EXHIBIT 10.4
                                                                    ------------

                        FIRST LOAN MODIFICATION AGREEMENT
                                   (EXIM Line)

         This First Loan  Modification  Agreement  (EXIM  Line) is  executed  on
January 17,  2001,  to be  effective  as of December  29,  2000,  by and between
SILICON  VALLEY BANK, a  California-chartered  bank with its principal  place of
business at 3003 Tasman Drive,  Santa Clara, CA 95054 and with a loan production
office located at One Newton Executive Park, Suite 200, 2221 Washington  Street,
Newton,  MA 02462,  doing business under the name "Silicon Valley East" ("Bank")
and  DATAWATCH  CORPORATION,  a Delaware  corporation  with its chief  executive
office located at 175 Cabot Street, Suite 503, Lowell,  Massachusetts 01854-3633
(Datawatch US"), DATAWATCH INTERNATIONAL LIMITED, a company registered under the
laws of England  and Wales with its  principal  place of business at 10th Floor,
Maple  House,  High  Street,  Potters  Bar,   Hertfordshire,   England  EN6  5BS
("Datawatch  International"),  DATAWATCH  EUROPE LIMITED,  a company  registered
under the laws of England and Wales with its principal  place of business at The
Software  Centre East Way,  Lee Mill  Industrial  Estate,  Ivybridge,  Plymouth,
England  PL21  9PE  ("Datawatch  Europe"),  and  GUILDSOFT  LIMITED,  a  company
registered  under the laws of  England  and Wales  with its  principal  place of
business at The Software Centre East Way, Lee Mill Industrial Estate, Ivybridge,
Plymouth,  England PL21 9PE ("Guildsoft")  (hereinafter  Datawatch US, Datawatch
International, Datawatch Europe and Guildsoft are referred to herein jointly and
severally as the "Borrower").

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 March 16, 1999, evidenced by, among other documents, a certain
Export-Import  Bank Loan and  Security  Agreement  dated as of December 27, 1999
between Borrower and Bank (the "Loan Agreement"). The Loan Agreement established
a  working  capital  line of  credit  in favor of the  Borrower  in the  maximum
principal  amount of Two Million  Dollars  ($2,000,000.00)  (the "Exim Committed
Line").  Capitalized  terms used but not otherwise defined herein shall have the
same meaning as in the Loan Agreement.

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

2.  DESCRIPTION  OF COLLATERAL.  Repayment of the  Obligations is secured by the
Collateral  as  described  in the Loan  Agreement,  and a  certain  Intellectual
Property  Security  Agreement  dated as of December  27, 1999 by Datawatch US in
favor of Bank (the "Intellectual Property Security Agreement") (hereinafter, the
Loan  Agreement,  as amended  hereby,  and the  Intellectual  Property  Security
Agreement, together with any other collateral security granted to Bank, shall be
referred to as the "Security Documents").

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

3.  DESCRIPTION OF CHANGE IN TERMS.


    A.   Modification(s) to Loan Agreement.

                  1.       The Loan  Agreement  shall be amended by deleting the
                           following text appearing as recital  paragraph (A) on
                           Page 1 thereof:

                                    "A.  Borrower  and Bank are  parties to that
                                    certain   Amended  and  Restated   Loan  and
                                    Security  Agreement dated March 16, 1999, as
                                    affected  and  amended  to  date,  including
                                    without   limitation,   pursuant   to   Loan
                                    Modification  Agreement  of even date (as so
                                    amended   and  as  amended   to  date,   the
                                    "Domestic Agreement"), together with related
                                    documents     executed    in     conjunction
                                    therewith."

                           and inserting in lieu thereof the following:



<PAGE>

                                    "A.  Datawatch  US and Bank are  parties  to
                                    that certain  Amended and Restated  Loan and
                                    Security  Agreement dated March 16, 1999, as
                                    affected  and  amended  to  date,  including
                                    without limitation,  pursuant to Second Loan
                                    Modification  Agreement  of even date (as so
                                    amended and as may be further  amended  from
                                    time to  time,  the  "Domestic  Agreement"),
                                    together with related documents  executed in
                                    conjunction therewith."

                  2.       The Loan  Agreement  shall be amended by deleting the
                           following   definition   appearing   in  Section  1.1
                           thereof:

                                    ""Exim  Maturity Date" means the earliest of
                                    (i) the  Maturity  Date  under the  Domestic
                                    Loan  Documents,  or (ii) the date  which is
                                    one day  prior to one (1) year from the date
                                    of this Exim Agreement."

                           and inserting in lieu thereof the following:

                                    ""Exim  Maturity Date" means the earliest of
                                    (i) the  Maturity  Date  under the  Domestic
                                    Loan Documents, or (ii) December 31, 2001."

