Document:

THIS  WARRANT  AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT  BEEN  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND  THE  COMMON  SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED  FOR  SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE OF AN EFFECTIVE
REGISTRATION  STATEMENT  AS  TO  THIS  WARRANT  UNDER  SAID ACT OR AN OPINION OF
COUNSEL  REASONABLY  SATISFACTORY  TO  DATA  SYSTEMS  &  SOFTWARE INC. THAT SUCH
REGISTRATION  IS  NOT  REQUIRED.

                                   Right  to  Purchase  190,000 Shares of Common
                                   Stock  of  Data  Systems  &  Software  Inc.
                                   (subject  to  adjustment  as provided herein)

                          COMMON STOCK PURCHASE WARRANT

No.  2002-2                                        Issue  Date:  December 4,2002

     DATA SYSTEMS & SOFTWARE INC., a corporation organized under the laws of the
State  of  Delaware  (the "COMPANY"), hereby certifies that, for value received,
LAURUS MASTER FUND, LTD., or assigns (the "HOLDER"), is entitled, subject to the
terms  set  forth  below,  to purchase from the Company from and after the Issue
Date  of this Warrant and at any time or from time to time before 5:00 p.m., New
York time, through five (5) years after such date (the "EXPIRATION DATE"), up to
190,000  fully  paid  and  nonassessable  shares of Common Stock (as hereinafter
defined),  $.01  par  value per share, of the Company, at the Purchase Price (as
defined  below). The number and character of such shares of Common Stock and the
Purchase  Price  are  subject  to  adjustment  as  provided  herein.

     As  used herein the following terms, unless the context otherwise requires,
have  the  following  respective  meanings:

     (a)     The  term  "Company" shall include Data Systems & Software Inc. and
any  corporation which shall succeed or assume the obligations of Data Systems &
Software  Inc.  hereunder.

     (b)     The  term  "Common  Stock" includes (a) the Company's Common Stock,
$.01  par  value  per share, as authorized on the date hereof, and (b) any other
securities into which or for which any of the securities described in (a) may be
converted  or  exchanged pursuant to a plan of recapitalization, reorganization,
merger,  sale  of  assets  or  otherwise.

     (c)  The  term  "Other  Securities"  refers  to  any  stock  (other  than
Common Stock) and other securities of the Company or any other person (corporate
or  otherwise)  which the holder of the Warrant at any time shall be entitled to
receive,  or  shall have received, on the exercise of the Warrant, in lieu of or
in  addition  to  Common  Stock, or which at any time shall be issuable or shall
have  been  issued  in  exchange  for or in replacement of Common Stock or Other
Securities  pursuant  to  Section  4  or  otherwise.

     (d)  The  term  "Purchase  Price"  shall  be  as  follows:

         (i)     30,000  shares  at  $2.00;
         (ii)    60,000  shares  at  $2.34;
         (iii)   100,000  shares  at  $3.34.

     1.  EXERCISE  OF  WARRANT.

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<PAGE>

     1.1.     NUMBER  OF SHARES ISSUABLE UPON EXERCISE.  From and after the date
hereof  through  and  including  the Expiration Date, the holder hereof shall be
entitled  to  receive, upon exercise of this Warrant in whole in accordance with
the  terms  of  subsection  1.2  or  upon  exercise  of  this Warrant in part in
accordance  with  subsection 1.3, shares of Common Stock of the Company, subject
to  adjustment  pursuant to Section 4 and subject to the restriction on transfer
pursuant  to  Section  1.7.

     1.2.     FULL  EXERCISE.  This  Warrant  may  be  exercised  in full by the
holder hereof by delivery of an original or fax copy of the form of subscription
attached  as  Exhibit  A  hereto (the "SUBSCRIPTION FORM") duly executed by such
Holder,  to  the Company at its principal office or at the office of its warrant
agent (as provided hereinafter), accompanied by payment, in cash, wire transfer,
or  by  certified or official bank check payable to the order of the Company, in
the  amount  obtained  by  multiplying  the number of shares of Common Stock for
which  this  Warrant  is  then exercisable by the Purchase Price (as hereinafter
defined)  then  in  effect.

