EXHIBIT 10.31
 
DATAWATCH CORPORATION

Non-Qualified Stock Option Agreement

Datawatch Corporation, a Delaware corporation (the “Company”), hereby grants as
of _________ __, ____ to [__________] (the “Optionee”), an option (the “Award”)
to purchase a maximum of [_____] shares (the “Option Shares”) of its Common
Stock, $.01 par value (“Common Stock”), at the price of [$____] per share, on
the following terms and conditions:

1.           Grant Under 2011 Equity Compensation and Incentive Plan.  This
option is granted pursuant to and is governed by the Company’s 2011 Equity
Compensation and Incentive Plan (the “Plan”) and, unless the context otherwise
requires, terms used herein shall have the same meaning as in the
Plan.  Determinations made in connection with this option pursuant to the Plan
shall be governed by the Plan as it exists on this date.

2.           Grant as Non-Qualified Stock Option; Other Options. This option
shall be treated as a Non-Qualified Stock Option (rather than an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”)).  This option is in addition to any other options heretofore or
hereafter granted to the Optionee by the Company or any Related Corporation (as
defined in the Plan), but a duplicate original of this instrument shall not
effect the grant of another option.

3.           Extent of Option if Business Relationship Continues. If the
Optionee has continued to serve the Company or any Related Corporation in the
capacity of an employee, officer, director or consultant (such service is
described herein as maintaining or being involved in a “Business Relationship”
with the Company) on the following dates, the Optionee may exercise this option
for the number of shares of Common Stock set opposite the applicable date:

Prior to _______ __, ____
 
 
-0- shares
On _______ __, ____ and at the end of each three-month period thereafter
-
An additional [____] shares (or such number of shares at the end of the last
three month period so that the total does not exceed [_____] shares).
     

In accordance with the foregoing schedule, a total of [_____] shares shall be
vested and exercisable on the third anniversary of _________ __,
____.  Notwithstanding the foregoing, in accordance with and subject to the
provisions of the Plan, the Committee may, in its discretion, accelerate the
date that any installment of this Option becomes exercisable.  The foregoing
rights are cumulative and, while the Optionee continues to maintain a Business
Relationship with the Company, may be exercised on or before the date which is
seven years from the date this option is granted.  All the foregoing rights are
subject to Sections 4 and 5, as appropriate, if the Optionee ceases to maintain
a Business Relationship with the Company.

 
 

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4.           Termination of Business Relationship.  If the Optionee ceases to
maintain a Business Relationship with the Company, other than by reason of death
or disability as defined in Section 5, no further installments of this option
shall become exercisable, and this option shall terminate after the passage of
ninety (90) days from the date the Business Relationship ceases (the “Additional
Exercise Period”), but in no event later than the scheduled expiration date;
provided, however, that, immediately upon the Optionee’s completion of his or
her first full year of continuous employment with the Company the Additional
Exercise Period shall increase to twelve months.  In such a case, the Optionee’s
only rights hereunder shall be those which are properly exercised before the
termination of this option.

5.           Death; Disability.  If the Optionee dies while involved in a
Business Relationship with the Company, this option may be exercised, to the
extent of the number of shares with respect to which the Optionee could have
exercised it on the date of his or her death, by his or her estate, personal
representative or beneficiary to whom this option has been assigned pursuant to
Section 9, at any time within 180 days after the date of death, but not later
than the scheduled expiration date.  If the Optionee’s Business Relationship
with the Company is terminated by reason of his or her disability (as defined in
the Plan), this option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date the
Business Relationship was terminated, at any time within 180 days after the date
of such termination, but not later than the scheduled expiration date, provided
that such period for exercise shall not expire before the date on which the
shares underlying the option are registered under an effective registration
statement on Form S-8 under the Securities Act of 1933, as amended, unless the
scheduled expiration date occurs before such registration is effective.  At the
expiration of such 180-day period or the scheduled expiration date, whichever is
the earlier, this option shall terminate and the only the rights hereunder shall
be those as to which the option was properly exercised before such termination.

6.           Partial Exercise.  This option may be exercised in part at any time
and from time to time within the above limits, except that this option may not
be exercised for a fraction of a share unless such exercise is with respect to
the final installment of stock subject to this option and cash in lieu of a
fractional share must be paid, in accordance with Paragraph 13(G) of the Plan,
to permit the Optionee to exercise completely such final installment.  Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Optionee in accordance with the terms hereof.

