respect to any Person,  any corporation,  or
other entity of which a majority of the Voting Securities is owned,  directly or
indirectly, by that Person.

     1.47 "Total Shares" has the meaning given it in Subsection 9.2.

     1.48 "Voting  Securities"  means any  securities  that are entitled to vote
generally in the election of directors,  in the admission of general partners or
in the selection of any other similar governing body.


SECTION 2.  SHARES OF STOCK SUBJECT TO THE PLAN

     2.1  Maximum  Number of Shares. Subject to the provisions of Subsection 2.2
and  Section  9, the  aggregate  number of shares of Stock that may be issued or
transferred pursuant to Awards under the Plan shall be 16,950,000 shares.

     2.2  Limitation  of Shares.  For purposes of the  limitations  specified in
Subsection 2.1, the following principles shall apply:

          (a) the  following  shall  count  against and  decrease  the number of
     shares of Stock that may be issued for  purposes  of  Subsection  2.1:  (i)
     shares of Stock  subject  to  outstanding  Options,  outstanding  shares of
     Restricted  Stock,  and shares  subject to outstanding  Stock  Appreciation
     Rights  granted  independent  of Options (based on a good faith estimate by
     the  Corporation or the Committee of the maximum number of shares for which
     the Stock  Appreciation  Right may be settled  (assuming payment in full in
     shares of Stock)),  and (ii) in the case of Options  granted in tandem with
     Stock  Appreciation  Rights,  the  greater of the number of shares of Stock
     that would be counted if one or the other alone was outstanding (determined
     as described in clause (i) above);

          (b) the following shall be added back to the number of shares of Stock
     that may be issued for purposes of Subsection 2.1: (i) shares of Stock with
     respect to which Options,  Stock Appreciation Rights granted independent of
     Options,  or Restricted  Stock Awards expire,  are cancelled,  or otherwise
     terminate without being exercised, converted, or vested, as applicable, and
     (ii) in the case of  Options  granted  in tandem  with  Stock  Appreciation
     Rights,  shares  of Stock as to which an  Option  has been  surrendered  in
     connection  with the exercise of a related  ("tandem")  Stock  Appreciation
     Right, to the extent the number surrendered  exceeds the number issued upon
     exercise of the Stock Appreciation Right;

          (c)  shares of Stock  subject  to Stock  Appreciation  Rights  granted
     independent  of Options  (calculated  as provided in clause (a) above) that
     are  exercised and paid in cash shall be added back to the number of shares
     of Stock that may be issued for purposes of Subsection 2.1;

<PAGE>

          (d) shares of Stock that are  transferred  by a Holder of an Award (or
     withheld by the  Corporation) as full or partial payment to the Corporation
     of the  purchase  price of  shares  of Stock  subject  to an  Option or the
     Corporation's or any Subsidiary's tax withholding  obligations shall not be
     added back to the number of shares of Stock that may be issued for purposes
     of Subsection 2.1 and shall not again be subject to Awards; and

          (e) if the  number of shares of Stock  counted  against  the number of
     shares that may be issued for purposes of  Subsection  2.1 is based upon an
     estimate made by the Corporation or the Committee as provided in clause (a)
     above and the  actual  number of shares  of Stock  issued  pursuant  to the
     applicable Award is greater or less than the estimated  number,  then, upon
     such issuance, the number of shares of Stock that may be issued pursuant to
     Subsection 2.1 shall be further reduced by the excess issuance or increased
     by the shortfall, as applicable.

     2.3 Description of Shares.  The shares to be delivered under the Plan shall
be made available from (a)  authorized but unissued  shares of Stock,  (b) Stock
held in the treasury of the  Corporation,  or (c)  previously  issued  shares of
Stock  reacquired by the  Corporation,  including  shares  purchased on the open
market,  in each  situation  as the  Board of  Directors  or the  Committee  may
determine from time to time at its sole option.

     2.4  Registration  and Listing of Shares.  From time to time,  the Board of
Directors and appropriate  officers of the Corporation  shall and are authorized
to  take  whatever  actions  are  necessary  to  file  required  documents  with
governmental authorities, stock exchanges, and other appropriate Persons to make
shares of Stock available for issuance pursuant to the exercise of Awards.


SECTION 3.  ADMINISTRATION OF THE PLAN

     3.1 Committee.

          (a) Procedure.

               (i) Multiple  Administrative Bodies. The Plan may be administered
          by different  Committees with respect to different  groups of Eligible
          Individuals.

               (ii)  Section  162(m).  To  the  extent  that  the  Administrator
          determines it to be desirable to qualify Awards  granted  hereunder as
          "performance-based  compensation" within the meaning of Section 162(m)
          of the Code, the Plan shall be  administered  by a Committee of two or
          more "outside  directors"  within the meaning of Section 162(m) of the
          Code.

               (iii) Rule 16b-3. To the extent desirable to qualify transactions
          hereunder as exempt under Rule 16b-3,  the  transactions  contemplated
          hereunder  shall  be  structured  to  satisfy  the   requirements  for
          exemption under Rule 16b-3.

               (iv) Other Administration. Other than as provided above, the Plan
          shall  be  administered  by (A) the  Board or (B) a  Committee,  which
          committee shall be constituted to satisfy Applicable Laws.

          (b)  Powers of the  Administrator.  Subject to the  provisions  of the
     Plan,  and in the  case of a  Committee,  subject  to the  specific  duties
     delegated by the Board to such Committee,  the Administrator shall have the
     authority, in its discretion:

               (i) to determine the Fair Market Value;

               (ii) to select the  Eligible  Individuals  to whom  Awards may be
          granted hereunder;

               (iii) to  determine  the  number of shares of Common  Stock to be
          covered by each Award granted hereunder;

               (iv) to approve forms of agreement for use under the Plan;

               (v) to determine the terms and conditions,  not inconsistent with
          the terms of the Plan, of any Award granted hereunder.  Such terms and
          conditions  include,  but are not limited to, the exercise price,  the
          time or times  when  Awards  may be  exercised  (which may be based on
          performance   criteria),   any  vesting   acceleration  or  waiver  of
          forfeiture  restrictions,  and any restriction or limitation regarding
          any Award of the shares of Common  Stock  relating  thereto,  based in
          each  case  on  such  factors  as  the  Administrator,   in  its  sole
          discretion, shall determine;

               (vi) to construe and  interpret  the terms of the Plan and Awards
          granted pursuant to the Plan;

<PAGE>

               (vii) to  prescribe,  amend and  rescind  rules  and  regulations
          relating  to the Plan,  including  rules and  regulations  relating to
          sub-plans  established for the purpose of qualifying for preferred tax
          treatment under foreign tax laws;

               (viii) to modify or amend each Award  (subject to Section 11.2 of
          the  Plan),  including  the  discretionary  authority  to  extend  the
          post-termination  exercisability  period  of  Options  longer  than is
          otherwise provided for in the Plan;

               (ix)  to  allow  Award  recipients  to  satisfy  withholding  tax
          obligations  by electing to have the Company  withhold from the Shares
          to be issued upon  exercise of an Award that number of Shares having a
          Fair Market Value equal to the minimum amount required to be withheld.
          The Fair Market Value of the Shares to be withheld shall be determined
          on the date that the amount of tax to be withheld is to be determined.
          All elections by an Award  recipient to have Shares  withheld for this
          purpose  shall be made in such form and under such  conditions  as the
          Administrator may deem necessary or advisable;

               (x) to  authorize  any person to execute on behalf of the Company
          any  instrument  required  to effect the grant of an Award  previously
          granted by the Administrator;

               (xi)  to  make  all  other  determinations  deemed  necessary  or
          advisable for administering the Plan.

          (c) Effect of Administrator's Decision. The Administrator's decisions,
     determinations and interpretations  shall be final and binding on all Award
     recipients and any other holders of Awards.

     3.2 Duration, Removal, Etc. The members of the Committee shall serve at the
discretion  of the Board of Directors,  which shall have the power,  at any time
and from time to time, to remove  members from or add members to the  Committee.
Removal from the Committee may be with or without cause. Any individual  serving
as a member of the Committee  shall have the right to resign from  membership in
the Committee by at least three days' written  notice to the Board of Directors.
The Board of Directors,  and not the remaining  members of the Committee,  shall
have the power and authority to fill all vacancies on the  Committee.  The Board
of Directors  shall  promptly fill any vacancy that causes the number of members
of the  Committee to be below two or any other number that  Applicable  Laws may
require from time to time.

     3.3  Meetings  and  Actions  of  Committee.  The Board of  Directors  shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee  chairman,  the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as  chairman  until he ceases to be a member of the  Committee  or until the
Board of Directors elects a new chairman.  The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
meetings of the  Committee,  a quorum for the  transaction  of business shall be
required  and a quorum  shall be deemed  present if at least a  majority  of the
members of the  Committee  are present.  At any meeting of the  Committee,  each
member shall have one vote.  All decisions and  determinations  of the Committee
shall be made by the  majority  vote or majority  decision of all of its members
present at a meeting at which a quorum is present;  provided,  however, that any
decision or determination reduced to writing and signed by all of the members of
the  Committee  shall be as fully  effective as if it had been made at a meeting
that was duly called and held. The Committee may make any rules and  regulations
for the conduct of its business that are not inconsistent with the provisions of
the Plan, the Articles or Certificate of Incorporation  of the Corporation,  and
the by-laws of the Corporation, as the Committee may deem advisable.