     1.3.     PARTIAL  EXERCISE.  This Warrant may be exercised in part (but not
for  a  fractional  share) by surrender of this Warrant in the manner and at the
place provided in subsection 1.2 except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying (a) the number
of  shares  of Common Stock designated by the holder in the Subscription Form by
(b)  the  Purchase  Price  then  in  effect.  On  any such partial exercise, the
Company,  at  its expense, will forthwith issue and deliver to or upon the order
of  the  holder  hereof  a  new Warrant of like tenor, in the name of the holder
hereof or as such holder (upon payment by such holder of any applicable transfer
taxes)  may request, the number of shares of Common Stock for which such Warrant
may  still  be  exercised.

     1.4.     FAIR MARKET VALUE. Fair Market Value of a share of Common Stock as
of  a  particular  date  (the  "DETERMINATION  DATE")  shall  mean:

               (a)  If the Company's Common Stock is traded on an exchange or is
quoted  on  the  National  Association  of  Securities  Dealers,  Inc. Automated
Quotation  ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately  preceding  the  Determination  Date.

               (b) If the Company's Common Stock is not traded on an exchange or
on the NASDAQ National Market System or the NASDAQ SmallCap Market but is traded
on  the NASD OTC Bulletin Board, then the mean of the average of the closing bid
and  asked  prices  reported for the last business day immediately preceding the
Determination  Date.

               (c)  Except  as  provided  in  clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in  the  absence  of  agreement by arbitration in accordance with the rules then
standing  of the American Arbitration Association, before a single arbitrator to
be chosen from a panel of persons qualified by education and training to pass on
the  matter  to  be  decided.

               (d)  If  the  Determination  Date  is  the date of a liquidation,
dissolution  or winding up, or any event deemed to be a liquidation, dissolution
or  winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such  liquidation,  dissolution  or  winding  up,  plus  all other amounts to be
payable  per  share  in  respect  of  the  Common Stock in liquidation under the
charter,  assuming for the purposes of this clause (d) that all of the shares of
Common  Stock  then issuable upon exercise of the Warrant are outstanding at the
Determination  Date.

     1.5.     COMPANY  ACKNOWLEDGMENT. The Company will, at the time of the
exercise  of  the  Warrant, upon the request of the holder hereof acknowledge in

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writing  its  continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the  provisions  of  this  Warrant.  If  the  holder shall fail to make any such
request,  such failure shall not affect the continuing obligation of the Company
to  afford  to  such  holder  any  such  rights.

     1.6.     TRUSTEE  FOR  WARRANT  HOLDERS.  In the event that a bank or trust
company  shall  have  been  appointed  as trustee for the holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and  duties  of  a warrant agent (as hereinafter described) and shall accept, in
its  own  name for the account of the Company or such successor person as may be
entitled  thereto,  all  amounts  otherwise  payable  to  the  Company  or  such
successor,  as  the  case  may  be, on exercise of this Warrant pursuant to this
Section  1.

     1.7     RESTRICTED  PERIOD.  During  the six month period commencing on the
date  hereof,  the  Holder  shall not sell or otherwise dispose of any shares of
Common  Stock  issued  to  the  Holder  upon  exercise  of  this  Warrant.

