UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC. 20549


     FORM 10-QSB (Mark One) 

[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended December 31, 1996

[ ]  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: 1-13088

                  DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION
                 (Name of small business issuer in its charter)

          Delaware                                       65-0014636
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248 
           (Address of principal executive offices; telephone number)

                                 (972) 248-1922
                           (Issuer's telephone number)


    ------------------------------------------------------------------------
(Former name,former address and former fiscal year,if changed since last report)


         Check whether issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 [ ]

         The number of shares  outstanding of the common stock of the registrant
on January 31, 1997, the latest practicable date, was 7,240,046.






<PAGE>



                                TABLE OF CONTENTS


Item                                                              Numbered
Number                                                              Page
------                                                            --------

Part I

     1.  Financial Statements.....................................     1

     2.  Management's Discussion and Analysis or
         Plan of Operation........................................     6


Part II

     1.  Legal Proceedings........................................     N/A

     2.  Changes in Securities....................................     N/A

     3.  Defaults Upon Senior Securities..........................     N/A

     4.  Submission of Matters to a Vote of Security
         Holders..................................................     9

     5.  Other Information........................................     N/A

     6.  Exhibits and Reports on Form 8-K.........................     10




















<PAGE>

                                                    
          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>                                                                            <C>                  <C>

                                                                                 December 31,               June 30,
                                                                                    1996                     1996
                                                                                 (Unaudited)              (Audited)
                                                                                --------------         ---------------

           ASSETS

Current assets:
        Cash and cash equivalents                                        $         465,177        $        615,037
        Marketable securities                                                      936,833               1,900,050
        Accounts receivable, net of  allowance for doubtful accounts
           of $475,000 at December 31, 1996 and $414,000 at June 30, 1996        6,946,653               3,719,265
        Inventories                                                              2,351,964               2,862,911
        Prepaid expenses and other current assets                                  673,884                 614,210
                                                                           ---------------         ---------------
             Total current assets                                               11,374,511               9,711,473
                                                                           ---------------         ---------------

Property, plant and equipment, net                                               5,694,061               5,469,304
Other assets                                                                       165,663                  81,343
Loans receivable, related parties                                                  414,698                 413,369
                                                                           ---------------         ---------------
                  Total assets                                           $      17,648,933        $     15,675,489
                                                                           ===============         ===============

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
        Revolving line of credit                                         $       2,709,602        $      1,625,325
        Current portion, long-term debt                                            425,130                 935,127
        Accounts payable                                                         3,477,304               3,032,236
        Accrued liabilities                                                        557,360                 362,520
                                                                           ---------------         ---------------
             Total current liabilities                                           7,169,396               5,955,208
                                                                           ---------------         ---------------

Long-term debt, less current portion                                             1,987,078               1,666,063
Deferred tax liability                                                             417,672                 157,216

Commitments and contingencies

Stockholders' Equity:
        Series A convertible preferred stock, 10,000,000 shares of
           $.0001 par value per share authorized; 10,000 and 100,000 shares
           issued and outstanding as of December 31, 1996 and June 30, 1996,
           respectively, $100,000 liquidation preference                                 1                      10
        Common stock, 25,000,000 shares of $.0002 par value per share
           authorized; 7,190,426 and 6,332,116 issued and 6,953,504
           and 6,125,162 shares outstanding as of December 31, 1996 and
           June 30, 1996, respectively                                               1,438                   1,266
        Additional paid-in capital                                               8,479,155               8,479,318
        Retained earnings                                                        1,327,405               1,030,152
        Investment in Millennia, Inc.                                          (1,084,983)             (1,084,983)
        Net unrealized holding loss on investment securities                     (648,229)               (528,761)
                                                                           ---------------         ---------------
             Total stockholders' equity                                          8,074,787               7,897,002
                                                                           ---------------         ---------------

                  Total liabilities and stockholders' equity             $      17,648,933        $     15,675,489          
</TABLE>

     The accompanying notes are an integral part of the financial statements



                                       1
<PAGE>

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)

<TABLE>
<CAPTION>
<S>                                                                            <C>          <C>              <C>
                                                            For the three months ended          For the six months ended
                                                                   December 31,                        December 31,
                                                                   ------------                        ------------
                                                               1996             1995              1996              1995
                                                            -----------     -----------       -----------        -----------

Net sales                                                  $  8,794,479    $  7,895,511      $ 15,814,416       $ 13,281,982
                                                            -----------     -----------       -----------        -----------
Costs and Expenses:
     Cost of goods sold (exclusive of depreciation
       and amortization, shown separately below)              7,073,707       6,278,412        12,650,843         10,462,738
     Selling expenses (exclusive of depreciation
       and amortization, shown separately below)                335,282         310,573           641,160            564,152
     General and administrative expenses 
       (exclusive of depreciation and amortization,
        shown separately below)                                 564,167         484,562         1,187,712            844,471
     Depreciation and amortization                              375,168         307,549           720,409            605,620
                                                            -----------     -----------       -----------        -----------
                                                      
          Total costs and expenses                            8,348,324       7,381,096        15,200,124         12,476,981
                                                            -----------     -----------       -----------        -----------
                                                                        
               Operating profit                                 446,155         514,415           614,292            805,001
                                                            -----------      ----------       -----------        -----------

Other income (expense):
     Realized gains (losses) from investment
        transactions                                             20,963         (43,573)           92,082             72,438
     Interest and other income                                        0          10,182                 0             21,612
     Interest expense                                          (103,184)       (203,566)         (211,692)          (379,929)
                                                            -----------     -----------       -----------        -----------
                                                                        
                                                                (82,221)       (236,957)         (119,610)          (285,879)
                                                            -----------     -----------       -----------        -----------
         Income from continuing operations
          before provision for income taxes                     363,934         277,458           494,682            519,122   
Provision for income taxes                                      127,411         107,436           192,742            201,000
                                                            -----------     -----------       -----------        -----------

         Income from continuing operations                      236,523         170,022           301,940            318,122
     

Discontinued operations:
     (Loss) gain  from operations of
     discontinued operation, net of related income
     taxes of $0, $21,900, $0 and $60,500, respectively          (4,935)         36,359            (4,685)            95,360
                                                            -----------     -----------       -----------        -----------
                                                      
                    Net income                             $    231,588    $    206,381      $    297,255       $    413,482
                                                            ===========     ===========       ===========        ===========


Weighted average shares of common stock
      outstanding                                             6,548,604       5,677,443         6,310,890          5,411,957
                                                            ===========     ===========       ===========       ============

Earnings per share:
     Continuing operations                                 $       0.04    $       0.03      $       0.05      $        0.06
     Discontinued operations                                       0.00            0.01              0.00               0.02
                                                            -----------     -----------       -----------       ------------
           Net income                                      $      0.04     $       0.04      $       0.05      $        0.08
                                                            ==========      ===========       ===========       ============
</TABLE>
     The accompanying notes are an integral part of the financial statements

                                       2

<PAGE>

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
<S>                                                                            <C>              <C>
                                                                                  For the six months ended
                                                                                        December 31,
                                                                                 1996                    1995
                                                                            ----------------        ----------------
Cash flows from operating activities:
     Net income                                                           $         297,255       $         413,482
                                                                            ---------------        ----------------
     Adjustments  to  reconcile  net  income  to  net  cash
       used  in  operating activities:
        Depreciation and amortization                                               720,409                 605,620
        Gain on sale of marketable securities                                       (92,082)                (72,438)
        Provision for bad debts                                                      60,833                 112,495
        Increase in accounts receivable                                          (3,288,221)             (1,331,822)
        Decrease (increase) in inventories                                          510,947                (147,497)
        Increase in prepaid expenses and other                                     (143,994)                162,226
        Increase (decrease) in accounts payable                                     445,068                (576,943)
        Increase in accrued liabilities                                             194,840                 264,920
        Increase in deferred tax liability                                          260,456                       0
                                                                            ---------------         ----------------
             Net cash used in operating activities                               (1,034,489)               (569,957)
                                                                            ---------------        ----------------

Cash flows from investing activities:
     (Increase) decrease in loans receivable, related parties                        (1,329)                148,678
     Change in marketable securities - available for sale                           935,829               1,014,367
     Increase in other assets and other liabilities                                      0                  (21,892)
     Capital expenditures                                                          (945,166)               (457,482)
                                                                            ---------------        ----------------
             Net cash (used in) provided by investing activities                    (10,666)                683,671
                                                                            ---------------        ----------------

Cash flows from financing activities:
     Net long-term repayments                                                      (188,982)               (356,568)
     Net short-term borrowings                                                    1,084,277                 360,000
                                                                            ---------------        ----------------
             Net cash provided by financing activities                              895,295                   3,432
                                                                            ---------------        ----------------

(Decrease) increase in cash and cash equivalents                                   (149,860)                117,146
Cash and cash equivalents at beginning of period                                    615,037                 284,837
                                                                            ---------------        ----------------
Cash and cash equivalents at end of period                                $         465,177       $         401,983
                                                                            ===============        ================

Supplemental disclosures of cash flow information:

Cash paid during the period for:
     Interest (non-capitalized)                                           $         173,631       $         379,550
                                                                            ===============        ================
     Income taxes                                                         $                       $
                                                                                    -                       -
                                                                            ===============        ================


</TABLE>


     The accompanying notes are an integral part of the financial statements





                                       3
<PAGE>
                                                 
          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       Summary of Significant Accounting Policies
         ------------------------------------------

         The accompanying consolidated financial statements include the accounts
         of Digital  Communications  Technology  Corporation,  (D/B/A  MagneTech
         Corporation) and its wholly-owned  subsidiaries,  Tapes Unlimited, Inc.
         and DCT - Internet Corporation. The operations of Tapes Unlimited, Inc.
         which were formerly  consolidated  with the  operations of the Company,
         have  been  segregated  as  discontinued  operations.  All  significant
         intercompany transactions have been eliminated.

         Certain  information  and  footnote  disclosures  normally  included in
         financial  statements  prepared in accordance  with generally  accepted
         accounting  principles  have  been  condensed  or  omitted  from  these
         unaudited internal  financial  statements.  These financial  statements
         should be read in conjunction  with the financial  statements and notes
         thereto included in the Company's annual audited financial statements.

         Certain  amounts in the prior  period  financial  statements  have been
         reclassified to conform with current year presentation.

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities  at the date of the financial  statements  and the reported
         amounts of revenues  and  expenses  during the period.  Actual  results
         could differ from those estimates.

         In the opinion of  management,  the  accompanying  unaudited  financial
         statements   contain  all  adjustments,   (consisting  of  only  normal
         recurring  accruals)  necessary  to  conform  with  generally  accepted
         accounting  principles.  The  results  of  operations  for the  periods
         presented are not necessarily  indicative of the results to be expected
         for the full year.

2.       Marketable Securities
         ---------------------

         Marketable  securities  consist of equity  securities with an aggregate
         cost,  based on specific  identification,  of $1,585,062 as of December
         31, 1996.  The  marketable  securities  portfolio  contains  unrealized
         losses of  $648,229,  resulting  in a  carrying  value of  $936,833  at
         December 31,  1996.  The  unrealized  losses are reported as a separate
         component of stockholders'  equity. All of the Company's securities are
         classified as available for sale securities.

3.       Inventory
         ---------

         Inventories  are  valued at the  lower of cost  (weighted  average)  or
         market and consisted of the following:

                                              December 31,             June 30,
                                                 1996                    1996
                                          -----------------     ----------------

           Raw materials                $         1,510,108   $        1,891,393
           Work-in-process                          673,485              769,254
           Finished goods                           168,371              202,264
                                          -----------------     ----------------
                                        $         2,351,964   $        2,862,911
                                          =================     ================


                                       4
<PAGE>

          DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION & SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)

4.       Property, Plant and Equipment
         -----------------------------

         Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
<S>                                                                            <C> 
                                                             December 31,           June 30,
                                                                 1996                 1996
                                                            -----------------     ----------------

           Land                                           $            73,000   $           73,000
           Buildings and improvements                                 727,529              546,703
           Machinery and equipment                                 10,377,207            9,612,867
                                                            -----------------     ----------------
                                                                   11,177,736           10,232,570
           Less accumulated depreciation                           (5,483,675)          (4,763,266)
                                                            =================     ================
           Net property, plant and equipment              $         5,694,061   $        5,469,304
                                                            =================     ================
</TABLE>

5.       Revolving Lines of Credit
         -------------------------

         The Company has a revolving  line of credit  agreement  for  aggregate
         borrowings of up to $5,000,000. Interest is payable on all outstanding
         cash advances at the bank's base lending rate (closely  related to the
         bank's  prime  interest  rate) plus 1/2%.  At  December  31,  1996 the
         interest rate was 8.75%.  Any unpaid principal and accrued interest is
         due on demand,  but no later than October 31, 1998. The line of credit
         is collateralized by accounts receivable, inventory and equipment. The
         terms of the  agreement  require,  among  other  provisions,  that the
         Company comply with requirements for maintaining certain cash flow and
         other financial ratios and restricts the payment of cash dividends. As
         of December 31,  1996,  $2,710,000  has been drawn upon the  Company's
         line of credit.

6.        Long Term Debt
          --------------

         Long term debt consists of the following:
<TABLE>
<CAPTION>
<S>                                                                              <C>

                                                                December 31,            June 30,
                                                                     1996                  1996
                                                              ------------------    -----------------
           Various  mortgages and notes payable with
           interest rates ranging from 7.63% to 1% over
           prime. Monthly payments range from $3,198
           to $29,000 and expiration dates range from
           1997 to 2007.                                     $           612,208   $       2,601,190
                                                                 

           Loan payable to bank in monthly installments
           of $30,000 plus interest at the bank's base rate
           (prime)  plus 1/2%,  maturing  October  1998;
           collateralized by accounts receivables, 
           inventory and equipment. The terms of the
           agreement  require,  among other  provisions,
           that the Company comply with certain ratios
           and covenants.                                              1,800,000                   0                    
                                                               -----------------    ----------------
                                                                       2,412,208           2,601,190
          Less current portion                                          (425,130)           (935,127)               
                                                               =================    ================
                                                              $        1,987,078   $       1,666,063
                                                               =================    ================
</TABLE>


                                       5
<PAGE>

Item 2.  Management's Discussion and Analysis or Plan of Operation

Overview
--------

         Digital Communications Technology Corporation ("the Company") continued
to enjoy  significant  sales  growth for the quarter and six month  period ended
December  31,  1996.  Net sales for the three  months  ended  December  31, 1996
increased  approximately 11% to an all-time  quarterly record. Net sales for the
six month period ended  December 31, 1996 increased  approximately  19% and were
also the  highest six  months'  sales in the  Company's  history.  The  Company,
however, experienced a decline in operating profits, both in real terms and as a
percentage  of net  sales.  Increases  in cost of  goods  sold and  general  and
administrative expenses, particularly legal fees associated with the shareholder
derivative lawsuit (approximately $100,000),  contributed to the lower operating
profits.

Liquidity
---------

         The Company utilized approximately $1,034,000 and $570,000 in cash from
operating  activities  for the six  months  ended  December  31,  1996 and 1995,
respectively.  The  Company's  operating  cash  position is due primarily to the
large increase in accounts  receivable which was partially offset by an increase
in accounts payable and a decrease in the level of inventory.

         Accounts receivable increased approximately $3,288,000 from the balance
at June 30, 1996. The increase is due to the corresponding increase in net sales
for the current six month period. The Company's accounts  receivable  collection
period  (measuring how quickly,  on average,  the Company  collects its accounts
receivable)   increased  from   approximately  61  days  at  June  30,  1996  to
approximately 86 days at December,  1996. The increase is due to the significant
amount of  billings  that  occurred  during  the last  quarter.  These  billings
negatively  affected the average days in collection by increasing the balance of
accounts  receivable at the end of the period.  The Company continues to receive
competitive  pressures  from  its  customers  to  grant  longer  payment  terms.
Management will continue to focus on this area to improve credit and collections
efforts.

         Accounts payable  increased  approximately  $445,000 for the six months
ended December 31, 1996 as compared to a decrease of approximately  $577,000 for
the same period ended December 31, 1995. The increase in accounts payable in the
current  period is due primarily to the growth in sales volume that has dictated
additional purchases. In addition, efforts to maintain a low outstanding balance
on the revolving line of credit have contributed to the increase.

     Overall  inventory  levels  declined  by  $511,000  from  June 30,  1996 to
December 31, 1996.  The reduction is primarily due to the decrease in the amount
of raw  materials  on hand.  Management  has been  successful  in its efforts to
ensure that the least  amount of  operating  cash is invested  in  inventory  by
insisting  that  shipments of raw  materials are made on a  just-in-time  basis.
Inventory  levels,  particularly  in  the  work-in-process  and  finished  goods
categories,  will fluctuate  somewhat  depending on the size and number of video
tape duplicating orders processed at any given time. Typically, the Company does
not  stock  significant   quantities  of  finished  products,   shipping  orders
immediately upon completion.

         Approximately  $11,000 in net cash was used in investing activities for
the six month  period  ended  December  31, 1996 as  compared  to  approximately
$684,000 in cash provided by investing  activities for the corresponding  period
of the prior  year.  The  primary  reason  for this  change in  position  is the
increase in capital  expenditures  in the current period (see Capital  Resources
below).


                                       6
<PAGE>

         The  Company  utilized  its line of  credit  to  provide  approximately
$1,084,000  for working  capital needs during the six months ended  December 31,
1996 and repaid approximately  $189,000 in long-term debt. Management intends to
selectively utilize its line of credit to fund working capital requirements when
needed,  and expects to reduce the amount  outstanding  on the line of credit as
collections on accounts receivable are received.

         During the six month period ended December 31, 1996, the Company's cash
needs were met  primarily  through  operations.  Long-term  liquidity  needs are
anticipated to be met through sales growth and separate financing  arrangements.
Management  anticipates  that it will continue to meet most  obligations as they
come due, and no vendor/supplier problems are expected.

Capital Resources
-----------------

     The Company  invested  approximately  $945,000 in equipment  and  leasehold
improvements  for the six month  period ended  December  31, 1996.  These larger
capital outlays  related  primarily to expenditures  for  duplication,  loading,
packaging, and leasehold improvements at both the Company's Indianapolis and Ft.
Lauderdale facilities. The Company plans to continue to expand current operating
facilities   in  order  to  fully   meet  the  high   volume   demands   of  the
retail-sell-through  market.  The Company intends to finance these  expenditures
through operations and through separate financing arrangements.

Results of Operations
---------------------

     Overall  growth in the  Company's  target  markets led to  continued  sales
growth of  approximately  19% in the current  fiscal year to date. Net sales for
the three  months  ended  December 31, 1996  increased  approximately  11% to an
all-time quarterly record of $8,794,000,  up from $7,896,000 for the same period
ended December 31, 1995. Net sales of $15,814,000 for the six month period ended
December 31, 1996 were also the highest in the Company's history,  compared with
$13,282,000  for the same period last year.  Significant  sales  increases  were
experienced in the last quarter as orders were filled to meet the holiday buying
season   demands.   As   in   prior   periods,   management's   focus   on   the
retail-sell-through  market resulted in this sales surge. This market centers on
sales of  pre-recorded  video  tapes  which are sold at the  retail  level.  The
Company's customer base has become increasingly dominated by the companies which
distribute these  pre-recorded  videos to the retail  sell-through  market,  and
management has positioned the Company to capitalize on this portion of the video
industry.

     Operating  profit  did  not  match  the  increased  sales,  declining  from
approximately  $514,000  (6.5% of net sales) to $446,000 (5.1% of net sales) for
the three  months  ended  December  31, 1995 and 1996,  respectively.  A similar
decline was  experienced  for the six months ended December 31, 1996.  Operating
profit for this period declined from approximately  $805,000 (6.1% of net sales)
in the prior year to  $614,000  (3.9% of net sales).  The  decline in  operating
profit is due to increases in cost of goods sold and general and  administrative
expenses,  particularly  legal fees associated  with the shareholder  derivative
lawsuit (approximately $100,000).

         Cost of goods sold, as a percentage of sales,  increased to 80% for the
six months  ended  December 31, 1996 as compared to 79% for the six months ended
December 31, 1995. The increased cost of goods sold is directly  attributable to
increased usage of temporary labor and the cost of offloading  excess production
volumes to other  duplicators.  Use of these outside  sources was unavoidable in
order to  complete  customer  orders  that  exceeded  existing  capacity at both
facilities.  The lack of sufficient capacity was due to unexpected delays in the
installation  of new capacity.  Management has already taken the steps necessary
to provide for the increase in sales volume by providing for new duplication and
packaging equipment. In addition, increased consultant fees were incurred in the
current  period as hands-on  outside  experts were  utilized to  accelerate  the


                                       7
<PAGE>

implementation  of  expanded   capacity  and  new  management   methods  in  the
Indianapolis  facility.  Management  recognizes  that cost  containment  through
efficiency  gains and  productivity  improvements  is essential to the Company's
continued  profitable  growth and will  continue  to  analyze  and  monitor  the
Company's performance in this area.

         Selling  expenses  increased in relative  proportion to the increase in
net sales for the three months ended  December 31, 1996.  As a percentage of net
sales, selling expenses remained relatively consistent,  decreasing from 4.2% to
4.1% for the six months ended December 31, 1995 and 1996, respectively.

         General and administrative  expenses increased for the six months ended
December 31, 1996 to approximately $1,188,000 (7.5% of net sales) as compared to
approximately  $844,000 (6.4%) for the  corresponding  period of the prior year.
The increase in the percentage of net sales is attributable to salary  increases
and additional legal fees incurred in connection with the shareholder derivative
lawsuit. See discussion of this matter in the Company's Form 10-KSB.