<PAGE>

     3.4 Committee's Powers.  Subject to the express provisions of the Plan, the
Committee shall have the authority, in its sole and absolute discretion,  to (a)
adopt, amend, and rescind  administrative and interpretive rules and regulations
relating to the Plan;  (b) determine the Eligible  Individuals  to whom, and the
time or times at which,  Awards shall be granted;  (c)  determine  the amount of
cash and the number of shares of Stock, Stock Appreciation Rights, or Restricted
Stock  Awards,  or any  combination  thereof,  that shall be the subject of each
Award;  (d) determine the terms and  provisions of each Award  Agreement  (which
need not be identical),  including  provisions defining or otherwise relating to
(i) the term and the  period or  periods  and  extent of  exercisability  of the
Options,  (ii) the extent to which the transferability of shares of Stock issued
or  transferred  pursuant  to any  Award is  restricted,  (iii)  the  effect  of
termination  of  employment  of the Holder on the Award,  and (iv) the effect of
approved leaves of absence  (consistent  with any applicable  regulations of the
Internal  Revenue  Service);  (e) accelerate the time of  exercisability  of any
Option that has been granted;  (f) construe the respective  Award Agreements and
the Plan; (g) make determinations of the Fair Market Value of the Stock pursuant
to the Plan;  (h)  delegate  its duties  under the Plan to such agents as it may
appoint  from time to time,  provided  that the  Committee  may not delegate its
duties with  respect to making  Awards to, or  otherwise  with respect to Awards
granted  to,  Eligible  Individuals  who are  subject  to  Section  16(b) of the
Exchange Act; and (i) make all other determinations, perform all other acts, and
exercise all other powers and authority necessary or advisable for administering
the   Plan,   including   the   delegation   of  those   ministerial   acts  and
responsibilities  as the Committee deems appropriate.  The Committee may correct
any defect,  supply any omission, or reconcile any inconsistency in the Plan, in
any Award,  or in any Award  Agreement  in the manner and to the extent it deems
necessary or desirable to carry the Plan into effect, and the Committee shall be
the sole and final judge of that necessity or desirability.  The  determinations
of the  Committee  on the matters  referred to in this  Subsection  3.4 shall be
final and conclusive.


SECTION 4.  ELIGIBILITY AND PARTICIPATION

     4.1 Eligible  Individuals.  Awards may be granted pursuant to the Plan only
to persons who are Eligible Individuals at the time of the
grant thereof.

     4.2 Grant of Awards.  Subject to the express  provisions  of the Plan,  the
Committee  shall determine  which Eligible  Individuals  shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
Corporation or its  Subsidiaries and such other  considerations  as the Board of
Directors may from time to time specify.  The Committee shall also determine the
number of shares subject to each of the Awards and shall authorize and cause the
Corporation to grant Awards in accordance with those determinations.

     4.3 Date of Grant.  The date on which the  Committee  completes  all action
resolving to offer an Award to an individual, including the specification of the
number of shares of Stock to be subject to the Award, shall be the date on which
the Award covered by an Award  Agreement is granted (the "Date of Grant"),  even
though  certain terms of the Award  Agreement may not be determined at that time
and even though the Award  Agreement may not be executed  until a later time. In
no event shall a Holder gain any rights in  addition to those  specified  by the
Committee in its grant,  regardless  of the time that may pass between the grant
of the Award and the actual  execution of the Award Agreement by the Corporation
and the Holder.

     4.4 Award Agreements.  Each Award granted under the Plan shall be evidenced
by an Award  Agreement  that is executed  by the  Corporation  and the  Eligible
Individual to whom the Award is granted and  incorporating  those terms that the
Committee shall deem necessary or desirable.  More than one Award may be granted
under the Plan to the same Eligible Individual and be outstanding  concurrently.
In the  event an  Eligible  Individual  is  granted  both one or more  Incentive
Options and one or more Nonstatutory Options, those grants shall be evidenced by
separate Award  Agreements,  one for each of the Incentive Option grants and one
for each of the Nonstatutory Option grants.

<PAGE>

     4.5  Limitation  for  Incentive  Options.   Notwithstanding  any  provision
contained herein to the contrary,  (a) a person shall not be eligible to receive
an Incentive  Option unless he is an Employee of the  Corporation or a corporate
Subsidiary  (but not a  partnership  Subsidiary)  and (b) a person  shall not be
eligible  to receive an  Incentive  Option if,  immediately  before the time the
Option is  granted,  that person  owns  (within the meaning of Sections  422 and
424(d) of the Code) stock possessing more than ten percent of the total combined
voting power or value of all classes of outstanding  stock of the Corporation or
a Subsidiary.  Nevertheless,  Subsection  4.5(b) shall not apply if, at the time
the Incentive  Option is granted,  the Exercise Price of the Incentive Option is
at least one hundred ten percent of Fair Market Value and the  Incentive  Option
is not, by its terms,  exercisable  after the  expiration of five years from the
Date of Grant.  An Employee shall not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the  Company or between  the  Company,  its Parent,  any  Subsidiary,  or any
successor.  For purposes of Incentive  Stock  Options,  no such leave may exceed
ninety days, unless  reemployment upon expiration of such leave is guaranteed by
statute or  contract.  If  reemployment  upon  expiration  of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive  Stock  Option  held by the  Optionee  shall cease to be treated as an
Incentive  Stock Option and shall be treated for tax purposes as a  Nonstatutory
Stock Option.  Neither  service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.

     4.6 No Right to Award. The adoption of the Plan shall not be deemed to give
any Person a right to be granted an Award.

     4.7  Internal  Revenue  Code  Section  162(m)  Limitations.  The  following
limitations shall apply to grants of Options to Employees:

          (a)  No  Employee  shall  be  granted,  in  any  fiscal  year  of  the
     Corporation, Options covering more than 337,500 Shares.

          (b) In connection with his or her initial employment,  an Employee may
     be granted Options to purchase up to 1,012,500 Shares which shall not count
     against the limit set forth in Subsection 4.7(a) above.

          (c) The foregoing  limitations  shall be adjusted  proportionately  in
     connection with any change in the Corporation's capitalization as described
     in Subsections 9.1(a) and (b).

          (d)  If an  Option  is  canceled  in  the  same  fiscal  year  of  the
     Corporation  in which  it was  granted  (other  than in  connection  with a
     transaction  described in Section 9), the  canceled  Option will be counted
     against the limit set forth in Subsection 4.7(a). For this purpose,  if the
     exercise price of an Option is reduced,  the transaction will be treated as
     a cancellation of the Option and the grant of a new Option.


SECTION 5.  TERMS AND CONDITIONS OF OPTIONS

     All Options granted under the Plan shall comply with, and the related Award
Agreements  shall be  deemed  to  include  and be  subject  to,  the  terms  and
conditions  set forth in this  Section 5 (to the extent each term and  condition
applies to the form of Option) and also to the terms and conditions set forth in
Sections 9 and 10; provided,  however, that the Committee may authorize an Award
Agreement  that expressly  contains  terms and  provisions  that differ from the
terms and provisions  set forth in Subsections  9.2, 9.3, and 9.4 and any of the
terms and provisions of Section 10 (other than Subsections 10.8 and 10.9).

     5.1 Number of Shares.  Each Award Agreement shall state the total number of
shares of Stock to which it relates.

     5.2 Vesting. Each Award Agreement shall state the time or periods in which,
or the conditions upon  satisfaction of which,  the right to exercise the Option
or a portion  thereof shall vest and the number of shares of Stock for which the
right  to  exercise  the  Option  shall  vest  at each  such  time,  period,  or
fulfillment of condition;  provided,  that  one-sixtieth of the Shares initially
subject to each Option granted to a Non-Employee Director (rounded up or down to
the  nearest  share)  shall vest on the last day of each month  during the sixty
month  period  commencing  in the month  during  which such Option was  granted;
provided that the Optionee  continues to serve as a Director on such dates.  The
term of each Option granted to a Non-Employee director shall be ten years.

     5.3  Expiration  of  Options.  No  Option  shall  be  exercised  after  the
expiration  of a  period  of ten  years  commencing  on the Date of Grant of the
Option;  provided,  however,  that any  portion of a  Nonstatutory  Option  that
pursuant  to the terms of the Award  Agreement  under  which  such  Nonstatutory
Option is granted shall not become exercisable until the date which is the tenth
anniversary of the Date of Grant of such Nonstatutory  Option may be exercisable
for a  period  of 30 days  following  the  date on which  such  portion  becomes
exercisable.

<PAGE>

     5.4 Exercise Price. Each Award Agreement shall state the exercise price per
share of Stock (the  "Exercise  Price");  provided,  however,  that the exercise
price per share of Stock subject to an Option shall not be less than the greater
of (a) the par value per share of the Stock or (b) 100% of the Fair Market Value
per share of the Stock on the Date of Grant of the Option.

