EXHIBIT 10.31


                              DATAWATCH CORPORATION

           1996 INTERNATIONAL EMPLOYEE NON-QUALIFIED STOCK OPTION PLAN
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      1. PURPOSE.  This 1996 International  Employee  Non-Qualified Stock Option
Plan (the "Plan") is intended to provide incentives to employees and consultants
of  Participating   Subsidiaries  (as  defined  in  paragraph  3)  of  DATAWATCH
Corporation  (the  "Company") by providing them with  opportunities  to purchase
stock in the Company pursuant to options ("Non-Qualified  Options" or "Options")
granted  hereunder  which do not qualify as "incentive  stock options"  ("ISOs")
under Section 422(b) of the United States Internal Revenue Code (the "Code").

      2.      ADMINISTRATION OF THE PLAN.

              A.  BOARD  OR   COMMITTEE   ADMINISTRATION.   The  Plan  shall  be
      administered  by the Board of Directors of the Company (the "Board") or by
      a committee  appointed by the Board (the  "Committee").  Hereinafter,  all
      references  in this  Plan to the  "Committee"  shall  mean the Board if no
      Committee  has been  appointed.  Subject to  ratification  of the grant or
      authorization  of each Option by the Board (if so  required by  applicable
      law), and subject to the terms of the Plan,  the Committee  shall have the
      authority to (i)  determine to whom,  from among the class of  individuals
      and entities eligible under paragraph 3 to receive Options, Options may be
      granted;  (ii)  determine  the time or times  at  which  Options  shall be
      granted;  (iii)  determine  the  option  price of shares  subject  to each
      Option,  which price shall not be less than the minimum price specified in
      paragraph  6; (iv)  determine  (subject to  paragraph 7) the time or times
      when each Option shall become exercisable and the duration of the exercise
      period; (v) determine whether  restrictions such as repurchase options are
      to be  imposed  on  shares  subject  to  Options  and the  nature  of such
      restrictions,  if any;  and (vi)  interpret  the Plan  and  prescribe  and
      rescind rules and  regulations  relating to it. The  Committee  shall take
      whatever actions it deems necessary, under Section 422 of the Code and the
      regulations  promulgated  thereunder,  to  ensure  that no  Option  issued
      hereunder is treated as an ISO. The interpretation and construction by the
      Committee of any  provisions of the Plan or of any Option granted under it
      shall be final unless otherwise determined by the Board. The Committee may
      from time to time adopt such rules and  regulations  for  carrying out the
      Plan as it may deem  advisable.  No member  of the Board or the  Committee
      shall be liable  for any action or  determination  made in good faith with
      respect to the Plan or any Option granted under it.




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              B. COMMITTEE ACTIONS.  The Committee may select one of its members
      as its chairman, and shall hold meetings at such time and places as it may
      determine.  A majority of the Committee shall constitute a quorum and acts
      by a majority  of the  members  of the  Committee,  or acts  reduced to or
      approved  in writing by a majority  of the  members of the  Committee  (if
      consistent with applicable  law),  shall  constitute the valid acts of the
      Committee.  From  time to time  the  Board  may  increase  the size of the
      Committee and appoint additional members thereof,  remove members (with or
      without  cause) and  appoint new members in  substitution  therefor,  fill
      vacancies  however  caused,  or remove all  members of the  Committee  and
      thereafter directly administer the Plan.

      3.  ELIGIBLE  EMPLOYEES AND OTHERS.  Non-Qualified  Options may be granted
under the Plan to any employee or consultant of any Participating  Subsidiary of
the Company. The Committee may take into consideration a recipient's  individual
circumstances  in  determining  whether to grant an Option.  The granting of any
Option to any  individual or entity shall  neither  entitle such grantee to, nor
disqualify such grantee from,  participation in any other grant of Options.  For
purposes of the Plan, the term "Participating Subsidiary" shall mean any present
or future  subsidiary of the Company,  as that term is defined in Section 424(f)
of the Code, incorporated outside of the United States.

      4. STOCK.  The stock subject to Options  shall be authorized  but unissued
shares of Common  Stock of the  Company,  par value $.01 per share (the  "Common
Stock"),  or shares of Common Stock reacquired by the Company in any manner. The
aggregate  number of shares which may be issued pursuant to the Plan is 200,000,
subject to adjustment  as provided in paragraph 13. If any Option  granted under
the Plan shall expire or terminate for any reason  without having been exercised
in full or shall cease for any reason to be  exercisable  in whole or in part or
shall be repurchased by the Company,  the shares of Common Stock subject to such
Option shall again be available for grants of Options under the Plan.