         The  Company   realized   income  from   securities   transactions   of
approximately  $92,000 for the six months ended December 31, 1996 as compared to
approximately  $72,000 for the corresponding period of the prior year. The gains
were from  investment  transactions  associated  with the  Company's  marketable
securities  portfolio.  The Company invests funds in equity  securities,  mainly
listed on the New York and American Stock Exchanges,  and by policy,  limits the
amount  of  exposure  in  any  one  equity  investment.   Such  investments  are
continually monitored to reduce the risk of any adverse stock market volatility.
Cash not invested in securities is placed on account with brokerage firms, which
is swept daily into a  federally  insured  money  market  account,  or placed on
account with a federally insured national bank.

         Interest  expense  decreased  sharply  from  approximately  $380,000 to
$212,000 for the six months ended December 31, 1995 and 1996,  respectively  and
from approximately  $204,000 to $103,000 for the three months ended December 31,
1995 and 1996, respectively. This decrease is due to decreased borrowings on the
Company's line of credit.

     During June 1995,  the  Company's  management  decided to  discontinue  the
operations of Tapes Unlimited,  Inc. (TU).  Management believed that the cost of
maintaining the TU subsidiary  outweighed the benefits  provided to the Company.
The effect on net income of the  operations  of TU is  segregated on the face of
the income  statement  as  discontinued  operations,  and totaled  approximately
$95,000  net of income  taxes,  for the six  months  ended  December  31,  1995.
Although all operations at TU have ceased,  certain collection efforts are still
conducted  by the  Company  on  behalf of TU.  These  efforts,  along  with debt
forgiveness resulting from settlements with TU creditors, resulted in recoveries
which is reflected in the income from discontinued operations for the six months
ended  December 31, 1995.  Such efforts are still  ongoing,  but did not produce
significant recoveries for the six months ended December 31, 1996.

Other Items
-----------

         The  costs  of the  Company's  products  are  subject  to  inflationary
pressures and commodity price fluctuations.  In addition,  the Company from time
to time  experiences  increases in cost of materials and labor, as well as other
manufacturing and operating  expenses.  The Company's ability to pass along such
increased costs through  increased  prices has been difficult due to competitive
pressures.  The Company  attempts to minimize  the effects of  inflation  on its
operations by controlling these costs.

         The Company's  sales levels  generally  follow the  retail-sell-through
markets,  which  typically  peak in the fall and early  winter  months as retail
demand and holiday  orders are met. The Company has  attempted to mitigate  this
seasonality  by  increasing  sales  efforts to lower  volume,  but higher margin
customers such as those involved with corporate  training video  duplication and
the video rental  market.  Finally,  management  intends to focus its  marketing
efforts  toward the mass  marketing  advertising  industry to help  mitigate the
seasonality  of  the  retail-sell-through   markets.  Even  by  utilizing  these
techniques, sales levels are still expected to be lower in the spring and summer
months.

                                     8
<PAGE>

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

         An annual meeting of  stockholders  of the Company was held on December
17, 1996 at the Company's corporate offices in Dallas, Texas.

         A proposal to elect  Kevin B.  Halter to hold office as director  until
the next annual election of directors by stockholders was approved as follows:

         4,974,245  shares, or 99.49% of the outstanding  shares  represented at
         the meeting voted in favor of the proposal.  9,264 shares,  or 0.18% of
         the  outstanding  shares  represented  at the meeting voted against the
         proposal. 16,455 shares, or 0.33% of the outstanding shares represented
         at the meeting abstained from voting.

         A proposal to elect Kevin B.Halter, Jr.to hold office as director until
 the next annual election of directors by stockholders was approved as follows:

         4,974,245  shares, or 99.49% of the outstanding  shares  represented at
         the meeting voted in favor of the proposal.  9,264 shares,  or 0.18% of
         the  outstanding  shares  represented  at the meeting voted against the
         proposal. 16,455 shares, or 0.33% of the outstanding shares represented
         at the meeting abstained from voting.

         A proposal to elect Gary C. Evans to hold office as director  until the
next annual election of directors by stockholders was approved as follows:

         4,973,245  shares, or 99.47% of the outstanding  shares  represented at
         the meeting voted in favor of the proposal.  10,124 shares, or 0.20% of
         the  outstanding  shares  represented  at the meeting voted against the
         proposal. 16,455 shares, or 0.33% of the outstanding shares represented
         at the meeting abstained from voting.


         A proposal to elect  James  Smith to hold office as director  until the
next annual election of directors by stockholders was approved as follows:

         4,972,070  shares, or 99.44% of the outstanding  shares  represented at
         the meeting voted in favor of the proposal.  11,439 shares, or 0.23% of
         the  outstanding  shares  represented  at the meeting voted against the
         proposal. 16,455 shares, or 0.33% of the outstanding shares represented
         at the meeting abstained from voting.

         A proposal to elect Don R. Benton to hold office as director  until the
next annual election of directors by stockholders was approved as follows:

         4,966,990  shares, or 99.34% of the outstanding  shares  represented at
         the meeting voted in favor of the proposal.  16,519 shares, or 0.33% of
         the  outstanding  shares  represented  at the meeting voted against the
         proposal. 16,455 shares, or 0.33% of the outstanding shares represented
         at the meeting abstained from voting.

         A proposal to elect Hugh C. Coppen to hold office as director until the
next annual election of directors by stockholders was approved as follows:

         4,978,535  shares, or 99.57% of the outstanding  shares  represented at
         the meeting voted in favor of the proposal.  4,974 shares,  or 0.10% of
         the  outstanding  shares  represented  at the meeting voted against the
         proposal. 16,455 shares, or 0.33% of the outstanding shares represented
         at the meeting abstained from voting.


                                       9
<PAGE>

     A  proposal  to ratify  the  appointment  of  Coopers & Lybrand  L.L.P.  as
independent auditors was approved as follows:

         4,947,635  shares, or 98.78% of the outstanding  shares  represented at
         the meeting voted in favor of the proposal.  9,832 shares,  or 0.71% of
         the  outstanding  shares  represented  at the meeting voted against the
         proposal. 16,455 shares, or 0.33% of the outstanding shares represented
         at the meeting abstained from voting.

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     10.1 Loan and Security Agreement,  together with Promissory Notes with Bank
          One, Texas, N.A.

(b)  Reports on Form 8-K

     No report on Form 8-K was filed during the quarter ended December 31, 1996.






































                                       10
<PAGE>



                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
has duly  caused  this  report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.


DIGITAL COMMUNICATIONS TECHNOLOGY CORPORATION


By:  /s/ Douglas L. Miller                             Date:  February 14, 1997
     -------------------------------------------
     Douglas L. Miller, Vice-President and
     Chief Financial Officer




































<PAGE>






















                                  Exhibit 10.1
























<PAGE>


                       LOAN AND SECURITY AGREEMENT


         THIS LOAN AND SECURITY AGREEMENT ("Agreement") made and entered into as
of the day of  acceptance  by and between the  undersigned  Debtor and BANK ONE,
TEXAS, NATIONAL ASSOCIATION:

                               W I T N E S S E T H

         1.       Definitions.  The following definitions shall apply:

                  (a)  "Accounts  Advance  Rate"  shall mean the  percentage  of
         Debtor's  Eligible  Accounts  that  may  be  used  in  determining  the
         Borrowing  Base.  The Accounts  Advance Rate for any month shall be the
         percentage set forth below opposite the applicable  Dilution Percentage
         as determined by Bank from time to time:

         Dilution Percentage                         Accounts Advance Rate
             0 - 5.0 %                                      up to 85 %
             5.1 % - 8.0 %                                  up to 80 %
             8.1 % - 10.0 %                                 up to 75 %
             10.1 % and higher                       to be determined in Bank's
                                                     sole discretion
                                                                       

                  (b) "Adjusted Net Income"  means,  with respect to any period,
         consolidated  net earnings  (before  reduction for federal income taxes
         but after  reduction for any gain or loss on the sale of  extraordinary
         items) of Debtor for such period, determined in accordance with GAAP.

                  (c)  "Affiliate"  shall mean any individual or entity directly
         or indirectly controlling, controlled by, or under common control with,
         or otherwise related to Debtor or any Obligated Party and shall include
         but not be limited  to any  partnership,  joint  venture,  joint  stock
         company, corporation,  parent company or subsidiary or other company or
         person  in which  any  Obligated  Party or any  person  related  to any
         Obligated  Party by blood,  adoption or marriage no more  remotely than
         two  degrees of  relationship  shall own,  directly or  indirectly,  of
         record or beneficially,  or hold, directly or indirectly,  the power to
         control  the vote of,  more than 10% of the  voting  stock of, or other
         equity interest in, such entity.

                  (d)  "Average  Monthly  Availability"  shall  mean the  amount
         obtained by adding the average daily  availability  for each month in a
         calendar year and dividing by twelve, and "average daily  availability"
         for a month  shall be the  amount  obtained  by adding  the  difference
         between  (i) the  Borrowing  Base,  and  (ii)  the  unpaid  balance  of
         Revolving Loans owing by Debtor to Lender at the end of each day during
         a calendar  month in question and by dividing such sum by the number of
         days in such a calendar month.

                  (e) "Bank" shall mean BANK ONE, TEXAS,  NATIONAL  ASSOCIATION,
         of Dallas,  Texas,  whose mailing address is 1717 Main Street,  Dallas,
         Texas 75201.

                  (f)  "Borrower"  shall  mean  Debtor  and any person or entity
         specified  in  Addendum I attached  hereto and  incorporated  herein by
         reference, or any of them.
<PAGE>

                  (g)   "Borrowing   Base"  shall  mean,   as  of  any  date  of
         determination,  the lesser of (i) $5,000,000.00, or (ii) the sum of (1)
         the  product  of (A)  the  Accounts  Advance  Rate,  and  (B)  Eligible
         Accounts,  plus (2) the product of (A) the Inventory  Advance Rate, and
         (B)  Eligible  Inventory;  provided,  however,  that the product of the
         Inventory  Advance Rate and Eligible  Inventory shall not exceed 50% of
         the Borrowing Base and "speculative  inventory"  (hereinafter  defined)
         shall not exceed 10% of total inventory, less (3) the Reserve, and less
         (4) the unpaid  balance on that  certain  loan to Debtor  from the U.S.
         Small  Business  Administration  in the  original  principal  amount of
         $515,000.00,  all  determined  as of such  date of  determination.  The
         reserve  for  the  loan  to  Debtor  from  the  U.S.   Small   Business
         Administration shall be deleted upon the execution between Bank and the
         U.S. Small Business  Administration  of an  intercreditor  agreement in
         form and  substance  acceptable  to Bank.  As used herein  "speculative
         inventory"  means  finished  goods  inventory  that is not subject to a
         purchase order.

                  (h) "Business Day"shall mean any calendar day except Saturday,
          Sunday  and  those  legal  public  holidays   specified  in  5  U.S.C.
          ss.6103(a), as may be amended from time to time.

                  (i) "Capital Expenditure Loan" shall have the meaning assigned
          to such term in Section 2 (d).

                  (j) "Code" shall mean the Uniform Commercial Code as in effect
         in the  State  of  Texas  on the  date of this  Agreement  or as it may
         hereafter be amended from time to time.

                  (k)   "Collateral"   shall  mean  all  that  certain  property
         described  in Addendum II attached  hereto and  incorporated  herein by
         reference.

                  (l) "Contract  Rate" shall mean a rate calculated on the basis
         of actual days  elapsed but  computed as if each year  consisted of 360
         days,  equal to the sum of (i) the  Base  Rate  (the  "Base  Rate")  of
         interest as established from time to time by the Bank (which may not be
         the lowest,  best or most  favorable  rate of  interest  which Bank may
         charge on loans to its customers),  plus (ii) one half percent (0.50 %)
         per  annum.  With  respect  to the  Revolving  Loan  only,  if (A)  the
         Shareholder Suit is resolved in a manner  satisfactory to Bank, and (B)
         no Default or Event of Default has occurred hereunder,  such rate shall
         be reduced after the final  resolution of the  Shareholder  Suit to the
         sum of (1) the Base Rate, plus (2) one quarter percent (0.25%).

                  (m)  "Debtor"  shall mean  Digital  Communications  Technology
         Corporation,  a Delaware  corporation,  whose chief executive office is
         located at 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248.

                  (n) "Default" means any of the events specified in Section 14,
         regardless  of whether there shall have occurred any passage of time or
         giving of notice or both that would be necessary in order to constitute
         such event an Event of Default.

                  (o)  "Default  Rate"  shall mean at the time in question a per
         annum rate equal to the lesser of (i) the Base Rate then in effect plus
         four percent (4.0%), or (ii) the Maximum Rate.

                  (p)   "Dilution   Percentage"   means,   as  of  any  date  of
         determination,  the  ratio of (i) the sum of (a) all  non-cash  credits
         given by Debtor to account  debtors  or  obtained  by  account  debtors
         during the 12-month  period ending on the date of  determination,  plus
         (b) bad debt expense  incurred or accrued by Debtor  during such period
         to (ii) the aggregate face amount of all accounts receivable  generated
         by Debtor during such 12-month period.
<PAGE>

                  (q) "Distributions" means, in respect of any corporation, cash
         distributions  or dividends or any other  distributions of property on,
         or in  respect  of,  any class of  capital  stock of such  corporation,
         except  for  distributions  made  solely in shares of stock of the same
         class, and means, in respect of any partnership or other unincorporated
         entity,  cash distributions or any other  distributions of property on,
         or in respect of, any capital or profits  interest in such  partnership
         or other entity.

                  (r) "Eligible  Accounts"  means,  as of any date, all accounts
         receivable  of Debtor  arising  from the sale of goods or  rendering of
         services by Debtor other than the following:  (a) accounts which remain
         unpaid more than the lesser of one hundred twenty (120) days past their
         respective  invoice dates or sixty (60) days past their  respective due
         dates;  (b)  accounts  which are not due and payable  within sixty (60)
         days after their respective  invoice dates; (c) all accounts owing by a
         single  account  debtor  if  twenty  percent  (20%) or more of the then
         balance owing by said account  debtor is ineligible  pursuant to clause
         (a) and/or (b) above;  (d)  accounts  with respect to which the account
         debtor is a shareholder, partner, director, officer, employee, agent or
         Affiliate of Debtor,  (e) accounts with respect to which payment by the
         account debtor is or may be conditional and accounts  commonly known as
         "bill  and hold" or  accounts  of a similar  or like  arrangement;  (f)
         accounts with respect to which the account  debtor is not a resident or
         citizen of or otherwise  located in the  continental  United  States of
         America,  or with respect to which the account debtor is not subject to
         service of process in the continental United States of America,  unless
         such  accounts are backed in full by  irrevocable  letters of credit in
         the form and  substance  satisfactory  to the Bank  issued by  domestic
         commercial  banks acceptable to the Bank, or backed by an Export/Import
         Bank guaranteed  financing program acceptable to Bank, but in the event
         of such credit  enhancement,  such accounts  rendered Eligible Accounts
         thereby   shall  not  exceed  an  aggregate  of  One  Million   Dollars
         ($1,000,000.00);  provided,  however,  Eligible  Accounts  may  include
         unbacked accounts  otherwise eligible hereunder that are denominated in
         U.S.  dollars and are owed by account debtors located in Canada up to a
         maximum of  $750,000.00,  which  Canadian  accounts  are not counted in
         calculating  the foregoing  $1,000,000.00  limitation;  (g) accounts in
         excess of a total amount of One Hundred Thousand Dollars  ($100,000.00)
         (for all government  accounts) with respect to which the account debtor
         is the United States of America,  any state of the United States or any
         other governmental body or any department, agency or instrumentality of
         any of the foregoing unless such accounts are duly assigned to the Bank
         in compliance with all applicable governmental requirements (including,
         without  limitation,  the Federal  Assignment of Claims Act of 1940, as
         amended,  if  applicable) so that the Bank is recognized by the account
         debtor to have all of the rights of an assignee of such  accounts;  (h)
         accounts  with respect to which  Debtor is or may become  liable to the
         account  debtor for goods sold or  services  rendered  by such  account
         debtor to Debtor,  but only to the extent of  Debtor's  then  aggregate
         liability to such account debtor (i.e. the excess of the aggregate face
         amount  of  accounts  of such  account  debtor to the  Debtor  over the
         aggregate  liability of Debtor to such account debtor shall  constitute
         an Eligible Account unless  otherwise  excepted under the terms of this
        
<PAGE>

         section);  (i)  accounts  with  respect to which the goods  giving rise
         thereto  have  not  been  shipped  and  delivered  to and  accepted  as
         satisfactory by the account debtor thereof or with respect to which the
         services  performed  giving rise  thereto have not been  completed  and
         accepted as satisfactory  by the account debtor  thereof;  (j) accounts
         which  are not  invoiced  (and  dated as of such  date) and sent to the
         account  debtor  thereof  concurrently  with or not later than five (5)
         days after  shipment or delivery to or acceptance by the account debtor
         of goods giving rise thereto or the performance of the services or sale
         of goods giving rise thereto;  (k) accounts  arising from a consignment
         sale,  a "sale on approval"  or a "sale or return",  (l) accounts  with
         respect to which  possession  and/or  control of the goods sold  giving
         rise thereto is held, maintained or retained by Debtor (or any agent or
         custodian  of Debtor) for the  account of or subject to further  and/or
         future  direction  from the account debtor thereof ; (m) accounts as to
         which the Bank,  at any time or times  hereafter,  determines,  in good
         faith,  that the  prospect  of payment or  performance  by the  account
         debtor is or will be impaired in any material respect;  (n) accounts of
         an account debtor to the extent, but only to the extent,  that the same
         exceed  a  credit  limit  determined  by the  Bank  in  its  reasonable
         discretion,  at any time or times hereafter;  (o) accounts with respect
         to which the account debtor is located in the State of New Jersey,  the
         State of Minnesota  or the State of Indiana;  provided,  however,  that
         such  restriction  shall  not  apply if  Debtor  (i) has  filed and has
         effective (A) in respect of account debtors located in the State of New
         Jersey,  a Notice  of  Business  Activity  Report  with the New  Jersey
         division  of  Taxation  for the then  current  year,  (B) in respect of
         account debtors located in the State of Minnesota, a Minnesota Business
         Activity  Report with the Minnesota  Department of Revenue for the then
         current year or (C) in respect of account  debtors located in the State
         of Indiana, a Business activities Report with the Indiana Department of
         Revenue for the then current year, as applicable,  or (ii) is otherwise
         exempt  from  such  reporting  requirements  under  the  laws  of  such
         State(s);  (p)  accounts  which  are not  subject  to a first  priority
         perfected  security  interest in favor of Bank; and (q) that portion of
         an  account  balance  owed by a single  account  debtor  which  exceeds
         twenty-five percent (25%) of total accounts receivable otherwise deemed
         eligible here under, unless waived in writing by Bank.

                  (s)   "Eligible   Inventory"   means,   as  of  any   date  of
         determination (the value determined at the lower of cost or market on a
         GAAP  average  cost  basis)  of  all  inventory  owned  by  and  in the
         possession  of Debtor and located in the United  States of America that
         Bank, in its sole credit  judgment,  deems to be eligible for borrowing
         purposes.  Without  limiting the  generality of the  foregoing,  unless
         otherwise agreed by Bank, the following is not Eligible Inventory:  (a)
         work-in-process;   (b)   finished   goods   which   do  not   meet  the
         specifications  of the  purchase  order for such goods;  (c)  inventory
         which Bank determines,  in the exercise of reasonable discretion and in
         accordance with Bank's or Debtor's customary business practices,  to be
         unacceptable  for  borrowing  purposes  due  to  age,  quality,   type,
         category,  category margin deterioration and/or quantity; (d) inventory
         with  respect to which Bank does not have a valid,  first  priority and
         fully perfected security interest;  (e) inventory with respect to which
         there  exists  any Lien in favor of any Person  other  than  Bank;  (f)
         inventory  produced in  violation of the Fair Labor  Standards  Act, in
         particular  provisions  contained  in Title 29  U.S.C.  215(a)(i);  (g)
         inventory  located at any location  other than those listed on Addendum
        
<PAGE>

         VI , (h)  inventory  situated at a location for which there is no valid
         landlord waiver or mortgagee waiver,  as appropriate,  in each instance
         in  form  and  substance  acceptable  to  Secured  Party  in  its  sole
         discretion,  and  (i)  inventory  that  is  "reworkable"  or  "seconds"
         inventory.

                  (t) "Fixed Charge  Coverage  Ratio" means, as of any date, the
         ratio of the following  items on a consolidated  basis (i) year to date
         after  tax  earnings,  plus  depreciation,  amortization  and  interest
         expense,  less Distributions and less 66% of gains on financial assets,
         to (ii) current  maturities of Funded Debt, plus the current portion of
         capital  leases,   plus  interest   expense,   plus  Unfunded   Capital
         Expenditures.

                  (u)  "Funded  Debt"  means,  as of any  date,  the  sum of the
         following (without duplication) for Debtor on a consolidated basis: (i)
         the aggregate of all  indebtedness  for borrowed  money of Debtor as of
         such date, other than current liabilities,  (ii) all indebtedness which
         would  be   classified   as   "funded   indebtedness"   or   "long-term
         indebtedness" (or other similar  classification)  on a balance sheet of
         Debtor  prepared  as of such date in  accordance  with GAAP,  (iii) the
         aggregate of all indebtedness of Debtor outstanding under any revolving
         credit or similar  agreement  providing for borrowing (and renewals and
         extensions   thereof)   over  a  period   of  more   than   one   year,
         notwithstanding  the fact that any such  indebtedness is created within
         one year of the expiration of such agreement and (iv) the amount of all
         obligations in respect of capital leases of Debtor booked in accordance
         with GAAP.

                  (v)"GAAP" means generally accepted accounting principles and
         practices,  consistently applied.

