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 30,1996 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                        (I.R.S.  Employer
of  incorporation or organization)                  Identification Number)

6504 Bridge Point Parkway
     Austin, Texas                                        78730
     -------------                                        -----
(address   of   principal                               (zip code)
executive  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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

            Class                               Outstanding at July 26, 1996
            -----                               ----------------------------
Common Stock - $0.01 par value                          21,589,483




<PAGE>

                        NATIONAL INSTRUMENTS CORPORATION


                                      INDEX

                                                               Page No


PART I. FINANCIAL INFORMATION


Item 1 Financial Statements:

      Consolidated Balance Sheets
      June 30, 1996 (unaudited) and December 31, 1995...............3

      Consolidated Statements of Income (unaudited)
      Three months and six months ended June 30, 1996 and 1995......4

      Consolidated Statements of Cash Flows (unaudited)
      Six months ended June 30, 1996 and 1995 ......................5

      Consolidated Statements of Stockholders' Equity (unaudited)
      Six months ended June 30, 1996 ...............................6

      Notes to Consolidated Financial Statements....................7


Item 2 Management's Discussion and Analysis of Financial
      Condition and Results of Operations...........................8



                    PART II.  OTHER INFORMATION


Item 4 Submission of Matters to a Vote of Security Holders.........15


Item 5 Other Information...........................................15


Item 6 Exhibits and Reports on Form 8-K............................16



<PAGE>



                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

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

                                                     June 30,    December 31,
                                                       1996          1995
                                                   ----------     ----------
ASSETS                                             (unaudited)
Current assets:
    Cash and cash equivalents..................... $  23,575      $  12,016
    Short-term investments........................    38,508         37,765
    Accounts receivable, net......................    32,429         28,789
    Inventories, net..............................    13,343         15,295
    Prepaid expenses and other current assets.....     6,391          6,788
                                                       -----          -----
        Total current assets......................   114,246        100,653
Property and equipment, net.......................    32,254         32,596
Intangibles and other assets......................     4,957          3,853
                                                       -----          -----
         Total assets............................. $ 151,457      $ 137,102
                                                   =========      =========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of long-term debt............. $   1,995      $   2,137
    Accounts payable..............................    10,368          9,783
    Accrued expenses and other liabilities........     9,990          7,313
    Taxes payable.................................     7,304          6,874
                                                       -----          -----
        Total current liabilities.................    29,657         26,107
Long-term debt, net of current portion............     9,718         11,603
Deferred income taxes.............................       629            656
                                                         ---            ---
        Total liabilities.........................    40,004         38,366
                                                      ------         ------

Commitments and contingencies                             --             --

Stockholders' equity:
    Common Stock: par value $.01; 60,000,000
    shares authorized; 21,586,966 and 21,471,896
    shares issued and outstanding, respectively.         216            215
Additional paid-in capital........................    43,431         41,277
Retained earnings.................................    67,992         57,104
Other.............................................      (186)           140
                                                        ----            ---
        Total stockholders' equity................   111,453         98,736
                                                     -------         ------
        Total liabilities and stockholders' equity $ 151,457      $ 137,102
                                                   =========      =========

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

                                      -3-

<PAGE>


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


                                Three Months Ended       Six Months Ended
                                     June 30,                 June 30,
                                     --------                 --------
                                  1996         1995      1996       1995
                                  ----         ----      ----       ----

Net sales.......................$50,241     $40,477    $96,649    $80,321
Cost of sales................... 12,762       9,829     24,028     19,655
                                 ------       -----     ------     ------
     Gross profit............... 37,479      30,648     72,621     60,666
                                 ------      ------     ------     ------
Operating expenses:
    Sales and marketing......... 18,077      16,467     35,642     31,945
    Research and development....  6,852       5,071     11,827      9,939
    General and administrative..  4,388       3,673      8,562      6,905
                                  -----       -----      -----      -----
     Total operating expenses... 29,317      25,211     56,031     48,789
                                 ------      ------     ------     ------
       Operating income.........  8,162       5,437     16,590     11,877
Other income (expense):
    Interest income, net........    314         340        571        352
    Foreign exchange
     (loss) gain, net...........   (287)        579       (665)     1,001
                                   ----         ---       ----      -----
     Income before income taxes.  8,189       6,356     16,496     13,230
Provision for income taxes......  2,784       2,414      5,608      5,094
                                  -----       -----      -----      -----
     Net income.................$ 5,405     $ 3,942    $10,888    $ 8,136
                                =======     =======    =======    =======

Earnings per share..............  $0.25       $0.18      $0.50      $0.40
                                  =====       =====      =====      =====
Weighted average
 shares outstanding............. 21,938      21,529     21,780     20,244
                                 ======      ======     ======     ======

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

                                      -4-

<PAGE>


                        NATIONAL INSTRUMENTS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
                                                     Six Months Ended June 30,
                                                     -------------------------
                                                         1996        1995
                                                         ----        ----
Cash flow from operating activities:
  Net income ......................................   $ 10,888     $ 8,136
  Adjustments to reconcile net income to cash
    provided by operating activities
     Charges to income not requiring cash outlays:
      Depreciation and amortization ...............      4,248       3,123
      Charge for in-process research & development.      1,000        --
     Changes in operating assets and liabilities:
      Increase in accounts receivable .............     (3,684)     (4,414)
      Decrease (increase) in inventory ............      1,772      (2,098)
      Decrease (increase) in prepaid
       expense and other assets ...................        369      (1,684)
      Increase in current liabilities .............      3,888         677
                                                         -----         ---
  Net cash provided by operating activities........     18,481       3,740
                                                        ------       -----
Cash flow from investing activities:
  Payments for acquisition of Georgetown Systems,
   net of cash received ...........................       (700)       --
  Capital expenditures ............................     (3,228)     (9,606)
  Additions to intangibles ........................       (972)       (260)
  Purchases of short-term investments .............    (21,688)    (48,766)
  Sales of short-term investments .................     20,873      15,308
                                                        ------      ------
   Net cash used in investing activities ..........     (5,715)    (43,324)
                                                        ------     -------
Cash flow from financing activities:
  (Repayments of) borrowings from debt ............     (2,002)      3,976
  Net proceeds from issuance of common stock ......        926      39,647
                                                           ---      ------
   Net cash (used in)provided by
    financing activities ..........................     (1,076)     43,623
                                                        ------      ------
Effect of translation rate changes on cash ........       (131)        288
                                                          ----         ---
Net increase in cash and cash equivalents .........     11,559       4,327
Cash and cash equivalents at beginning of period...     12,016       7,526
                                                        ------       -----
Cash and cash equivalents at end of period ........   $ 23,575    $ 11,853
                                                      ========    ========

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

                                      -5-

<PAGE>


                        NATIONAL INSTRUMENTS CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                        (In thousands, except share data)



                                         Additional
                     Common Stock Common   Paid-In   Retained
                       (Share)    Stock    Capital   Earnings  Other   Total
                     -----------  ------ ---------- ---------  ------ ---------
Balance at
  December 31, 1995   21,471,896  $  215 $   41,277 $  57,104  $  140  $ 98,736

Net income ........           --      --         --    10,888      --    10,888

Issuance in
  connection with
  acquisition .....       60,916       1      1,228        --      --     1,229

Issuance under
  employee plans ..       54,154      --        926        --      --       926

Unrealized loss
  on short-term
  investments .....           --      --         --        --     (72)      (72)

Foreign currency
  translation
  adjustment.......           --      --         --        --    (254)     (254)
                      ---------- ------- ---------- ---------- ------- --------
  June 30, 1996 ...   21,586,966  $  216 $   43,431 $  67,992  $ (186) $111,453
                      ========== ======= ========== ========== ======= =========



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

                                      -6-

<PAGE>


                        NATIONAL INSTRUMENTS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Basis of Presentation

The accompanying  unaudited  financial  statements should be read in conjunction
with the consolidated  financial statements and notes thereto for the year ended
December 31, 1995,  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, 1996 and December 31, 1995, the results of
operations  for the  three-month  and six-month  periods ended June 30, 1996 and
1995, and the cash flows for the six-month periods ended June 30, 1996 and 1995.
Operating  results for the three-month and six-month periods ended June 30, 1996
are not necessarily  indicative of the results that may be expected for the year
ending December 31, 1996.

NOTE 2 - Earnings Per Share

Earnings per share are  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.

NOTE 3 - Inventories

Inventories consist of the following (in thousands):
                                               June 30,            December 31,
                                                  1996                    1995
                                    -------------------     --------------------
 Raw materials                        $           6,252        $          8,101
 Work-in-process                                    929                     719
 Finished goods                                   6,162                   6,475
                                    -------------------     --------------------
                                      $          13,343        $         15,295
                                    ===================     ====================

NOTE 4 - Acquisition

On April 1, 1996, the Company acquired all of the issued and outstanding  shares
of common stock of Georgetown  Systems,  Inc. ("GSI") for an aggregate  purchase
price of approximately $2.0 million, paid with 60,916 unregistered shares of the
Company's  common stock and $764,000 in cash. The  acquisition was accounted for
as a purchase.  The results of GSI's operations have been combined with those of
the Company since the date of acquisition.

The Company recorded a $1.0 million charge against earnings for the write-off of
in-process  GSI research  and  development  technology  that had not reached the
working  model stage and has no  alternative  future use. If this charge had not
been taken,  net income for the quarter ended June 30, 1996 would have been $6.1
million or $0.28 per share and net income for the  six-month  period  ended June
30,  1996 would have been $11.5  million or $0.53 per share.  The  Company  also
recorded  $920,000 of  capitalized  software  development  costs  related to the
acquisition,  which are included in  intangibles  and other assets and are being
amortized on a straight line basis over 3 years.

                                      -7-

<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.  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 Issues and  Outlook  section  and
financial statement line item discussions below.  Readers are also encouraged to
refer to the Company's Annual Report on Form 10-K for further  discussion of the
Company's business and the risks and opportunities attendant thereto.

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        Six Months
                                        Ended               Ended
                                       June 30,            June 30,
                                    --------------     ---------------
                                     1996    1995       1996     1995
                                     ----    ----       ----     ----
Net sales:
    North America                    57.2%    57.5%     56.9%    55.9%
    Europe                           28.9     30.4      28.6     31.9
    Asia Pacific                     13.9     12.1      14.5     12.2
                                     ----     ----      ----     ----
    Consolidated net sales          100.0    100.0     100.0    100.0
Cost of sales                        25.4     24.3      24.9     24.5
                                     ----     ----      ----     ----
    Gross profit                     74.6     75.7      75.1     75.5
                                     ----     ----      ----     ----
Operating expenses:
    Sales and marketing              36.0     40.7      36.9     39.8
    Research and development         13.6     12.5      12.2     12.4
    General and administrative        8.7      9.1       8.8      8.5
                                      ---      ---       ---      ---
      Total operating expenses       58.3     62.3      57.9     60.7
                                     ----     ----      ----     ----
        Operating income             16.3     13.4      17.2     14.8
Other income (expense):
    Interest income, net              0.6      0.8       0.6      0.4
    Foreign exchange (loss)
     gain, net                       (0.6)     1.4      (0.7)     1.2
                                     ----      ---      ----      ---
       Income before income taxes    16.3     15.6      17.1     16.4
Provision for income taxes            5.5      5.9       5.8      6.3
                                      ---      ---       ---      ---
    Net income                       10.8%     9.7%    11.3%     10.1%
                                     ====      ===     ====      ====

     NET SALES.  Consolidated  net sales  represent  gross sales less discounts,
returns and adjustments. Consolidated net sales increased by $9.8 million or 24%
for the three months ended June 30, 1996 to $50.2 million from $40.5 million for
the three months  ended June 30, 1995,  and  increased  $16.3  million or 20% to
$96.6  million for the six months ended June 30, 1996 from $80.3 million for the
comparable 1995 period.  The increase in sales is primarily  attributable to the
expansion  of sales and  marketing  efforts,  particularly  in the Asia  Pacific
market;  the  introduction  of  new  and  upgraded  products;  increased  market
acceptance of the Company's products; and an expanding customer base.

                                      -8-

<PAGE>

     North  American  sales for the quarter  and six months  ended June 30, 1996
increased 23% over the comparable 1995 periods.  Compared to 1995, the Company's
European net sales  increased by 18% to $14.5 million for the quarter ended June
30, 1996 and by 8% to $27.6 million for the six months ended June 30, 1996.  Net
sales in Asia Pacific increased by 43% to $7.0 million in the quarter ended June
30, 1996  compared to 1995 and by 44% to $14.1  million for the six months ended
June 30, 1996.  Products  released late in the first quarter  contributed to the
European  sales  growth  in the  second  quarter  of 1996  and  the  disruptions
previously  experienced  in  connection  with  the  centralization  of  European
inventory  have  been  largely  mitigated  as all but  two  branches  have  been
centralized.  The sales increase in the Asia Pacific region is  attributable  to
increased customer acceptance of localized products and support, particularly in
Japan,  and to the  Company's  new sales  offices in Hong Kong,  South Korea and
Taiwan  which  opened in late 1994 and early  1995.  The Company  expects  sales
outside of North  America to continue to represent a  significant,  and possibly
increasing, portion of its revenue.

     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.
Sales made by the Company's  direct sales offices in Europe and Asia Pacific are
denominated in local  currencies,  and accordingly,  the US dollar equivalent of
these sales is  affected  by changes in the value of the US dollar.  Between the
second quarter of 1995 and the second quarter of 1996 the weighted average value
of the US Dollar  increased  by 8%,  causing an  equivalent  decrease  in the US
dollar value of the Company's foreign currency sales and expenses. This weighted
average is  calculated  as the  percentage  change in the value of the  currency
relative to the dollar,  multiplied  by the  proportion of  international  sales
recorded in the particular currency. If the weighted average value of the dollar
in the second quarter of 1996 had been the same as that in the second quarter of
1995,  the Company's  sales for the second quarter of 1996 would have been $52.2
million.  If the  weighted  average  value of the dollar in the six months ended
June 30, 1996 had been the same as that in the six months  ended June 30,  1995,
the Company's  year-to-date  sales would have been $98.8 million.  Since most of
the  Company's  international  operating  expenses  are also  incurred  in local
currencies the change in exchange rates has a corresponding  effect on operating
expenses.  If the current trend in the value of the dollar continues  throughout
1996, it will  continue to have the effect of lowering the US dollar  equivalent
of international sales and operating expenses.

     GROSS  PROFIT.  Cost of  goods  sold  consists  primarily  of the  costs of
components  and  subassemblies,  amortization  of  software  development  costs,
freight,  labor and manufacturing  overhead. As a percentage of net sales, gross
profit  decreased  to 74.6% for the  second  quarter  of 1996 from 75.7% for the
second  quarter of 1995 and  decreased to 75.1% for the first six months of 1996
from 75.5% for the comparable period a year ago. The lower margin for the second
quarter of 1996 compared to the second  quarter of 1995 is  attributable  to the
foreign  exchange effect on sales during the second quarter of 1996 as discussed
above and  start-up  costs from the  outsourcing  of software  duplication  to a
third-party  vendor.  The decrease in the US dollar  equivalent of international
sales results in a lower margin which is offset,  to a much smaller  extent,  by
the decline in international costs of goods sold.

                                      -9-

<PAGE>

     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,  or products embodying new technology.  While the Company maintains
valuation  allowances for excess and obsolete inventory and management continues
to monitor the adequacy of such valuation allowances,  there can be no assurance
that such valuation allowances will be sufficient.

     SALES AND MARKETING.  Sales and marketing  expenses consist of salaries and
commissions,  customer support,  advertising and promotional expenses. Sales and
marketing  expenses for the second quarter of 1996 increased to $18.1 million, a
10% increase,  as compared to the second  quarter of 1995,  and increased 12% to
$35.6 million for the first six months of 1996 from the comparable  1995 period.
As a percentage of net sales,  sales and marketing  expenses  decreased to 36.0%
for the second  quarter  of 1996 from  40.7% for the second  quarter of 1995 and
decreased to 36.9% for the first six months of 1996 from 39.8% for the first six
months of 1995.  The increase in these  expenses in absolute  dollar  amounts is
primarily  attributable to programs designed to increase the Company's  presence
in both the  European  and the Asia  Pacific  markets,  including  increases  in
international  sales and marketing  personnel and increased  sales and marketing
activities  in these  markets,  as well as increases in United  States sales and
marketing personnel. Overall sales and marketing personnel increased from 455 at
June 30, 1995 to 515 at June 30, 1996, with increases  primarily in the European
and US sales forces.  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 initial marketing and advertising  campaign costs associated with
major new product  releases,  the opening of new sales offices and the timing of
domestic and international conferences and trade shows.

     RESEARCH  AND  DEVELOPMENT.   Research  and  development  expenses  consist
principally  of personnel  costs and overhead  costs  relating to occupancy  and
equipment  depreciation.  Research and  development  expenses  increased to $6.9
million for the quarter ended June 30, 1996, a 35% increase, as compared to $5.1
million for the three  months ended June 30, 1995,  and  increased  19% to $11.8
million for the six months ended June 30, 1996 from the comparable  1995 period.
As a percentage  of net sales,  research and  development  expenses  represented
13.6%  and  12.5%  for the  second  quarters  ended  June  30,  1996  and  1995,
respectively,  and 12.2% and 12.4% for the six months  ended  June 30,  1996 and
1995, respectively.  The increase in the absolute dollar amounts of research and
development expenses is primarily  attributable to a $1.0 million charge for the
write-off  of  in-process  research and  development  technology  of  Georgetown
Systems, Inc. ("GSI"), a company acquired on April 1, 1996, that had not reached
the working  model  stage and has no  alternative  future  use.  This amount was
written  off  in  accordance  with  generally  accepted  accounting   principles
requiring the expensing of such research and development acquired. Excluding the
effect  of the GSI charge, research and  development expenses have declined as a
percentage of  revenue during the six-month  period as compared to 1995 which is
due to the  capitalization  of LabVIEW 4.0  development  costs  during the first
quarter of 1996.  The Company  believes that a significant,  on-going investment
in research and development is required to remain competitive.

                                      -10-

<PAGE>

     The Company capitalizes  software  development costs in accordance with the
Statement of Financial  Accounting  Standards No. 86. 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.
Amortization  expense  totaled  $428,000 and $301,000 for the quarter ended June
30, 1996 and 1995, respectively, and $713,000 and $604,000 during the six months
ended June 30, 1996 and 1995, respectively. The increase in amortization expense
is due primarily to amortization of development costs capitalized as a result of
the GSI acquisition.  Software  development  costs capitalized were $1.2 million
and $200,000  for the quarter  ended June 30, 1996 and 1995,  respectively,  and
$1.9  million  and  $200,000  for  the  first  six  months  of  1996  and  1995,
respectively. The amounts capitalized in the second quarter and first six months
of 1996  include  $920,000  of  software  development  costs  related to the GSI
acquisition.  In the six-month period ended June 30, 1996,  amounts  capitalized
also include development costs of LabVIEW 4.0.

     GENERAL AND ADMINISTRATIVE.  General and administrative expenses consist of
personnel  costs  for  administration,   finance,   information  systems,  human
resources  and  general  management,  as well as legal  and  auditing  services.
General and  administrative  expenses for the second quarter ended June 30, 1996
increased  19% to $4.4 million from $3.7 million for the  comparable  prior year
period. For the first six months of 1996,  general and  administrative  expenses
increased  24% to $8.6  million  from $6.9  million  for the first six months of
1995.  As a  percentage  of  net  sales,  general  and  administrative  expenses
decreased  to 8.7% for the quarter  ended June 30, 1996 from 9.1% for the second
quarter of 1995. During the first six months of 1996, general and administrative
expenses increased as a percentage of sales to 8.8% from 8.5% for the comparable
prior year  period.  The  Company's  general and  administrative  expenses  have
increased  in  absolute  dollars  primarily  due to the costs of support for its
worldwide management information system in the US and Europe which will continue
to affect general and administrative  expense.  Implementation of the management
information system for European operations began in October 1995, in conjunction
with the centralization of European  warehousing and administrative  operations.
This project is expected to be completed in early 1997.  The Company  expects to
eventually achieve a worldwide management information system that will allow for
the  consolidation of common  functions,  reduced costs, and improvements in the
ability  to  deliver  product  worldwide.  No  assurance  can be given  that the
Company's  efforts will be  successful.  As a result of these and other factors,
the Company  expects that general and  administrative  expense in future periods
will increase in absolute amounts as the worldwide  implementation continues and
will fluctuate as a percentage of net sales.

     INTEREST INCOME,  NET.  Interest income,  net in the second quarter of 1996
decreased to $314,000 from $340,000 in the second  quarter of 1995 and increased
to  $571,000  for the first six months of 1996 from  $352,000  for the first six
months of 1995.  Interest  income  for the six months  ended  June 30,  1996 has
increased  as a result of the  investment  of the  proceeds  from the  Company's
initial public offering.

     FOREIGN EXCHANGE (LOSS) GAIN, NET. Net foreign  exchange losses  recognized
in the second quarter of 1996 were ($287,000)  compared to net foreign  exchange
gains of $579,000 recognized in the second quarter of 1995. Net foreign exchange
losses of ($665,000)  were  recognized for the first six months of 1996 compared
with net  foreign  exchange  gains of $1.0  million  for the first six months of
1995. These results are attributable to movements  between the US 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 net  losses  in 1996 are a result  of the
strengthening of the US dollar against local currencies,  primarily the Japanese
Yen.

