8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported)     February 11, 2011

Datawatch Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

000-19960	02-0405716
(Commission File Number)	(IRS Employer Identification No.)

Quorum Office Park 271 Mill Road Chelmsford, Massachusetts	01824
(Address of Principal Executive Offices)	(Zip Code)

(978) 441-2200

 (Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see  General Instruction A.2. below):

o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers

Appointment of Chief Executive Officer and Vice Chairman

On February 11, 2011, the Board of Directors of Datawatch Corporation (the “Company”) approved the appointment of Michael A. Morrison as the Company’s new President and Chief Executive Officer.  Mr. Morrison was also appointed as a member of the Company’s Board of Directors.  Additionally on February 11, 2011, the Board of Directors appointed David C. Mahoney as a Vice Chairman of the Board.

From October 2007 until joining Datawatch, Mr. Morrison was Vice President, Financial Performance Management, at Cognos Inc., a subsidiary of IBM since January 2008.  In this role, Mr. Morrison directed all development, product management, product marketing and strategic business development activities for the FPM business unit.  From January 2007 to October 2007 Mr. Morrison was Chief Operating Officer of Applix Inc., having been vice president of worldwide field and marketing operations from 2004 until his appointment as COO.  Before joining Applix in 2004, Mr. Morrison held various positions at Cognos, including vice president of enterprise planning operations, vice president of finance and administration, and corporate counsel.

Mr. Morrison’s annual base salary as Chief Executive Officer will be $285,000 per year.  In connection with his appointment, Mr. Morrison was also granted options to purchase 100,000 shares of the Company’s common stock and restricted stock units for 25,000 shares of the Company’s common stock.  The options and restricted stock were granted under the Company’s 2006 Equity Compensation and Incentive Plan, with the options having an exercise price equal to the fair market value of a share of the Company’s stock on February 11, 2011, the date of the option grant.  Mr. Morrison has additionally signed the Company’s standard form of Proprietary Information Inventions and Non-Competition Agreement for senior executives.

Resignation of Current Chief Executive Officer

Simultaneous with Mr. Morrison’s appointment, the Board of Directors accepted Kenneth P. Bero’s resignation as a director of the Company and as President and Chief Executive Officer.  Under Mr. Bero’s executive severance agreement with the Company dated as of January 24, 2007, as amended on February 11, 2011 (the “Bero Agreement”), Mr. Bero is entitled to continuation of base salary and health benefits for a period of twelve months and a $5,000 payment for outplacement services, in each case subject to his execution of a general release and compliance with the provisions of his Proprietary Information Inventions and Non-Competition Agreement with the Company.  The Bero Agreemen t additionally provides for the surrender and cancellation of all of Mr. Bero’s outstanding options to purchase Common Stock of the Company and the expiration of unvested restricted stock units. A copy of the Bero Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference.  The description of the Bero Agreement contained in this Current Report on Form 8-K is qualified in its entirety by reference to such document.

On February 14, 2011, the Company issued a press release regarding Mr. Morrison’s appointment as Chief Executive Officer, Mr. Mahoney’s appointment as a Vice Chairman of the Board of Directors, and Mr. Bero’s resignation.  The press release is attached as Exhibit 99.1 to this report and is incorporated herein by reference.

Item 9.01  Financial Statements and Exhibits

(d)           Exhibits

The following Exhibit is furnished as part of this report:

Exhibit No.             Description

10.1 Letter Agreement by and between the Company and Kenneth P. Bero, dated January 24, 2007 as amended on February 11, 2011.

99.1 Press release issued by Datawatch Corporation, dated February 14, 2011.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DATAWATCH CORPORATION
Date:  February 14, 2011	By:	/s/ Murray P. Fish
		Name: Murray P. Fish
		Title:   Chief Financial Officer

EXHIBIT INDEX

Exhibit No.            Description

10.1 Letter Agreement by and between the Company and Kenneth P. Bero, dated January 24, 2007 as amended on February 11, 2011.

