**Exhibit 10.28**

**DATAWATCH CORPORATION**

**Incentive Stock Option Agreement**

Datawatch Corporation, a Delaware corporation (the “Company”),hereby grants as of **[Date]** to**[Officer]**(the“Employee”), an option to purchase a maximum of **[# ofshares]**shares (the “Option Shares”) of its Common Stock,$.01 par value (“Common Stock”), at the price of **[Price]**per share,on the following terms and conditions:

**1.**                                      **Grant Under 2006 EquityCompensation and Incentive Plan****.**  This option is granted pursuant to and isgoverned by the Company’s 2006 Equity Compensation and Incentive Plan (the “Plan”)and, unless the context otherwise requires, terms used herein shall have thesame meaning as in the Plan. Determinations made in connection with this option pursuant to the Planshall be governed by the Plan as it exists on this date.

**2.**                                      **Grant as Incentive Stock Option;Other Options****.** This option is intended to qualify as anincentive stock option under Section 422 of the Internal Revenue Code of1986, as amended (the “Code”).  This optionis in addition to any other options heretofore or hereafter granted to theEmployee by the Company or any Related Corporation (as defined in the Plan),but a duplicate original of this instrument shall not effect the grant ofanother option.

**3.**                                      **Vesting of Option if EmploymentContinues****.** If the Employee has continued to be employedby the Company or any Related Corporation on the following dates, the Employeemay exercise this option for the number of shares of Common Stock set oppositethe applicable date:
| Prior to **[Date]**                                                   |   |   |   | -0- shares                                                                                                                                                                                 |
|-----------------------------------------------------------------------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                  |   |   |   |                                                                                                                                                                                       |
| On **[Date]**  and at the end of each   three-month period thereafter |   | -      |   | An additional **[   ]**  shares (or such smaller number of shares at the end of the last three month period  so that the total does not exceed [# **of****shares**] shares. |

 

Notwithstanding the foregoing, in accordance with and subject to theprovisions of the Plan, the Committee may, in its discretion, accelerate thedate that any installment of this Option becomes exercisable.  The foregoing rights are cumulative and(subject to Sections 4 or 5 hereof if the Employee ceases to be employedby the Company and all Related Corporations) may be exercised on or before thedate which is seven years from the date this option is granted.

**4.**                                      **Termination of Employment****.**

**(a)**                                  **Termination Other Than for Cause****.** If theEmployee ceases to be employed by the Company and all Related Corporations,other than by reason of death or disability as defined in Section 5 ortermination for Cause as defined in Section 4(c), no further installmentsof this option shall become exercisable, and this option shall terminate (andmay no longer be exercised) after thepassage of three months from the Employee’s last day of employment (the “AdditionalExercise Period”), but in no event later than the scheduled expiration date;provided, however, that, immediately upon the Employee’s completion of his orher first full year of continuous employment with the Company the AdditionalExercise Period shall increase to twelve months.  Employee acknowledges that if Employeeexercises this option to purchase Option Shares at any time after the passageof three months from the Employee’s last day of employment, the option will nolonger qualify as an incentive stock option under Section 422 of 

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theCode and will be treated for all purposes as a non-qualified stock option.  TheEmployee’s only rights hereunder shall be those which are properly exercisedbefore the termination of this option.

**(b)**                                  **Termination for Cause****. **If the employment ofthe Employee is terminated for Cause (as defined in Section 4(c)), thisoption shall terminate upon the Employee’s receipt of written notice of suchtermination and shall thereafter not be exercisable to any extent whatsoever.

**(c)**                                  **Definition of Cause****. **“Cause” shall meanconduct involving one or more of the following: (i) the substantial and continuing failure of the Employee, afternotice thereof, to render services to the Company or Related Corporation inaccordance with the terms or requirements of his or her employment;(ii) disloyalty, gross negligence, willful misconduct, dishonesty orbreach of fiduciary duty to the Company or Related Corporation; (iii) thecommission of an act of embezzlement or fraud; (iv) deliberate disregardof the rules or policies of the Company or Related Corporation which results indirect or indirect loss, damage or injury to the Company or RelatedCorporation; (v) the unauthorized disclosure of any trade secret orconfidential information of the Company or Related Corporation; or(vi) the commission of an act which constitutes unfair competition withthe Company or Related Corporation or which induces any customer or supplier tobreach a contract with the Company or Related Corporation.

**5.**                                      **Death; Disability****.**

**(a)**                                  **Death****.**  Ifthe Employee dies while in the employ of the Company or any RelatedCorporation, this option may be exercised, to the extent otherwise exercisableon the date of his or her death, by the Employee’s estate, personalrepresentative or beneficiary to whom this option has been assigned pursuant toSection 9, at any time within 180 days after the date of death, butnot later than the scheduled expiration date.

**(b)****                                 ****Disability****.**  Ifthe Employee ceases to be employed by the Company and all Related Corporationsby reason of his or her disability (as defined in the Plan), this option may beexercised, to the extent otherwise exercisable on the date of the terminationof his or her employment, at any time within 180 days after such termination,but not later than the scheduled expiration date.