                                      -11-

<PAGE>

     The Company enters into foreign currency forward exchange contracts against
a majority of its intercompany foreign currency-denominated receivables in order
to reduce its  exposure  to  significant  foreign  currency  fluctuations.  This
hedging  strategy  only  partially  addresses  the  Company's  risks in  foreign
currency  transactions  as the  Company  does not  currently  hedge  anticipated
transactions.  There can be no assurance  that this strategy will be successful.
The Company's  hedging strategy has reduced the foreign exchange losses recorded
by  $444,000   during  the  six-month   period  ended  June  30,  1996.  If  the
strengthening  of the US dollar  continues  throughout  1996,  the Company could
experience significant foreign exchange losses due to the foreign exchange risks
that are not addressed by the Company's hedging strategy.  The Company typically
limits the  duration of its foreign  exchange  contracts to 90 days and does not
invest in contracts for speculative purposes.

     PROVISION  FOR INCOME TAXES.  The  provision  for income taxes  reflects an
effective  tax rate of 34% and 39% for the six months  ended  June 30,  1996 and
1995,  respectively,  and an effective  tax rate of 34% and 38% for the quarters
ended June 30, 1996 and 1995,  respectively.  The decrease in the effective rate
resulted from income tax benefits  attributable  to the Company's  foreign sales
corporation,  utilization of foreign net operating loss carryforwards and higher
nontaxable   interest  income.  At  June  30,  1996,  eleven  of  the  Company's
subsidiaries had available, for income tax purposes,  foreign net operating loss
carryforwards  of approximately  $1.3 million,  of which $940,000 expire between
1996 and 2006.  The  remaining  $340,000  of loss  carryforwards  may be carried
forward  indefinitely  to  offset  future  taxable  income  in the  related  tax
jurisdictions.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed its operations and capital  resources through cash
flow from operations and, to a lesser degree,  through borrowings from financial
institutions. At June 30, 1996, the Company had working capital of approximately
$84.6 million  compared to $74.5  million at December 31, 1995.  The increase in
working  capital is reflected by the  increase in cash and cash  equivalents  of
$11.6 million from December 31, 1995 to June 30, 1996,  because of positive cash
flow from operating activities.

     Accounts receivable increased to $32.4 million at June 30, 1996, from $28.8
million at Dec. 31, 1995,  as a result of higher sales levels.  Receivable  days
outstanding  were 59 at June 30, 1996 and Dec. 31, 1995.  In the event that days
sales outstanding  significantly lengthen, the Company's cash could be adversely
affected.  Inventory turns of 4.0 represent an improvement  over turns of 2.7 at
December  31,  1995  and  indicate  the  Company's  continuing  improvements  in
inventory management occurring at the manufacturing facility in Austin, Texas as
well as the centralized European warehouse in Amsterdam.

     Cash used for investing activities in the first six months of 1996 includes
$3.2  million for the  purchase of property  and  equipment,  capitalization  of
software  development  costs of $972,000 which excludes  $920,000 of capitalized
software  acquired on a non-cash basis, net short-term  investment  purchases of
$815,000 and the purchase of GSI for  $700,000.  The Company is currently in the
preliminary  stages of design  and  development  for an  office  building  to be
located next to the new  manufacturing  facility  which was completed in Austin,
Texas  in  June,  1995.  It is  currently  anticipated  that  a  portion  of the
construction  costs will be paid out of the Company's  existing  working capital
with the remaining costs being funded through credit from the Company's  current
financial institutions.  The Company estimates that capital expenditures for the
new building will range from $25 million to $30 million.  The Company intends to
spend less than 10% of such building  expenses during 1996 with the remainder to
be spent throughout 1997 and 1998. The Company has entered into firm commitments
of approximately  $2.0 million for building design and site  development  costs.
The Company is not committed to spend the remaining amounts and the actual level
of spending may vary depending on a variety of factors including  decisions on a
final  design  plan,  progress of the  Company's  third-party  contractors,  and
availability of resources.

                                      -12-

<PAGE>

     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,  internally
generated  funds,  and  financing   arrangements   with  its  current  financial
institutions.  The Company has a $31.7 million credit agreement with NationsBank
of Texas,  N.A. which consists of (i) an $8.0 million  revolving line of credit,
(ii) a $7.5 million  line of credit for new  equipment  purchases,  (iii) a $3.9
million loan to finance  equipment  purchased prior to 1993, (iv) a $3.8 million
loan to finance the Company's  existing real estate and (v) an $8.5 million loan
for  the  purchase  of  real  estate  and  the  construction  costs  of the  new
manufacturing  facility.  As of June 30,  1996,  the Company had no  outstanding
balances under the revolving and new equipment lines of credit,  $975,000,  $3.4
million and $7.3  million,  under such other  credit  facilities,  respectively.
During the second quarter,  the Company  negotiated  one-year  extensions on its
existing lines of credit.  The revolving line of credit expires on June 30, 1998
and the new equipment line of credit is available for draws until June 30, 1997.
The  Company's  credit  agreements  contain  certain  financial   covenants  and
restrictions  as to various  matters,  including  the bank's  prior  approval of
mergers and acquisitions. Borrowings under the line of credit are collateralized
by substantially all of the Company's assets.

     The Company believes that it's cash flow from operations,  if any, existing
cash  balances  and  short-term  investments  and  available  credit  under  the
Company's  existing  credit  facilities,  will be  sufficient  to meet  its cash
requirements for at least the next twelve months.

ISSUES AND OUTLOOK

     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.  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,  having a material adverse impact on the Company's  operating results.
In addition,  the Company's  results of operations may be adversely  affected by
lower sales  levels in Europe  which  typically  occur in the summer  months and
adversely  impact the third quarter of the Company's  fiscal year.  Furthermore,
the   Company   serves  a  number   of   industries   such  as   semiconductors,
telecommunications,  aerospace,  defense and  automotive  which are  cyclical in
nature.  Downturns  in these  industries,  including  the recent  decline in the
semiconductor  industry,  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.  If this historical
pattern   continues,   revenues  for  the  third   quarter  of  1996  would  not
significantly  exceed  revenues  for the  second  quarter of 1996.  The  Company
believes  the  seasonality  of  its  revenue  results  from  the  budgeting  and
purchasing cycles of its customers.  In addition,  total operating expenses have
in the past  tended  to be higher in the third  quarter  of each  year.  If this
historical pattern  continues,  net income for the third quarter of 1996 will be
less than that in the first and second quarters of 1996.

                                      -13-

<PAGE>

     MANAGEMENT  INFORMATION  SYSTEMS.  The Company does not  currently  have an
integrated world-wide management information system. While the Company is in the
process  of  implementing  a new  world-wide  system,  the  deficiencies  in its
existing information  resources have at times inhibited  management's ability to
manage  certain  aspects of the  Company's  operations in a timely  manner.  The
Company has implemented  all of the US components of the new world-wide  system.
Implementation  began  for  European  operations  during  October  1995 and will
continue  throughout  1996 in conjunction  with the Company's plan to centralize
European warehouse and administrative  operations.  As of June 1996, the Company
has transitioned eleven of its thirteen European  subsidiaries to a centralized,
third-party warehouse in Amsterdam which represents the successful transition of
the  significant  portion of the  Company's  European  inventory  balances.  The
Company's Asia Pacific  operations are currently using a proprietary  management
information  system.  Until the new world-wide system can be implemented in this
region, the growth of the Company's Japanese  operations may be inhibited by the
deficiencies of the proprietary  system. In addition,  no assurance can be given
that the Company's  world-wide  implementation  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.

     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  in part 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
international  markets.  There can be no assurance that the Company will be able
to introduce  new  products on a timely  basis,  that new products  will achieve
market  acceptance  or  that  any  such  acceptance  will be  sustained  for any
significant  period.  Moreover,  there can be no  assurance  that the  Company's
efforts to increase international market penetration will be successful.

     OPERATION  IN  INTENSELY  COMPETITIVE  MARKETS.  The  markets  in which the
Company  operates  are  characterized  by  intense   competition  from  numerous
competitors, and the Company expects to face further competition from new market
entrants in the future. The Company believes its ability to compete successfully
depends on a number of factors both within and outside its  control,  including:
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 and its competitors;  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.

     VOLATILE STOCK MARKET. The market price of the Company's common stock could
be subject to  significant  fluctuations  due to the inherent  volatility of the
technology  industry.  In addition,  the stock  market has recently  experienced
significant price fluctuations, which often have been unrelated to the operating
performance  of the specific  companies  whose  stocks are traded.  Broad market
fluctuations,  as well as economic  conditions  generally and in the  technology
industry  specifically,  may adversely  affect the market price of the Company's
common stock.


                                      -14-

<PAGE>



 
                          PART II - OTHER INFORMATION



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

         (a) The annual meeting of stockholders was held on May 14, 1996.

         (b) The following three directors were elected at the meeting to serve
             a term of three years:
               
               William C. Nowlin, Jr.
               L. Wayne Ashby
               Dr. Donald M. Carlton

             The following directors are continuing to serve their terms:

               Dr. James J. Truchard
               Jeffrey L. Kodosky
               Dr. Peter T. Flawn
               Gerald T. Olson

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

                                                 For      Withheld
                                                 ---      --------
            (1) Election of directors:
                William C. Nowlin, Jr.       19,974,599     15,320
                L. Wayne Ashby               19,975,199     14,720
                Dr. Donald M. Carlton        19,974,336     15,583

                                                 For       Against    Abstain
                                                 ---       -------    -------
            (2) Ratification of Price        19,978,008        386     11,525
                Waterhouse LLP as the
                Company's independent
                public  accountants for
                the fiscal year ending
                December 31, 1996.

          The  foregoing  matters  are  described  in  detail  in the  Company's
          definitive proxy statement dated April 4, 1996, for the Annual Meeting
          of Stockholders held on May 14, 1996.


ITEM 5.   OTHER INFORMATION

          Director  Jim A. Smith left the Board of  Directors  of the Company to
          accept the position of Executive  Vice  President and Chief  Financial
          Officer for Alamo Group, Inc. (Seguin, Texas) effective June 10, 1996.
          Mr.  Smith  served on the  Compensation  and Audit  Committees  of the
          Company's Board of Directors.  William C. Nowlin, Jr. has been elected
          to replace Mr. Smith on those committees.

                                      -15-

<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits.

              10.1 Loan  Agreements  dated  as of  June  27,  1996  between
                   the  Company  and NationsBank of Texas, N.A. as amended
                   and supplemented.

              11.1 Computation of Earnings Per Share

         (b)  Reports on Form 8-K.

              No reports on Form 8-K were  filed by the  Company  during the
              quarter ended June 30, 1996.




                                      -16-

<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



/s/ Joel B. Rollins
- - ------------------------------------------------
BY: Joel B. Rollins
Vice President, Finance, Chief Financial
Officer and Treasurer (principal financial and
accounting officer)






Dated: July 30, 1996









                                      -17-

<PAGE>



                        NATIONAL INSTRUMENTS CORPORATION


                                INDEX TO EXHIBITS


                                                                
Exhibit No.                     Description                     
- - -----------                     -----------                     
   10.1      Loan Agreements dated as of June 27, 1996 between  
             the Company and NationsBank of Texas, N.A. as
             amended and supplemented
   11.1      Statement Regarding Computation of Earnings per    
             Share








                       AMENDED AND RESTATED LOAN AGREEMENT

STATE OF TEXAS             

COUNTY OF TRAVIS           

     This Amended and Restated Loan  Agreement  (this  "Agreement")  is made and
entered  into  as of the  27th  day of  June,  1996,  by  and  between  NATIONAL
INSTRUMENTS CORPORATION ("Borrower"), a Delaware corporation, and NATIONSBANK OF
TEXAS, N. A. ("Lender"), a national banking association, who stipulate, contract
and agree as follows:
                                   Recitations

     1. Lender concluded on July 6, 1993, with National Instruments Corporation,
a Texas  corporation,  a comprehensive  Loan Agreement,  which governed multiple
extensions  of credit by Lender to  National  Instruments  Corporation,  a Texas
corporation. As shown by a certain Agreement of Consent and Assumption effective
as of May 26,  1994,  National  Instruments  Corporation,  a Texas  corporation,
merged into  Borrower,  with  Borrower  being the  surviving  corporation.  With
Lender's consent, Borrower became possessed of all rights,  privileges,  powers,
and franchises of National  Instruments  Corporation,  a Texas corporation,  and
assumed all liabilities,  duties and  responsibilities  of National  Instruments
Corporation, a Texas corporation, under said prior agreement.

     2. Lender and Borrower have modified said prior Loan Agreement
 by a certain
Supplement  to and  Amendment of Loan  Agreement  effective  June 30, 1994, by a
certain Second  Amendment of Loan Agreement  effective August 25, 1994, and by a
certain Third  Amendment of Loan Agreement  effective June 30, 1995.  Said prior
Loan  Agreement,  as so modified,  is referred to in this Agreement as the Prior
Agreement.  Lender and Borrower  desire to change the Prior Agreement in certain
additional  respects and desire also, in the interest of simplicity,  to replace
the Prior Agreement with a single document. Lender and Borrower have accordingly
concluded this Agreement, which replaces the Prior Agreement in its entirety.

                                Other Agreements

     1. Definitions.  Unless a particular word or phrase is otherwise defined or
the context  otherwise  requires,  each of the following listed terms as used in
this Agreement has the meaning indicated below (such meaning to be applicable to
both the singular and plural forms of such term):

     Each of the terms Accounts, Account Debtor, Contract Rights, Chattel Paper,
Equipment, Fixtures, Proceeds, Security Interest and Security Agreement, whether
or not used with first letters  capitalized,  shall have the respective meanings
assigned or ascribed to them in the Texas Business and Commerce Code in force on
the date the document using such term was executed.

<PAGE>

     ADJUSTED  EURODOLLAR  RATE shall mean, for and with respect to a Eurodollar
Tranch,  a fixed per annum rate equal to the  quotient  produced by dividing (i)
the  percentage  rate of  interest  determined  by Lender at or about 10:00 a.m.
Austin,  Texas,  U.S.A.  time on the second  business day  preceding the date of
advance,  to be the average  (rounded up to the nearest whole multiple of 1/16th
of 1.0% per  annum,  if such  average is not such a  multiple)  of the per annum
rates at which  deposits in Dollars are offered to Lender (or to an affiliate of
Lender) in the interbank  eurodollar market in an amount  substantially equal to
the amount of that Eurodollar  Tranch and for a period that is substantially the
same as that  Eurodollar  Interest  Period,  by (ii) the  remainder  produced by
subtracting  the Eurodollar  Reserve  Percentage  (expressed as a decimal in one
hundredths [e.g., 100% = 1.0; 1.0% = .01; etc.]) from 1.0.

     AGREEMENT shall mean this Loan Agreement.

     ALTERNATE  RATE shall  mean a fixed  rate  equal to the sum of an  Adjusted
Eurodollar Rate plus eighty-five one-hundredths of one percent (.85%) per annum,
not to exceed the Highest Lawful Rate, in regard to the Revolving  Line; the sum
of an Adjusted  Eurodollar Rate plus one and twenty-five one- hundredths percent
(1.25%) per annum,  not to exceed the Highest  Lawful Rate, in regard to the New
Equipment Line; and the sum of an Adjusted Eurodollar Rate plus one percent (1%)
per annum,  not to exceed the Highest Lawful Rate, in regard to the New Building
Loan.

     BORROWING  BASE shall mean an amount equal to the sum of (a) eighty percent
(80%) of all Eligible  Domestic  Accounts,  and (b) fifty  percent  (50%) of all
Inventory of finished goods located in the United  States,  valued at the lesser
of cost or market  value,  provided  that such amount  included in the Borrowing
Base on account of Inventory is limited to no more than $2,000,000.00.

     BORROWING BASE  CERTIFICATE  shall mean a certification  by Borrower of the
Borrowing Base. (See Section 6.2.2 and Exhibit "1").

     CASH  FLOW  shall  mean  Net  Income,  plus  (a)  depreciation,  depletion,
obsolescence  and  amortization  of  property   determined  in  accordance  with
Generally Accepted Accounting Principles,  plus (b) deferred taxes, reserves and
other  non-cash  charges  deducted from receipts in  accordance  with  Generally
Accepted Accounting Principles in determining Net Income.

     CODE shall mean the Internal  Revenue Code of 1986,  as amended,  as now or
hereafter in effect, together with all regulations,  rulings and interpretations
thereof or thereunder by the Internal Revenue Service.

     COLLATERAL shall mean all property, tangible or intangible,  real, personal
or mixed, now or hereafter subject to the Security Documents,  or intended so to
be.

     CONSOLIDATED shall mean, as applied to any term used in this Agreement, the
relevant  figures for  Borrower and the  Subsidiaries  on a  consolidated  basis
determined, so far as reasonably possible, in accordance with Generally Accepted
Accounting  Principles after  eliminating all  inter-company  items and minority
interests.

<PAGE>

     CONSOLIDATING  shall mean,  as applied to any term used in this  Agreement,
the relevant figures for Borrower and the Subsidiaries,  on a Consolidated Basis
and  including  individual  profit and loss  statements  and  balance  sheets of
Borrower and the Subsidiaries with eliminating  entries  canceling  transactions
between Borrower and the Subsidiaries.

     CURRENT ACCOUNTS RECEIVABLE shall mean all Accounts, that as of the date of
any  determination of Current Accounts  Receivable:  (a) are payable by Eligible
Domestic  Account  Debtors and are due and payable not more than forty-five (45)
days from the date of the invoice or agreement  evidencing  same;  (b) have been
billed  within thirty (30) days after the shipment of the goods or the providing
of  services  giving  rise to the Account and are not more than ninety (90) days
past due; (c) arise from the performance of services by Borrower which have been
fully  performed,  or from  the  absolute  sale of goods  by  Borrower  in which
Borrower  had the sole and complete  ownership,  and the goods have been shipped
and delivered to the Account Debtor (evidencing which Borrower has possession of
shipping and delivery  receipts);  (d) are not subject in any material amount to
set-off,  counterclaim,  defense,  allowance or adjustment (other than discounts
for prompt  payment shown on the invoice) or to dispute,  objection or complaint
by the Account Debtor  concerning  its liability on the Account,  and the goods,
the sale of which gave rise to the Account, have not been returned, rejected, or
lost or damaged on shipment; and (e) arose in the ordinary course of business of
Borrower, and no notice of bankruptcy,  insolvency or financial embarrassment of
the Account Debtor has been received by Borrower.

     CURRENT ASSETS,  to the extent permitted by and as determined in accordance
with Generally  Accepted  Accounting  Principles,  shall include all (1) cash on
hand or in  transit  or on  deposit  in a bank or trust  company  which  has not
suspended business;  (2) Permitted Investment Securities valued at not more than
the  lesser of cost or  current  market  value;  (3)  accounts  receivable;  (4)
inventories  of raw materials and supplies,  or work or materials in process and
of finished products,  all valued at not more than the lesser of cost or current
market  value;  and (5) such  other  assets  as, in  accordance  with  Generally
Accepted Accounting Principles, would be included in "current assets"; all after
deduction  of  adequate  reserves  in each case where a reserve is proper  under
Generally Accepted  Accounting  Principles;  provided that,  notwithstanding the
foregoing,  in  computing  Current  Assets  there  shall  be  excluded  (a)  all
Investments  other than those  permitted  to be included in this  definition  by
clause (2)  hereof,  (b) all  franchises,  licenses,  permits,  patents,  patent
applications,  copyrights,  trademarks,  trade names, good will, experimental or
organizational  expense and other like  intangibles,  (c) all loans to, advances
to,  and any  other  receivables  from  officers,  stockholders,  directors,  or
employees of Borrower or  Subsidiaries  which are each in an amount in excess of
$10,000.00.

     CURRENT LIABILITIES shall mean all indebtedness due on demand or within one
year  after  the  date  as of  which  the  determination  is made  and,  without
limitation,   shall  include  for  any  Person  all  (1)  final  maturities  and
prepayments  of  indebtedness  and sinking fund payments  required to be made in
respect of any  indebtedness  within one year after said date, (2) taxes payable
or accrued as  estimated  and  deferred  income taxes due for the Fiscal Year in
which  such   determination  is  made  arising  from  differences  in  reporting
depreciation  and other  non-cash  charges for tax  purposes  and for  corporate
financial purposes, (3) indebtedness owing to any employee,  officer,  director,
stockholder or Subsidiary which is due within one year, (4) accrued liabilities,
(5) principal  payments  required to be made with respect to capitalized  leases
within one year of said  date,  and (6) other  items  which in  accordance  with
Generally   Accepted   Accounting   Principles  would  be  included  as  current
liabilities.

<PAGE>

     CURRENT  MATURITIES  COVERAGE RATIO shall mean, as of any particular  date,
the ratio of (a) Cash Flow during the twelve  months ending  immediately  before
such particular date, less unfinanced  capital  expenditures,  to (b) the sum of
(i) all scheduled principal payments that will be due on long-term  indebtedness
during the next  twelve  months,  plus (ii) all  "principal"  payments  due with
respect to capitalized  leases during such twelve months. For the purpose of the
foregoing,  any capital expenditure  financed under the Revolving Line or any of
the other Loans shall be treated as a "financed" capital expenditure.

     CURRENT   RATIO  shall  mean  the  ratio  of  Current   Assets  to  Current
Liabilities.