                  (w) "Indemnified Persons" means,  collectively,  Secured Party
         and its officers, directors, shareholders, employees, agents, attorneys
         and  representatives,  and any Person owned or controlled  by, or which
         owns or controls or is under common control or is otherwise  affiliated
         with,  Secured  Party,  and any other  Person,  if any,  who acquires a
         portion  of  the  Collateral  in any  manner  through  Secured  Party's
         exercise of rights and remedies under the Loan Documents.

                  (x) "Inventory  Advance Rate" means the percentage of Debtor's
         Eligible  Inventory that may be used in determining the Borrowing Base.
         Such percentage shall equal up to 45% of Eligible Inventory  consisting
         of finished goods and up to 40% of Eligible Inventory consisting of raw
         materials.  Six months after the date of the initial advance  hereunder
         the  Inventory  Advance  Rates shall  increase to up to 55% of Eligible
         Inventory  consisting  of  finished  goods  and up to  50% of  Eligible
         Inventory  consisting of raw materials  provided that (i) no Default or
         Event of Default has occurred  hereunder,  (ii) Bank has  performed two
         quarterly field exams that were  satisfactory  to Bank,  (iii) Debtor's
         inventory and perpetual inventory accounting system are satisfactory to
         Bank,  and (iv) Debtor has a positive  fiscal year to date Adjusted Net
         Income.

                  (y)  "Investment" in any Person means any investment,  whether
         by means of share purchase, loan, advance, purchase of debt instrument,
         extension of credit  (other than accounts  receivable  arising from the
         sale of goods or services in the ordinary course of business),  capital
         contribution  or otherwise,  in or to such Person,  the guaranty of any
         indebtedness of such Person or the  subordination  of any claim against
         such Person to other indebtedness of such person or entity.

                  (z)  "Letter of  Credit"  means,  individually,  any letter of
         credit  issued by Secured  Party for the  account  of  Debtor,  and any
         renewal or extension of any of the  foregoing,  and "Letters of Credit"
         means all such letters of credit collectively.

                  (aa) "Letter of Credit  Exposure"  means,  as of any date, the
         aggregate  undrawn maximum face amount of all Letters of Credit on such
         date.

<PAGE>

                  (bb) "Letter of Credit  Obligations"  means any obligations of
         Debtor under this Agreement in connection with the Letters of Credit.

                  (cc) "Loan  Documents" shall mean this Agreement and all other
         documents and instruments  executed in connection  herewith  (including
         without limitation,  all notes,  documents,  agreements and instruments
         evidencing, securing, governing,  guaranteeing and/or pertaining to the
         indebtedness  created  or  arising  hereunder  and  all  documents  and
         agreements  relating  to any  Letter  of  Credit),  as the  same may be
         amended, restated, renewed, extended, or otherwise modified.

                  (dd)     "Maturity Date" shall mean October 31, 1998.

                  (ee)  "Maximum  Rate"  shall  mean at any  particular  time in
         question  the maximum  rate of interest  which,  under  applicable  law
         (including  federal  laws),  may then be charged  on the sums  advanced
         hereunder.

                  (ff)  "Obligated  Party"  shall  mean  any  party  other  than
         Borrower who secures,  guarantees and/or is otherwise  obligated to pay
         all or any portion of the Obligations.

                  (gg) "Obligations"  shall mean (i) all loans or other advances
         made by  Secured  Party  to  Borrower  pursuant  to this  Agreement  or
         otherwise   (including  without  limitation,   all  notes,   documents,
         agreements   and   instruments   evidencing,    securing,    governing,
         guaranteeing  and/or pertaining to the indebtedness  created or arising
         hereunder and all documents  and  agreements  relating to any Letter of
         Credit),  (ii) all future advances or other value, of whatever class or
         for whatever  purpose,  at any time  hereafter made or given by Secured
         Party to  Borrower,  whether  or not the  advances  or value  are given
         pursuant  to  commitment  and  whether or not  Borrower  is indebted to
         Secured  Party at the time of such  advance;  (iii)  any and all  other
         debts,  liabilities  and duties of every kind and character of Borrower
         to Secured Party, whether now or hereafter existing,  and regardless of
         whether such present or future debts,  liabilities or duties are direct
         or  indirect,  primary  or  secondary,  joint,  several,  or joint  and
         several, fixed or contingent, and regardless of whether such present or
         future debts,  liabilities or duties may, prior to their acquisition by
         Secured Party,  be or have been payable to, or be or have been in favor
         of,  some other  person or have been  acquired  by  Secured  Party in a
         transaction  with one other than Borrower (it being  contemplated  that
         Secured Party may make such acquisitions  from others),  howsoever such
         indebtedness shall arise or be incurred or evidenced;  (iv) interest on
         all of the debts,  liabilities  and  duties set forth in (i),  (ii) and
         (iii) above; and (v) any and all renewals and extensions of such debts,
         liabilities and duties set forth in (i), (ii), (iii) and (iv) above, or
         any part thereof.

                  (hh) "Person" means an individual,  corporation,  partnership,
         joint venture,  association,  governmental  entity,  court or any other
         entity.

                  (ii)  "Permitted  Liens" means the security  interests held by
         Mid-City  Pioneer  Corporation in certain  listed  equipment of Debtor,
         which  lien shall be  subordinated  to the  Obligations  upon terms and
         conditions acceptable to Bank in its sole discretion.

<PAGE>

                  (jj)  "Reserve"  at any time shall mean an amount from time to
         time  established  by Secured  Party in its  discretion as a reserve in
         reduction of the Borrowing  Base in respect of  contingencies  or other
         potential  factors  which,  in  the  event  they  should  occur,  could
         adversely affect or otherwise  reduce the anticipated  amount of timely
         collections in payment of Eligible  Accounts or the anticipated  amount
         of  proceeds  which  could be  realized  upon  liquidation  of Eligible
         Inventory.  The "Reserve," if any from time to time, does not represent
         cash funds.

                  (kk)"Revolving Line" means Five Million and No/100 Dollars
        ($5,000,000.00).

                  (ll)  "Revolving  Loans" means all loans and advances  made by
         Secured Party to Debtor pursuant to Section 2 herein.

                  (mm) "Secured  Party" means the Bank,  and its  successors and
         assigns,  including  specifically,  any party to whom the Bank,  or its
         successors or assigns,  may assign its rights and interests  under this
         Agreement.

                  (nn)"Shareholder Suit"means the lawsuit styled Richard Abrons,
          on behalf of Digital Communications  Technology Corporation and Adrian
          Jacoby, on behalf of S.O.I.  Industries,  Inc., Derivative Plaintiffs,
          vs. Kevin B. Halter, et al, Cause No. 96-02169-G.

                  (oo)  "Subsidiary"  means any corporation more than 50% of the
         voting  shares  of which is at the time  owned by  Debtor  directly  or
         indirectly through Subsidiaries.

                  (pp)  "Tangible Leverage Ratio"  means  the ratio of  Total
         Liabilities to Tangible Net Worth.

                  (qq)  "Tangible  Net Worth" means,  as of any date,  the total
         shareholders' equity (including additional paid-in capital and retained
         earnings) which would appear on a consolidated  balance sheet of Debtor
         prepared  as of such date in  accordance  with  GAAP plus  subordinated
         debt, less the aggregate book value of Intangible  Assets shown on such
         balance sheet,  provided that, for purposes of Section 12(p),  Tangible
         Net  Worth  shall  be  determined  using  total  shareholders'   equity
         (including   additional   paid  in  capital  and  retained   earnings),
         subordinated  debt,  and  Intangible  Assets  which would  appear on an
         unconsolidated  balance  sheet of Debtor  prepared in  accordance  with
         GAAP.  For this  purpose,  "Intangible  Assets"  means assets which are
         treated as intangible  pursuant to GAAP,  including without  limitation
         (i)  obligations  owing from any persons that are officers,  directors,
         shareholders,  employees,  subsidiaries,  any  entity in which any such
         person owns any interest, or any other Affiliate,  (ii) any asset which
         is   intangible   or   lacks   intrinsic   and   marketable   value  or
         collectibility,  including without limitation, goodwill, noncompetition
         agreements, patents, copyrights, trademarks, franchises or organization
         or research and development costs.
<PAGE>

                  (rr)"Term  Loan" shall have the meaning assigned to such term
         in Section 2(c).

                  (ss) "Total  Liabilities"  means, as of any date, Funded Debt,
         plus  consolidated  current  liabilities,  plus all other  consolidated
         liabilities  which would be reflected on a  consolidated  balance sheet
         prepared in accordance with GAAP, of Debtor.

                  (tt) "Unfunded Capital  Expenditures"  means the annual amount
         of consolidated  capital  expenditures  that are not financed by either
         (i) loans,  or (ii) capital  leases.  All words and phrases used herein
         which are expressly defined in Section 1.201 or in Chapter 9 of the
         Code shall have the meaning  provided for therein.  Other such words
         and phrases defined  elsewhere in the Code shall have the meanings 
         specified therein except to the extent such meaning is inconsistent
         with a definition in Section 1.201 or Chapter 9.

         For purposes of defining  financial terms used in calculating  Debtor's
compliance with financial  covenants  contained herein,  all "realized"  trading
profits from  Debtor's  financial  assets shall be excluded  from income and all
"realized" losses from such items shall be included in income.

         The term  "consolidated",  when used in connection  with any accounting
terms,  financial  covenants or defined terms used in any  financial  covenants,
shall refer to Debtor and its Subsidiaries.

         2.       Loans and Letters of Credit.

         (a) Revolving  Loans.  Subject to the terms and  provisions  hereof and
provided that the aggregate  principal  outstanding on the Revolving  Loans plus
the Letter of Credit Exposure does not then exceed the Borrowing  Base,  Secured
Party shall, from time to time, make loans to Borrower secured by the Collateral
and evidenced by one or more  promissory  notes in the form of Exhibit A hereto.
The maximum aggregate  principal balance  outstanding at any one time under this
Section 2(a) plus the Letter of Credit  Exposure  shall not exceed the Borrowing
Base as then determined by the Bank in its sole discretion.  Unless  accelerated
in  accordance  with the terms  hereof,  all  outstanding  principal  and unpaid
accrued interest  constituting  Revolving Loans shall be due and payable in full
on the Maturity Date.

         (b) Letters of Credit. Subject to the terms hereof, Secured Party will,
from time to time,  upon  request by Borrower,  issue  Letters of Credit for the
account of Borrower  provided  that (i) the maximum  undrawn  face amount of all
Letters of Credit outstanding at any time (including the amount of the requested
Letter of Credit) does not exceed  $500,000.00,  (ii) Borrower would be entitled
to an  advance  under  Section  2(a) in the  amount of the  requested  Letter of
Credit,  (iii) the  Letter of Credit  is for a  business  purpose,  and (iv) any
Letter of Credit  issued  hereunder  shall  terminate  on or before the Maturity
Date.  As a condition  to the issuance of any Letter of Credit,  Borrower  shall
execute and deliver to Secured Party its customary Letter of Credit  application
and shall pay to Secured Party, in addition to clerical issuance and transaction
costs charged by Secured Party, a Letter of Credit fee as provided  therein,  in
an amount equal to one sixth (1/6) of one percent (1%) per month of the unfunded
face amount thereof.  Each Letter of Credit shall be issued in form satisfactory
to Secured Party. The amount,  if any, from time to time funded by Secured Party
for the account of Borrower  under any Letter of Credit shall be reimbursed  and
paid by  Borrower to Secured  Party on demand,  or, at Secured  Party's  option,
charged to  Borrower  as a  Revolving  Loan,  whether or not  Borrower  would be
entitled to an advance for such amount pursuant to Section 2(a).
<PAGE>

        (c) Term Loan.Subject to the terms and conditions  hereof, Secured Party
agrees to lend to Debtor in a single  advance the amount of  $1,800,000.00  (the
"Term Loan").  The Term Loan shall be secured by the Collateral and evidenced by
a  promissory  note in the form of  Exhibit  B  hereto.  Unless  accelerated  in
accordance with the terms hereof, the principal of the

Term Loan shall be due and payable in equal, consecutive monthly payments in the
amount of $30,000.00 each on the first business day of each month, commencing on
December 1, 1996, and continuing each month thereafter, and in one final payment
of all  outstanding  principal on the earlier of (i) the Maturity  Date, or (ii)
the termination of this Agreement pursuant to Section 17 hereof.

         (d)  Capital  Expenditure  Loan.  Subject  to the terms and  conditions
hereof,  Secured  Party shall make loans to Debtor,  from time to time, up to an
aggregate  amount  equal to the lesser of (i)  $1,950,000.00  or (ii) 80% of the
"hard acquisition  cost" of newly acquired  Equipment in which Secured Party has
been  granted  a first  priority,  perfected  security  interest  (the  "Capital
Expenditure  Loan").  As used herein the term "hard acquisition cost" shall mean
the total cost of an item less related freight,  installation costs, sales taxes
and other  expenses.  The  Capital  Expenditure  Loan  shall be  secured  by the
Collateral  and evidenced by a promissory  note in the form of Exhibit C hereto.
Requests  for  advances  under the  Capital  Expenditure  Loan  shall be made by
submitting to Secured Party (i) a completed request for Capital Expenditure Loan
advance,  and (ii) the original  invoice for the Equipment to be purchased  with
the proceeds of such advance.  Unless  accelerated in accordance  with the terms
hereof,  each advance under the Capital Expenditure Loan shall be amortized over
a sixty (60) month period with payments due and payable  commencing on the first
day of the month after the initial advance under the Capital  Expenditure  Loan,
and  continuing  on the first  day of each  month  thereafter,  and in one final
payment of all outstanding principal on the earlier of (i) the Maturity Date, or
(ii) the termination of this Agreement  pursuant to Section 17 hereof.  Advances
under the Capital Expenditure Loan shall be in a minimum amount of $100,000.00.

         3. Security  Interest.  As security for all  Obligations,  Debtor,  for
value received,  hereby grants to Secured Party a continuing  security  interest
in, and assigns and pledges to Secured Party,  the Collateral  which it now owns
or holds or  hereafter  owns,  holds or  acquires.  Secured  Party  may hold for
security any property,  securities,  guaranties or monies of Debtor which may at
any time come into the  possession  of  Secured  Party and may apply same or the
proceeds  thereof to payment of any  Obligations,  as the  Secured  Party  shall
elect,  which at any time then or thereafter are owing to Secured Party.  To the
extent that a security  interest in the inventory and/or the equipment of Debtor
is granted to Secured Party  hereunder,  such security  interest  shall continue
through all stages of manufacture and shall,  without further act, attach to the
accounts or other proceeds resulting from the sale or other disposition  thereof
and to all such Collateral as may be returned to Debtor by its account  debtors.
The  designation  of proceeds  does not  authorize  Debtor to sell,  transfer or
otherwise convey any of the Collateral except finished goods inventory  intended
for sale in the ordinary course of Debtor's business.

         4. Interest.(a) Contract Rate. Debtor agrees to pay, in addition to all
other amounts payable  hereunder,  interest on the principal  amount of all sums
now or  hereafter  loaned or  advanced  by  Secured  Party to Debtor  hereunder,
irrespective  of  whether  such  indebtedness  of  Debtor  to  Secured  Party be
evidenced  by  promissory  notes,  drafts,   acceptances  or  otherwise,   at  a
fluctuating  rate per annum  from the date any such  indebtedness  is created in
favor of Secured Party until  maturity,  which shall from day to day be equal to
the lesser of (i) the Maximum  Rate, or (ii) the Contract  Rate,  each change in
the rate to be charged hereunder to be effective without notice to Debtor on the
effective  date of each  change  in the  Maximum  Rate,  the Base  Rate,  or the
Contract Rate, as the case may be;  provided,  however,  that if at any time the
Contract Rate shall exceed the Maximum Rate, thereby causing the interest on the
Revolving  Loans to be limited to the Maximum Rate as provided in (i) preceding,
then any subsequent  reduction in the Contract Rate shall not reduce the rate of
interest on the Revolving Loans below the Maximum Rate until the total amount of
interest  accrued on the  Revolving  Loans  equals the amount of interest  which
would have accrued  thereon if the rate  specified in (ii)  preceding had at all
times been in effect.

<PAGE>

         (b)  General.  If  applicable  law ceases to provide for such a maximum
rate of interest,  the Maximum Rate shall be equal to eighteen percent (18%) per
annum.  Interest accrued  hereunder shall be payable monthly on the first day of
each calendar  month.  To the extent that any interest due by Debtor is not paid
on the first day of each  month,  Secured  Party may,  at its  option,  add such
accrued interest to the principal indebtedness due by Debtor under the Revolving
Loans.  After the occurrence and during the  continuance of an Event of Default,
the outstanding  principal balance of the Revolving Loans shall bear interest at
a rate of interest  equal to the Default Rate.  Notwithstanding  any  provisions
contained in this Agreement or in any of the other Loan  Documents,  the Secured
Party shall never be entitled to receive,  collect or apply,  as interest on the
indebtedness arising hereunder, any amount in excess of the Maximum Rate and, in
the event the Secured Party ever  receives,  collects or applies as interest any
such excess,  such amount which could be excessive  interest shall be applied to
the  reduction  of the  unpaid  principal  balance of the  indebtedness  arising
hereunder,  and, if the principal  balance of such indebtedness is paid in full,
any  remaining  excess  shall  forthwith be paid to the Debtor.  In  determining
whether or not the  interest  paid or  payable  under any  specific  contingency
exceeds the Maximum  Rate,  Debtor and the Secured  Party shall,  to the maximum
extent  permitted  under  applicable  law, (i)  characterize  any  non-principal
payment as a standby fee, commitment fee, prepayment charge,  delinquency charge
or reimbursement for a third party expense,  (ii) exclude voluntary  prepayments
and the effect  thereof,  and (iii)  amortize,  prorate,  allocate and spread in
equal parts  throughout  the entire  period  during which the  indebtedness  was
outstanding the total amount of interest at any time contracted for,  charged or
received.  Subject to the terms of this  section,  all  checks  and other  items
received by Secured  Party in payment of the  Obligations  shall be subject to a
charge for two (2) Business Days clearance.

         5. Conditions to Closing.  Prior to or simultaneous  with the execution
and delivery  hereof and as  conditions  precedent to the  obligation of Bank to
make any loan  hereunder,  Debtor shall  deliver,  or cause to be delivered,  to
Bank,  the  following,  all in form and substance  satisfactory  to Bank and its
counsel or the following shall be fulfilled to the  satisfaction of Bank, as the
case may be:


                  (a) A  Revolving  Loan note in the form of  Exhibit  A; a Term
         Loan note in the form of Exhibit B and a Capital  Expenditure Loan note
         in the form of Exhibit C;

                  (b) An opinion of legal counsel for Debtor satisfactorily
         addressing such matters as may be required by Bank and its counsel;

                  (c)  A  copy  of  the  articles  of  incorporation,   and  all
         amendments  thereto,  of Debtor,  accompanied by the certificate of the
         Secretary of State of the state of incorporation  of Debtor,  bearing a
         date no more than  thirty  (30) days prior to the date  hereof,  to the
         effect that each such copy is correct and complete and that Debtor is a
         corporation  duly  incorporated and validly existing in such state, and
         certified by the  corporate  secretary of Debtor dated the date hereof,
         as being correct and complete as of the date hereof;

                  (d) A copy of the  bylaws,  and  all  amendments  thereto,  of
         Debtor accompanied by a certificate from Debtor's corporate  secretary,
         dated the date  hereof,  to the effect  that such copy is  correct  and
         complete as of the date hereof;

                  (e)  Certification  of  incumbency  of all  officers of Debtor
         executed  by the  president  or  vice  president  and by the  corporate
         secretary  of Debtor,  as of the date hereof,  certifying  the name and
         signature of each such officer;

<PAGE>

                  (f) A copy of corporate  resolutions of Debtor  approving this
         Agreement,   authorizing  the  transactions  contemplated  hereby,  and
         authorizing and directing a named officer or officers of Debtor to sign
         and deliver all Loan  Documents to be executed by Debtor,  duly adopted
         by Debtor's board of directors,  accompanied by the  certificate of the
         corporate  secretary,  dated the date hereof,  that such copy is a true
         and  complete  copy  of  resolutions  duly  adopted  by  the  board  of
         directors,  and that such resolutions have not been amended,  modified,
         or  revoked in any  respect  and are in full force and effect as of the
         date hereof;

                  (g)  Certification  by the Comptroller of the States of Texas,
         Indiana and Florida  bearing  dates no more than thirty (30) days prior
         to the date hereof,  to the effect that Debtor is in good standing with
         respect to payment of franchise and similar taxes in such states;

                  (h) All financing statements and hypothecs required by Secured
         Party  in  connection  with  perfection  of  Secured  Party's  security
         interests in the  Collateral and all  termination  statements and other
         amendments  to financing  statements  required by Secured Party to make
         Secured  Party's  security  interest in the Collateral a first priority
         (and only) security interest therein subject, however, to the Permitted
         Liens;

                  (i) Evidence of insurance in compliance with the requirements
         of Section 11(g) and such loss payable endorsements as may be required
         by Secured Party;

                  (j) Executed landlord's waivers and consents for each location
         leased by Debtor and mortgagee waiver's from each location owned by 
         Debtor;

                  (k) Debtor shall have  implemented  administrative  procedures
         satisfactory to Secured Party,  including,  but not limited to, matters
         relating  to  financial   statements,   receivable  agings,   inventory
         summaries,  collections,  borrowing base  reporting,  projections,  and
         eligibility determination;

                  (l) Evidence  that the  difference  between (i) the  Borrowing
         Base,  and (ii) the unpaid balance of the Revolving  Loans  immediately
         after closing will be at least $300,000.00;

                  (m) No material  adverse  change has occurred in the financial
         condition  of  Debtor  since  the  date of the  most  recent  financial
         statements delivered to Bank prior to closing;

                  (n)Debtor shall not have defaulted on any of its obligations
         to any third parties;

                  (o) No litigation or other legal  proceedings shall be pending
         or threatened  against Debtor (other than the  Shareholder  Suit) which
         Bank  in its  sole  discretion  believes  might  adversely  affect  the
         financial condition of Debtor;

                  (p) Satisfactory review by Bank and its legal counsel of the
         Shareholder Suit;

                  (q) Satisfactory review of the audited financial statements of
         Debtor for the fiscal year ended June 30, 1996;

                  (r)  Satisfactory  review  of  the  company  prepared  interim
         financial statements of Debtor for the period ended August 31, 1996 and
         Debtor's  chief  financial  officer's  "flash  estimate"  for September
         sales, margins and results;

                  (s)  Payment  to  Bank of  $6,513.29  for  the  initial  field
         examination by Bank and $8,238.00 for the ATEC equipment  appraisal fee
         and all out of pocket expenses of Bank including,  without  limitation,
         attorneys' fees and expenses,  examination  expenses,  appraisal costs,
         and filing, search and recording fees;

<PAGE>

                  (t) Satisfactory review by Bank and its legal counsel of all 
         licenses, contracts and contingent liabilities of Debtor;

                  (u) Satisfactory subordination and inter-creditor agreements
         with Mid-City Pioneer Corporation and the U.S. Small Business
         Administration regarding their second lien on certain equipment;

                  (v) Satisfactory review and approval by Bank of trade checks 
         on Debtor's top five customers;

                  (w)  Satisfactory  review and approval by Bank of (i) Debtor's
         pre-funding  inventory and inventory records,  and (ii) a sales backlog
         analysis for the coming October through January period; and

                  (x)  Such  other  agreements,  instruments,  certificates  and
         financing  statements  as Secured Party may request in order to perfect
         or protect its  interests  and rights in the  Collateral  and under the
         Loan Documents.