      5. GRANTING OF OPTIONS.  Options may be granted under the Plan at any time
on or after  October 4, 1996 and prior to October 4, 2006.  The date of grant of
an Option under the Plan will be the date specified by the Committee at the time
it grants the Option;  provided,  however,  that such date shall not be prior to
the date on which the Committee acts to approve the grant.

      6. MINIMUM OPTION PRICE.

      The exercise price per share  specified in the agreement  relating to each
Non-Qualified Option granted under the Plan (the "Agreement"),  may be less than
the fair market  value of the Common  Stock of the Company 




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on the date of  grant,  but  shall in no event be less  than the  minimum  legal
consideration  required  therefor under the laws of the State of Delaware or the
laws of any  jurisdiction in which the Company or its successors in interest may
be organized.

      7.  OPTION  DURATION.  Subject  to  earlier  termination  as  provided  in
paragraphs 9 and 10 or as specified  in the  Agreement  relating to such Option,
each Option shall expire on the date  specified by the  Committee,  but not more
than ten years from the date of grant.

      8. EXERCISE OF OPTION.  Subject to the  provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:

              A. VESTING.  The Option shall either be fully  exercisable  on the
      date of grant or shall become exercisable  thereafter in such installments
      as the Committee may specify.

              B. FULL  VESTING  OF  INSTALLMENTS.  Once an  installment  becomes
      exercisable it shall remain exercisable until expiration or termination of
      the Option, unless otherwise specified by the Committee.

              C. PARTIAL  EXERCISE.  Each Option or installment may be exercised
      at any time or from time to time, in whole or in part, for up to the total
      number of shares with respect to which it is then exercisable.

              D. ACCELERATION OF VESTING.  The Committee shall have the right to
      accelerate   the  date  that  any   installment   of  any  Option  becomes
      exercisable.

      9. TERMINATION OF BUSINESS  RELATIONSHIP.  Each Option may provide that it
shall terminate  before its stated  expiration date, upon terms specified by the
Committee,  if the  optionee  ceases  to be an  employee  or  consultant  of all
Participating  Subsidiaries of the Company or of the Company (such  relationship
hereinafter referred to as a "Business Relationship with the Company").  Nothing
in the Plan or any Option granted hereunder shall be deemed to give any optionee
the right to continue his or her Business  Relationship with the Company for any
period of time.

      10.  DEATH; DISABILITY.

              A. DEATH.  Unless  otherwise  specified  by the  Committee,  if an
      optionee's Business  Relationship with the Company terminates by reason of
      death, his or her Option may be exercised,  to the extent of the number of
      shares with respect to which such optionee  could




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      have exercised it on the date of such optionee's death, by such optionee's
      estate, personal representative or beneficiary who has acquired the Option
      by will or by the laws of descent and  distribution,  at any time prior to
      the  earlier of the  specified  expiration  date of the Option or 180 days
      from the date of death.

              B. DISABILITY.  Unless otherwise specified by the Committee, if an
      optionee's Business  Relationship with the Company terminates by reason of
      such optionee's disability, such optionee shall have the right to exercise
      his or her Option,  to the extent of the number of shares with  respect to
      which such optionee  could  otherwise have exercised it on the date his or
      her Business  Relationship with the Company terminated,  at any time prior
      to the earlier of the specified  expiration date of the Option or 180 days
      from the date of the termination of the optionee's  Business  Relationship
      with the  Company.  For the  purposes of the Plan,  the term  "disability"
      shall mean "permanent and total disability" as defined in Section 22(e)(3)
      of the Code or any successor statute.

      11.  ASSIGNABILITY.  No Option shall be assignable or  transferable by the
optionee except by will or by the laws of descent and  distribution,  and during
the  lifetime of the  optionee  each  Option  shall be  exercisable  only by the
optionee.

      12.  TERMS AND  CONDITIONS  OF  OPTIONS.  Options  shall be  evidenced  by
instruments  (which need not be  identical)  in such forms as the  Committee may
from time to time  approve.  Such  instruments  shall  conform  to the terms and
conditions  set forth in  paragraphs  6 through 11 hereof and may  contain  such
other  provisions as the Committee deems  advisable  which are not  inconsistent
with the Plan,  including  restrictions  applicable  to  shares of Common  Stock
issuable  upon  exercise of Options.  The  Committee may specify that any Option
shall be subject  to the  restrictions  set forth  herein  or,  consistent  with
paragraph 7, to such other or additional termination and cancellation provisions
as the  Committee  may  determine.  The  Committee  may from time to time confer
authority  and  responsibility  on one or more of its own members  and/or one or
more officers of the Company to execute and deliver such instruments. The proper
officers of the Company are  authorized  and directed to take any and all action
necessary  or  advisable  from  time to  time to  carry  out the  terms  of such
instruments.

