REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December
13,  2001,  is entered  into by and  between  DATA  SYSTEMS & SOFTWARE  INC.,  a
Delaware  corporation  (the "Company"),  and each of the stockholders  listed on
Exhibit  A  attached  hereto  (each  a  "Stockholder"  and,  collectively,   the
"Stockholders").

                              W I T N E S S E T H:

     WHEREAS, pursuant to the Share Purchase Agreement, dated as of November 29,
2001, by and among the Company, Decision Systems Israel Ltd., Endan IT Solutions
Ltd., Jacob Neuwirth (Noy),  Neuwirth Investment Ltd., and the Stockholders (the
"Purchase  Agreement"),  the  Company  has  agreed  to  issue  to  each  of  the
Stockholders  the number of DSSI Shares set forth  opposite  such  Stockholder's
name on Exhibit A attached hereto; and

     WHEREAS,  to induce  each of the  Stockholders  to execute  and deliver the
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights under the Securities Act of 1933, as amended (the "Act"),  and applicable
state  securities  laws,  subject to the terms and  conditions set forth in this
Agreement.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby  acknowledged,  the Company and the Stockholders
hereby agree as follows:

     1.  Definitions.  Capitalized  terms used herein and not otherwise  defined
herein shall have the meanings set forth in the Purchase Agreement.

     2. Restrictions on Transfer.

     2.1.  Except as provided in Section 2.3 hereof,  commencing  on the Closing
Date and ending on the sixth month  anniversary  thereof (the "Lock Up Period"),
no Stockholder shall,  directly or indirectly,  offer,  transfer,  sell, assign,
pledge,  hypothecate  or otherwise  dispose of (each a  "Transfer")  any of such
Stockholder's  DSSI Shares in any public  sale.  The  foregoing  restriction  on
Transfer during the Lock Up Period shall apply  notwithstanding the registration
of the DSSI Shares by the Company pursuant to Section 3 of this Agreement.

     2.2.  Except as  provided  in Section  2.3  hereof,  commencing  on the day
immediately  after the Lock Up Period and ending on the ninth month  anniversary
of the Closing Date, no  Stockholder  shall  Transfer in a public sale more than
50% of the DSSI Shares received by such  Stockholder at the Closing (which shall
include  public  sales of DSSI Shares by any  transferee  of such  Stockholder),
except  with the  prior  written  consent  of the  Chairman  of the Board of the
Company. After the ninth month anniversary of the Closing Date, each Stockholder
may Transfer his or its DSSI Shares in public sales  without any  limitation  or
restriction  other than as provided under the Act and Other  Securities Laws (as
defined below).

<PAGE>

     2.3. Each Stockholder may at any time, and from time to time,  Transfer his
or its DSSI Shares in a non-public  transaction  exempt from registration  under
the Act and Other  Securities Laws (as defined below),  without the restrictions
set forth in Sections  2.1 and 2.2 of this  Agreement,  provided  the  following
conditions are met: (a) prior to such Transfer counsel for the Stockholder shall
have  furnished  the  Company  with an  opinion,  reasonably  acceptable  to the
Company,  that an  exemption  is  available  under  the  Act and any  applicable
securities laws of any U.S.  state,  Israel and/or any other country (the "Other
Securities  Laws"),  (b) such Transfer is made in compliance with such exemption
from registration and (c) the Stockholder shall have provided the Company with a
copy of the executed agreements for such Transfer. After the Lock Up Period, the
Company  shall  provide  any  reasonable  assistance  requested  in writing by a
Stockholder to facilitate any sale of DSSI Shares  permitted  under this Section
2.3.

     2.4.  Any  purported  Transfer  of DSSI  Shares by any  Stockholder  or any
transferee of any Stockholder that violates any provision of this Agreement will
be invalid,  and the Company and its transfer  agent will be under no obligation
to record any such  Transfer on the books of the Company.  Until the ninth month
anniversary of the Closing Date, the Company will maintain instructions with its
transfer agents regarding the restrictions on Transfer as set forth in Section 2
of this Agreement.

     2.5. The  restrictions  on the number of DSSI Shares that a Stockholder may
Transfer under this Section 2 shall include any Transfer of the DSSI Shares held
by a transferee of such Stockholder.