     5.5 Method of  Exercise.  The Option shall be  exercisable  only by written
notice of exercise (the "Exercise  Notice")  delivered to the Corporation during
the term of the  Option,  which  notice  shall (a) state the number of shares of
Stock with respect to which the Option is being exercised,  (b) be signed by the
Holder  of the  Option  or,  if the  Holder  is dead or  becomes  affected  by a
Disability,  by the  person  authorized  to  exercise  the  Option  pursuant  to
Subsections  10.2  and  10.3,  (c) be  accompanied  by the  Exercise  Price  (as
specified in the Award Agreement and under Section 5.7 hereof) for all shares of
Stock for which  the  Option is being  exercised,  and (d)  include  such  other
information,  instruments, and documents as may be required to satisfy any other
condition to exercise contained in the Award Agreement.  The Option shall not be
deemed to have been exercised  unless all of the  requirements  of the preceding
provisions of this Subsection 5.5 have been satisfied.

     5.6 Incentive Option Exercises.  Except as otherwise provided in Subsection
10.3,  during the Holder's  lifetime,  only the Holder may exercise an Incentive
Option.

     5.7 Medium and Time of Payment.  The  Exercise  Price of an Option shall be
payable in full upon the exercise of the Option (a) in cash or by an  equivalent
means acceptable to the Committee,  (b) on the Committee's  prior consent,  with
shares of Stock owned by the Holder  (including shares received upon exercise of
the Option or  restricted  shares  already held by the Holder) and having a Fair
Market  Value  at  least  equal  to the  aggregate  Exercise  Price  payable  in
connection with such exercise,  (c) by delivery of a properly  executed Exercise
Notice together with such other documentation as the Corporation and the broker,
if applicable, shall require to effect an exercise of the Option and delivery to
the Corporation of the sale or loan proceeds required to pay the Exercise Price,
or (d) by any  combination of clauses (a), (b) and (c). If the Committee  elects
to accept  shares of Stock in  payment  of all or any  portion  of the  Exercise
Price,  then (for  purposes of payment of the  Exercise  Price)  those shares of
Stock shall be deemed to have a cash value equal to their  aggregate Fair Market
Value  determined as of the date the certificate for such shares is delivered to
the Corporation. If the Committee elects to accept shares of restricted Stock in
payment of all or any portion of the  Exercise  Price,  then an equal  number of
shares issued pursuant to the exercise shall be restricted on the same terms and
for the restriction period remaining on the shares used for payment.

     5.8  Payment of Taxes.  The  Committee  may, in its  discretion,  require a
Holder to pay to the Corporation (or the Corporation's  Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation),  at the time of the exercise
of an Option or  thereafter,  the amount that the Committee  deems  necessary to
satisfy the  Corporation's or its Subsidiary's  current or future  obligation to
withhold  federal,  state, or local income or other taxes that the Holder incurs
by exercising an Option.  In connection with the exercise of an Option requiring
tax  withholding,  a Holder may (a) direct the  Corporation to withhold from the
shares of Stock to be issued to the  Holder the  number of shares  necessary  to
satisfy the Corporation's obligation to withhold taxes, that determination to be
based on the shares' Fair Market  Value as of the date of exercise;  (b) deliver
to the Corporation  sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the  Corporation's  tax  withholding
obligations,  which tax  withholding  obligation  is based on the  shares'  Fair
Market Value as of the later of the date of exercise or the date as of which the
shares of Stock issued in connection with such exercise become includible in the
income of the  Holder;  or (c) deliver  sufficient  cash to the  Corporation  to
satisfy its tax withholding  obligations.  Holders who elect to use such a stock
withholding  feature  must make the  election at the time and in the manner that
the  Committee  prescribes.  The  Committee  may, at its sole  option,  deny any
Holder's  request to satisfy  withholding  obligations  through Stock instead of
cash. In the event the Committee subsequently determines that the aggregate Fair
Market Value (as determined  above) of any shares of Stock withheld or delivered
as payment of any tax  withholding  obligation is insufficient to discharge that
tax  withholding  obligation,  then the  Holder  shall  pay to the  Corporation,
immediately upon the Committee's  request,  the amount of that deficiency in the
form of payment requested by the Committee.

<PAGE>

     5.9  Limitation  on  Aggregate  Value  of  Shares  That  May  Become  First
Exercisable  During Any Calendar  Year Under an Incentive  Option.  Except as is
otherwise  provided in  Subsection  9.3,  with respect to any  Incentive  Option
granted  under this Plan,  the  aggregate  Fair Market  Value of shares of Stock
subject to an Incentive  Option and the aggregate Fair Market Value of shares of
Stock or stock of any  Subsidiary  (or a  predecessor  of the  Corporation  or a
Subsidiary)  subject to any other  incentive stock option (within the meaning of
Section  422  of  the  Code)  of  the  Corporation  or  its  Subsidiaries  (or a
predecessor  corporation of any such corporation) that first become  purchasable
by a Holder in any calendar  year may not (with  respect to that Holder)  exceed
$100,000,  or such other amount as may be  prescribed  under  Section 422 of the
Code or  applicable  regulations  or rulings  from time to time.  As used in the
previous sentence, Fair Market Value shall be determined as of the Date of Grant
of the  Incentive  Option.  For purposes of this  Subsection  5.9,  "predecessor
corporation" means (a) a corporation that was a party to a transaction described
in Section  424(a) of the Code (or which would be so described if a substitution
or assumption under that Section had been effected) with the Corporation,  (b) a
corporation  which,  at the time the new  incentive  stock  option  (within  the
meaning  of  Section  422  of the  Code)  is  granted,  is a  Subsidiary  of the
Corporation  or a predecessor  corporation  of any such  corporations,  or (c) a
predecessor  corporation of any such  corporations.  Failure to comply with this
provision shall not impair the  enforceability  or exercisability of any Option,
but shall cause the excess  amount of shares to be  reclassified  in  accordance
with the Code.

     5.10  No  Fractional  Shares.  The  Corporation  shall  not in any  case be
required  to sell,  issue,  or deliver a  fractional  share with  respect to any
Option.  In  lieu  of the  issuance  of  any  fractional  share  of  Stock,  the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as  the  fractional  Stock)  of the  Fair  Market  Value  of a share  of  Stock
determined as of the date of the applicable Exercise Notice.

     5.11 Modification,  Extension, and Renewal of Options. Subject to the terms
and  conditions  of and  within the  limitations  of the Plan,  and any  consent
required by the last  sentence of this  Subsection  5.11,  the Committee may (a)
modify,  extend, or renew outstanding Options granted under the Plan, (b) accept
the surrender of Options  outstanding  hereunder  (to the extent not  previously
exercised)  and  authorize  the  granting  of new  Options in  substitution  for
outstanding Options (to the extent not previously exercised),  and (c) amend the
terms of an  Incentive  Option at any time to include  provisions  that have the
effect of changing the Incentive Option to a Nonstatutory Option.  Nevertheless,
without the consent of the Holder,  the Committee may not modify any outstanding
Options  so as to  specify  a higher  or lower  Exercise  Price  or  accept  the
surrender of  outstanding  Incentive  Options and  authorize the granting of new
Options in substitution therefor specifying a higher or lower Exercise Price. In
addition,  no modification  of an Option granted  hereunder  shall,  without the
consent  of the  Holder,  alter or impair any  rights or  obligations  under any
Option theretofore granted to such Holder under the Plan except, with respect to
Incentive  Options,  as may be necessary to satisfy the  requirements of Section
422 of the Code or as permitted in clause (c) of this Subsection 5.11.

     5.12 Other Agreement Provisions.  The Award Agreements authorized under the
Plan shall  contain such  provisions  in addition to those  required by the Plan
(including without  limitation  restrictions or the removal of restrictions upon
the  exercise of the Option and the  retention  or  transfer  of shares  thereby
acquired)  as the  Committee  may deem  advisable.  Each Award  Agreement  shall
identify the Option  evidenced  thereby as an Incentive  Option or  Nonstatutory
Option, as the case may be. Each Award Agreement relating to an Incentive Option
granted  hereunder  shall contain such  limitations  and  restrictions  upon the
exercise of the  Incentive  Option to which it relates as shall be necessary for
the  Incentive  Option to which such Award  Agreement  relates to  constitute an
incentive stock option, as defined in Section 422 of the Code.


SECTION 6.  STOCK APPRECIATION RIGHTS

     All Stock Appreciation Rights granted under the Plan shall comply with, and
the related Award  Agreements  shall be deemed to include and be subject to, the
terms and  conditions  set forth in this  Section 6 (to the extent each term and
condition  applies to the form of Stock  Appreciation  Right) and also the terms
and  conditions  set forth in  Sections 9 and 10;  provided,  however,  that the
Committee may authorize an Award Agreement related to a Stock Appreciation Right
that  expressly  contains  terms and  provisions  that differ from the terms and
provisions set forth in  Subsections  9.2, 9.3, and 9.4 and any of the terms and
provisions of Section 10 (other than Subsection 10.9).

     6.1 Form of Right. A Stock Appreciation Right may be granted to an Eligible
Individual (a) in connection  with an Option,  either at the time of grant or at
any time during the term of the Option, or (b) independent of an Option.