      13.  ADJUSTMENTS.  Upon the occurrence of any of the following  events, an
optionee's  rights with respect to Options  granted to such  optionee  hereunder
shall  be  adjusted  as  hereinafter  provided,  unless  otherwise  specifically
provided in the written  agreement between the optionee and the Company relating
to such Option:

              A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
      shall be subdivided or combined into a greater or smaller





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      number of shares or if the Company  shall issue any shares of Common Stock
      as a stock dividend on its outstanding  Common Stock, the number of shares
      of  Common  Stock  deliverable  upon  the  exercise  of  Options  shall be
      appropriately  increased or  decreased  proportionately,  and  appropriate
      adjustments  shall be made in the purchase price per share to reflect such
      subdivision, combination or stock dividend.

              B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
      with or acquired by another entity in a merger or other  reorganization in
      which  the  holders  of  the  outstanding  voting  stock  of  the  Company
      immediately  preceding the consummation of such event, shall,  immediately
      following such event, hold, as a group, less than a majority of the voting
      securities of the surviving or successor entity, or in the event of a sale
      of all or substantially all of the Company's assets or otherwise (each, an
      "Acquisition"),  the  Committee  or the board of  directors  of any entity
      assuming the obligations of the Company hereunder (the "Successor Board"),
      shall, as to outstanding  Options,  either (i) make appropriate  provision
      for the continuation of such Options by substituting on an equitable basis
      for the shares then subject to such Options  either (a) the  consideration
      payable  with  respect  to the  outstanding  shares  of  Common  Stock  in
      connection with the  Acquisition,  (b) shares of stock of the surviving or
      successor  corporation or (c) such other securities as the Successor Board
      deems  appropriate,  the fair market  value of which shall not  materially
      exceed the fair market value of the shares of Common Stock subject to such
      Options immediately preceding the Acquisition; or (ii) upon written notice
      to the  optionees,  provide  that all Options  must be  exercised,  to the
      extent  then  exercisable  or  to  be  exercisable  as  a  result  of  the
      Acquisition, within a specified number of days of the date of such notice,
      at the end of which period the Options shall terminate; or (iii) terminate
      all Options in exchange for a cash payment equal to the excess of the fair
      market  value of the shares  subject to such  Options  (to the extent then
      exercisable or to be exercisable as a result of the Acquisition)  over the
      exercise price thereof.

              C.   RECAPITALIZATION  OR  REORGANIZATION.   In  the  event  of  a
      recapitalization   or   reorganization   of  the  Company  (other  than  a
      transaction   described  in   subparagraph  B  above)  pursuant  to  which
      securities  of the  Company or of  another  corporation  are  issued  with
      respect  to the  outstanding  shares of Common  Stock,  an  optionee  upon
      exercising  an Option shall be entitled to receive for the purchase  price
      paid upon such exercise the  securities  such optionee would have received
      if  such   optionee  had  exercised  his  or  her  Option  prior  to  such
      recapitalization or reorganization.




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              D.  DISSOLUTION  OR  LIQUIDATION.  In the  event  of the  proposed
      dissolution  or  liquidation  of the Company,  each Option will  terminate
      immediately  prior to the  consummation of such proposed action or at such
      other time and subject to such other  conditions as shall be determined by
      the Committee.

              E. ISSUANCES OF SECURITIES.  Except as expressly  provided herein,
      no issuance by the Company of shares of stock of any class,  or securities
      convertible  into  shares  of stock of any  class,  shall  affect,  and no
      adjustment by reason  thereof shall be made with respect to, the number or
      price of shares  subject  to  Options.  No  adjustments  shall be made for
      dividends  paid  in cash  or in  property  other  than  securities  of the
      Company.

              F. FRACTIONAL  SHARES.  No fractional shares shall be issued under
      the Plan and the optionee  shall  receive from the Company cash in lieu of
      such fractional shares.

              G. ADJUSTMENTS.  Upon the happening of any of the events described
      in subparagraphs A, B or C above, the class and aggregate number of shares
      set  forth  in  paragraph  4 hereof  that are  subject  to  Options  which
      previously have been or  subsequently  may be granted under the Plan shall
      also be  appropriately  adjusted to reflect the events  described  in such
      subparagraphs.  The Committee or the Successor  Board shall  determine the
      specific  adjustments to be made under this  paragraph 13 and,  subject to
      paragraph 2, its determination shall be conclusive.