     DOLLAR  ADVANCE  shall mean an advance  under the  Revolving  Line which is
denominated in Dollars.

     DOLLAR  EQUIVALENT  shall  mean  the  amount  in  Dollars  which  shall  be
equivalent on any particular date (as conclusively  ascertained by Lender absent
manifest  error) to a  specified  amount in a foreign  currency  and,  generally
speaking,  is the amount of Dollars which could be purchased with such amount in
a foreign currency in the London foreign  currency  deposits market for delivery
on such date at the spot rate of exchange prevailing on such date.

     DOLLAR  REFERENCE  RATE shall mean a  varying,  per annum rate of  interest
equal to the Prime Rate less one-half of one percent (1/2 of 1%) per annum.  The
Dollar  Reference  Rate shall change  automatically  from time to time with each
change in the Prime Rate, as of the date of each such change,  without notice to
Borrower or any other Person.

     DOLLARS shall mean dollars of the United States of America.

     DOMESTIC SUBSIDIARY shall mean a Subsidiary organized or incorporated under
the laws of Texas or another state of United States of America.

     ELIGIBLE  DOMESTIC  ACCOUNT DEBTOR shall mean an Account Debtor of Borrower
that is United  States-based  and that is not a Subsidiary or a  shareholder  of
Borrower or a Subsidiary.

     ELIGIBLE  DOMESTIC  ACCOUNTS  shall mean all  Current  Accounts  Receivable
payable by Eligible  Domestic  Account  Debtors  which  Borrower  believes to be
collectible.  Eligible Domestic  Accounts do not include any account  receivable
which  represents  a retainage or which is an account  which  Lender  reasonably
determines may be uncollectible after consultation with Borrower.

     ERISA shall mean the Employee  Retirement  Income  Security Act of 1974, as
amended   from  time  to  time,   and  all  rules,   regulations,   rulings  and
interpretations  adopted by the Internal  Revenue  Service or the  Department of
Labor thereunder.

<PAGE>

     EURODOLLAR  INTEREST  PERIOD  shall  mean  the  period  of  existence  of a
Eurodollar  Tranch  properly  designated by Borrower.  That is to say, it is the
period of time for which a Tranch is to bear interest at the Alternate Rate.

     EURODOLLAR  RESERVE  PERCENTAGE  shall  mean,  for each  term of a  Foreign
Currency Advance and for each Eurodollar Interest Period of a Eurodollar Tranch,
the  maximum  reserve  requirement  including  any  supplemental  and  emergency
reserves  (expressed as a percentage)  applicable during such term or Eurodollar
Interest  Period to member  banks of the  Federal  Reserve  System in respect of
"Eurocurrency  liabilities"  under Regulation D of the Board of Governors of the
Federal Reserve System,  or such  substituted or amended reserve  requirement as
may be hereafter  applicable  to member banks of the Federal  Reserve  System in
respect of such Eurocurrency  liabilities or other foreign currency  liabilities
of the nature contemplated by this Agreement.

     EURODOLLAR  TRANCH shall mean that portion of the unpaid principal  balance
of a Loan which is bearing  interest  at a  particular  Alternate  Rate during a
particular Eurodollar Interest Period.

     FISCAL YEAR OF BORROWER  shall mean the period  beginning  on January 1 and
ending on December 31.

     FOREIGN  CURRENCY  ADVANCE shall mean an advance  under the Revolving  Line
which is in a foreign currency.

     FOREIGN  CURRENCY  RATE shall mean, in relation to the term of each Foreign
Currency  Advance,  a fixed per annum rate for such term  equal to the  quotient
produced  by  dividing  (a)  the  sum of (i) the  percentage  rate  of  interest
determined by Lender at or about 10:00 a.m. Austin,  Texas,  U.S.A.  time on the
second  business day preceding the  anticipated  date of advance,  to be the per
annum rate at which deposits of the type of foreign currency  denominated during
such term are  offered to Lender by prime banks in the London  foreign  currency
deposits market,  at the time of determination  and in accordance with the usual
practice in such market,  for delivery on the first day of such term and for the
number of days comprised  therein,  in amounts of such currency equal (as nearly
as may be) to the  principal  amount  of the  advance,  and  (ii) an  additional
percentage  rate of interest  not to exceed  one-half of one percent (1/2 of 1%)
per annum to compensate Lender for making advances having a Dollar Equivalent of
less than  $1,000,000.00  each, by (b) the remainder produced by subtracting the
Eurodollar Reserve  Percentage  (expressed as a decimal in one hundredths [e.g.,
100% = 1.0; 1.0% = .01; etc.]) from 1.0.

     FOREIGN  EXCHANGE  TRADING  TRANSACTIONS  shall mean all  foreign  exchange
transactions  entered  into by Lender on behalf of Borrower  including,  without
limitation, spot foreign exchange contracts,  forward foreign exchange contracts
and foreign exchange options.

     FOREIGN   SUBSIDIARY   shall  mean  a  Subsidiary  which  is  organized  or
incorporated under the laws of a foreign country.

<PAGE>

     GENERALLY  ACCEPTED  ACCOUNTING  PRINCIPLES  shall mean, as to a particular
Person,  such  accounting  practice  as,  in  the  opinion  of  the  independent
accountants  of  recognized  standing  regularly  retained  by such  Person  and
acceptable  to Lender,  conforms at the time to  Generally  Accepted  Accounting
Principles, consistently applied. Generally Accepted Accounting Principles means
those principles and practices (a) which are recognized as such by the Financial
Accounting Standards Board, (b) which are applied for all periods after the date
hereof in a manner  consistent  with the  manner in which  such  principles  and
practices  were applied to the most recent audited  financial  statements of the
relevant Person furnished to Lender, and (c) which are consistently  applied for
all  periods  after the date  hereof so as to  reflect  properly  the  financial
condition and results of operations and changes in cash flow of such Person.  If
any change in any accounting  principle or practice is required by the Financial
Accounting  Standards  Board in order for such principle or practice to continue
as a  Generally  Accepted  Accounting  Principle  or  practice,  all reports and
financial  statements required hereunder may be prepared in accordance with such
change  only  after  written  notice  of such  change  is given to  Lender.  Any
accounting  terms used in this  Agreement but not defined  herein shall have the
same meaning as promulgated by the Financial Accounting Standards Board.

     HAZARDOUS  MATERIALS shall mean (i) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.),
as amended from time to time, and regulations promulgated  thereunder;  (ii) any
"hazardous  substance" as defined by the Comprehensive  Environmental  Response,
Compensation  and  Liability  Act of 1980  (42  U.S.C.  Section  9601  et  seq.)
("CERCLA"),   as  amended  from  time  to  time,  and  regulations   promulgated
thereunder;  (iii) asbestos; (iv) polychlorinated  biphenyls;  (v) any substance
the  presence  of which  on any of  Borrower's  property  is  prohibited  by any
governmental  authority;  and (vi) any other substance which by any governmental
requirement requires special handling in its collection,  storage,  treatment or
disposal.

     HIGHEST  LAWFUL  RATE shall mean the maximum  nonusurious  rate of interest
permitted to be charged,  contracted  for,  received or collected by  applicable
federal or Texas law  (whichever  shall permit the higher lawful rate) from time
to time in effect. At all times, if any, as Chapter One of the Texas Credit Code
shall  establish the Highest  Lawful Rate,  the Highest Lawful Rate shall be the
"indicated  rate  ceiling"  (as  defined  in  Chapter  One) from time to time in
effect. If the obligation is an open-end account,  Lender may from time to time,
as to  then-current  and future  balances,  implement  any other  ceiling  under
Chapter  One and/or  revise  the index,  formula,  or  provision  of law used to
compute the rate on such  obligation,  if and to the extent permitted by, and in
the manner provided in, Chapter One.

     INVENTORY,  whether or not used with first letter  capitalized,  shall mean
goods held by Borrower in the United States for sale or lease or to be furnished
under  contracts  of service,  or raw  materials,  excluding  materials  used or
consumed by Borrower in its business.

     INVESTMENT  shall mean the purchase or other  acquisition of any securities
or indebtedness of, or the making of any loan, advance, transfer of property, or
capital  contribution  to, or the incurring of any  liability,  contingently  or
otherwise, respecting the indebtedness of, any Person.

<PAGE>

     LIEN  shall  mean  any  mortgage,  pledge,  charge,  encumbrance,  security
interest,  collateral  assignment,  or other  lien or  restriction  of any kind,
whether based on common law, constitutional provision, statute, or contract, and
shall include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions.

     LOANS  shall  mean the  Loans  made or  intended  to be made by  Lender  to
Borrower as described in Section 2 of this Agreement.

     LOAN DOCUMENTS shall mean this Agreement,  the notes  evidencing the Loans,
all Security  Documents,  the Deeds of Trust, all instruments,  certificates and
agreements now or hereafter  executed or delivered to Lender  pursuant to any of
the  foregoing,  and  all  amendments,   modifications,   renewals,  extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.

     NET INCOME and NET LOSS shall mean gross  revenues and other proper  income
credits, less all proper expenses (including taxes and interest), all determined
in accordance with Generally  Accepted  Accounting  Principles;  provided,  that
there shall not be included in such  revenues  any item which is  classified  as
"extraordinary" in accordance with Generally Accepted Accounting Principles.

     OFFICER'S  CERTIFICATE  shall mean a certificate  signed in the name of the
relevant  business entity by either its President,  one of its Vice  Presidents,
its Treasurer, its Secretary or its Chief Financial Officer.

     ORGANIZATIONAL  DOCUMENTS  shall mean,  with respect to a corporation,  the
certificate  of  incorporation,  articles  of  incorporation  and bylaws of such
corporation;  with respect to a general partnership,  the partnership  agreement
establishing  such  partnership,  with  respect  to a limited  partnership,  the
partnership  agreement  establishing  such  partnership  and the  certificate of
limited  partnership;  with  respect  to a  joint  venture,  the  joint  venture
agreement  establishing  such joint  venture,  and with respect to a trust,  the
instrument  establishing  such  trust;  in  each  case  including  any  and  all
modifications  thereof  as of the date of the Loan  Document  referring  to such
Organizational  Document and any and all future modifications  thereof which are
consented to by Lender.

     PARTIES  shall  mean all  Persons  other  than  Lender  executing  any Loan
Document.

     PERMITTED  INVESTMENT  SECURITIES  shall mean  cash,  money  market  funds,
Government and Government Agency Securities,  including: (1) taxable investments
in  (i)  U.S.  Government  and  U.S.  Government  Obligations,  (ii)  Repurchase
Agreements, (iii) Domestic Certificates of Deposit, Bankers Acceptances and Time
Deposits,  (iv)  Eurodollar  Certificates  of  Deposit  and Time  Deposits,  (v)
Corporate  Obligations,  Medium Term Notes and Deposit  Notes,  (vi)  Commercial
Paper and (vii) Auction Rate Preferreds;  (2) tax-exempt investments in the form
of (i) Variable Rate Demand Notes, (ii) Puttable Bonds,  (iii) Commercial Paper,
(iv) General Obligation & Revenue Bonds and (v) Auction Rate Securities; and (3)
foreign currency forward  contracts  specifically  undertaken for the purpose of
hedging foreign currency receivable  exposure.  In order to qualify as Permitted
Investment  Securities,  Commercial  Paper  must be  A2/P2  or  better;  taxable
instruments must be Aa/AA or better; Municipal Notes must be Mig2/A-2 or better;
and Municipal Obligations must be AA or better.

<PAGE>

     PERSON shall mean any individual,  business entity,  trust,  unincorporated
organization, governmental authority, or any other form of entity.

     PLAN shall mean any plan  subject to Title IV of ERISA and  maintained  for
employees of Borrower or of any member of a "controlled  group of corporations,"
as such term is defined in the Code,  of which  Borrower is a part,  or any such
plan to which Borrower is required to contribute on behalf of its employees.

     PRIME RATE  shall mean the  varying,  per annum rate of  interest  which is
announced  or  determined  from time to time by the credit  policy  committee of
Lender as Lender's prime rate. The Prime Rate does not necessarily represent the
lowest or best rate actually charged to any customer by Lender.  Lender may make
commercial  loans or other  loans at rates of  interest  at,  above or below the
Prime Rate.  The Prime Rate shall  change  automatically  from time to time with
each  change in the Prime  Rate,  as of the date of each  such  change,  without
notice to Borrower or any other Person.

     SECURITY DOCUMENTS shall mean this Agreement, the Security Agreements,  the
Deeds  of  Trust,  and  any  and  all  other  Agreements,   mortgages,  security
agreements,  pledges,  assignments of income,  assignments  of contract  rights,
subordination  agreements,  undertakings  and other  instruments  and  financing
statements  now or hereafter  executed and  delivered by any Person  (other than
solely by Lender and/or any other creditor  participating in the Loans evidenced
by the notes or any collateral or security  therefor) in connection  with, or as
security for the payment or  performance  of, the notes  evidencing the Loans or
any indebtedness under this Agreement.

     SUBSIDIARY  shall mean a corporation,  joint stock company,  partnership or
other business entity of which fifty-one percent (51%) , or more, of the indicia
of equity rights (whether  outstanding  capital stock or otherwise) is now owned
or is hereafter  acquired by Borrower and/or by one or more of the  Subsidiaries
and each entity which is actually  controlled by Borrower  and/or one or more of
the Subsidiaries, although such parties own less than fifty-one percent (51%) of
the indicia of equity rights of the same. The  Subsidiaries  currently  existing
are identified on Exhibit "1a" attached hereto and made a part hereof.

     TANGIBLE  NET WORTH  shall  mean total  assets  (valued at lower of cost or
market value less normal  depreciation),  less (1) all intangibles and (2) Total
Liabilities.  The term "intangibles" shall include, without limitation,  (i) the
amount of any write-up in the book value of any assets  contained in any balance
sheet resulting from  revaluation  thereof or any write-up in excess of the cost
of such assets  acquired,  (ii) the  aggregate  of all amounts  appearing on the
assets  side of any such  balance  sheet  for  franchises,  licenses  (excluding
licenses to use  computer  software),  permits,  patents,  patent  applications,
copyrights,  trademarks,  trade names, goodwill, treasury stock, experimental or
organizational  expenses and other like intangibles,  and (iii) foreign currency
translation adjustments.

     TOTAL  LIABILITIES shall mean and include (1) all items which in accordance
with Generally Accepted Accounting Principles would be included on the liability
side of a balance sheet (except as provided below) on the date as of which Total
Liabilities  are to be determined  (excluding  capital stock,  surplus,  surplus
reserves and deferred  credits) and (2) obligations under leases which have been
capitalized;  provided that such term shall not mean or include any indebtedness
in respect of which  monies  sufficient  to pay and  discharge  the same in full
(either on the  expressed  date of maturity  thereof or on such  earlier date as
such  indebtedness  may be duly called for  redemption  and  payment)  have been
deposited with a depository, agency or trustee acceptable to Lender in trust for
the payment thereof, and shall not include deferred federal income tax until the
tax is owed and treated as an account payable.

     TRANCH  shall mean that portion of the unpaid  principal  balance of a Loan
which is bearing interest at a particular rate for a particular term or interest
period.

<PAGE>


2.       The Loans.

     Subject to the terms and conditions of this Agreement and of the respective
notes evidencing the same,  Lender has made or is making available to Borrower a
revolving line of credit for working capital (the "Revolving  Line"),  a line of
credit for  purchase of new  equipment  (the "New  Equipment  Line"),  a loan to
refinance indebtedness on Borrower's existing equipment (the "Existing Equipment
Loan"), a loan to refinance  indebtedness on Borrower's  existing  building (the
"Existing  Building  Loan"),  and a loan  which is  referred  to herein  and was
referred to in the Prior  Agreement as the New  Building  Loan.  Lender  earlier
extended  to  Borrower  a loan to  finance  Borrower's  purchase  of a tract  of
approximately  65.250 acres in Travis County,  Texas, which loan was referred to
in the Prior  Agreement as the Land Purchase  Loan.  Said Land Purchase Loan was
renewed and extended into and combined  with an additional  advance by Lender to
Borrower to finance  construction  of a building on such acreage,  this combined
loan having been referred to in the Prior Agreement as the Interim  Construction
Loan. Following  completion of construction of Borrower's building,  the Interim
Construction Loan was renewed and extended to comprise the New Building Loan.

     2.1 The  Revolving  Line.  The  Revolving  Line is  evidenced  by a certain
promissory note dated July 16, 1993, in the principal sum of  $8,000,000.00,  as
extended by a certain  Extension of Revolving Line of Credit  effective June 30,
1994,  and by a certain Second  Extension of Revolving Line of Credit  effective
June 30, 1995.

     Term - The parties are executing that certain Third  Extension of Revolving
Line of Credit of which a blank copy is  attached  hereto and made a part hereof
as Exhibit 2.1, in order to extend the term of the  Revolving  Line through June
30, 1998. Unless the term of the Revolving Line is further extended,  no Foreign
Currency  Advance shall be made for a term which extends beyond said date and no
Eurodollar Interest Period shall extend beyond said date.

     Purpose - The  Revolving  Line is  intended to support  Borrower's  working
capital needs by means of advances in either domestic or foreign currencies,  to
provide  for the  issuance  of  letters of credit  and to  provide  for  foreign
exchange transactions.

     Amount - The  amount  available  to be drawn at any  given  time  under the
Revolving Line shall be the lesser of (i)  $8,000,000.00 or (ii) an amount equal
to the Borrowing  Base, as the Borrowing  Base may fluctuate  from time to time;
less in  either  case the sum of (a) the  aggregate  principal  amount of Dollar
Advances  remaining  outstanding  and all  outstanding  letters of credit issued
under the  Revolving  Line;  (b) 115% of the Dollar  Equivalent of the aggregate
principal amount of Foreign Currency Advances remaining outstanding, and (c) 15%
of all active Foreign Trading  Transactions  which are entered into by Lender on
behalf of Borrower.

<PAGE>

     Foreign  Currency  Option - Advances under the Revolving Line may be either
in Dollars ("Dollar Advances") or, if Borrower requests and Lender accepts, in a
foreign  currency  designated by Borrower  ("Foreign  Currency  Advances").  The
foreign  currencies in which it is  contemplated  at this time that advances may
feasibly be made include the  following:  Japanese Yen,  French  Franc,  British
Pound,  Deutsch  Mark,  Italian Lira,  Swiss Franc,  Norwegian  Kroner,  Swedish
Kroner,  Australian  Dollar,  Canadian  Dollar,  Dutch Guilder,  Spanish Peseta,
Danish Kroner, Belgium Franc, Finnish Marks, Singapore Dollar, Taiwanese Dollar,
Hong Kong Dollar, Israeli Shekels, Mexican Pesos and Irish Punts.

     Special  Provisions  Concerning  Foreign  Currency  Advances - Each Foreign
Currency  Advance  requested by Borrower  shall be for an amount having a Dollar
Equivalent  of at least  $50,000.00  and shall be for a limited term of not less
than thirty (30) days and not more than one (1) year. Lender may decline to make
a requested  Foreign  Currency Advance for any reason which Lender in good faith
deems  sound,  in Lender's  sole  discretion,  including  without  limitation  a
determination  by Lender that the currency  requested by Borrower is excessively
volatile, or is not freely transferable and convertible into Dollars, or that it
is  impracticable  for  Lender to fund such  advance or that the  advance  risks
illegality or involves significant costs not anticipated by Lender. Lender shall
not decline to make a requested  Foreign  Currency  Advance  simply  because the
requested  advance involves  incidental or minor  inconvenience  or expense.  If
Lender declines to extend a requested  Foreign  Currency  Advance,  Borrower may
obtain a substitute  advance in Dollars or,  subject to Lender's  acceptance,  a
different foreign  currency.  If Lender shall determine that any adverse changes
affecting any foreign  currency deposit market or any applicable law (whether as
a result of a change thereof or otherwise) make it impracticable or unlawful for
Lender to make Foreign  Currency  Advances  generally  or to make  advances in a
particular   foreign   currency,   then  Lender  may  notify  Borrower  of  such
determination  in writing and  Borrower  shall not  request any further  Foreign
Currency Advances or advances in the particular  foreign  currency,  as the case
may be, until and unless Borrower is notified in writing of a  determination  by
Lender that such advances are again  feasible.  In the event  Borrower  fails to
repay any Foreign  Currency  Advance on the last day of the term of such Foreign
Currency Advance,  Borrower shall, upon demand by Lender, pay to Lender, for the
account of Lender, all amounts  reasonably  determined by Lender to be necessary
to compensate Lender for such failure,  including without  limitation any losses
incurred  by Lender in  converting  funds to and/or  from the  foreign  currency
involved,  wiring costs, loss of interest or additional interest costs incurred.
In the event a Foreign  Currency  Advance  is not  repaid on the last day of the
term of such Foreign Currency Advance and Lender pursues  collection of the same
from  Borrower,  Lender may, at its option,  either  pursue  collection  of such
delinquent  amount  denominated in the foreign currency which was the subject of
the advance or the Dollar  Equivalent of the same,  determined as of the date on
which Borrower repays the indebtedness  incurred by Lender in order to make such
Foreign Currency Advance.