<PAGE>

     6.2 Rights Related to Options. A Stock Appreciation Right granted in tandem
with an Option shall require the Holder, upon exercise of the Stock Appreciation
Right, to surrender the related Option.  Upon such exercise,  the Optionee shall
receive payment of an amount computed pursuant to Subsection 6.2(b). The related
Option  shall then cease to be  exercisable  to the  extent  surrendered.  Stock
Appreciation  Rights  granted in tandem  with an Option  shall be subject to the
terms of the Award Agreement  governing the Option,  which shall comply with the
following provisions in addition to those applicable to Options:

          (a)  Exercise  and  Transfer.  Subject  to  Subsection  10.8,  a Stock
     Appreciation  Right  granted in tandem with an Option shall be  exercisable
     only at such time or times and only to the extent that the  related  Option
     is exercisable and shall not be transferable  except to the extent that the
     related Option is transferable.

          (b) Value of Right.  Upon the exercise of a Stock  Appreciation  Right
     granted in tandem with an Option,  the Holder  shall be entitled to receive
     payment from the Corporation of an amount determined by Multiplying:

               (i) The difference  obtained by subtracting the Exercise Price of
          a share of Stock  specified in the related Option from the Fair Market
          Value  of a share  of  Stock  on the  date of  exercise  of the  Stock
          Appreciation Right, by

               (ii) The  number of shares as to which  that  Stock  Appreciation
          Right has been exercised.

     6.3 Right Without Option. A Stock Appreciation Right granted independent of
an Option shall be  exercisable  as determined by the Committee and set forth in
the  Award  Agreement  governing  the  Stock  Appreciation  Right,  which  Award
Agreement shall comply with the following provisions:

          (a)  Number of  Shares.  Each Award  Agreement  shall  state the total
     number of shares of Stock to which the Stock Appreciation Right relates.

          (b) Vesting.  Each Award  Agreement shall state the time or periods in
     which  the right to  exercise  the  Stock  Appreciation  Right or a portion
     thereof shall vest and the number of shares of Stock for which the right to
     exercise  the  Stock  Appreciation  Right  shall  vest at each such time or
     period.

          (c) Expiration of Rights. Each Award Agreement shall state the date at
     which  the  Stock  Appreciation  Rights  shall  expire  if  not  previously
     exercised.

          (d) Value of Right.  Each Stock  Appreciation  Right shall entitle the
     Holder,  upon exercise thereof,  to receive payment of an amount determined
     by multiplying:

               (i) The difference  obtained by subtracting the Fair Market Value
          of a share of Stock  on the  Date of Grant of the  Stock  Appreciation
          Right  from the Fair  Market  Value of a share of Stock on the date of
          exercise of that Stock Appreciation Right, by

               (ii) The  number of  shares  as to which  the Stock  Appreciation
          Right has been exercised.

     6.4 Limitations on Rights.  Notwithstanding  Subsections 6.2(b) and 6.3(d),
the Committee may limit the amount payable upon exercise of a Stock Appreciation
Right.  Any such  limitation  must be  determined as of the Date of Grant and be
noted on the Award Agreement evidencing the Holder's Stock Appreciation Right.

     6.5 Payment of Rights.  Payment of the amount  determined  under Subsection
6.2(b) or 6.3(d) and Subsection  6.4 may be made, in the sole  discretion of the
Committee unless specifically provided otherwise in the Award Agreement,  solely
in whole  shares of Stock valued at Fair Market Value on the date of exercise of
the Stock  Appreciation  Right,  solely in cash, or in a combination of cash and
whole shares of Stock.  If the Committee  decides to make full payment in shares
of Stock and the amount payable results in a fractional  share,  payment for the
fractional share shall be made in cash.

<PAGE>

     6.6  Payment of Taxes.  The  Committee  may, in its  discretion,  require a
Holder to pay to the Corporation (or the Corporation's  Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation),  at the time of the exercise
of a Stock Appreciation Right or thereafter, the amount that the Committee deems
necessary to satisfy the  Corporation's  or its  Subsidiary's  current or future
obligation to withhold  federal,  state, or local income or other taxes that the
Holder incurs by exercising a Stock  Appreciation  Right. In connection with the
exercise of a Stock Appreciation  Right requiring tax withholding,  a Holder may
(a) direct the  Corporation to withhold from the shares of Stock to be issued to
the  Holder  the  number  of  shares  necessary  to  satisfy  the  Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market  Value  as of the  date  of  exercise;  (b)  deliver  to the  Corporation
sufficient  shares of Stock  (based upon the Fair Market Value as of the date of
such delivery) to satisfy the Corporation's tax withholding  obligations,  which
tax  withholding  obligation is based on the shares' Fair Market Value as of the
later of the date of exercise or the date of which the shares of Stock issued in
connection with such exercise become  includible in the income of the Holder; or
(c) deliver  sufficient  cash to the  Corporation to satisfy its tax withholding
obligations.  Holders  who elect to have Stock  withheld  pursuant to (a) or (b)
above must make the  election at the time and in the manner  that the  Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy  withholding  obligations through Stock instead of cash. In the event
the Committee  subsequently  determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax  withholding  obligation is  insufficient  to discharge that tax withholding
obligation,  then the Holder shall pay to the Corporation,  immediately upon the
Committee's  request,  the  amount  of that  deficiency  in the form of  payment
requested by the Commission.

     6.7 Other Agreement Provisions. The Award Agreements authorized relating to
Stock  Appreciation  Rights shall  contain such  provisions in addition to those
required by the Plan (including without  limitation  restrictions or the removal
of  restrictions  upon the  exercise  of the  Stock  Appreciation  Right and the
retention  or transfer of shares  thereby  acquired) as the  Committee  may deem
advisable.


SECTION 7.  RESTRICTED STOCK AWARDS

     All Restricted Stock Awards granted under the Plan shall comply with and be
subject to, and the related  Award  Agreements  shall be deemed to include,  the
terms  and  conditions  set  forth in this  Section  7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the Committee
may  authorize  an Award  Agreement  related to a  Restricted  Stock  Award that
expressly  contains  terms  and  provisions  that  differ  from  the  terms  and
provisions  set  forth  in  Subsections  9.2,  9.3,  and 9.4 and the  terms  and
provisions set forth in Section 10 (other than Subsections 10.8 and 10.9).

     7.1  Restrictions.  All shares of Restricted  Stock Awards  granted or sold
pursuant to the Plan shall be subject to the following conditions:

          (a)  Transferability.  The  shares  may not be sold,  transferred,  or
     otherwise  alienated or hypothecated  until the restrictions are removed or
     expire.

          (b)  Conditions to Removal of  Restrictions.  Conditions to removal or
     expiration  of the  restrictions  may  include,  but are not required to be
     limited to, continuing employment or service as a director, officer, or Key
     Employee or achievement of  performance  objectives  described in the Award
     Agreement.

          (c) Legend.  Each  certificate  representing  Restricted  Stock Awards
     granted  pursuant  to the  Plan  shall  bear a  legend  making  appropriate
     reference to the restrictions imposed.

          (d)  Possession.  The Committee may require the  Corporation to retain
     physical custody of the certificates  representing  Restricted Stock Awards
     during the  restriction  period and may  require the Holder of the Award to
     execute  stock  powers in blank for those  certificates  and deliver  those
     stock powers to the Corporation, or the Committee may require the Holder to
     enter into an escrow agreement providing that the certificates representing
     Restricted  Stock Awards  granted or sold pursuant to the Plan shall remain
     in the  physical  custody of an escrow  holder until all  restrictions  are
     removed or expire.

          (e) Other Conditions. The Committee may impose other conditions on any
     shares granted or sold as Restricted  Stock Awards  pursuant to the Plan as
     it may deem advisable,  including without limitation (i) restrictions under
     the Securities Act or Exchange Act, (ii) the requirements of any securities
     exchange upon which the shares or shares of the same class are then listed,
     and (iii) any state securities law applicable to the shares.

<PAGE>

     7.2 Expiration of Restrictions.  The restrictions imposed in Subsection 7.1
on  Restricted  Stock Awards shall lapse as  determined by the Committee and set
forth in the applicable  Award  Agreement,  and the  Corporation  shall promptly
deliver to the Holder of the Restricted  Stock Award a certificate  representing
the number of shares for which restrictions have lapsed, free of any restrictive
legend relating to the lapsed restrictions. Each Restricted Stock Award may have
a  different  restriction  period as  determined  by the  Committee  in its sole
discretion.  The  Committee  may, in its  discretion,  prospectively  reduce the
restriction period applicable to a particular Restricted Stock Award.

     7.3 Rights as Stockholder. Subject to the provisions of Subsections 7.1 and
10.9, the Committee may, in its discretion,  determine what rights,  if any, the
Holder shall have with respect to the  Restricted  Stock Awards granted or sold,
including  the right to vote the  shares and  receive  all  dividends  and other
distributions paid or made with respect thereto.

     7.4  Payment of Taxes.  The  Committee  may, in its  discretion,  require a
Holder to pay to the Corporation (or the Corporation's  Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation) the amount that the Committee
deems  necessary to satisfy the  Corporation's  or its  Subsidiary's  current or
future  obligation to withhold  federal,  state,  or local income or other taxes
that the Holder incurs by reason of the Restricted  Stock Award.  The Holder may
(a) direct the  Corporation to withhold from the shares of Stock to be issued to
the  Holder  the  number  of  shares  necessary  to  satisfy  the  Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date on which tax  withholding is to be made; (b) deliver
to the Corporation  sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the  Corporation's  tax  withholding
obligations,  which tax  withholding  obligation  is based on the  shares'  Fair
Market Value as of the later of the date of issuance or the date as of which the
shares of Stock issued  become  includible  in the income of the Holder;  or (c)
deliver  sufficient  cash to the  Corporation  to  satisfy  its tax  withholding
obligations.  Holders  who elect to have Stock  withheld  pursuant to (a) or (b)
above must make the  election at the time and in the manner  that the  Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy  withholding  obligations through Stock instead of cash. In the event
the Committee  subsequently  determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax  withholding  obligation is  insufficient  to discharge that tax withholding
obligation,  then the Holder shall pay to the Corporation,  immediately upon the
Committee's request, the amount of that deficiency.

