REGISTRATION RIGHTS AGREEMENT

             This  Registration  Rights Agreement (this "AGREEMENT") is made and
entered  into  as  of December   4, 2002, by and between Data Systems & Software
Inc.,  a  Delaware  corporation (the "COMPANY"), and Laurus Master Fund, Ltd., a
Cayman  Islands  company  (the  "PURCHASER").

                    This Agreement is made pursuant to the Purchase and Security
Agreement,  dated  as  of  the  date  hereof, between the Purchaser and Comverge
Technologies,  Inc. ("Comverge") (the "Purchase Agreement"), and pursuant to the
Note.

    The  Company  and  the  Purchaser  hereby  agree  as  follows:

        1. DEFINITIONS.  Capitalized terms used and not otherwise defined herein
that  are  defined  in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement.  As used in this Agreement, the following terms
shall  have  the  following  meanings:

        "EFFECTIVENESS  DATE"  means  the  60th  day  following the Filing Date.

        "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a).

        "FILING DATE" means, with respect to the Registration Statement required
to  be  filed  hereunder,  the  30th  day  following  the  Closing  Date.

        "HOLDER"  or  "Holders"  means the Purchaser or any of its affiliates to
the  extent  any  of  them  hold  Registerable  Securities.

        "INDEMNIFIED  PARTY"  shall  have the meaning set forth in Section 5(c).

        "INDEMNIFYING  PARTY"  shall have the meaning set forth in Section 5(c).

        "LOSSES"  shall  have  the  meaning  set  forth  in  Section  5(a).

          "NOTE"  means the Convertible  Note  issued  on  the  date  hereof.

        "PROCEEDING"  means  an action, claim, suit, investigation or proceeding
(including,  without limitation, an investigation or partial proceeding, such as
a  deposition),  whether  commenced  or  threatened.

        "PROSPECTUS"  means  the prospectus included in a Registration Statement
(including,  without  limitation,  a  prospectus  that  includes any information
previously  omitted from a prospectus filed as part of an effective registration
statement  in  reliance upon Rule 430A promulgated under the Securities Act), as
amended  or supplemented by any prospectus supplement, with respect to the terms
of  the  offering  of  any  portion of the Registrable Securities covered by the
Registration  Statement,  and  all  other  amendments  and  supplements  to  the
Prospectus,  including  post-effective amendments, and all material incorporated

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by  reference  or  deemed  to  be  incorporated by reference in such Prospectus.

     "REGISTRABLE  SECURITIES"  means the shares of Common Stock issued upon the
conversion  of  to  the  Note  and  issuable  upon  exercise  of  the  Warrant.

     "REGISTRATION  STATEMENT"  means  the registration statement required to be
filed  hereunder,  including  the Prospectus, amendments and supplements to such
registration  statement  or  Prospectus,  including  pre-  and  post-effective
amendments,  all exhibits thereto, and all material incorporated by reference or
deemed  to  be  incorporated  by  reference  in  such  registration  statement.

     "RULE  144"  means  Rule  144 promulgated by the Commission pursuant to the
Securities  Act,  as  such Rule may be amended from time to time, or any similar
rule  or regulation hereafter adopted by the Commission having substantially the
same  effect  as  such  Rule.

     "RULE  415"  means  Rule  415 promulgated by the Commission pursuant to the
Securities  Act,  as  such Rule may be amended from time to time, or any similar
rule  or regulation hereafter adopted by the Commission having substantially the
same  effect  as  such  Rule.

     "RULE  424"  means  Rule  424 promulgated by the Commission pursuant to the
Securities  Act,  as  such Rule may be amended from time to time, or any similar
rule  or regulation hereafter adopted by the Commission having substantially the
same  effect  as  such  Rule.

     "WARRANT"  means  the  Common Stock purchase warrant issued pursuant to the
Purchase  Agreement.

