Exhibit 10.6

                          DATA SYSTEMS & SOFTWARE INC.

               1995 STOCK OPTION PLAN FOR NONMANAGEMENT EMPLOYEES

                  1.  Purpose.  The  purpose of the 1995 Stock  Option  Plan for
Nonmanagement  Employees of DATA SYSTEMS & SOFTWARE INC. is to provide incentive
to Employees (as defined  below) of and  consultants  to the Company (as defined
below), to encourage such individuals'  proprietary  interest in the Company, to
encourage  such  individuals  to remain in the  employ  of the  Company,  and to
attract to the Company individuals of experience and ability. Executive officers
and directors of Data Systems & Software Inc. not eligible to participate in the
Plan.

                  2. Definitions.

                  (a) "Board"  shall mean the Board of Directors of Data Systems
& Software Inc.

                  (b) "Code"  shall mean the Internal  Revenue Code of 1986,  as
amended.

                  (c)  "Committee"  shall mean the  Committee  appointed  by the
Board in accordance with Section 4 of the Plan.

                  (d) "Common Stock" shall mean the Common Stock par value, $.01
per share, of Data Systems & Software Inc.

                  (e) "Company"  shall mean and include DSSI (as defined  below)
and any subsidiary thereof.

                  (f) "DSSI" shall mean Data Systems & Software Inc., a Delaware
corporation.

                  (g)  "Disability"  shall mean the condition of an Employee who
is  unable  to  engage  in any  substantial  gainful  activity  by reason of any
medically  determinable  physical or mental  impairment which can be expected to
result in death or which has lasted or can be expected to last for a  continuous
period of not less than  twelve (12)  months,  all within the meaning of Section
22(e)(3) of the Code.


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                  (h)  "Employee"  shall  mean  any  individual  (other  than an
executive  officer or a director) who is an employee of the Company  (within the
meaning of Section 422A(a)(2) of the Code and the regulations thereunder).

                  (i) "Exercise  Price" shall mean the price per Share of Common
Stock,  determined  by the  Board  or  Committee,  at  which  an  Option  may be
exercised.

                  (j) "Fair  Market  Value"  of a Share of Common  Stock as of a
specified  date shall mean the closing  price of a Share of the Common  Stock on
the  principal  trading  market on which the  Common  Stock is traded on the day
immediately  preceding  the  date  as  of  which  Fair  Market  Value  is  being
determined, or on the next preceding date on which the Common Stock is traded if
no shares of Common Stock were traded on such immediately preceding day.

                  (k) "Incentive Stock Option" shall mean an Option described in
Code Section 422(b).

                  (l) "Nonstatutory  Stock Option" shall mean an Option which is
not an Incentive Stock Option.

                  (m) "Option" shall mean a stock option granted pursuant to the
Plan.

                  (n) "Optionee"  shall mean a person to whom an Option has been
granted.

                  (o)  "Plan"  shall  mean  this  1995  Stock  Option  Plan  for
Nonmanagement Employees.

                  (p) "Purchase  Price" shall mean the Exercise  Price times the
number of whole Shares with respect to which an Option is exercised.

                  (q) "Share" shall mean one share of Common Stock.

                  (r) "Ten Percent  Stockholder" shall mean any Employee who, at
the time of the grant of an Option,  owns (or is deemed to own,  under  Sections
422A(b)(6)  and 425(d) of the Code) more than ten percent of the total  combined
voting power of all classes of outstanding stock of DSSI.


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                  3.  Effective  Date.  This Plan was  approved  by the Board on
April 18, 1995, which date is the effective date of the Plan.

                  4. Administration. The Plan shall be administered by the Board
or a Committee  appointed by the Board  consisting of not less than two members.
The Board may from time to time  remove  members  from,  or add  members to, the
Committee.  The Board may appoint to the Committee one or more alternate members
who act in the event of the absence or disqualification of any member. Vacancies
on the Committee,  however  caused,  shall be filled by the Board.  The Board or
Committee  shall  from  time to time at its  discretion  determine  who shall be
granted Options, the number of Shares to be optioned to each, the designation of
such Options as Incentive  Stock  Options or  Nonstatutory  Stock  Options,  the
exercise price thereof and the other terms thereof.  All such determinations and
the  interpretation  and  construction  by the  Board  or the  Committee  of any
provisions of the Plan or of any Option granted  thereunder shall be binding and
conclusive on all Optionees and their legal  representatives  and beneficiaries.
Notwithstanding the foregoing,  the Board may appoint an officer of Data Systems
& Software Inc. to grant  Options to Employees  pertaining up to an aggregate of
75,000  Shares,  subject to the provisions of the Plan. The officer so appointed
by the Board shall  administer the Plan with respect to the Options such officer
has  granted.  For purposes of the Options  granted by officer  pursuant to this
Section  4, all  references  to the  Committee  in this Plan shall  include  the
officer appointed by the Board under this Section 4.