     3. Registration.

     3.1. As soon as  practicable,  but in any event no later than 30 days after
the Closing, the Company shall file a registration statement on a Form S-3 under
the Act  with  respect  to all  DSSI  Shares  held  by each of the  Stockholders
(collectively,  the "Registerable  Shares"),  and the Company shall use its best
efforts to cause such registration statement to become effective within 120 days
following  the  Closing,  all  at  its  sole  cost  and  expense.  Each  of  the
Stockholders  undertakes in  connection  therewith to provide in a timely manner
all such information and materials  pertaining to it as may be required in order
to  permit  the  Company  to  comply  with all  applicable  requirements  of the
Securities and Exchange Commission ("SEC") and to obtain the acceleration of the
effective  date  of  the  registration   statement.   In  connection  with  such
registration, the Company shall:

(a) use its best efforts to keep the registration  statement effective until the
earlier  of  (i)  when  all of  the  Stockholders  have  sold  their  respective
Registerable  Shares or (ii)  when the  Registerable  Shares  may be sold by the
Stockholders (or the respective transferees) under Rule 144(k) of the Act;

(b) as  expeditiously  as  possible  furnish  to each of the  Stockholders  such
reasonable  numbers of copies of the  prospectus  contained in the  registration
statement  covering  the  Registerable   Shares  as  any  such  Stockholder  may
reasonably  request in order to facilitate  the public sale or other Transfer of
the Registerable Shares;


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<PAGE>

(c) as expeditiously as possible use its best efforts to register or qualify the
Registerable Shares under the securities or Blue Sky laws of such U.S. states as
the undersigned shall reasonably request,  provided,  however,  that the Company
shall not be  required in  connection  with this  paragraph  (c) to qualify as a
foreign  corporation  or execute a general  consent to service of process in any
jurisdiction or register or qualify the Registerable Shares in any country other
than the United States;

(d) cause all such Registerable  Shares registered  pursuant hereto to be listed
on each securities exchange on which the Common Stock is then listed; and

(e)  pay  all  costs  and  expenses   incident  to   registration,   filings  or
qualifications  pursuant to this Agreement,  such as registration,  listing, and
qualification fees, printing and accounting fees, and the fees and disbursements
of counsel to the Company and the  reasonable  legal fees and  expenses  (not to
exceed $3,500) of one counsel designated by the Stockholders;

     3.2.  Each of the  Stockholders  shall pay any and all of their  respective
underwriters' discounts,  brokerage fees and transfer taxes incident to the sale
of the Registerable Shares sold by such Stockholder pursuant to this Agreement.

     4. Indemnification.

     4.1.  Subject to Section 4.4, the Company shall indemnify and hold harmless
each  Stockholder,  and each other  person,  if any, who controls a  Stockholder
within  the  meaning  of the Act or the  Securities  Exchange  Act of 1934  (the
"Exchange Act") against any losses,  claims,  damages, or liabilities,  joint or
several (the "Losses"),  to which such  Stockholder,  or controlling  person may
become subject under the Act, the Exchange Act or any state  securities laws, or
otherwise,  insofar as such Losses (or actions in respect  thereof) arise out of
or are based upon (i) any untrue  statement or alleged  untrue  statement of any
material  fact  contained  in  the  registration   statement  under  which  such
Registerable   Shares  were   registered   pursuant  to  this   Agreement   (the
"Registration  Statement"),  any  preliminary  prospectus  or  final  prospectus
contained in the Registration  Statement,  or any amendment or supplement to the
Registration  Statement,  or (ii) any  omission  or alleged  omission to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading;  provided,  however, that the Company will not be liable
to a Stockholder in any such case to the extent that any such Loss arises out of
or is based upon any  untrue  statement  or  omission  made in the  Registration
Statement, preliminary prospectus, or final prospectus, or any such amendment or
supplement, in reliance upon and in conformity with information furnished to the
Company,  in writing,  by or on behalf of such Stockholder or controlling person
specifically for use in the preparation thereof.

     4.2.  Subject to Section  4.4,  each of the  Stockholders,  severally  with
respect to itself, shall indemnify and hold harmless the Company, and each other
person,  if any, who  controls the Company  within the meaning of the Act or the
Exchange Act against any Losses to which the Company,  or controlling person may
become subject under the Act, the Exchange Act, state


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<PAGE>

securities  laws,  or  otherwise,  insofar as such Losses (or actions in respect
thereof) arise out of or are based upon (i) any untrue  statement or alleged any
untrue statement of any material fact contained in the  Registration  Statement,
any preliminary  prospectus or final  prospectus  contained in the  Registration
Statement,  or any amendment or supplement to the Registration Statement, to the
extent that any such statement was made in reliance upon and in conformity  with
the information  furnished to the Company,  in writing,  by or on behalf of such
Stockholder  or  controlling  person  specifically  for  use in the  preparation
thereof,  or (ii) the  omission  or alleged  omission  to state a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading  which  omission  was made in reliance  upon and in  conformity  with
information  furnished  to the  Company,  in  writing,  by or on  behalf of such
Stockholder  or  controlling  person  specifically  for  use in the  preparation
thereof.