     2.  REGISTRATION.

     (a)  On  or  prior  to  the Filing Date, the Company shall prepare and file
with the Commission a Registration Statement covering the Registrable Securities
for  an  offering  to  be  made on a continuous basis pursuant to Rule 415.  The
Registration  Statement  shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case  such  registration  shall  be  on  another  appropriate form in accordance
herewith) and shall contain (except if otherwise required by the Commission) the
"PLAN OF DISTRIBUTION" attached hereto as ANNEX A.  The Holders acknowledge that
the  Registerable  Securities  are  subject  to  a  six-month  restriction  on
transferability  as  set  forth  in the Note and the Warrant.  The Company shall
cause  the  Registration  Statement  to become effective and remain effective as
provided  herein.  The  Company  shall  use its reasonable commercial efforts to
cause  the  Registration Statement to be declared effective under the Securities
Act  as promptly as possible after the filing thereof, but in any event no later
than  the  Effectiveness  Date,  and  shall  keep  the  Registration  Statement
continuously  effective  under  the  Securities  Act until the date which is the

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earlier  date  of when (i) all Registrable Securities have been sold or (ii) all
Registrable  Securities  may  be sold immediately without registration under the
Securities  Act  and  without  volume  restrictions  pursuant to Rule 144(k), as
determined by the counsel to the Company pursuant to a written opinion letter to
such  effect,  addressed  and acceptable to the Company's transfer agent and the
affected  Holders  (the  "EFFECTIVENESS  PERIOD").

     (b)  If:  (i)  any  Registration  Statement is not filed on or prior to the
Filing  Date;  (ii)  a  Registration  Statement  filed hereunder is not declared
effective  by  the  Commission  by  the  Effectiveness  Date;  (iii)  after  a
Registration  Statement  is filed with and declared effective by the Commission,
such  Registration Statement ceases to be effective (by suspension or otherwise)
as  to  all Registrable Securities to which it is required to relate at any time
prior  to  the  expiration  of the Effectiveness Period (without being succeeded
immediately  by  an  additional  registration  statement  filed  and  declared
effective)  for a period of time which shall exceed 30 days in the aggregate per
year  but not more than 20 consecutive calendar days (defined as a period of 365
days  commencing  on the date the Registration Statement is declared effective);
or  (iv)  the Common Stock is not listed or quoted, or is suspended from trading
on  any  Trading  Market  for  a  period  of  three (3) consecutive Trading Days
(provided  the  Company shall not have been able to cure such trading suspension
within 60 days of the notice thereof or list the Common Stock on any of the Pink
Sheets, the NASD OTC Bulletin Board, NASDAQ SmallCap Market, the Nasdaq National
Market,  American  Stock  Exchange  or  New  York  Stock  Exchange (the "Trading
Market"))(any  such  failure  or breach being referred to as an "Event," and for
purposes  of clause (i), (ii) or (v) the date on which such Event occurs, or for
purposes of clause (iii) the date which such 30 day or 20 consecutive day period
(as  the  case  may  be) is exceeded, or for purposes of clause (iv) the date on
which  such  60 day period is exceeded, being referred to as "EVENT DATE"), then
until  the  applicable  Event  is cured, the Company shall pay to each Holder an
amount  in  cash,  as liquidated damages and not as a penalty, equal to 1.0% for
the  first  two thirty (30) day periods and 2.0% for each thirty (30) day period
thereafter  (prorated  for  partial  periods)  on a daily basis of the principal
amount  of  the Note then eligible to be converted into Registerable Securities.
Such  liquidation  damages  shall  be  paid  not less than each thirty (30) days
during an Event and within three (3) days following the date on which such Event
has  been  cured  by  the  Company.

     3.  REGISTRATION  PROCEDURES If and whenever the Company is required by the
provisions hereof to effect the registration of the Registrable Securities under
the  Act,  the  Company  will,  as  expeditiously  as  possible:

          (a)  prepare  and  file  with  the  SEC  a registration statement with
respect  to  such securities and use its best efforts to cause such registration
statement  to  become  and  remain  effective for the period of the distribution
contemplated  thereby  (determined  as herein provided), and promptly provide to
the  Purchaser  copies  of  all  filings  and  SEC  letters  of  comment;

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          (b)  prepare  and file with the SEC such amendments and supplements to
such  registration  statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until the earlier
of:  (i)  six  months after the latest exercise period of the Warrant; (ii) four
years  after  the  Closing  Date,  or  (iii) the date on which the Purchaser has
disposed  of  all  of  the  Registrable  Securities covered by such registration
statement  in accordance with the Purchaser's intended method of disposition set
forth  in  such  registration  statement  for  such  period;