     7.5 Other Agreement Provisions. The Award Agreements relating to Restricted
Stock Awards shall contain such  provisions in addition to those required by the
Plan as the Committee may deem advisable.


SECTION 8.  [Intentionally Omitted]


SECTION 9.  ADJUSTMENT PROVISIONS

     9.1  Adjustment of Awards and Authorized  Stock.  The terms of an Award and
the number of shares of Stock authorized pursuant to Subsection 2.1 for issuance
under the Plan shall be subject to  adjustment  from time to time, in accordance
with  the  following  provisions,  provided,  however,  that  the  terms of such
Subsection  2.1  already  reflect  the  adjustment  which would be required as a
result of the  five-for-one  stock  dividend  effected in January 1995 and, as a
consequence,  no  adjustment  pursuant  to this  Section  9 as a result  of such
dividend shall be required:

          (a) If at any  time,  or from  time to  time,  the  Corporation  shall
     subdivide  as a  whole  (by  reclassification,  by a  Stock  split,  by the
     issuance of a  distribution  on Stock payable in Stock,  or otherwise)  the
     number of shares of Stock then  outstanding into a greater number of shares
     of Stock,  then (i) the maximum number of shares of Stock available for the
     Plan as provided in Subsection 2.1 shall be increased proportionately,  and
     the kind of  shares or other  securities  available  for the Plan  shall be
     appropriately  adjusted,  (ii) the number of shares of Stock (or other kind
     of shares or  securities)  that may be  acquired  under any Award  shall be
     increased  proportionately,  and (iii) the price (including Exercise Price)
     for each share of Stock (or other kind of shares or securities)  subject to
     then outstanding Awards shall be reduced proportionately,  without changing
     the aggregate purchase price or value as to which outstanding Awards remain
     exercisable or subject to restrictions.

<PAGE>

          (b) If at any  time,  or from  time to  time,  the  Corporation  shall
     consolidate  as a whole  (by  reclassification,  reverse  Stock  split,  or
     otherwise)  the  number of shares of Stock then  outstanding  into a lesser
     number of shares of Stock,  then (i) the maximum  number of shares of Stock
     available  for the Plan as provided in  Subsection  2.1 shall be  decreased
     proportionately,  and the kind of shares or other securities  available for
     the Plan  shall be  appropriately  adjusted,  (ii) the  number of shares of
     Stock (or other kind of shares or  securities)  that may be acquired  under
     any  Award  shall  be  decreased  proportionately,   and  (iii)  the  price
     (including Exercise Price) for each share of Stock (or other kind of shares
     or  securities)  subject  to then  outstanding  Awards  shall be  increased
     proportionately,  without changing the aggregate purchase price or value as
     to which outstanding Awards remain exercisable or subject to restrictions.

          (c)  Whenever  the number of shares of Stock  subject  to  outstanding
     Awards and the price for each share of Stock subject to outstanding  Awards
     are  required  to be  adjusted as  provided  in this  Subsection  9.1,  the
     Committee  shall promptly  prepare a notice  setting  forth,  in reasonable
     detail, the event requiring adjustment,  the amount of the adjustment,  the
     method by which such adjustment was calculated, and the change in price and
     the  number of  shares  of  Stock,  other  securities,  cash,  or  property
     purchasable  subject to each Award after giving effect to the  adjustments.
     The Committee shall promptly give each Holder such a notice.

          (d) Adjustments under Subsections  9.1(a) and (b) shall be made by the
     Committee,  and its  determination as to what adjustments shall be made and
     the extent thereof shall be final,  binding, and conclusive.  No fractional
     interest shall be issued under the Plan on account of any such adjustments.

     9.2 Changes in Control.  Upon the occurrence of a Change in Control (a) all
outstanding Stock Appreciation Rights and Options shall immediately become fully
vested and exercisable in full, including that portion of any Stock Appreciation
Right or Option that  pursuant  to the terms and  provisions  of the  applicable
Award  Agreement had not yet become  exercisable  (the total number of shares of
Stock as to which a Stock  Appreciation  Right or Option is exercisable upon the
occurrence of a change in Control is referred to herein as the "Total  Shares");
and (b) the restriction  period of any Restricted Stock Award shall  immediately
be accelerated and the restrictions  shall expire. Any Option Agreement may (but
need not) provide that,  the Holder of such Option shall  immediately be granted
corresponding  Stock  Appreciation  Rights  upon the  occurrence  of a Change in
Control. If a Change in Control involves a Restructuring or occurs in connection
with a series of related  transactions  involving  a  Restructuring  and if such
Restructuring  is in the  form of a  Non-Surviving  Event  and as a part of such
Restructuring  shares of Stock,  other  securities,  cash, or property  shall be
issuable or deliverable in exchange for Stock, then the Holder of an Award shall
be entitled to purchase or receive (in lieu of the Total  Shares that the Holder
would otherwise be entitled to purchase or receive), as appropriate for the form
of Award, the number of shares of Stock, other securities,  cash, or property to
which that number of Total Shares would have been  entitled in  connection  with
such  Restructuring  (and, for Options,  at an aggregate exercise price equal to
the  Exercise  Price that would have been payable if that number of Total Shares
had  been  purchased  on the  exercise  of the  Option  immediately  before  the
consummation of the Restructuring).  Nothing in this Subsection 9.2 shall impose
on a Holder the obligation to exercise any Award immediately  before or upon the
Change of Control,  or cause  Holder to forfeit the right to exercise  the Award
during the  remainder of the original  term of the Award  because of a Change in
Control.

     9.3 Restructuring  Without Change in Control.  In the event a Restructuring
shall occur at any time while there is any outstanding  Award hereunder and that
Restructuring  does not occur in connection with a Change in Control or a series
of related transactions involving a Change in Control, then:

          (a)  no  outstanding   Option  or  Stock   Appreciation   Right  shall
     immediately  become fully vested and  exercisable in full merely because of
     the occurrence of the Restructuring;

          (b)  no  Holder  of  an  Option   shall   automatically   be   granted
     corresponding Stock Appreciation Rights;

          (c) the  restriction  period of any  Restricted  Stock Award shall not
     immediately be accelerated  and the  restrictions  expire merely because of
     the occurrence of the Restructuring; and

          (d) at the option of the  Committee,  the Committee may (but shall not
     be  required  to)  cause  the  Corporation  to take  any one or more of the
     following actions:

<PAGE>

               (i)  accelerate  in whole or in part the time of the  vesting and
          exercisability   of  any  one  or  more  of  the   outstanding   Stock
          Appreciation  Rights and  Options so as to  provide  that those  Stock
          Appreciation Rights and Options shall be exercisable before,  upon, or
          after the consummation of the Restructuring;

               (ii)  grant  each  Holder  of  an  Option   corresponding   Stock
          Appreciation Rights;

               (iii)  accelerate  in whole or in part the  expiration of some or
          all of the  restrictions  on any Restricted  Stock Award;  

               (iv)  if the  Restructuring  is in the  form  of a  Non-Surviving
          Event,  cause the  surviving  entity to assume in whole or in part any
          one or more of the  outstanding  Awards upon such terms and provisions
          as the Committee deems desirable; or

               (v) redeem in whole or in part any one or more of the outstanding
          Awards (whether or not then  exercisable) in  consideration  of a cash
          payment,   as  such  payment  may  be  reduced  for  tax   withholding
          obligations  as  contemplated  in  Subsections  5.8,  6.6,  or 7.4, as
          applicable, in an amount equal to:

                    (A) for Options  and Stock  Appreciation  Rights  granted in
               connection with Options, the excess of (1) the Fair Market Value,
               determined as of the date immediately  preceding the consummation
               of the Restructuring,  of the aggregate number of shares of Stock
               subject to the Award and as to which the Award is being  redeemed
               over (2) the Exercise Price for that number of shares of Stock;

                    (B) for Stock Appreciation  Rights not granted in connection
               with  an  Option,  the  excess  of (1)  the  Fair  Market  Value,
               determined as of the date immediately  preceding the consummation
               of the Restructuring,  of the aggregate number of shares of Stock
               subject to the Award and as to which the Award is being  redeemed
               over (2) the Fair Market  Value of that number of shares of Stock
               on the Date of Grant; and

                    (C) for  Restricted  Stock  Awards,  the Fair Market  Value,
               determined as of the date immediately  preceding the consummation
               of the Restructuring,  of the aggregate number of shares of Stock
               subject to the Award and as to which the Award is being redeemed.