     4.3. If any action is brought against a person entitled to  indemnification
pursuant  to this  Section  4 (an  "indemnified  party")  in  respect  of  which
indemnity  may  be  sought  against  a  person  granting   indemnification   (an
"indemnifying  party") pursuant to such Section,  such  indemnified  party shall
promptly notify such indemnifying  party in writing of the commencement  thereof
(provided  the omission to so notify the  indemnifying  party of any such action
shall not release the indemnifying  party from any liability it may have to such
indemnified  party  except to the extent such  failure  shall have  actually and
materially  prejudiced the indemnifying party as a result thereof).  In case any
such  action  is  brought  against  any  indemnified  party and it  notifies  an
indemnifying party of the commencement  thereof,  the indemnifying party against
which a claim is to be made  will be  entitled  to  participate  in the  defense
thereof and, to the extent that it may wish, to assume the defense thereof, with
counsel reasonably  satisfactory to such indemnified party;  provided,  however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall reasonably conclude based
upon advice of counsel that there may be legal  defenses  available to it and/or
other  indemnified  parties  which are  different  from or  additional  to those
available to the indemnifying  party, the indemnified party shall have the right
to select  separate  counsel to assume  such legal  defenses  and  otherwise  to
participate in the defense of such action on behalf of such indemnified party or
parties  (the  "Separate  Counsel  Proviso").  Upon  receipt of notice  from the
indemnifying  party to such  indemnified  party of its election so to assume the
defense of such action and approval by that  indemnified  party of counsel,  the
indemnifying  party  will not be liable to such  indemnified  party  under  this
Section  4 for  any  legal  or  other  expenses  subsequently  incurred  by such
indemnified  party  in  connection  with  the  defense  thereof  unless  (i) the
indemnified  party  shall have  employed  such  counsel in  connection  with the
assumption of legal defenses in accordance with the Separate Counsel Proviso (it
being understood,  however,  that the indemnifying party shall not be liable for
the expenses of more than one separate  counsel),  (ii) the  indemnifying  party
shall not have employed counsel reasonably satisfactory to the indemnified party
to represent  the  indemnified  party  within a reasonable  time after notice of
commencement of the action,  or (iii) the indemnifying  party has authorized the
employment  of  counsel  for  the  indemnified  party  at  the  expense  of  the
indemnifying party. An indemnifying party shall not be liable for any settlement
of any action or proceeding effected without its written consent.


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<PAGE>

     4.4. No claim may be made against an indemnifying party for indemnification
by any  indemnified  party  pursuant  to this  Section  4 unless  the  aggregate
liability of the indemnifying party to the indemnified parties hereunder exceeds
$75,000 ("Minimum Liability").

     5. Assignment of Registration  Rights. The rights of a Stockholder pursuant
to this  Agreement  shall be  automatically  assigned by any  Stockholder to any
transferee  of all or any  portion  of the  Registerable  Shares  held  by  such
Stockholder if: (a) the Transfer of  Registerable  Shares to such transferee was
made in accordance with Section 2.3 hereof, (b) such Stockholder provides a copy
of the written agreement with the transferee within a reasonable time after such
Transfer and (c) the  transferee  agrees in writing with the Company to be bound
by all  of the  provisions  contained  in  this  Agreement,  including,  without
limitation,  the  restrictions  on  Transfer  set  forth  in  Section  2 of this
Agreement  and the inclusion on Exhibit A hereto of such  transferee's  name and
number of DSSI Shares owned thereby).

     6. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the  observance  thereof  may be waived  (either  generally  or in a
particular  instance and either  retroactively or  prospectively)  only with the
written consent of the Company and the holders of all Registerable  Shares which
are not then  saleable  pursuant  to Rule 144  within  the  coming 90 days.  Any
amendment or waiver made in accordance with this Section 6 shall be binding upon
all the Stockholders, all transferees of each Stockholder and the Company.

     7. Legend. The Stockholders  agree that all stock  certificates  evidencing
DSSI Shares held by them or any of their respective transferees,  in addition to
any notice thereon  required by the applicable law, shall bear  conspicuously on
the face or back thereof, a legend reading substantially as follows:

     "Until  September 13, 2002,  this  certificate  and the shares  represented
hereby are subject to restrictions on transfer,  and may not be sold,  assigned,
transferred  or otherwise  disposed  of, nor may a security  interest be created
herein or therein, except in accordance with the terms of a certain Registration
Rights  Agreement,  dated as of December 13, 2001, by and among the  Corporation
and certain of its stockholders  listed therein, a copy of which may be examined
at the offices of the Corporation."