<PAGE>

     Interest Rate on Dollar Advances - Dollar Advances under the Revolving Line
shall bear interest at the Dollar  Reference Rate,  except that any amount which
Borrower  elects to designate as a Eurodollar  Tranch shall bear interest at the
Alternate  Rate. At any time,  and from time to time,  Borrower may designate an
amount to be advanced or an amount currently  outstanding  (other than a Foreign
Currency Advance) as a Eurodollar Tranch; provided, however that each Eurodollar
Tranch  shall  be in the  amount  of at  least  $500,000.00  and  shall be for a
designated term (the  Eurodollar  Interest  Period) of one month,  two months or
three  months.  Borrower  shall  exercise  its option to  designate a Eurodollar
Tranch by giving  written  notice  thereof to Lender at least three (3) business
days prior to the beginning of the Eurodollar  Interest  Period for such Tranch,
which  notice  shall  identify  the amount of the  Tranch,  the first day of the
Eurodollar  Interest  Period  for the same  and the  length  of such  Eurodollar
Interest  Period.  Each  Eurodollar  Tranch  designated  by Borrower,  as herein
described,  or in such other manner as Lender may accept, shall bear interest at
the Alternate Rate during its Eurodollar  Interest Period.  A Eurodollar  Tranch
shall  cease to exist as such upon the  expiration  of its  Eurodollar  Interest
Period and the amount of principal  indebtedness  which  formerly  constituted a
Eurodollar Tranch, bearing interest at the Alternate Rate, shall thereafter bear
interest at the Dollar Reference Rate.
     On any date for  determining  the Alternate Rate for any Eurodollar  Tranch
that by reason of any one or more  changes  arising on or after the date of this
Agreement  affecting  the interbank  eurodollar  market,  Dollar  deposits in an
amount  substantially  equal  to that  Eurodollar  Tranch  (and/or  for a period
substantially  equal  to  the  relevant  Eurodollar  Interest  Period)  are  not
generally  available  in the  interbank  eurodollar  market or adequate and fair
means do not exist for  ascertaining  the Adjusted  Eurodollar Rate on the basis
provided for herein,  then the  Alternate  Rate will not be  available  for that
Tranch  and the  Dollar  Reference  Rate  shall  apply.  At any  time  that  the
initiation or the continued use of the Alternate Rate has become unlawful, under
Lender's good faith  interpretation of any law,  governmental rule,  regulation,
guideline or order (or would conflict with any such rule, regulation,  guideline
or order not having the force of law), or has become  impractical  as the result
of a  contingency  occurring  on or  after  the  date  of this  Agreement  which
materially  and adversely  affects the  interbank  eurodollar  market,  then the
Alternate  Rate shall no longer be available,  the Dollar  Reference  Rate shall
apply and any exercise by Borrower of an option to designate a Eurodollar Tranch
shall be ineffective.

     Interest  Rate on Foreign  Currency  Advances - Foreign  Currency  Advances
shall bear interest at a fixed per annum rate equal to the Foreign Currency Rate
plus two percent (2%) per annum, but never to exceed the Highest Lawful Rate.

     Procedure  for Advances - Each request for an advance  under the  Revolving
Line which includes the designation of a Eurodollar  Tranch and/or a request for
a Foreign Currency  Advance shall be submitted in writing,  in the form attached
hereto as  Exhibit  "2.1a"  and made a part  hereof,  no later  than  10:00 a.m.
Austin,  Texas,  time on the third  business day preceding the requested date of
advance.  Each other  request for an advance must be received no later than 1:00
p.m.  Austin,  Texas,  time on the  date  of the  advance  and may be  submitted
verbally  unless  Lender  requires  otherwise. 
     Any  request  to  renew  or  extend  a  Eurodollar   Tranch  (that  is,  to
"redesignate"  a Eurodollar  Tranch) or to renew or extend the term of a Foreign
Currency  Advance (such an extension being  tantamount to a new Foreign Currency
Advance) shall  similarly be submitted in writing in the form attached hereto as
Exhibit "2.1a" and must be received no later than 10:00 a.m. Austin, Texas, time
on the  third  business  day  preceding  either  the last day of the  Eurodollar
Interest Period of the Eurodollar Tranch which is being extended or the last day
of the term of the Foreign Currency  Advance which is being extended.  Each such
request is subject to the same terms and  conditions  as those which  govern the
initial  designation  of a  Eurodollar  Tranch or an initial  advance of foreign
currency.

<PAGE>

     Repayment  -  Interest  is  payable  quarter-annually,  at the  end of each
calendar quarter,  and principal is due and payable at maturity of the Revolving
Line,  except as follows:  (a) interest on each Eurodollar  Tranch is due on the
last day of the Eurodollar  Interest  Period for such Tranch,  without regard to
whether  such  Tranch is  extended  or  redesignated;  and (b)  interest on each
Foreign  Currency  Advance  is due on the last  day of the term of such  Foreign
Currency  Advance,  without  regard to whether  such term is  extended,  and the
principal  amount of each Foreign Currency Advance is due on the last day of the
term of such Foreign Currency Advance unless such term is extended. Repayment of
Dollar Advances shall be made in Austin,  Travis County, Texas, and repayment of
Foreign Currency  Advances shall be made in the foreign  currency  advanced at a
depository  designated  by Lender in the country in which such currency is legal
tender during business hours of such designated depository.

     Prepayment - Advances  may be prepaid in whole or in part  without  penalty
and without notice at any time,  except that a Eurodollar Tranch may not be paid
prior to expiration of its  Eurodollar  Interest  Period and a Foreign  Currency
Advance may not be paid prior to the expiration of the term of such advance.

     Mandatory  Prepayment  - If the sum of (a) the  aggregate  amount of Dollar
Advances  remaining  outstanding  and all  outstanding  letters of credit issued
under the  Revolving  Line,  (b) 115% of the Dollar  Equivalent of the aggregate
amount of Foreign Currency Advances  remaining  outstanding,  and (c) 15% of all
active Foreign Exchange Trading Transactions which are entered into by Lender on
behalf of Borrower,  at any time exceeds the Borrowing  Base as disclosed by the
most recent  Borrowing Base  Certificate,  Borrower shall,  within ten (10) days
following  receipt  from Lender of notice of such excess,  make a prepayment  in
Dollars on the Revolving line in the amount of such excess.  No such  prepayment
shall be required,  however, to the extent that the prepayment would unavoidably
effect the prepayment of any Eurodollar Tranch or Foreign Currency Advance.

     Fee - Borrower shall pay to Lender a fee in the amount of one eighth of one
percent  (1/8 of 1%) per  annum  on the  average  daily  unused  portion  of the
Revolving Line, which fee shall be billed or invoiced and shall be due quarterly
in arrears within ten (10) days following the end of each calendar quarter.  The
unused  portion  of the  Revolving  Line on a given day shall be the  difference
between $8,000,000.00 and the sum of (i) the aggregate amount of Dollar Advances
remaining outstanding under the Revolving Line and (ii) the Dollar Equivalent of
the  aggregate of Foreign  Currency  Advances  remaining  outstanding  under the
Revolving Line.

     Collateral  -  Payment  of the  Revolving  Line  shall  be  secured  by all
collateral  which secures any  indebtedness or obligation of Borrower to Lender,
but shall be deemed secured primarily by first priority security interests, duly
perfected,  in all  accounts,  inventory,  contract  rights and chattel paper of
Borrower.  Additionally,  as set  forth  at  section  7.2,  below,  Borrower  is
extending a negative covenant in regard to certain assets of the Subsidiaries.

     Renewal and Extension - Lender will  consider  allowing an extension of the
Revolving  Line for an  additional  period of one (1) year at each June 30. Upon
any repricing of the Revolving  Line for the period June 30, 1998,  through June
30, 2000,  incident to renewal or extension,  the Dollar Reference Rate shall be
increased to no more than a varying, per annum rate equal to the Prime Rate.

<PAGE>

     2.2 The New Equipment  Line.  Each advance and each note executed under the
New Equipment Line shall be in the amount of at least  $500,000.00  and shall be
evidenced  by a note (a  "New  Equipment  Note")  substantially  in the  form of
Exhibit "2.2" attached hereto and made a part hereof.

     Purpose - To finance or refinance up to 75% of the cost of new equipment.

     Amount - Up to $7,500,000.00.

     Term -  Availability  for advances under the New Equipment Line shall lapse
after June 30, 1997,  meaning  that no new advances  shall occur after said date
unless properly requested prior to said date. Each New Equipment Note shall have
a term of  three  (3) to five (5)  years  from its  inception,  such  term to be
determined  reasonably by Lender at the time the advance is requested based upon
the type of equipment being financed (with  particular  attention being given to
the anticipated useful life thereof).

     Interest Rate - Each New Equipment Note, at Borrower's  option,  shall bear
interest  at either (i) a varying,  per annum rate equal to the Prime  Rate,  or
(ii) a fixed rate equal to the  published U. S.  Treasury  Index for issues with
maturity  dates  similar  to the New  Equipment  Note  which is  current  at the
inception of the New Equipment Note, plus one and one-quarter percent (1 & 1/4%)
per annum; provided, however, that each portion of the indebtedness evidenced by
a New Equipment Note which borrower  properly  designates as a Eurodollar Tranch
shall bear interest at the Alternate Rate. The terms and conditions  under which
Borrower may designate a Eurodollar Tranch, and all other provisions  concerning
such alternate  pricing,  are the same as those set forth in Section 2.1, above,
under  "Interest  Rate on Dollar  Advances,"  including  without  limitation the
minimum Tranch amount of  $500,000.00  and the  requirement  of advance  notice,
except that each Eurodollar Tranch designated under the New Equipment Line shall
have a Eurodollar  Interest Period of either six months or one year and upon the
expiration of a Eurodollar  Interest Period,  the principal  indebtedness  which
formerly comprised a Eurodollar Tranch shall bear interest at the Prime Rate.

     Procedure  for  Advances  - Borrower  shall  submit a written  request  for
advance,  accompanied  by copies of invoices,  and shall execute a New Equipment
Note,  security  agreement  and  financing  statement  prepared by Lender.  Each
request for  advance  shall cover only  equipment  purchased  within one hundred
eighty (180) days prior to submission of such request.

     Prepayment - Advances  under the New Equipment Line may be prepaid in whole
or in part without  penalty and without notice at any time;  provided,  however,
that the  principal  amount of a Eurodollar  Tranch may not be paid prior to the
expiration of its Eurodollar Interest Period, except as provided below.

<PAGE>

     Repayment - Each New Equipment Note shall require equal quarterly  payments
of principal,  together with accrued interest,  sufficient to fully amortize the
indebtedness  evidenced by the note by the note's  maturity date.  Prepayment of
the principal amount of a Eurodollar Tranch is permitted to the extent, and only
to  the  extent,  that  such  prepayment  is  necessary  to  maintain  scheduled
amortization  of a particular  New  Equipment  Note.  That is to say,  principal
payments on each New Equipment  Note shall first be applied to that portion,  if
any,  of the  indebtedness  evidenced  by such  note  which is not a  Eurodollar
Tranch.  For the purpose of determining when quarterly  payments of interest are
due, each Eurodollar  Tranch shall be treated as a separate item of indebtedness
in that with respect to each  Eurodollar  Tranch  having a  Eurodollar  Interest
Period of six (6)  months,  interest  shall be due three (3)  months and six (6)
months from the  inception of such Tranch,  and with respect to each  Eurodollar
Tranch having a Eurodollar  Interest  Period of one (1) year,  interest shall be
due three (3) months, six (6) months,  nine (9) months and one (1) year from the
date of inception of such Tranch.

     Collateral  - Payment  of the New  Equipment  Line  shall be secured by all
collateral  which secures any  indebtedness or obligation of Borrower to Lender,
but shall be deemed  secured  primarily by a first priority  security  interest,
duly perfected,  in all equipment  financed,  together with hazard  insurance on
said equipment in amounts and by issuers reasonably  acceptable to Lender,  with
Lender  shown as loss payee.  Only  equipment  purchased  by  Borrower  shall be
financed.  All such equipment shall remain in the United States and no equipment
shall  be moved  outside  Texas  unless  a  financing  statement  or such  other
instrument  as may be  required  to continue  perfection  of  Lender's  security
interest is duly filed in the state to which the equipment is moved.

     2.3 The Existing  Equipment Loan. The Existing  Equipment Loan is evidenced
by a certain  promissory  note  dated July 16,  1993,  in the  principal  sum of
$3,900,000.00,  payable as therein provided and being for a term ending June 30,
1997.

     Purpose - To refinance indebtedness to Texas Commerce Bank-Austin, National
Association, on Borrower's existing equipment.

     Prepayment - May be prepaid in whole or in part without penalty and without
notice at any time.

     Collateral - Payment of the Existing Equipment Loan shall be secured by all
collateral  which secures any  indebtedness or obligation of Borrower to Lender,
but is deemed secured  primarily by a first  priority  security  interest,  duly
perfected,  in  all of  Borrower's  existing  equipment,  together  with  hazard
insurance  thereon in amounts and by issuers  reasonably  acceptable  to Lender,
with Lender shown as loss payee.

     2.4 The Existing  Building Loan. The Existing Building Loan is evidenced by
a promissory  note dated March 1, 1991,  payable to Franklin  Federal Bancorp in
the principal sum of $4,200,000.00, said note and liens securing the same having
been transferred and assigned by Franklin Federal Bancorp to Lender, as renewed,
extended,  and/or otherwise  modified by a certain Extension and Modification of
Real Estate Note and Lien effective July 9, 1993. The Existing  Building Loan is
payable upon terms set forth or referred to in said note and said  Extension and
Modification of Real Estate Note and Lien over a term extending  through July 9,
2000.

<PAGE>

     Purpose - To refinance Borrower's existing indebtedness to Franklin Federal
Bancorp on Borrower's  existing  building  located at 6504 Bridge Point Parkway,
Austin, Travis County, Texas.

     Prepayment - The Existing  Building Loan may be prepaid in whole or in part
without penalty and without notice at any time.

     Collateral  - Payment  of the  Existing  Building  Loan is  secured  by all
collateral  which secures any  indebtedness or obligation of Borrower to Lender,
but is deemed  secured  primarily  by a first  lien  deed of trust and  security
agreement covering Lot 2, Hidden Valley-Phase B, a subdivision in Travis County,
Texas,  said property being known locally as 6504 Bridge Point Parkway,  Austin,
Travis County, Texas, together with all improvements thereon.

     2.5 The New Building  Loan. The New Building Loan is evidenced by a certain
Real  Estate  Lien  Note  dated  August  25,  1994,  in  the  principal  sum  of
$8,480,000.00,  as  renewed,  extended  and/or  otherwise  modified by a certain
Extension and Modification of Real Estate Note and Lien effective June 30, 1995.
The New Building Loan is payable on terms set forth in said instruments,  over a
term extending through the last day of February, 2001.

     Collateral - Payment of the New Building Loan is secured by all  collateral
which  secures any  indebtedness  or  obligation  of Borrower to Lender,  but is
deemed secured primarily by a first priority,  duly perfected deed of trust lien
on a tract of 65.250  acres,  (the "65  acres")  more or less,  out of the James
Rogers Headright Survey No. 19, in Travis County, Texas, and by a first priority
security  interest,  duly  perfected,  in all fixtures  and  personal  property,
including  building  materials,  used or acquired for use on said  acreage,  all
rights to utility services relating to said acreage,  and all contracts,  plans,
specifications,  permits,  engineering studies and documents  pertaining to said
acreage and/or improvements constructed thereon.


3. Conditions of All Advances.

     In  addition  to the  conditions  set forth  elsewhere  in this  Agreement,
Lender's  obligation  to  make  any  advance  of one or  more  of the  Loans  is
conditioned  upon  the  accuracy  of  all  of  Borrower's   representations  and
warranties, when made and on the date of such advance, to Borrower's performance
of its  obligations  under the Loan  Documents,  and to the  satisfaction of the
following additional  conditions:  (a) Lender shall have received the following,
all of which shall be duly executed and in form  acceptable  to Lender:  (1) the
signed note that will evidence  indebtedness  created by such advance;  (2) such
other  documents as Lender may customarily  and reasonably  require,  consistent
with the terms of this Agreement;  and (3) evidence satisfactory to Lender as to
the perfection  (except as otherwise  provided herein) and first priority of the
security  interests granted by the Security  Documents;  (b) no event of default
shall have  occurred and be  continuing;  (c) making such  advance  shall not be
prohibited by, or subject Lender to any penalty or onerous  condition under, any
law or legal  requirement;  and (d) Borrower shall have paid all of the expenses
for which Borrower is responsible,  as set forth in Section 10.6, below, through
the date of such advance.

<PAGE>


4. Pledge of Stock of National Instruments Japan Corporation.

     To  additionally  secure the payment and  performance  of all of Borrower's
indebtedness  and  obligations  to Lender,  Borrower  has created and granted to
Lender a pledge of or security  interest in all issued and outstanding  stock of
National  Instruments Japan Corporation,  a wholly owned subsidiary of Borrower.
Such pledge or security interest is evidenced by the Pledge Agreement of which a
copy is attached hereto and made a part hereof as Exhibit 4.


5. Representations and Warranties.

     To  induce  Lender  to enter  into this  Agreement  and to make the  Loans,
Borrower has represented and warranted,  and does hereby  represent and warrant,
as follows:

     5.1  Organization.  Borrower and the  Subsidiaries are each duly organized,
validly  existing,  and in good standing under the laws of the state and country
of their respective organization;  have all power and authority to conduct their
respective  businesses  as  presently  conducted;  and are duly  qualified to do
business  and in good  standing  in the  states  and  countries  where  they are
currently conducting business and such qualification is required.

     5.2  Financial  Statements.  The financial  statements  delivered to Lender
fairly present the financial condition and the results of operations of Borrower
and the Subsidiaries as of the dates and for the periods indicated. No material,
adverse  change has occurred in the assets,  liabilities,  financial  condition,
business,  or affairs of  Borrower or the  Subsidiaries  since the dates of such
financial  statements.  Neither  Borrower nor any  Subsidiary  is subject to any
instrument  or  agreement  materially  and  adversely  affecting  its  financial
condition, business, or affairs.

     5.3 Enforceable Obligations;  Authorization.  The Loan Documents are legal,
valid, and binding  obligations of the Parties,  enforceable  under Texas law in
accordance with their respective terms,  except as may be limited by bankruptcy,
insolvency,  and other similar laws affecting creditors' rights generally and by
general equitable principles.  The execution,  delivery,  and performance of the
Loan  Documents  have all been duly  authorized by all  necessary  action of the
Parties;  are within the power and authority of the Parties; do not and will not
contravene or violate any legal requirement or the  Organizational  Documents of
the  Parties;  do not and will not  result in the  breach  of, or  constitute  a
default under,  any agreement or instrument by which the Parties or any of their
respective  property may be bound or affected,  except for  Borrower's  existing
loan  agreements  with Texas Commerce  Bank-Austin,  National  Association,  and
Franklin  Federal  Bancorp,  which  agreements  are  expected  to be  terminated
shortly;  and do not and will not  result in the  creation  of any Lien upon any
property of any of the Parties  except as expressly  contemplated  therein.  All
necessary permits,  registrations,  and consents for such making and performance
have  been  obtained.  Except as  otherwise  expressly  stated  in the  Security
Documents,  the  Liens of the  Security  Documents  will  constitute  valid  and
perfected,  first and prior Liens on the property described therein,  subject to
no other Liens whatsoever  except for Liens for  non-delinquent ad valorem taxes
created by operation of law.

<PAGE>

     5.4 Other Debt.  Neither Borrower nor any of the Subsidiaries is in default
in the payment of any indebtedness owed by it or under any agreement,  mortgage,
deed of trust, security agreement, or lease to which it is a party.

     5.5  Litigation.   There  is  no  material   litigation  or  administrative
proceeding pending or threatened against, nor any outstanding judgment, order or
decree  affecting,  Borrower,  the  Subsidiaries or any property owned by any of
them. Neither Borrower nor any of the Subsidiaries is in default with respect to
any judgment, order or decree of any governmental authority.

     5.6 Title.  Except for the leases of equipment  identified  in filings with
the Securities and Exchange  Commission,  Borrower and the Subsidiaries each has
good and  indefeasible  title to all property which it appears or claims to own,
free and clear of all Liens.

     5.7 Taxes.  Borrower  and the  Subsidiaries  each has filed all tax returns
required  to have  been  filed and paid all taxes  due,  except  those for which
extensions  have been obtained and those which are being contested in good faith
and reserves deemed adequate by Lender have been established therefor.  Borrower
is not aware of any pending  investigation  by any taxing authority which in the
event of an adverse determination would have a material, adverse impact upon the
financial condition or the business prospects of Borrower or any Subsidiary.

     5.8 Subsidiaries.  Borrower has no Subsidiaries other than those identified
on Exhibit "1a"  attached  hereto and made a part hereof,  which shows the legal
name of each Subsidiary,  the address of its principal office, the nature of the
entity (whether corporation,  joint stock company,  limited liability company or
other), the jurisdiction under whose laws it was organized or incorporated,  the
percentage of Borrower's  ownership therein and, for each partnership,  the name
of each general and limited partner.

     5.9  Representations  by  Others.  All  statements  made by or on behalf of
Borrower  or the  Subsidiaries  in  connection  with  any  Loan  Document  shall
constitute representations and warranties of Borrower hereunder.

     5.10 Investment Company Act Not Applicable. Neither Borrower nor any of its
Subsidiaries  is  an  "investment  company,"  or a  company  "controlled"  by an
"investment  company," within the meaning of the Investment Company Act of 1940,
as amended.