**(c)****                                 ****Effect of Termination****. **At the expiration ofthe 180-day period provided in paragraphs (a) or (b) of this Section 5 orthe scheduled expiration date, whichever is the earlier, this option shallterminate (and shall no longer be exercisable) and the only rights hereundershall be those as to which the option was properly exercised before suchtermination.

**6.**                                      **Partial Exercise****. **This option may beexercised 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 unlesssuch exercise is with respect to the final installment of stock subject to thisoption and cash in lieu of a fractional share must be paid, in accordance withParagraph 13(G) of the Plan, to permit the Employee to exercise completely suchfinal installment.  Any fractional sharewith respect to which an installment of this option cannot be exercised becauseof the limitation contained in the preceding sentence shall remain subject tothis option and shall be available for later purchase by the Employee inaccordance with the terms hereof.

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

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

(ii)                                  subject to Section 7(b) below, bydelivery of shares of the Company’s Common Stock having a fair market value (asdetermined by the Committee) as of the date of the exercise equal to the cashexercise price of this option;

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(iii)                               by delivery of an assignment satisfactory inform****and substance to the Company of asufficient amount of the proceeds from the sale of the Option Shares and aninstruction 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 byDelivery of Common Stock****.**  Ifthe Employee delivers Common Stock held by the Employee (“Old Stock”) to theCompany in full or partial payment of the option price, and the Old Stock sodelivered is subject to restrictions or limitations imposed by agreementbetween the Employee and the Company, an equivalent number of Option Sharesshall be subject to all restrictions and limitations applicable to the OldStock to the extent that the Employee paid for the Option Shares by delivery ofOld Stock, in addition to any restrictions or limitations imposed by thisAgreement.  Notwithstanding theforegoing, the Employee may not pay any part of the exercise price hereof bytransferring Common Stock to the Company unless such Common Stock has beenowned by the Employee free of any substantial risk of forfeiture for at leastsix months.

**8.**                                      **Method of Exercising Option****. **Subject to the termsand conditions of this Agreement, this option may be exercised by writtennotice to the Company at its principal executive office,  or to such transfer agent as the Companyshall designate.  Such notice shall statethe election to exercise this option and the number of Option Shares for whichit is being exercised and shall be signed by the person or persons soexercising this option.  Such noticeshall be accompanied by payment of the full purchase price of such shares, andthe Company shall deliver a certificate or certificates representing suchshares as soon as practicable after the notice shall be received.  Such certificate or certificates shall beregistered in the name of the person or persons so exercising this option (or,if this option shall be exercised by the Employee and if the Employee shall sorequest in the notice exercising this option, shall be registered in the nameof the Employee and another person jointly, with right of survivorship). In theevent this option shall be exercised, pursuant to Section 5 hereof, by anyperson or persons other than the Employee, such notice shall be accompanied byappropriate proof of the right of such person or persons to exercise thisoption.

**9.**                                      **Option Not Transferable****. **This option is nottransferable or assignable except by will or by the laws of descent anddistribution.  During the Employee’slifetime only the Employee can exercise this option.

**10.**                               **No Obligation to Exercise Option****. **The grant andacceptance of this option imposes no obligation on the Employee to exercise it.

**11.**                               **No Obligation to ContinueEmployment****. **Neither the Plan, this Agreement, nor the grant of this option imposesany obligation on the Company or any Related Corporation to continue theEmployee in employment.

**12.**                               **No Rights as Stockholder untilExercise****. **The Employee shall have no rights as a stockholder with respect to theOption Shares until such time as the Employee has exercised this option bydelivering a notice of exercise and has paid in full the purchase price for theshares so exercised in accordance with Section 8.  Except as is expressly provided in the Planwith respect to certain changes in the capitalization of the Company, noadjustment shall be made for dividends or similar rights for which the recorddate is prior to such date of exercise.

**13.**                               **Capital Changes and BusinessSuccessions****. **The Plan contains provisions covering the treatment of options in anumber of contingencies such as stock splits and mergers.  Provisions in the Plan for adjustment withrespect to stock subject to options and the related provisions with respect tosuccessors to the business of the Company are hereby made applicable hereunderand are incorporated herein by reference.

**14.**                               **Early Disposition****. **The Employee agreesto notify the Company in writing immediately after the Employee transfers anyOption Shares, if such transfer occurs on or before the later of (a) thedate two years after the date of this Agreement or (b) the date one yearafter the date the Employee acquired such Option Shares.  The 

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Employee also agrees to provide the Company with any informationconcerning any such transfer required by the Company for tax purposes.