          (c) furnish to the Purchaser such number of copies of the registration
statement  and  the  prospectus  included  therein  (including  each preliminary
prospectus)  as  the  Purchaser  reasonably may request to facilitate the public
sale  or  disposition  of the securities covered by such registration statement;

          (d) use its commercially reasonable efforts to register or qualify the
Purchaser's  Registrable Securities covered by such registration statement under
the  securities  or  "blue  sky"  laws  of  such jurisdictions as the Purchaser,
provided,  however,  that the Company shall not for any such purpose be required
to  qualify  generally  to  transact  business  as  a foreign corporation in any
jurisdiction  where  it  is not so qualified or to consent to general service of
process  in  any  such  jurisdiction;
          (e)  list  the  Registrable  Securities  covered  by such registration
statement  with any securities exchange on which the Common Stock of the Company
is  then  listed;

          (f)  immediately  notify  the  Purchaser at any time when a prospectus
relating  thereto  is  required to be delivered under the Securities Act, of the
happening  of  any event of which the Company has knowledge as a result of which
the  prospectus  contained  in  such  registration statement, as then in effect,
includes  an  untrue  statement  of a material fact or omits to state a material
fact  required  to be stated therein or necessary to make the statements therein
not  misleading  in  light  of  the  circumstances  then  existing;  and

          (g)  make  available for inspection by the Purchaser and any attorney,
accountant  or  other  agent  retained by the Purchaser, all publicly available,
non-confidential  financial and other records, pertinent corporate documents and
properties  of  the  Company,  and  cause  the Company's officers, directors and
employees  to  supply  all  publicly  available,  non-confidential  information
reasonably  requested  by  the  attorney,  accountant or agent of the Purchaser.

     4. REGISTRATION EXPENSES. All expenses incurred by the Company in complying
with  Sections  2  and 3 hereof, including, without limitation, all registration
and  filing  fees,  printing  expenses,  fees  and  disbursements of counsel and
independent  public  accountants  for  the Company, fees and expenses (including
reasonable  counsel  fees)  incurred  in  connection  with  complying with state
securities  or  "blue  sky"  laws,  fees  of  the  NASD, transfer taxes, fees of
transfer  agents  and  registrars,  fees  of, and disbursements incurred by, one
counsel  for  the  Holders,  whose  fees  shall  not exceed $1,000, and costs of

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insurance  are  called  "REGISTRATION  EXPENSES". All underwriting discounts and
selling  commissions applicable to the sale of Registrable Securities, including
any  fees  and  disbursements of any special counsel to the Holders beyond those
included  in  Registration  Expenses,  are  called  "SELLING  EXPENSES."

     5.  INDEMNIFICATION.          (a)     In the event of a registration of any
Registrable  Securities under the Securities Act pursuant to this Agreement, the
Company  will  indemnify  and  hold  harmless  the  Purchaser, and its officers,
directors  and  each other person, if any, who controls the Purchaser within the
meaning  of  the  Securities  Act,  against  any  losses,  claims,  damages  or
liabilities,  joint  or  several,  to  which  the Purchaser, or such persons may
become  subject  under  the Securities Act or otherwise, insofar as such losses,
claims,  damages  or liabilities (or actions in respect thereof) arise out of or
are  based upon any untrue statement or alleged untrue statement of any material
fact  contained  in  any  registration  statement  under  which such Registrable
Securities  were registered under the Securities Act pursuant to this Agreement,
any  preliminary  prospectus  or  final  prospectus  contained  therein,  or any
amendment  or supplement thereof, or arise out of or are based upon the omission
or  alleged  omission  to  state  therein  a material fact required to be stated
therein  or  necessary  to  make the statements therein not misleading, and will
reimburse  the Purchaser, and each such person for any reasonable legal or other
expenses incurred by them in connection with investigating or defending any such
loss,  claim,  damage,  liability or action; provided, however, that the Company
will  not  be  liable  in any such case if and to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged  untrue  statement or omission or alleged omission so made in conformity
with  information  furnished  by  the  Purchaser  or  any such person in writing
specifically  for  use  in  any  such  document.