     5.11 Public Utility Holding Company Act Not  Applicable.  Neither  Borrower
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding  company," or an "affiliate" of a "holding  company," or an affiliate
of a "subsidiary  company" of a "holding  company," as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended.

<PAGE>

     5.12  Regulations  G, T, U and X. None of the  proceeds of any Loan will be
used for the purpose of  purchasing  or carrying,  directly or  indirectly,  any
"margin  stock"  within the meaning of Regulation U of the Board of Governors of
the Federal  Reserve System  ("margin  stock") or to extend credit to others for
the purpose of  purchasing or carrying any margin stock or for any other purpose
which would constitute this transaction a "purpose credit" within the meaning of
said  Regulation  U, as now in effect or as the same may hereafter be in effect.
Neither  Borrower  nor any of its  Subsidiaries  will take or permit  any action
which would  involve  Lender in a  violation  of  Regulation  G,  Regulation  T,
Regulation U, Regulation X or any other  regulation of the Board of Governors of
the Federal  Reserve  System or a violation  of the  Securities  Exchange Act of
1934, in each case as now or hereafter in effect.

     5.13 ERISA.  No Reportable  Event (as defined in Section  4043(b) of ERISA)
has occurred with respect to any Plan.  Each Plan  complies with all  applicable
provisions of ERISA,  and Borrower and each of its  Subsidiaries  have filed all
reports  required  by ERISA and the Code to be filed with  respect to each Plan.
Borrower  has no  knowledge  of any event which could  result in a liability  of
Borrower or any of its Subsidiaries to the Pension Benefit Guaranty Corporation.
Borrower and its Subsidiaries  have met all requirements with respect to funding
the Plans imposed by ERISA or the Code.  Since the effective date of Title IV of
ERISA there have not been, nor are there now existing,  any events or conditions
that would  permit any Plan to be  terminated  under  circumstances  which would
cause the lien provided under Section 4068 of ERISA to attach to any property of
Borrower or any of its Subsidiaries. The value of the Plans' benefits guaranteed
under  Title IV of ERISA on the date  hereof  does not  exceed the value of such
Plans' assets  allocable to such  benefits as of the date of this  Agreement and
shall not be permitted to do so hereafter.

     5.14 No Financing of Corporate Takeovers.  None of the proceeds of any Loan
will be used to acquire  any  security  in any  transaction  which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

     5.15 Patents, Franchises,  Co-licenses,  Etc. Borrower and its Subsidiaries
own,  have  obtained or are in process of obtaining  all  material  governmental
permits, certificates of authority, leases, patents, trademarks,  service marks,
trade  names,  copyrights,  franchises  and  licenses,  and rights with  respect
thereto,  required,  advisable  or  necessary  in  Borrower's  sole,  reasonable
judgment  in  connection  with the  conduct of their  respective  businesses  as
presently conducted or as proposed to be conducted.

     5.16  Line of  Business.  The  primary  nature of the line of  business  of
Borrower  and the  Subsidiaries  is the  manufacture  and sale of  hardware  and
software for use in the process control and instrumentation industry.

     5.17  Hazardous  Materials  and  Related  Matters.   Except  for  Hazardous
Materials, if any, which are used in Borrower's business and are stored, handled
and  disposed  of  in  all  respects  in  compliance   with   applicable   legal
requirements,  no real property  owned by Borrower or, to Borrower's  knowledge,
any of the  Subsidiaries,  (i) is currently being used or is intended to be used
for the storage,  transportation,  processing or disposal of Hazardous Materials
or, to the knowledge of Borrower, has ever been used for such purposes,  (ii) is
currently being used or is intended to be used or, to the knowledge of Borrower,
has ever been used in such a way as to create an environmental condition that is
actionable  under  applicable  laws or  regulations,  (iii) to the  knowledge of
Borrower, contains any Hazardous Materials, or (iv) is currently being operated,
occupied or used in a manner which fails to comply with all  applicable  health,
safety and environmental laws, regulations and ordinances.

<PAGE>

     5.18 Survival of  Representations,  Etc. All representations and warranties
made by  Borrower  hereunder  shall  survive  the  closing  of the  transactions
contemplated  by this  Agreement and the making of the Loans  hereunder,  and no
investigation at any time made by or on behalf of Lender shall diminish Lender's
rights to rely thereon.  All  statements  contained in any  certificate or other
written instrument delivered by Borrower or by any Person authorized by Borrower
under or pursuant  to this  Agreement  or in  connection  with the  transactions
contemplated  hereby shall constitute  representations  and warranties as of the
time made by Borrower hereunder.


6.  Affirmative Covenants.

     Borrower has  covenanted and agreed with Lender,  and does hereby  covenant
and agree with Lender, that prior to (i) the termination of this Agreement, (ii)
payment in full of the Loans,  (iii)  performance of all obligations of Borrower
to Lender under the Loan Documents, and (iv) termination of all obligations,  if
any, of Lender to advance monies to or on behalf of Borrower, it will do, and if
necessary cause the Subsidiaries to do, each and all of the following:

     6.1 Taxes, Existence, Regulations, Property, Etc. At all times (a) pay when
due all taxes and  governmental  charges  of every  kind  upon  Borrower  or the
Subsidiaries,  or against  income,  profits,  or  property  of  Borrower  or the
Subsidiaries,  unless,  and only to the extent that, the same shall be contested
in good  faith and  reserves  reasonably  deemed  adequate  by Lender  have been
established  therefor;  (b) do all things  necessary to preserve  the  corporate
existence,   qualifications,   rights,   and  franchises  of  Borrower  and  the
Subsidiaries in all states and countries where such  qualification  is necessary
or desirable;  (c) comply with all applicable  legal  requirements in respect of
the conduct of the business of Borrower and the  Subsidiaries  and the ownership
of the property of Borrower and the Subsidiaries;  and (d) cause the property of
Borrower and the  Subsidiaries  to be  protected,  maintained,  and kept in good
repair  and make all  replacements  and  additions  to such  property  as may be
reasonably  necessary to conduct the  business of Borrower and the  Subsidiaries
properly and efficiently.

     6.2 Financial  Statements and Information.  Furnish to Lender the following
in regard to Borrower and the Subsidiaries:

          6.2.1 as soon as  available  and in any event within  forty-five  (45)
     days  following the end of each calendar  quarter,  a detailed  listing and
     aging  of all  accounts  receivable  of  Borrower  in the  form  heretofore
     submitted by Borrower to Lender or such other form as Lender may reasonably
     accept;

          6.2.2 as soon as  available  and in any event within  forty-five  (45)
     days  following  the  end  of  each  calendar  quarter,  a  Borrowing  Base
     Certificate  in the form attached  hereto and made a part hereof as Exhibit
     "1", signed by an officer of Borrower;

          6.2.3 within  forty-five  (45) days following the end of each calendar
     quarter,  copies of the financial  statements which Borrower files with the
     Securities and Exchange Commission for such preceding calendar quarter;

<PAGE>

          6.2.4 as soon as available and in any event within one hundred  twenty
     (120) days following the end of each of Borrower's fiscal years,  copies of
     the financial  statements  which  Borrower  files with the  Securities  and
     Exchange Commission for such preceding fiscal year;

          6.2.5 as soon as  available  and in any event within  forty-five  (45)
     days  following  the end of  each  calendar  quarter,  a  certification  by
     Borrower's chief financial officer,  in the form attached hereto and made a
     part  hereof  as  Exhibit  "6.2.5,"  of  compliance  of all  covenants  and
     financial ratios; and

          6.2.6 such other information  relating to the financial  condition and
     affairs  of  Borrower  and  the  Subsidiaries  as from  time  to  time  may
     reasonably be requested by Lender,  including without limitation statements
     of contingent  liabilities,  monthly  consolidating/consolidated  financial
     statements, and information in such reasonable detail as may be required to
     demonstrate compliance with covenants and financial ratios.

     6.3  Inspection.  Permit Lender to inspect all property of Borrower and the
Subsidiaries,  to examine the files,  books,  and  records of  Borrower  and the
Subsidiaries  and make and take away copies thereof,  and to discuss the affairs
of Borrower and the Subsidiaries with their respective officers and accountants,
all at such times and  intervals  and to such  extent as Lender  may  reasonably
desire.

     6.4 Further Assurances.  Promptly execute and deliver any and all other and
further  instruments  which may be requested by Lender to cure any defect in the
execution and delivery of any Loan Document or more fully to describe particular
aspects of Borrower's  agreements set forth in the Loan Documents or so intended
to be.

     6.5 Books and Records. Maintain its books and records,  including accounts,
in such a manner as to reflect  fairly the  financial  condition of Borrower and
the Subsidiaries.

     6.6  Insurance.  Maintain  insurance  with  such  insurers,  on such of the
properties  of Borrower and the  Subsidiaries,  in such amounts and against such
risks as is reasonably  satisfactory to Lender, and furnish Lender  satisfactory
evidence  thereof  promptly  upon  request.   These  insurance   provisions  are
cumulative of the insurance provisions of the Security Documents. Borrower shall
cause  Lender to be named as  beneficiary,  loss  payee as to  hazard  insurance
and/or additional  insured as to liability  insurance (as required by Lender) of
such insurance and shall provide Lender with copies of the policies of insurance
and a certificate of the insurer that the insurance required by this Section 6.6
may not be  canceled,  reduced,  or affected in any manner  without  thirty (30)
days' prior written notice to Lender.

     6.7 Notice of Certain  Matters.  Notify Lender in writing  immediately upon
acquiring knowledge of the occurrence of any of the following: (i) the incurring
of any  material  contingent  liability;  (ii)  the  institution  or  threatened
institution  of any  material  lawsuit or  administrative  proceeding  affecting
Borrower or any Subsidiary; (iii) the occurrence of any material, adverse change
in the assets, liabilities, financial condition, business or affairs of Borrower
or any  Subsidiary;  (iv)  the  institution  or  threatened  institution  of any
enforcement,  cleanup,  remedial,  removal or other  governmental  or regulatory
action relating to Hazardous Materials affecting property owned by Borrower or a
Subsidiary or the business  operations  of Borrower or a Subsidiary;  or (v) any
claim made or  threatened by a third party  against  Borrower or any  Subsidiary
relating to damages,  contribution,  cost recovery compensation,  loss or injury
resulting  from any Hazardous  Materials.  Additionally,  Borrower  shall notify
Lender in writing at least  thirty (30) days prior to the  occurrence  of any of
the  following:  (i)  Borrower  changes  its name or the  location  of its chief
executive  office or principal place of business or the place where it keeps its
books and records;  or (ii) the cessation of operation or  reorganization of any
existing  Subsidiary  if such event causes a material  impact on the business of
Borrower.

<PAGE>

     6.8 Use of Proceeds of the  Revolving  Line.  Use proceeds of the Revolving
Line  solely  for  working  capital  needs  of  Borrower  and the  Subsidiaries,
including the payment of any notes  executed and delivered by Borrower to Lender
in support of letters of credit which become funded.

     6.9 Current Maturities Coverage Ratio. Maintain on a consolidated basis, to
be tested as of the end of each calendar quarter, a Current Maturities  Coverage
Ratio of not less than 1.75.

     6.10 Tangible Net Worth.  Maintain on a  consolidated  basis at all times a
Tangible  Net Worth  equal to at least the sum of (i)  $65,000,000.00  plus (ii)
one-half  of  Borrower's  net  income  for  all  completed  fiscal  years  after
Borrower's fiscal year 1994.

     6.11  Maintenance  of Employee  Benefit  Plans.  Maintain  each  respective
pension,  profit sharing and other employee benefit plan and any  multi-employer
plan to which Borrower and its  Subsidiaries  may be a party in compliance  with
ERISA,  if  applicable,  and all rules and  regulations  adopted  by  regulatory
authorities  pursuant thereto and file all reports required to be filed pursuant
to ERISA and such rules and regulations.

     6.12 Pay  Indebtedness.  Pay, renew or extend the principal and interest on
all indebtedness  owed by Borrower,  and cause the Subsidiaries to pay, renew or
extend the principal and interest on all indebtedness  owed by them, as the same
becomes due and payable.

     6.13 Hazardous Materials.  Defend,  indemnify and hold harmless Lender from
any  and  all  liabilities  (including  strict  liability),   actions,  demands,
penalties,  losses,  costs or expenses (including without limitation  reasonable
attorneys' fees and remedial costs),  suits, costs of any settlement or judgment
and  claims  of any and every  kind  whatsoever  which may now or in the  future
(whether  before or after the release of any applicable  Security  Documents) be
paid, incurred or suffered by or asserted against Lender by any person or entity
or  governmental  agency for, with respect to, or as a direct or indirect result
of, the  placement  on or under,  or the  escape,  seepage,  leakage,  spillage,
discharge,  emission,  discharge or release from any property of Borrower or any
of the Subsidiaries of any Hazardous  Materials,  or arise out of or result from
the  environmental  condition of any of such properties or the  applicability of
any governmental requirement relating to Hazardous Materials (including, without
limitation,  CERCLA or any  so-called  federal,  state or local  "Superfund"  or
"Superlien" law, statute,  ordinance, code, rule, regulation,  order or decree).
The  representations,  covenants and  warranties  contained in this Section 6.15
shall survive the release of any applicable Liens held by Lender.

<PAGE>

     6.14 Borrower's Attorney's Opinion.  Lender is entitled to continue to rely
upon the opinion from counsel for Borrower which was Exhibit "6.16" to the Prior
Agreement.


7.       Negative Covenants.

     Borrower has  covenanted and agreed with Lender,  and does hereby  covenant
and agree with Lender, that prior to (i) the termination of this Agreement, (ii)
payment in full of the Loans,  (iii)  performance of all obligations of Borrower
and the Subsidiaries to Lender under the Loan Documents, and (iv) termination of
all  obligations,  if any,  of  Lender  to  advance  monies  to or on  behalf of
Borrower, it will not do any of the following,  nor will any of the Subsidiaries
do any of the following, without the prior written consent of Lender:

     7.1  Liens.  Create or suffer to exist any Lien upon any real  property  on
which Lender has a Lien or any equipment, accounts receivable,  contract rights,
inventory or chattel  paper now owned or hereafter  acquired;  or in any manner,
directly or indirectly,  sell, assign, pledge or otherwise transfer any accounts
or contract  rights;  provided,  however,  that the  following may be created or
suffered to exist:  (a)  artisans' or  mechanics'  Liens arising in the ordinary
course of  business,  and Liens for taxes,  but only to the extent that  payment
thereof shall not be due; (b) Liens in effect on the date hereof that have been,
as of such  date,  disclosed  to  Lender in  writing,  but only if  neither  the
indebtedness  secured thereby nor the property  covered thereby  increases after
such  date;  (c)  Liens in favor of  Lender;  and (d)  purchase  money  security
interests  taken or  retained to secure  payment of all or part of the  purchase
price for the property  subject to such security  interests.  Borrower  shall be
entitled  to grant Liens on any  property  which is part of the  Collateral  but
which is released by Lender.

     7.2 Negative  Pledge  Concerning  Subsidiaries.  Suffer any  Subsidiary  to
create or allow to exist any Liens  other  than Liens in favor of Lender on such
Subsidiary's accounts, contract rights, inventory or chattel paper.

     7.3 Mergers,  Consolidations,  and Dispositions and Acquisitions of Assets.
In any single transaction or series of transactions, directly or indirectly: (a)
liquidate or dissolve;  (b) be a party to any merger or  consolidation  in which
Borrower is not the  surviving  entity;  (c) sell,  convey,  or lease all or any
substantial part of the assets of Borrower or any Subsidiary, except for sale of
inventory  in  the  ordinary   course  of  business;   or  (d)  acquire  all  or
substantially  all  of the  assets  of any  Person  other  than  as  part  of an
Investment permitted under Section 7.6.

     7.4 Nature of Business. Change the primary nature of its business, or enter
into any business which is substantially different from the business in which it
is presently engaged.

     7.5  Transactions  with  Related  Parties.  Enter into any  transaction  or
agreement with any officer, director, or holder of any outstanding capital stock
of  Borrower  unless  the  same is upon  terms  substantially  similar  to those
obtainable from wholly unrelated sources.

     7.6 Loans and  Investments.  Make advances or loans to, or Investments  in,
any Person or  Persons,  other  than the  Subsidiaries,  in an annual  aggregate
amount  (to or in all such  parties)  in excess of  $10,000,000.00  without  the
prior,  written  consent  of  Lender,   Lender's  consent  not  to  be  withheld
unreasonably;  provided,  however,  that  this  limitation  shall  not  apply to
purchase or repurchase  by Borrower of capital  stock of Borrower.  This section
applies to  acquisition  of entities which are merged into Borrower but does not
apply to Investments in Permitted Investment Securities.

<PAGE>

     7.7  Hazardous  Materials.  Cause or permit any  Hazardous  Materials to be
placed,  held,  used,  located or  disposed  of on,  under or at any of its real
property or any part thereof (including  subsurface waters) by any Person except
for Hazardous  Materials,  if any, which are used in Borrower's business and are
stored,  handled and disposed of in all respects in compliance  with  applicable
legal  requirements,  or cause or permit any part of any of such  property to be
used as a manufacturing,  storage or dump site for Hazardous Materials in such a
way as to  create  an  environmental  condition  that is  actionable  under  any
federal, state or local environmental law or regulation,  or operate,  occupy or
use such  property in violation of any  environmental  requirement,  or cause or
suffer  any  Liens  to be  recorded  against  any  of  its  real  property  as a
consequence of, or in any way related to, the presence,  remediation or disposal
of  Hazardous  Materials  in or about any of its real  property,  including  any
so-called state, federal or local "Superfund" lien relating to such matters.


8.       Cross-Collateralization, Cross-Default and Release of Collateral.

     8.1 Cross-Collateralization. Each Lien, security interest and other item of
collateral  which secures any of the Loans shall secure any and all indebtedness
and obligations of Borrower to Lender,  including without limitation the payment
of all the Loans.  Except as provided in Section 8.3, below, Lender shall not be
required to release any of such collateral until all of the Loans have been paid
in full and all other  indebtedness  and  obligations of Borrower to Lender have
been paid and performed.

     8.2 Cross-Default.  Any default or event of default in regard to any of the
Loans which is not  remedied  within any  applicable  period for notice and cure
shall  constitute  default or an event of default in regard to all of the Loans,
authorizing the acceleration of maturity of any one or more of the same.

     8.3 Release of Collateral. So long as Borrower is in compliance with all of
Borrower's obligations to Lender,  Borrower shall be entitled to obtain releases
and/or partial releases of the Collateral prior to full and final payment of all
indebtedness and obligations of Borrower to Lender as set forth herein.

          (a)  Upon full and final  payment of both the New  Equipment  Line and
               the Existing  Equipment Loan,  Lender shall promptly  release its
               security interests in all equipment of Borrower.

          (b)  Upon full and final payment of the Existing Building Loan, Lender
               shall  promptly  release  all of  its  Liens,  including  without
               limitation  those  evidenced  by  Lender's  Deed  of  Trust  (And
               Security Agreement, Assignment of Rents and Financing Statement),
               on the  property  known  locally as 6504  Bridge  Point  Parkway,
               Austin,  Travis County,  Texas,  together with fixtures and other
               property   relating  to  said  real   property   such  as  plans,
               specifications and permits. This subpart (b) does not require the
               release of Lender's  security  interest in  equipment  located on
               said property.

<PAGE>

          (c)  Upon full and final  payment  of the New  Building  Loan,  Lender
               shall  promptly  release its Liens and  security  interests on or
               referable to the 65 Acres.  This subpart (c) does not require the
               release of Lender's  security  interest in  equipment  located on
               said property.

          (d)  Lender shall grant partial  releases of portions of the 65 Acres,
               with  all  costs  of  partial  releases  to be paid by  Borrower,
               provided the following occur:

                    (1) a resubdivision  of the 65 Acres is  accomplished  which
               renders the unreleased property  self-sufficient as to access and
               in all other  respects (as to its then current use or uses),  and
               fully   in   compliance   with   applicable   laws,   ordinances,
               regulations,   restrictions  and  other  requirements,  including
               without  limitation those  pertaining to frontage,  minimum area,
               zoning,   set-back  requirements,   environmental  matters,  use,
               impervious cover, drainage and density of development; and

                    (2) a current appraisal  acceptable to Lender is obtained at
               Borrower's cost which  indicates  clearly that Borrower's loan to
               value  ratio  subsequent  to a  requested  release,  taking  into
               account any prepayments,  will be no greater than the ratio which
               would  have  existed  at that  time  based on (i) the  amount  of
               indebtedness  which was  anticipated  to exist at the time of the
               partial release  calculated  solely by reference to the schedules
               of amortization  originally  established (that is, without regard
               to  prepayments  or  modifications),  and (ii) the  appraisal  or
               appraisals upon which Lender originally relied in making the Loan
               or Loans for purchase and development of the 65 Acres.

          (e)  Lender  will  consider  releasing  portions of the 65 Acres under
               alternative development arrangements such as a condominium regime
               or a long-term lease provided they do not, in Lender's  judgment,
               result in  impairment  of Lender's  collateral  and  provided all
               costs are paid by Borrower.

