Document:

EXHIBIT 10.4

                           INVESTORS' RIGHTS AGREEMENT
                           ---------------------------

                  THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as
of the 7th day of August, 2006 among Paketeria GmbH, a limited liability company
incorporated under the laws of Germany, Data Systems & Software Inc., a Delaware
corporation (the "Investor"),  and each shareholder of the Company, all of which
are listed on Schedule A hereto  (each a  "Shareholder"  and  collectively,  the
"Shareholders"),  and  any  additional  Person  that  becomes  a  party  to this
Agreement in accordance with Section 8.1 and Section 9.1 hereof.

                                    RECITALS
                                    --------

                  WHEREAS,  the Company,  the  Shareholders and the Investor are
parties  to the Common  Stock  Purchase  Agreement  of even date  herewith  (the
"Purchase Agreement"); and

                  WHEREAS,  in order to induce  the  Company  to enter  into the
Purchase  Agreement  and to induce the  Investor to invest  funds in the Company
pursuant  to  the  Purchase  Agreement,  the  Investor,  the  Company  and  each
Shareholder  of the Company  hereby agree that this  Agreement  shall govern the
rights of the  Investor to cause the Company to register  shares of Common Stock
issuable to the Investor,  to receive certain information from the Company,  and
to  participate  in future  equity  offerings by the  Company,  and shall govern
certain other matters as set forth in this Agreement;

                  NOW, THEREFORE, the parties hereby agree as follows:

      1. Definitions. For purposes of this Agreement:

            1.1 "Affiliate"  means,  with respect to any specified  Person,  any
other Person who or which,  directly or indirectly,  controls, is controlled by,
or is under  common  control  with  such  specified  Person,  including  without
limitation any partner,  officer,  director,  manager or employee of such Person
and any venture capital fund now or hereafter  existing that is controlled by or
under common control with one or more general  partners or managing  members of,
or shares the same management company with, such Person.

            1.2  "Common  Stock"  means  shares of the  Company's  common  stock
("Stammkapital")  or - after conversion of the Company into a Stock  Corporation
("AG")- of its "Grundkapital".

            1.3   "Derivative   Securities"   means  any  securities  or  rights
convertible  into, or exercisable or exchangeable  for, Common Stock,  including
options and warrants.

            1.4 "Founders" means each of Andy Roesch and Viola Roesch

            1.5 "GAAP" means  generally  accepted  accounting  principles in the
United States.

            1.6 "Immediate Family Member" means a child, stepchild,  grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law,  father-in-law,
son-in-law,   daughter-in-law,   brother-in-law,  or  sister-in-law,   including
adoptive relationships, of a natural person referred to herein.

                                      -1-
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            1.7 "IPO" means the Company's first  underwritten  public  offering,
after its conversion into a Stock Corporation, of its Common Stock.

            1.8 "Key Employee"  means any  executive-level  employee  (including
division  director and vice  president-level  positions) as well as any employee
who, either alone or in concert with others,  develops,  invents,  programs,  or
designs  any  Company   Intellectual   Property  (as  defined  in  the  Purchase
Agreement).

            1.9 "New Securities" means,  collectively,  equity securities of the
Company,  whether or not currently  authorized,  as well as rights,  options, or
warrants  to  purchase  such  equity  securities,  or  securities  of  any  type
whatsoever  that  are,  or may  become,  convertible  or  exchangeable  into  or
exercisable for such equity securities.

            1.10 "Permitted  Issuances"  means (i) shares of Common Stock or the
Derivative  Securities  therefor  issued by reason of a dividend,  stock  split,
split-up,  conversion or other  distribution on shares of Common Stock; (ii) the
issuance of  securities  pursuant to the  conversion,  exercise,  or exchange of
Derivative  Securities  outstanding  on the date hereof;  (iii);  (iv) shares of
Common Stock issued in the IPO; or (v)  securities of the Company that otherwise
are excluded by the affirmative vote or consent of the Investor

            1.11 "Person" means any individual, corporation, partnership, trust,
limited liability company, association or other entity.

            1.12  "Prospective  Transferee"  means any  Person to whom a Founder
proposes to make a Proposed Founder Transfer.

            1.13  "Registrable  Securities" means (i) the shares of Common Stock
issued to the Investor  pursuant to the Purchase  Agreement;  (ii) the shares of
Common Stock  issuable upon  conversion of the Long Term Note (as defined in the
Purchase  Agreement),  (iii)  the  shares of Common  Stock  transferable  to the
Investor  pursuant to the M & R Option  Agreement  (as  defined in the  Purchase
Agreement),  (iv) any shares of Common Stock  acquired by the Investor after the
date hereof;  (v) any shares of Common Stock issued or issuable upon  conversion
of any capital  stock of the Company  acquired  by the  Investor  after the date
hereof;  and (vi) any shares of Common  Stock  issued as (or  issuable  upon the
conversion or exercise of any warrant,  right,  or other security that is issued
as) a  dividend  or other  distribution  or  otherwise  with  respect  to, or in
exchange for or in replacement of, the shares  referenced in clauses (i) through
(v) above.

      2. Registration Rights.

            2.1 Demand  Registration.  In the event that the  securities  of the
Company or any  successor  thereof  shall at any time be tradeable in any public
market, whether as a result of registration,  qualification,  or otherwise,  the
Company  shall,  at the request of the holders of a majority of the  Registrable
Securities, undertake and complete, at the sole cost and expense of the Company,
such  regulatory  and  other  procedures  as shall  permit  the  holders  of the
Registrable  Securities to resell the Registrable Securities held thereby (or by
their   transferees)   into  such  public  market  from  time  to  time  without
restriction.