          (b) In the event of a registration of the Registrable Securities under
the  Securities Act pursuant to this Agreement, the Purchaser will indemnify and
hold harmless the Company, and its officers, directors and each other person, if
any,  who controls the Company within the meaning of the Securities Act, against
all  losses,  claims,  damages  or  liabilities,  joint or several, to which the
Company  or  such  persons  may  become  subject  under  the  Securities  Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement  of  any material fact contained in the registration statement
under which such Registrable Securities were registered under the Securities Act
pursuant  to  this  Agreement,  any  preliminary  prospectus or final prospectus
contained  therein,  or  any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required  to  be  stated therein or necessary to make the statements therein not
misleading,  and  will  reimburse  the  Company  and  each  such  person for any
reasonable  legal  or  other  expenses  incurred  by  them  in  connection  with
investigating  or  defending  any such loss, claim, damage, liability or action,
provided,  however,  that  the  Purchaser will be liable in any such case if and
only  to the extent that any such loss, claim, damage or liability arises out of
or  is based upon an untrue statement or alleged untrue statement or omission or
alleged  omission so made in conformity with information furnished in writing to
the  Company  by  the  Purchaser  specifically  for  use  in  any such document.
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          (c) Promptly after receipt by an indemnified party hereunder of notice
of  the  commencement of any action, such indemnified party shall, if a claim in
respect  thereof  is to be made against the indemnifying party hereunder, notify
the  indemnifying  party  in  writing thereof, but the omission so to notify the
indemnifying  party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 5(c) and shall only relieve
it  from  any  liability  which it may have to such indemnified party under this
Section  5(c)  if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and  it  shall  notify  the  indemnifying party of the commencement thereof, the
indemnifying  party  shall  be  entitled to participate in and, to the extent it
shall  wish,  to  assume  and  undertake  the  defense  thereof  with  counsel
satisfactory  to such indemnified party, and, after notice from the indemnifying
party  to  such indemnified party of its election so to assume and undertake the
defense  thereof, the indemnifying party shall not be liable to such indemnified
party  under  this  Section 5(c) for any legal expenses subsequently incurred by
such  indemnified  party  in  connection  with  the  defense  thereof;  if  the
indemnified  party retains its own counsel, then the indemnified party shall pay
all  fees,  costs  and expenses of such counsel, provided, however, that, if the
defendants  in  any  such  action  include  both  the  indemnified party and the
indemnifying  party  and  the  indemnified party shall have reasonably concluded
that  there  may be reasonable defenses available to it which are different from
or  additional  to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of  the  indemnifying  party,  the  indemnified  parties shall have the right to
select  one  separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of  such separate counsel and other expenses related to such participation to be
reimbursed  by  the  indemnifying  party  as  incurred.

          (d)  In  order  to  provide for just and equitable contribution in the
event  of  joint  liability under the Securities Act in any case in which either
(i) the Purchaser, or any controlling person of the Purchaser, makes a claim for
indemnification  pursuant  to  this Section 5(c) but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and  the expiration of time to appeal or the denial of the last right of appeal)
that  such  indemnification may not be enforced in such case notwithstanding the
fact  that  this Section 5(c) provides for indemnification in such case, or (ii)
contribution  under  the  Securities  Act  may  be  required  on the part of the
Purchaser  or  controlling  person  of  the Purchaser in circumstances for which
indemnification  is  provided  under  this  Section 5(c); then, and in each such
case,  the  Company  and  the Purchaser will contribute to the aggregate losses,
claims,  damages or liabilities to which they may be subject (after contribution
from  others)  in  such proportion so that the Purchaser is responsible only for
the  portion represented by the percentage that the public offering price of its
securities  offered  by  the registration statement bears to the public offering
price  of  all  securities  offered  by  such  registration statement, provided,
however,  that,  in  any  such  case,  (A) the Purchaser will not be required to
contribute  any  amount  in  excess  of  the  public  offering price of all such
securities  offered  by  it  pursuant to such registration statement; and (B) no
person  or  entity guilty of fraudulent misrepresentation (within the meaning of

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Section  10(f)  of  the Act) will be entitled to contribution from any person or
entity  who  was  not  guilty  of  such  fraudulent  misrepresentation.

