DATAWATCH CORP
EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>exhibit10-1_11413.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>

                                                                    EXHIBIT 10.1
                                                                    ------------


                                                                  April 25, 2002


Mr. Alan R. MacDougall
8 Nakomo Drive
Litchfield, NH  03052

Dear Alan:

     The purpose of this letter is to memorialize the terms of your eligibility
for severance with Datawatch Corporation ("the Company") in the event that you
are involuntarily terminated by the Company without Cause (as defined in
Paragraph 3) or if you terminate your employment for Good Reason (as defined in
Paragraph 2).

     1. As an at-will employee, either you or the Company may terminate your
employment at any time for any or no reason with or without notice. Neither this
letter nor its terms constitute a contract for continued employment or a
contract for a specific term of employment. Instead, this letter sets forth the
terms of our agreement with respect to your eligibility for severance.

     2. In the event that you voluntarily terminate your employment with the
Company at your own election and without Good Reason, you shall be entitled to
no severance. For the purpose of this Agreement, "Good Reason" is defined as a
material diminution in the nature or scope of your responsibilities, duties or
authority; provided, however, that the transfer of certain job responsibilities,
or the assignment to others of your duties and responsibilities while you are
out of work due to a disability or on a leave of absence for any reason, shall
not constitute a material diminution in the nature or scope of the your
responsibilities, duties or authority as set forth in this Section.

     3. In the event that the Company terminates your employment for "Cause,"
you shall be entitled to no severance. Termination by the Company shall
constitute a termination for Cause under this Paragraph 3 if such termination is
for one or more of the following reasons:

               (a)  the willful and continuing failure or refusal by you to
                    render services to the Company in accordance with your
                    obligations to the Company;

               (b)  gross negligence, dishonesty, breach of fiduciary duty or
                    breach of the terms of any other agreements executed in
                    connection herewith;

<PAGE>

               (c)  the commission by you of an act of fraud, embezzlement or
                    substantial disregard of the rules or policies of the
                    Company;

               (d)  acts which, in the judgment of the Board of Directors, would
                    tend to generate significant adverse publicity toward the
                    Company;

               (e)  the commission, or plea of nolo contendere, by you of a
                    felony; or

               (f)  a breach by you of the terms of the Proprietary Information
                    and Inventions Agreement executed by you.

     4. In the event that the Company terminates your employment for any reason
other than those stated in Paragraph 3 above or if you terminate your employment
for Good Reason as defined in Paragraph 2, and you sign a comprehensive release
in the form, and of a scope, acceptable to the Company (the "Release"), the
Company will pay you severance payments in equal monthly installments at your
then monthly base salary for six months following your termination (the
"Severance Period"). Such payments shall be made in accordance with the
Company's customary payroll practices and shall be subject to all applicable
federal and state withholding, payroll and other taxes.

     If you breach your post-employment obligations under your Proprietary
Information and Inventions Agreement, the Company may immediately cease payment
of all severance and/or benefits described in this Agreement. This cessation of
severance and/or benefits shall be in addition to, and not as an alternative to,
any other remedies in law or in equity available to the Company, including the
right to seek specific performance or an injunction.

     5. The terms of this agreement constitute the entire understanding relating
to your employment and supersede and cancel all agreements, written or oral,
made prior to the date hereof between you and the Company relating to your
employment with the Company; provided, however, that nothing herein shall be
deemed to limit or terminate the provisions of Proprietary Information and
Inventions Agreement executed by you or in any manner alter the terms of any
stock option entered into between you and the Company.

     6. 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 Massachusetts, without giving effect to the principles of choice of law
or conflicts of law of Massachusetts and this Agreement shall be deemed to be
performable in Massachusetts. Any claims or legal actions by one party against
the other arising out of the relationship between the parties contemplated
herein (whether or not arising under this Agreement) shall be commenced or
maintained in any state or federal court located in Massachusetts, and Executive
hereby submits to the jurisdiction and venue of any such court.

<PAGE>

     7. No waiver by either party of any breach by the other or any provision
hereof shall be deemed to be a waiver of any later or other breach thereof or as
a waiver of any other provision of this Agreement. This Agreement and its terms
may not be waived, changed, discharged or terminated orally or by any course of
dealing between the parties, but only by an instrument in writing signed by the
party against whom any waiver, change, discharge or termination is sought. No
modification or waiver by the Company shall be effective without the consent of
the Board of Directors then in office at the time of such modification or
waiver.

     8. You acknowledge that the services to be rendered by you to the Company
are unique and personal in nature. Accordingly, you may not assign any of your
rights or delegate any of your duties or obligations under this Agreement. The
rights and obligations of the Company under this Agreement may be assigned by
the Company and shall inure to the benefit of, and shall be binding upon, the
successors and assigns of the Company.

     If this letter correctly states the understanding we have reached, please
indicate your acceptance by countersigning the enclosed copy and returning it to
me.


                              Very truly yours,

                              DATAWATCH CORPORATION

                               /s/ Robert Hagger
                              ---------------------------------
                              Robert Hagger
                              President and Chief Executive Officer


YOU REPRESENT THAT YOU HAVE READ THE FOREGOING AGREEMENT, THAT YOU FULLY
UNDERSTAND THE TERMS AND CONDITIONS OF SUCH AGREEMENT AND THAT YOU ARE
VOLUNTARILY EXECUTING THE SAME.

ACCEPTED:


 /s/ Alan R. MacDougall           April 25, 2002
--------------------------        ------------------
Alan R. MacDougall                Date





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</DOCUMENT>