                                      -2-
<PAGE>

      3. Information and Observer Rights.

            3.1 Delivery of Financial  Statements.  From the date hereof through
December 31, 2006,  the Company shall deliver to the Investor (i) each financial
statement the Company is required to produce  pursuant to German law,  including
any financial statement applicable to the year ended December 31, 2006, and (ii)
as soon as  practicable,  but in any event at least  thirty  (30) days  prior to
December 31, 2006, a budget and business plan for fiscal year 2007,  prepared on
a monthly basis, including balance sheets, income statements,  and statements of
cash flow for such months and,  promptly  after  prepared,  any other budgets or
revised  budgets  prepared by the Company.  Beginning as of January 1, 2007, the
Company shall deliver to the Investor:

               (a) as soon as  practicable,  but in any event within one hundred
twenty  (120)  days  after the end of each  fiscal  year of the  Company,  (i) a
balance sheet as of the end of such year; (ii) statements of profit and loss and
of cash flows for such year; and (iii) a statement of stockholders' equity as of
the end of such year, audited and certified by independent public accountants of
regionally   recognized   standing  selected  and  appointed  by  the  Company's
shareholders' meeting;

               (b) as soon as  practicable,  but in any event within thirty (30)
days of the end of each  fiscal  quarter,  an  unaudited  income  statement  and
statement  of cash  flows  for such  quarter,  an  unaudited  balance  sheet and
statement of stockholders' equity as of the end of such quarter, all prepared in
accordance  with GAAP  (except that the  financial  report may (i) be subject to
normal  year-end audit  adjustments  and (ii) not contain all notes thereto that
may  be  required  in  accordance  with  GAAP),  and a  management's  discussion
reporting on additional metrics, including employment;

               (c) as soon as  practicable,  but in any event  thirty  (30) days
before the end of each  fiscal  year,  a budget and  business  plan for the next
fiscal year,  prepared on a monthly  basis,  including  balance  sheets,  income
statements,  and  statements  of cash flow for such months and,  promptly  after
prepared, any other budgets or revised budgets prepared by the Company; and

               (d) such other information  relating to the financial  condition,
business,  prospects,  or  corporate  affairs of the Company as the Investor may
from time to time reasonably request.

If,  for  any  period,  the  Company  has  any  subsidiary  whose  accounts  are
consolidated  with those of the  Company,  then in  respect  of such  period the
financial  statements  delivered pursuant to the foregoing sections shall be the
consolidated and consolidating  financial statements of the Company and all such
consolidated subsidiaries.

                                      -3-
<PAGE>

            3.2  Inspection.  Without  prejudice  to the rights of the  Investor
under  Statutory  Law, the Company shall permit the Investor,  at the Investor's
expense,  to visit and inspect the  Company's  properties;  examine its books of
account and records; and discuss the Company's affairs,  finances,  and accounts
with its officers,  directors,  Key Employee and independent  public  accountant
during normal  business  hours of the Company as may be reasonably  requested by
the  Investor;  provided,  however,  that the  Company  shall  not be  obligated
pursuant  to this  Section  3.2 to  provide  access to any  information  that it
reasonably  considers to be a trade secret or confidential  information  (unless
covered by an enforceable  confidentiality  agreement, in form acceptable to the
Company) or the disclosure of which would adversely  affect the  attorney-client
privilege between the Company and its counsel.

            3.3 Further  Information.  The Company  shall  provide the  Investor
prompt written notice of material events and communications (oral or in writing)
with and from  any  Person  interested  in  acquiring  the  Company  or  forming
strategic relationships.

            3.4   Confidentiality.   The  Investor  agrees  that  it  will  keep
confidential and will not disclose,  divulge, or use for any purpose (other than
to monitor its investment in the Company) any confidential  information obtained
from  the  Company  pursuant  to  the  terms  of  this  Agreement,  unless  such
confidential  information (a) is known or becomes known to the public in general
(other than as a result of a breach of this Section 3.4 by the Investor), (b) is
or has been independently  developed or conceived by the Investor without use of
the  Company's  confidential  information,  or (c) is or has been made  known or
disclosed to the Investor by a third party without a breach of any obligation of
confidentiality  such third party may have to the  Company;  provided,  however,
that the Investor may disclose  confidential  information  (i) to its attorneys,
accountants,  consultants,  and other  professionals  to the extent necessary to
obtain their  services in  connection  with  monitoring  its  investment  in the
Company;  (ii) to any prospective  purchaser of any Registrable  Securities from
the Investor, if such prospective purchaser agrees to be bound by the provisions
of this Section 3.4; (iii) to any Affiliate,  partner, member,  stockholder,  or
wholly owned  subsidiary  of such  Investor in the ordinary  course of business,
provided  that the  Investor  informs  such  Person  that  such  information  is
confidential  and directs  such Person to maintain the  confidentiality  of such
information;  or (iv) as may  otherwise  be required by law,  provided  that the
Investor  promptly  notifies the Company of such disclosure and takes reasonable
steps to  minimize  the  extent of any such  required  disclosure.  The  Company
acknowledges  that  certain  officers  of the  Investor  are in the  business of
venture  capital  investing and therefore  review the business plans and related
proprietary information of many enterprises, including enterprises that may have
products or services  that  compete  directly  or  indirectly  with those of the
Company.  Nothing in this  Agreement  shall preclude or in any way restrict such
officers of the Investor  from  investing  or  participating  in any  particular
enterprise,  regardless of whether such enterprise has products or services that
compete with those of the Company.

      4. Rights to Future Stock Issuances.

            4.1 Right of First  Offer.  Subject to the terms and  conditions  of
this Section 4.1 and  applicable  securities  laws,  if the Company  proposes to
offer or sell  any New  Securities,  the  Company  shall  first  offer  such New
Securities  to the  Investor.  The Investor  shall be entitled to apportion  the
right of first offer  hereby  granted to it among itself and its  Affiliates  in
such proportions as it deems appropriate.

               (a) The Company  shall give  notice  (the "Offer  Notice") to the
Investor, stating (i) its bona fide intention to offer such New Securities, (ii)
the number of such New Securities to be offered,  and (iii) the price and terms,
if any, upon which it proposes to offer such New Securities.

                                      -4-
<PAGE>

               (b) By  notification to the Company within thirty (30) days after
the Offer Notice is given,  the Investor,  through itself and/or its Affiliates,
may  elect to  purchase  or  otherwise  acquire,  at the  price and on the terms
specified in the Offer Notice,  up to that portion of such New Securities  which
equals  the  proportion  that the  Common  Stock  issued  and held and any other
Derivative Securities then held, by the Investor bears to the total Common Stock
of the Company then  outstanding  (assuming full  conversion and exercise of all
Derivative Securities).  The closing of any sale pursuant to this Section 4.1(b)
shall occur within sixty (60) days of the date that the Offer Notice is given.