     6.  REPRESENTATIONS  AND  WARRANTIES

          (a)  The Common Stock of the Company is registered pursuant to Section
12(b)  or  12(g)  of the Exchange Act and the Company has timely filed all proxy
statements,  reports,  schedules, forms, statements and other documents required
to  be  filed by it under the Exchange Act. The Company has filed (i) its Annual
Report  on  Form 10-K for the fiscal year ended December 31, 2001 as amended and
(ii)  its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
2002,  June  30,  2002 and September 30, 2002 (collectively, the "SEC Reports").
The  Company is eligible to file with the Commission a registration statement on
Form S-3 pursuant to Instruction I.B.3 thereof. Each SEC Report was, at the time
of its filing, in substantial compliance with the requirements of its respective
form  and  none  of the SEC Reports, nor the financial statements (and the notes
thereto)  included  in  the  SEC  Reports,  as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact  required to be stated therein or necessary to make the statements therein,
in  light  of  the circumstances under which they were made, not misleading. The
financial  statements  of  the  Company included in the SEC Reports comply as to
form  in  all  material respects with applicable accounting requirements and the
published  rules and regulations of the Commission or other applicable rules and
regulations  with  respect thereto. Such financial statements have been prepared
in  accordance with generally accepted accounting principles ("GAAP") applied on
a  consistent  basis during the periods involved (except (i) as may be otherwise
indicated  in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may  be  condensed)  and  fairly  present in all material respects the financial
condition,  the  results of operations and the cash flows of the Company and its
subsidiaries,  on a consolidated basis, as of, and for, the periods presented in
each  such  SEC  Report.

          (b)  The  Company  Common  Stock  is  listed for trading on the Nasdaq
National  Market  and  satisfies  all  requirements for the continuation of such
listing.  The  Company has not received any notice that its Common Stock will be
delisted  from the Nasdaq National Market or that the Common Stock does not meet
all  requirements  for  the  continuation  of  such  listing.

          (c)  Neither  the  Company,  nor any of its affiliates, nor any person
acting  on  its  or  their behalf, has directly or indirectly made any offers or
sales  of  any  security  or  solicited  any  offers  to  buy any security under
circumstances  that  would cause the offering of the Securities pursuant to this
Agreement  to  be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Common Stock
pursuant  to  Rule  506  under  the  Securities  Act,  or  any  applicable
exchange-related stockholder approval provisions. Nor will the Company or any of
its  affiliates  or  subsidiaries  take any action or steps that would cause the
offering  of  the  Securities  to  be  integrated  with  other  offerings.
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          (d)  The  Registrable  Securities  are restricted securities under the
Securities Act as of the date of this Agreement.  The Company will not issue any
stop  transfer order or other order impeding the sale and delivery of any of the
Registrable Securities at such time as the Registrable Securities are registered
for  public  sale  or  an  exemption  from  registration is available, except as
required  by  federal  or  state  securities  laws.

          (e)  The  Company understands the nature of the Registrable Securities
issuable  upon  the  conversion  of the Note and the exercise of the Warrant and
recognizes  that  the  Registerable  Securities  may  have  a potential dilutive
effect.  The  Company specifically acknowledges that its obligation to issue the
Registrable Securities is binding upon the Company and enforceable regardless of
the  dilution  such  issuance  may  have  on  the  ownership  interests of other
shareholders  of  the  Company.

          (f)  Except  for  agreements  made in the ordinary course of business,
there  is  no  agreement that has not been filed with the SEC as an exhibit to a
registration  statement  or  to a form required to be filed by the Company under
the  Securities  Exchange  Act  the  breach  of  which could have a material and
adverse  effect  on  the  Company  and  its  subsidiaries,  or would prohibit or
otherwise  interfere  with  the ability of the Company to enter into and perform
any  of  its  obligations  under  this  Agreement  in  any  material  respect.

          (g)  The  Company  will  at  all  times have authorized and reserved a
sufficient  number of shares of Common Stock for the full conversion of the Note
and  exercise  of  the  Warrant.

     7.  MISCELLANEOUS

     (a)  REMEDIES.  In  the event of a breach by the Company or by a Holder, of
any  of  their  obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific  performance  of  its  rights  under  this  Agreement.

     (b)  NO  PIGGYBACK  ON REGISTRATIONS. Except as and to the extent specified
in  SCHEDULE  6(b)  hereto,  neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include securities
of  the  Company  in  the  Registration  Statement  other  than  the Registrable
Securities,  and  the  Company  shall  not  after the date hereof enter into any
agreement  providing  any such right for inclusion of shares in the Registration
Statement  to any of its security holders. Except as and to the extent specified
in  SCHEDULE  6(b)  hereto,  the  Company  has  not  previously entered into any
agreement granting any registration rights with respect to any of its securities
to  any  Person  which  has  not  been  fully  satisfied.