     8. Miscellaneous.

     8.1.  Subject to the  requirements of Section 6 of this Agreement,  neither
this  agreement  nor any  provisions  hereof  shall be modified,  discharged  or
terminated  except by an instrument in writing  signed by the party against whom
any such waiver, change, discharge or termination is sought to be enforced.

     8.2.  All  notices,  requests,  claims,  demands  and other  communications
hereunder  shall be in  writing  and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile, by registered
or certified  airmail  (postage  prepaid,  return receipt  requested) or sent by
internationally-recognized  courier to each other party as set forth below or to
such other address as the party to whom notice is to be given may have furnished
to


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<PAGE>

the other parties hereto in writing in accordance  herewith.  Any such notice or
communication  shall be deemed to have been  delivered  and  received (a) in the
case of  personal  delivery,  on the date of such  delivery,  (b) in the case of
facsimile,  on the date sent if  confirmation  of receipt is  received  and such
notice is also  promptly  mailed by  registered  or  certified  airmail  (return
receipt requested) or by internationally-recognized  courier, (c) in the case of
a internationally-recognized  courier, on the second business day after the date
when sent and (d) in the case of mailing,  on the fifth  business day  following
that date on which the piece of mail containing such communication is posted:

                                if to the Company:

                                Data Systems & Software Inc.
                                200 Route 17
                                Mahwah, New Jersey 07430
                                United States
                                Attention: George Morgenstern
                                Facsimile:  201-529-3163

                                With a copy to:

                                Ehrenreich Eilenberg & Krause, LLP
                                11 East 40th Street, 17th Floor
                                New York, New York 10017
                                Attention: Sheldon Krause, Esq.
                                Facsimile:  212-986-2399

                                If to a Stockholder:

                                To the address set forth opposite
                                Such Stockholder's name on Exhibit A

     8.3. If any provision of this Agreement  shall be invalid or  unenforceable
in any  jurisdiction,  such  validity or  unenforceability  shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

     8.4. This  Agreement  constitutes  the entire  agreement  among the parties
hereto with respect to the subject matter hereof. This Agreement  supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.

     8.5. This agreement  shall be governed by and construed in accordance  with
the law of the  State  of New  York  applicable  to  agreements  made  and to be
performed in that State. Each of the parties consents to the jurisdiction of the
federal  courts whose  districts  encompass  any part of the County of New York,
State of New York or the state  courts of the State of New York  sitting  in the
County of New York in connection  with any dispute  arising under this Agreement


                                       6
<PAGE>

and hereby  waives,  to the maximum  extent  permitted  by law,  any  objection,
including any objection  based on forum non  conveniens,  to the bringing of any
such proceeding in such jurisdictions.

     8.6. The headings of this  Agreement are for  convenience  of reference and
shall not form part of, or affect the interpretation of, this Agreement.

     8.7. This agreement may be executed  through the use of separate  signature
pages or in any number of counterparts, and each of such counterparts shall, for
all   purposes,   constitute   one   agreement   binding  on  all  the  parties,
notwithstanding that all parties are not signatories to the same counterpart.


[Signatures appear on next page]



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<PAGE>

     IN  WITNESS  WHEREOF,  the  undersigned  has  caused  to be  executed  this
agreement as of the date indicated and agrees to be bound by this agreement.



                                          DATA SYSTEMS AND SOFTWARE INC.
                                          By: s/Yacov Kaufman
                                              ----------------------------
                                          Name:
                                          Title:


                                          KARDAN COMMUNICATIONS LTD.


                                          By: s/Avraham Kurzweil
                                              ----------------------------
                                          Name:
                                          Title:

                                          By: s/Israel Frieder
                                              ----------------------------
                                          Name:
                                          Title:


                                          s/Yossi Avraham
                                          --------------------------------
                                          ADV. YOSSI AVRAHAM AS TRUSTEE
                                          FOR MEIR GIVON



                                       8
<PAGE>

                            EXHIBIT A - STOCKHOLDERS


--------------------------------------------------------------------------------

Name and Address of Stockholder                      Number of DSSI Shares Owned
--------------------------------------------------------------------------------
Kardan Communications Ltd.                           354,218
154 Petach Tikva Rd.Tel Aviv  64921, Israel
Facsimile: +972-3-691-3457

With a copy to:
Shem-tov, Ickovics, Engler & Co.
9 Montefiore St., Tel Aviv  65252, Israel
Attention: Jay Neustadter, Adv.
Facsimile: +972-3-5100898
--------------------------------------------------------------------------------
Adv. Yossi Avraham, as Trustee for Meir Givon        10,993
13 Admonit St., Zoran  42823, Israel
Facsimile: +972-9-8949442

--------------------------------------------------------------------------------


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