**15.**                               **Withholding Taxes****.**  Ifthe Company or any Related Corporation in its discretion determines that it isobligated 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, anyCommon Stock or other property acquired pursuant to this option, the Employeehereby agrees that the Company or any Related Corporation may withhold from theEmployee’s wages or other remuneration the appropriate amount of tax.  At the discretion of the Company or RelatedCorporation, the amount required to be withheld may be withheld in cash fromsuch wages or other remuneration or in kind from the Common Stock or otherproperty otherwise deliverable to the Employee on exercise of this option.  The Employee further agrees that, if theCompany or any Related Corporation does not withhold an amount from theEmployee’s wages or other remuneration sufficient to satisfy the withholdingobligation of the Company or Related Corporation, the Employee will makereimbursement on demand, in cash, for the amount underwithheld.

**16.****                              ****Provision****of****Documentation****to****Employee****.**  Bysigning this Agreement the Employee acknowledges receipt of a copy of thisAgreement and a copy of the Plan.

**17.****                              ****Acceleration of Vesting uponChange in Control.**  Notwithstanding Section 3 hereof, in theevent 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 inControl, become fully vested and all unexercised options shall be exercisableby the Employee: provided, however, that the Board, in its solediscretion, may require that the Employee’s rights under this section shall beconditioned on approval by the stockholders of the Company in accordance withSection 280G(b)5(B) of the Code and regulations thereunder.  For purposes of this Agreement, a “Change inControl” means the occurrence of any of the following events:

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

**(g)****                                **The Company sell or otherwise transfers allor substantially all of its assets to any other corporation or other legalperson, and as a result of such sales or transfer less than a majority of thecombined voting power of the then-outstanding securities of such corporation orperson immediately after such sale or transfer is held in the aggregate by theholder of Voting Stock of the Company immediately prior to such sale ortransfer;

**(h)****                                **There is a report filed on Schedule 13D orSchedule 14D-1 (or any successor schedule, form or report), each as promulgatedpursuant 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) orSection 14(d)(2) of the Exchange Act) has become the “beneficial owner” (assuch term is used in Rule 13d-3 under the Exchange Act) of securitiesrepresenting 35% or more of the Voting Stock of the Company;

**(i)****                                   **The Company files a report or proxy statementwith the Securities and Exchange Commission pursuant to the Exchange Actdisclosing 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 hasoccurred; or

**(j)****                                   **If during any period of two consecutive years,individuals who at the beginning of any such period constitute the Board ceasefor any reason to constitute at least a majority thereof, unless the election,or the nomination for election by the Company’s stockholders, of each directorof the Company first elected during such period was approved by a vote of atleast a majority of the 

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directorsthen still in office who were directors of the Company at the beginning of anysuch period;

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

**18.**                               **Miscellaneous****.**

**(a)**                                  **Notices****.**  Allnotices hereunder shall be in writing and shall be deemed given when sent bycertified or registered mail, postage prepaid, return receipt requested, to theaddress set forth below.  The addressesfor such notices may be changed from time to time by written notice given in themanner provided for herein.

**(b)****                                 ****Entire Agreement; Modification****. **This Agreementconstitutes the entire agreement between the parties relative to the subjectmatter hereof, and supersedes all proposals, written or oral, and all othercommunications between the parties relating to the subject matter of thisAgreement.  This Agreement may bemodified, amended or rescinded only by a written agreement executed by bothparties.

**(c)**                                  **Severability****. **The invalidity,illegality or unenforceability of any provision of this Agreement shall in noway affect the validity, legality or enforceability of any other provision.

**(d)****                                 ****Successors and Assigns****. **This Agreement shallbe binding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns, subject to the limitations set forth inSection 9 hereof.

**(e)**                                  **Governing Law****.**  ThisAgreement shall be governed by and interpreted in accordance with the laws ofthe Commonwealth of Massachusetts**,** withoutgiving effect to the principles of the conflicts of laws thereof.

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IN WITNESS WHEREOF, the Company and the Employeehave caused this instrument to be executed as of the date first above written.
|       | DATAWATCH CORPORATION |
|------------|-----------------------|
|       | Quorum Office Park    |
|       | 271 Mill Road         |
|       | Chelmsford, MA 01824  |
|       |                  |
|       | By:                   |   |   |
|       |                  | Robert W. Hagger, |
|       |                  | President & CEO |
|       |                  |
|       |                  |
|       | By: Employee:         |
|       |                  |
| ** ** | ** **            | ** ** | ** ** |
| ** ** | ** **            | **[Name]** | ** ** |
|       |                  |   |
|       |                  |   |   |
|       |                  | Street Address |
|       |                  |   |
|       |                  |   |   |
|       |                  | City | State | Zip Code |   |
|       |                  |   |
|       |                  |   |
|       | By:                   |   |   |
|       |                  | Robert W. Hagger |
|       |                  | President and CEO |
|       |                  |
|       |                  |
| ** ** | **OPTIONEE:**         |   |
|       |                  |   |
|       |                  |   |
| ** ** | **[Name]**            |   |
|       |                  |   |
|       |                  |   |
|       | Street Address        |   |
|       |                  |   |
|       | City                  | State | Zip Code |   |
|            |                       |  |  |  |  |  |  |  |  |  |  |

 

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