     (c)  COMPLIANCE.  Each Holder covenants and agrees that it will comply with
the  prospectus  delivery requirements of the Securities Act as applicable to it
in  connection with sales of Registrable Securities pursuant to the Registration
Statement.

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     (d)  DISCONTINUED  DISPOSITION.  Each  Holder  agrees by its acquisition of
such  Registrable  Securities that, upon receipt of a notice from the Company of
the  occurrence  of  a  Discontinuation  Event,  such  Holder  will  forthwith
discontinue  disposition  of  such Registrable Securities under the Registration
Statement  until  such  Holder's  receipt  of  the  copies  of  the supplemented
Prospectus  and/or  amended  Registration  Statement  or  until it is advised in
writing  (the "Advice") by the Company that the use of the applicable Prospectus
may  be  resumed,  and, in either case, has received copies of any additional or
supplemental  filings  that  are  incorporated  or  deemed to be incorporated by
reference  in such Prospectus or Registration Statement. The Company may provide
appropriate  stop  orders  to  enforce  the  provisions  of  this paragraph. For
purposes  of  this Section 7(d), a "Discontinuation Event" shall mean (i) when a
Prospectus  or  any  Prospectus  supplement  or  post-effective amendment to the
Registration  Statement  is  proposed  to  be  filed;  (ii)  when the Commission
notifies  the  Company  whether  there  will  be a "review" of such Registration
Statement  and  whenever the Commission comments in writing on such Registration
Statement  (the  Company  shall provide true and complete copies thereof and all
written  responses  thereto  to  each  of the Holders); (iii) any request by the
Commission  or  any other Federal or state governmental authority for amendments
or  supplements  to  the  Registration Statement or Prospectus or for additional
information;  (iv)  the  issuance by the Commission of any stop order suspending
the  effectiveness  of  the  Registration  Statement  covering any or all of the
Registrable  Securities  or  the initiation of any Proceedings for that purpose;
(v)  the  receipt  by  the  Company  of  any  notification  with  respect to the
suspension  of  the  qualification or exemption from qualification of any of the
Registrable  Securities  for  sale  in  any  jurisdiction,  or the initiation or
threatening  of  any Proceeding for such purpose; and (vi) the occurrence of any
event  or  passage  of  time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement made in
the  Registration Statement or Prospectus or any document incorporated or deemed
to  be  incorporated therein by reference untrue in any material respect or that
requires  any  revisions  to  the  Registration  Statement,  Prospectus or other
documents  so that, in the case of the Registration Statement or the Prospectus,
as  the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading.

     (e)  PIGGY-BACK  REGISTRATIONS.  If  at  any  time during the Effectiveness
Period  there  is  not  an  effective Registration Statement covering all of the
Registrable  Securities and the Company shall determine to prepare and file with
the  Commission  a  registration  statement  relating to an offering for its own
account  or  the account of others under the Securities Act of any of its equity
securities,  other  than  on Form S-4 or Form S-8 (each as promulgated under the
Securities  Act)  or  their then equivalents relating to equity securities to be
issued  solely  in  connection with any acquisition of any entity or business or
equity  securities  issuable  in  connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder  shall  so  request  in  writing,  the  Company  shall  include  in  such

                                        9
<PAGE>
registration  statement  all  or  any  part  of such Registrable Securities such
holder  requests  to  be  registered,  subject to customary underwriter cutbacks
applicable  to  all holders of registration rights and subject to the consent of
any  selling  stockholder(s)  under  such  registration  statement.

     (f) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
provisions  of  this sentence, may not be amended, modified or supplemented, and
waivers  or  consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
the  then  outstanding  Registrable Securities. Notwithstanding the foregoing, a
waiver  or consent to depart from the provisions hereof with respect to a matter
that  relates  exclusively  to  the  rights of certain Holders and that does not
directly  or  indirectly  affect  the  rights  of  other Holders may be given by
Holders  of  at  least  a  majority  of the Registrable Securities to which such
waiver  or  consent  relates;  provided,  however,  that  the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the  provisions  of  the  immediately  preceding  sentence.