<PAGE>

          (f)  Upon full and final payment of the Revolving  Line,  Lender shall
               release Lender's security interests in accounts, contract rights,
               inventory  and chattel  paper of Borrower and  Lender's  negative
               pledges relating to the accounts,  contract rights, inventory and
               chattel paper of each of the  Subsidiaries,  provided that one or
               more of the following have  occurred:  (i) Lender has declined to
               extend the Revolving Line at any  anniversary of the inception of
               the Revolving Line for an additional period of one (1) year, with
               the Dollar  Reference  Rate during such period of extension to be
               no greater than a varying, per annum rate equal to the Prime Rate
               and  otherwise  upon   substantially  the  same  terms  as  those
               originally  applicable  to the  Revolving  Line;  (ii) Lender has
               declined to increase the amount of the Revolving Line in response
               to  Borrower's  request  therefor,   although  such  increase  is
               supported  by the then  current  Borrowing  Base and Borrower has
               obtained a  commitment  from  another  financial  institution  to
               extend to Borrower a revolving  line of credit in such  increased
               amount on terms otherwise generally  comparable to those extended
               by  Lender;  or (iii) at any time  after  four (4) years from the
               inception of the  Revolving  Line,  Lender has  received  written
               notice  from  Borrower  that  another  financial  institution  is
               offering  to extend a  revolving  line of credit to  Borrower  on
               terms which Borrower considers more favorable than those afforded
               by Lender,  setting forth in reasonable  detail the terms offered
               by the other  financial  institution,  and Lender has declined to
               modify its terms to "match" those offered by such other financial
               institution  within  twenty-one  (21) days  following  receipt of
               notice  thereof  by  Lender.  If  such  payment  and  release  of
               collateral  occur within four (4) years from the inception of the
               Revolving Line, Lender shall be entitled to increase the interest
               rate on all remaining indebtedness of Borrower to Lender (meaning
               each  individual  Loan) by  one-fourth of one percent (1/4 of 1%)
               per annum.  If such payment and such release of collateral  occur
               more than  four (4) years  from the  inception  of the  Revolving
               Line, Lender shall not be entitled to increase such interest rate
               or rates. 

                    Upon full and final payment of the Revolving Line after four
               (4) years from the inception of the Revolving Line,  Lender shall
               release Lender's security interests in accounts, contract rights,
               inventory  and chattel  paper of Borrower and  Lender's  negative
               pledges relating to the accounts,  contract rights, inventory and
               chattel paper of each of the Subsidiaries  even if one or more of
               (i),  (ii) and (iii),  set forth  above,  has not  occurred,  but
               Lender shall be entitled in such event to require  that  Borrower
               pay all of Borrower's remaining  indebtedness to Lender by a date
               set by  Lender,  which  date  shall  be at  least  two (2)  years
               following such release.  Lender shall notify Borrower of Lender's
               requirement at least one (1) year in advance of the date by which
               Borrower's  remaining  indebtedness  to Lender is  required to be
               paid.

<PAGE>

     8.4  Payment  of   Indebtedness.   Upon  full  and  final  payment  of  all
indebtedness  of Borrower to Lender,  Lender shall  promptly  release all of the
Collateral.


9.       Events of Default and Remedies.

     9.1 Events of Default.  Each of the following  described events shall be an
event of default:

          (a)  Borrower fails to pay any of Borrower's indebtedness to Lender or
               any other amount owed under the Loan  Documents as due and within
               five (5) business  days  following  the date on which the same is
               due;

          (b)  Default shall be made in the  performance of any term,  covenant,
               negative covenant or agreement  contained in this Agreement,  the
               Loan Documents or any other  instruments  securing the payment of
               any  indebtedness  of Borrower to Lender,  other than  failure to
               comply  with the  financial  covenants  or  ratios  set  forth in
               Sections 6.9 and 6.10 of this Agreement;

          (c)  Any  representation or warranty herein contained or any financial
               statement,  certificate  report or opinion submitted to Lender in
               connection with the Loans, or pursuant to the requirements of the
               Loan Documents,  shall prove to have been incorrect or misleading
               in any material respect when made;

          (d)  Borrower fails to be in compliance  with any financial  covenants
               or ratios  contained in Sections 6.9 and 6.10 of the Agreement as
               of the  end  of two  (2)  consecutive  quarter-annual  accounting
               periods;

          (e)  Any judgment  against  Borrower or any  attachment  or other levy
               against the property of Borrower  with respect to a claim remains
               unpaid,  not  superseded  on  appeal  or  unstayed  on  appeal by
               agreement with the judgment creditor, undischarged, not bonded or
               not dismissed for a period of thirty (30) days;

          (f)  Borrower  sells or abandons,  other than in the regular course of
               Borrower's business,  or encumbers (except as otherwise expressly
               permitted  by the  Loan  Documents)  any of the  property  now or
               hereafter  subject  to any of the  Security  Documents  (it being
               understood,  however,  that  Borrower  is  entitled  to  exercise
               reasonable  discretion in regard to disposition  and placement of
               Borrower's equipment); or any levy, seizure or attachment is made
               thereof or  thereon;  or any order is  entered in any  proceeding
               against  Borrower  decreeing  the  dissolution,   liquidation  or
               split-up of Borrower, and such order remains in effect for thirty
               (30) days;

<PAGE>

          (g)  Borrower  makes  an  assignment  for the  benefit  of  creditors,
               becomes  insolvent,  fails  generally  to pay its  debts  as they
               become  due,  petitions  or  applies  to  any  tribunal  for  the
               appointment of a trustee, custodian,  receiver, (or other similar
               official) of, or for,  Borrower or of all or any substantial part
               of the assets of  Borrower or  commences a voluntary  case or any
               other  proceedings  relating  to Borrower  under any  bankruptcy,
               reorganization,  compromise arrangement, insolvency, readjustment
               of debt, dissolution or liquidation or similar law (herein called
               the "bankruptcy law") of any jurisdiction;

          (h)  Any petition or application is filed, or any such proceedings are
               commenced,  against  Borrower  under  the  bankruptcy  law of any
               jurisdiction,  and Borrower by any act or omission  indicates its
               approval,  consent  or  acquiescence,  or an order for  relief is
               entered in an involuntary case under the federal  bankruptcy laws
               as now or hereafter constituted,  or an order, judgment or decree
               is  entered   appointing   any  trustee,   custodian,   receiver,
               liquidator  or similar  official for Borrower or any  substantial
               part  of  its  assets  or  adjudicating   Borrower   bankrupt  or
               insolvent, or approving the petition in any such proceedings, and
               such order,  judgment or decree  remains in effect for sixty (60)
               days; or

          (i)  Borrower conceals,  removes or permits to be concealed or removed
               any part of its property, with intent to hinder, delay or defraud
               its creditors,  or any of them, or makes or suffers a transfer of
               any of its property which may be fraudulent under any bankruptcy,
               fraudulent  conveyance  or  similar  law;  or shall have made any
               transfer of its property to or for the benefit of a creditor at a
               time when other creditors similarly situated have not been paid.

If an event of default occurs under this Section 9.1, then Lender shall have the
right,  subject to Section 9.4 , below,  to do any or all of the following:  (1)
declare  all or any  part  of  Borrower's  indebtedness  to  Lender  to be,  and
thereupon the same shall  forthwith  become,  immediately  due and payable;  (2)
cease all advances of the Loans and terminate all other commitments of Lender to
Borrower;  (3) exercise  its right of offset  against each account and all other
property of Borrower in the possession of Lender,  which right is hereby granted
by Borrower to Lender; and (4) exercise any and all other rights pursuant to the
Loan Documents.

<PAGE>

     9.2 Other Remedies. In addition to and cumulative of any rights or remedies
provided in Section 9.1 hereof,  if any one or more events of default shall have
occurred,  Lender may proceed to protect and enforce its rights hereunder by any
appropriate proceedings, and the Liens evidenced by the Security Documents shall
be subject to foreclosure in any manner provided therein or by law as Lender may
elect.  Lender may also  proceed  to enforce  the  specific  performance  of any
covenant  contained in any of the Loan Documents,  to enforce the payment of the
notes held by Lender, and to enforce any other legal or equitable right provided
under any of the Loan Documents or otherwise existing under any law.

     9.3 Remedies Cumulative. No remedy, right or power conferred upon Lender is
intended to be exclusive of any other remedy,  right or power given hereunder or
now or hereafter existing at law, in equity or otherwise, and all such remedies,
rights and powers shall be cumulative.

     9.4 Notice and Right to Cure. Any provisions  (other than the last sentence
of this Section 9.4) herein to the contrary  notwithstanding,  Lender shall not,
as the result of any Curable Event of Default,  exercise any remedy  provided in
any of the Loan Documents  unless Lender has previously  given written notice of
that Curable  Event of Default to Borrower and that Curable Event of Default has
continued for a certain period (the "Cure Period") after such written notice was
so given. With respect to each Curable Event of Default that is a failure to pay
or a default in paying any amount of money,  the Cure  Period  shall be ten (10)
days; and with respect to all other Curable  Events of Default,  the Cure Period
shall be thirty (30) days or, with  respect to any such other  Curable  Event of
Default that cannot be cured within  thirty (30) days,  such longer,  reasonable
period of time as is acceptable  to Lender.  As used herein,  "Curable  Event of
Default"  means any event of default  except any event  described in Subsections
(d),  (e),  (h),  (i) and (j) of Section  9.1. In no event shall Lender have any
obligation  to advance  any funds to Borrower at a time when an event of default
has occurred and is continuing.

10.      Miscellaneous.

     10.1 Letters of Credit.  All letters of credit issued hereunder shall be in
Dollars only and the terms of all letters of credit shall be subject to Lender's
reasonable approval. Prior to the issuance of a letter of credit, Borrower shall
submit a letter of credit  application  and promissory note in the form or forms
customarily  employed by Lender.  Concurrently  with the issuance of a letter of
credit,  Borrower shall pay a letter of credit fee (computed on the basis of the
term of the  letter of  credit)  as  determined  by Lender  in  accordance  with
Lender's customary  practices and rates.  Lender shall not be obligated to issue
under the Revolving Line any letter of credit which has a term extending  beyond
the scheduled maturity of the Revolving Line.

     10.2 Foreign Currency Trading  Transactions.  If Borrower  desires,  Lender
intends  to enter  into  Foreign  Exchange  Trading  Transactions  on  behalf of
Borrower.  Lender's  willingness to enter such  transactions is conditioned upon
the concluding of an understanding concerning the parameters of the same.

     10.3 Negative Pledge of Intellectual  Property.  Borrower  covenants not to
grant  a  security  interest  in,  pledge  or  otherwise  encumber  any  of  its
intellectual property (patents,  copyrights, trade secrets and the like) for the
benefit of a third party without Lender's prior,  written  consent.  To evidence
such covenant,  Borrower shall execute a UCC-1  Financing  Statement to be filed
with the Secretary of State of Texas.

<PAGE>

     10.4 Use of Proceeds  of  Insurance.  So long as Borrower is in  compliance
with all of Borrower's  obligations to Lender,  Borrower shall be allowed to use
all proceeds of hazard insurance on Lender's collateral to repair or replace the
item damaged or destroyed,  it being  understood that any  replacement  property
acquired shall be part of Lender's collateral.

     10.5 Use of Proceeds of Condemnation.  So long as Borrower is in compliance
with all of  Borrower's  obligations  to Lender,  Borrower  shall be entitled to
apply any proceeds of  collateral  taken in a  condemnation  proceeding or under
threat of  condemnation  to repair or replacement of the property  affected,  it
being  understood  that  any  replacement  property  acquired  shall  be part of
Lender's collateral.

     10.6  Expenses.  Borrower  shall pay all  attorney's  fees and other  costs
incurred by Lender in connection  with the  preparation  and  concluding of this
Agreement.  Borrower shall also pay all attorney's fees and other costs incurred
by Lender in connection with any further extension,  renewal and/or modification
of any of the Loans.  However,  Borrower  shall not be  required  to pay for any
further  appraisals or environmental  site assessments  unless Lender determines
that such  appraisals or  assessments  are  necessitated  by the  occurrence and
continuation of an event of default,  even if such event of default is waived by
Lender.

     10.7 Calculation of Interest.  Interest on the Loans shall be calculated on
the basis of a 360-day year,  with the result that the daily interest rate shall
be 1/360th of the stated per annum rate; provided,  however, that interest shall
never be due on any  Loan at a rate  higher  than the  Highest  Lawful  Rate.  A
different  basis of  calculation  may be used in regard to a particular  Foreign
Currency  Advance if such different  basis is customary in the country where the
foreign  currency  advanced is legal  tender,  but any such  variation  shall be
disclosed fully to Borrower.

     10.8 Chapter 15 of the Texas  Credit  Code.  Chapter 15 of the Texas Credit
Code  is  not  applicable  to any of  the  Loans  or to any of the  transactions
contemplated by this Agreement.

     10.9 Application of Prepayments.  The partial prepayment by Borrower of any
of the Loans which requires periodic payments of principal and/or interest shall
not  interrupt  the accrual of periodic  payments.  All such  prepayments  shall
rather be  applied  to the  principal  balance  due at  maturity  or to the last
principal payments becoming due, in inverse order.

     10.10 No Waiver.  No failure to exercise and no delay on the part of Lender
in  exercising  any power or right in  connection  herewith  or under any of the
other Loan Documents shall operate as a waiver thereof,  nor shall any single or
partial   exercise  of  any  such  right  or  power,   or  any   abandonment  or
discontinuance of steps to enforce such a right or power,  preclude any other or
further  exercise thereof or the exercise of any other right or power. No course
of dealing between Borrower and Lender shall operate as a waiver of any right of
Lender.  No  modification  or waiver of any  provision of this  Agreement or any
other Loan  Document  nor any consent to any  departure  therefrom  shall in any
event be effective  unless the same shall be in writing and signed by the person
against  whom  enforcement  thereof  is to be  sought,  and then such  waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.

<PAGE>

     10.11 Notices. All notices under the Loan Documents shall be in writing and
either (i)  delivered  against  receipt  therefor,  (ii) mailed by registered or
certified mail, return receipt  requested,  or (iii) sent by telecopy,  telex or
telegram, in each case addressed as follows:


                  (a)      If to Borrower, to:

                           National Instruments Corporation
                           6504 Bridge Point Parkway
                           Austin, Texas 78730-5039
                           Attn:    Joel B. Rollins
                           Telecopy: (512) 795-6913

                           With a copy to:

                           Graves, Dougherty, Hearon & Moody
                           P. O. Box 98
                           Austin, Texas 78767
                           Attn:  Mr. Clarke Heidrick
                           Telecopy: (512) 478-1976



                  (b)      If to Lender, to:

                           NationsBank of Texas, N.A.
                           501 Congress Avenue
                           Austin, Texas 78701
                           Attn:  Mr. Eric Kosmin
                           Telecopy: (512) 397-2052

                           With a copy to:

                           Pearce, Smith & Akin, L.L.P.
                           116 W. 8th Street, Ste. 201
                           Georgetown, Texas  78626
                           Attn:  Mr. R. Harry Akin
                           Telecopy:  (512) 930-4177

or to such other  address as a party may  designate.  Notices shall be deemed to
have been given  (whether  actually  received  or not) when  delivered  (or,  if
mailed,  on the next  business  day);  however,  the notices to Lender  shall be
effective only when actually received by Lender.

     10.12 Governing Law. Unless otherwise specified therein, each Loan Document
shall be governed by and construed in  accordance  with the laws of the State of
Texas and the United States of America.  Borrower hereby irrevocably agrees that
any legal  proceeding  against Lender arising out of or in connection  with this
Agreement or the other Loan Documents shall be brought in the district courts of
Travis  County,  Texas,  or in the United States  District Court for the Western
District of Texas, Austin Division.

<PAGE>

     10.13 Survival; Parties Bound. All representations,  warranties, covenants,
and  agreements  made by or on behalf of Borrower in connection  herewith  shall
survive the execution and delivery of the Loan Documents,  shall not be affected
by an  investigation  made  by any  Person,  and  shall  bind  Borrower  and its
successors,  trustees,  receivers  and  assigns  and inure to the benefit of the
successors  and  assigns  of Lender,  provided  that the  undertaking  of Lender
hereunder  to make  Loans to  Borrower  shall  not inure to the  benefit  of any
successor or assign of Borrower.  The term of this Agreement  shall be until the
final  maturity  of the Loans and the  payment of all amounts due under the Loan
Documents.

     10.14 Usury Not Intended;  Refund of Any Excess Payments.  It is the intent
of the parties in the execution and performance of this Agreement to contract in
strict  compliance  with the usury  laws of the  State of Texas  and the  United
States of America from time to time in effect.  In furtherance  thereof,  Lender
and Borrower stipulate and agree that none of the terms and provisions contained
in this Agreement or the other Loan Documents  shall ever be construed to create
a contract to pay for the use, forbearance,  or detention of money with interest
at a rate in excess of the  Highest  Lawful  Rate and that for  purposes  hereof
"interest" shall include the aggregate of all charges which constitute  interest
under such laws that are contracted for, reserved,  taken,  charged, or received
under this Agreement. In determining whether or not the interest paid or payable
under any specific  contingency  exceeds the Highest  Lawful Rate,  Borrower and
Lender shall, to the maximum extent  permitted  under  applicable law, (a) treat
all Loans as but a single  extension  of credit (and  Borrower  and Lender agree
that  such is the case and  that  provision  herein  for  multiple  loans is for
convenience only), (b) characterize any nonprincipal payment as an expense, fee,
or premium rather than as interest,  (c) exclude  voluntary  prepayments and the
effects  thereof,  and (d) "spread" the total amount of interest  throughout the
entire  contemplated  term of the Loans.  The provisions of this paragraph shall
control over all other provisions of the Loan Documents which may be in apparent
conflict herewith.

     10.15 Captions.  The headings and captions  appearing in the Loan Documents
have been  included  solely  for  convenience  and shall  not be  considered  in
construing the Loan Documents.

     10.16 Attorneys' Fees. Borrower agrees that if at any time Borrower asserts
a claim or cause of action  against  Lender and fails to obtain a final judgment
in Borrower's favor,  Borrower shall pay all attorneys' fees, costs and expenses
incurred by Lender in defending  against  such claim or cause of action.  Lender
agrees  that if at any time  Lender  asserts a claim or cause of action  against
Borrower and fails to obtain a final  judgment in Lender's  favor,  Lender shall
pay all reasonable  attorneys' fees, costs and expenses  reasonably  incurred by
Borrower in defending against such claim or cause of action.

     10.17  Severability.  If any  provision  of any  Loan  Documents  shall  be
invalid,  illegal or  unenforceable in any respect under any applicable law, the
validity,  legality and enforceability of the remaining  provisions shall not be
affected or impaired thereby.

<PAGE>

     10.18 Set-Off by Borrower.  All payments by Borrower  under this  Agreement
shall be made without set-off or counterclaim  and free and clear of and without
deduction for any taxes, levies,  imposts,  duties,  charges,  fees, deductions,
withholdings,  compulsory loans, restrictions or conditions of any nature now or
hereafter  imposed or levied by any  country  (other  than the United  States of
America)  or any  political  subdivision  thereof  or taxing or other  authority
therein  unless  Borrower  is  compelled  by  law  to  make  such  deduction  or
withholding. If any such obligation is imposed upon Borrower with respect to any
amount payable by it to Lender  hereunder,  Borrower will pay to Lender,  on the
date on which such amount  becomes due and payable  hereunder,  such  additional
amount as shall be  necessary  to enable  Lender to receive  the same net amount
which it would  have  received  on such  due  date had no such  obligation  been
imposed upon Borrower.  Borrower will deliver promptly to Lender certificates or
other valid  vouchers for all taxes or other charges  deducted from or paid with
respect to payments made by Borrower.

     10.19  Sale  or  Assignment.   Lender  reserves  the  right,  in  its  sole
discretion,  without notice to Borrower,  to sell  participations  or assign its
interest,  or both,  in all or any part of any Loan,  the notes  evidencing  the
Loans or any commitment evidenced by this Agreement or the other Loan Documents.

     10.20   Loan   Agreement   Controls.   If  there  are  any   conflicts   or
inconsistencies  among this Agreement and any of the other Loan Documents,  this
Agreement shall prevail and control.

     10.21  Commitment.  Lender has no  commitment or obligation to lend sums to
Borrower or to renew,  extend or  otherwise  modify any of the Loans,  except as
specifically set forth herein.

     10.22  Confidentiality.  That certain  Nondisclosure  Agreement executed by
Lender and Borrower  under date of April 6, 1993,  shall  continue in full force
and effect until this Agreement is terminated and thereafter.

     10.23 Termination of Agreement. This Agreement shall terminate at such time
as all of the Loans and all other  amounts due in  connection  with the Loans or
this  Agreement  have  been  paid in full and  Lender  has  released  all of the
Collateral; provided, however, that the indemnity provisions herein in regard to
Hazardous Materials and any other agreements, covenants and indemnity provisions
herein which would logically  survive the  termination of this Agreement,  shall
survive indefinitely.

     10.24 No Claims by  Borrower.  To induce  Lender to accept and execute this
Agreement,  Borrower  warrants  and  represents  that the  Loans  and the  notes
evidencing the same are subject to no credit,  charge,  claim or right of offset
or deduction  of any kind  whatsoever.  Additionally,  Borrower  hereby  forever
releases and discharges Lender from any and all claims,  demands,  and causes of
action,  of any and every  nature  whatsoever,  which arise from or are related,
either  directly or indirectly,  to the Loans and/or to collateral  securing the
same and are based upon events occurring to date.

