EXHIBIT 10.22



                           LOAN MODIFICATION AGREEMENT


         This Loan Modification Agreement is entered into as of December 27,
1999, by and between DATAWATCH CORPORATION, a Delaware corporation with its
principal place of business at 900 Chelmsford Street, Tower 3, 5th Floor,
Lowell, Massachusetts 01851-8100 ("Borrower") and SILICON VALLEY BANK, a
California-chartered bank ("Bank"), with its principal place of business at 3003
Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at
Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02481, doing
business under the name "Silicon Valley East".

1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of March 16, 1999, evidenced by, among other documents, a
certain Amended and Restated Loan and Security Agreement dated as of March 16,
1999 by and among the Borrower, Personics Corporation, and the Bank (as amended
to date, the "Loan Agreement"). The Loan Agreement established in favor of the
Borrower a revolving line of credit in the maximum principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00) (the "Revolving Line").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.

2. Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to
as the "Indebtedness".

3. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement (together with any
other collateral security granted to Bank, the "Security Documents").

4. Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".

5. DESCRIPTION OF CHANGE IN TERMS.

         A.       Modification(s) to Loan Agreement.

                  1.       Bank hereby waives: Borrower's existing Defaults
                           under the Loan Agreement by virtue of Borrower's
                           failure to comply with the financial covenants in
                           Section 6.7 for the periods ending July 31, 1999,
                           August 31, 1999, and September 30, 1999. Bank's
                           waiver of Borrower's compliance of said covenants
                           shall apply only to the foregoing periods.

                           Bank's agreement to waive the above-described
                           compliance (i) shall not be deemed an agreement by
                           Bank to waive Borrower's compliance with the
                           above-described covenants as of any other dates, (ii)
                           shall not limit or impair Bank's right to demand
                           strict performance of these covenants as of any other
                           dates, and (iii) shall not limit or impair Bank's
                           right to demand strict performance of all other
                           covenants as of any date.

                  2.       All references in the Loan Agreement to "Personics
                           Corporation" are deleted in each instance they appear
                           and all references to the Borrower in the Loan
                           Agreement shall now mean and refer to Datawatch
                           Corporation singly.


<PAGE>

                  3.       The Loan Agreement shall be amended by inserting the
                           following text immediately after the last sentence of
                           Section 4.1:

                           "Notwithstanding the foregoing, it is expressly
                           acknowledged and agreed that the security interest
                           created in this Agreement with respect to EXIM
                           Eligible Foreign Accounts only is subject to and
                           subordinate to the security interest granted to the
                           Bank in the EXIM Agreement with respect to such EXIM
                           Eligible Foreign Accounts, but only to the extent any
                           advances are actually made to the Borrower based upon
                           such EXIM Eligible Foreign Accounts."

                  4.       The Loan Agreement shall be amended by deleting the
                           following text appearing as Section 6.2:

                           "6.2 Financial Statements, Reports, Certificates. (a)
                           Borrower shall deliver to Bank: (i) at such times as
                           outstanding Advances exist, as soon as available, but
                           in any event within 35 days after the end of each
                           month, a company prepared consolidated balance sheet
                           and income statement covering Borrower's consolidated
                           operations during the period, in a form and certified
                           by a Responsible Officer acceptable to Bank; (ii) as
                           soon as available, but no later than 120 days after
                           the last day of Borrower's fiscal year, audited
                           consolidated financial statements of Borrower
                           prepared in accordance with GAAP, consistently
                           applied, together with an unqualified opinion on such
                           financial statements from an independent certified
                           public accounting firm acceptable to Bank; (iii) at
                           such times as no outstanding Advances exist, within 5
                           days of filing, copies of all statements, reports and
                           notices made available to Borrower's security holders
                           or to any holders of Subordinated Debt and all
                           reports on Form 10-K, 10-Q and 8-K filed with the
                           Securities and Exchange Commission; (iv) a prompt
                           report of any legal actions pending or threatened
                           against Borrower or any Subsidiary that could result
                           in damages or costs to Borrower or any Subsidiary of
                           $100,000 or more; and (v) budgets, sales projections,
                           operating plans or other financial information Bank
                           requests; and (vi) prompt notice of any material
                           change in the composition of the Intellectual
                           Property, including any subsequent ownership right of
                           Borrower in or to any Copyright, Patent or Trademark
                           not shown in any intellectual property security
                           agreement between Borrower and Bank or knowledge of
                           an event that materially adversely affects the value
                           of the Intellectual Property.