         6. Unused Facility Fee. Debtor agrees to pay to Secured Party an unused
facility fee equal to one quarter  percent (.25%) per annum of the average daily
unused  portion  of the  Revolving  Line in effect  from  time to time,  payable
quarterly in arrears,  beginning  December 31, 1996 and continuing on each March
31, June 30,  September  30 and December 31  thereafter  during the term of this
Agreement and upon the termination hereof.

         7. Assignment of Accounts. The execution and delivery of this Agreement
shall constitute,  with respect to the accounts hereby assigned and pledged,  an
agreement,  representation  and warranty by Debtor to Secured Party that, except
for the security interest of Secured Party therein:

                  (a)  Debtor  is the sole  owner  of and has full  unrestricted
         power and right to assign and pledge such  accounts free from any lien,
         security interest or encumbrance.

                  (b) Each account is in existence, unconditional and valid, and
         arose from a bona fide outright sale of personal  property usually sold
         by Debtor, or for services usually performed by Debtor, in the ordinary
         course of its  business,  for  liquidated  amounts and  maturing as set
         forth on its face and that such  personal  property has been shipped to
         respective  account  debtors or such services  have been  performed for
         respective account debtors.

                  (c) No account is  subject to any sale,  assignment,  claim or
         security interest of any character and Debtor will not make any sale or
         other assignment thereof or create any other security interest therein.

                  (d) No account is subject to any claim for credit,  deduction,
         allowance  or  adjustment  by an  account  debtor,  or to any  defense,
         dispute,  set-off  or  counterclaim,  and  there  is  no  extension  or
         indulgence with respect thereto.
                  (e) Each  account  will be paid in full at maturity and if not
         paid, Debtor will, upon demand,  promptly pay the amount represented to
         be  owing  thereon  to  Secured  Party  for  application   against  the
         Obligations  in such manner as Secured  Party may elect,  or at Secured
         Party's option such unpaid amount may be deducted from any payment then
         or thereafter  due from Secured Party to Debtor,  and Secured Party may
         retain such account as collateral for any of the Obligations.

<PAGE>

         8.  Establishment  of Lock Box. So long as this  Agreement  shall be in
effect or any Obligations  shall be  outstanding,  Borrower agrees that all sums
payable by any  account  debtor to  Borrower  in payment or on account of any of
Borrower's  accounts  shall be  deposited  in a payment  account  (the  "Payment
Account")  established  pursuant to Secured  Party's  standard  form of Lock Box
Agreement  ("Lock Box  Agreement") and maintained with Secured Party in the name
of Borrower,  marked "Payment Account," over which Secured Party alone has power
of withdrawal. Such sums shall be deposited in the form received, except for the
endorsement of Borrower  where  necessary to permit  collection of items,  which
endorsement  Borrower  agrees to make,  and which  Secured  Party is also hereby
authorized to make on Borrower's behalf.  Borrower hereby agrees, at the request
of Secured Party,  immediately  upon receipt of checks,  drafts,  cash and other
remittances  and  payment  of or on account of any of  Borrower's  accounts,  to
immediately  deposit all of the same into the Payment  Account.  Borrower hereby
also agrees,  upon request by Secured Party, to notify all of Borrower's present
and future  account  debtors to send all  amounts  payable  to  Borrower  to the
address  indicated  in the  Lock Box  Agreement.  Secured  Party is  authorized,
empowered  and  directed to apply any and all funds in the  Payment  Account (i)
toward the payment of the outstanding  principal amount of, and accrued interest
on, the  Revolving  Loans and any other  amounts then due and payable to Secured
Party, at any time when no Event of Default has occurred and is continuing,  and
(ii),  after the occurrence  and during the  continuance of an Event of Default,
toward,  in Secured  Party's  sole and absolute  discretion,  the payment of the
outstanding   principal   amount  of,  and  accrued  interest  on,  any  of  the
Obligations, with any balance remaining after payment in full of the Obligations
to be deposited  into an account  maintained  with Secured  Party in the name of
Borrower,  marked  "Operating  Account" and over which Borrower has the right of
withdrawal.  All amounts received by Secured Party in payment of the Obligations
shall be subject to a charge for two (2) Business Days clearance.

         9.       Establishment of Blocked Account; Collection Account.

                  (a) Blocked  Account.  So long as this  Agreement  shall be in
         effect or any of the Obligations shall be outstanding,  Borrower agrees
         that, at the request of Secured Party, all funds payable by any account
         debtor to Borrower shall be deposited in special deposit accounts (each
         a "Blocked Account") of Borrower set up in one or more banks acceptable
         to Secured Party. Each Blocked Account shall be established pursuant to
         a tri-party  agreement  among  Borrower,  Secured Party,  and such bank
         (each  a  "Blocked   Account   Agreement"),   in  form  and   substance
         satisfactory to Secured Party,  which Blocked Account  Agreements shall
         include the following provisions:

                        (1)  Agreement   by  Borrower   that  it  has  no  power
                  of withdrawal over the funds in the Blocked Account;

                        (2)   Agreement by the bank that it shall neither claim
                  nor exercise any right of off-set or banker's lien against the
                  funds in the Blocked Account;

                         (3)   Waiver and release by the bank to Secured Party 
                  of any right or claim which such bank may have in or to the
                  funds in the Blocked Account;

                         (4) Agreement by the bank to forward daily to Secured
                  Party by wire  transfer  (or by such other  manner of transfer
                  acceptable to Secured Party) all funds in the Blocked  Account
                  to the Collections Account (hereinafter defined) maintained by
                  Borrower with Secured Party;

<PAGE>

                         (5)  Assignment  and  pledge by  Borrower  to Secured
                  Party, as additional  collateral security for the Obligations,
                  of all  funds  in  each  Blocked  Account,  and  direction  by
                  Borrower  to each bank  maintaining  a Blocked  Account (i) to
                  hold  such  funds as bailee  for  Secured  Party,  and (ii) to
                  distribute  the funds  daily to  Secured  Party in the  manner
                  specified by Secured Party from time to time;

                          (6)Agreement by Borrower to pay directly to each bank
                 maintaining a Blocked Account all costs and expenses associated
                  with such Blocked Account; and

                          (7) Agreement by Borrower that it may not unilaterally
                 terminate any Blocked Account or the Blocked Account Agreement.

         All funds forwarded to Secured Party from a Blocked Account pursuant to
         this Section shall be deposited in the Collections  Account and applied
         as set forth in Section  9(b).  The  provisions  of this Section are in
         addition to and not in limitation of the provisions of Section 8.

                  (b) Collection  Account. So long as this Agreement shall be in
         effect  or any  Obligations  shall be  outstanding,  all  funds in each
         Blocked  Account shall be wire  transferred to (or transferred by other
         manner of transfer  acceptable to Secured  Party),  and all collections
         and proceeds of  Collateral  shall be deposited  in, a special  account
         (the "Collections  Account")  maintained with Secured Party in the name
         of Borrower,  marked  "Collections  Account,"  over which Secured Party
         alone has power of withdrawal. Such sums shall be deposited in the form
         received,  except for the  endorsement of Borrower  where  necessary to
         permit collection of items, which endorsement  Borrower agrees to make,
         and which Secured Party is also hereby authorized to make on Borrower's
         behalf.  Borrower  hereby  agrees  immediately  upon receipt of checks,
         drafts,  cash and other remittances and payment of or on account of any
         of Borrower's accounts, to immediately deposit all of the same into the
         Collections  Account.  Borrower  hereby also  agrees,  upon  request by
         Secured Party,  to notify all of Borrower's  present and future account
         debtors  to send to  Secured  Party  any and  all  amounts  payable  to
         Borrower  for  deposit in the  Collections  Account.  Secured  Party is
         authorized,  empowered  and  directed to apply any and all funds in the
         Collections Account (i) toward the payment of the outstanding principal
         amount of, and accrued  interest on, the Revolving  Loans and any other
         amounts  then due and  payable  to Secured  Party,  at any time when no
         Event of Default has occurred and is  continuing,  and (ii),  after the
         occurrence and during the  continuance of an Event of Default,  toward,
         in Secured  Party's  sole and absolute  discretion,  the payment of the
         outstanding  principal  amount of, and accrued  interest on, any of the
         Obligations,  with any balance  remaining  after payment in full of the
         Obligations  to be deposited  into an account  maintained  with Secured
         Party in the name of  Borrower,  marked  "Operating  Account"  and over
         which  Borrower has the right of  withdrawal.  All amounts  received by
         Secured  Party in  payment  of the  Obligations  shall be  subject to a
         charge for two (2) Business Days clearance.
<PAGE>

         10.   Other Representations and Warranties of Debtor. Debtor represents
 and warrants to Secured Party that:

                  (a) Debtor is  conducting,  transacting,  and  carrying on its
         business  under the name shown  above,  or such  other  names as may be
         specified in Addendum III attached  hereto and  incorporated  herein by
         reference,  and is not  engaged in business  under any other name;  and
         Debtor's  chief  executive  office  is that set forth in  Section  1(m)
         above,  at which office  Debtor keeps,  and will continue to keep,  its
         records concerning accounts.  Debtor will promptly notify Secured Party
         in  writing of any change in (i) the name of Debtor or any of the names
         under which it is carrying on its business as specified on Addendum III
         attached  hereto,  (ii) the address of Debtor,  (iii) Debtor's  primary
         place of  business,  (iv) the  location  of the  office  where  records
         concerning  accounts  are  kept,  (v) the  opening  of any new place of
         business,  or  (vi)  the  closing  of  any of its  existing  places  of
         business.

                  (b) Debtor is duly  organized and validly  existing  under the
         laws of the state set forth in Section  1(m) above,  is duly  qualified
         and is in good  standing  in each and every  state in which it is doing
         business, and has all the requisite power and authority to execute this
         Agreement and the other Loan Documents to be executed by Debtor.

                  (c) The execution,  delivery and performance of this Agreement
         and all of the other Loan Documents by Debtor have been duly authorized
         by all necessary corporate action by such Debtor, and constitute legal,
         valid and binding obligations on Debtor, enforceable in accordance with
         their respective terms, except as limited by bankruptcy,  insolvency or
         similar  laws of general  application  relating to the  enforcement  of
         creditors'  rights  and  except to the  extent  specific  remedies  may
         generally be limited by equitable principles.

                  (d) The execution,  delivery and performance of this Agreement
         and the other Loan Documents,  and the consummation of the transactions
         contemplated  hereby and thereby, do not (i) conflict with, result in a
         violation  of, or  constitute a default under any provision of Debtor's
         Articles  of  Incorporation  or  Bylaws,  or  any  agreement  or  other
         instrument  binding upon Debtor, or any law,  governmental  regulation,
         court  decree,  or order  applicable  to Debtor,  or (ii)  require  the
         consent, approval or authorization of any third party.

                  (e) There are no actions, suits or proceedings, pending or, to
         the knowledge of Debtor,  threatened against or affecting Debtor or the
         properties  of  Debtor,  before any court or  governmental  department,
         commission or board,  which, if determined  adversely to Debtor,  would
         have a material adverse effect on the financial condition,  properties,
         or operations of Debtor.

<PAGE>

                (f)  Debtor  has not  executed  any other  security  agreement
         currently affecting the Collateral or any financing statement regarding
         the  Collateral,  and no  financing  statement  executed by such Debtor
         regarding the Collateral is now on file.

                  (g) All  Collateral  is and will be owned by Debtor,  free and
         clear of all other liens,  encumbrances,  security  interests or claims
         (subject,  however, to the Permitted Liens),  shall be kept at Debtor's
         address  noted  above  and such  other  addresses  as may be  listed in
         Addendum IV attached hereto and incorporated  hereby by reference,  and
         Debtor shall not (without the prior written  approval of Secured Party)
         remove the Collateral  therefrom  except for the purpose of sale or use
         in the ordinary course of business.

                  (h) Debtor owns all of the assets reflected on its most recent
         balance sheet delivered to Secured Party,  free and clear of all liens,
         security  interests  or other  encumbrances,  except for the  Permitted
         Liens.

                  (i) As of the date  hereof,  and after  giving  effect to this
         Agreement and the completion of all other transactions  contemplated by
         Debtor at the time of its execution, (i) Debtor is and will be solvent,
         (ii) the  fair  saleable  value of  Debtor's  assets  exceeds  and will
         continue to exceed Debtor's  liabilities  (both fixed and  contingent),
         (iii)  Debtor is and will  continue to be able to pay its debts as they
         mature,  and (iv) Debtor has and will have sufficient  capital to carry
         on its business and all businesses in which it is about to engage.

                  (j) Debtor has filed all federal,  state and local tax reports
         and returns required by any law or regulation to be filed by it and has
         either  duly paid all taxes,  duties and charges  indicated  due on the
         basis of such returns and reports,  or made adequate  provision for the
         payment  thereof,   and  the  assessment  of  any  material  amount  of
         additional taxes in excess of those paid and reported is not reasonably
         expected. There is no tax lien notice against Debtor presently on file,
         judgment  entered  against  Debtor  or  levy  on or  attachment  of its
         property outstanding.

                  (k) Debtor (i) does not maintain or  contribute to any defined
         benefit  pension plan  ("Plan")  under the Employee  Retirement  Income
         Security Act of 1974, as amended from time to time  ("ERISA"),  or (ii)
         is not in violation of any provisions of ERISA, or any other applicable
         state or federal law with respect to any Plan that it contributes to or
         maintains.

<PAGE>

                  (l) Except as  disclosed  in writing  to  Secured  Party:  (i)
         Debtor is conducting  Debtor's  businesses in material  compliance with
         all applicable  federal,  state and local laws,  statutes,  ordinances,
         rules,  regulations,   orders,   determinations  and  court  decisions,
         including without limitation, (A) those pertaining to the protection of
         intellectual   property   and  (B)  those   pertaining   to  health  or
         environmental matters such as the Comprehensive Environmental Response,
         Compensation,  and  Liability  Act of 1980, as amended by the Superfund
         Amendments and Reauthorization Act of 1986 (collectively, together with
         any subsequent amendments,  hereinafter called "CERCLA"),  the Resource
         Conservation  and  Recovery  Act of 1976,  as  amended  by the Used Oil
         Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980,
         and the Hazardous  Substance  Waste  Amendments of 1984  (collectively,
         together with any subsequent  amendments,  hereinafter  called "RCRA"),
         the Texas Water Code and the Texas Solid Waste  Disposal Act; (ii) none
         of the operations of Debtor is the subject of a federal, state or local
         investigation evaluating whether any material remedial action is needed
         to respond to a release or disposal of any toxic or hazardous substance
         or solid  waste into the  environment;  (iii)  Debtor has not filed any
         notice under any federal,  state or local law indicating that Debtor is
         responsible for the release into the  environment,  the disposal on any
         premises in which Debtor is conducting  its  businesses or the improper
         storage,  of any material amount of any toxic or hazardous substance or
         solid  waste or that any such  toxic or  hazardous  substance  or solid
         waste has been released,  disposed of or is improperly stored, upon any
         premise on which Debtor is conducting its  businesses;  and (iv) Debtor
         otherwise  does not have any known  material  contingent  liability  in
         connection  with the  release  into the  environment,  disposal  or the
         improper  storage,  of any such toxic or  hazardous  substance or solid
         waste. The terms "hazardous  substance" and "release",  as used herein,
         shall  have the  meanings  specified  in CERCLA,  and the terms  "solid
         waste"  and  "disposal",  as  used  herein,  shall  have  the  meanings
         specified in RCRA; provided,  however, that to the extent that the laws
         of the  State of Texas  establish  meanings  for such  terms  which are
         broader  than that  specified  in either  CERCLA or RCRA,  such broader
         meanings shall apply.

                  (m)  There is no fact  known to  Debtor  that  Debtor  has not
         disclosed to Secured  Party in writing which may result in any material
         adverse change in Debtor's business, properties or operations.

                  (n)  No  certificate  or  statement   herewith  or  heretofore
         delivered  by Debtor to Secured  Party in  connection  herewith,  or in
         connection  with any  transaction  contemplated  hereby,  contains  any
         untrue statement of a material fact or fails to state any material fact
         necessary  to  keep  the  statements   contained   therein  from  being
         misleading.

                  (o) The representations,  warranties,  and covenants of Debtor
         set forth in this  Agreement are true and correct as of the time of the
         making of this  Agreement,  and each  request  by Debtor  for a loan or
         advance hereunder shall constitute,  without the necessity of a written
         certificate or agreement, a representation and warranty by Debtor that,
         as of the date of such  request and at and as of the time of the making
         of each loan or advance hereunder,  (i) all of the  representations and
         warranties of Debtor  contained in this Agreement are true and correct,
         (ii) no material adverse change in Debtor's  financial  condition since
         the effective date of the most recent financial statements furnished to
         Secured  Party by Debtor  shall have  occurred and be  continuing,  and
         (iii) no event has occurred and is continuing, or would result from the
         requested  advance,  which  constitutes  an Event of Default under this
         Agreement.
<PAGE>

                  (p) Each financial  statement of Debtor previously supplied to
         Secured  Party was  prepared in  accordance  with GAAP in effect on the
         date of such  statements  were prepared and truly  discloses and fairly
         presents Debtor's financial condition as of the date of each statement,
         and  there  has  been no  material  adverse  change  in such  financial
         condition or results of operations  of Debtor  subsequent to August 31,
         1996,  which is the date of the most  recent  financial  statements  of
         Debtor supplied to Secured Party.

                  (q)      The only Subsidiary of Debtor is DCT Internet, Inc.

                  (r)  All  of   Debtor's   Affiliates   and  their   respective
         relationships  to Debtor are set forth on Addendum VII attached  hereto
         and made a part hereof.

     11. Affirmative Covenants.  So long as this Agreement shall be in effect or
any of the Obligations  shall be outstanding,  Debtor agrees and covenants that,
unless the Secured Party shall otherwise consent in writing:

                  (a) Debtor shall promptly  inform Secured Party of (i) any and
         all material adverse changes in Debtor's financial condition,  (ii) all
         contingent  liabilities,  litigation and other claims  affecting Debtor
         which could materially affect the financial condition of Debtor.

                  (b) Debtor shall maintain its books and records in accordance
         with GAAP, applied on a consistent basis.

                  (c) Debtor  shall  execute and  deliver to Secured  Party such
         financing  statement or  statements,  PPSA  financing  statements,  and
         hypothecs,  in form satisfactory to Secured Party,  which Secured Party
         may at any time  desire to file in order to perfect  and  preserve  its
         security  interest in the Collateral and shall reimburse  Secured Party
         for the costs of filing  the same;  and  Debtor  shall  take any action
         and/or execute and deliver to Secured Party any  instrument,  document,
         assignment or other writing which Secured Party in its sole  discretion
         may deem  necessary or  appropriate  (i) to carry out the terms of this
         Agreement,  (ii) to perfect  Secured Party's  security  interest in the
         Collateral,  (iii) to comply with the Federal Assignment of Claims Act,
         as  amended,  and/or  (iv) to  facilitate  the  collection  of Debtor's
         accounts.

                  (d) Debtor  shall,  at its sole cost and  expense,  defend any
         action  which might  affect  Secured  Party's  security  interest in or
         Debtor's title to the Collateral.

                  (e) If sales of Collateral  are made by Debtor in the ordinary
         course of its business for cash,  Debtor shall  immediately  deliver to
         Secured Party the identical checks,  cash or the forms of payment which
         Debtor receives.
<PAGE>

                  (f) Debtor shall  perform,  at its sole cost and expense,  any
         and all steps  requested by Secured  Party to protect  Secured  Party's
         security  interest in the  Collateral,  such as leasing  warehouses  to
         Secured  Party  or  its  designee,   placing  and  maintaining   signs,
         appointing  custodians,  executing and filing financing or continuation
         statements  in  form  and  substance  satisfactory  to  Secured  Party,
         maintaining stock records and transferring Collateral to warehouses. If
         any  Collateral  is in the  possession  or control  of any of  Debtor's
         agents or  processors,  Debtor shall notify such agent or processors of
         Secured Party's security  interest  therein,  and upon request instruct
         them to hold all such  Collateral  for the account of Secured Party and
         subject  to Secured  Party's  instructions.  A physical  listing of all
         Collateral,  wherever  located,  shall  be  taken  by  Debtor  whenever
         requested by Secured  Party,  and a copy of each such physical  listing
         shall be  supplied  to Secured  Party.  Secured  Party may  examine and
         inspect the Collateral at any time.