      14. MEANS OF  EXERCISING  OPTIONS.  An Option (or any part or  installment
thereof)  shall be  exercised  by giving  written  notice to the  Company at its
principal  office  address,  or to such  transfer  agent  as the  Company  shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase  price  therefor  either (a) in United States dollars in
cash or by check,  (b) at the discretion of the Committee,  through  delivery of
shares of Common  Stock  having a fair market  value equal as of the date of the
exercise to the cash exercise price of the Option,  (c) at the discretion of the
Committee, by delivery of the optionee's personal recourse note bearing interest
payable  not less than  annually  at no less than 100% of the lowest  applicable
Federal rate, as defined in Section  1274(d) of the Code,  (d) at the discretion
of the Committee and consistent with applicable law,  through the delivery of an
assignment  to the Company of a sufficient  amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company,  which sale shall
be at  the  participant's  direction  at the  time  of  exercise,  or (e) at the
discretion of the Committee,  by any combination of (a), (b), (c) and (d) above.
The holder of an Option




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shall not have the rights of a shareholder with respect to the shares covered by
such Option until the date of issuance of a stock certificate to such holder for
such shares.  Except as expressly provided above in paragraph 13 with respect to
changes in capitalization  and stock dividends,  no adjustment shall be made for
dividends  or similar  rights for which the record  date is before the date such
stock certificate is issued.

      15.  TERM AND  AMENDMENT  OF PLAN.  This Plan was  adopted by the Board on
October 4, 1996.  The Plan shall expire at the end of the day on October 4, 2006
(except as to Options  outstanding  on that date).  The Board may  terminate  or
amend the Plan in any  respect at any time.  In no event may action of the Board
alter or impair the rights of an optionee, without his or her consent, under any
Option previously granted to such optionee.

      16.  APPLICATION OF FUNDS.  The proceeds  received by the Company from the
sale of shares  pursuant  to  Options  granted  under the Plan shall be used for
general corporate purposes.

      17.  WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the grant or exercise of
an Option,  the  vesting or transfer  of an Option  pursuant to an  arm's-length
transaction,  the vesting or transfer of restricted stock or securities acquired
upon the exercise of an Option  hereunder,  or the making of a  distribution  or
other  payment  with  respect  to such  stock or  securities,  the  Company or a
Participating   Subsidiary  may  withhold  taxes  in  respect  of  amounts  that
constitute  compensation  includible  in  gross  income.  The  Committee  in its
discretion  may  condition  (i) the grant or  exercise  of an  Option,  (ii) the
transfer  of an Option or (iii) the  vesting or  transferability  of  restricted
stock or securities  acquired by exercising a Option,  on the optionee's  making
satisfactory  arrangement  for such  withholding.  Such  arrangement may include
payment by the  optionee  in cash or by check of the  amount of the  withholding
taxes or, at the  discretion of the  Committee,  by the  optionee's  delivery of
previously  held shares of Common  Stock or the  withholding  from the shares of
Common Stock  otherwise  deliverable  upon exercise of a Option shares having an
aggregate fair market value equal to the amount of such withholding taxes.

      18.  DETERMINATION OF FAIR MARKET VALUE OF COMMON STOCK.  Whenever,  under
the terms of any option agreement or in administering  the Plan, it is necessary
or desirable to determine the fair market value of the  Company's  Common Stock,
the Committee  shall make such  determination  in accordance  with this Section.
"Fair Market  Value" shall be  determined  as of the last business day for which
the prices or quotes  discussed in this sentence are available prior to the date
such Option is granted and shall mean (i) the average (on that date) of the high
and low prices of the Common Stock on the principal national securities exchange
on which the Common  Stock is traded,  if the Common  Stock is then  traded on a
national  securities  exchange;  or (ii) the last  reported  sale price (on that
date) of the Common Stock on the Nasdaq National Market,  if the Common Stock is
not



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then traded on a national  securities  exchange;  or (iii) the closing bid price
(or  average  of bid  prices)  last  quoted  (on that  date)  by an  established
quotation service for  over-the-counter  securities,  if the Common Stock is not
reported on the Nasdaq  National  Market.  However,  if the Common  Stock is not
publicly  traded at the time an Option is granted  under the Plan,  "fair market
value" shall be deemed to be the fair value of the Common Stock as determined by
the  Committee  after  taking  into  consideration  all  factors  which it deems
appropriate,  including, without limitation, recent sale and offer prices of the
Common Stock in private transactions negotiated at arm's length.

      19. GOVERNMENTAL REGULATION.  The Company's obligation to sell and deliver
shares of the Common  Stock  under this Plan is subject to the  approval  of any
governmental  authority required in connection with the authorization,  issuance
or sale of such shares.

      Government  regulations may impose  reporting or other  obligations on the
Company or a Participating Subsidiary with respect to the Plan. For example, the
Company or a  Participating  Subsidiary may be required to file tax  information
returns with  appropriate  taxing  authorities  reporting the income received by
optionees in connection with the Plan.

      20.  GOVERNING  LAW.  The validity  and  construction  of the Plan and the
instruments evidencing Options shall be governed by the laws of the Commonwealth
of  Massachusetts,  or the laws of any  jurisdiction in which the Company or its
successors in interest may be organized.



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