                           (b) At such times as outstanding Advances exist and
                           prior to the initial Advance, within 25 days after
                           the last day of each month, Borrower will deliver to
                           Bank a Borrowing Base Certificate signed by a
                           Responsible Officer in the form of Exhibit C, with
                           aged listings of accounts payable.

                           (c) Borrower will deliver to Bank with the monthly
                           financial statements and with the quarterly 10-Q
                           report a Compliance Certificate signed by a
                           Responsible Officer in the form of Exhibit D.

                           (d) Bank has the right to audit Borrower's Collateral
                           at Borrower's expense at such times as outstanding
                           Advances exist, but the audits will be conducted no
                           more often than annually (or every 6 months if the
                           aggregate outstanding Advances exceed 25% of the
                           Committed Revolving Line) unless an Event of Default
                           has occurred and is continuing."

                                      -2-
<PAGE>

                           and inserting in lieu thereof the following:

                           "6.2 Financial Statements, Reports, Certificates.
                           Borrower shall deliver to Bank: (a) as soon as
                           available, but in any event within thirty five (35)
                           days after the end of each month during which either
                           Advances have been requested or are outstanding, a
                           company prepared consolidated balance sheet and
                           income statement covering Borrower's consolidated
                           operations during such period, in a form and
                           certified by a Responsible Officer of Borrower
                           acceptable to Bank; (b) as soon as available, but in
                           any event within one hundred twenty (120) days after
                           the end of Borrower's fiscal year, audited
                           consolidated financial statements of Borrower
                           prepared in accordance with GAAP, consistently
                           applied, together with an unqualified opinion on such
                           financial statements of an independent certified
                           public accounting firm acceptable to Bank; (c) within
                           five (5) days of filing, copies of all statements,
                           reports and notices sent or made available generally
                           by Borrower to its security holders or to any holders
                           of Subordinated Debt and all reports on Form 10-K
                           10-Q, and 8-K filed with the Securities and Exchange
                           Commission; (d) promptly upon receipt of notice
                           thereof, a report of any legal actions pending or
                           threatened against Borrower or any Subsidiary that
                           could result in damages or costs to Borrower or any
                           Subsidiary of One Hundred Thousand Dollars ($100,000)
                           or more; (e) such budgets, sales projections,
                           operating plans or other financial information as
                           Bank may reasonably request from time to time; and
                           (f) prompt notice of any material change in the
                           composition of the Intellectual Property, including
                           any subsequent ownership right of Borrower in or to
                           any Copyright, Patent or Trademark not shown in any
                           intellectual property security agreement between
                           Borrower and Bank or knowledge of an event that
                           materially adversely affects the value of the
                           Intellectual Property.

                           Within twenty five (25) days after the last day of
                           each month during which either Advances have been
                           requested or are outstanding, Borrower shall deliver
                           to Bank a Borrowing Base Certificate signed by a
                           Responsible Officer in substantially the form of
                           Exhibit C hereto, together with aged listings of
                           accounts receivable.

                           Within thirty five (35) days after the last day of
                           each month during which either Advances have been
                           requested or are outstanding, Borrower shall deliver
                           to Bank with the monthly financial statements a
                           Compliance Certificate signed by a Responsible
                           Officer in substantially the form of Exhibit D
                           hereto.

                           Bank shall have a right from time to time hereafter
                           to audit Borrower's Accounts at Borrower's expense at
                           any time when either Advances have been requested or
                           are outstanding, provided that such audits will be
                           conducted no more often than every six (6) months
                           unless an Event of Default has occurred and is
                           continuing."

                  5.       The Loan Agreement shall be amended by deleting the
                           following text appearing as Sections 6.7(a)(ii)
                           thereof:

                           "(ii)  TANGIBLE NET WORTH.  A Tangible Net Worth of
                           at least $6,000,000."

                           and inserting in lieu thereof the following:

                                      -3-
<PAGE>

                           "(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at
                           least (1) $4,500,000.00 commencing with the month
                           ending October 31, 1999 through the month ending
                           August 31, 2000, and (2) $5,000,000.00 commencing
                           with the month ending October 31, 2000 and for each
                           November, January, February, April, May, July,
                           August, and October thereafter."

                  6.       The Loan Agreement shall be amended by deleting the
                           following text appearing as Sections 6.7(b)(ii)
                           thereof:

                           "(ii)  TANGIBLE NET WORTH.  A Tangible Net Worth of
                           at least $7,000,000."

