EXHIBIT 10.29



                           LOAN MODIFICATION AGREEMENT

      This Loan  Modification  Agreement is entered into as of October 31, 1996,
by and between  DATAWATCH  Corporation  and Personics  Corporation  (jointly and
severally,  the "Borrower" and sometimes referred to as "Company") whose address
is 234  Ballardvale  Street,  Wilmington,  MA 01887 and Silicon  Valley  Bank, a
California-chartered  bank  ("Lender"),  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
02181, doing business under the name "Silicon Valley East".

1. DESCRIPTION OF EXISTING  INDEBTEDNESS:  Among other indebtedness which may be
owing by Borrower to Lender,  Borrower is indebted to Lender  pursuant to, among
other  documents,  a  Promissory  Note,  dated  November 1, 1994 in the original
principal  amount of One  Million  Five  Hundred  Thousand  and  00/100  Dollars
($1,500,000.00),  as may have been modified from time to time (the "Note").  The
Note, together with the promissory notes from Borrower to Lender, is governed by
the terms of a Letter  Agreement,  dated November 1, 1994,  between Borrower and
Lender,  as  such  agreement  may be  amended  from  time  to  time  (the  "Loan
Agreement").  Defined terms used but not otherwise defined herein shall have the
same meaning as in the Loan Agreement.

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

2.  DESCRIPTION OF COLLATERAL:  Repayments of the Indebtedness is secured by two
(2)  Commercial  Security  Agreements,  each dated  November 1, 1994 (each,  the
"Security Agreement"),  and two (2) Collateral  Assignment,  Patent Mortgage and
Security   Agreements,   each  dated   November  1,  1994  (each,   the  "Patent
Agreements").

Hereinafter,  the above-described  security  documents,  together with all other
documents  securing  payments  of the  Indebtedness  shall be referred to as the
"Security  Documents".  Hereinafter,  the Security Documents,  together with all
other documents  evidencing or securing the Indebtedness shall be referred to as
the "Existing Loan Documents".

3. DESCRIPTION OF CHANGE IN TERMS:

     A. Modification(s) to Note:

              1. Payable in one payment of all  outstanding  principal  plus all
              accrued unpaid interest on October 30, 1997. In addition, Borrower
              will pay regular  monthly  payments of all accrued unpaid interest
              due as of each payment date  beginning  November 30, 




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              1996, and all subsequent interest payments are due on the same day
              of each month thereafter.

              2. The interest rate to be applied to the unpaid principal balance
              of the Note, effective as of this date, is hereby decreased to one
              (1.00)  percentage  point over Lender's  current Index (as defined
              therein).


     B. Modification(s) to Loan Agreement:

              1. The paragraph  describing the maximum  available  borrowings is
              hereby  modified to increase the  percentage  of all the Company's
              eligible  non-distributor  domestic trade accounts  within 90 days
              from invoice, from 70% to 75%.

              2. The paragraph  entitled  "Minimum  Equity" is hereby amended in
              its entirety, to read as follows:


              (Tested  Monthly)  Have a minimum  Tangible  Capital Base (TCB) of
              $4,500,000.00 through quarter ending December 31, 1996, increasing
              to $5,500,000.00 through quarter ending March 31, 1997, increasing
              to  $6,500,000.00   through  quarter  ending  June  30,  1997  and
              increasing to  $7,500,000.00  through quarter ending September 30,
              1997 and thereafter.  TCB is defined as Stockholder's  Equity plus
              Subordinated  Debt (debt  which is  formally  subordinated  to the
              Bank) less  intangibles  (including  but not limited to  Goodwill,
              Capitalized Software and Excess Purchase Costs).

              3. The  paragraph  entitled  "Leverage"  is amended to include the
              months  ending  January  and  February  under the  covenant  ratio
              requirement of 1.50 to 1.00.

              4. The following  paragraphs are hereby incorporated into the Loan
              Agreement:

              SUBROGATION   AND  SIMILAR  RIGHTS:   Notwithstanding   any  other
              provisions of this  Agreement or any other Existing Loan Document,
              each  Borrower  irrevocably  waives all rights that it may have at
              law  or  in  equity  (including,   without  limitation,   any  law
              subrogating  the  Borrower  to the  rights of  Borrower  under the
              Existing Loan Documents) to seek contribution, indemnification, or
              any other form of  reimbursement  from any other Borrower,  or any
              other person now or hereafter  primarily or secondarily liable for
              any Indebtedness of Borrower, for any payment made by the Borrower
              with respect to the Indebtedness in connection with this Agreement
              or the Existing Loan Documents or otherwise and 




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              all rights that it might have to benefit from,  or to  participate
              in, any security for the  Indebtedness  as a result of any payment
              made  by  the  Borrower  with  respect  to  the   Indebtedness  in
              connection  with the Existing  Loan  Documents or  otherwise.  Any
              agreement  providing  for  indemnification,  reimbursement  or any
              other  arrangement  prohibited  under this Agreement shall be null
              and void. If any payment is made to a Borrower in contravention of
              this Section,  such Borrower  shall hold such payment in trust for
              Lender and such payment shall be promptly  delivered to Lender for
              application to the Indebtedness, whether matured or unmatured.

              SUBROGATION  DEFENSES:  Each  Borrower  hereby  waives any defense
              based on impairment or  destruction  of its  subrogation  or other
              rights  against any other  Borrower and waives all benefits  which
              might   otherwise  be  available  to  it  under   Commonwealth  of
              Massachusetts law now in effect and hereafter  amended,  and under
              any other similar laws now and hereafter in effect.

4. PAYMENT OF LOAN FEE:  Borrower  shall pay Lender a fee in the amount of Three
Thousand and 00/100 Dollars  ($3,000.00)  plus all  out-of-pocket  expenses (the
"Loan Fee").

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

6. 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.

7. CONTINUING  VALIDITY:  Borrower  understands and agrees that in modifying the
existing  Indebtedness,  Lender  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.
Lender's  agreement to  modifications to the existing  Indebtedness  pursuant to
this Loan  Modification  Agreement in no way shall  obligate  Lender 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 Lender and  Borrower  to retain as liable  parties  all makers and
endorsers of Existing Loan Documents,  unless the party is expressly released by
Lender in writing. No maker,  endorser,  or guarantor will be released by virtue
of this Loan Modification Agreement.  The terms of this Paragraph apply not only
to  this  Loan  Modification   Agreement,   but  also  to  all  subsequent  loan
modification agreements.



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8.  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  Lender  cannot  avail  itself  of  the  courts  of the  Commonwealth  of
Massachusetts, then venue shall lie in Santa Clara County, California.

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


10.  CONDITIONS.  The  effectiveness  of this  Loan  Modification  Agreement  is
conditioned upon payment of the Loan Fee.


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

BORROWER:

DATAWATCH CORPORATION and
PERSONICS CORPORATION


By: /s/Bruce R. Gardner
    ------------------------------------
Name: Bruce R. Gardner
      ----------------------------------
Title: Executive Vice President
       --------------------------------- 

LENDER:                                    SILICON VALLEY BANK
SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST


By: /s/James C. Maynard                    By: /s/ Christine Ware
    ------------------------------------      ---------------------------------
Name: James C. Maynard                     Name: Christine Ware
      ----------------------------------        -------------------------------
Title: Vice President                      Title: Vice President
      ----------------------------------         ------------------------------
                                           (Signed at Santa Clara County, CA)




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