               (c) If all New Securities referred to in the Offer Notice are not
elected to be purchased or acquired as provided in Section  4.1(b),  the Company
may,  during the ninety (90) day period  following the  expiration of the period
provided in Section 4.1(b), offer and sell the remaining unsubscribed portion of
such New  Securities to any Person or Persons at a price not less than, and upon
terms no more  favorable  to the  offeree  than,  those  specified  in the Offer
Notice.  If the Company does not enter into an agreement for the sale of the New
Securities  within such period,  or if such agreement is not consummated  within
thirty (30) days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such New  Securities  shall not be offered unless first
reoffered to the Investor in accordance with this Section 4.1.

               (d) The  right of first  offer in this  Section  4.1 shall not be
applicable to Permitted Issuances.

            4.2  Termination.  The  covenants  set  forth in  Section  4.1 shall
terminate  and  be  of  no  further  force  or  effect  immediately  before  the
consummation of the IPO.

      5. Right of Co-Sale.

               (a)  Exercise of Right.  Subject to the terms and  conditions  of
this Section 5 and applicable  securities  laws, if any Founder  intends to sell
any capital stock  (including  any Common Stock) to any third party (a "Proposed
Founder  Transfer"),  such Founder must deliver  written  notice (the  "Proposed
Transfer  Notice") to the Investor not later than  forty-five (45) days prior to
the  consummation  of such Proposed  Founder  Transfer;  such Proposed  Transfer
Notice shall contain the material terms and conditions (including price and form
of  consideration)  of the  Proposed  Founder  Transfer  and the identity of the
Prospective Transferee.  The Investor shall have the right to, and may elect to,
participate on a pro rata basis in the Proposed  Founder Transfer (the "Right of
Co-Sale") as set forth in Section 5(b) below and otherwise on the same terms and
conditions  specified in the Proposed  Transfer  Notice  (provided  that if such
Founder is selling capital stock other than Common Stock, the price set forth in
the Proposed Transfer Notice shall be appropriately adjusted into Common Stock).
If the Investor desires to exercise its Right of Co-Sale, the Investor must give
the selling Founder written notice to that effect within fifteen (15) days after
receipt  of the  Proposed  Transfer  Notice,  and upon  giving  such  notice the
Investor shall be deemed to have effectively  exercised the Right of Co-Sale and
such selling Founder shall not consummate such Proposed Founder Transfer without
the  inclusion  of the shares of Common  Stock of the  Investor  as to which the
Right of Co-Sale has been exercised.

                                      -5-
<PAGE>

               (b) Shares Includable. Upon exercise of the Right of Co-Sale, the
Investor  may include in the Proposed  Founder  Transfer all or any part of such
Investor's  Common Stock equal to the product  obtained by  multiplying  (i) the
aggregate  number of shares of Common  Stock owned by the  Investor  immediately
before  consummation of the Proposed  Founder  Transfer by (ii) a fraction,  the
numerator  of which is the number of shares of  capital  stock to be sold in the
Proposed Founder  Transfer,  and the denominator of which is the total number of
shares  of  capital  stock  owned  by  the  Founders  immediately  prior  to the
consummation of the Proposed  Founder  Transfer.  In the event that the Investor
exercises such Right of Co-Sale in accordance  with the terms and conditions set
forth herein, and the Prospective Transferee is unwilling to purchase the shares
described  in the  Proposed  Transfer  Notice plus the number of shares that the
Investor  is entitled  to sell  pursuant to the Right of Co-Sale,  the number of
shares of  capital  stock  that the  selling  Founder  may sell in the  Proposed
Founder Transfer shall be reduced on a pro rata basis.

               (c)  Delivery of  Certificates.  The  Investor  shall  effect its
participation  in the Proposed  Founder  Transfer by  delivering  to the selling
Founder,  no later than fifteen (15) days after the  Investor's  exercise of the
Right of Co-Sale,  a duly executed power of attorney relating to the sale of the
number of shares of Common  Stock  that the  Investor  elects to  include in the
Proposed Founder Transfer.

               (d) Purchase  Agreement.  The parties hereby agree that the terms
and conditions of any sale pursuant to this Section 5 will be  memorialized  in,
and governed by, a written  purchase and sale agreement with customary terms and
provisions for such a transaction and the parties further  covenant and agree to
enter  into such an  agreement  as a  condition  precedent  to any sale or other
transfer pursuant to this Section 5.

               (e) Deliveries.  The shares covered by the power of attorney that
the Investor delivers to the selling Founder pursuant to Section 5(c) above will
be  transferred  to the  Prospective  Transferee  against  payment  therefor  in
consummation of the sale  contemplated by the Proposed Founder Transfer pursuant
to the terms and conditions  specified in the Proposed  Transfer  Notice and the
purchase  and  sale  agreement,  and  the  selling  Founder  shall  concurrently
therewith  remit or direct  payment to the  Investor of that portion of the sale
proceeds to which the  Investor is  entitled by reason of its  participation  in
such sale. If any  Prospective  Transferee or Transferees  refuse(s) to purchase
securities  subject to the Right of Co-Sale  from the  Investor  exercising  its
Right of  Co-Sale  hereunder,  no  Founder  may sell any  capital  stock to such
Prospective Transferee or Transferees unless and until, simultaneously with such
sale, such Founder purchases all securities subject to the Right of Co-Sale from
the Investor on the same terms and conditions  (including the proposed  purchase
price) as set forth in the Proposed Transfer Notice.

                                      -6-
<PAGE>

               (f) Additional  Compliance.  If any Proposed  Founder Transfer is
not  consummated  within sixty (60) days after receipt of the Proposed  Transfer
Notice by the Investor,  the Founder proposing the Proposed Founder Transfer may
not sell any capital stock unless they first comply in full with each  provision
of this  Section 5. The  exercise or election  not to exercise  any right by the
Investor  hereunder  shall not adversely  affect its right to participate in any
other purchases or sales of capital stock subject to this Section .