                           and inserting in lieu thereof the following:

                           "(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at
                           least (1) $5,500,000.00 for each calender quarter
                           commencing with the calender quarter ending September
                           30, 1999, and (2) $6,000,000.00 commencing with the
                           quarter ending September 30, 2000 and for each
                           quarter thereafter."

                  7.       The Loan Agreement is hereby amended by the deletion
                           of Section 10.1 in its entirety and the insertion of
                           the following in its stead:

                           "Unless otherwise provided in this Agreement, all
                           notices or demands by any party to this Agreement or
                           any other related agreement must be in writing and be
                           personally delivered or sent by an overnight delivery
                           service, by certified mail, postage prepaid, return
                           receipt requested, or by telefacsimile at the
                           addresses listed at the beginning of this Agreement.
                           Either Bank or Borrower may change its notice address
                           by giving the other written notice.

                           If to Borrower:  Datawatch Corporation
                                            900 Chelmsford Street
                                            Tower 3, 5th Floor
                                            Lowell, Massachusetts 01851-8100
                                            Attn: Betsy J. Hartwell
                                            FAX: (978) 453-4443

                           With a copy to:  Testa, Hurwitz & Thibeault,  LLP
                                            125 High Street
                                            Boston, Massachusetts 02110
                                            Attn: William B. Simmons, Esquire
                                            FAX: (617) 248-7100

                           If to Bank:      Silicon Valley Bank
                                            40 William Street
                                            Wellesley, Massachusetts 02481
                                            Attn: Jonathan L. Gray
                                            FAX: (781) 431-9906

                                      -4-
<PAGE>

                           with a copy to:  Riemer & Braunstein LLP
                                            Three Center Plaza
                                            Boston, Massachusetts 02108
                                            Attn: David A. Ephraim, Esquire
                                            FAX: (617) 880-3456"

                  8.       The Loan Agreement is hereby amended by the addition
                           of the following text appearing as a new Section 8.9:

                           "8.9 CROSS DEFAULT. The occurrence of any Event of
                           Default under the EXIM Loan Documents."

                  9.       The Loan Agreement is hereby amended by the deletion
                           of the defined term "Eligible Foreign Accounts" in
                           Section 13.1 thereof and in each other instance it
                           appears in the Loan Agreement.

                 10.       The Loan Agreement is hereby amended by the insertion
                           of the following new defined terms in Section 13.1
                           thereof:

                           ""EXIM Agreement: shall mean that certain
                           Export-Import Loan and Security Agreement dated
                           December 27, 1999 by and between the Borrower and the
                           Bank."

                           ""EXIM Eligible Foreign Accounts shall have the
                           meaning set forth in the EXIM Agreement."

                           ""EXIM Loan Documents" shall mean the EXIM Agreement
                           together with all documents, instruments and
                           agreements executed in conjunction therewith."

                 11.       The Loan Agreement is hereby amended by the deletion
                           of the following defined terms in Section 13.1
                           thereof:

                           ""Borrowing Base" is (a) 80% of Eligible Accounts in
                           which the Account debtor is a non-distributor, plus
                           (b) 50% of Eligible Accounts (not to exceed 40% of
                           the aggregate Borrowing Base) in which the Account
                           debtor (i) is a distributor and (ii) is approved in
                           writing by Bank on a case by case basis, plus (c) 60%
                           of Eligible Foreign Accounts (not to exceed $400,000)
                           each as determined by Bank from Borrower's most
                           recent Borrowing Base Certificate."

                           ""Eligible Accounts" are Accounts in the ordinary
                           course of Borrower's business that meet all
                           Borrower's representations and warranties in Section
                           5; but Bank may change eligibility standards by
                           giving Borrower notice. Unless Bank agrees otherwise
                           in writing, Eligible Accounts will not include:

                                (a)         Accounts that the account debtor has
                                            not paid within 90 days (or 60 days
                                            if account debtor is a distributor)
                                            of invoice date;

                                (b)         Accounts for an account debtor, 50%
                                            or more of whose Accounts have not
                                            been paid within 90 days (or 60 days
                                            if account debtor is a distributor)
                                            of invoice date;

                                      -5-
<PAGE>

                                (c)         Credit balances over 90 days from
                                            invoice date;

                                (d)         Accounts for an account debtor,
                                            including Affiliates, whose total
                                            obligations to Borrower exceed 25%
                                            of all Accounts, for the amounts
                                            that exceed that percentage, unless
                                            Bank approves in writing;