99.1 Press release issued by Datawatch Corporation, dated February 14, 2011.

EX-10.1

EXHIBIT 10.1

January 24, 2007

Mr. Kenneth Bero

74 Cudworth Lane

Sudbury, MA  01776

Dear Ken:

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;

(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,  Inventions and Non-Competition 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 Inventions and Non-Competition 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, Inventions and Non-Competition 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.

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/ Kenneth P. Bero                                                      April 19, 2007

Kenneth P. Bero                                                            Date

February 11, 2011

Mr. Kenneth Bero

74 Cudworth Lane

Sudbury, MA  01766

Dear Ken,

The purpose of this letter is to amend certain terms of the letter agreement by and between you and Datawatch Corporation (the “Company”) dated as of January 24, 2007 (the “Severance Agreement”).  In consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, you and the Company hereby agree, notwithstanding any provision of the Severance Agreement to the contrary, as follows:

1.The “Severance Period” provided for in Section 4 of the Severance Agreement during which the Company will pay you severance payments in equal monthly installments at your monthly base salary in effect as of the date of your termination is hereby amended to be the twelve month period following your termination.

2.The Company shall promptly make cash payments to you in respect of any accrued but unpaid salary and vacation as of the date of your termination on February 11, 2011, to the extent not previously paid.

3.Subject to your execution of the attached General Release of Claims as well as the conditions of the second paragraph of Section 4 of the Severance Agreement:

(a)   The Company shall make a cash payment to you in the amount of $5,000 for outplacement services on the date it commences payment of the severance payments pursuant to Section 3 of the attached General Release of Claims; and

(b)   During the Severance Period, the Company shall continue to provide you with health care insurance benefits on the same or substantially similar terms as such benefits are provided to the executive officers of the Company during such period.

4.As of the date hereof, you (a) hereby surrender for cancellation all of your outstanding options, vested and unvested, to purchase shares of Common Stock of the Company and (b) hereby acknowledge and agree that any unvested restricted stock units for Common Stock of the Company have expired as of the date of your termination in accordance with the terms of the applicable restricted stock unit agreements.

5.Except as set forth herein, the Severance Agreement remains in full force and effect.  This amendment constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter set forth herein.

[ Remainder of page intentionally left blank. ]

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

By:/s/ Richard de J. Osborne                 

Name:  Richard de J. Osborne

Title:    Chairman

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

ACCEPTED:

/s/ Kenneth P. Bero                                           February 11, 2011

Kenneth P. Bero                                                 Date

EX-99.1

EXHIBIT 99.1

SOFTWARE VETERAN MICHAEL MORRISON NAMED PRESIDENT AND CHIEF EXECUTIVE OFFICER OF DATAWATCH CORPORATION

Track Record of Success and Market Understanding Strengthens Datawatch Leadership Team

Chelmsford, MA—February 14, 2011—Datawatch Corporation (NASDAQ-CM: DWCH), the leading global provider of report analytics products and services, announced today that Michael Morrison has joined the company as president and chief executive officer.  Mr. Morrison replaces Ken Bero, who has served as Datawatch’s chief executive officer since January 2008.  In addition to his role as CEO, Mr. Morrison will serve on Datawatch’s board of directors.

Mr. Morrison joins Datawatch at a pivotal time, as its solutions are being viewed as more relevant than ever to companies of all sizes.  Datawatch’s solutions allow the vast amounts of static information contained in existing reports, PDF files, business documents and other content-rich, but difficult-to-use data sources to be utilized as part of a complete information analytics strategy.  Organizations recognize the scale of the investments that they have made in the applications that provide these reports and the leverage they can realize by tapping into the value that the reports hold.  They are now looking to companies like Datawatch as the key to unlocking this value in a more timely and cost effective manner.

“Michael brings an ideal set of skills to lead Datawatch as we concentrate on aggressive revenue growth and profitability,” said Richard de J. Osborne, Datawatch’s chairman of the board.  “Our Datawatch solutions have always been extremely well regarded by our extensive user community, and recently we have identified new and exciting applications for these solutions.  Michael’s background, direct experience and leadership qualities are a perfect fit to take advantage of these opportunities.”