<PAGE>

     10.25 ENTIRE  AGREEMENT.  THE WRITTEN LOAN  AGREEMENT  (CONSISTING  OF THIS
INSTRUMENT AND OTHER WRITTEN INSTRUMENTS EXECUTED AND DELIVERED IN REGARD TO THE
LOANS)  REPRESENTS  THE  FINAL  AGREEMENT  BETWEEN  THE  PARTIES  AND MAY NOT BE
CONTRADICTED  BY  EVIDENCE  OF  PRIOR,   CONTEMPORANEOUS,   OR  SUBSEQUENT  ORAL
AGREEMENTS OF THE PARTIES.

     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date set forth above.

                                          BORROWER:

                                          NATIONAL INSTRUMENTS CORPORATION,
                                          a Delaware corporation

                                          By:  /s/  Joel B. Rollins

                                          Joel B. Rollins
                                          (Name typed or printed)

                                          Its:  Vice President of Finance


                                          LENDER:

                                          NATIONSBANK OF TEXAS, N.A.,
                                          a national banking association

                                          By:  /s/ Eric Kosmin
                                          Eric Kosmin
                                          (Name typed or printed)

                                          Its: Vice President



<PAGE>

                                   Exhibit "1"

                        NATIONAL INSTRUMENTS CORPORATION
                           BORROWING BASE CERTIFICATE

                              For the Period Ending
                                 ________, 19__

DOMESTIC ACCOUNTS RECEIVABLE

Total Domestic Accounts Receivable                              ________________

                 less:    Accounts of subsidiaries
                          and accounts of shareholders
                          of NIC or its subsidiaries            ________________

                          Retainage                             ________________

                          Accounts with terms > 45 days         ________________

                          Past due accounts
                          (greater than 90 days)                ________________

Subtotal Eligible Domestic Accounts                             ________________

A)    80% of Eligible Domestic Accounts                         ________________

INVENTORY

B)    The lesser of 50% of all Domestic Finished
      Goods Inventory or $2,000,000                            _________________

C)    Borrowing Base (A + B)                                   _________________


CREDIT SUBJECT TO BORROWING BASE

D)    U.S. Dollar Advances
      (including Eurodollar Tranches)                          _________________

U.S. Dollar Equivalent of Foreign Currency
Advances (FCA's)                                               _________________

E)    115% of U.S. Dollar Equivalent of FCA's                  _________________

F)    Total Letter of Credits Issued

U.S. Dollar Equivalent of Foreign Exchange
Trading Transactions (F/X's)                                   _________________

G)    15% of U.S. Dollar Equivalent of F/X's                   _________________

H)    Total Credit Subject to Borrowing Base
(D+E+F+G)                                                      _________________

I)    Availability
The lesser of [$8,000,000-H] or [C-H])                         _________________

<PAGE>

                              OFFICER CERTIFICATION

     As an officer of National Instruments Corporation, I that he responsibility
for the  accuracy of the above  information  and certify  that to the best of my
actual  knowledge,  it is  true  and  correct  and no  events  of  default  were
continuing at the close of the period.

                                         National Instruments Corporation

                                            By:________________________

                                           Title:______________________

                                            Date:______________________


<PAGE>

                                  Exhibit "1a"

                              LIST OF SUBSIDIARIES


         "NIC"= National Instruments Corporation
         "NIE" = National Instruments Europe Corporation

1.       Export (Barbados) Ltd.
         Corporate Services Division
         P.O. Box 634C
         Collymore Rock
         Barbados

         Type of Operation:  Foreign Sales Corp.
         Ownership:  NIC 100%
         Place of Incorporation: Barbados

2.       NI/GSI, Inc.
         6504 Bridge Point Parkway
         Austin, Texas 78730

         Type of Operation:  Design and Sale of Software Products
         Ownership:  NIC 100%
         Place of Incorporation: Texas

3.       National Instruments (Ireland) Limited
         St. John's Court
         Old Swords Road
         Santry
         Dublin 9, Ireland

         Type of Operation:  Centralized European Logistical Support Services
         Ownership:  NIC 100%
         Place of Incorporation:  Ireland

4.       National Instruments (Korea) Corporation
         Room #201, Seocho B/D
         1680-3 Seocho-dong, Seocho-ku
         Seoul, Korea 137-070

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Korea



<PAGE>

5.       National  Instruments  Australia Corporation
         Technology House
         1st Floor
         Maroondah Hwy
         Ringwood North, Victoria 3134
         Australia

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Texas

6.       National Instruments Belgium N.V.
         Leuvensesteenweg 613
         B-1930 Zaventem
         Belgium

         Type of Operation:  Sales and Support
         Ownership:  NIC 99%, NIE 1%
         Place of Incorporation: Belgium

7.       National Instruments  Canada Corporation
         P.O. Box 42252
         Queen Street South
         Mississauga, ON
         Canada L5M 4Z0

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Texas

8.       National Instruments Corporation (UK) Limited
         21 Kingfisher Court
         Hambridge Road
         Newbury, Berkshire RG 14 5SJ
         United Kingdom

         Type of Operation:  Sales and Support
         Ownership:  National Instruments United Kingdom Corporation 100%
         Place of Incorporation: United Kingdom



<PAGE>

9.       National Instruments  de Mexico, S.A. de C.V.
         Galileo, 31B
         Suite 570
         Col. Polanco
         Mexico, D.F.

         Type of Operation:  Sales and Support
         Ownership:  NIC 99%, NIE 1%
         Place of Incorporation: Mexico

10.      National Instruments Europe Corporation
         c/o Gijs H. J. Heutink
         Frederiksplein 42
         1017 XN
         Amsterdam

         Type of Operation:  Centralized European Inventory
         Ownership:  NIC 100%
         Place of Incorporation: Texas

11.      National  Instruments  Finland Oy
         P.O. Box 2
         SF-02631 Espoo, Finland

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Finland

12.      National  Instruments  France Corporation
         Centre d'affaires Paris Nord
         Immeuble Le Continental-BP217
         153 Le Blanc-Mesnil CEDEX
         France

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Texas

13.      National  Instruments  Germany GmbH
         Konrad-Celtis Str. 79
         81369 Munich
         Germany

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Germany

<PAGE>

14.      National  Instruments  Gesellschaft m.b.H.
         Plainbachstr. 12
         5101 Salzburg - Bergheim
         Austria

         Type of Operation:  Sales and Support
         Ownership:  NIC  98%, NIE 2%
         Place of Incorporation: Austria

15.      National Instruments Hong Kong Limited
         Unit 10, 6/F, Block B
         New Trade Plaza
         On Ping Street
         Shatin, N.T.
         Hong Kong

         Type of Operation:  Sales and Support
         Ownership: NIC 99.98 %; NIE .02 %
         Place of Incorporation: Hong Kong


16.      National Instruments International Distribution B.V.
         c/o Gijs H. J. Heutink
         Frederiksplein 42
         1017 XN
         Amsterdam

         Type of Operation:  Holding Company, European Software Reproduction and
         Distribution
         Ownership:  NIC 100%
         Place of Incorporation: Netherlands

17.      National Instruments Israel Ltd.
         c/o KARDIS
         P.O. Box 184
         Givatayim 53101
         Israel

         Type of Operation:  Sales and Support
         Ownership:  NIC 99%, NIE 1%
         Place of Incorporation: Israel


<PAGE>

18.      National  Instruments  Italy s.r.l..
         Via Anna Kuliscioff, 22
         Milan, Italy

         Type of Operation:  Sales and Support
         Ownership:  NIC 95%; NIE 5%
         Place of Incorporation: Italy

19.      National  Instruments  Japan Kabushiki Kaisha
         Shuwa Shiba Park Bldg. B-5F
         Shibakoen 2-4-1, Minato-ku
         Tokyo Japan 105

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation:  Japan

20.      National  Instruments  Netherlands B.V.
         Popmolenlaan 25
         3347 GK Woerden
         The Netherlands

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Netherlands

21.      National Instruments Netherlands Investment B.V.
         c/o Gijs H. J. Heutink
         Frederiksplein 42
         1017 XN
         Amsterdam

         Type of Operation:  Management Company
         Ownership:  NIC 100%
         Place of Incorporation: Netherlands

22.      National  Instruments Scandinavia Corporation

         National Instruments Norway
         Industrigt. 15
         Postboks 592
         Lierstranda
         Norway



<PAGE>

         National Instruments Denmark
         Christianshusvej 189
         Horsholm
         Denmark

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Texas

23.      National Instruments Singapore (PTE) Ltd.
         138 Cecil Street, #05-03
         #05-03 Cecil Court
         Singapore 069538

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Singapore

24.      National  Instruments  Spain S.L.
         Europa Empresarial
         C/Rozabella No 6
         Edf. Paris, 2o Planta, Oficina No 8
         28230-Las Rozas
         Madrid, Spain

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Spain

25.      National  Instruments  Sweden A.B.
         Box 2004
         Rasundavagen 166
         171 02 Solna
         Sweden

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Sweden



<PAGE>

26.      National  Instruments  Switzerland Corporation
         Sonnenbergstr. 53
         CH-5408 Ennetbaden
         Switzerland

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Texas

27.      National Instruments Taiwan Corporation
         3F, NO. 97-1
         Ho Ping East Road Section 3
         Taipei, Taiwan

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Texas

28.      National  Instruments  United Kingdom Corporation
         Church Street
         Basingstoke RG 21 7QQ
         England

         Type of Operation:  Sales and Support
         Ownership:  NIC 100%
         Place of Incorporation: Texas

29.      NI Cayman Islands
         1st Hone Tower
         British American Centre
         Dr. Roy's Drive
         George Town, Grand Cayman
         BWI

         Type of Operation:  Research and Development
         Ownership:        Travis Investments C.V. 99%;
         National Instruments International Distribution B.V. 1%
         Place of Incorporation: Cayman Islands



<PAGE>

30.      Travis Investments C.V.
         c/o Gijs H.. J. Heutink
         Frederiksplein 42
         1017 XN
         Amsterdam

         Type of Operation:  Participation in Management and Finance Corporation
         Ownership: NIC 99%; National Instruments Netherlands Investment B.V. 1%
         Place of Incorporation:  Amsterdam





<PAGE>

                                  EXHIBIT "2.1"

                   THIRD EXTENSION OF REVOLVING LINE OF CREDIT


THE STATE OF TEXAS                  

COUNTY OF TRAVIS           

     WHEREAS,  NationsBank of Texas, N.A.  ("Lender") is the legal and equitable
owner and holder of that  certain  Revolving  Line of Credit  Note  executed  by
National Instruments Corporation,  a Texas corporation,  payable to the order of
Lender under date of July 6, 1993,  in the  principal  sum of Eight  Million and
No/100 Dollars ($8,000,000.00),  as renewed,  extended and/or otherwise modified
by a certain Extension of Revolving Line of Credit dated June 30, 1994, and by a
certain  Second  Extension  of  Revolving  Line of Credit  dated June 30,  1995,
executed  by  Lender  and  by  National  Instruments  Corporation,   a  Delaware
Corporation,   ("Borrower")   successor   by  merger  to  National   Instruments
Corporation, a Texas corporation; and

     WHEREAS, Borrower desires to further extend or rearrange the time or manner
of  payment  of said  Revolving  Line of Credit  Note,  and Lender has agreed to
extend or rearrange the same as hereinafter provided;

     NOW,  THEREFORE,  in consideration of the extension or rearrangement of the
time or  manner of  payment  of said note as  hereinafter  set forth by  Lender,
Borrower hereby renews said note and promises to pay to the order of Lender,  at
P. O. Box 908, 501 Congress Avenue, in the City of Austin, Travis County, Texas,
the sum of Eight Million Dollars ($8,000,000.00), or such different amount as is
actually  advanced,  together  with  interest  thereon  on  the  balance  of the
principal  sum  advanced  and  remaining  unpaid,  at a per annum  rate or rates
determined in accordance  with that certain  Amended and Restated Loan Agreement
(the "Loan Agreement") by and between Lender and Borrower, as follows:

          except as  provided  in the Loan  Agreement  with  respect to what are
          referred  to therein  as  Eurodollar  Tranches  and  Foreign  Currency
          Advances,  accrued interest is payable  quarter-annually  beginning on
          the last day of  September,  1996,  and  continuing on the last day of
          each December,  March, June and September  thereafter,  through March,
          1998,  and the entire  principal  balance,  together  with accrued and
          unpaid interest, is due and payable on or before June 30, 1998.

     All liens and security interests which formerly secured the payment of said
Revolving  Line of Credit  Note,  are renewed and carried  forward to secure the
payment of said note, as extended or rearranged hereby.

     All terms and  provisions of said  original  note and of the  instrument or
instruments  securing  the same  shall be and remain in full force and effect as
therein written except as expressly  provided herein or in another instrument in
writing signed by the parties.

<PAGE>

     Borrower warrants and represents to Lender that the indebtedness  evidenced
by said  note is  subject  to no  credit,  charge,  claim or right of  offset or
deduction of any kind whatsoever. Additionally, Borrower hereby forever releases
and discharges Lender from any and all claims,  demands and causes of action, of
any and  every  nature  whatsoever,  which  arise  from or are  related,  either
directly or indirectly,  to such indebtedness  and/or to collateral securing the
same, and are based upon events occurring to date.

     THE WRITTEN LOAN AGREEMENT  (CONSISTING OF WRITTEN  DOCUMENTS  EXECUTED AND
DELIVERED IN CONNECTION  WITH THE SUBJECT LOAN)  REPRESENTS THE FINAL  AGREEMENT
BETWEEN  THE  PARTIES  AND  MAY  NOT  BE  CONTRADICTED  BY  EVIDENCE  OF  PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     EXECUTED to be effective the 30th day of June, 1996.

                                    NationsBank of Texas, N.A.


                                    By:
                                    Eric Kosmin, Vice President


                                    National Instruments Corporation, a Delaware
                                    corporation


                                    By:
                                    Joel B. Rollins, Chief Financial Officer



<PAGE>

                                  EXHIBIT 2.1a
                               REQUEST FOR ADVANCE

     The  undersigned  hereby  requests  NationsBank  of Texas to advance (or to
designate as a Eurodollar Tranch) the following amount on the terms indicated:

AMOUNT:
______ Amount ______________ in U.S. Dollars, or
______ The equivalent of _____________ U.S. Dollars in ___________________.
                            (amount)                   (foreign currency)
(Eurodollar Tranch Minimum Request:  $500,000)
(Foreign Currency Minimum Request:   $50,000 in Dollar Equivalent)

ADVANCE (or designation) DATE: _______________________________, 19___.
(Must  be at least  three  (3)  Business  Days  following  the date of this
request in the case of either a Eurodollar  Tranch or Foreign Currency  Advance,
and such request must be received by Bank by 10:00 a.m. Austin time. U.S. Dollar
Advance requests must be received by 1:00 p.m. on date of Advance)

TERMS OF ADVANCE OR DESIGNATION:

_______U.S. Dollar Reference Rate.  Advance to mature at maturity of line. Or

_______U.S.  Currency - Eurodollar  Tranch for  _____/months(option  of one
month, two months, or three months), or

_______Foreign  Currency Advance for _______ days (No less than 30 days and
no more than 90 days)

INSTRUCTIONS FOR LOAN PROCEEDS ON NEW ADVANCES:

_______Deposit  U.S.  loan  proceeds  to the  following  account:  National
Instruments Corporation No. , or

_______Wire loan proceeds per the instructions below:

           Amount                                    ________________________
           Currency                                  ________________________
           Name of Bank                              ________________________
           Branch                                    ________________________
           City                                      ________________________
           Country                                   ________________________
           Account Name                              ________________________
           Account Number                            ________________________
           Special Instructions                      ________________________
           __________________________________________________________________
           __________________________________________________________________
The undersigned  understands  that there can be NO PREPAYMENT of either the
Eurodollar Tranches or Foreign Currency advances pursuant to this request.

National Instruments Corporation,
a Delaware corporation
By:_______________________
Print name_________________
Title: _____________________


<PAGE>

                                  Exhibit "2.2"
                               NEW EQUIPMENT NOTE

                        NATIONAL INSTRUMENTS CORPORATION,
                             a Delaware corporation
                                       to
                           NATIONSBANK OF TEXAS, N.A.
                                  Austin, Texas
$____________                                                   _______________

     FOR VALUE RECEIVED, the undersigned,  NATIONAL INSTRUMENTS  CORPORATION,  a
Delaware  corporation,  promises to pay to NATIONSBANK OF TEXAS, N.A., or order,
at   Austin,    Travis    County,    Texas,    the   sum   of   NO/100   DOLLARS
($______________________),  together with interest  thereon from the date hereof
until  maturity at a per annum rate or rates  determined in accordance  with the
"Loan Agreement," as that term is hereinafter defined.  Interest before maturity
shall be  calculated  on the basis of a 360-day  year,  with the result that the
daily  interest rate shall be 1/360th of the stated per annum rate,  unless such
calculation  produces  a  usurious  rate,  in  which  event  interest  shall  be
calculated at the Highest Lawful Rate.  Matured,  unpaid  principal and interest
shall bear  interest  from  maturity  until paid at the Highest  Lawful Rate. If
Article  1.04 of the Texas Credit Code is  applicable  to this note and the loan
evidenced hereby,  the interest rate ceiling applicable to the note shall be the
indicated rate ceiling (as that term is defined in said Article).

     This note is executed  and  delivered  in  accordance  with a certain  Loan
Agreement (the "Loan  Agreement") of even date herewith  between the undersigned
and NationsBank of Texas, N.A. Terms used herein with first letters  capitalized
shall have the meanings  assigned to such terms in the Loan Agreement.  The loan
evidenced by this note is part of the New  Equipment  Line.  The Loan  Agreement
sets forth certain rights and obligations of the parties and certain  provisions
concerning  this note and the  collateral  securing  the same,  such as (without
limitation)  provisions  in  regard to  cross-default,  cross-collateralization,
refinancing and release of collateral, notice of default and opportunity to cure
default.  To the extent,  if any, that the Loan Agreement is  inconsistent  with
this note and the documents securing the same, the Loan Agreement shall control.

     Except as  provided  in the Loan  Agreement  with  respect  to  payment  of
interest on Eurodollar Tranches, this note is payable over a term of _____ years
in  equal,  quarter-annual  installments  of  principal,  each in the  amount of
$_________________,  with accrued interest payable together with and in addition
to each such  installment of principal,  such payments to begin on the _____ day
of  ___________,  19____,  and to continue on the ______ day of each third month
thereafter until the expiration of the term of years stated above, at which time
all remaining principal,  together with accrued and unpaid interest,  is finally
due and payable.

     Payment  of this  note is  secured  by all  collateral  which  secures  any
indebtedness or obligation of the undersigned to NationsBank of Texas, N.A., but
is deemed secured  primarily by a security  interest in certain new equipment as
evidenced  by a  security  agreement  of even  date  herewith.  In the  event of
default,  the holder shall have complete  discretion with regard to the order in
which it resorts to collateral available to it.

     Prior to the occurrence of default,  payment on the indebtedness  evidenced
hereby  shall  be  credited  first  to  accrued,  unpaid  interest  and  then to
principal;  but after default,  the holder hereof may credit payment in whatever
lawful manner it chooses.

     If this note is placed in the hands of an  attorney  for  collection  or is
collected  by suit or through  bankruptcy,  probate or any other  court,  either
before or after maturity,  then in any of said events, the undersigned shall pay
reasonable  attorney and collection  fees incurred by the holder,  which, if not
paid upon demand,  shall bear the same rate of interest as the principal of this
note.

<PAGE>

     Failure to pay any part of  principal  and  interest  of this note when due
and/or  failure to comply with the terms of the deed of trust securing this note
shall authorize the holder of this note to declare the whole of the same due and
payable and to immediately  institute suit for foreclosure and/or collection and
to pursue any other remedies  available to such holder.  If,  however,  prior to
pursuing such remedies,  the holder is required to furnish any notice of default
and notice of the time  within  which  such  default  may be cured,  and if such
notice cannot be waived,  the holder shall  furnish the same to the  undersigned
before pursuing any such remedies.

     Except as provided in the Loan Agreement,  each maker,  surety and endorser
of this note expressly  waives all notices,  demands for payment,  presentations
for  payment,  notices  of  intention  to  accelerate  the  maturity,  notice of
maturity,  protest and notice of protest,  as to this note and as to each, every
and all installments  hereof and each consents that the payee or other holder of
this  note  may at any  time,  and  from  time to time,  upon  request  of or by
agreement with any of us, renew this note or extend the date of maturity  hereof
or change the time or method of payments, any number of times, without notice to
any of the other makers,  sureties or endorsers,  who shall remain bound for the
payment hereof.

     The  undersigned  and the payee  intend to conform  strictly to laws now in
force pertaining to usury and any agreement to pay interest hereon shall be held
subject to reduction to the amount  allowed  under said laws as now or hereafter
construed by courts having  jurisdiction.  In no event shall the  undersigned be
required to pay for the use, forbearance or detention of any money borrowed more
than the maximum legal rate of interest  allowed by the laws of Texas and of the
United States and the right to demand any such  interest  shall be and is hereby
waived.  Any  interest  which  may be paid in excess of  amounts  allowed  under
applicable laws shall be refunded to the undersigned  promptly upon discovery of
such overpayment.

