Exhibit
10.26


DATAWATCH CORPORATION


Non-Qualified Stock Option
Agreement


Datawatch Corporation, a Delaware corporation (the “Company”),
hereby grants as of [Date] to [Director] (the “Optionee”), an option to purchase a maximum
of [# of shares] 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 Equity
Compensation and Incentive Plan.  This option is granted pursuant to and is
governed by the Company’s 2006 Equity Compensation and Incentive Plan (the “Plan”)
and, unless the context otherwise requires, terms used herein shall have the
same meaning as in the Plan. 
Determinations made in connection with this option pursuant to the Plan
shall be governed by the Plan as it exists on this date.


2.                                      Grant as Non-Qualified Stock
Option; Other Options.
 This option shall be treated as a
Non-Qualified Stock Option (rather than an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)).  This option is in addition to any other
options heretofore or hereafter granted to the Optionee by the Company or any
Related Corporation (as defined in the Plan), but a duplicate original of this
instrument shall not effect the grant of another option.


3.                                      Extent of Option if Business
Relationship Continues.
 If the Optionee has continued to serve the
Company or any Related Corporation in the capacity of an employee, officer,
director or consultant (such service is described herein as maintaining or
being involved in a “Business Relationship” with the Company) on the following
dates, the Optionee may exercise this option for the number of shares of Common
Stock set opposite the 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)

  



 


In accordance with the foregoing schedule, a total of [# of shares] shares shall be vested and
exercisable on the third anniversary of [Date].  Notwithstanding the foregoing, in accordance
with and subject to the provisions of the Plan, the Committee may, in its
discretion, accelerate the date that any installment of this Option becomes
exercisable.  The foregoing rights are
cumulative and, while the Optionee continues to maintain a Business Relationship
with the Company, may be exercised on or before the date which is seven years
from the date this option is granted. 
All the foregoing rights are subject to Sections 4 and 5, as
appropriate, if the Optionee ceases to maintain a Business Relationship with
the Company.


4.                                      Termination of Business
Relationship.  If
the Optionee ceases to maintain a Business Relationship with the Company, other
than by reason of death or disability as defined in Section 5, no further
installments of this option shall become exercisable, and this option shall
terminate (and may no longer be exercised) (i) after the passage of twelve
months from the date the Business Relationship ceases, but in no event later
than the scheduled expiration date, if the Optionee has been involved in a
Business Relationship with the Company as a Director on the Company’s Board of
Directors for less than five years or (ii) after the passage of
twenty-four months from the date the Business Relationship ceases, but in no
event later than the scheduled expiration date, if the Optionee has been
involved in a Business Relationship with the Company as a Director on 



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the Company’s Board of Directors for five years or more.  In such a case, the Optionee’s only rights
hereunder shall be those which are properly exercised before the termination of
this option.


5.                                      Death; Disability.  If
the Optionee dies while involved in a Business Relationship with the Company,
this option may be exercised, to the extent of the number of shares with
respect to which the Optionee could have exercised it on the date of his or her
death, by his or her estate, personal representative or beneficiary to whom
this option has been assigned pursuant to Section 9, at any time within
180 days after the date of death, but not later than the scheduled expiration
date.  If the Optionee’s Business
Relationship with the Company is terminated by reason of his or her disability
(as defined in the Plan), this option may be exercised, to the extent of the
number of shares with respect to which the Optionee could have exercised it on
the date the Business Relationship was terminated, at any time within 180 days
after the date of such termination, but not later than the scheduled expiration
date.  At the expiration of such 180-day
period or the scheduled expiration date, whichever is the earlier, this option
shall terminate and the only the rights hereunder shall be those as to which
the option was properly exercised before such termination.


6.                                      Partial Exercise. 
This option may be
exercised 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 unless
such exercise is with respect to the final installment of stock subject to this
option and cash in lieu of a fractional share must be paid, in accordance with Paragraph
13(G) of the Plan, to permit the Optionee to exercise completely such final
installment.  Any fractional share with
respect to which an installment of this option cannot be exercised because of
the limitation contained in the preceding sentence shall remain subject to this
option and shall be available for later purchase by the Optionee in accordance
with the terms hereof.


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


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


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


(iii)                               by delivery of an assignment satisfactory in
form and substance to the Company of a
sufficient amount of the proceeds from the sale of the Option Shares and an
instruction 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 by
Delivery of Common Stock.  If
the Optionee delivers Common Stock held by the Optionee (“Old Stock”) to the
Company in full or partial payment of the option price, and the Old Stock so
delivered is subject to restrictions or limitations imposed by agreement
between the Optionee and the Company, an equivalent number of Option Shares
shall be subject to all restrictions and limitations applicable to the Old
Stock to the extent that the Optionee paid for the Option Shares by delivery of
Old Stock, in addition to any restrictions or limitations imposed by this
Agreement.  Notwithstanding the
foregoing, the Optionee may not pay any part of the exercise price hereof by
transferring Common Stock to the Company unless such Common Stock has been
owned by the Optionee free of any substantial risk of forfeiture for at least
six months.


8.                                      Method of Exercising Option. 
Subject to the terms
and conditions of this Agreement, this option may be exercised by written
notice to the Company at its principal executive office,  or to such transfer agent as the Company
shall designate.  Such notice shall state
the election to exercise this option and the number of Option Shares for which
it is being exercised and shall be signed by the person or persons so
exercising this option.  Such notice
shall be accompanied by payment of the full purchase price of such shares, and
the Company shall deliver a certificate or certificates representing such
shares as soon as practicable after the notice shall be received.  Such certificate or certificates shall be
registered in the name of the person or persons so exercising this 



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option (or, if this option shall be exercised by the Optionee and if
the Optionee shall so request in the notice exercising this option, shall be
registered in the name of the Optionee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the Optionee, such
notice shall be accompanied by appropriate proof of the right of such person or
persons to exercise this option.