                  (g) Debtor shall keep or cause to be kept  adequately  insured
         by financially sound and reputable insurers all of its property usually
         insured  by  persons  or  entities  engaged  in  the  same  or  similar
         businesses.  Without  limiting the  foregoing,  Debtor shall insure the
         Collateral  in Secured  Party's  name  against  loss or damage by fire,
         theft, burglary,  pilferage, loss in transit, and such other hazards as
         Secured  Party may  specify in amounts  and under  policies by insurers
         acceptable to Secured Party,  and all premiums thereon shall be paid by
         Debtor and the policies  delivered to Secured Party. If Debtor fails to
         do so,  Secured Party may procure such insurance and charge the cost to
         Debtor's  account.  Each policy of insurance  covering  the  Collateral
         shall  provide  that at least ten (10)  days  prior  written  notice of
         cancellation  or notice of lapse must be given to Secured  Party by the
         insurer.

                  (h) Debtor shall keep the  Collateral in good order and repair
         and will not waste or destroy the  Collateral  or any part  thereof and
         shall not use the Collateral in violation of any statute or ordinance.

                  (i) Debtor shall cause each  mortgagee of real property  owned
         by  Debtor  and each  landlord  of real  property  leased  by Debtor to
         execute and deliver  agreements  satisfactory  in form and substance to
         Secured   Party  by  which  such   mortgagee  or  landlord   waives  or
         subordinates any rights it may have in the Collateral.

                  (j) If any  account  debtor  rejects,  returns  or  refuses to
         accept or receive  property  represented  by any account,  Debtor shall
         notify  Secured Party,  and at the request of Secured Party,  hold such
         property separate and apart from Debtor's property in trust for Secured
         Party and subject to its order or immediately  deliver such property to
         Secured   Party.   Secured  Party  may  accept  a  return  of  property
         represented by any account  without  discharging or affecting  Debtor's
         Obligations.  Secured  Party may take and sell such  property  for such
         prices  and upon such  terms at public or  private  sale in the  manner
         provided in the Code. At Secured Party's option, Debtor shall forthwith
         pay Secured  Party the  original  invoice  price of such  property  for
         application against the Obligations in such manner as Secured Party may
         elect.  In the event such  property  is  resold,  any  account  created
         thereby  shall  be  deemed   assigned  and  pledged  to  Secured  Party
         hereunder.
<PAGE>

                  (k) Debtor shall give Secured Party or any persons  designated
         by it, at any time and from time to time,  full  access to all  records
         available to Debtor from any credit reporting service,  bureau or other
         similar agency and Secured Party and any persons designated by it shall
         have the right to  inspect  and make and take  away  copies of any such
         records.

                  (l) Debtor  shall  furnish  such  additional  information  and
         statements,  lists of assets and  liabilities,  tax returns,  and other
         reports  with  respect to Debtor's  financial  condition  and  business
         operations  as Secured  Party may  request  from time to time.  Secured
         Party shall have the right without  hindrance or delay to conduct field
         examinations,  to inspect the Collateral and to inspect, audit and copy
         Debtor's books, records, journals, correspondence and other records and
         data relating to the Collateral or Debtor's business.  Secured Party is
         authorized  to discuss  Debtor's  affairs  with any  Person,  including
         without  limitation  employees  of Debtor,  as  Secured  Party may deem
         necessary in relation to the Collateral,  Debtor's financial  condition
         or Secured Party's rights under the Loan Documents.

                  (m)  Debtor  shall  pay  and  discharge  when  due  all of its
         indebtedness  and  obligations,   including  without  limitation,   all
         assessments,  taxes, governmental charges and levies, of every kind and
         nature,  imposed  upon  Debtor or its  properties  (including,  without
         limitation,  the Collateral),  income, or profits, prior to the date on
         which  penalties  would attach,  and all lawful claims that, if unpaid,
         might become a lien or charge upon any of Debtor's properties,  income,
         or profits;  provided,  however, Debtor will not be required to pay and
         discharge any such assessment, tax charge, levy or claim so long as (i)
         the  legality  of  the  same  shall  be  contested  in  good  faith  by
         appropriate proceedings,  and (ii) Debtor shall have established on its
         books adequate reserves with respect to such contested assessment, tax,
         charge,  levy or claim in accordance with GAAP. Debtor,  upon demand of
         Secured Party, will furnish to Secured Party evidence of payment of all
         assessments,  taxes,  charges,  levies and claims against Debtor or its
         properties,  income  or  profits  and will  authorize  the  appropriate
         governmental official to deliver to Secured Party at any time a written
         statement of any assessments, taxes, charges, levies and claims against
         Debtor or its properties, income or profits.

                  (n) Debtor  shall  conduct  its  business  in an  orderly  and
         efficient manner consistent with good business  practices,  and perform
         and comply with all  statutes,  rules,  regulations  and/or  ordinances
         imposed by any  governmental  unit upon Debtor and its  businesses  and
         operations,   including,   without  limitation,   those  pertaining  to
         environmental  matters  and  those  pertaining  to  the  protection  of
         intellectual property.

                  (o) Debtor shall execute and deliver,  or cause to be executed
         and delivered,  any and all other agreements,  instruments or documents
         which Secured Party may  reasonably  request in order to give effect to
         the transactions  contemplated  under this Agreement and the other Loan
         Documents.

                  (p) Debtor shall do and perform all acts  required of it under
         this  Agreement  and the other Loan  Documents  and  furnish to Secured
         Party such other  information  respecting  the business,  properties or
         condition,  or the  operations,  financial or  otherwise,  of Debtor as
         Secured Party may from time to time reasonably request.

                  (q) Debtor shall maintain,  as of each date set forth below, a
         Tangible  Leverage  Ratio not greater than the ratio set forth opposite
         such date:

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                            <C>
                           Date                                                 Tangible Leverage Ratio

                  September 30, 1996 and December 31, 1996                      1.50 to 1.0
                  March 31, 1997 and each fiscal quarter end
                           thereafter                                           1.25 to 1.0

</TABLE>

                  (r) Debtor shall maintain,  as of each date set forth below, a
         Tangible  Net Worth  equal to or greater  than that set forth  opposite
         such date below:
<TABLE>
<CAPTION>
<S>                                                                            <C>
                           Date                                                 Tangible Net Worth

                  September 30, 1996                                            $7,400,000.00
                  December 31, 1996                                             $7,700,000.00
                  March 31, 1997                                                $7,800,000.00
                  June 30, 1997                                                 $7,900,000.00
                  September 30, 1997                                            $8,100,000.00
                  December 31, 1997                                             $8,400,000.00
                  March 31, 1998                                                $8,600,000.00
                  June 30, 1998 and thereafter                                  $8,700,000.00

</TABLE>

                  (s) Debtor shall maintain,  as of each date set forth below, a
         Fixed Charge  Coverage Ratio  determined on a fiscal year to date basis
         of not less than the ratio set forth opposite such date below:

<TABLE>
<CAPTION>
<S>                                                                            <C>    
                           Date                                                 Fixed Charge Coverage Ratio
                  September 30, 1996                                            1.30 to 1.0
                  December 31, 1996, March 31, 1997
                           and June 30, 1997                                    1.40 to 1.0
                  September 30, 1997 and each fiscal quarter
                           end thereafter                                       1.50 to 1.0

</TABLE>


                  (t)     Debtor will furnish to Secured Party:

                                    (1) As soon  as  possible  and in any  event
                  within  ten (10) days  after the  occurrence  of each Event of
                  Default or Default  continuing on the date of such  statement,
                  the statement of the President or the Chief Financial  Officer
                  of Debtor  setting  forth the details of such Event of Default
                  or Default and the action which  Debtor  proposes to take with
                  respect thereto.


<PAGE>

                                    (2) As soon as  available,  and in any event
                  within thirty (30) days after the end of each calendar  month,
                  a  consolidated  and  consolidating  balance  sheet and income
                  statement  and  statement of cash flow of Debtor as of the end
                  of such month,  all in form and  substance  and in  reasonable
                  detail  satisfactory  to  Secured  Party  and  duly  certified
                  (subject to year-end audit adjustments) by the Chief Financial
                  Officer  of  Debtor  (A) as  being  true  and  correct  in all
                  material  aspects to the best of his or her  knowledge and (B)
                  as having been  prepared in  accordance  with GAAP,  provided,
                  that if the end of the calendar  month  coincides with the end
                  of a  fiscal  quarter,  such  financial  statements  shall  be
                  delivered  as  soon  as  available  and  in any  event  within
                  forty-five  (45) days  after the end of such  fiscal  quarter,
                  provided,  further,  that  if the  end of the  calendar  month
                  coincides  with the end of the  fiscal  year,  such  financial
                  statements  shall be delivered as soon as available and in any
                  event  within  sixty  (60) days  after the end of such  fiscal
                  year.

                                    (3) As soon as  available  and in any  event
                  within  one  hundred  twenty  (120) days after the end of each
                  fiscal year of Debtor, a copy of Debtor's 10-KSB together with
                  a certified  consolidated  and  consolidating  balance  sheet,
                  income  statement  and  statement of cash flow of Debtor as of
                  the end of such fiscal year,  together with a  certificate  of
                  independent   public   accountants   of  recognized   standing
                  acceptable  to  Secured  Party  stating  that in the course of
                  their audit of Debtor, such accountants  obtained no knowledge
                  that an Event of  Default  or  Default,  has  occurred  and is
                  continuing,  or if, in the  opinion  of such  accountants,  an
                  Event of Default or Default has occurred and is continuing,  a
                  statement as to the nature thereof.

                                   (4)As soon as the same is received by Debtor,
                  a copy of any management letter delivered  to  Debtor  by  its
                  independent accountants;

                                    (5) (A) Within  forty-five  (45) days of the
                  date  hereof,   the  following   financial   consolidated  and
                  consolidating statements of Debtor on a one (1) year pro forma
                  basis for  fiscal  year  1997:  (i)  balance  sheet and income
                  statement,  and (ii) cash flow statement, and (B) prior to the
                  commencement  of each  fiscal  year of Debtor,  the  following
                  financial consolidated and consolidating  statements of Debtor
                  on a one (1) year pro  forma  basis:  (i)  balance  sheet  and
                  income  statement,  and (ii) cash flow statement,  all in form
                  and substance and in reasonable detail satisfactory to Secured
                  Party.

                                    (6) Promptly after the commencement thereof,
                  notice of all actions,  suits and proceedings before any court
                  or any governmental department,  commission or board involving
                  Debtor.


<PAGE>

                                    (7)  Within  forty-five  (45) days after the
                  end of each  fiscal  quarter,  a  certificate  from the  Chief
                  Financial  Officer of Debtor  stating  such  entity is in full
                  compliance  with all of its  obligations  under this Agreement
                  and the other  Loan  Documents,  and is not in  default of any
                  term  or  provision   hereof  or  thereof  and   demonstrating
                  compliance  with all financial  ratios and covenants set forth
                  in this Agreement and calculating the Tangible Leverage Ratio,
                  the Interest  Coverage  Ratio,  and the Fixed Charge  Coverage
                  Ratio for  Debtor,  provided  that,  if the end of such fiscal
                  quarter  coincides  with  the  end of the  fiscal  year,  such
                  certificate  calculated from preliminary  financial statements
                  shall be  delivered  within  sixty  (60) days after the end of
                  such fiscal year and such  certificate  calculated  from final
                  financial statements shall be delivered within one hundred and
                  twenty  (120) days  after the end of such  fiscal  year.  Such
                  certificate  shall be  substantially  in the form of Exhibit D
                  attached hereto and otherwise in form and substance acceptable
                  to Secured Party.

                           (8) Within forty-five (45) days after the end of each
                  fiscal quarter, Debtor's 10-QSB and consolidating schedules.

                           (9)  Promptly  upon  Debtor's  receipt of the monthly
                  statements  respecting each of Debtor's securities accounts, a
                  copy of such monthly statements.

                                    (10) Within  fifteen (15) days after the end
                  of each  month for  Debtor  (i) an  analysis  of its  accounts
                  showing an aging of accounts as follows:  accounts 30 days old
                  and  less;  accounts  over 30 days and less  than 61 days old;
                  accounts over 60 days old and less than 91 days old;  accounts
                  over 90 days old and less than 120 days old;  and accounts 120
                  days old and older,  (ii) an aging of Debtor's  payables,  and
                  (iii) a  listing  of  Borrower's  inventory  and an  inventory
                  analysis in such form as Secured Party may request.

                           (11) Upon request of the Secured Party,  but not less
                  often than once each week, a borrowing base certificate signed
                  by the President,  Chief Financial  Officer,  or controller of
                  Debtor,  along  with  supporting  documentation,  in form  and
                  substance satisfactory to Secured Party.

                  (u) Debtor will deliver to its independent  public accountants
         contemporaneously   with   the   execution   hereof   the   irrevocable
         instructions, in the form attached as Addendum V, that such accountants
         are to  send  to  Secured  Party  copies  of all  financial  statements
         (whether  preliminary  or final) and  reports  which are  prepared as a
         result  of any  audit  or other  review  of the  operations,  business,
         finances or internal controls of Debtor, including, without limitation,
         any management reports and any reports concerning  improper  accounting
         practices, defalcations, financial reporting errors or misstatements or
         fraud.

                  (v)Debtor will use all advances made by Secured Party pursuant
         hereto for working capital purposes only.

                  (w)  Within   thirty  (30)  days  after  closing  such  margin
         positions,  Debtor shall provide  evidence  reasonably  satisfactory to
         Bank that all margin positions  respecting Debtor's investment accounts
         have been closed.

         12.  Negative Covenants.  So long as this Agreement shall be in effect
or any of the Obligations shall be outstanding, Debtor agrees that, without the 
prior written consent of Secured Party:

                  (a) Debtor shall not permit any financing  statement regarding
         the  Collateral  to be  filed  other  than  a  financing  statement  or
         statements  in  favor of  Secured  Party  and  other  than a  financing
         statement filed in connection with the Permitted Liens.
<PAGE>

                  (b) Debtor shall not, and shall not permit any  Subsidiary to,
         liquidate, merge or consolidate with or into any other entity.

                  (c) Debtor shall not, and shall not permit any  Subsidiary to,
         hereafter  permit any tax lien  notice to be filed,  a  judgment  to be
         entered  against it or its property or a levy on or  attachment  of its
         property to be made.

                  (d) Debtor shall not, and shall not permit any  Subsidiary to,
         sell, transfer or otherwise dispose of any of its assets or properties,
         other than sales of inventory in the ordinary course of its business.

                  (e) Except for the  Permitted  Liens,  Debtor  shall not,  and
         shall not permit any  Subsidiary  to,  grant,  create,  incur,  assume,
         permit or suffer to exist any security interest, lien or encumbrance on
         any of its  assets or  properties,  including  the  Collateral,  and no
         financing   statements  shall  remain  on  file  except  for  financing
         statements naming Bank as secured party; provided,  however, Debtor may
         grant purchase money security interests covering the property purchased
         not to exceed  $750,000.00 in the aggregate on a consolidated  basis in
         any fiscal year.

                  (f) Debtor shall not, and shall not permit any  Subsidiary to,
         create, incur or assume any indebtedness for borrowed money or issue or
         assume  any  other  note,   debenture,   bond  or  other  evidences  of
         indebtedness,  or enter into any capital leases,  or guarantee any such
         indebtedness or such evidences of  indebtedness  of others,  other than
         (i)  borrowing  from  Secured  Party,  (ii)  borrowing  secured  by the
         Permitted   Liens,   and  (iii)  capital   leases  or  purchase   money
         indebtedness  secured  by the  property  purchased  with  the  proceeds
         thereof not to exceed  $750,000.00  in the aggregate on a  consolidated
         basis in any fiscal year.

                  (g)      Debtor shall not change its primary line of business.

                  (h) Debtor  shall not declare or pay any  Distributions,  make
         any other  distribution  with  respect to any payment on account of the
         purchase, redemption, or other acquisition or retirement of any capital
         stock of Debtor,  or make any other  distribution,  sale,  transfer  or
         lease of any of Debtor's assets other than the sale of inventory in the
         ordinary  course of business;  provided,  however,  Debtor may pay cash
         dividends  to  shareholders  so long as prior to any such  dividend and
         after giving effect thereto Debtor is in compliance  with all financial
         covenants  set forth  herein and no  Default  or Event of  Default  has
         occurred and is continuing.

                  (i) Debtor shall not, and shall not permit any  Subsidiary to,
         (A) make or permit to exist any loans or advances to any Person  except
         for (i)  advances  for  business  expenses  in the  ordinary  course of
         business  which do not exceed the sum of  $25,000.00  in the  aggregate
         outstanding at any time,  and (ii) advances by Debtor to  DCT-Internet,
         Inc.  that do not  exceed  $250,000.00  in any  fiscal  year and do not
         exceed  $500,000.00  in the aggregate  outstanding  at any time, or (B)
         make any Investment in any Subsidiary other than Investments  permitted
         under the preceding clause (A) and Investments  outstanding on the date
         hereof.

                  (j) Debtor shall not, and shall not permit any  Subsidiary to,
         pay or cause to be paid any advance  rentals  for any leased  property,
         real  or  personal,  utilized  in  the  conduct  and  operation  of its
         business.

                  (k) Debtor shall not, and shall not permit any  Subsidiary to,
         enter into any  transaction  with an  Affiliate  except on  arms-length
         terms  that  are as  favorable  as  could  have  been  obtained  from a
         non-Affiliate.
<PAGE>

                  (l)Debtor shall not permit any change in the senior management
         (Chairman of the Board, President/CEO and CFO) of Debtor.

                  (m) Debtor shall not, and shall not permit any  Subsidiary to,
         make  capital  expenditures  or enter into  capital  leases that in the
         aggregate on a consolidated  basis exceed the sum of $2,600,000.00  for
         the fiscal year ending June 30, 1997, or  $2,500,000.00  for any fiscal
         year thereafter.

                  (n) Debtor shall not, and shall not permit any  Subsidiary to,
         permit the aggregate  amount of  compensation  paid to its officers and
         directors  to exceed  one  hundred  twenty-five  percent  (125%) of the
         aggregate amount of such compensation paid for the month of July, 1996,
         annualized  for the entire  fiscal year,  plus the amount of the annual
         incentive  bonuses paid to each of the Chief Executive  Officer and the
         Chief Operating  Officer of Debtor,  which bonuses may not exceed 5% of
         net  income of  Debtor  before  taxes  for each of the Chief  Executive
         Officer and the Chief Operating Officer.

                  (o) Debtor shall not, and shall not permit any  Subsidiary to,
         enter  into,  permit or  acquiesce  in, any change in any  subordinated
         indebtedness.

                  (p) (i) Debtor shall not purchase  any  financial  assets that
         exceed in the  aggregate  the lesser of 30% of  Debtor's  Tangible  Net
         Worth or 30% of Debtor's  total assets  determined in  accordance  with
         GAAP, (ii) advances  hereunder and cash receipts by Debtor shall not be
         used to purchase  or trade in  financial  assets,  (iii) from and after
         November 23, 1996,  Debtor shall not invest in any margin  stocks,  buy
         any financial assets on margin or invest in any uncovered options, (iv)
         Debtor shall not make any  investments in financial  assets unless such
         financial  assets  are  traded on the New York  Stock  Exchange  or the
         American Stock Exchange, and (v) Debtor shall not permit any Subsidiary
         to purchase any or make any investments in financial assets.

                  (q) Debtor shall not, and shall not permit any  Subsidiary to,
         transfer  any  funds  or any  financial  assets  out of any  securities
         accounts  unless  such funds are to be used in the  ordinary  course of
         business of Debtor and for a valid business purpose.

                 (r)Debtor and each of its Subsidiaries shall cease all trading
         in, or funding of, covered options if for any reason whatsoever Kevin
         Halter, Sr. is no longer active in the management of the Debtor.

                  (s)  Unrealized  losses in all financial  assets of Debtor and
         its  Subsidiaries  shall not (i) exceed 10% of Tangible Net Worth as of
         September  30, 1996,  and the date hereof or (ii) exceed 8% of Tangible
         Net Worth on December 31, 1996 and thereafter.

                  (t) Debtor  shall not,  directly  or  indirectly  through  any
         Subsidiaries,  own, create or acquire any  Subsidiaries  other than DCT
         Internet, Inc.

                  (u) Debtor shall not, and shall not permit any  Subsidiary to,
         pay or cause to be paid,  by  Debtor  and all  Subsidiaries,  aggregate
         defense costs for any or all of the parties to the Shareholder  Suit in
         excess of $250,000 in any fiscal year.

                  (v) Debtor shall not, and shall not permit any  Subsidiary to,
         pay or cause to be paid,  directly or indirectly,  damages  suffered in
         the  Shareholder  Suit,   provided  that  proceeds  of  directors'  and
         officers' insurance shall not be included in such limitation.
<PAGE>

         13. Rights  of  Secured  Party.   Secured Party  shall have the rights
contained in this Section at all times during the period of time this Agreement 
is effective.

                  (a) Debtor hereby  authorizes  Secured Party to file,  without
         the  signature  of  Debtor,  one  or  more  financing  or  continuation
         statements, and amendments thereto, relating to the Collateral.  Debtor
         further agrees that a carbon,  photographic  or other  reproduction  of
         this Agreement or any financing statement  describing any Collateral is
         sufficient   as  a  financing   statement  and  may  be  filed  in  any
         jurisdiction Secured Party may deem appropriate.