                  5. Eligibility. Except as set forth below, any Employee may be
granted  Incentive  Stock  Options  under the Plan and any  Employee or officer,
consultant  or other  person  rendering  services to, the Company may be granted
Nonstatutory  Stock  Options under the Plan if, in each  instance,  the Board or
Committee  determines  that such person  performs  services of importance to the
operation  and  development  of the  business  of  the  Company.  Directors  and
executive  officers of DSSI are not eligible to receive  grants of Options under
the Plan.

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<PAGE>

                  6. Stock.  The stock subject to Options granted under the Plan
shall be Shares of  authorized  but unissued or  reacquired  Common  Stock.  The
aggregate  number of Shares which may be issued under  Options  exercised  under
this Plan shall not exceed  870,225(1).  The number of Shares subject to Options
outstanding  under  the Plan at any time may not  exceed  the  number  of Shares
remaining  available  for issuance  under the Plan. In the event that any Option
outstanding  under the Plan expires for any reason or is terminated,  the Shares
allocable to the unexercised portion of such Option shall again be available for
grant of Options under the Plan. The  limitations  established by this Section 6
shall be subject to adjustment  upon the occurrence of the events  specified and
in the manner provided in Section 9 hereof.

                  7. Terms and Conditions of Options.  Options granted  pursuant
to the Plan shall be evidenced by written  agreements  in such form as the Board
or the  Committee  shall from time to time  determine,  which  agreements  shall
comply with and be subject to the following terms and conditions:

                           (a) Date of Grant.  Each  Option  shall  specify  its
effective date (the "date of
grant"),  which shall be the date  specified  by the Board or  Committee  in its
action relating to the grant of the Option,  but which date shall not be earlier
than the date of the  determination  by the  Board or  Committee  to grant  such
Option.

                           (b) Number of Shares.  Each  Option  shall  state the
number of Shares to which it  pertains  and  shall  provide  for the  adjustment
thereof in accordance with the provisions of Section 9 hereof.

                           (c)  Exercise  Price.  Each  Option  shall  state the
Exercise  Price,  which price  shall be  determined  by the Board or  Committee;
provided, however, that the Exercise Price (i) in the case of an Incentive Stock
Option granted to an Employee who is not a Ten Percent Stockholder, shall not be
less than the par value nor less  than the Fair  Market  Value of the  Shares to
which  the  Option  relates  on the  date of  grant,  and (ii) in the case of an
Incentive Stock Option granted to an Employee who is a Ten Percent  Stockholder,
shall not be less than the par value nor less than 110% of the Fair Market Value
of the  Shares to which the Option  relates  on the date of grant.  The Board or
Committee may provide for payment for shares by the surrender of shares owned by
the  Optionee or by the  surrender  of the right to purchase  shares  under this
Option or other rights to purchase shares. The Exercise Price of an Option shall
be subject to adjustment in accordance with Section 9 hereof.

----------
(1) As amended from original authorization of 500,000.


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<PAGE>

                           (d)  Exercise  of  Options  and  Medium  and  Time of
Payment.  To exercise  an Option,  the  Optionee  shall give  written  notice of
exercise to DSSI, specifying the number of Shares to be purchased, together with
either (i) full payment of the purchase  price  therefor in cash or by certified
check payable to the order of DSSI or (ii) irrevocable  instructions to a broker
designated  or  approved by DSSI to sell shares of Common  Stock  issuable  upon
exercise of such Option and  promptly  deliver to DSSI a portion of the proceeds
thereof equal to the exercise price and any applicable withholding taxes.

                           (e) Term and Exercise of Options;  Nontransferability
of Options. Subject to Section 10 hereof, Options may be exercised as determined
by the Board or Committee and as stated in the written agreement  evidencing the
Option; provided, however, that no Incentive Stock Option granted to an Employee
who is not a Ten Percent  Stockholder  shall be exercisable after the expiration
of ten (10) years from its date of grant,  and no Incentive Stock Option granted
to an Employee who is a Ten Percent  Stockholder  shall be exercisable after the
expiration of five (5) years from its date of grant. In addition,  the aggregate
fair market value  (determined at the time an Incentive Stock Option is granted)
of Shares with respect to which  Incentive Stock Options are exercisable for the
first time by the same  Optionee  during any calendar  year (under this Plan and
all other plans maintained by the Company) shall not exceed $100,000. During the
lifetime of the Optionee,  the Option shall be exercisable  only by the Optionee
and shall not be assignable or transferable,  other than pursuant to a qualified
domestic  relations order. In the event of the Optionee's death, no Option shall
be transferable by the Optionee otherwise than by will or by the laws of descent
and distribution.