     The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Subsection 9.3. In the event of any election
or action taken by the Corporation pursuant to this Subsection 9.3 that requires
the amendment or  cancellation of any Award Agreement as may be specified in any
notice to the Holder  thereof,  that Holder  shall  promptly  deliver that Award
Agreement to the  Corporation in order for that amendment or  cancellation to be
implemented by the Corporation  and the Committee.  The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence  shall not in any manner affect the validity or  enforceability  of any
action taken by the  Corporation  and the Committee  under this  Subsection 9.3,
including  without  limitation any redemption of an Award as of the consummation
of a Restructuring.  Any cash payment to be made by the Corporation  pursuant to
this Subsection 9.3 in connection with the redemption of any outstanding  Awards
shall  be  paid  to the  Holder  thereof  currently  with  the  delivery  to the
Corporation of the Award  Agreement  evidencing that Award;  provided,  however,
that any  such  redemption  shall be  effective  upon  the  consummation  of the
Restructuring notwithstanding that the payment of the redemption price may occur
subsequent to the consummation. If all or any portion of an outstanding Award is
to be exercised or accelerated upon or after the consummation of a Restructuring
that does not occur in connection with a Change in Control and is in the form of
a  Non-Surviving  Event,  and as a part of that  Restructuring  shares of stock,
other securities, cash, or property shall be issuable or deliverable in exchange
for Stock, then the Holder of the Award shall thereafter be entitled to purchase
or  receive  (in lieu of the  number of shares of Stock  that the  Holder  would
otherwise  be entitled  to  purchase or receive)  the number of shares of Stock,
other  securities,  cash,  or  property  to which such number of shares of Stock
would have been entitled in connection with the Restructuring (and, for Options,
upon payment of the aggregate  exercise  price equal to the Exercise  Price that
would have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the Restructuring)
and  such  Award  shall be  subject  to  adjustments  that  shall  be as  nearly
equivalent as may be practical to the  adjustments  provided for in this Section
9.

     9.4 Notice of  Restructuring.  The  Corporation  shall  attempt to keep all
Holders  informed  with  respect  to  any  Restructuring  or  of  any  potential
Restructuring  to the  same  extent  that  the  Corporation's  stockholders  are
informed by the Corporation of any such event or potential event.


<PAGE>

SECTION 10.  ADDITIONAL PROVISIONS

     10.1 Termination of Status. If a Holder's employment, Non-Employee Director
or consulting  relationship  with the Corporation or any of its  Subsidiaries is
terminated  for any  reason  other  than  (a)  that  Holder's  death or (b) that
Holder's Disability  (hereafter  defined),  then any and all Awards held by such
Holder as of the date of the  termination  that are not yet  exercisable (or for
which restrictions have not lapsed) shall become null and void as of the date of
such termination;  provided,  however,  that the portion, if any, of such Awards
that are  exercisable as of the date of termination  shall be exercisable  for a
period of the  lesser of (a) the  remainder  of the term of the Award or (b) the
date  which is set forth in the Award  (but in no event  more than 90 days after
the date of termination with respect to any Incentive Option). Any portion of an
Award not exercised  upon the  expiration of the lesser of the period  specified
above shall be null and void unless the Holder dies during such period, in which
case the provisions of Subsection 10.2 shall govern.  For purposes of this Plan,
a Holder's employment,  Non-Employee  Director or consulting  relationship shall
not be deemed  terminated  as a result of a change in the  Holder's  status from
that of employee,  Non-Employee  Director or  consultant to that of any other of
such  relationships  with the  Corporation or any of its  Subsidiaries,  and any
Awards  outstanding  at the time of any such change of status shall  continue to
remain in full force and effect.

     10.2  Death.  Upon the death of a Holder,  any and all  Awards  held by the
Holder that are not yet exercisable (or for which  restrictions have not lapsed)
as of the date of the Holder's  death shall become  exercisable  in full and any
restrictions shall immediately lapse as of the date of death; provided, however,
that the Awards held by the Holder as of the date of death shall be  exercisable
by that Holder's legal  representatives,  heirs, legatees, or distributees for a
period of 6 months or such  longer  period as  required  by any  Applicable  Law
following the date of the Holder's death.  Any portion of an Award not exercised
upon the  expiration of such period shall be null and void.  Except as expressly
provided in this Subsection 10.2, no Award held by a Holder shall be exercisable
after the death of that Holder.

     10.3  Disability.  If  a  Holder's  employment,  Non-Employee  Director  or
consulting relationship is terminated by reason of the Holder's Disability, then
the  portion,  if  any,  of any  and  all  Awards  held  by the  Holder  not yet
exercisable (or for which  restrictions  have not lapsed) as of the date of that
termination for Disability shall become exercisable in full and any restrictions
shall immediately lapse as of the date of termination;  provided,  however, that
the  Awards  held by the  Holder  as of the  date of that  termination  shall be
exercisable by the Holder, his guardian or his legal representative for a period
of 6 months or such longer  period as required by any  Applicable  Law following
the date of such  termination.  Any portion of an Award not  exercised  upon the
expiration  of such period  shall be null and void unless the Holder dies during
such period,  in which event the  provisions  of  Subsection  10.2 shall govern.
"Disability" shall have the meaning given it in the employment  agreement of the
Holder;  provided,  however,  that if that Holder has no  employment  agreement,
"Disability"  shall mean,  as  determined  by the Board of Directors in the sole
discretion  exercised  in good faith of the Board of  Directors,  a physical  or
mental  impairment  of  sufficient  severity that either the Holder is unable to
continue  performing  the duties he  performed  before  such  impairment  or the
Holder's  condition  entitles him to disability  benefits under any insurance or
employee benefit plan of the Corporation or its Subsidiaries and that impairment
or condition is cited by the  Corporation  as the reason for  termination of the
Holder's employment, Non-Employee Director or consulting relationship.

     10.4 Leave of Absence.  With respect to an Award,  a Holder shall not cease
to be an  Employee  in the case of (i) any  leave  of  absence  approved  by the
Company or (ii)  transfers  between  locations  of the  Company  or between  the
Company, its Parent, any Subsidiary,  or any successor,  for any or all purposes
of the Plan and the Award Agreement of such Holder.

     10.5  Transferability  of  Awards.  In  addition  to such  other  terms and
conditions  as may  be  included  in a  particular  Award  Agreement,  an  Award
requiring  exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative.  An Award requiring
exercise shall not be transferable other than by will or the laws of descent and
distribution.

     10.6  Forfeiture and  Restrictions  on Transfer.  Each Award  Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired  pursuant to an Award or otherwise and may also provide for those
restrictions on the  transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable.  The conditions giving rise to forfeiture may include,
but need not be limited to, the requirement  that the Holder render  substantial
services to the Corporation or its  Subsidiaries for a specified period of time.
The  restrictions on  transferability  may include,  but need not be limited to,
options and rights of first refusal in favor of the Corporation and stockholders
of the Corporation  other than the Holder of such shares of Stock who is a party
to the particular Award Agreement or a subsequent  holder of the shares of Stock
who is bound by that Award Agreement.

<PAGE>

     10.7 Delivery of  Certificates  of Stock.  Subject to Subsection  10.8, the
Corporation  shall  promptly  issue and deliver a certificate  representing  the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation  receives an Exercise  Notice and upon receipt by the Corporation of
the Exercise  Price and any tax  withholding  as may be  requested,  (b) a Stock
Appreciation Right has been exercised (to the extent the Committee determines to
pay such Stock Appreciation Right in shares of Stock pursuant to Subsection 6.5)
and upon receipt by the  Corporation of any tax withholding as may be requested,
and (c)  restrictions  have lapsed with respect to a Restricted  Stock Award and
upon receipt by the Corporation of any tax withholding as may be requested.  The
value of the shares of Stock or cash transferable  because of an Award under the
Plan shall not bear any interest owing to the passage of time,  except as may be
otherwise  provided  in an Award  Agreement.  If a Holder is entitled to receive
certificates  representing  Stock received for more than one form of Award under
the Plan,  separate Stock certificates shall be issued with respect to Incentive
Options and Nonstatutory Options.

     10.8  Conditions  to  Delivery  of  Stock.  Nothing  herein or in any Award
granted  hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance  would,  in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or  superseding  statute or statutes,  any other  applicable  statute or
regulation,  or the rules of any  applicable  securities  exchange or securities
association,  as then in  effect.  At the time of any  exercise  of an Option or
Stock  Appreciation  Right,  or at the time of any grant of a  Restricted  Stock
Award,  the  Corporation  may, as a condition  precedent to the exercise of such
Option or Stock  Appreciation  Right or vesting of any  Restricted  Stock Award,
require  from the Holder of the Award (or in the event of his  death,  his legal
representatives, heirs, legatees, or distributees) such written representations,
if any,  concerning  the  Holder's  intentions  with regard to the  retention or
disposition of the shares of Stock being acquired pursuant to the Award and such
written  covenants and agreements,  if any, as to the manner of disposal of such
shares as, in the opinion of counsel to the  Corporation,  may be  necessary  to
ensure  that any  disposition  by that  Holder (or in the event of the  Holder's
death, his legal  representatives,  heirs,  legatees,  or distributees) will not
involve a violation of the Securities Act or any similar or superseding  statute
or statutes, any other applicable state or federal statute or regulation, or any
rule of any applicable securities exchange or securities association, as then in
effect.