                  (b)  Debtor  hereby  irrevocably  appoints  Secured  Party  as
         Debtor's  attorney-in-fact  and proxy, with full authority in the place
         and stead of Debtor and in the name of Debtor or  otherwise,  from time
         to time in  Secured  Party's  discretion,  to take  any  action  and to
         execute  any  instrument  which  Secured  Party may deem  necessary  or
         appropriate  to accomplish  the purposes of this  Agreement,  including
         without  limitation:  (i) to obtain and adjust  insurance  required  by
         Secured Party hereunder;  (ii) to demand,  collect,  sue for,  recover,
         compound,  receive and give acquittance and receipts for moneys due and
         to become due under or in respect of the Collateral;  (iii) to receive,
         endorse and collect any checks, drafts or other instruments,  documents
         and chattel paper in connection with clause (i) or (ii) above; and (iv)
         to file any  claims or take any  action or  institute  any  proceedings
         which  Secured  Party  may  deem  necessary  or  appropriate   for  the
         collection  and/or  preservation  of the  Collateral  or  otherwise  to
         enforce the rights of Secured Party with respect to the Collateral.

                  (c) If Debtor  fails to perform any  agreement  or  obligation
         provided  herein  (including  without   limitation,   the  payment  and
         discharge  of  any  taxes,   liens  or   encumbrances   affecting   the
         Collateral), Secured Party may itself perform, or cause performance of,
         such  agreement  or  obligation,  and the  expenses  of  Secured  Party
         incurred in connection  therewith  shall be a part of the  Obligations,
         secured by the Collateral and payable by Debtor on demand.

                  (d) Secured  Party or any persons  designated by it shall have
         the right to call at Debtor's place or places of business during normal
         business hours to inspect,  audit,  check and make and take away copies
         or extracts from Debtor's books, records,  journals,  orders,  receipts
         and any  correspondence and other data relating to Debtor's business or
         to any other transactions between the parties hereto, without hindrance
         or delay.
                  (e)  All  amounts  and  proceeds  (including  instruments  and
         writings) received by Debtor in respect of Debtor's accounts or general
         intangibles shall be received in trust for the benefit of Secured Party
         hereunder and, upon request of Secured Party,  shall be segregated from
         other  property of Debtor and shall be  forthwith  delivered to Secured
         Party in the same form as so received (with any necessary  endorsement)
         and applied to the  Obligations  in such manner as Secured  Party deems
         appropriate in its sole discretion.

<PAGE>

                  (f)  Notwithstanding  the  existence of any Lock Box Agreement
         between  Debtor and Second Party,  Secured Party may at its  discretion
         from time to time  notify any or all  obligors  under any  accounts  or
         general  intangibles (i) of Secured Party's  security  interest in such
         accounts  or general  intangibles  and  direct  such  obligors  to make
         payment  of all  amounts  due or to  become  due to  Debtor  thereunder
         directly to Secured  Party,  and (ii) to verify the accounts or general
         intangibles with such obligors.  Secured Party shall have the right, at
         the  expense  of  Debtor  (i)  after  the  occurrence  and  during  the
         continuance  of a  Default  or an  Event  of  Default  (A)  to  enforce
         collection of any such accounts or general intangibles,  (B) to adjust,
         settle or compromise the amount or payment thereof,  and (C) to demand,
         collect,  receive,  receipt for, sue for, compound and give acquittance
         for any and all amounts due or to become due on the accounts,  and (ii)
         at any time,  (A) to take  control  of cash and other  proceeds  of any
         accounts, (B) to endorse the name of Debtor on any notes,  acceptances,
         checks,   drafts,  money  orders  or  other  evidences  of  payment  or
         collateral that may come into possession of Secured Party,  (C) to sign
         the name of Debtor on any  invoice  or bill of lading  relating  to any
         account,  on any drafts against  account  debtors,  on assignments  and
         verifications of accounts and on notices to account debtors, and (D) to
         do all other acts and things  necessary  to carry out the  purposes  of
         this  Agreement.  Subject to the terms and  provisions  of any Lock Box
         Agreement  or  Blocked  Account  Agreement,  until such time as Secured
         Party  elects to  exercise  the  rights  hereinabove  set forth in this
         Section,  Secured  Party  authorizes  Debtor to collect and enforce all
         accounts.  Costs of collection and  enforcement of accounts,  including
         payment of attorneys' fees and out-of-pocket  expenses,  shall be borne
         solely by Debtor,  whether  same are  incurred  by Secured  Party or by
         Debtor.  Debtor  agrees  that the  collection  and  enforcement  of all
         accounts by Debtor shall be for the account of Secured  Party,  and all
         collections  and  proceeds  thereof  shall be  promptly  turned over by
         Debtor  to  Secured  Party in the form in which  they are  received  by
         Debtor,  either by mailing or delivering  the same to Secured Party not
         later  than the  banking  business  day  following  receipt  thereof by
         Debtor.  All checks,  drafts and other instruments shall be endorsed by
         Debtor to Secured Party,  and in the event of failure of Debtor to make
         such  endorsement,  Secured Party is hereby  irrevocably  authorized to
         endorse the same on  Debtor's  behalf.  Debtor  agrees that it will not
         compromise accounts and will not use or dispose of proceeds of accounts
         or commingle  collections  or proceeds with any of Debtor's other funds
         or property or otherwise  exercise any dominion  over the same but will
         hold them  separate  and apart and upon an  express  trust for  Secured
         Party.  All  payments  received  by Secured  Party on accounts or other
         proceeds or on account of cash sales of Collateral  shall be subject to
         a charge for two (2) Business Days clearance.
<PAGE>

                  (g)  Secured  Party  will at all times  have the right to take
         physical  possession in the Collateral and to maintain such  possession
         on the  premises  of  Debtor or to remove  the  Collateral  or any part
         thereof to such other  places as Secured  Party may desire.  If Secured
         Party exercises its right to take possession of the Collateral,  Debtor
         shall,  upon demand by Secured Party,  assemble the Collateral and make
         it  available  to Secured  Party at a place  reasonably  convenient  to
         Secured Party. In addition, with respect to all Collateral,  as well as
         all  accounts  and other  security,  Secured  Party  shall have all the
         rights and remedies set forth hereafter in this Agreement.

                  (h)  Secured  Party  shall have the right of  set-off  against
         Debtor  at any  and  all  times  and in any  and  all  proceedings  and
         instances  including,  but not limited to, bankruptcy,  reorganization,
         receivership or insolvency of Debtor.

         14. Events of Default.   The occurrence  of  any  one  or more of  the
following events shall constitute an Event of Default hereunder:

                  (a)      The failure,  refusal or  neglect  of Debtor to make
         payment of the Obligations or any portion thereof, as the same shall
         become due and payable;

                  (b) The failure of Debtor or any Obligated Party to timely and
         properly observe, keep or perform any covenant,  agreement, warranty or
         condition required (i) in this Agreement, (ii) in any of the other Loan
         Documents, or (iii) in any of the Agreements (as defined hereinbelow);

                  (c) The occurrence of an event of default under (i) any of the
         other Loan Documents, or (ii) any of the Agreements;

                  (d) Any  representation  made by Debtor or any Obligated Party
         contained herein or contained in any of the other Loan Documents or the
         Agreements is false or misleading in any material respect;

                  (e)  Debtor  or any  Obligated  Party  shall  (i) apply for or
         consent  to  the  appointment  of  a  receiver,   trustee,   custodian,
         intervenor or liquidator of such Person or of all or a substantial part
         of such Person's assets,  (ii) file a voluntary petition in bankruptcy,
         admit in writing that such Person is unable to pay such Person's  debts
         as they become due, (iii) make a general  assignment for the benefit of
         creditors,  (iv) file a petition or answer seeking reorganization or an
         arrangement  with  creditors or to take  advantage of any bankruptcy or
         insolvency proceeding, or (vi) take corporate or partnership action for
         the purpose of effecting any of the foregoing;

                  (f) An  involuntary  petition  or  complaint  shall  be  filed
         against   Debtor  or  any  Obligated   Party   seeking   bankruptcy  or
         reorganization  of  such  Person  or  the  appointment  of a  receiver,
         custodian,  trustee, intervenor or liquidator of such Person, or of all
         or  substantially  all of such  Person's  assets,  and such petition or
         complaint  shall not have been dismissed  within sixty (60) days of the
         filing thereof; or an order, order for relief, judgment or decree shall
         be entered by any court of competent  jurisdiction  or other  competent
         authority  approving a petition or complaint seeking  reorganization of
         such   intervenor  or   liquidator  of  such  Person,   or  of  all  or
         substantially all of such Person's assets;

                  (g) the  failure of Debtor or any  Obligated  Party to pay any
         money  judgment  against such Person at least thirty (30) days prior to
         the date on which such  Person's  assets  may be sold to  satisfy  such
         judgment;
<PAGE>

                  (h) the  failure,  within a period of ten (10) days  after the
         commencement thereof, to have discharged any attachment, sequestration,
         or  similar  proceedings  against  Debtor's  or any  Obligated  Party's
         assets;

                  (i) The filing of a tax lien notice by the United States, any 
         state  or  any  governmental  subdivision thereof  against any  of the
         property of a Borrower;

                  (j)The Collateral or any portion thereof is taken on execution
         or other process of law in any action against Debtor;

                  (k)     Debtor abandons the Collateral or any portion thereof;

                  (l) The holder of any lien or security  interest on any of the
         assets of Debtor, including without limitation, the Collateral (without
         hereby  implying  the  consent of  Secured  Party to the  existence  or
         creation  of any such lien or  security  interest  on the  Collateral),
         institutes  foreclosure or other proceedings for the enforcement of its
         remedies thereunder;

                  (m) The  occurrence of a default or event of default under any
         other indebtedness of Debtor which indebtedness  exceeds $10,000 or the
         occurrence of any event or condition  which,  with the giving of notice
         or lapse of time or both,  could  become a default  or event of default
         under such other indebtedness;

                  (n)the occurrence of a default  or event of default under any 
         agreements, leases, indebtedness or other  obligations  between Debtor
         and Banc One Leasing Corporation; or

                  (o) If a Borrower  or any Obligated  Party is an  entity, the
         liquidation, dissolution, merger or consolidation of any such entity.

         15. Remedies.  Upon the occurrence of any Event of Default,  and at any
time  thereafter,  Secured Party shall have, in addition to all other rights and
remedies  provided  herein,  in any other  agreement  between  Secured Party and
Debtor or by law, the remedies of a secured party under the Code, including, but
not limited to, the right to take  possession  of the  Collateral,  and for that
purpose,  Secured Party may, so far as Debtor can give authority therefor, enter
upon any  premises on which the  Collateral  may be situated and remove the same
therefrom. The rights and remedies referred to in this Agreement are cumulative,
and in addition to the general  remedies  set forth above,  Secured  Party shall
have the following specific remedies upon the occurrence of an Event of Default:

                  (a) At its option,  Secured  Party may  terminate  any further
         loans or  advances  to  Debtor  hereunder  and may  refuse to issue any
         Letters of Credit.  Further,  Secured  Party may require that  Borrower
         deposit  with Secured  Party in cash an amount  equal to the  aggregate
         undrawn face amount of all outstanding Letters of Credit.

                  (b) The entire unpaid balance of the Obligations then owing by
         Debtor to Secured Party (including,  without limitation,  the Revolving
         Loans,  the Term Loan and the Capital  Expenditure  Loan) shall, at the
         option of Secured Party,  become  immediately  due and payable  without
         notice of default, presentment, demand for payment, notice of intent to
         accelerate,  notice of acceleration  or dishonor,  protest or notice of
         protest or non-payment, or any other notice of any kind whatsoever, all
         of which  are  expressly  waived by Debtor  and each  Obligated  Party;
         provided,  however, upon the occurrence of any of the Events of Default
         described  in Section 14 (e) or (f), the entire  unpaid  balance of the
         Obligations  shall,  without any action by Secured  Party,  immediately
         become due and payable without notice of default,  presentment,  demand
         for payment, notice of intent to accelerate,  notice of acceleration or
         dishonor,  protest or notice of protest  or  non-payment,  or any other
         notice  of any kind  whatsoever,  all of which  are  expressly  waived,
         jointly and severally, by Borrower and each Obligated Party.
<PAGE>

                  (c) At  its  option,  Secured  Party  may  require  Debtor  to
         assemble the  Collateral  and make it  available to Secured  Party at a
         place to be designated by Secured Party which is reasonably  convenient
         to Secured  Party and Debtor.  Unless the  Collateral  is perishable or
         threatens to decline speedily in value or is of a type customarily sold
         on a  recognized  market,  Secured  Party will give  Debtor  reasonable
         notice of the time and place of any public sale  thereof or of the time
         after which any private sale or any other intended  disposition thereof
         is to be made. The  requirements  of reasonable  notice shall be met if
         such  notice is mailed,  postage  prepaid,  to Debtor at least five (5)
         days  before  the time of sale or  other  intended  disposition  of the
         Collateral.

                  (d) Secured Party may at any time in its  discretion  transfer
         any other property  constituting  the  Collateral  into its own name or
         that of its nominee and receive the income thereon and hold the same as
         security for the  Obligations  or apply it to the principal or interest
         due on the Obligations,  as the Secured Party may elect.  Secured Party
         may demand, collect, receipt for, settle, compromise,  adjust, sue for,
         foreclose,  or  realize  upon  the  Collateral  as  Secured  Party  may
         determine,  whether or not any of the Obligations are then due; and for
         the  purpose  of  asserting,  protecting  or  enforcing  any of Secured
         Party's rights therein, Secured Party may receive, open, and dispose of
         mail  addressed  to Debtor and endorse  notes,  checks,  drafts,  money
         orders, documents of title, or other evidences of payment, shipment, or
         storage of any part of the  Collateral  on behalf of and in the name of
         Debtor.

                  (e) Debtor  shall pay to  Secured  Party on demand any and all
         expenses,  including  legal  expenses,  attorneys'  fees,  court costs,
         collection costs, and traveling  expenses,  incurred or paid by Secured
         Party in protecting or enforcing any of its rights hereunder, including
         its right to take possession of the Collateral, to hold, store, prepare
         for  sale,  sell,  or  otherwise  dispose  of  the  Collateral,  and in
         collecting the proceeds thereof.  After deducting all of such expenses,
         the residue of any  proceeds of  collection  or sale of the  Collateral
         shall be applied to the  payment  of the  Obligations  in such order of
         preference  as  Secured  Party  may  determine,  proper  allowance  for
         interest on  Obligations  not then due being made, and any excess shall
         be  returned  to  Debtor,  and  Debtor  shall  remain  liable  for  any
         deficiency.  Secured  Party is hereby  authorized  to add, from time to
         time, all such expenses to the balance of indebtedness due by Debtor to
         Secured   Party,   and  such  expenses  shall  become  a  part  of  the
         Obligations.

                  (f) In the  event  that  Debtor or any  other  party  seeks to
         redeem the Collateral,  to the extent that any such right of redemption
         may  exist,   Debtor  shall  pay  to  Secured  Party,  in  addition  to
         fulfillment of all the Obligations  secured by the Collateral,  any and
         all expenses  incurred or paid by Secured  Party in retaking,  holding,
         storing,  and preparing the Collateral  for sale or other  disposition,
         including  legal expenses,  attorneys'  fees,  court costs,  collection
         costs, and traveling expenses.
<PAGE>

         16. Other  Agreements.  If at any time Debtor and Secured Party or Banc
One Leasing  Corporation are parties to any other  financing  agreements (all of
such  agreements,  whether  one or more,  being  hereinafter  referred to as the
"Agreements"),  and if the  Agreements (or any of them, if more than one) should
be  breached  in whole or in part by Debtor or should  terminate  for any reason
whatsoever  without the consent of Secured Party, such event shall constitute an
Event of Default hereunder.  Any sums due hereunder or under the Agreements,  or
any one or more of  them,  may be  collected  by  Secured  Party  out of sums or
credits due Secured Party under the terms of this  Agreement or the  Agreements,
or any one or more of them, and any  collateral or security for the  performance
of this Agreement or any of the Agreements may be realized upon by Secured Party
for the satisfaction of any indebtedness  arising with respect to this Agreement
or any of the  Agreements.  Debtor  and  Secured  Party  hereby  agree  that all
indebtedness,  securities  and remedies  available  to Secured  Party under this
Agreement or the Agreements may be utilized by Secured Party for the enforcement
of its rights and the collection of any  indebtedness  due it under the terms of
this  Agreement  or the  Agreements,  the rights and  remedies of Secured  Party
hereunder  being  cumulative of all other rights and remedies of Secured  Party,
and not in substitution thereof or as an alternative thereto.

         17.      Term.

                  (a) This Agreement  shall become  effective upon acceptance by
         Secured Party, as of the date hereinafter set forth, and shall continue
         in full  force  and  effect  until the  Maturity  Date  unless  earlier
         terminated  by Secured  Party in  connection  with the  exercise of its
         rights and remedies  under this  Agreement  upon the  occurrence  of an
         Event of Default.

                  (b) If Debtor  terminates this Agreement after the first (1st)
         anniversary of the date hereof but prior to the Maturity  Date,  Debtor
         acknowledges  that (i) such  termination  would  result  in the loss to
         Secured  Party of the benefits of this  Agreement  and that the damages
         incurred by Secured Party as a result of such termination are and would
         be difficult of  ascertainment,  and (ii) no such termination  shall be
         effective until Debtor has paid to Secured Party all of the Obligations
         in  immediately  available  funds,  together  with  a  sum  certain  as
         liquidated damages, being Debtor's and Secured Party's best and fairest
         estimate of Secured Party's damages caused by such  termination,  equal
         to one percent  (1.0%) of the  average  aggregate  loan  balance of the
         Revolving Loan, the Term Loan and the Capital  Expenditure Loan for the
         twelve  consecutive  months  ending on the date such  loans are paid in
         full.  The  foregoing  fees  shall be waived by Bank if the loans  made
         hereunder are repaid with the proceeds of conventional, non-asset based
         credit facilities provided by Bank.

                  (c)  Notwithstanding  anything to the  contrary,  any proposed
         termination  of this  Agreement  shall not be effective,  and shall not
         release or affect the Collateral  already  assigned to Secured Party or
         any Obligations incurred or rights accrued hereunder,  unless and until
         all  Obligations,  whether  incurred  pursuant  to  this  Agreement  or
         otherwise, have been paid in full.

         18.      Miscellaneous.

                  (a)  Waiver of Rights.  Debtor  waives  notice of  nonpayment,
         presentment,   notice  of  demand,   demand,  notice  of  intention  to
         accelerate, notice of acceleration, protest or notice thereof as to the
         Obligations or as to any of the Collateral.
<PAGE>

                  (b)  Entire  Agreement.  This  Agreement  contains  the entire
         agreement of Secured  Party and Debtor with respect to the  Collateral.
         If the  parties  hereto  are  parties  to any prior  agreement,  either
         written  or  oral,  relating  to the  Collateral,  the  terms  of  this
         Agreement shall amend and supersede the terms of such prior  agreements
         as to  transactions  on or after the effective date of this  Agreement,
         but all security agreements,  financing statements,  guaranties,  other
         contracts and notices for the benefit of Secured  Party shall  continue
         in full force and effect to secure all Obligations of Debtor to Secured
         Party  under  the  terms  hereof  or  thereof   unless   Secured  Party
         specifically releases its rights thereunder by separate release.

                  (c)  Fees  and  Expenses.  Debtor  agrees  that  all  fees and
         expenses,  including, without limitation,  legal, accounting, audit and
         field  examination  fees and  expenses,  incurred  by Secured  Party in
         connection  with the  preparation  of this Agreement and the other Loan
         Documents, the closing of any loan secured hereby, and in administering
         this  Agreement  and the matters  referenced  herein  shall be paid and
         borne by Debtor,  and Secured  Party is hereby  authorized by Debtor to
         deduct all such fees and expenses from the proceeds of any loan secured
         hereby or to add, from time to time,  all such fees and expenses to the
         balance of  Revolving  Loan due by Debtor to Secured  Party  hereunder,
         with such fees and expenses  becoming a part of the Obligations.  Field
         examination  expenses  for  examinations  will be  charged to Debtor as
         follows:  actual out of pocket expenses for examiner's travel,  lodging
         and meals plus $500.00 per day per examiner  (separate  and in addition
         to  reimbursement  of the  $6,513.29  actual cost for the initial field
         examination by Secured Party and the $8,238.00 ATEC equipment appraisal
         fee which  amounts  shall be paid at closing).  Secured Party will have
         the right to conduct such field  examinations  as it deems necessary in
         its sole  discretion,  and Debtor will reimburse  Secured Party for all
         costs and expenses  incurred by Secured Party in connection  therewith.
         Actual costs for the initial field  examination  conducted prior to the
         date hereof shall be  reimbursed to Secured Party by Debtor at closing.
         Notwithstanding  the foregoing,  Bank will limit total examination fees
         to a cap of $20,000.00 in year one and  $10,000.00 in year two provided
         that no Default or Event of Default has occurred.

                  (d)  Account  Debtor  Notification.  Debtor  will  immediately
         notify  Secured Party in the event (i) that any account debtor fails to
         accept,  refuses to accept,  returns,  offers to return or revokes  the
         acceptance  of  any  personal  property  which  is the  subject  of any
         account, (ii) of the bankruptcy,  insolvency or financial embarrassment
         of any account  debtor,  and (iii) of any claim asserted by any account
         debtor  for  credit,   allowance,   adjustment,   dispute,  set-off  or
         counterclaim.  Debtor will immediately,  upon receipt thereof,  endorse
         and  deliver  to  Secured  Party  any  and  all  checks,  notes,  trade
         acceptances,  drafts or other instruments with respect to or in payment
         of any account or any chattel  paper with respect to personal  property
         or services performed giving rise to any account.