               (g) Violation of Co-Sale Right.  If any Founder  purports to sell
any  capital  stock in  contravention  of the Right of  Co-Sale  (a  "Prohibited
Transfer"),  the Investor  may, in addition to such remedies as may be available
by law,  in equity or  hereunder,  require  such  Founder to  purchase  from the
Investor the number of shares of Common Stock that the Investor  would have been
entitled  to sell to the  Prospective  Transferee  under this  Section 5 had the
Prohibited  Transfer been effected  pursuant to and in compliance with the terms
of Section  5. The sale will be made on the same  terms and  subject to the same
conditions  as would  have  applied  had the  Founder  not  made the  Prohibited
Transfer, except that the sale (including,  without limitation,  the delivery of
the  purchase  price)  must be made within  twenty (20) days after the  Investor
learns of the  Prohibited  Transfer,  as opposed to the timeframe  prescribed in
Section  5(f).  Such Founder  shall also  reimburse the Investor for any and all
reasonable and documented out-of-pocket fees and expenses,  including reasonable
legal fees and  expenses,  incurred  pursuant to the  exercise or the  attempted
exercise of the Investor's rights under Section 5.

      6. Anti-Dilution Protection.

               (a) If at any time or from  time to time  after  the date of this
Agreement,  the Company issues or sells, or is deemed by the express  provisions
of this Section 6 to have issued or sold,  Additional Shares of Common Stock (as
defined in Section 6(d) hereof),  for an Effective  Price (as defined in Section
6(d))  less than the then  applicable  Adjusted  Price Per Share (as  defined in
Section  6(d)),  then in each such  case,  in  consideration  of the  Investor's
payment of the requisite par value of the Common Stock to be issued  pursuant to
this Section 6.1(a), the Company shall issue an additional share of Common Stock
to the  Investor,  as of the  opening of  business  on the date of such issue or
sale, the nominal Euro value of such additional  share to be calculated by using
the following formula:

                           D = ((A * B)/C)  - B

                  For purpose of the foregoing formula:

                  A =    Adjusted Price Per Share.
                  B      Nominal  amount of the  Common  Stock of the  Company
                         issued  to  the  Investor   pursuant  to  the  Purchase
                         Agreement.
                  C =    Effective Price of Additional Shares of Common Stock.
                  D =    Nominal value of the  additional  share of Common Stock
                         to be issued to the  Investor.

      If D is not divisible by 50, the nominal value of the additional  share of
Common Stock to be issued to the  Investor  shall be the value that results from
rounding D to the next higher value divisible by 50.

                                      -7-
<PAGE>

               (b) For the purpose of the adjustment required under this Section
6, the consideration received by the Company for any issue or sale of securities
shall (i) to the extent it  consists  of cash,  be computed at the net amount of
cash  received by the Company  after  deduction of any  underwriting  or similar
commissions,  compensation  or  concessions  paid or allowed  by the  Company in
connection with such issue or sale but without deduction of any expenses payable
by the Company,  (ii) to the extent it consists of property  other than cash, be
computed at the fair value of that  property as  determined in good faith by the
managing  directors of the  Company,  and (iii) if  Additional  Shares of Common
Stock,  Convertible Securities (as defined in Section 6(c)) or rights or options
to purchase either Additional  Shares of Common Stock or Convertible  Securities
are issued or sold  together  with other stock or  securities or other assets of
the Company for a consideration which covers both, be computed as the portion of
the consideration so received that may be reasonably determined in good faith by
the  managing  directors to be  allocable  to such  Additional  Shares of Common
Stock, Convertible Securities or rights or options.

               (c) For the purpose of the adjustment required under this Section
6, if the  Company  issues or sells (i)  stock or other  securities  convertible
into,  Additional  Shares of Common Stock (such  convertible stock or securities
being herein referred to as "Convertible  Securities") or (ii) rights or options
for the purchase of Additional Shares of Common Stock or Convertible  Securities
and if the  Effective  Price of such  Additional  Shares of Common Stock is less
than the Price Per Share,  in each case the Company  shall not be deemed to have
issued the Additional Shares of Common Stock at the time of the issuance of such
rights or options or  Convertible  Securities.  The  adjustment  to the Adjusted
Price Per Share shall occur upon the  issuance of shares of Common  Stock issued
due to the sale or upon the  conversion or exercise of such rights or options or
Convertible Securities.

               (d) For  purposes of this  Section 6, the  following  terms shall
have the meaning assigned below:

                                    (i)  "Additional  Shares  of  Common  Stock"
                  shall mean all shares of Common Stock issued by the Company or
                  deemed to be issued  pursuant  to this  Section  6, other than
                  Permitted Issuances.

                                    (ii)  "Adjusted  Price Per Share" shall mean
                  initially,  (euro)50.70  for each Euro nominal value of shares
                  of Common Stock of the Company  (subject to adjustment for any
                  splits,  reserve  splits,  combinations or similar events) and
                  shall  be  reduced  to the  Effective  Price  as  used  in the
                  application of this Section 6 to the immediately prior sale or
                  issuance of Additional Shares of Common Stock.

                                    (iii) "Effective Price" of Additional Shares
                  of Common Stock shall mean the quotient determined by dividing
                  the aggregate  nominal  value of  Additional  Shares of Common
                  Stock issued or sold, or deemed to have been issued or sold by
                  the  Company   under  this   Section  6  into  the   aggregate
                  consideration received, or deemed to have been received by the
                  Company  for  such  issue  under  this   Section  6  for  such
                  Additional Shares of Common Stock.