                                (e)         Accounts for which the account
                                            debtor does not have its principal
                                            place of business in the United
                                            States except for Eligible Foreign
                                            Accounts;

                                (f)         Accounts for which the account
                                            debtor is a federal, state or local
                                            government entity or any department,
                                            agency, or instrumentality;

                                (g)         Accounts for which Borrower owes the
                                            account debtor, but only up to the
                                            amount owed (sometimes called
                                            "contra" accounts, accounts payable,
                                            customer deposits or credit
                                            accounts);

                                (h)         Accounts for demonstration or
                                            promotional equipment, or in which
                                            goods are consigned, sales
                                            guaranteed, sale or return, sale on
                                            approval, bill and hold, or other
                                            terms if account debtor's payment
                                            may be conditional;

                                (i)         Accounts for which the account
                                            debtor is Borrower's Affiliate,
                                            officer, employee, or agent;

                                (j)         Accounts in which the account debtor
                                            disputes liability or makes any
                                            claim and Bank believes there may be
                                            a basis for dispute (but only up to
                                            the disputed or claimed amount), or
                                            if the Account Debtor is subject to
                                            an Insolvency Proceeding, or becomes
                                            insolvent, or goes out of business;

                                (k)         Accounts for which Bank reasonably
                                            determines collection to be
                                            doubtful."

                           ""Obligations" are debts, principal, interest, Bank
                           Expenses and other amounts Borrower owes Bank now or
                           later, including letters of credit and Exchange
                           Contracts and including interest accruing after
                           Insolvency Proceedings begin and debts, liabilities,
                           or obligations of Borrower assigned to Bank."

                           ""Revolving Maturity Date" is January 30, 2000."

                           ""Tangible Net Worth" is, on any date, the
                           consolidated total assets of Borrower and its
                           Subsidiaries minus (i) any amounts attributable to
                           (a) goodwill, (b) intangible items such as
                           unamortized debt discount and expense, Patents, trade
                           and service marks and names, Copyrights and research
                           and development expenses except prepaid expenses, and
                           (c) reserves not already deducted from assets, minus
                           (ii) Total Liabilities."

                                      -6-
<PAGE>

                           and inserting in lieu thereof the following:

                           ""Borrowing Base" is (a) 80% of Eligible Accounts in
                           which the Account debtor is a non-distributor, plus
                           (b) 50% of Eligible Accounts (not to exceed 40% of
                           the aggregate Borrowing Base) in which the Account
                           debtor (i) is a distributor and (ii) is approved in
                           writing by Bank on a case by case basis, each as
                           determined by Bank from Borrower's most recent
                           Borrowing Base Certificate."

                           ""Eligible Accounts" are Accounts in the ordinary
                           course of Borrower's business that meet all
                           Borrower's representations and warranties in Section
                           5.2; but Bank may change eligibility standards by
                           giving Borrower notice. Unless Bank agrees otherwise
                           in writing, Eligible Accounts shall not include:

                                (a)         Accounts that the account debtor has
                                            not paid within ninety (90) days (or
                                            sixty (60) days if account debtor is
                                            a distributor) of invoice date;

                                (b)         Accounts for an account debtor,
                                            fifty percent (50%) or more of whose
                                            Accounts have not been paid within
                                            ninety (90) days (or sixty (60) days
                                            if account debtor is a distributor)
                                            of invoice date;

                                (c)         Credit balances over ninety (90)
                                            days from invoice date;

                                (d)         Accounts for an account debtor,
                                            including Affiliates, whose total
                                            obligations to Borrower exceed
                                            twenty-five (25%) of all Accounts,
                                            for the amounts that exceed that
                                            percentage, unless Bank approves in
                                            writing;

                                (e)         Accounts for which the account
                                            debtor does not have its principal
                                            place of business in the United
                                            States;

                                (f)         Accounts for which the account
                                            debtor is a federal government
                                            entity or any department, agency, or
                                            instrumentality thereof;

                                (g)         Accounts for which Borrower owes the
                                            account debtor, but only up to the
                                            amount owed (sometimes called
                                            "contra" accounts, accounts payable,
                                            customer deposits or credit
                                            accounts);

                                (h)         Accounts for demonstration or
                                            promotional equipment, or in which
                                            goods are consigned, sales
                                            guaranteed, sale or return, sale on
                                            approval, bill and hold, or other
                                            terms if account debtor's payment
                                            may be conditional;

                                (i)         Accounts for which the account
                                            debtor is Borrower's Affiliate,
                                            officer, employee, or agent;

                                      -7-
<PAGE>

                                (j)         Accounts in which the account debtor
                                            disputes liability or makes any
                                            claim and Bank believes there may be
                                            a basis for dispute (but only up to
                                            the disputed or claimed amount), or
                                            if the Account Debtor is subject to
                                            an Insolvency Proceeding, or becomes
                                            insolvent, or goes out of business;

                                (k)         Accounts for which Bank reasonably
                                            determines collection to be
                                            doubtful."