7.           Payment of Price.  (a) The option price shall be paid in the
following manner:

 
(i)
in United States dollars in cash or by check;

 
(ii)
subject to Section 7(b) below, by delivery of shares of the Company’s Common
Stock having a Fair Market Value (as determined by the Committee) as of the date
of the exercise equal to the cash exercise price of this option;

 
 

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(iii)
by delivery (including by attestation) of an assignment satisfactory in form and
substance to the Company of a sufficient amount of the proceeds from the sale of
the Option Shares and an instruction to the broker or selling agent to pay that
amount to the Company; or

 
(iv)
by any combination of the foregoing.

(b)           Limitations on Payment by Delivery of Common Stock.  If the
Optionee delivers Common Stock held by the Optionee (“Old Stock”) to the Company
in full or partial payment of the option price, and the Old Stock so delivered
is subject to restrictions or limitations imposed by agreement between the
Optionee and the Company, an equivalent number of Option Shares shall be subject
to all restrictions and limitations applicable to the Old Stock to the extent
that the Optionee paid for the Option Shares by delivery of Old Stock, in
addition to any restrictions or limitations imposed by this
Agreement.  Notwithstanding the foregoing, the Optionee may not pay any part of
the exercise price hereof by transferring Common Stock to the Company unless
such Common Stock has been owned by the Optionee free of any substantial risk of
forfeiture for at least six months.

8.           Method of Exercising Option.  Subject to the terms and conditions
of this Agreement, this option may be exercised by written notice to the Company
at its principal executive office,  or to such transfer agent as the Company
shall designate.  Such notice shall state the election to exercise this option
and the number of Option Shares for which it is being exercised and shall be
signed by the person or persons so exercising this option.  Such notice shall be
accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received.  Such certificate or
certificates shall be registered in the name of the person or persons so
exercising this option (or, if this option shall be exercised by the Optionee
and if the Optionee shall so request in the notice exercising this option, shall
be registered in the name of the Optionee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the Optionee, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise this option.

9.           Option Not Transferable.  This option is not transferable or
assignable except by will or by the laws of descent and distribution.  During
the Optionee’s lifetime only the Optionee can exercise this option.

10.           No Obligation to Exercise Option.  The grant and acceptance of
this option imposes no obligation on the Optionee to exercise it.

 
 
 

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11.           No Obligation to Continue Business Relationship.  Neither the
Plan, this Agreement, nor the grant of this option imposes any obligation on the
Company or any Related Corporation to continue to maintain a Business
Relationship with the Optionee.

12.           No Rights as Stockholder until Exercise.  The Optionee shall have
no rights as a stockholder with respect to the Option Shares until such time as
the Optionee has exercised this option by delivering a notice of exercise and
has paid in full the purchase price for the shares so exercised in accordance
with Section 8.  Except as is expressly provided in the Plan with respect to
certain changes in the capitalization of the Company, no adjustment shall be
made for dividends or similar rights for which the record date is prior to such
date of exercise.

13.           Capital Changes and Business Successions.  The Plan contains
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers.  Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.

14.           Withholding Taxes.  If the Company or any Related Corporation in
its discretion determines that it is obligated to withhold any tax in connection
with the exercise of this option, or in connection with the transfer of, or the
lapse of restrictions on, any Common Stock or other property acquired pursuant
to this option, the Optionee hereby agrees that the Company or any Related
Corporation may withhold from the Optionee’s wages or other remuneration the
appropriate amount of tax.  At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Optionee on exercise of this option.  The
Optionee further agrees that, if the Company or any Related Corporation does not
withhold an amount from the Optionee’s wages or other remuneration sufficient to
satisfy the withholding obligation of the Company or Related Corporation, the
Optionee will make reimbursement on demand, in cash, for the amount
underwithheld.

15.           Provision of Documentation to Optionee.  By signing this Agreement
the Optionee acknowledges receipt of a copy of this Agreement and a copy of the
Plan.