                                      -8-
<PAGE>

      7.  Protective  Provisions.  Without  the prior  written  approval  of the
Investor  (in  addition  to any  stockholder  approval  as may  be  required  by
applicable statute,  the organizational  documents of the Company,  agreement or
otherwise) the Company or its shareholders or subsidiaries (if any) shall not:

                  (i)  liquidate,  dissolve,  re-capitalize  or  reorganize  the
Company or any of its subsidiaries (if any), merge or consolidate, or enter into
any agreement to merge or  consolidate,  the Company or any of its  subsidiaries
(if any) with or into any other entity,  or effect a share exchange  pursuant to
which any of the  outstanding  shares of Common Stock are  converted  into other
securities or property;

                  (ii) declare dividends or distribution of any kind, other than
dividends payable pro rata to all holders of Common Stock solely in the issuance
of shares of Common Stock;

                  (iii)  materially  change the nature of the  business in which
the Company is engaged as of the time of such determination;

                  (iv) approve any transaction or series of related transactions
in excess of (euro)  10,000 per annum with any  officer,  manager,  director  or
shareholder  of the Company or any of its  subsidiaries  or any  affiliate of an
officer,  manager,  director  of  shareholder  of  the  Company  or  any  of its
subsidiaries (including Immediate Family Members);

                  (v) increase  the annual cash  compensation  of the  Company's
chief executive officer above a gross amount of (euro) 150,000 per annum;

                  (vi) sell,  lease,  exchange,  transfer,  convey or  otherwise
dispose,  directly or indirectly, in a single transaction or a series of related
transactions,  of all or  substantially  all of the  property or business of the
Company or any of its  subsidiaries (if any) or effect any transaction or series
of related  transactions  in which more than fifty  percent  (50%) of the voting
power of the Company or any of its subsidiaries (if any) is disposed of;

                  (vii) except to the extent required by mandatory law, commence
any voluntary bankruptcy proceeding, liquidation,  reorganization,  dissolution,
conservation, delinquency or receivership proceeding, or a proceeding similar to
any of the foregoing or permit any involuntary  bankruptcy  proceeding to remain
unstayed  for more than 30 days from the date of the  petition  for  involuntary
bankruptcy;

                  (viii) amend the organizational documents of the Company so as
to adversely affects the rights, preferences,  restrictions or privileges of the
Investor;

                  (ix)  create  any  subsidiary  by  the  Company  or any of its
subsidiaries (if any), other than a wholly-owned subsidiary;

                  (x)  incur  any  indebtedness  by  the  Company  or any of its
subsidiaries  (if any),  directly or  indirectly,  in a single  transaction or a
series of related  transactions,  in excess of (euro) 215,000, or enter into any
agreement  pursuant to which the Company or any of its  subsidiaries  (if any) ,
directly  or  indirectly,  in a  single  transaction  or  a  series  of  related
transactions,  may be obligated to pay amounts,  or provide goods or services so
that the  total  aggregate  value  of such  obligations  and the  aforementioned
indebtedness exceeds (euro) 500,000;

                                      -9-
<PAGE>

                  (xi) redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking  fund for such  purpose) any share or shares of Common Stock
(such covenant to also prohibit,  without  limitation,  any redemption,  whether
voluntary  or not,  under Sec.  10 of the  Restated  Articles  of the  Company);
provided,  however,  that this restriction  shall not apply to the repurchase of
shares of Common Stock from employees or other persons  performing  services for
this Company or any of its  subsidiaries  (if any) pursuant to agreements  under
which this Company has the option to repurchase  such shares upon the occurrence
of certain events, such as the termination of employment; or

                  (xii)  authorize,  issue or create any additional  security or
class  of  stock  of the  Company  or,  any  other  type of  instrument  that is
convertible  into or  exchangeable  into a  security  or  class  of stock of the
Company.

      8. Additional Covenants.

            8.1 Transfer.  No shares of the capital stock of the Company held by
a Shareholder,  including the Founders, may be transferred (or encumbered) other
than with the Investor's  prior written  consent until such time as the later of
(i) any shares of the Company's equity securities are publicly traded,  and (ii)
the third  anniversary  of the date hereof.  The  Investor's  consent  cannot be
withheld if such proposed  transfer is to an Immediate  Family Member (or trusts
or partnerships  wholly owned or benefiting  such parties) of such  Shareholder,
provided, that such transfer shall be contingent upon the transferee providing a
written  instrument  to the Company  notifying  the Company of such transfer and
such  transferee  becoming a party to this Agreement by executing and delivering
an  additional  counterpart  signature  page to this  Agreement  to the Company.
Notwithstanding the foregoing,  up to five percent (5%) of the shares of capital
stock held by Andy Roesch as of the date hereof, may by transferred  without the
Investor's prior written consent to a third party, provided, such third party is
an  employee  of the  Company as of the  effective  date of such  transfer  and,
provided,  further,  that such transfer shall be contingent  upon the transferee
providing  a written  instrument  to the Company  notifying  the Company of such
transfer and such transferee becoming a party to this Agreement by executing and
delivering an additional  counterpart  signature  page to this  Agreement to the
Company.  Thereafter,  in each  such  case of  permissible  transfer  hereunder,
following the delivery of the required written  instrument and signature page to
the Company,  such transferee  shall be deemed a "Shareholder"  for all purposes
hereunder.

            8.2 Shareholder Action. The Shareholders shall duly and promptly and
in the form required by law, resolve any shareholder resolution,  enter into any
agreement,  execute any  transaction and perform any other action (whether legal
or factual ) that is or may become  necessary  in order to enable the Company to
fulfill  its  obligations  and  covenants  under this  Agreement,  the  Purchase
Agreement  or any other part of the  Transaction  Agreements  (as defined in the
Purchase  Agreement),  including,  without  limitation,  the issuance of capital
stock  upon any  conversion  of the Long Term Note (as  defined in the Long Term
Note). The obligation pursuant to the immediately  preceding sentence to perform
any action  required in  connection  with any  conversion  of the Long Term Note
includes,  without limitation,  the shareholders' resolution for the increase of
the Company's  share capital as required  under the terms of the Long Term Note,
the admission of the Conversion Holder as sole subscriber to the new share under
such capital  increase,  the waiver of any shareholder other than the Conversion
holder  to  participate  in  such  capital  increase,  the  cooperation  in  the
subscription  by the Conversion  Holder of the new share,  and the filing of the
Capital Increase to the Commercial Register.

