EXHIBIT 10.25
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                         MANAGEMENT TRANSITION AGREEMENT
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            This Management Transition Agreement (the "Agreement") is made as of
July 6, 2001, by and between Bruce R. Gardner, (the "Employee") and Datawatch
Corporation (the "Company"). This Agreement supersedes the Executive Agreement
dated April 11, 1996 by and between the Company and Bruce R. Gardner.

            WHEREAS, the Company desires to continue to employ the Employee in a
part-time capacity for a period of approximately two years, ending on July 9,
2003, to assist the Company's incoming Chief Executive Officer ("CEO") in
transitioning to the role of CEO for the Company and to advise the CEO on such
matters as he determines, including, but not limited to, SEC rules, regulations,
filings, and compliance; investor relations, banking facilities, contract
status, and general business advice; and the Employee desires to be employed by
the Company on the terms specified herein;

            NOW, THEREFORE, in consideration of the foregoing and the agreements
herein contained, and intending to be legally bound, the parties hereby agree as
follows:

            1. Position and Responsibilities. The Employee agrees to serve as
Advisor to the CEO of the Company. The Employee agrees to make himself
reasonably available on an as needed basis to advise and assist the CEO in his
transition to the position of CEO for the Company. The Employee shall report to,
and his activities shall be subject to the reasonable direction and control of
the Company's CEO, and the Employee shall exercise such powers and comply with
and perform, faithfully and to the best of his ability, such directions and
duties in relation to his position as Advisor to the CEO as may from time to
time be reasonably vested in or requested of him. As of July 10, 2002, although
Employee will continue to be employed by the Company until July 9, 2003, he will
no longer have any duties and responsibilities to fulfill as Advisor to the CEO.

            2. Resignation of Officer and Director Positions. The Employee
agrees to resign, as of July 9, 2001, any and all officer positions with the
Company, as well as his position as a director on the Company's Board of
Directors.

            3. Term. The parties agree that the Employee's employment with the
Company, under this Agreement, shall be for a term of approximately two years,
ending on July 9, 2003 (the "Termination Date"). The parties further agree that
the Employee will use his currently accrued but unused vacation time during the
period July 9, 2001 to August 15, 2001.

            4. Compensation and Benefits. As compensation for the satisfactory
performance by the Employee of his duties and obligations hereunder to the
Company and subject to the provisions of Section 5, the Employee shall receive:

               4.1. Base Salary. The Employee's salary shall be paid at a rate
of $10,416.67 per month (the "Base Salary") beginning on August 16, 2001. During
the period of Employee's vacation from July 9 to August 15, 2001, the Employee
will be paid at the rate of pay which he
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had been receiving immediately prior to his July 9, 2001 resignation. The Base
Salary shall be payable in accordance with the customary payroll practices of
the Company as may be established or modified from time to time. All payments
shall be subject to all applicable federal, state and/or local payroll and
withholding taxes.

               4.2. Benefits. During Employee's employment, and subject to any
contribution generally required of employees of the Company, the Employee shall
be eligible to participate in all employee health and benefits plans, to the
extent permitted under the terms of the plans, as may be from time to time
adopted by the Company and in effect for employees of the Company in similar
positions. Employee's participation shall be subject to (i) the terms of the
applicable plan documents, (ii) generally applicable Company policies, and (iii)
the discretion of the Board or any administrative or other committee provided
for in, or contemplated by, such plan. Notwithstanding the above, the Company
and/or the Board may not alter its policies or take any action during the term
of this Agreement which is designed to affect Employee's rights only (and not
those of other employees of the Company) to participate in the employee health
and benefit plans, except as otherwise required due to a change in governing law
or regulation.