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                           (f) Termination of Employment. Subject to the further
provisions of this  Subsection (f), in the event that an Optionee shall cease to
be  employed  by the  Company,  other  than  a  termination  of  the  Optionee's
employment by the Company for cause,  such Optionee (or the heirs or legatees of
such Optionee,  if applicable) shall have the right, subject to the restrictions
of  Subsection  (e) hereof,  to exercise the Option at any time within three (3)
months  after  such  termination  of  employment  (twelve  (12)  months  if  the
termination  was due to the death or  Disability of the Optionee or, in the case
of a  Nonstatutory  Stock  Option,  retirement)  to the extent that,  on the day
preceding  the  date of  termination  of  employment,  the  Optionee's  right to
exercise such Option had accrued  pursuant to the terms of the option  agreement
pursuant to which such Option was granted, and had not previously been exercised
or expired.

                           For this purpose, the employment relationship will be
treated as continuing intact while the Optionee is on military leave, sick leave
or other bona fide leave of absence (to be determined in the sole  discretion of
the Board or the  Committee  and, in the case of an Optionee who has received an
Incentive Stock Option,  only to the extent  permitted under Section 422A of the
Code and the regulations  promulgated  thereunder).  Moreover, in the case of an
Optionee who has been granted an Incentive Stock Option, employment shall, in no
event, be deemed to continue beyond the ninetieth  (90th) day after the Optionee
ceased  active  employment,   unless  the  Optionee's  reemployment  rights  are
guaranteed by statute or by contract.

                           Any  Optionee's  right to exercise any portion of any
Option granted under this Plan after  termination  of the Optionee's  employment
with  the  Company  shall  be  subject  to the  satisfaction  of the  conditions
precedent  that such Optionee not (i) accept any other  employment or render any
services  to others  without  DSSI's  written  consent  or (ii) take any  action
adversely affecting the Company.


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                           (g)  Rights  as  a  Stockholder.  An  Optionee  or  a
transferee of a deceased  Optionee  shall have no rights as a  stockholder  with
respect  to any  Shares  covered  by his or her  Option  until  the  date of the
issuance of a stock certificate for such Shares. No adjustment shall be made for
dividends  (ordinary  or  extraordinary,  whether in cash,  securities  or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 9.

                           (h)  Modification,  Extension and Renewal of Options.
Subject to the terms and conditions and within the  limitations of the Plan, the
Board or Committee may modify, extend or renew outstanding Options granted under
the Plan, or accept the  cancellation of outstanding  Options (to the extent not
theretofore exercised) for the granting of new Options in substitution therefor.
Notwithstanding  the foregoing,  however,  no  modification  of an Option shall,
without the consent of the Optionee,  alter or impair the rights or  obligations
under any Option theretofore  granted under the Plan.  Moreover,  in the case of
any modification,  extension or renewal of an Incentive Stock Option, all of the
requirements  set forth  herein  shall  apply in the same manner as though a new
Incentive  Stock  Option had been  granted to the  Optionee  on the date of such
modification,  extension or renewal, but only if such modification, extension or
renewal is treated,  under Section  425(h) of the Code, as the granting of a new
option.

                           (i)  Identification  of Option.  Each Option  granted
under the Plan shall clearly identify its status as an Incentive Stock Option or
Nonstatutory Stock Option.

                           (j)   Other   Provisions.   The   option   agreements
authorized  under  the Plan  shall  contain,  in  addition  to those  provisions
provided in Section 7(e) hereof, such other provisions not inconsistent with the
terms of the Plan, including, without limitation, restrictions upon the exercise
of any  Option,  and  restrictions  upon the  transfer of Shares  received  upon
exercise of Options, as the Board or Committee shall deem advisable.


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                  8. Term of Plan.  Options may be granted  pursuant to the Plan
until April 18, 2005,  which is ten years from the  effective  date of the Plan;
provided,  however, that upon and subject to the approval of an amendment to the
Plan by the  stockholders  of DSSI at the annual  meeting  held on December  16,
2004, options may be granted pursuant to the Plan until December 31, 2008.

                  9.  Recapitalization.  Subject to any  required  action by the
stockholders of DSSI and the last sentence of Subsection 7(h) hereof, the number
of Shares  covered by this Plan as  provided  in Section 6, the number of Shares
covered by each  outstanding  Option,  and the Exercise  Price  thereof shall be
proportionately  adjusted  for any  increase or decrease in the number of issued
Shares resulting from a subdivision or  consolidation of Shares,  stock split or
the payment of a stock dividend.