                                      -10-
<PAGE>

Notwithstanding   Section  9.9  hereof,   each  party  hereto  consents  to  the
non-exclusive  jurisdiction  of the  courts  of  competent  jurisdiction  of the
Republic of Germany with respect to any action brought by the Conversion  Holder
(as  defined in the Long Term Note) to enforce  its rights to convert  such Long
Term Note.

            8.3   Administrative   Board.   The  parties   shall   establish  an
Administrative  Board  as  provided  by  Sec.  7 of  the  Restated  Articles  of
Association,  by executing a shareholders'  resolution substantially in the form
attached to this  Agreement as Exhibit  8.3.  The Investor  will always have the
right to nominate at least 50% of the members of this Administrative  Board. One
member appointed by the Investor shall be appointed  chairman.  The Shareholders
shall  at  any  time  implement   such   nominations  by  passing  the  required
shareholders'  resolutions and shall abstain from any resolutions and actions in
contravention thereof.

      9. Miscellaneous.

            9.1 Successors and Assigns. The Investor hereby agrees that it shall
not, and may not,  assign any of its rights and  obligations  hereunder,  unless
such assignee provides a written instrument to the Company notifying the Company
of such  assignment  and  agreeing  in  writing to be bound by the terms of this
Agreement.  The terms and conditions of this  Agreement  inure to the benefit of
and are binding upon the respective  successors  and permitted  assignees of the
parties.  Nothing in this Agreement,  express or implied,  is intended to confer
upon any party other than the parties hereto or their respective  successors and
permitted assignees any rights, remedies, obligations or liabilities under or by
reason of this Agreement,  except as expressly provided herein.  During the term
of this Agreement, the Company shall condition any issuance of New Securities by
the Company upon the purchaser of such New Securities  agreeing to be bound,  in
writing, by the terms of this Agreement as a "Shareholder" hereunder.

            9.2 Governing Law. This Agreement shall be governed by and construed
in  accordance  with the laws of the  State of New York  without  regard  to its
principles of conflicts of laws.

            9.3 Titles and  Subtitles.  The  titles and  subtitles  used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting this Agreement.

            9.4 Notices. All notices,  requests,  and other communications given
or made  pursuant  to this  Agreement  shall be in  writing  and shall be deemed
effectively given (i) upon personal  delivery to the party to be notified;  (ii)
when sent by  confirmed  electronic  mail or  facsimile  if sent  during  normal
business  hours  of the  recipient,  and if not so  confirmed,  then on the next
business  day;  (iii)  five (5) days after  having  been sent by  registered  or
certified mail, return receipt requested,  postage prepaid;  or (iv) one (1) day
after  deposit  with  a  nationally  recognized  overnight  courier,  specifying
next-day  delivery,  with written  verification of receipt.  All  communications
shall be sent to the respective  parties at their  addresses as set forth on the
signature page or Schedule A hereto, or to such email address, facsimile number,
or address as  subsequently  modified by written notice given in accordance with
this Section  9.4. If notice is given to the Company,  a copy shall also be sent
to [Name], [Address], [fax number] Attention: [ ].

                                      -11-
<PAGE>

            9.5  Amendments  and  Waivers.  Any  term of this  Agreement  may be
amended and the  observance of any term of this  Agreement 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  Investor
unless  notarization  is required  for such  amendment.  The Company  shall give
prompt notice of any amendment or termination  hereof or waiver hereunder to any
party hereto. Any amendment,  termination, or waiver effected in accordance with
this Section 9.5 shall be binding on all parties  hereto,  regardless of whether
any such party has consented  thereto.  No waivers of or exceptions to any term,
condition, or provision of this Agreement,  in any one or more instances,  shall
be deemed to be or construed as a further or continuing waiver of any such term,
condition, or provision.

            9.6  Severability.  In  case  any  one or  more  of  the  provisions
contained  in this  Agreement  is for any reason held to be invalid,  illegal or
unenforceable in any respect, such invalidity,  illegality,  or unenforceability
shall not  affect  any other  provision  of this  Agreement,  and such  invalid,
illegal,  or unenforceable  provision shall be reformed and construed so that it
will be valid, legal, and enforceable to the maximum extent permitted by law.

            9.7 Aggregation of Stock. All shares of Registrable  Securities held
or  acquired  by  Affiliates  shall be  aggregated  together  for the purpose of
determining the availability of any rights under this Agreement.

            9.8 Entire  Agreement.  This Agreement  (including any Schedules and
Exhibits  hereto)  constitutes the full and entire  understanding  and agreement
between the parties with  respect to the subject  matter  hereof,  and any other
written or oral agreement relating to the subject matter hereof existing between
the parties is expressly canceled.

            9.9 Dispute  Resolution.  Subject to Section 8.2 hereof, the parties
(a) hereby  irrevocably and  unconditionally  submit to the  jurisdiction of the
state courts of New York and to the  jurisdiction  of the United States District
Court for the Southern  District of New York for the purpose of any suit, action
or other proceeding  arising out of or based upon this Agreement,  (b) agree not
to commence any suit,  action or other  proceeding  arising out of or based upon
this  Agreement  except in such courts,  and (c) hereby waive,  and agree not to
assert, by way of motion, as a defense,  or otherwise,  in any such suit, action
or proceeding,  any claim that it is not subject  personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution,  that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.

            9.10 Delays or  Omissions.  No delay or  omission  to  exercise  any
right,  power, or remedy  accruing to any party under this  Agreement,  upon any
breach or default of any other party under this Agreement, shall impair any such
right,  power, or remedy of such nonbreaching or nondefaulting  party, nor shall
it be construed to be a waiver of or acquiescence to any such breach or default,
or to any similar breach or default thereafter  occurring,  nor shall any waiver
of any  single  breach or  default  be  deemed a waiver  of any other  breach or
default theretofore or thereafter  occurring.  All remedies,  whether under this
Agreement or by law or otherwise  afforded to any party, shall be cumulative and
not alternative.

                                      -12-
<PAGE>

            9.11 Waiver of Jury Trial. Each party hereto waives any right it may
have to a trial by jury in any  action  or  proceeding  directly  or  indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract, tort, equity or any other theory). Each party
certifies  that no  representative,  agent or  attorney  of the other  party has
represented,  expressly or otherwise,  that the other parties to this  Agreement
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that all  parties  hereto  have been  induced  to enter  into this
Agreement by, among other things,  the waivers and  certifications  contained in
this Section 9.11.