                  3.       The Borrower  acknowledges,  confirms and agrees that
                           its  representations,  warranties  and covenants with
                           respect to the Domestic Loan Documents under Sections
                           5.1,  6.1,  7.1 of the Loan  Agreement,  and all such
                           other   representations,   warranties  and  covenants
                           appearing in the Loan  Agreement,  remain true and in
                           full force and  effect.  The  Borrower  acknowledges,
                           confirms and agrees that it shall  continue to comply
                           with  all  such   representations,   warranties   and
                           covenants   described  in  the   foregoing   sentence
                           notwithstanding  any termination of the Domestic Loan
                           Documents or the repayment of all  obligations  under
                           the Domestic Loan Documents.

                  4.       Datawatch US ratifies,  confirms and  reaffirms,  all
                           and  singular,  the terms and  conditions  of:  (i) a
                           certain  Collateral  Assignment,  Patent Mortgage and
                           Security  Agreement dated as of November 1, 1994 (the
                           "1994 IP Agreement")  between  Datawatch US and Bank,
                           and  acknowledges,  confirms  and  agrees  that  said
                           Collateral  Assignment,  Patent Mortgage and Security
                           Agreement shall remain in full force and effect,  and
                           (ii)  a  certain   Intellectual   Property   Security
                           Agreement dated as of December 27, 1999 (the "1999 IP
                           Agreement")  by  Datawatch  US in favor of Bank,  and
                           acknowledges,   confirms   and   agrees   that   said
                           Intellectual Property Security Agreement shall remain
                           in full force and effect.

                           Datawatch US hereby acknowledges, confirms and agrees
                           that the  Collateral  under the 1994 IP Agreement and
                           the Intellectual  Property  Collateral under the 1999
                           IP  Agreement  shall be amended to  include,  without
                           limitation,  the  intellectual  property  owed by the
                           Datawatch US  appearing on Exhibit B attached  hereto
                           and made a part hereof.

4.  FEE.  Borrower  shall  pay  to  Bank  a fee  for  the  modification  of  the
Export-Import Bank line equal to Thirty Thousand Dollars ($30,000.00), which fee
shall be due on the date hereof and shall be deemed  fully earned as of the date
hereof.  The Borrower  shall also reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents.

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

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<PAGE>

6. 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 Obligations.

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

8. CONTINUING  VALIDITY.  Borrower  understands and agrees that in modifying the
existing   Obligations,   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  Obligations  pursuant to this
Loan  Modification  Agreement in no way shall  obligate  Bank to make any future
modifications to the Obligations.  Nothing in this Loan  Modification  Agreement
shall constitute a satisfaction of the Obligations.  It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan  Documents,
unless the party is  expressly  released  by Bank in  writing.  No maker will be
released by virtue of this Loan Modification Agreement.

9.  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.

10.  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).

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<PAGE>

         This Loan  Modification  Agreement  is executed as a sealed  instrument
under the laws of the Commonwealth of Massachusetts 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/  Jonathan L. Gray
   ----------------------------------        -----------------------------------

Name: Bruce R. Gardner                    Name: Jonathan L. Gray
     --------------------------------          ---------------------------------

Title: President                          Title: SVP
      -------------------------------           --------------------------------


DATAWATCH INTERNATIONAL LIMITED           SILICON VALLEY BANK

By: /s/  Bruce R. Gardner                 By: /s/  Maggie Garcia
   ----------------------------------        -----------------------------------

Name: Bruce R. Gardner                    Name: Maggie Garcia
     --------------------------------          ---------------------------------

Title: President                          Title: Loan Administrative Manager
      -------------------------------           --------------------------------
                                                  (signed in Santa Clara County,
                                                    California)


DATAWATCH EUROPE LIMITED

By: /s/  Bruce R. Gardner
   ----------------------------------

Name: Bruce R. Gardner
     --------------------------------

Title: President
      -------------------------------


GUILDSOFT LIMITED

By: /s/  Bruce R. Gardner
   ----------------------------------

Name: Bruce R. Gardner
     --------------------------------

Title: President
      -------------------------------



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<PAGE>

                 Exhibit B to First Loan Modification Agreement
                 ----------------------------------------------


Trademark:  QUETZAL/SC
Status:  Pending
Application Number:  821,537
Country:  Australia
Owner:  Datawatch Corporation
Filed:  28-Jan-2000
Classes:          9

Trademark:  QUETZAL/SC
Status:  Pending
Application Number:  1,045,423
Country:  Canada
Owner:  Datawatch Corporation
Filed:  03-Feb-2000
Classes:         9


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