                  Subject to any required action by the stockholders of DSSI and
the last  sentence of  Subsection  7(h) hereof,  if DSSI shall be the  surviving
corporation  in any  merger or  consolidation,  each  outstanding  Option  shall
pertain  and apply to the  securities  to which a holder of the number of Shares
subject to the Option would have been entitled.  A dissolution or liquidation of
DSSI or a merger or consolidation in which DSSI is not the surviving corporation
shall cause each outstanding Option to terminate, unless the agreement of merger
or consolidation shall otherwise provide,  provided that each Optionee shall, in
such event, have the right immediately prior to such dissolution or liquidation,
or merger or  consolidation  in which DSSI is not the surviving  corporation  to
exercise  the  Option  in  whole  or  in  part,   subject  to   limitations   on
exercisability  of  Options  under  Section 7 hereof to the extent the Option is
exercisable  without  regard to this  sentence at the date of such  dissolution,
liquidation, merger or consolidation.


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                  In the  event of a change  in the  Common  Stock as  presently
constituted,  which is limited to a change of all of its authorized  shares with
par value into the same number of shares  with a different  par value or without
par  value,  the shares  resulting  from any such  change  shall be deemed to be
Shares of Common Stock within the meaning of the Plan.

                  To the extent that the foregoing  adjustments  relate to stock
or securities of DSSI, such adjustments shall be made by the Board or Committee,
whose determination in that respect shall be final, binding and conclusive.

                  Except as  hereinabove  expressly  provided in this Section 9,
the Optionee shall have no rights by reason of any subdivision or  consolidation
of  shares of stock of any  class,  stock  split,  or the  payment  of any stock
dividend  or any other  increase or decrease in the number of shares of stock of
any class or by reason of any dissolution,  liquidation, merger or consolidation
or  spin-off  of assets or stock of  another  corporation,  and any issue by the
Company of shares of stock of any class or securities convertible into shares of
stock of any class,  shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to the Option.

                  The grant of an Option  pursuant  to the Plan shall not affect
in any way the  right or power of DSSI to make  adjustments,  reclassifications,
reorganizations  or changes of its capital or business  structure or to merge or
consolidate or to dissolve,  liquidate,  sell or transfer all or any part of its
business or assets.

                  10.  Securities  Law  Requirements.  No Shares shall be issued
upon the exercise of any Option unless and until DSSI has  determined  that: (i)
it and the Optionee have taken all actions required to register the Shares under
the  Securities  Act of 1933 or  perfect  an  exemption  from  the  registration
requirements thereof (including the furnishing by the Optionee of an appropriate
investment  letter);  (ii)  any  applicable  listing  requirement  of any  stock
exchange on which the Common Stock is listed has been  satisfied;  and (iii) any
other applicable provision of state or federal law has been satisfied.


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                  11.  Application of Funds. The proceeds  received by DSSI from
the sale of Common Stock  pursuant to the exercise of an Option will be used for
general corporate purposes.

                  12. No  Obligation  to  Exercise  Option.  The  granting of an
Option shall impose no obligation upon the Optionee to exercise such Option.

                  13. Withholding.

                           (a) Nonstatutory  Options.  Whenever Shares are to be
delivered  upon  exercise of a  Nonstatutory  Option,  DSSI shall be entitled to
require as a condition  of delivery  that the  Optionee  remit to DSSI an amount
sufficient  to  satisfy  DSSI's  federal,   state  and  local   withholding  tax
obligations with respect to the exercise of the Option.

                           (b) Incentive Stock Options. The acceptance of Shares
upon exercise of an Incentive Stock Option shall  constitute an agreement by the
Optionee  (unless and until DSSI shall notify the Optionee  that it is relieved,
in whole or in part, of its obligations  under this Section 13(b)) (i) to notify
DSSI if any or all of such  Shares are  disposed of by the  Optionee  within two
years from the date the Option was  granted or within one year from the date the
Shares were transferred to the Optionee  pursuant to his exercise of the Option,
and  (ii)  to  remit  to  DSSI,  at the  time  of and in the  case  of any  such
disposition,  an amount  sufficient to satisfy DSSI's  federal,  state and local
withholding tax obligations with respect to such disposition, whether or not, as
to both (i) and (ii),  the  Optionee is in the employ of the Company at the time
of such disposition.

                  14.  Governing  Law. The Plan shall be governed by the laws of
the State of New York.


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