                          [Signature Page(s) Follow(s)]

                                      -13-
<PAGE>

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

                                         COMPANY:

                                         PAKETERIA GmbH

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

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                         INVESTOR:

                                         DATA SYSTEMS & SOFTWARE INC.

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

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                         SHAREHOLDER

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

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                      -14-
<PAGE>

                                         SHAREHOLDER

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

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                         SHAREHOLDER

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

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                         SHAREHOLDER

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

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                         SHAREHOLDER

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

                                         ---------------------------------------
                           Telephone No.:
                                         ---------------------------------------
                                 Fax No.:
                                         ---------------------------------------
                                   Email:
                                         ---------------------------------------

                                      -15-
<PAGE>

                                   SCHEDULE A

                                    Investor

Data Systems & Software Inc.
200 Route 17
Mahwah, New Jersey 07430
Attention:  John A. Moore
            President and Chief Executive Officer

With a copy to:

Reitler Brown & Rosenblatt LLC
800 Third Avenue, 21st Floor
New York, New York 10022
Facsimile:  (212) 371-5500
Attention:  Scott H. Rosenblatt, Esq.

                                  Shareholders
Andy Roesch
Kornblumenring 3
12357 Berlin, Federal Republic of Germany
Phone Number
Fax Number
Email

Ralf Budde
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------

Joseph Benson
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------

John Moore
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------

<PAGE>

Richard Rimer
Address
        ------------------------------------
Phone Number
             -------------------------------
Fax Number
           ---------------------------------
Email
      --------------------------------------

                                      -2-EXHIBIT 10.5

                         NON-PLAN STOCK OPTION AGREEMENT
                         -------------------------------

         THIS STOCK OPTION  AGREEMENT  (this  "Agreement") is made as of the 7th
day of August, 2006 between DATA SYSTEMS & SOFTWARE INC., a Delaware corporation
(the "Company"), and Andy Roesch (the "Optionee").

                                    RECITALS
                                    --------

         WHEREAS,  in  connection  with that certain (i)  Employment  Agreement,
dated  as of the  date  hereof  between  Paketeria  GmbH  ("Paketeria")  and the
Optionee, and (ii) Common Stock Purchase Agreement,  dated as of the date hereof
(the  "Purchase  Agreement"),   between  Paketeria  and  the  Company,  and  the
transactions  contemplated  thereby,  the parties  hereto are entering into this
Agreement;

         WHEREAS,  the Purchase  Agreement  states  that,  as a condition to its
effectiveness, the Company and the Optionee enter into this Agreement; and

         WHEREAS the Board of Directors of the Company (the "Board"), authorized
the grant to Optionee,  an option to purchase  150,000  shares of the  Company's
common stock, par value $.01 per share (the "Common Stock").

         WHEREAS,  the parties  hereto  desire to enter into this  Agreement  in
order to set forth the terms of such option.

         Accordingly, the parties hereto agree as follows:

         1. Grant of Option; Exercise Price.

            (a)  Subject  to the terms and  conditions  of this  Agreement,  the
Company  hereby grants to Optionee the option (the  "Option") to purchase,  from
the Company,  up to 150,000 shares of Common Stock ("Option  Shares") at a price
per share of $______ (the "Exercise Price").  The Option Shares and the Exercise
Price are subject to adjustment in accordance  with the  provisions set forth in
Section 5 below.

            (b) The  Optionee  shall  deliver a fully  executed  Form W-8 to the
Company, dated as of the date hereof, in the form of Exhibit A hereto.

         2. Non-Incentive Stock 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.

         3.  Vesting of  Option.  This  Option  shall  vest and  thereby  become
exercisable  in three equal parts,  of which (a)  one-third of the Option Shares
(50,000  shares)  shall vest upon  Complete  Execution  (as defined  below) of a
licence  agreement for the sixtieth (60th) Paketeria store, (b) one-third of the
Option Shares  (50,000  shares) shall vest upon Complete  Execution of a licence
agreement for the  seventy-fifth  (75th)  Paketeria store, and (c) the remaining
one-third  of the  Option  Shares  (50,000  shares)  shall  vest  upon  Complete
Execution of a licence  agreement  for the  one-hundred  and  fifteenth  (115th)
Paketeria  store.  For purposes of this Agreement,  "Complete  Execution"  shall
mean, with respect to each license  agreement  executed by the Paketeria,  (i) a
fully executed  license  agreement  between  Paketeria and a licensee,  (ii) the
licensee shall pay the Paketeria,  and/or provide the Paketeria with evidence of
sufficient  financing  to fund the payment  of,  both the  license fee  required
pursuant to the license  agreement and the reasonable  "build-out" costs of such
licensee's store, and (iii) if necessary,  acceptance of such  [licensee/license
agreement] by the Kreditanstalt fur Wiederaufbau.

<PAGE>

         4. Termination of Option. This Option shall terminate (x) to the extent
vested, upon the earlier of (i) August 7, 2011 (the "Expiration Date"), and (ii)
the date  ninety  (90)  days  from the date on which  Optionee  ceases  to be an
employee of Paketeria for any reason,  and (y) to the extent unvested,  upon the
earlier of (i) the Expiration  Date, and (ii) the date on which Optionee  ceases
to be an employee of the Company for any reason.

         5. Adjustments.

            (a) In the event of a stock split,  stock  dividend,  combination of
shares,  or any other similar  change in the Common Stock as a whole,  the Board
shall make equitable, proportionate adjustments in the number and kind of shares
covered by the Option and in the Exercise Price.