                           ""Obligations" are debts, principal, interest, Bank
                           Expenses and other amounts Borrower owes Bank now or
                           later whether under this Agreement, the EXIM Loan
                           Documents, or otherwise, including letters of credit
                           and foreign exchange contracts and including interest
                           accruing after Insolvency Proceedings begin and
                           debts, liabilities, or obligations of Borrower
                           assigned to Bank."

                           ""Revolving Maturity Date" is December 27, 2000."

                           ""Tangible Net Worth" is, on any date, the
                           consolidated total assets of Borrower and its
                           Subsidiaries minus (i) any amounts attributable to
                           (a) goodwill, (b) intangible items such as
                           unamortized debt discount and expense, Patents, trade
                           and service marks and names, Copyrights and research
                           and development expenses except prepaid expenses, and
                           (c) reserves not already deducted from assets, minus
                           (ii) Total Liabilities, plus (iii) Subordinated
                           Debt."

                  13.      The Borrower ratifies, confirms and reaffirms, all
                           and singular, the terms and conditions of that
                           certain Collateral Assignment, Patent Mortgage and
                           Security Agreement dated as of November 1, 1994
                           between Borrower and Bank, and acknowledges, confirms
                           and agrees that said Collateral Assignment, Patent
                           Mortgage and Security Agreement shall remain in full
                           force and effect.

                  14.      The Borrowing Base Certificate appearing as EXHIBIT C
                           to the Loan Agreement is hereby replaced with the
                           Borrowing Base Certificate attached as EXHIBIT A
                           hereto.

                  15.      The Compliance Certificate appearing as EXHIBIT D to
                           the Loan Agreement is hereby replaced with the
                           Compliance Certificate attached as EXHIBIT B hereto.

6. FEE. Borrower shall pay to Bank a modification fee equal to Two Thousand Five
Hundred Dollars ($2,500.00), which fee shall be due on the date hereof and which
shall be deemed fully earned as of the date hereof. The Borrower shall also
reimburse Lender for all legal fees and expenses incurred in connection with
this amendment to the Loan Documents and the preparation of the EXIM Loan
Documents.

7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

                                      -8-
<PAGE>

8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.

9. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Indebtedness.

10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of Bank
and Borrower to retain as liable parties all makers and endorsers of Existing
Loan Documents, unless the party is expressly released by Bank in writing. No
maker, endorser, or guarantor will be released by virtue of this Loan
Modification Agreement.

11. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.

12. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).

                                      -9-
<PAGE>

         This Loan Modification Agreement is executed as of the date first
written above.

BORROWER:                                            BANK:

DATAWATCH CORPORATION               SILICON VALLEY BANK, doing business as
                                                     SILICON VALLEY EAST


By: /s/ Bruce R. Gardner            By: /s/ James C. Maynard
    ----------------------              ------------------------------

Name: Bruce R. Gardner              Name: James C. Maynard
      --------------------                ----------------------------

Title: President and Chief          Title: Senior Vice President
       Executive Officer                   ---------------------------
       -------------------



                                    SILICON VALLEY BANK

                                    By: /s/ Heidi Fetty
                                        ------------------------------

                                    Name: Heidi Fetty
                                          ----------------------------

                                    Title: Assistant Vice President
                                           ---------------------------
                                    (signed in Santa Clara County, California)






                                      -10-
<PAGE>

EXHIBIT A

                           BORROWING BASE CERTIFICATE

Borrower: Datawatch Corporation             Bank:    Silicon Valley Bank

Commitment Amount:         $ 1,500,000.00

ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
<S>     <C>                                                  <C>                      <C>
12.      Accounts Receivable Book Value as of                    $
                                              --------            ----------------------
13.      Additions (please explain on reverse)                   $
                                                                  ----------------------
14.      TOTAL ACCOUNTS RECEIVABLE                               $
                                                                  ----------------------

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)              Distributor          Non-Distributor
                                                                  -----------          ---------------

