Exhibit 10.37

                             STOCK OPTION AGREEMENT

                  STOCK OPTION  AGREEMENT  dated as of  ______________,  between
DATA SYSTEMS & SOFTWARE INC., a Delaware corporation (the "Company"), and
________ (the "Optionee").

                              Preliminary Statement

                  Pursuant  to  the   Company's   1995  Stock  Option  Plan  for
Nonmanagement  Employees (the "Plan"), and the authority delegated to him by the
Board of Directors,  on ________________,  the Company's Chief Executive Officer
(the  "Authorized  Officer")  granted  to the  Optionee  an option  to  purchase
_________  shares  of the  Company's  Common  Stock,  par  value  $.01 per share
("Common  Stock"),  subject to the Plan and the terms and  conditions  set forth
herein.

                  Accordingly, the parties hereto agree as follows:

                  1.  Grant of  Option.  Subject  to the Plan and the  terms and
conditions of this  Agreement,  the Company hereby grants to Optionee the option
(the  "Option")  to  purchase  from the Company up to  ______________  shares of
Common  Stock  (the  "Shares")  at a price per share of  $______.  The number of
shares to which  this  Option  pertains  and the  price per share at which  this
Option  may be  exercised  are  subject to  adjustment  in  accordance  with the
provisions of the Plan.

                  2. Plan Governs Terms of Option.  The Option is subject in all
respects to the terms and conditions of the Plan.

                  3. Type of Option. The Option is not intended to qualify as an
"incentive  stock  option"  within the meaning of Section  422A of the  Internal
Revenue Code of 1986, as amended.

                  4. Time of Exercise of Option. This Option may be exercised as
to not more than _______ of the Shares at any time after ___________________, as
to not more than __________ of the Shares at any time after  ______________  and
all the  Shares at any time  after  ____________  unless  this  Option  has been
terminated in accordance with the provisions of Paragraph 5.

                  5.  Termination  of  Option.  This  Option  shall  immediately
terminate  after  _______________,  or  upon  the  earlier  termination  of  the
Optionee's  employment  with  the  Company  (including,  for this  purpose,  any
subsidiary of the Company), except that if the date of such termination is after
______________, the Optionee's right to exercise the unexercised portion of this
Option shall continue to be  exercisable  but only as to the number of Shares as
to which it would  otherwise have been  exercisable for __ months after the date
of such termination (but in no event later than  _____________).  The Optionee's
right to exercise any portion of this Option after termination of the Optionee's
employment  with  the  Company  shall  be  subject  to the  satisfaction  of the
conditions  precedent that the Optionee not take any action adversely  affecting
the Company.

                  6. Manner of  Exercise.  This Option may be  exercised  by the
delivery to the Company of a written  notice  signed by the Optionee in the form
of Exhibit A hereto, together with either (i) full payment of the purchase price
therefor in cash or by  certified  check  payable to the order of the Company or
(ii) irrevocable  instructions to a broker designated or approved by the Company
to sell Shares issuable upon exercise of this Option and promptly deliver to the
Company a portion of the proceeds  thereof  equal to the exercise  price and any
applicable  withholding  taxes.  As provided in the Plan,  the  Optionee  may be
required to remit to the Company an amount  sufficient  to satisfy any  federal,
state or local withholding tax requirements  prior to delivering to Optionee any
shares purchased upon exercise of this Option.  This Option may not be exercised
with respect to a fractional share.

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                  7. Restriction on Transfer. This Option may not be assigned or
transferred except by will or the law of descent and distribution and during the
Optionee's lifetime may be exercised only by Optionee.

                  8.  Notice.   Any  notice  or  communication  to  the  Company
hereunder  shall be in writing  and shall be deemed to have been duly given when
delivered in person,  or by United States mail, to the following  address (or to
such other address as the Company shall from time to time specify):

                           Data Systems & Software Inc.
                           200 Route 17
                           Mahwah, New Jersey  07340
                           Attention:  Secretary

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the date and year first above written.

                                        DATA SYSTEMS & SOFTWARE INC.

                                        By
                                           -------------------------------------
                                           Name:  George Morgenstern
                                           Title: President and CEO

---------------
Optionee


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<PAGE>

                       EXHIBIT A TO STOCK OPTION AGREEMENT

                              OPTION EXERCISE FORM

DATA SYSTEMS & SOFTWARE INC.
200 ROUTE 17
MAHWAH, NJ  07430

Gentlemen:

                  I hereby  exercise the  following  portion of the stock option
that has heretofore been granted to me as follows:

                  Date of grant________________________

                  Exercise price per share $________________________

                  Number of shares underlying option grant______________________

                  Number of shares underlying option held_______________________

                  Number of shares for which option being exercised hereby______

                  In connection with this exercise [check one]:

                  _____ I enclose my check in the amount of $______________

                  _____ I am  delivering  to a broker  designated or approved by
the Company irrevocable instructions to (i) sell shares of Common Stock acquired
upon exercise and (ii) promptly deliver to the Company a portion of the proceeds
thereof equal to the exercise price and any applicable withholding taxes.

                  I  hereby  agree  to  execute  whatever  other  documents  are
necessary in order to comply with the Plan and any applicable legal requirements
in connection with the issuance of the stock to me pursuant to the Plan.


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Optionee (Signature)                              Social Security Number

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Please print name

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Date                                              Address