            (b) In the event of any  reclassification  or  reorganization of the
outstanding shares of Common Stock other than a change covered by subsection (a)
hereof or that solely  affects the par value of such shares of Common Stock,  or
in the case of any merger or  consolidation  of the Company with or into another
corporation  (other than a  consolidation  or merger in which the Company is the
continuing  corporation  and that  does not  result in any  reclassification  or
reorganization  of the outstanding  shares of Common Stock),  the Optionee shall
have the right thereafter (until the expiration of the right of exercise of this
Option) to receive  upon the  exercise  hereof  after such  event,  for the same
aggregate   Exercise  Price  payable   hereunder   immediately   prior  to  such
reclassification,  reorganization,  merger or consolidation, the amount and kind
of consideration  receivable by a holder of the number of shares of Common Stock
obtainable  upon exercise of this Option  immediately  prior to such event.  The
provisions  of  this   subsection  (b)  shall   similarly  apply  to  successive
reclassifications,  reorganizations,  mergers or consolidations,  sales or other
transfers.

         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 B
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 of Common Stock equal to the Option  Shares and promptly  deliver to
the Company a portion of the proceeds  thereof  equal to the Exercise  Price and
any applicable  withholding  taxes. 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 the Option Shares.  This Option
may not be exercised with respect to a fractional share.

<PAGE>

         7. Restriction on Transfer.

            (a) This Option may not be assigned  or  transferred  and during the
Optionee's lifetime may be exercised only by Optionee.

            (b) Notwithstanding  anything in this Agreement to the contrary, the
Optionee  hereby  agrees  that he  shall  not  sell,  transfer  by any  means or
otherwise  dispose of the Options  Shares  acquired by him without  registration
under the Securities Act of 1933, as amended (the "Securities  Act"), or that in
the event  that they are not so  registered,  unless (i) an  exemption  from the
Securities Act requirements is available  thereunder,  and (ii) the Optionee has
furnished  the Company with notice of such  proposed  transfer and the Company's
legal counsel, in its reasonable  opinion,  shall deem such proposed transfer to
be so exempt.

         8. Miscellaneous.

            (a)  Notices.  Any  notice or  communication  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
either party shall from time to time specify):

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

                          If to the Optionee:       Mr. Andy Roesch
                                                    Kornblumenring 3
                                                    12357 Berlin

            (b)  Stockholder  Rights.  The  Optionee  shall  not have any of the
rights of a stockholder with respect to the Option Shares until such shares have
been issued after the due exercise of the Option.

            (c)  Waiver.  The  waiver  by any  party  hereto  of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach.

            (d)  Entire  Agreement.   This  Agreement   constitutes  the  entire
agreement  between the parties with respect to the subject matter  hereof.  This
Agreement may not be amended except by writing  executed by the Optionee and the
Company.

            (e)  Counterparts;  Facsimile.  This  Agreement  may be executed and
delivered by facsimile signature and in two or more counterparts,  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same  instrument.  Execution  and  delivery of this  Agreement  by facsimile
transmission  (including  the delivery of  documents in Adobe PDF format)  shall
constitute  execution and delivery of this Agreement for all purposes,  with the
same force and effect as execution and delivery of an original  manually  signed
copy hereof.

<PAGE>

            (f) Binding  Effect;  Successors.  This Agreement shall inure to the
benefit  of and be  binding  upon the  parties  hereto  and,  to the  extent not
prohibited   herein,   their   respective   heirs,   successors,   assigns   and
representatives. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto and as provided above,  their
respective heirs, successors, assigns and representatives, any rights, remedies,
obligations or liabilities.

            (g) Governing Law. This Agreement shall be governed by and construed
in accordance  with the laws of the State of New York (without  regard to choice
of law provisions); provided, however, that all matters relating to or involving
corporate law shall be governed by the Delaware General Corporation Law.

            (h) Headings. The headings contained herein are for the sole purpose
of convenience of reference and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.

            (i)  Severability.  If any one or more  provisions of this Agreement
shall be found to be illegal or unenforceable  in any respect,  the validity and
enforceability  of the  remaining  provisions  hereof  shall  not in any  way be
affected or impaired thereby.

            (j)  Dispute  Resolution.  The parties  (a) hereby  irrevocably  and
unconditionally  submit to the  jurisdiction of the state courts of New York and
to the  jurisdiction  of the  United  States  District  Court  for the  Southern
District  of New York for the  purpose of any suit,  action or other  proceeding
arising out of or based upon this Agreement, (b) agree not to commence any suit,
action or other proceeding arising out of or based upon this Agreement except in
the  state  courts  of New York or the  United  States  District  Court  for the
Southern District of New York, and (c) hereby waive, and agree not to assert, by
way of  motion,  as a  defense,  or  otherwise,  in any  such  suit,  action  or
proceeding,  any claim that it is not subject  personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution,  that the suit,  action or proceeding  is brought in an  inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.

            (k) Waiver of Jury Trial.  Each party hereto waives any right it may
have to a trial by jury in any  action  or  proceeding  directly  or  indirectly
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby (whether based on contract, tort, equity or any other theory). Each party
certifies  that no  representative,  agent or  attorney  of the other  party has
represented,  expressly  or  otherwise,  that the other party to this  Agreement
would not, in the event of litigation,  seek to enforce the foregoing waiver and
acknowledges  that all  parties  hereto  have been  induced  to enter  into this
Agreement by, among other things,  the waivers and  certifications  contained in
this Section 8(k).

<PAGE>

                          [Signature Page(s) Follow(s)]

<PAGE>

      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:
                                                       Title

                                                    OPTIONEE

                                                    By:
                                                       -------------------------
                                                       Andy Roesch

                     Roesch Option Agreement Signature Page

<PAGE>

                                    EXHIBIT A

                                    FORM W-8
                                    --------

<PAGE>

                                    EXHIBIT B

                              OPTION EXERCISE FORM
                              --------------------

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

Gentlemen:

                  I hereby  exercise the following  portion of the stock options
that  have  heretofore  been  granted  to me under  the  Non-Plan  Stock  Option
Agreement  by and between  myself and Data Systems & Software  Inc.  dated as of
August [ ], 2006:

                  Date of grant                      August 7, 2006
                                                     --------------
                  Exercise price per share             $
                                                       --------
                  Number of options originally granted   150,000
                                                       ---------
                  Number of options currently held
                  Number of options 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  Agreement  and any  applicable  legal
requirements  in connection with the issuance of the stock to me pursuant to the
Agreement.

Optionee (Signature)

-------------------------
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Date                                                  Address

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