12.      Amounts over 90* days due                            $                       $
                                                               ----------------------  -----------------
13.      Balance of 50% over 90* day accounts                 $                       $
                                                               ----------------------  -----------------
14.      Concentration Limits                                 $                       $
                                                               ----------------------  -----------------
15.      Foreign Accounts                                     $                       $
                                                               ----------------------  -----------------
16.      Governmental Accounts                                $                       $
                                                               ----------------------  -----------------
17.      Contra Accounts                                      $                       $
                                                               ----------------------  -----------------
18.      Promotion or Demo Accounts                           $                       $
                                                               ----------------------  -----------------
19.      Intercompany/Employee Accounts                       $                       $
                                                               ----------------------  -----------------
20.      Other (please explain on reverse)                    $                       $
                                                               ----------------------  -----------------
21.      TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS                 $                       $
                                                               ----------------------  -----------------
22.      Eligible Accounts (#3 minus #13)                     $                       $
                                                               ----------------------  -----------------
23.      LOAN VALUE OF ACCOUNTS (80.0% of #14
         for Non-Distributor accounts plus 50.0%
         of #14 for Distributor accounts**)                   $                       $
                                                               ----------------------  -----------------
         *60 days if account debtor is distributor
         **Loan value of accounts for account debtors which are
         distributors shall not exceed 40% of aggregate borrowing base.

BALANCES

12.      Maximum Loan Amount                                           $1,500,000.00
13.      Total Funds Available (Lesser of #16 or #15)                  $____________
14.      Present balance owing on Line of Credit                       $____________
</TABLE>

                                      -11-
<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                           <C>

15.      Outstanding under Sublimits (including Letters of Credit)     $____________
16.      RESERVE POSITION (#17 minus #18 and #19)                      $____________
</TABLE>

The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.

COMMENTS:                                       ================================
                                                         BANK USE ONLY
DATAWATCH CORPORATION                           ================================
                                                RECEIVED BY:____________________
                                                DATE:___________________________
By: _______________________                     REVIEWED BY:____________________
         Authorized Signer                      COMPLIANCE STATUS:  YES / NO


                                      -12-
<PAGE>

EXHIBIT B

                             COMPLIANCE CERTIFICATE

TO:               SILICON VALLEY BANK

FROM:             DATAWATCH CORPORATION

         The undersigned authorized officer of DATAWATCH CORPORATION hereby
certifies that in accordance with the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
____________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes. The Officer
expressly acknowledges that no borrowings may be requested by the Borrower at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that such compliance is determined not just at
the date this certificate is delivered.

  PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.

<TABLE>
<CAPTION>
         REPORTING COVENANT                      REQUIRED                                     COMPLIES
         ------------------                      --------                                     --------

<S>                                              <C>                                         <C>
         Monthly financial statements & CC       Monthly within 35 days*                     Yes      No
         Annual (CPA Audited)                    FYE within 120 days                         Yes      No
         10-K, 10-Q and 8-K                      Within 5 days after filing with SEC         Yes      No
         A/R & BBC                               Monthly within 25 days*                     Yes      No
</TABLE>

*when Advances are outstanding or have been requested

<TABLE>
<CAPTION>
         FINANCIAL COVENANT                  REQUIRED          ACTUAL             COMPLIES
         ------------------                  --------          ------             --------

<S>                                         <C>               <C>                  <C>
         Maintain on a Monthly Basis
         (only for months ending January, February, May, July, August, October and November)

         Minimum Adjusted Quick Ratio       1.50:1.0              _____:1.0         Yes No
         Minimum Tangible Net Worth         $4,500,000.00**   $________             Yes No

         Maintain on a Quarterly Basis:

         Minimum Adjusted Quick Ratio       1.75:1.0              _____:1.0         Yes No
         Minimum Tangible Net Worth         $5,500,000.00***  $________             Yes No
</TABLE>

**increasing to $5,000,000.00 as of October 31, 2000 as set forth in Section
6.7(a)(ii)

***increasing to $6,000,000.00 as of September 30, 2000 as set forth in Section
6.7(b)(ii)

                                      -13-
<PAGE>

COMMENTS REGARDING EXCEPTIONS:                    ==============================
Sincerely,                                                 BANK USE ONLY
                                                  ==============================
_______________________    Date:_______________   RECEIVED BY:__________________
SIGNATURE                                         DATE:________________
------------------------                          REVIEWED BY:__________________
TITLE                                             COMPLIANCE STATUS:  YES / NO



                                      -14-