     (g)  NOTICES.Any notice or request hereunder may be given to the Company or
Purchaser  at  the  respective  addresses set forth below or as may hereafter be
specified in a notice designated as a change of address under this Section 7(g).
Any  notice or request hereunder shall be given by registered or certified mail,
return  receipt  requested, hand delivery, overnight mail or telecopy (confirmed
by mail).  Notices and requests shall be, in the case of those by hand delivery,
deemed  to have been given when delivered to any officer of the party to whom it
is  addressed,  in  the  case of those by mail or overnight mail, deemed to have
been  given  when deposited in the mail or with the overnight mail carrier, and,
in  the  case  of  a telecopy, when confirmed.  THE ADDRESS FOR SUCH NOTICES AND
COMMUNICATIONS  SHALL  BE  AS  FOLLOWS:

          If  to  the         Data  Systems  &  Software  Inc.
          Company:            200  Route  17  South
                              Mahwah,  New  Jersey  07430
                              Attention:  Mr.  George  Morgenstern

                              Facsimile:  201-529-3163

                              With  a  copy  to:

                              Sheldon  Krause,  Esq.
                              Ehrenreich  Eilenberg  &  Krause  LLP
                              11  East  44th  Street
                              New  York,  New  York  10017

                              Facsimile:  212-986-2399

          If  to  a           To  the  address  set  forth  under  such

                                       10
<PAGE>
          Purchaser:          Purchaser  name
                              on  the  signature  pages  hereto.

          If  to  any  other  Person  who  is  then  the  registered  Holder:

                              To  the  address  of  such  Holder  as  it
                              appears  in  the
                              stock  transfer  books  of  the  Company

or  such  other  address  as may be designated in writing hereafter, in the same
manner,  by  such  Person.

     (h)  SUCCESSORS  AND  ASSIGNS. This Agreement shall inure to the benefit of
and  be binding upon the successors and permitted assigns of each of the parties
and  shall  inure  to the benefit of each Holder. The Company may not assign its
rights  or  obligations  hereunder  without  the  prior  written consent of each
Holder.  Each  Holder may assign their respective rights hereunder in the manner
and  to  the  Persons  as  permitted  under  the  Note.

     (i)  EXECUTION  AND  COUNTERPARTS.  This  Agreement  may be executed in any
number  of counterparts, each of which when so executed shall be deemed to be an
original  and,  all  of  which  taken together shall constitute one and the same
Agreement.  In  the  event  that  any  signature  is  delivered  by  facsimile
transmission,  such  signature  shall  create  a valid binding obligation of the
party  executing  (or  on whose behalf such signature is executed) the same with
the  same  force  and  effect  as  if such facsimile signature were the original
thereof.

     (j)  GOVERNING  LAW.  All  questions concerning the construction, validity,
enforcement  and  interpretation  of  this  Agreement  shall  be governed by and
construed  and enforced in accordance with the internal laws of the State of New
York,  without  regard to the principles of conflicts of law thereof. Each party
agrees  that  all  Proceedings  concerning  the interpretations, enforcement and
defense  of  the  transactions contemplated by this Agreement shall be commenced
exclusively  in  the  state  and federal courts sitting in the City of New York,
Borough  of  Manhattan.  Each  party  hereto  hereby  irrevocably submits to the
exclusive  jurisdiction  of  the state and federal courts sitting in the City of
New  York, Borough of Manhattan for the adjudication of any dispute hereunder or
in  connection herewith or with any transaction contemplated hereby or discussed
herein,  and  hereby  irrevocably  waives,  and  agrees  not  to  assert  in any
Proceeding,  any  claim that it is not personally subject to the jurisdiction of
any  such  court,  that  such  Proceeding  is improper. Each party hereto hereby
irrevocably  waives  personal  service  of process and consents to process being
served  in  any  such  Proceeding  by  mailing  a copy thereof via registered or
certified  mail  or overnight delivery (with evidence of delivery) to such party
at  the address in effect for notices to it under this Agreement and agrees that
such  service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to  serve  process  in  any  manner  permitted  by law. Each party hereto hereby
irrevocably  waives,  to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to

                                       11
<PAGE>
this  Agreement  or  the transactions contemplated hereby. If either party shall
commence  a Proceeding to enforce any provisions of a Transaction Document, then
the  prevailing  party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys fees and other costs and expenses incurred with the
investigation,  preparation  and  prosecution  of  such  Proceeding.