     The undersigned reserves the right to prepay this note in any amount at any
time prior to maturity without penalty,  and interest shall immediately cease on
any amount so prepaid. Any partial prepayment shall not interrupt the accrual of
any scheduled installments.

     THE WRITTEN LOAN AGREEMENT  (CONSISTING OF THIS  PROMISSORY  NOTE AND OTHER
WRITTEN   INSTRUMENTS   EXECUTED   AND   DELIVERED  IN  REGARD  TO  THE  SUBJECT
INDEBTEDNESSES)  REPRESENTS THE FINAL AGREEMENT  BETWEEN THE PARTIES AND MAY NOT
BE  CONTRADICTED  BY  EVIDENCE OF PRIOR,  CONTEMPORANEOUS,  OR  SUBSEQUENT  ORAL
AGREEMENTS OF THE PARTIES.

     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

                                    NATIONAL INSTRUMENTS CORPORATION,
                                    a Delaware corporation

                                    By:
                                        Joel B. Rollins, Chief Financial Officer


<PAGE>


                                   EXHIBIT "4"

                                PLEDGE AGREEMENT

     THIS  AGREEMENT  is made and  entered as of June 30,  1996,  by and between
National  Instruments  Corporation,  a  Delaware  corporation  ("Pledgor"),  and
NationsBank of Texas, N.A., a national banking association under the laws of the
United States ("Pledgee").  Any capitalized terms used herein without definition
shall have the meaning  assigned  thereto in the Loan Agreement dated as of July
6, 1993, as amended, between Pledgor and Pledgee (the "Loan Agreement").

     WHEREAS  Pledgee and Pledgor  have entered  into the Loan  Agreement  under
which,  inter alia,  Pledgee  agrees to make Loans  provided in Article 2 of the
Loan Agreement to the Pledgor in accordance with the Terms thereof;

     WHEREAS pursuant to Section 4 of the Loan Agreement, Pledgor has granted or
has agreed to grant to Pledgee a pledge of or  security  interest in all capital
stock of National  Instruments Japan Corporation  ("NIC-Japan"),  a wholly-owned
subsidiary of Pledgee;

     NOW, THEREFORE THE PARTIES AGREE AS FOLLOWS:

Article 1. Security Interest in Stock

          1.1  Subject  to the terms and  conditions  set forth  below,  Pledgor
               hereby  creates  a  security  interest  of  unregistered   pledge
               (ryakushiki  shichi)  for the benefit of Pledgee to secure all of
               the obligations of Pledgor to Pledgee under the Loan Agreement of
               four  hundred  (400)  issued and  outstanding  shares of stock in
               NIC-Japan   represented  by  the  share  certificates  listed  in
               Schedule 1 hereto (the "Pledged Shares").

          1.2  The  security  interests  granted  pursuant to this Article 1 are
               granted as  security  only and shall not  subject  Pledgee to, or
               transfer  or in any way  affect  or  modify,  any  obligation  or
               liability of Pledgor under the Pledged Shares.


Article 2.  Delivery of Share Certificates


     Pledgor and Pledgee  hereby  confirm that Pledgor has  delivered to Pledgee
and Pledgee has received from Pledgor the share  certificates  representing  the
Pledge Shares (the "Share Certificates").



<PAGE>


Article 3.  New Shares

     Pledgor  agrees that,  in the event that new shares (the "New  Shares") are
issued in respect of or in exchange for the Pledged Shares,  including,  without
limitation,  as a result  of a  consolidation,  stock  split or  similar  event,
Pledgee's  Security  interest  in the  Pledged  Shares  shall  extend to the New
Shares,  and Pledgor in cooperation  with Pledgee shall perform all necessary or
advisable  procedures to effect and perfect a security interest of pledge on the
New Shares.

Article 4.  Representations, Warranties and Covenants

     Pledgor hereby represents, warrants and covenants as follows:

          4.1  Pledgor is the sole  legal and  beneficial  owner of the  Pledged
               Shares and has good,  clear,  sole legal and beneficial  title to
               the Pledged  Shares free and clear of any and all liens,  claims,
               pledges  or  other  encumbrances  or  restrictions  of  any  kind
               whatsoever;  and the Pledged shares  constitute all of the issued
               and outstanding shares of NIC-Japan.

          4.2  Each share of stock  which  constitutes  a portion of the Pledged
               Shares is validly and duly issued,  fully paid and non-assessable
               and the share Certificates duly represent the Pledged Shares.

          4.3  The Pledged  Shares can be pledged  without  any  authorizations,
               approvals or consents of NIC-Japan or its board of directors,  or
               any governmental bodies.

          4.4  Pledgor  has  the  power  to  execute  and  deliver  this  Pledge
               Agreement  and to  perform  its  obligations  under  this  Pledge
               Agreement.

          4.5  NIC-Japan is a corporation  (Kabushiki Kaisha) duly incorporated,
               organized and validly existing under the laws of Japan.

Article 5.  Voting Rights, Dividends

     Pledgor shall be entitled to exercise any and all voting rights  pertaining
to the Pledged  Shares or any part  thereof;  and  Pledgor  shall be entitled to
receive any and all dividends  paid or payable in cash in respect of the Pledged
Shares.

Article 6.  Priority of Loan Agreement

     This  Pledge  Agreement  is  executed  and  delivered  pursuant to the Loan
Agreement. The Loan Agreement sets forth certain rights and other obligations of
the parties and certain provisions  concerning the obligation and the collateral
securing  the  same,  such as  (without  limitation)  provisions  in  regard  to
cross-default,  cross-collateralization,  refinancing and release of collateral,
notice of default and opportunity to cure default.  TO THE EXTENT,  IF ANY, THAT
THE  LOAN  AGREEMENT  IS  INCONSISTENT  WITH  THIS  PLEDGE  AGREEMENT,  THE LOAN
AGREEMENT SHALL CONTROL.

<PAGE>

Article 7.  Termination of Security Interests

     Upon the repayment in full by the Pledgor of all payment  obligations under
the Loan Agreement,  the pledge created hereunder shall terminate and all rights
to the Pledged Shares shall revert to the Pledgor.

Article 8.  Governing Law

     This Agreement  shall be governed by and interpreted in accordance with the
laws of Japan.


     IN WITNESS  WHEREOF,  the parties hereto have caused their duly  authorized
representatives  to execute this  Agreement in duplicate as of the date and year
first above written.


                                   NATIONAL INSTRUMENTS CORPORATION



                                   By:____________________________________
                                       James J. Truchard, President



                                   NATIONSBANK OF TEXAS, N.A.


                                   By:____________________________________

                                   Name:__________________________________

                                   Title:__________________________________





<PAGE>

                                   SCHEDULE 1



        Pledged Shares:


        Issuer: National Instruments Japan Corporation


                  Number of Shares:   400 Shares

                  Share Certificates:  1 certificate representing
                                           400 shares, No. AOO1



<PAGE>

                                 EXHIBIT "6.2.5"
                            CERTIFICATE OF COMPLIANCE
                        National Instruments Corporation
     Financial Covenants for the Quarter Ending __________________, 19____.

1.    Event of Default

          The  undersigned  hereby  certifies  that,  to  the  best  of  his/her
          knowledge,  no Events of Default has occurred  under that certain Loan
          Agreement  (the  "Loan   Agreement")   between  National   Instruments
          Corporation ("Borrower") and NationsBank of Texas, N.A. ("Lender").

          (Or)

          The  undersigned  hereby  certifies that an Event of Default  occurred
          under that  certain  Loan  Agreement  (the "Loan  Agreement")  between
          National  Instruments  ("Borrower")  and  NationsBank  of Texas,  N.A.
          ("Lender"). The Event of Default occurred is described as follows:



          Borrower has taken the following steps to cure such Event of Default:


2.   Financial Compliance

     A.  Tangible Net Worth
         Net Worth                                            __________________
         Less:  Intangibles                                   __________________
                Translation Adjustment                        __________________
         Tangible Net Worth                                   __________________
         Minimum                                              __________________
         (Equal to the sum of $65,000,000 plus 50% of net profits on an
         annual basis for all completed years beginning after fiscal year
         end 1994)

     B.  Current Maturities Coverage
         (figures for prior four quarters)
         Net Income                                           __________________
         Plus:  Depreciation and Amortization                 __________________
         Subtotal                                             __________________
         Current Maturities Due Next 12 months                __________________
         Coverage Ratio                                       __________________
         Minimum                                                     1.75

     C.  Advances or Loans to third parties which remain outstanding and
         Investments on an annual aggregate basis.           ___________________
         Maximum                                                  $10,000,000



<PAGE>

                              Officer Certification

     As  an   officer  of   National   Instruments   Corporation,   I  have  the
responsibility for the accuracy of the above information and certify that to the
best of my actual  knowledge,  it is true and  correct  and no Events of Default
were continuing at the close of the period.


National Instruments Corporation

By:_______________________

Title:_____________________

Date:_____________________


<PAGE>

                              MODIFICATION OF NOTE

THE STATE OF TEXAS                  
                                            
COUNTY OF TRAVIS           

     WHEREAS,  NATIONSBANK  OF TEXAS,  N.A.  ("Bank") is the legal and equitable
owner  and  holder  of  that  certain   promissory  note  executed  by  NATIONAL
INSTRUMENTS CORPORATION,  a Texas corporation,  payable to the order of Franklin
Federal  Bancorp,  a Federal  Savings Bank,  under date of March 1, 1991, in the
principal  sum  of  FOUR  MILLION  TWO  HUNDRED   THOUSAND  AND  NO/100  DOLLARS
($4,200,000.00),  as  extended  and/or  modified  by  a  certain  Extension  and
Modification  of Real Estate Note and Lien effective  July 9, 1993,  recorded in
Volume 11980,  Page 393, of the Real Property  Records of Travis County,  Texas,
(said note, as so modified,  being referred to herein as the "Note") the payment
of which is secured by a vendor's  lien  retained  in a deed  recorded in Volume
11384, Page 700, of the Official Real Property Records of Travis County,  Texas,
and by a Deed of  Trust  (and  Security  Agreement,  Assignment  of  Rents,  and
Financing  Statement)  recorded in Volume 11384,  Page 707, of the Real Property
Records of Travis County,  Texas, covering the following described real property
(the  "Property"):

     Lot 2, HIDDEN  VALLEY - PHASE B, a  subdivision  in Travis  County,  Texas,
     according  to the map or plat of record in Volume 85, Page 44D, of the Plat
     Records of Travis County, Texas; and

     WHEREAS,   National  Instruments   Corporation,   a  Delaware  corporation,
("Maker") is the  successor  by merger to National  Instruments  Corporation,  a
Texas corporation; and
         WHEREAS, Bank and Maker now desire to modify certain terms of the Note;
         NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS: 
          
          That for and in  consideration  of the  premises,  and the  payment by
     Maker to Bank of the sum of Ten Thousand and No/100  Dollars  ($10,000.00),
     in cash,  as a loan  modification  fee,  the  receipt  of  which is  hereby
     acknowledged, the undersigned parties hereby contract, agree, stipulate and
     covenant as follows:

          (1)  As of the effective date hereof,  the principal balance remaining
               on the Note is THREE  MILLION  FOUR  HUNDRED TEN  THOUSAND  EIGHT
               HUNDRED ONE AND 39/100 DOLLARS ($3,410,801.39).

<PAGE>

          (2)  Said  principal  sum of  $3,410,801.39)  due on  the  Note  shall
               hereafter  bear interest prior to maturity at the rate of six and
               forty-five one-hundredths percent (6.45%) per annum.

          (3)  The Note shall hereafter be payable, and Maker promises to pay
               the same, as follows:

                    (a)  quarter-annual  installments of principal and interest,
                         each in the  amount of ONE  HUNDRED  TWO  THOUSAND  ONE
                         HUNDRED TEN AND NO/100 DOLLARS ($102,110.00), beginning
                         on the last day of September,  1996,  and continuing on
                         the  same  day  of  each  December,   March,  June  and
                         September  thereafter  through March,  2000,  with each
                         installment being applied first to accrued interest and
                         then to principal; and (b) the entire principal balance
                         remaining,  together  with  interest  then  accrued and
                         unpaid, on or before July 6, 2000.

          (4)  Interest  on the Note has been paid  current as of the  effective
               date hereof.

          (5)  The terms of the Note remain in full force and effect,  except as
               specifically modified hereby. Maker stipulates that liens created
               or  referred  to in the  above  mentioned  Deed and Deed of Trust
               continue  in effect to secure the payment of the Note as modified
               hereby and that said liens are valid, subsisting, first and prior
               liens on the Property.

          (6)  Maker  warrants  and  represents  to Bank  that the  indebtedness
               evidenced by the Note is subject to no credit,  charge,  claim or
               right  of   offset   or   deduction   of  any  kind   whatsoever.
               Additionally,  Maker hereby forever  releases and discharges Bank
               from any and all claims, demands and causes of action, of any and
               every nature whatsoever,  which arise from or are related, either
               directly or indirectly, to such indebtedness and/or to collateral
               securing the same, and are based upon events occurring to date.

          (7)  THE WRITTEN LOAN  AGREEMENT  (CONSISTING  OF THIS  INSTRUMENT AND
               OTHER WRITTEN INSTRUMENTS EXECUTED AND DELIVERED IN REGARD TO THE
               SUBJECT LOAN) REPRESENTS THE FINAL AGREEMENT  BETWEEN THE PARTIES
               AND   MAY   NOT   BE   CONTRADICTED   BY   EVIDENCE   OF   PRIOR,
               CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

          THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

          EXECUTED effective the 1st day of July, 1996.


                                       MAKER:

                                          NATIONAL INSTRUMENTS CORPORATION,
                                          a Delaware corporation

                                          BY:  /s/  Joel B. Rollins

                                          Joel B. Rollins
                                          (name typed or printed)

                                          ITS:  Vice President Finance

                                       BANK:

                                          NATIONSBANK OF TEXAS, N.A.

                                          BY:  /s/ Eric Kosmin
                                               ERIC KOSMIN, Vice President


<PAGE>



THE STATE OF TEXAS                  
                                            
COUNTY OF Travis  

     This  instrument was  acknowledged  before me on this the 27th day of June,
1996,  Joel  B.  Rollins,  Vice  President,   Finance  of  NATIONAL  INSTRUMENTS
CORPORATION, a Delaware corporation,  in behalf of said corporation.  To certify
which, witness my hand and seal of office.

                                                /s/ Gay F. Glick
                                               Notary Public, State of Texas
                                               Gay F. Glick
                                                 (printed name of Notary)






STATE OF TEXAS                      
                                            
COUNTY OF TRAVIS                    

     This  instrument was  acknowledged  before me on this the 28th day of June,
1996, by ERIC KOSMIN,  Vice President of NATIONSBANK OF TEXAS,  N.A., a national
banking association, in behalf of said association. To certify which, witness my
hand and seal of office.

                                                  /s/  Linda B. Gibson
                                                Notary Public, State of Texas
                                                Linda B. Gibson
                                                  (printed name of Notary)



<PAGE>


                   THIRD EXTENSION OF REVOLVING LINE OF CREDIT


THE STATE OF TEXAS                  

COUNTY OF TRAVIS           

     WHEREAS,  NationsBank of Texas, N.A.  ("Lender") is the legal and equitable
owner and holder of that  certain  Revolving  Line of Credit  Note  executed  by
National Instruments Corporation,  a Texas corporation,  payable to the order of
Lender under date of July 6, 1993,  in the  principal  sum of Eight  Million and
No/100 Dollars ($8,000,000.00),  as renewed,  extended and/or otherwise modified
by a certain Extension of Revolving Line of Credit dated June 30, 1994, and by a
certain  Second  Extension  of  Revolving  Line of Credit  dated June 30,  1995,
executed  by  Lender  and  by  National  Instruments  Corporation,   a  Delaware
Corporation,   ("Borrower")   successor   by  merger  to  National   Instruments
Corporation, a Texas corporation; and

     WHEREAS, Borrower desires to further extend or rearrange the time or manner
of  payment  of said  Revolving  Line of Credit  Note,  and Lender has agreed to
extend or rearrange the same as hereinafter provided;

     NOW,  THEREFORE,  in consideration of the extension or rearrangement of the
time or  manner of  payment  of said note as  hereinafter  set forth by  Lender,
Borrower hereby renews said note and promises to pay to the order of Lender,  at
P. O. Box 908, 501 Congress Avenue, in the City of Austin, Travis County, Texas,
the sum of Eight Million Dollars ($8,000,000.00), or such different amount as is
actually  advanced,  together  with  interest  thereon  on  the  balance  of the
principal  sum  advanced  and  remaining  unpaid,  at a per annum  rate or rates
determined in accordance  with that certain  Amended and Restated Loan Agreement
(the "Loan Agreement") by and between Lender and Borrower, as follows:

               except as provided in the Loan Agreement with respect to what are
               referred to therein as Eurodollar  Tranches and Foreign  Currency
               Advances,  accrued interest is payable quarter-annually beginning
               on the last day of September,  1996,  and  continuing on the last
               day of each  December,  March,  June  and  September  thereafter,
               through March, 1998, and the entire principal  balance,  together
               with accrued and unpaid interest, is due and payable on or before
               June 30, 1998.

     All liens and security interests which formerly secured the payment of said
Revolving  Line of Credit  Note,  are renewed and carried  forward to secure the
payment of said note, as extended or rearranged hereby.

     All terms and  provisions of said  original  note and of the  instrument or
instruments  securing  the same  shall be and remain in full force and effect as
therein written except as expressly  provided herein or in another instrument in
writing signed by the parties.

<PAGE>

     Borrower warrants and represents to Lender that the indebtedness  evidenced
by said  note is  subject  to no  credit,  charge,  claim or right of  offset or
deduction of any kind whatsoever. Additionally, Borrower hereby forever releases
and discharges Lender from any and all claims,  demands and causes of action, of
any and  every  nature  whatsoever,  which  arise  from or are  related,  either
directly or indirectly,  to such indebtedness  and/or to collateral securing the
same, and are based upon events occurring to date.

     THE WRITTEN LOAN AGREEMENT  (CONSISTING OF WRITTEN  DOCUMENTS  EXECUTED AND
DELIVERED IN CONNECTION  WITH THE SUBJECT LOAN)  REPRESENTS THE FINAL  AGREEMENT
BETWEEN  THE  PARTIES  AND  MAY  NOT  BE  CONTRADICTED  BY  EVIDENCE  OF  PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     EXECUTED to be effective the 30th day of June, 1996.

                                 NationsBank of Texas, N.A.


                                 By:  /s/ Eric Kosmin
                                      Eric Kosmin, Vice President


                                 National Instruments Corporation, a Delaware
                                 corporation


                                 By:  /s/  Joel B. Rollins
                                     Joel B. Rollins, Chief Financial Officer







EXHIBIT 11.1

             STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
                      (In thousands, except per share data)


                               Three Months Ended     Six Months Ended
                                   June 30,              June 30,
                              --------------------   --------------------

                                1996        1995        1996       1995
                                ----        ----        ----       ----

Net Income...................  $ 5,405    $ 3,942     $10,888    $ 8,136
Weighted Average Shares
 Outstanding.................   21,938     21,529      21,780     20,244

Earnings Per Share...........  $  0.25    $  0.18     $  0.50     $ 0.40
                               =======    =======     =======     ======

Calculation of Weighted
 Average Shares:
   Weighted Average Common
    Stock Outstanding........   21,587     21,344      21,529     20,096
   Weighted Average Common
    Stock Options, utilizing
    the treasury stock method      351        185         251        148
                                   ---        ---         ---        ---
                                21,938     21,529      21,780     20,244
                                ======     ======      ======     ======






<TABLE> <S> <C>

<ARTICLE>                                          5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AND STATEMENTS OF INCOME FILED
AS PART OF THE JUNE 30, 1996 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<MULTIPLIER>                                                 1,000
       
<S>                                                  <C>
<PERIOD-TYPE>                                      3-MOS
<FISCAL-YEAR-END>                                  DEC-31-1996
<PERIOD-START>                                     APR-01-1996
<PERIOD-END>                                       JUN-30-1996
<CASH>                                                       23575
<SECURITIES>                                                 38508
<RECEIVABLES>                                                32429
<ALLOWANCES>                                                     0
<INVENTORY>                                                  13343
<CURRENT-ASSETS>                                            114246
<PP&E>                                                       32254
<DEPRECIATION>                                                   0
<TOTAL-ASSETS>                                              151457
<CURRENT-LIABILITIES>                                        29657
<BONDS>                                                          0
<PREFERRED-MANDATORY>                                            0
<PREFERRED>                                                      0
<COMMON>                                                       216
<OTHER-SE>                                                  111237
<TOTAL-LIABILITY-AND-EQUITY>                                111453
<SALES>                                                      50241
<TOTAL-REVENUES>                                             50241
<CGS>                                                        12762
<TOTAL-COSTS>                                                12762
<OTHER-EXPENSES>                                             29317
<LOSS-PROVISION>                                                 0
<INTEREST-EXPENSE>                                               0
<INCOME-PRETAX>                                               8189
<INCOME-TAX>                                                  2784
<INCOME-CONTINUING>                                           5405
<DISCONTINUED>                                                   0
<EXTRAORDINARY>                                                  0
<CHANGES>                                                        0
<NET-INCOME>                                                  5405
<EPS-PRIMARY>                                                    0.25
<EPS-DILUTED>                                                    0.25
        




</TABLE>