            The Company's plans and policies shall govern all other benefits.
The Company and/or the Board of Directors may alter, modify, add to, or delete
its employee benefits plans and policies at any time as the Company and/or the
Board of Directors, in its or their sole judgment, determines to be appropriate.
The Employee's medical and dental insurance coverage under the Company's group
health plan is scheduled to terminate on July 9, 2003 - the date of the
"qualifying event" under the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"). Beginning on July 10, 2003, if elected by the Employee, the
Company will pay both the employer and employee portions of COBRA premium
payments for medical and dental coverage for a period of eighteen (18) months.
Should the Employee's medical and dental insurance coverage under the Company's
group health plan terminate prior to July 9, 2003, then the Company shall pay
the 18 months of COBRA premium payments for medical and dental coverage
beginning on the date upon which Employee's eligibility under the group health
plan terminates. In addition, the Company shall provide, at its own expense, a
health and dental insurance plan with substantially similar benefits (as
determined by the Company in its sole discretion) for the period from the end
date of COBRA coverage to January 9, 2005. Should the Employee's life insurance
coverage under the Company's group life insurance plan terminate prior to July
9, 2003, then the Company shall purchase, on Employee's behalf (following a
physical as required by the insurance carrier), a term life insurance policy for
a term ending on July 9, 2003, in the amount of $150,000.

            Notwithstanding the above, the Employee will not be eligible for any
bonuses, stock options (other than as previously granted), or accrual of any
vacation time under this Agreement. The parties agree that during the term of
this Agreement Employee's stock options, as previously granted, shall continue
to vest in accordance with the vesting schedules set forth in Employee's
Incentive Stock Option Agreements dated April 30, 1997, December 11, 1997, and
July 15, 1999. Employee's rights to exercise such stock options shall remain
subject to the terms and conditions of the Datawatch Corporation 1996 Stock
Option Plan and the above-referenced Incentive Stock Option Agreements.

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               4.3. Business Expenses. The Company shall pay or reimburse the
Employee for all reasonable business expenses incurred or paid by the Employee
in the performance of his duties and responsibilities hereunder, subject to (i)
any reasonable expense policy of the Company, as set by the Company and/or the
Board of Directors from time to time and generally applicable to employees of
the Company in similar positions, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Company and/or Board of
Directors from time to time.

            5. Termination of Employment Due to Death or Disability. In the
event of the Employee's death or Disability (as defined herein) during the
Employee's employment hereunder, the Employee's employment shall immediately and
automatically terminate. The Company shall, however, continue to pay to the
Employee (or in the case of death, the Employee's designated beneficiary or, if
no beneficiary has been designated by the Employee, his estate), the Employee's
Base Salary through July 9, 2003. Additionally, and upon Employee's election (in
the case of Disability) or his spouse's election (in the case of death), the
Company shall pay both the employer and employee portions of COBRA premium
payments for medical and dental coverage until January 9, 2005. The date of
death or Disability shall be the date of the "qualifying event" under COBRA.
Should either the Employee (in the case of Disability) or his spouse (in the
case of death) be eligible for COBRA benefits beyond January 9, 2005, such
benefits may be continued but only to the extent that either Employee or his
spouse makes timely premium payments for such continuation of benefits. In the
event the maximum period of COBRA coverage lapses prior to January 9, 2005, the
Company shall purchase, on Employee's and/or his spouse's behalf, a medical and
dental insurance policy with substantially similar benefits to the lapsed COBRA
coverage (as determined by the Company in its sole discretion) to cover the
period from the end date of COBRA coverage to January 9, 2005. For the purposes
of this Agreement, "Disability" shall mean any physical incapacity or mental
incompetence (i) as a result of which the Employee is unable to perform the
essential functions of his job for an aggregate of 90 days, whether or not
consecutive, during any calendar year, and (ii) which cannot be reasonably
accommodated by the Company without undue hardship.

            6. Termination of Employment For Any Reason Other Than Death or
Disability. In the event that the Employee's employment is terminated by the
Company for any reason other than death or Disability, the Company will,
nonetheless, be obligated to fulfill all obligations under this Agreement,
including payment of all compensation and benefits set forth in Section 4.

            7. Termination of Benefits. Except for any right of continuation of
benefits coverage to the extent provided by this Agreement, COBRA, or other
applicable law, benefits shall terminate pursuant to the terms of the applicable
benefit plans as of the Termination Date.