                  (e)  Effectiveness  of Agreement.  This Agreement shall become
         effective  only upon  acceptance  by  Secured  Party at its  offices in
         Dallas,  Texas. All transactions  hereunder shall take place at Secured
         Party's offices in Dallas, Texas.
<PAGE>

                  (f)  Waiver.  Neither the failure nor any delay on the part of
         Secured Party to exercise any right, power or privilege herein or under
         any of the Loan Documents shall operate as a waiver thereof,  nor shall
         any  single or  partial  exercise  of such  right,  power or  privilege
         preclude any other or further  exercise  thereof or the exercise of any
         other right,  power or  privilege.  No waiver of any  provision in this
         Agreement  or in any of the other Loan  Documents  and no  departure by
         Debtor therefrom shall be effective unless the same shall be in writing
         and signed by Secured  Party,  and then shall be effective  only in the
         specific instance and for the purpose for which given and to the extent
         specified in such writing.

                  (g) Amendment.  No modification or amendment to this Agreement
         or to any of the  other  Loan  Documents  shall be  valid or  effective
         unless the same is signed by the party  against whom it is sought to be
         enforced.

                  (h) Parties In Interest.  This Agreement shall be binding upon
         the parties  and their  successors  or assigns,  and shall inure to the
         benefit of the parties and the  successors or assigns of Secured Party,
         but shall  not  inure to the  benefit  of any  heirs,  representatives,
         successors or assigns of Debtor.

                  (i)  Venue.  All  warranties  and  representations  of  Debtor
         contained  herein and any payment on any  indebtedness  secured  hereby
         have been or shall be made in Dallas  County,  Texas,  and all  parties
         hereto agree that venue is proper only in such county, that such county
         is a convenient forum in which to decide any dispute arising  hereunder
         and to submit  themselves  to the personal  jurisdiction  of the courts
         located in such county.

                  (j)  Governing  Law.  The  laws  of  Texas  shall  govern  the
         construction  of this  Agreement and the rights,  remedies,  duties and
         obligations  of the  parties  hereto with  respect to all  transactions
         hereunder and any and all Collateral, to the extent that federal law is
         not applicable.

                  (k) Cumulative  Rights.  All rights of Secured Party under the
         terms of this Agreement shall be cumulative of, and in addition to, the
         rights of  Secured  Party  under any and all other  agreements  between
         Debtor and Secured Party (including, but not limited to, the other Loan
         Documents  and any  other  agreements  referenced  herein),  and not in
         substitution  or  diminution  of any  rights now or  hereafter  held by
         Secured Party under the terms of any other agreement.

                  (l)  Notices.  Any notice or other  communication  required or
         permitted  hereunder  shall be in  writing  and shall be deemed to have
         been given when  personally  delivered or when  deposited in the United
         States mail, registered or certified, postage prepaid, and addressed as
         follows:

            If to Debtor:         Digital Communications Technology Corporation
                                  16910 Dallas Parkway
                                  Suite 100
                                  Dallas, Texas 75248

            If to Secured Party:  BANK ONE, TEXAS, NATIONAL ASSOCIATION
                                  P.O. Box 660094
                                  Dallas, Texas 75266-0094
                                  Attn: Asset Based Lending Group
<PAGE>

         Each of the  parties  hereto  shall be  entitled to specify a different
         address  by  giving  written  notice  to  the  other  party  hereto  in
         accordance with this Subsection.

                  (m)  Indemnification.  Debtor hereby indemnifies and agrees to
         hold harmless and defend all  Indemnified  Persons from and against any
         and all Indemnified Claims. Upon notification and demand, Debtor agrees
         to  provide  defense  of any  Indemnified  Claim  and pay all costs and
         reasonable  expenses of counsel  selected by any Indemnified  Person in
         respect  thereof.  The  indemnification  provided for in this paragraph
         shall survive any  termination of this Agreement and shall continue for
         the benefit of all Indemnified Persons. Except as specifically provided
         in this  paragraph,  Debtor  waives all  notices  from any  Indemnified
         Person  with   respect  to  such   indemnification.   As  used herein,
         "Indemnified Claims" means any and all claims, demands, actions, causes
         of action,  judgments,  obligations,  liabilities,  losses, damages and
         consequential  damages,  penalties,  fines,  costs, fees,  expenses and
         disbursements  (including  without  limitation,   reasonable  fees  and
         expenses of attorneys and other professional consultants and experts in
         connection  with  investigation  or defense)  of every  kind,  known or
         unknown,  existing or hereafter arising,  foreseeable or unforeseeable,
         which may be imposed upon,  threatened or asserted against, or incurred
         or paid by, any  Indemnified  Person at any time and from time to time,
         because of,  resulting from, in connection  with, or arising out of any
         transaction,  act, omission, event or circumstance in any way connected
         with the  Collateral or the Loan  Documents  (including  enforcement of
         Secured Party's rights thereunder or defense of Secured Party's actions
         thereunder and  specifically  including any and all Indemnified  Claims
         arising  from Secured  Party's  ordinary  negligence,  but in any event
         excluding Secured Party's gross negligence or intentional misconduct or
         breach  of any  Loan  Document)  or any  breach  by a  Borrower  or any
         Obligated Party of any representation, warranty, covenant, agreement or
         condition  contained  in any Loan  Documents or any Event of Default as
         defined in this Agreement.

                  (n) Descriptive Headings.  The captions in this Agreement are 
         for convenience  only and shall  not define or  limit the  provisions  
         hereof.

                  (o)  Participation of Obligations.  Debtor agrees that Secured
         Party may, at its option,  sell  interests in the  Obligations  and its
         rights under this Agreement to a financial  institution or institutions
         and, in connection with each such sale,  Secured Party may disclose any
         financial and other  information  available to Secured Party concerning
         Debtor to each prospective purchaser.

                  (p) Invalid Provisions.  If any provision of this Agreement or
         any of the other  Loan  Documents  is held to be  illegal,  invalid  or
         unenforceable  under present or future laws,  such  provision  shall be
         fully  severable and the remaining  provisions of this Agreement or any
         of the other Loan  Documents  shall remain in full force and effect and
         shall  not  be  affected  by  the  illegal,  invalid  or  unenforceable
         provision or by its severance.
<PAGE>

                  (q) Power of Attorney.  On the date hereof Debtor has provided
         to Bank a Power of Attorney with regard to an  investment  account held
         by Debtor with Andrew Peck  Associates Inc. Bank agrees not to exercise
         such Power of Attorney  until after (i) the  occurrence  and during the
         continuation  of an Event of  Default,  and (ii)  notice  from  Bank to
         Debtor.

         IN WITNESS THEREOF,  this Agreement is executed,  to be effective as of
the date of acceptance by Secured Party.


                       DEBTOR:
                                    DIGITAL COMMUNICATIONS
                                    TECHNOLOGY CORPORATION



                               By:  _____________________________________
                                    Kevin B. Halter, Chairman of the Board

ACCEPTED at Dallas, Texas,
this 6th day of November, 1996

BANK ONE, TEXAS, NATIONAL ASSOCIATION


By:   _______________________________
      Mark Champion, Vice President


<PAGE>
         

                                 PROMISSORY NOTE


$1,950,000.00 Dallas, Texas November 6, 1996


      FOR VALUE RECEIVED,  on or before October 31, 1998 ("Maturity  Date"), the
undersigned   Digital   Communications   Technology   Corporation,   a  Delaware
corporation  ("Borrower"),  promises  to pay to the  order of BANK  ONE,  TEXAS,
NATIONAL  ASSOCIATION  ("Bank") at its offices in Dallas County,  Texas, at 1717
Main, Dallas, Texas 75208 the principal amount of ONE MILLION NINE HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS  ($1,950,000.00) ("Total Principal Amount"), or such
amount less than the Total  Principal  Amount which is outstanding  from time to
time if the total amount outstanding under this Promissory Note ("Note") is less
than the Total Principal  Amount,  together with interest on such portion of the
Total  Principal  Amount  which  has been  advanced  to  Borrower  from the date
advanced until paid at a fluctuating  rate per annum which shall from day to day
be equal to the lesser of (a) the Maximum Rate (as hereinafter  defined), or (b)
a rate (the "Contract Rate"), calculated on the basis of the actual days elapsed
but computed as if each year consisted of 360 days,  equal to the sum of (i) the
Base Rate (the "Base Rate") of interest as established  from time to time by the
Bank (which may not be the lowest, best or most favorable rate of interest which
Bank may charge on loans to its  customers),  plus (ii) one half of one  percent
(0.50%) per annum;  provided,  however,  that if at any time the  Contract  Rate
shall exceed the Maximum Rate,  thereby  causing the interest on this Note to be
limited to the Maximum  Rate,  then any  subsequent  reduction  in the Base Rate
shall not reduce the rate of interest on this Note below the Maximum  Rate until
the total amount of interest  accrued on this Note equals the amount of interest
which would have accrued on this Note if the Contract Rate had at all times been
in effect.

      The term "Maximum Rate," as used herein, shall mean at the particular time
in question the maximum rate of interest which,  under  applicable law, may then
be charged on this Note. If such maximum rate of interest changes after the date
hereof and this Note  provides for a fluctuating  rate of interest,  the Maximum
Rate shall be automatically  increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective  date of each change in
such maximum rate.  If applicable  law ceases to provide for such a maximum rate
of  interest,  the  Maximum  Rate shall be equal to eighteen  percent  (18%) per
annum.

      Capitalized  terms used but not defined  herein have the meaning  given to
them in that  certain Loan and Security  Agreement  dated of even date  herewith
executed by and among  Borrower and Bank (as the same may be amended,  restated,
renewed, extended, or modified from time to time, "Loan Agreement").

      The principal of and all accrued but unpaid interest on this Note shall be
due and payable as follows:

      (a) Interest shall be due and payable monthly as it accrues, commencing on
the first (1st) day of the month  following  the initial  advance  hereunder and
continuing on the first (1st) day of each successive month thereafter during the
term of this Note and on the Maturity Date.

  (b) (A) The  outstanding  principal  balance  of this  Note  shall  be due and
  payable  monthly  commencing on the first (1st) day of the month following the
  initial  advance  hereunder  and  continuing  on the  first  (1st) day of each
  successive month thereafter.
<PAGE>

      (B) The amount of each monthly principal payment due hereunder shall equal
  the sum of the amounts  required  to  amortize  each  advance  made  hereunder
  calculated  as if such  advance were being  amortized  over 60 months from the
  date of advance.  The amount of monthly principal payments due hereunder shall
  be increased as additional advances are made hereunder.

      (C) The unpaid principal  balance of this Note shall be due and payable in
full on the Maturity Date.

      To the extent  that any  interest is not paid on or before the fifth (5th)
day after it becomes due and payable,  Bank may, at its option, add such accrued
interest to the principal of this Note.  Notwithstanding  anything herein to the
contrary,  upon an Event of Default  (as  hereinafter  defined)  or at  maturity
whether by acceleration  or otherwise,  all principal of this Note shall, at the
option of Bank, bear interest at the Maximum Rate until paid.

      This Note evidences  obligations and indebtedness  from time to time owing
by  Borrower  to Bank  pursuant  to the Loan  Agreement  and is  secured  by the
security interests and liens set forth therein.

      This  Note,  the  Loan  Agreement  and  all  other  documents  evidencing,
securing, governing,  guaranteeing and/or pertaining to this Note, including but
not limited to those documents  described  above,  are hereinafter  collectively
referred to as the "Loan  Documents." The holder of this Note is entitled to the
benefits and security provided in the Loan Documents.

      Under the Loan Agreement,  Borrower may request advances and make payments
hereunder from time to time,  provided that it is understood and agreed that the
aggregate  principal amount outstanding from time to time hereunder shall not at
any time  exceed the Total  Principal  Amount.  The unpaid  balance of this Note
shall increase and decrease with each new advance or payment  hereunder,  as the
case may be. This Note shall not be deemed  terminated or canceled  prior to the
Maturity  Date,  although the entire  principal  balance hereof may from time to
time be paid in full.  Borrower may borrow,  repay and reborrow  hereunder.  All
regularly  scheduled payments of the indebtedness  evidenced by this Note and by
any of the other Loan Documents shall be applied first to any accrued but unpaid
interest then due and payable  hereunder or thereunder and then to the principal
amount then due and  payable.  All  non-regularly  scheduled  payments  shall be
applied to such indebtedness in such order and manner as the holder of this Note
may  from  time to time  determine  in its sole  discretion.  All  payments  and
prepayments  of  principal  of or  interest on this Note shall be made in lawful
money of the United States of America in  immediately  available  funds,  at the
address of Bank indicated  above, or such other place as the holder of this Note
shall  designate  in writing to  Borrower.  If any  payment of  principal  of or
interest  on this Note shall  become  due on a day which is not a Business  Day,
such  payment  shall be made on the next  succeeding  Business  Day and any such
extension of time shall be included in  computing  interest in  connection  with
such payment. The books and records of Bank shall be prima facie evidence of all
outstanding principal of and accrued and unpaid interest on this Note.

      Borrower  agrees  that no  advances  under  this  Note  shall  be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.
<PAGE>

      Borrower agrees that upon the occurrence of an Event of Default the holder
of this Note may, at its option,  without further notice or demand,  (i) declare
the  outstanding  principal  balance of and accrued but unpaid  interest on this
Note at once due and  payable,  (ii)  refuse to advance any  additional  amounts
under this Note, (iii) foreclose all liens securing payment hereof,  (iv) pursue
any and all other rights,  remedies and recourse available to the holder hereof,
including  but not limited to any such  rights,  remedies or recourse  under the
Loan  Documents,  at law or in  equity,  or (v) pursue  any  combination  of the
foregoing.

      The failure to exercise the option to accelerate the maturity of this Note
or any other right,  remedy or recourse  available to the holder hereof upon the
occurrence of an Event of Default hereunder shall not constitute a waiver of the
right of the  holder  of this Note to  exercise  the same at that time or at any
subsequent  time with  respect to such  Event of  Default or any other  Event of
Default. The rights,  remedies and recourse of the holder hereof, as provided in
this  Note and in any of the  other  Loan  Documents,  shall be  cumulative  and
concurrent and may be pursued  separately,  successively or together as often as
occasion therefore shall arise, at the sole discretion of the holder hereof. The
acceptance  by the holder  hereof of any  payment  under this Note which is less
than the  payment  in full of all  amounts  due and  payable at the time of such
payment  shall not (i)  constitute  a waiver of or  impair,  reduce,  release or
extinguish any right,  remedy or recourse of the holder  hereof,  or nullify any
prior exercise of any such right,  remedy or recourse,  or (ii) impair,  reduce,
release or extinguish the  obligations of any party liable under any of the Loan
Documents as originally provided herein or therein.

      This Note and all of the other Loan Documents are intended to be performed
in accordance  with, and only to the extent  permitted by, all applicable  usury
laws.  If any  provision  hereof or of any of the other  Loan  Documents  or the
application  thereof to any person or circumstance  shall, for any reason and to
any  extent,  be invalid  or  unenforceable,  neither  the  application  of such
provision  to  any  other  person  or  circumstance  nor  the  remainder  of the
instrument in which such  provision is contained  shall be affected  thereby and
shall be enforced  to the  greatest  extent  permitted  by law. It is  expressly
stipulated  and  agreed to be the  intent of the  holder  hereof to at all times
comply with the usury and other  applicable laws now or hereafter  governing the
interest payable on the  indebtedness  evidenced by this Note. If the applicable
law is ever revised, repealed or judicially interpreted so as to render usurious
any amount called for under this Note or under any of the other Loan  Documents,
or  contracted  for,  charged,  taken,  reserved or received with respect to the
indebtedness  evidenced  by this Note,  or if Bank's  exercise  of the option to
accelerate the maturity of this Note, or if any  prepayment by Borrower  results
in Borrower having paid any interest in excess of that permitted by law, then it
is the express intent of Borrower and Bank that all excess  amounts  theretofore
collected by Bank be credited on the principal balance of this Note (or, if this
Note and all other  indebtedness  arising  under or  pursuant  to the other Loan
Documents have been paid in full,  refunded to Borrower),  and the provisions of
this Note and the other Loan Documents  immediately  be deemed  reformed and the
amounts thereafter  collectable  hereunder and thereunder  reduced,  without the
necessity of the  execution of any new  document,  so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for  hereunder or  thereunder.  All sums paid,  or agreed to be paid,  by
Borrower for the use, forbearance,  detention,  taking,  charging,  receiving or
reserving  of the  indebtedness  of  Borrower to Bank under this Note or arising
under or  pursuant to the other Loan  Documents  shall,  to the  maximum  extent
permitted  by  applicable  law, be  amortized,  prorated,  allocated  and spread
throughout the full term of such indebtedness  until payment in full so that the
<PAGE>

rate or amount of interest on account of such  indebtedness  does not exceed the
usury ceiling from time to time in effect and  applicable  to such  indebtedness
for so long as such  indebtedness  is  outstanding.  To the extent  federal  law
permits Bank to contract  for,  charge or receive a greater  amount of interest,
Bank will rely on  federal  law  instead  of TEX.  REV.  CIV.  STAT.  ANN.  art.
5069-1.04,  as  amended,  for the  purpose  of  determining  the  Maximum  Rate.
Additionally, to the maximum extent permitted by applicable law now or hereafter
in effect,  Bank may, at its option and from time to time,  implement  any other
method of computing the Maximum Rate under such Article  5069-1.04,  as amended,
or under other  applicable  law by giving  notice,  if required,  to Borrower as
provided by applicable law now or hereafter in effect.  Notwithstanding anything
to the contrary  contained  herein or in any of the other Loan Documents,  it is
not the  intention of Bank to  accelerate  the maturity of any interest that has
not accrued at the time of such  acceleration or to collect unearned interest at
the time of such acceleration.

     In no event  shall  TEX.  REV.  CIV.  STAT.  ANN.  art.  5069 Ch. 15 (which
regulates  certain  revolving  loan accounts and revolving  tri-party  accounts)
apply to this Note. To the extent that TEX. REV. CIV. STAT. ANN. art. 5069-1.04,
as amended,  is applicable to this Note, the "indicated rate ceiling"  specified
in such article is the applicable ceiling;  provided that, if any applicable law
permits greater interest, the law permitting the greatest interest shall apply.

      If this Note is placed in the hands of an attorney for  collection,  or is
collected in whole or in part by suit or through  probate,  bankruptcy  or other
legal proceedings of any kind,  Borrower agrees to pay, in addition to all other
sums payable hereunder, all costs and expenses of collection,  including but not
limited to reasonable attorneys' fees.

      Borrower and any and all endorsers and  guarantors of this Note  severally
waive presentment for payment, notice of nonpayment,  protest, demand, notice of
protest,  notice of intent to accelerate,  notice of acceleration  and dishonor,
diligence  in  enforcement  and  indulgences  of every kind and without  further
notice  hereby  agree  to  renewals,   extensions,   exchanges  or  releases  of
collateral,  taking of additional  collateral,  indulgences or partial payments,
either before or after maturity.

      THIS NOTE HAS BEEN EXECUTED UNDER,  AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE  WITH,  THE  LAWS OF THE  STATE OF  TEXAS,  EXCEPT  AS SUCH  LAWS ARE
PREEMPTED BY APPLICABLE FEDERAL LAWS.


                                           BORROWER:

                  Digital Communications Technology Corporation

                     By:___________________________________
                        Kevin B. Halter, Chairman of the Board


<PAGE>

                                 PROMISSORY NOTE


$5,000,000.00 Dallas, Texas November 6, 1996


      FOR VALUE RECEIVED,  on or before October 31, 1998 ("Maturity  Date"), the
undersigned   Digital   Communications   Technology   Corporation,   a  Delaware
corporation  ("Borrower"),  promises  to pay to the  order of BANK  ONE,  TEXAS,
NATIONAL  ASSOCIATION  ("Bank") at its offices in Dallas County,  Texas, at 1717
Main,  Dallas,  Texas  75208 the  principal  amount of FIVE  MILLION  AND NO/100
DOLLARS ($5,000,000.00) ("Total Principal Amount"), or such amount less than the
Total  Principal  Amount  which is  outstanding  from  time to time if the total
amount  outstanding  under this  Promissory Note ("Note") is less than the Total
Principal Amount,  together with interest on such portion of the Total Principal
Amount which has been advanced to Borrower from the date advanced  until paid at
a fluctuating  rate per annum which shall from day to day be equal to the lesser
of (a) the Maximum Rate (as hereinafter  defined),  or (b) a rate (the "Contract
Rate"),  calculated  on the basis of the actual days  elapsed but computed as if
each  year  consisted  of 360  days,  equal to the sum of (i) the Base Rate (the
"Base Rate") of interest as established from time to time by the Bank (which may
not be the lowest, best or most favorable rate of interest which Bank may charge
on loans to its  customers),  plus (ii)  one-half  percent  (0.50 %) per  annum;
provided,  however, the Contract Rate is subject to reduction as provided in the
Loan  Agreement  (hereinafter  defined).  If at any time the Contract Rate shall
exceed the Maximum Rate, thereby causing the interest on this Note to be limited
to the Maximum Rate,  then any  subsequent  reduction in the Base Rate shall not
reduce the rate of interest on this Note below the Maximum  Rate until the total
amount of  interest  accrued on this Note  equals the amount of  interest  which
would have  accrued on this Note if the  Contract  Rate had at all times been in
effect.

      The term "Maximum Rate," as used herein, shall mean at the particular time
in question the maximum rate of interest which,  under  applicable law, may then
be charged on this Note. If such maximum rate of interest changes after the date
hereof and this Note  provides for a fluctuating  rate of interest,  the Maximum
Rate shall be automatically  increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective  date of each change in
such maximum rate.  If applicable  law ceases to provide for such a maximum rate
of  interest,  the  Maximum  Rate shall be equal to eighteen  percent  (18%) per
annum.