      10.9  [Intentionally Omitted]

     10.10 Securities Act Legend. Certificates for shares of Stock, when issued,
may have the following  legend,  or statements of other applicable  restrictions
(including,  without limitation,  restrictions required under any Federal, state
or foreign law), endorsed thereon and may not be immediately transferable:

     THE  SHARES  OF  STOCK  REPRESENTED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
     REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  OR ANY STATE
     SECURITIES  LAWS.  THE SHARES MAY NOT BE OFFERED FOR SALE,  SOLD,  PLEDGED,
     TRANSFERRED,  OR  OTHERWISE  DISPOSED OF UNTIL THE HOLDER  HEREOF  PROVIDES
     EVIDENCE  SATISFACTORY  TO THE  ISSUER  (WHICH,  IN THE  DISCRETION  OF THE
     ISSUER, MAY INCLUDE AN OPINION OF COUNSEL  SATISFACTORY TO THE ISSUER) THAT
     SUCH OFFER, SALE, PLEDGE,  TRANSFER,  OR OTHER DISPOSITION WILL NOT VIOLATE
     APPLICABLE FEDERAL OR STATE LAWS.

This legend  shall not be  required  for shares of Stock  issued  pursuant to an
effective registration statement under the Securities Act.

     10.11 Legend for Restrictions on Transfer.  Each  certificate  representing
shares issued to a Holder  pursuant to an Award granted under the Plan shall, if
such shares are subject to any transfer restriction,  including a right of first
refusal,  provided for under this Plan or an Award Agreement, bear a legend that
complies with applicable law with respect to the restrictions on transferability
contained in this Subsection 10.11, such as:

     THE  SHARES  OF  STOCK  REPRESENTED  BY THIS  CERTIFICATE  ARE  SUBJECT  TO
     RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT ENTITLED
     "NATIONAL  INSTRUMENTS  CORPORATION  1994  INCENTIVE  PLAN" AS  ADOPTED  BY
     NATIONAL INSTRUMENTS CORPORATION (THE "CORPORATION"),  ON MAY 10, 1994, AND
     AN AGREEMENT  THEREUNDER  BETWEEN THE  CORPORATION  AND THE INITIAL  HOLDER
     THEREOF DATED ________________,  199_, AND MAY NOT BE TRANSFERRED, SOLD, OR
     OTHERWISE  DISPOSED OF EXCEPT AS THEREIN  PROVIDED.  THE  CORPORATION  WILL
     FURNISH A COPY OF SUCH  INSTRUMENT  AND  AGREEMENT TO THE RECORD  HOLDER OF
     THIS  CERTIFICATE  WITHOUT  CHARGE ON  REQUEST  TO THE  CORPORATION  AT ITS
     PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.

<PAGE>

     10.12  Rights  as  a  Stockholder.  A  Holder  shall  have  no  right  as a
stockholder  with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends  (ordinary  or  extraordinary,  whether in cash or other  property) or
distributions  or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof. Nevertheless,
dividends,  dividend  equivalent rights and voting rights may be extended to and
made part of any Award  denominated in Stock or units of Stock,  subject to such
terms, conditions and restrictions as the Committee may establish. The Committee
may also  establish  rules and  procedures  for the  crediting  of  interest  on
deferred cash payments and dividend equivalents for deferred payment denominated
in Stock or units of Stock.

     10.13 Furnish Information. Each Holder shall furnish to the Corporation all
information  requested  by the  Corporation  to  enable  it to  comply  with any
reporting  or other  requirement  imposed upon the  Corporation  by or under any
applicable statute or regulation.

     10.14  Obligation  to Exercise.  The granting of an Award  hereunder  shall
impose no obligation upon the Holder to exercise the same or any part thereof.

     10.15 Adjustments to Awards.  Subject to the general  limitations set forth
in Sections 5, 6, and 9, the Committee  may make any  adjustment in the Exercise
Price of, the number of shares subject to, or the terms of a Nonstatutory Option
or Stock Appreciation Right by canceling an outstanding  Nonstatutory  Option or
Stock  Appreciation  Right  and  regranting  a  Nonstatutory   Option  or  Stock
Appreciation Right. Such adjustment shall be made by amending,  substituting, or
regranting an outstanding  Nonstatutory Option or Stock Appreciation Right. Such
amendment,  substitution,  or regrant  may result in terms and  conditions  that
differ from the terms and  conditions  of the  original  Nonstatutory  Option or
Stock Appreciation  Right. The Committee may not, however,  impair the rights of
any Holder of  previously  granted  Nonstatutory  Options or Stock  Appreciation
Rights without that Holder's  consent.  If such action is effected by amendment,
such amendment shall be deemed  effective as of the Date of Grant of the amended
Award.

     10.16 Remedies.  The Corporation shall be entitled to recover from a Holder
reasonable  attorneys'  fees incurred in connection  with the enforcement of the
terms and provisions of the Plan and any Award Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.

     10.17 Information  Confidential.  As partial consideration for the granting
of each Award  hereunder,  the Holder shall agree with the  Corporation  that he
will keep confidential all information and knowledge that he has relating to the
manner and amount of his participation in the Plan; provided, however, that such
information  may be disclosed as required by law and may be given in  confidence
to the Holder's spouse, tax or financial advisors, or to a financial institution
to the extent that such  information is necessary to secure a loan. In the event
any breach of this promise  comes to the  attention of the  Committee,  it shall
take into  consideration  that breach in  determining  whether to recommend  the
grant of any future Award to that  Holder,  as a factor  mitigating  against the
advisability of granting any such future Award to that Person.

     10.18  Consideration.  No  Option  or  Stock  Appreciation  Right  shall be
exercisable  and no restriction  on any Restricted  Stock Award shall lapse with
respect to a Holder unless and until the Holder  thereof shall have paid cash or
property  to,  or  performed  services  for,  the  Corporation  or  any  of  its
Subsidiaries  that the  Committee  believes is equal to or greater in value than
the par value of the Stock subject to such Award.


SECTION 11.  DURATION AND AMENDMENT OF PLAN

     11.1  Duration.  No Awards may be granted  hereunder  after the date of the
Corporation's  annual stockholders meeting to be held in 2005, but no later than
December 31, 2005.

     11.2  Amendment.  The Board of Directors may,  insofar as permitted by law,
with  respect  to any  shares  which,  at the time,  are not  subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect  whatsoever
and may amend any provision of the Plan or any Award  Agreement to make the Plan
or the Award Agreement,  or both,  comply with Section 16(b) of the Exchange Act
and the exemptions from that Section in the regulations thereunder. The Board of
Directors may also amend, modify, suspend, or terminate the Plan for the purpose
of meeting or addressing any changes in other legal  requirements  applicable to
the Corporation or the Plan or for any other purpose  permitted by law. The Plan
may not be  amended  without  the  consent of the  holders of a majority  of the
shares of Stock then outstanding to (a) increase materially the aggregate number
of shares of Stock that may be issued  under the Plan  (except  for  adjustments
pursuant to Section 9 hereof),  (b) increase materially the benefits accruing to
Eligible  Individuals  under the Plan, or (c) modify materially the requirements
about eligibility for participation in the Plan;  provided,  however,  that such
amendments may be made without the consent of stockholders of the Corporation if
changes occur in law or other legal requirements that would permit such changes.


<PAGE>

SECTION 12.  GENERAL

     12.1  Application of Funds.  The proceeds  received by the Corporation from
the sale of shares  pursuant  to Awards  may be used for any  general  corporate
purpose.

     12.2 Right of the  Corporation and  Subsidiaries  to Terminate  Employment.
Nothing contained in the Plan, or in any Award Agreement,  shall confer upon any
Holder the right to continue in the employ of the  Corporation or any Subsidiary
or interfere in any way with the rights of the  Corporation or any Subsidiary to
terminate the Holder's employment at any time.

     12.3 No Liability for Good Faith Determinations. Neither the members of the
Board of Directors nor any member of the Committee  shall be liable for any act,
omission or  determination  taken or made in good faith with respect to the Plan
or any Award  granted  under it; and members of the Board of  Directors  and the
Committee  shall  be  entitled  to  indemnification  and  reimbursement  by  the
Corporation  in respect  of any  claim,  loss,  damage,  or  expense  (including
attorneys'  fees,  the costs of settling any suit,  provided such  settlement is
approved by independent  legal counsel selected by the Corporation,  and amounts
paid in satisfaction of a judgment,  except a judgment based on a finding of bad
faith)  arising  therefrom  to the full  extent  permitted  by law and under any
directors' and officers'  liability or similar insurance  coverage that may from
time to time be in effect.  This right to  indemnification  shall be in addition
to, and not a limitation on, any other indemnification  rights any member of the
Board of Directors or the Committee may have.

     12.4  Other  Benefits.  Participation  in the Plan shall not  preclude  the
Holder  from  eligibility  in any  other  stock  or  stock  option  plan  of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing   retirement,   bonus,  or  other  extra  compensation  plans  that  the
Corporation or any Subsidiary  has adopted,  or may, at any time,  adopt for the
benefit  of its  Employees.  Neither  the  adoption  of the Plan by the Board of
Directors nor the submission of the Plan to the  stockholders of the Corporation
for approval shall be construed as creating any  limitations on the power of the
Board of Directors  to adopt such other  incentive  arrangements  as it may deem
desirable,  including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise  than under the Plan and such  arrangements
may be either generally applicable or applicable only in specific cases.