     (k)  CUMULATIVE  REMEDIES.  The remedies provided herein are cumulative and
not  exclusive  of  any  remedies  provided  by  law.

     (l)    SEVERABILITY.  If  any  term,  provision, covenant or restriction of
this  Agreement  is  held  by  a  court of competent jurisdiction to be invalid,
illegal,  void  or  unenforceable,  the  remainder  of  the  terms,  provisions,
covenants  and  restrictions  set  forth  herein  shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto  shall  use  their  reasonable  efforts to find and employ an alternative
means  to achieve the same or substantially the same result as that contemplated
by  such  term,  provision, covenant or restriction. It is hereby stipulated and
declared  to  be  the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such  that  may  be  hereafter declared invalid, illegal, void or unenforceable.

     (m)  HEADINGS.  The  headings  in  this  Agreement  are  for convenience of
reference only  and  shall  not  limit  or otherwise affect the meaning  hereof.

                                       12
<PAGE>

     IN  WITNESS  WHEREOF,  the  parties  have executed this Registration Rights
Agreement  as  of  the  date  first  written  above.

                                DATA  SYSTEMS  &  SOFTWARE  INC.


                                By:
                                   -------------------------------------------
                                   Name:  George  Morgenstern
                                   Title: President and Chief Executive Officer
                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES OF PURCHASER TO FOLLOW]

                                       13
<PAGE>

        IN  WITNESS  WHEREOF, the parties have executed this Registration Rights
Agreement  as  of  the  date  first  written  above.

                                   LAURUS  MASTER  FUND,  LTD.


                                   By:
                                      ------------------------------------------
                                   Name:
                                   Title:

                                   Address  for  Notice:

                                   c/o  Laurus  Capital  Management,  LLC
                                   152  West  57th  Street,  4th  Floor
                                   New  York,  New  York  10019
                                   Attention:  David  Grin

                                       14
<PAGE>

ANNEX  A

PLAN  OF  DISTRIBUTION

        On  and  after ________, 2002, the selling stockholder may, from time to
time,  sell  any  or  all  of  its shares of common stock on any stock exchange,
market  or  trading  facility  on  which  the  shares  are  traded or in private
transactions.  These  sales  may  be  at fixed or negotiated prices. The selling
stockholder  may  use  any  one  or  more  of the following methods when selling
shares:

     *    ordinary  brokerage  transactions  and  transactions  in  which  the
          broker-dealer  solicits  Purchaser;
     *    block  trades  in  which  the  broker-dealer  will attempt to sell the
          shares  as agent but may position and resell a portion of the block as
          principal  to  facilitate  the  transaction;
     *    purchases  by  a  broker-dealer  as  principal  and  resale  by  the
          broker-dealer  for  its  account;
     *    an  exchange  distribution  in  accordance  with  the  rules  of  the
          applicable  exchange;
     *    privately  negotiated  transactions;
     *    short  sales
     *    broker-dealers  may  agree  with  the  selling  stockholders to sell a
          specified  number  of  such  shares  at  a stipulated price per share;
     *    a  combination  of  any  such  methods  of  sale;  and
     *    any  other  method  permitted  pursuant  to  applicable  law.

     The  selling  stockholder  may  also  sell  shares under Rule 144 under the
Securities  Act,  if  available,  rather  than  under  this  prospectus.

     Broker-dealers  engaged  by  the  selling stockholder may arrange for other
brokers-dealers  to participate in sales. Broker-dealers may receive commissions
or  discounts  from  the  selling  stockholder (or, if any broker-dealer acts as
agent  for  the  purchaser  of  shares,  from  the  purchaser)  in amounts to be
negotiated.  The  selling  stockholder  does  not  expect  these commissions and
discounts  to  exceed  what  is customary in the types of transactions involved.

     The selling stockholders and any broker-dealers or agents that are involved
in  selling  the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received  by  such  broker-dealers or agents and any profit on the resale of the
shares  purchased  by  them  may  be  deemed  to  be underwriting commissions or
discounts  under  the  Securities Act. The selling stockholder hase informed the
Company  that  it  does  not  have  any  agreement or understanding, directly or
indirectly,  with  any  person  to  distribute  the  Common  Stock.

                                       15
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