16.           Conformity with the Plan. The Award is intended to conform in all
respects with, and is subject to applicable provisions of, the Plan. To the
extent that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall
control and, if necessary, the applicable provisions of this Agreement shall be
deemed to be amended so as to carry out the purpose and intent of the Plan. By
the Optionee’s acceptance of this Agreement, the Optionee agrees to be bound by
all of the terms of this Agreement and the Plan.  Notwithstanding any other
provision of this Section 16, in the event that the provisions of this Agreement
are subject to Section 409A of the Internal Revenue Code of 1986, as amended,
and the Treasury Regulations promulgated thereunder (“Section 409A”), the
provisions of this Agreement shall comply with, and shall be interpreted in a
manner consistent with, Section 409A.
 
 
 

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[FORM NOTE: INCLUDE SECTION 17 BELOW FOR DIRECTOR GRANTS. OTHERWISE, CONSULT
WITH M. FISH AND CHOATE BEFORE INCLUDING.]

17.           Acceleration of Vesting upon Change in Control.  Notwithstanding
Section 3 hereof, in the event of a Change in Control of the Company while this
option is in effect, this option shall, immediately prior to the consummation of
such Change in Control, become fully vested and all unexercised options shall be
exercisable by the Optionee; provided, however, that the Board, in its sole
discretion, may require that the Optionee’s rights under this section shall be
conditioned on approval by the stockholders of the Company in accordance with
Section 280G(b)5(B) of the Code and regulations thereunder.  For purposes of
this Agreement, a “Change in Control” means the occurrence of any of the
following events:

(a)  
The Company is merged or consolidated or reorganized into or with another
corporation or other legal person, and as a result of a merger, tender offer,
consolidation, reorganization or transaction, less than a majority of the
combined voting power of the then-outstanding securities of such surviving,
resulting or reorganized corporation or person immediately after such
transaction is held in the aggregate by the holders of the then-outstanding
securities entitled to vote generally in the election of directors of the
Company (“Voting Stock”) immediately prior to such transaction;

(b)  
The Company sells or otherwise transfers all or substantially all of its assets
to any other corporation or other legal person, and as a result of such sales or
transfer less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holder of Voting Stock of the
Company immediately prior to such sale or transfer;

(c)  
There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report), each as promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any
“person” (as such term is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the “beneficial owner” (as such term is used in Rule
13d-3 under the Exchange Act) of securities representing 35% or more of the
Voting Stock of the Company;

(d)  
The Company files a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) that a
change in control of the Company has occurred; or

(e)  
If during any period of two consecutive years, individuals who at the beginning
of any such period constitute the Board cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for election by
the Company’s stockholders, of each director of the Company first elected during
such period was approved by a vote of at least a majority of the directors then
still in office who were directors of the Company at the beginning of any such
period;

 
 

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Provided, however, that a “Change in Control” shall not be deemed to have
occurred for purposes of this Agreement solely because (x) the Company, (y) an
entity in which the Company directly or indirectly beneficially owns 50% or more
of the voting securities, or (z) any Company-sponsored employee stock ownership
plan or any other employee benefit plan of the Company, either files or becomes
obligated to file a report or a proxy statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form
or report) under the Exchange Act, disclosing beneficial ownership by it of
shares of Voting Stock or because the Company reports that a change in control
of the Company has occurred by reason of such beneficial ownership.

18.           Miscellaneous.

(a)           Notices.  All notices hereunder shall be in writing and shall be
deemed given when sent by certified or registered mail, postage prepaid, return
receipt requested, to the address set forth below.  The addresses for such
notices may be changed from time to time by written notice given in the manner
provided for herein.

(b)           Entire Agreement; Modification.  This Agreement constitutes the
entire agreement between the parties relative to the subject matter hereof, and
supersedes all proposals, written or oral, and all other communications between
the parties relating to the subject matter of this Agreement.  This Agreement
may be modified, amended or rescinded only by a written agreement executed by
both parties.

(c)           Severability.  The invalidity, illegality or unenforceability of
any provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision.

(d)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, subject to the limitations set forth in Section 9 hereof.

(e)           Governing Law.  This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of the conflicts of laws thereof.