      Capitalized  terms used but not defined  herein have the meaning  given to
them in that  certain Loan and Security  Agreement  dated of even date  herewith
executed by and among  Borrower and Bank (as the same may be amended,  restated,
renewed, extended, or modified from time to time, "Loan Agreement").

      The principal of and all accrued but unpaid interest on this Note shall be
due and payable as follows:

      (a) interest shall be due and payable monthly as it accrues, commencing on
the first (1st) day of December,  1996 and  continuing on the first (1st) day of
each successive month thereafter during the term of this Note; and

      (b) the  outstanding  principal  balance of this Note,  together  with all
accrued but unpaid interest, shall be due and payable on the Maturity Date.
<PAGE>

      To the extent  that any  interest is not paid on or before the fifth (5th)
day after it becomes due and payable,  Bank may, at its option, add such accrued
interest to the principal of this Note.  Notwithstanding  anything herein to the
contrary,  upon an Event of Default  (as  hereinafter  defined)  or at  maturity
whether by acceleration  or otherwise,  all principal of this Note shall, at the
option of Bank, bear interest at the Maximum Rate until paid.

      This Note evidences  obligations and indebtedness  from time to time owing
by  Borrower  to Bank  pursuant  to the Loan  Agreement  and is  secured  by the
security interests and liens set forth therein.

      This  Note,  the  Loan  Agreement  and  all  other  documents  evidencing,
securing, governing,  guaranteeing and/or pertaining to this Note, including but
not limited to those documents  described  above,  are hereinafter  collectively
referred to as the "Loan  Documents." The holder of this Note is entitled to the
benefits and security provided in the Loan Documents.

      Under the Loan Agreement,  Borrower may request advances and make payments
hereunder from time to time,  provided that it is understood and agreed that the
aggregate  principal amount outstanding from time to time hereunder shall not at
any time  exceed the Total  Principal  Amount.  The unpaid  balance of this Note
shall increase and decrease with each new advance or payment  hereunder,  as the
case may be. This Note shall not be deemed  terminated or canceled  prior to the
Maturity  Date,  although the entire  principal  balance hereof may from time to
time be paid in full.  Borrower may borrow,  repay and reborrow  hereunder.  All
regularly  scheduled payments of the indebtedness  evidenced by this Note and by
any of the other Loan Documents shall be applied first to any accrued but unpaid
interest then due and payable  hereunder or thereunder and then to the principal
amount then due and  payable.  All  non-regularly  scheduled  payments  shall be
applied to such indebtedness in such order and manner as the holder of this Note
may  from  time to time  determine  in its sole  discretion.  All  payments  and
prepayments  of  principal  of or  interest on this Note shall be made in lawful
money of the United States of America in  immediately  available  funds,  at the
address of Bank indicated  above, or such other place as the holder of this Note
shall  designate  in writing to  Borrower.  If any  payment of  principal  of or
interest  on this Note shall  become  due on a day which is not a Business  Day,
such  payment  shall be made on the next  succeeding  Business  Day and any such
extension of time shall be included in  computing  interest in  connection  with
such payment. The books and records of Bank shall be prima facie evidence of all
outstanding principal of and accrued and unpaid interest on this Note.

      Borrower  agrees  that no  advances  under  this  Note  shall  be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.

      Borrower agrees that upon the occurrence of an Event of Default the holder
of this Note may, at its option,  without further notice or demand,  (i) declare
the  outstanding  principal  balance of and accrued but unpaid  interest on this
Note at once due and  payable,  (ii)  refuse to advance any  additional  amounts
under this Note, (iii) foreclose all liens securing payment hereof,  (iv) pursue
any and all other rights,  remedies and recourse available to the holder hereof,
including  but not limited to any such  rights,  remedies or recourse  under the
Loan  Documents,  at law or in  equity,  or (v) pursue  any  combination  of the
foregoing.
<PAGE>

      The failure to exercise the option to accelerate the maturity of this Note
or any other right,  remedy or recourse  available to the holder hereof upon the
occurrence of an Event of Default hereunder shall not constitute a waiver of the
right of the  holder  of this Note to  exercise  the same at that time or at any
subsequent  time with  respect to such  Event of  Default or any other  Event of
Default. The rights,  remedies and recourse of the holder hereof, as provided in
this  Note and in any of the  other  Loan  Documents,  shall be  cumulative  and
concurrent and may be pursued  separately,  successively or together as often as
occasion therefore shall arise, at the sole discretion of the holder hereof. The
acceptance  by the holder  hereof of any  payment  under this Note which is less
than the  payment  in full of all  amounts  due and  payable at the time of such
payment  shall not (i)  constitute  a waiver of or  impair,  reduce,  release or
extinguish any right,  remedy or recourse of the holder  hereof,  or nullify any
prior exercise of any such right,  remedy or recourse,  or (ii) impair,  reduce,
release or extinguish the  obligations of any party liable under any of the Loan
Documents as originally provided herein or therein.

      This Note and all of the other Loan Documents are intended to be performed
in accordance  with, and only to the extent  permitted by, all applicable  usury
laws.  If any  provision  hereof or of any of the other  Loan  Documents  or the
application  thereof to any person or circumstance  shall, for any reason and to
any  extent,  be invalid  or  unenforceable,  neither  the  application  of such
provision  to  any  other  person  or  circumstance  nor  the  remainder  of the
instrument in which such  provision is contained  shall be affected  thereby and
shall be enforced  to the  greatest  extent  permitted  by law. It is  expressly
stipulated  and  agreed to be the  intent of the  holder  hereof to at all times
comply with the usury and other  applicable laws now or hereafter  governing the
interest payable on the  indebtedness  evidenced by this Note. If the applicable
law is ever revised, repealed or judicially interpreted so as to render usurious
any amount called for under this Note or under any of the other Loan  Documents,
or  contracted  for,  charged,  taken,  reserved or received with respect to the
indebtedness  evidenced  by this Note,  or if Bank's  exercise  of the option to
accelerate the maturity of this Note, or if any  prepayment by Borrower  results
in Borrower having paid any interest in excess of that permitted by law, then it
is the express intent of Borrower and Bank that all excess  amounts  theretofore
collected by Bank be credited on the principal balance of this Note (or, if this
Note and all other  indebtedness  arising  under or  pursuant  to the other Loan
Documents have been paid in full,  refunded to Borrower),  and the provisions of
this Note and the other Loan Documents  immediately  be deemed  reformed and the
amounts thereafter  collectable  hereunder and thereunder  reduced,  without the
necessity of the  execution of any new  document,  so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for  hereunder or  thereunder.  All sums paid,  or agreed to be paid,  by
Borrower for the use, forbearance,  detention,  taking,  charging,  receiving or
reserving  of the  indebtedness  of  Borrower to Bank under this Note or arising
under or  pursuant to the other Loan  Documents  shall,  to the  maximum  extent
permitted  by  applicable  law, be  amortized,  prorated,  allocated  and spread
throughout the full term of such indebtedness  until payment in full so that the
rate or amount of interest on account of such  indebtedness  does not exceed the
usury ceiling from time to time in effect and  applicable  to such  indebtedness
for so long as such  indebtedness  is  outstanding.  To the extent  federal  law
permits Bank to contract  for,  charge or receive a greater  amount of interest,
Bank will rely on  federal  law  instead  of TEX.  REV.  CIV.  STAT.  ANN.  art.
5069-1.04,  as  amended,  for the  purpose  of  determining  the  Maximum  Rate.
Additionally, to the maximum extent permitted by applicable law now or hereafter
in effect,  Bank may, at its option and from time to time,  implement  any other
method of computing the Maximum Rate under such Article  5069-1.04,  as amended,
or under other  applicable  law by giving  notice,  if required,  to Borrower as
provided by applicable law now or hereafter in effect.  Notwithstanding anything
to the contrary  contained  herein or in any of the other Loan Documents,  it is
not the  intention of Bank to  accelerate  the maturity of any interest that has
not accrued at the time of such  acceleration or to collect unearned interest at
the time of such acceleration.
<PAGE>

     In no event  shall  TEX.  REV.  CIV.  STAT.  ANN.  art.  5069 Ch. 15 (which
regulates  certain  revolving  loan accounts and revolving  tri-party  accounts)
apply to this Note. To the extent that TEX. REV. CIV. STAT. ANN. art. 5069-1.04,
as amended,  is applicable to this Note, the "indicated rate ceiling"  specified
in such article is the applicable ceiling;  provided that, if any applicable law
permits greater interest, the law permitting the greatest interest shall apply.

      If this Note is placed in the hands of an attorney for  collection,  or is
collected in whole or in part by suit or through  probate,  bankruptcy  or other
legal proceedings of any kind,  Borrower agrees to pay, in addition to all other
sums payable hereunder, all costs and expenses of collection,  including but not
limited to reasonable attorneys' fees.

      Borrower and any and all endorsers and  guarantors of this Note  severally
waive presentment for payment, notice of nonpayment,  protest, demand, notice of
protest,  notice of intent to accelerate,  notice of acceleration  and dishonor,
diligence  in  enforcement  and  indulgences  of every kind and without  further
notice  hereby  agree  to  renewals,   extensions,   exchanges  or  releases  of
collateral,  taking of additional  collateral,  indulgences or partial payments,
either before or after maturity.

      THIS NOTE HAS BEEN EXECUTED UNDER,  AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE  WITH,  THE  LAWS OF THE  STATE OF  TEXAS,  EXCEPT  AS SUCH  LAWS ARE
PREEMPTED BY APPLICABLE FEDERAL LAWS.


                                           BORROWER:

                  Digital Communications Technology Corporation


                     By:___________________________________
                        Kevin B. Halter, Chairman of the Board
              
<PAGE>

                   PROMISSORY NOTE


$1,800,000.00 Dallas, Texas November 6, 1996


      FOR VALUE RECEIVED,  on or before October 31, 1998 ("Maturity  Date"), the
undersigned   Digital   Communications   Technology   Corporation,   a  Delaware
corporation  ("Borrower"),  promises  to pay to the  order of BANK  ONE,  TEXAS,
NATIONAL  ASSOCIATION  ("Bank") at its offices in Dallas County,  Texas, at 1717
Main,  Dallas,  Texas 75208 the  principal  amount of ONE MILLION  EIGHT HUNDRED
THOUSAND AND NO/100 DOLLARS  ($1,800,000.00) ("Total Principal Amount"), or such
amount less than the Total  Principal  Amount which is outstanding  from time to
time if the total amount outstanding under this Promissory Note ("Note") is less
than the Total Principal  Amount,  together with interest on such portion of the
Total  Principal  Amount  which  has been  advanced  to  Borrower  from the date
advanced until paid at a fluctuating  rate per annum which shall from day to day
be equal to the lesser of (a) the Maximum Rate (as hereinafter  defined), or (b)
a rate (the "Contract Rate"), calculated on the basis of the actual days elapsed
but computed as if each year consisted of 360 days,  equal to the sum of (i) the
Base Rate (the "Base Rate") of interest as established  from time to time by the
Bank (which may not be the lowest, best or most favorable rate of interest which
Bank may charge on loans to its  customers),  plus (ii) one half of one  percent
(0.50 %) per annum;  provided,  however,  that if at any time the Contract  Rate
shall exceed the Maximum Rate,  thereby  causing the interest on this Note to be
limited to the Maximum  Rate,  then any  subsequent  reduction  in the Base Rate
shall not reduce the rate of interest on this Note below the Maximum  Rate until
the total amount of interest  accrued on this Note equals the amount of interest
which would have accrued on this Note if the Contract Rate had at all times been
in effect.

      The term "Maximum Rate," as used herein, shall mean at the particular time
in question the maximum rate of interest which,  under  applicable law, may then
be charged on this Note. If such maximum rate of interest changes after the date
hereof and this Note  provides for a fluctuating  rate of interest,  the Maximum
Rate shall be automatically  increased or decreased, as the case may be, without
notice to Borrower from time to time as of the effective  date of each change in
such maximum rate.  If applicable  law ceases to provide for such a maximum rate
of  interest,  the  Maximum  Rate shall be equal to eighteen  percent  (18%) per
annum.

      Capitalized  terms used but not defined  herein have the meaning  given to
them in that  certain Loan and Security  Agreement  dated of even date  herewith
executed by and among  Borrower and Bank (as the same may be amended,  restated,
renewed, extended, or modified from time to time, "Loan Agreement").

      The principal of and all accrued but unpaid interest on this Note shall be
due and payable as follows:

      (a) interest shall be due and payable monthly as it accrues, commencing on
the first (1st) day of December,  1996, and continuing on the first (1st) day of
each successive month thereafter during the term of this Note; and

      (b) the  outstanding  principal  balance  of this  Note  shall  be due and
payable  in  equal  monthly  installments  in  the  amount  of  $30,000.00  each
commencing on the first (1st) day of December, 1996, and continuing on the first
day of each successive  month thereafter until the Maturity Date when the unpaid
principal balance shall be due and payable in full.

      To the extent  that any  interest is not paid on or before the fifth (5th)
day after it becomes due and payable,  Bank may, at its option, add such accrued
interest to the principal of this Note.  Notwithstanding  anything herein to the
contrary,  upon an Event of Default  (as  hereinafter  defined)  or at  maturity
whether by acceleration  or otherwise,  all principal of this Note shall, at the
option of Bank, bear interest at the Maximum Rate until paid.
<PAGE>

      This Note evidences  obligations and indebtedness  from time to time owing
by  Borrower  to Bank  pursuant  to the Loan  Agreement  and is  secured  by the
security interests and liens set forth therein.

      This  Note,  the  Loan  Agreement  and  all  other  documents  evidencing,
securing, governing,  guaranteeing and/or pertaining to this Note, including but
not limited to those documents  described  above,  are hereinafter  collectively
referred to as the "Loan  Documents." The holder of this Note is entitled to the
benefits and security provided in the Loan Documents.

      Under the Loan Agreement,  Borrower may request advances and make payments
hereunder from time to time,  provided that it is understood and agreed that the
aggregate  principal amount outstanding from time to time hereunder shall not at
any time  exceed the Total  Principal  Amount.  The unpaid  balance of this Note
shall increase and decrease with each new advance or payment  hereunder,  as the
case may be. This Note shall not be deemed  terminated or canceled  prior to the
Maturity  Date,  although the entire  principal  balance hereof may from time to
time be paid in full.  Borrower may borrow,  repay and reborrow  hereunder.  All
regularly  scheduled payments of the indebtedness  evidenced by this Note and by
any of the other Loan Documents shall be applied first to any accrued but unpaid
interest then due and payable  hereunder or thereunder and then to the principal
amount then due and  payable.  All  non-regularly  scheduled  payments  shall be
applied to such indebtedness in such order and manner as the holder of this Note
may  from  time to time  determine  in its sole  discretion.  All  payments  and
prepayments  of  principal  of or  interest on this Note shall be made in lawful
money of the United States of America in  immediately  available  funds,  at the
address of Bank indicated  above, or such other place as the holder of this Note
shall  designate  in writing to  Borrower.  If any  payment of  principal  of or
interest  on this Note shall  become  due on a day which is not a Business  Day,
such  payment  shall be made on the next  succeeding  Business  Day and any such
extension of time shall be included in  computing  interest in  connection  with
such payment. The books and records of Bank shall be prima facie evidence of all
outstanding principal of and accrued and unpaid interest on this Note.

      Borrower  agrees  that no  advances  under  this  Note  shall  be used for
personal, family or household purposes, and that all advances hereunder shall be
used solely for business, commercial, investment or other similar purposes.

      Borrower agrees that upon the occurrence of an Event of Default the holder
of this Note may, at its option,  without further notice or demand,  (i) declare
the  outstanding  principal  balance of and accrued but unpaid  interest on this
Note at once due and  payable,  (ii)  refuse to advance any  additional  amounts
under this Note, (iii) foreclose all liens securing payment hereof,  (iv) pursue
any and all other rights,  remedies and recourse available to the holder hereof,
including  but not limited to any such  rights,  remedies or recourse  under the
Loan  Documents,  at law or in  equity,  or (v) pursue  any  combination  of the
foregoing.

      The failure to exercise the option to accelerate the maturity of this Note
or any other right,  remedy or recourse  available to the holder hereof upon the
occurrence of an Event of Default hereunder shall not constitute a waiver of the
right of the  holder  of this Note to  exercise  the same at that time or at any
subsequent  time with  respect to such  Event of  Default or any other  Event of
Default. The rights,  remedies and recourse of the holder hereof, as provided in
this  Note and in any of the  other  Loan  Documents,  shall be  cumulative  and
concurrent and may be pursued  separately,  successively or together as often as
occasion therefore shall arise, at the sole discretion of the holder hereof. The
acceptance  by the holder  hereof of any  payment  under this Note which is less
than the  payment  in full of all  amounts  due and  payable at the time of such
payment  shall not (i)  constitute  a waiver of or  impair,  reduce,  release or
extinguish any right,  remedy or recourse of the holder  hereof,  or nullify any
prior exercise of any such right,  remedy or recourse,  or (ii) impair,  reduce,
release or extinguish the  obligations of any party liable under any of the Loan
Documents as originally provided herein or therein.
<PAGE>

      This Note and all of the other Loan Documents are intended to be performed
in accordance  with, and only to the extent  permitted by, all applicable  usury
laws.  If any  provision  hereof or of any of the other  Loan  Documents  or the
application  thereof to any person or circumstance  shall, for any reason and to
any  extent,  be invalid  or  unenforceable,  neither  the  application  of such
provision  to  any  other  person  or  circumstance  nor  the  remainder  of the
instrument in which such  provision is contained  shall be affected  thereby and
shall be enforced  to the  greatest  extent  permitted  by law. It is  expressly
stipulated  and  agreed to be the  intent of the  holder  hereof to at all times
comply with the usury and other  applicable laws now or hereafter  governing the
interest payable on the  indebtedness  evidenced by this Note. If the applicable
law is ever revised, repealed or judicially interpreted so as to render usurious
any amount called for under this Note or under any of the other Loan  Documents,
or  contracted  for,  charged,  taken,  reserved or received with respect to the
indebtedness  evidenced  by this Note,  or if Bank's  exercise  of the option to
accelerate the maturity of this Note, or if any  prepayment by Borrower  results
in Borrower having paid any interest in excess of that permitted by law, then it
is the express intent of Borrower and Bank that all excess  amounts  theretofore
collected by Bank be credited on the principal balance of this Note (or, if this
Note and all other  indebtedness  arising  under or  pursuant  to the other Loan
Documents have been paid in full,  refunded to Borrower),  and the provisions of
this Note and the other Loan Documents  immediately  be deemed  reformed and the
amounts thereafter  collectable  hereunder and thereunder  reduced,  without the
necessity of the  execution of any new  document,  so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for  hereunder or  thereunder.  All sums paid,  or agreed to be paid,  by
Borrower for the use, forbearance,  detention,  taking,  charging,  receiving or
reserving  of the  indebtedness  of  Borrower to Bank under this Note or arising
under or  pursuant to the other Loan  Documents  shall,  to the  maximum  extent
permitted  by  applicable  law, be  amortized,  prorated,  allocated  and spread
throughout the full term of such indebtedness  until payment in full so that the
rate or amount of interest on account of such  indebtedness  does not exceed the
usury ceiling from time to time in effect and  applicable  to such  indebtedness
for so long as such  indebtedness  is  outstanding.  To the extent  federal  law
permits Bank to contract  for,  charge or receive a greater  amount of interest,
Bank will rely on  federal  law  instead  of TEX.  REV.  CIV.  STAT.  ANN.  art.
5069-1.04,  as  amended,  for the  purpose  of  determining  the  Maximum  Rate.
Additionally, to the maximum extent permitted by applicable law now or hereafter
in effect,  Bank may, at its option and from time to time,  implement  any other
method of computing the Maximum Rate under such Article  5069-1.04,  as amended,
or under other  applicable  law by giving  notice,  if required,  to Borrower as
provided by applicable law now or hereafter in effect.  Notwithstanding anything
to the contrary  contained  herein or in any of the other Loan Documents,  it is
not the  intention of Bank to  accelerate  the maturity of any interest that has
not accrued at the time of such  acceleration or to collect unearned interest at
the time of such acceleration.

     In no event  shall  TEX.  REV.  CIV.  STAT.  ANN.  art.  5069 Ch. 15 (which
regulates  certain  revolving  loan accounts and revolving  tri-party  accounts)
apply to this Note. To the extent that TEX. REV. CIV. STAT. ANN. art. 5069-1.04,
as amended,  is applicable to this Note, the "indicated rate ceiling"  specified
in such article is the applicable ceiling;  provided that, if any applicable law
permits greater interest, the law permitting the greatest interest shall apply.

      If this Note is placed in the hands of an attorney for  collection,  or is
collected in whole or in part by suit or through  probate,  bankruptcy  or other
legal proceedings of any kind,  Borrower agrees to pay, in addition to all other
sums payable hereunder, all costs and expenses of collection,  including but not
limited to reasonable attorneys' fees.

      Borrower and any and all endorsers and  guarantors of this Note  severally
waive presentment for payment, notice of nonpayment,  protest, demand, notice of
protest,  notice of intent to accelerate,  notice of acceleration  and dishonor,
diligence  in  enforcement  and  indulgences  of every kind and without  further
notice  hereby  agree  to  renewals,   extensions,   exchanges  or  releases  of
collateral,  taking of additional  collateral,  indulgences or partial payments,
either before or after maturity.
<PAGE>

      THIS NOTE HAS BEEN EXECUTED UNDER,  AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE  WITH,  THE  LAWS OF THE  STATE OF  TEXAS,  EXCEPT  AS SUCH  LAWS ARE
PREEMPTED BY APPLICABLE FEDERAL LAWS.


                                           BORROWER:

                  Digital Communications Technology Corporation


                     By:___________________________________
                        Kevin B. Halter, Chairman of the Board