"The board joins me in thanking Ken Bero for his contributions as CEO during the last three years.  Under his leadership the company profitably weathered the recession from which we are just now emerging," continued Mr. Osborne.  "Datawatch is now in an excellent position to capitalize on the next phase of its growth strategy, with no debt and a cash balance of nearly $7.5 million."

“I am excited about this opportunity with Datawatch, and I thank the board for their confidence,” said Mr. Morrison.  “Datawatch is an undiscovered jewel and has the potential to redefine the analytics market with a unique technology solution and an extensive and passionate customer base.  By focusing the talents of the Datawatch team on delivering solutions that expand on the current success of our customers, we can change the way reporting is viewed in the analytics market, drive tremendous momentum, and grow significant shareholder value.”

Mr. Morrison was most recently vice president, financial performance management at IBM, and held a similar position at Cognos prior to its acquisition by IBM in 2008.  Prior to Cognos, Mr. Morrison was chief operating officer at Applix Inc., a leader in business analytics software.  During his three-year tenure at Applix, Mr. Morrison was responsible for all sales operations, marketing, business development and customer support.  During this time, the company emerged as the fastest growing vendor in its market segment, achieving compound annual growth rates in excess of 30 percent.  Applix was acquired by Cognos in October 2007 for $339 million, almost six times its annual revenue.

Before Applix, Mr. Morrison worked at Cognos for 11 years in a variety of roles including VP - Planning Operations, VP - Finance & Administration and corporate counsel.  He began his career as in-house counsel for NYNEX Corporation.  Mr. Morrison has a B.S. in Mathematics from Tufts University and a J.D. from Boston College Law School.

Datawatch also announced that David Mahoney has been named a vice chairman of the board of directors.  Mr. Mahoney, a current director, joined the board in September 2010.   He will work closely with Mr. Morrison in implementing business strategy, developing strategic alliances and driving the Company’s growth agenda.  Mr. Mahoney was previously CEO of Applix and worked closely with Mr. Morrison on the very successful turnaround at that company.

ABOUT DATAWATCH CORPORATION

Datawatch Corporation (NASDAQ-CM: DWCH) empowers organizations to transform the massive amounts of information that is trapped in static reports, PDF files, XML files and other content-rich, but difficult-to-use data sources, into a dynamic information analytics system that accelerates and improves decision-making throughout their operations.   Datawatch’s technology allows its tens of thousands of customers worldwide to leverage the investments they have made in reports from ERP, CRM and other custom applications into high performance analytic information at a fraction of the cost and time of traditional approaches. Datawatch is headquartered in Chelmsford, Massachusetts with offices in London, Sydney and Manila, with partners and customers in more than 100 countries worldwide. For more information, visit www.datawatch.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Any statements contained in this press release that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any such statements, including but not limited to those relating to results of operations, contained herein are based on current expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. The factors that could cause actual future results to differ materially from current expectations include the following: risks associated with the uncertainty of the current economic climate; risks associated with fluctuations in quarterly operating results; the volatility of Datawatch’s stock price; limitations on the effectiveness of internal controls; rapid techn ological change; competition in the software industry; Datawatch's dependence on its principal products; proprietary software technology and software license agreements; risks associated with international sales; risks associated with indirect distribution channels; the adequacy of Datawatch’s sales returns reserve; risks associated with a subscription sales model; risks associated with acquisitions; Datawatch’s dependence on the introduction of new products and possible delays in those introductions; Datawatch’s dependence on its ability to hire and retain skilled personnel; and uncertainty and additional costs that may result from evolving regulation of corporate governance and public disclosure. Further information on factors that could cause actual results to differ from those anticipated is detailed in various publicly-available documents, which include, but are not limited to, filings made by Datawatch from time to time with the Securities and Exchange Commission, including but not li mited to, those appearing in the Company's Annual Report on Form 10-K for the year ended September 30, 2010. Any forward-looking statements should be considered in light of those factors.

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