(f)           Data Protection Waiver. The Optionee understands and consents to
the Company or its agents or independent contractors appointed to administer the
Plan obtaining certain of the Optionee’s personal employment information
required for the effective administration of the Plan and that such information
may be transmitted outside of the country of the Optionee’s employment and/or
residence.  Information relating to the Optionee’s participation under the Plan
may constitute personal data that is subject to the Company’s policies on
protection and use of personal data.

 
 

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(g)           Clawback. This Award and any resulting payment or delivery of
shares of the Company’s Common Stock is subject to set-off, recoupment, or other
recovery or “claw back” as required by applicable law or by a Company policy on
the claw back of compensation, as amended from time to time.

[FORM NOTE: ADD THE FOLLOWING AND CONSULT LOCAL COUNSEL FOR ADDITIONAL/REVISED
PROVISIONS IN THE CASE OF GRANTS OUTSIDE THE U.S., AS WELL AS FOR ADVICE ON
COMPLIANCE WITH LOCAL SECURITIES REGISTRATION REQUIREMENTS AND AGREEMENT
TRANSLATION REQUIREMENTS.]

19.           Additional Conditions.

(a)           In accepting the Award, the Optionee acknowledges that: (i) the
grant of Option Shares is voluntary and occasional and does not create any
contractual or other right to receive future Awards, or benefits in lieu of
Awards, even if Option Shares have been granted repeatedly in the past; (ii) all
decisions with respect to future grants of Option Shares, if any, will be at the
sole discretion of the Company; (iii) the Optionee is voluntarily participating
in the Plan; (iv) the Option Shares and the underlying shares of Common Stock
are an extraordinary item that does not constitute compensation of any kind for
services of any kind rendered to the Company or any Subsidiary, and which is
outside the scope of the Optionee’s employment contract, if any; (v) the Option
Shares and the underlying shares of Common Stock are not intended to replace any
pension rights or compensation; (vi) the Option Shares are not part of normal or
expected compensation or salary for any purposes, including, but not limited to,
calculating any severance, resignation, termination, redundancy, unfair
dismissal, end-of-service payments, bonuses, long-service awards, pension or
retirement benefits or similar payments and in no event should be considered as
compensation for, or relating in any way to, past services for the Company or
any Subsidiary; (vii) in consideration of the Award, no claim or entitlement to
compensation or damages shall arise from termination, forfeiture or cancelation
of the Option Shares, or diminution in value of the shares of Common Stock
acquired under the Plan, resulting from termination of the Optionee’s employment
by the Company or a Subsidiary (for any reason whatsoever and whether or not in
breach of local labor laws), and the Optionee irrevocably releases the Company
and its Subsidiaries from any such claim that may arise; if, notwithstanding the
foregoing, any such claim is found by a court of competent jurisdiction to have
arisen, the Optionee shall be deemed irrevocably to have waived his or her
entitlement to pursue such claim; (viii) in the event of termination of the
Optionee’s employment (whether or not in breach of local labor laws), the
Optionee’s right to receive the Option Shares and any resulting shares under the
Plan, if any, will terminate effective as of the date that the Optionee is no
longer actively employed and will not be extended by any notice period mandated
under local law (e.g., active employment would not include a period of “garden
leave” or
 
 
 

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similar period pursuant to local law); furthermore, in the event of termination
of employment (whether or not in breach of local labor laws) the Board shall
have the exclusive discretion to determine when the Optionee is no longer
actively employed for purposes of the Award; and (ix) the rights and benefits
under the Plan, if any, will not automatically transfer to another company in
the case of a merger, takeover or transfer of liability.

(b)           Neither the Company nor any Subsidiary is providing any tax, legal
or financial advice, nor is the Company making any recommendations regarding
participation in the Plan, or the Optionee’s acquisition or sale of the
underlying shares of Common Stock.  The Optionee is advised to consult with his
or her own personal tax, legal and financial advisors regarding participation in
the Plan before taking any action related to the Plan.
 
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IN WITNESS WHEREOF, the Company and the Optionee have caused this instrument to
be executed as of the date first above written.

COMPANY:

DATAWATCH CORPORATION
Quorum Office Park
271 Mill Road
Chelmsford, MA 01824

By:   ____________________________
 Murray P. Fish
 CFO

OPTIONEE:

________________________________

________________________________
Street Address

________________________________
City           State                Zip Code