9.                                      Option Not Transferable. 
This option is not
transferable or assignable except by will or by the laws of descent and
distribution.  During the Optionee’s lifetime
only the Optionee can exercise this option.


10.                               No Obligation to Exercise Option. 
The grant and
acceptance of this option imposes no obligation on the Optionee to exercise it.


11.                               No Obligation to Continue
Business Relationship.  Neither the Plan, this Agreement, nor the grant of this option imposes
any obligation on the Company or any Related Corporation to continue to
maintain a Business Relationship with the Optionee.


12.                               No Rights as Stockholder until
Exercise.  The Optionee shall have no rights as a stockholder with respect to the
Option Shares until such time as the Optionee has exercised this option by
delivering a notice of exercise and has paid in full the purchase price for the
shares so exercised in accordance with Section 8.  Except as is expressly provided in the Plan
with respect to certain changes in the capitalization of the Company, no
adjustment shall be made for dividends or similar rights for which the record
date is prior to such date of exercise.


13.                               Capital Changes and Business
Successions.  The Plan contains provisions covering the treatment of options in a
number of contingencies such as stock splits and mergers.  Provisions in the Plan for adjustment with
respect to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.


14.                               Withholding Taxes.  If
the Company or any Related Corporation in its discretion determines that it is
obligated 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, any
Common Stock or other property acquired pursuant to this option, the Optionee
hereby agrees that the Company or any Related Corporation may withhold from the
Optionee’s wages or other remuneration the appropriate amount of tax.  At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Optionee on exercise of this option.  The Optionee further agrees that, if the
Company or any Related Corporation does not withhold an amount from the
Optionee’s wages or other remuneration sufficient to satisfy the withholding
obligation of the Company or Related Corporation, the Optionee will make
reimbursement on demand, in cash, for the amount underwithheld.


15.                               Provision of  Documentation  to  Optionee.  By
signing this Agreement the Optionee acknowledges receipt of a copy of this
Agreement and a copy of the Plan.


16.                               Acceleration of Vesting upon
Change in Control. 
Notwithstanding Section 3 hereof, in the event 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 in Control, become fully
vested and all unexercised options shall be exercisable by the Optionee; provided,
however, that the Board, in its sole discretion, may require that the
Optionee’s rights under this Section 16 shall be conditioned on approval by the
stockholders of the Company in accordance with Section 280G(b)5(B) of the Code
and regulations thereunder.  For purposes
of this Agreement, a “Change in Control” means the occurrence of any of the
following events:


(a)                  The Company is merged or consolidated or
reorganized into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less than a majority of
the combined voting power of the then-outstanding securities of such surviving,
resulting or reorganized corporation or person immediately after such
transaction is held in the aggregate by the holders of the then-outstanding



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securities entitled to vote generally in the election of directors of
the Company (“Voting Stock”) immediately prior to such transaction;


(b)                  The Company sells or otherwise transfers all
or substantially all of its assets to any other corporation or other legal
person, and as a result of such sale or transfer less than a majority of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such sale or transfer is held in the aggregate by the
holders of Voting Stock of the Company immediately prior to such sale or
transfer;


(c)                  There is a report filed on Schedule 13D
or Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant 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) or Section 14(d)(2) of the Exchange Act) has become
the “beneficial owner” (as such term is used in Rule 13d-3 under the Exchange
Act) of securities representing 35% or more of the Voting Stock of the Company;


(d)                  The Company files a report or proxy statement
with the Securities and Exchange Commission pursuant to the Exchange Act
disclosing 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 has occurred; or


(e)                  If during any period of two consecutive
years, individuals who at the beginning of any such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company’s stockholders, of each
director of the Company first elected during such period was approved by a vote
of at least a majority of the directors then still in office who were directors
of the Company at the beginning of any such period;


provided, however,
that a “Change in Control” shall not be deemed to have occurred for purposes of
this Agreement solely because (x) the Company, (y) an entity in which
the Company directly or indirectly beneficially owns 50% or more of the voting
securities, or (z) any Company-sponsored employee stock ownership plan or
any other employee benefit plan of the Company, either files or becomes
obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or
any successor schedule, form or report) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock or because the Company
reports that a change in control of the Company has occurred by reason of such
beneficial ownership.


17.                               Miscellaneous.


(a)                                  Notices.  All
notices hereunder shall be in writing and shall be deemed given when sent by
certified or registered mail, postage prepaid, return receipt requested, to the
address set forth below.  The addresses
for such notices may be changed from time to time by written notice given in
the manner provided for herein.


(b)                                  Entire Agreement; Modification. 
This Agreement
constitutes the entire agreement between the parties relative to the subject
matter hereof, and supersedes all proposals, written or oral, and all other
communications between the parties relating to the subject matter of this
Agreement.  This Agreement may be
modified, amended or rescinded only by a written agreement executed by both
parties.


(c)                                  Severability. 
The invalidity,
illegality or unenforceability of any provision of this Agreement shall in no
way affect the validity, legality or enforceability of any other provision.


(d)                                  Successors and Assigns. 
This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, subject to the limitations set forth in
Section 9 hereof.



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(e)                                  Governing Law.  This
Agreement shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without
giving effect to the principles of the conflicts of laws thereof.


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IN WITNESS WHEREOF, the Company and the Optionee
have caused this instrument to be executed as of the date first above written.


	
  

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  DATAWATCH CORPORATION

  
	
   

  	
  Quorum Office Park

  
	
   

  	
  271 Mill Road

  
	
   

  	
  Chelmsford, MA 01824

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Robert W. Hagger,

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Street Address

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  City

  	
  State

  	
  Zip Code

  
							



 



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