            8. Proprietary Information, Inventions, and Noncompete Agreements.
The Employee understands and agrees that he remains subject to the DataWatch
Proprietary Information and Inventions Agreement, dated March 23, 1987, and the
DataWatch Corporation Agreement Not to Compete, dated March 27, 1987, each of
which remains in full force and effect.

            9. Conflicting Agreements. The Employee hereby warrants that the
execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which or by which
the Employee is a party or is bound and that the

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Employee is not now subject to and will not enter into any agreement, including,
without limitation, any covenants against competition or similar covenants that
would affect the performance of his obligations hereunder. Notwithstanding the
above, the Employee shall be free to enter into any other employment, consulting
or other business relationship (collectively, "business relationships") with any
other entity, provided such business relationships are consistent with and do
not violate Employee's obligations as contained in his Proprietary Information
and Inventions Agreement, and his Agreement Not to Compete.

            10. Withholding; Taxes. All payments made by the Company under this
Agreement shall be subject to and reduced by any federal, state and/or local
taxes or other amounts required to be withheld by the Company under any
applicable law.

            11. Miscellaneous.

               11.1. Assignment. The Employee shall not assign this Agreement or
any interest herein. The Company may assign this Agreement in connection with
the sale of the Company or the sale of substantially all of the Company's
assets. This Agreement shall inure to the benefit of the Company and shall be
binding upon the Company and the Employee, and their respective successors,
executors, administrators, heirs and permitted assigns.

               11.2. Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be modified to permit its enforcement to the maximum extent permitted by law,
and both the application of such portion or provision in circumstances other
than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.

               11.3. Waiver; Amendment. No waiver of any provision hereof shall
be effective unless made in writing and signed by the waiving party. The failure
of the Company to require the performance of any term or obligation of this
Agreement, or the waiver by the Company of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Employee and/or an authorized member of
the Board of Directors.

               11.4. Notices. All notices, requests and other communications
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or three (3) business days after being deposited in the mail
of the United States, postage prepaid, registered or certified, and addressed
(a) in the case of the Employee, to the address set forth underneath his
signature to this Agreement, or (b) in the case of the Company, to the attention
of the Chairman of the Board, at 175 Cabot Street, Suite 503, Lowell, MA 01854,
and/or to such other address as either party may specify by notice to the other.

               11.5. Entire Agreement. This Agreement, the Proprietary
Information and Inventions Agreement, and the Agreement Not to Compete
constitute the entire agreement between the Company and the Employee with
respect to the terms and conditions of the Employee's employment with the
Company and supersede all prior communications, agreements

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and understandings, written or oral, between the Employee and the Company with
respect to the terms and conditions of the Employee's employment with the
Company. Effective July 9, 2001, the Executive Agreement dated April 11, 1996 by
and between the Company and Bruce R. Gardner is terminated.

               11.6. Counterparts. This Agreement may be executed in
counterparts, each of which shall be original and all of which together shall
constitute one and the same instrument.

               11.7. Governing Law. This Agreement, the employment relationship
contemplated herein and any claim arising from such relationship, whether or not
arising under this Agreement, shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Massachusetts without giving
effect to any choice or conflict of laws provision or rule thereof.

               11.8. Consent to Jurisdiction. Each of the Company and the
Employee, by its or his execution hereof, hereby irrevocably submits to the
exclusive jurisdiction of the state or federal courts of the Commonwealth of
Massachusetts for the purpose of any claim or action arising out of or based
upon this Agreement, the Employee's employment with the Company and/or
termination thereof, or relating to the subject matter hereof, and agrees not to
commence any such claim or action other than in the above-named courts.

            IN WITNESS WHEREOF, this Agreement has been executed by the Company,
by its duly authorized representative, and by the Employee, as of the date first
above written.

                                              DATAWATCH CORPORATION

                                              By:  Richard de J. Osborne
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                                              Name:  Richard de J. Osborne
                                                    ----------------------------
                                              Title  Director
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                                              THE EMPLOYEE

                                              Bruce R. Gardner
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                                              Signature

                                              Bruce R. Gardner
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                                              Name - please print

                                              ADDRESS:

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