     12.5 Exclusion From Pension and Profit-Sharing Compensation.  By acceptance
of an Award (regardless of form), as applicable,  each Holder shall be deemed to
have agreed that the Award is special  incentive  compensation  that will not be
taken  into  account  in  any  manner  as  salary,  compensation,  or  bonus  in
determining  the amount of any payment under any pension,  retirement,  or other
employee benefit plan of the Corporation or any Subsidiary,  unless any pension,
retirement,  or other  employee  benefit plan of the  Corporation  or Subsidiary
expressly  provides  that such Award  shall be so  considered  for  purposes  of
determining  the amount of any payment  under any such plan.  In addition,  each
beneficiary  of a deceased  Holder shall be deemed to have agreed that the Award
will not affect the amount of any life insurance  coverage,  if any, provided by
the Corporation or a Subsidiary on the life of the Holder that is payable to the
beneficiary under any life insurance plan covering  employees of the Corporation
or any Subsidiary.

     12.6  Execution  of  Receipts  and  Releases.  Any  payment  of cash or any
issuance  or  transfer  of  shares  of  Stock  to the  Holder,  or to his  legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof,  shall, to the extent thereof,  be in full satisfaction of all claims of
such  persons   hereunder.   The  Committee   may  require  any  Holder,   legal
representative,  heir, legatee, or distributee, as a condition precedent to such
payment,  to execute a release  and  receipt  therefor  in such form as it shall
determine.

     12.7  Unfunded  Plan.  Insofar as it provides for Awards of cash and Stock,
the Plan shall be unfunded.  Although  bookkeeping  accounts may be  established
with respect to Holders who are entitled to cash, Stock, or rights thereto under
the Plan, any such accounts  shall be used merely as a bookkeeping  convenience.
The  Corporation  shall not be required to segregate  any assets that may at any
time be represented by cash,  Stock,  or rights  thereto,  nor shall the Plan be
construed as providing for such  segregation,  nor shall the Corporation nor the
Board of  Directors  nor the  Committee  be deemed to be a trustee  of any cash,
Stock,  or rights  thereto to be granted  under the Plan.  Any  liability of the
Corporation  to any Holder  with  respect to a grant of cash,  Stock,  or rights
thereto  under the Plan shall be based solely upon any  contractual  obligations
that may be created by the Plan and any Award  Agreement;  no such obligation of
the Corporation shall be deemed to be secured by any pledge or other encumbrance
on any property of the  Corporation.  Neither the  Corporation  nor the Board of
Directors nor the  Committee  shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.

<PAGE>

     12.8 No Guarantee of Interests.  Neither the Committee nor the  Corporation
guarantees the Stock of the Corporation from loss or depreciation.

     12.9 Payment of  Expenses.  All  expenses  incident to the  administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages,  fees,
expenses,  and costs  arising out of any  actions  taken by the  Corporation  to
enforce its right to purchase Stock under this Plan.

     12.10 Corporation  Records.  Records of the Corporation or its Subsidiaries
regarding the Holder's  period of employment,  termination of employment and the
reason therefor,  leaves of absence,  re-employment,  and other matters shall be
conclusive for all purposes hereunder,  unless determined by the Committee to be
incorrect.

     12.11 Information. The Corporation and its Subsidiaries shall, upon request
or as may be specifically  required hereunder,  furnish or cause to be furnished
all of the  information or  documentation  which is necessary or required by the
Committee to perform its duties and functions under the Plan.

     12.12 No Liability of Corporation. The Corporation assumes no obligation or
responsibility to the Holder or his legal  representatives,  heirs, legatees, or
distributees for any act of, or failure to act on the part of, the Committee.

     12.13 Corporation  Action.  Any action required of the Corporation shall be
by  resolution  of its Board of  Directors or by a person  authorized  to act by
resolution of the Board of Directors.

     12.14  Severability.  In the event that any  provision of this Plan, or the
application  hereof  to any  Person  or  circumstance,  is held  by a  court  of
competent  jurisdiction to be invalid,  illegal, or unenforceable in any respect
under present or future laws  effective  during the  effective  term of any such
provision,  such invalid,  illegal,  or  unenforceable  provision shall be fully
severable;  and this  Plan  shall  then be  construed  and  enforced  as if such
invalid,  illegal,  or  unenforceable  provision had not been  contained in this
Plan;  and the remaining  provisions of this Plan shall remain in full force and
effect and shall not be  affected  by the  illegal,  invalid,  or  unenforceable
provision or by its severance from this Plan. Furthermore,  in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Plan a provision as similar in terms to such  illegal,  invalid,
or  unenforceable  provision  as  may  be  possible  and be  legal,  valid,  and
enforceable.  If any of the terms or  provisions  of this Plan conflict with the
requirements  of Section 422 of the Code (with  respect to  Incentive  Options),
then those  conflicting  terms or provisions shall be deemed  inoperative to the
extent they so conflict with the requirements of Section 422 of the Code and, in
lieu of such conflicting  provision,  there shall be added automatically as part
of this Plan a provision  as similar in terms to such  conflicting  provision as
may be possible and not  conflict  with the  requirements  of Section 422 of the
Code.  With  respect to  Incentive  Options,  if this Plan does not  contain any
provision  required to be included  herein under  Section 422 of the Code,  that
provision  shall be deemed to be  incorporated  herein  with the same  force and
effect  as if that  provision  had  been  set out at  length  herein;  provided,
however,  that,  to the  extent  any Option  that is  intended  to qualify as an
Incentive Option cannot so qualify, that Option (to that extent) shall be deemed
a Nonstatutory Option for all purposes of the Plan.

     12.15 Notices. Whenever any notice is required or permitted hereunder, such
notice must be in writing and  personally  delivered or sent by mail. Any notice
required or permitted to be delivered  hereunder shall be deemed to be delivered
on the date on which it is actually received by the Corporation addressed to the
attention of the Corporate Secretary at the Corporation's office as specified in
the applicable Award Agreement.  The Corporation or a Holder may change,  at any
time and from time to time, by written notice to the other, the address which it
or  he  had  previously  specified  for  receiving  notices.  Until  changed  in
accordance  herewith,  the  Corporation and each Holder shall specify as its and
his address for receiving  notices the address set forth in the Award  Agreement
pertaining to the shares to which such notice  relates.  Any person  entitled to
notice hereunder may waive such notice.

<PAGE>

     12.16  Successors.  The Plan shall be binding  upon the  Holder,  his legal
representatives,  heirs, legatees, and distributees,  upon the Corporation,  its
successors and assigns and upon the Committee and its successors.

     12.17  Headings.  The titles and headings of Sections and  Subsections  are
included for  convenience  of  reference  only and are not to be  considered  in
construction of the provisions hereof.

     12.18  Governing Law. All questions  arising with respect to the provisions
of the Plan  shall be  determined  by  application  of the laws of the  State of
Delaware,  without  giving  effect to any  conflict of law  provisions  thereof,
except to the extent Delaware law is preempted by federal law. Questions arising
with  respect  to the  provisions  of an Award  Agreement  that are  matters  of
contract  law shall be governed by the laws of the state  specified in the Award
Agreement,  except to the extent that Delaware  corporate law conflicts with the
contract law of such state,  in which event Delaware  corporate law shall govern
irrespective  of any conflict of law laws. The obligation of the  Corporation to
sell and deliver  Stock  hereunder is subject to applicable  federal,  state and
foreign  laws and to the  approval  of any  governmental  authority  required in
connection with the authorization, issuance, sale, or delivery of such Stock.

     12.19 Word Usage.  Words used in the masculine  shall apply to the feminine
where  applicable,  and wherever the context of this Plan  dictates,  the plural
shall be read as the singular and the singular as the plural.



                                                                    EXHIBIT 31.1


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, James Truchard, certify that:

1.   I  have  reviewed  this  report  on  Form  10-Q  of  National   Instruments
     Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure
  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     (b)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a)  All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: August 5, 2004
                                /s/ James Truchard
                                    James Truchard
                                    Chief Executive Officer




                                                                    EXHIBIT 31.2


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alex Davern, certify that:

1.   I  have  reviewed  this  report  on  Form  10-Q  of  National   Instruments
     Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that
  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     (b)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a)  All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: August 5, 2004
                                /s/ Alex Davern
                                    Alex Davern
                                    Chief Financial Officer




                                                                    EXHIBIT 32.1



      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, James  Truchard,  certify,  pursuant to 18 U.S.C.  Section  1350,  as adopted
pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002,  that the Quarterly
Report of National  Instruments  Corporation on Form 10-Q for the fiscal quarter
ended June 30, 2004 fully  complies  with the  requirements  of Section 13(a) or
15(d) of the Securities  Exchange Act of 1934 and that information  contained in
such Form 10-Q fairly presents in all material respects the financial  condition
and results of operations of National Instruments Corporation.



                                                 By:  /s/ James Truchard
                                               Name:  James Truchard
                                              Title:  Chief Executive Officer

I, Alex Davern, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the  Sarbanes-Oxley  Act of 2002, that the Quarterly Report of
National Instruments  Corporation on Form 10-Q for the fiscal quarter ended June
30, 2004 fully complies with the  requirements  of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Form 10-Q
fairly presents in all material respects the financial
  condition and results of
operations of National Instruments Corporation.



                                                By:  /s/ Alex Davern
                                              Name:  Alex Davern
                                             Title:  Chief Financial Officer