     2.1     DELIVERY  OF  STOCK  CERTIFICATES,  ETC.  ON  EXERCISE. The Company
agrees  that  the shares of Common Stock purchased upon exercise of this Warrant
shall  be  deemed  to be issued to the holder hereof as the record owner of such
shares  as of the close of business on the date on which this Warrant shall have
been  surrendered  and  payment  made  for  such shares as aforesaid. As soon as
practicable  after  the  exercise of this Warrant in full or in part, and in any
event  within  7  days  thereafter,  the  Company  at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of  and  delivered to the holder hereof, or as such holder (upon payment by such
holder  of  any  applicable  transfer  taxes)  may  direct  in  compliance  with
applicable Securities Laws, a certificate or certificates for the number of duly
and  validly  issued,  fully  paid  and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled on such exercise, plus,
in  lieu  of  any  fractional  share  to  which  such  holder would otherwise be
entitled,  cash  equal to such fraction multiplied by the then Fair Market Value
of  one  full  share,  together  with  any  other  stock or other securities and
property  (including  cash,  where  applicable) to which such holder is entitled
upon  such  exercise  pursuant  to  Section  1  or  otherwise.

     2.2.     CASHLESS  EXERCISE.

               (a)  Payment  may  be  made either in (i) cash or by certified or
official  bank check payable to the order of the Company equal to the applicable
aggregate  Purchase  Price, (ii) by delivery of the Warrant, Common Stock and/or
Common  Stock receivable upon exercise of the Warrant in accordance with Section
(b)  below,  or  (iii) by a combination of any of the foregoing methods, for the
number of Common Shares specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable  to  the  holder  per  the  terms of this Warrant) and the holder shall
thereupon  be entitled to receive the number of duly authorized, validly issued,
fully-paid  and  non-assessable  shares  of  Common  Stock (or Other Securities)
determined  as  provided  herein.

               (b) Notwithstanding any provisions herein to the contrary, if the
Fair  Market  Value  of  one  share of Common Stock is greater than the Purchase
Price  (at  the  date  of calculation as set forth below), in lieu of exercising
this Warrant for cash, the holder may elect to receive shares equal to the value
(as  determined  below) of this Warrant (or the portion thereof being cancelled)
by  surrender  of  this  Warrant at the principal office of the Company together
with  the  properly  endorsed Subscription Form in which event the Company shall
issue  to  the  holder  a  number  of  shares of Common Stock computed using the
following  formula:

                X=Y  (A-B)
                      ---
                        A

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<PAGE>
         Where      X=   the  number  of  shares of Common Stock to be issued to
                         the  holder

                    Y=   the  number of shares of Common Stock purchasable under
                         the  Warrant  or,  if  only a portion of the Warrant is
                         being  exercised,  the  portion  of  the  Warrant being
                         exercised  (at  the  date  of  such  calculation)

                    A=   the  Fair  Market  Value  of one share of the Company's
                         Common  Stock  (at  the  date  of  such  calculation)

                    B=   Purchase  Price  (as  adjusted  to  the  date  of  such
                         calculation)

  3.  ADJUSTMENT  FOR  REORGANIZATION,  CONSOLIDATION,  MERGER,  ETC.

     3.1.     REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time or
from  time  to  time,  the  Company  shall  (a)  effect  a  reorganization,  (b)
consolidate  with  or  merge  into  any  other  person,  or  (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or  arrangement contemplating the dissolution of the Company, then, in each such
case,  as  a  condition  to  the  consummation of such a transaction, proper and
adequate  provision  shall  be  made  by  the Company whereby the holder of this
Warrant,  on  the exercise hereof as provided in Section 1 at any time after the
consummation  of  such  reorganization, consolidation or merger or the effective
date  of  such  dissolution,  as  the case may be, shall receive, in lieu of the
Common  Stock  (or  Other  Securities)  issuable  on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including  cash)  to  which  such  holder  would  have  been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder  had so exercised this Warrant, immediately prior thereto, all subject to
further  adjustment  thereafter  as  provided  in  Section  4.

     3.2.     DISSOLUTION.  In  the  event  of  any  dissolution  of the Company
following  the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be  delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrant after the effective date of
such  dissolution  pursuant  to this Section 3 to a bank or trust company having
its  principal  office  in New York, NY, as trustee for the holder or holders of
the  Warrant.

     3.3.     CONTINUATION  OF  TERMS.  Upon  any reorganization, consolidation,
merger  or  transfer (and any dissolution following any transfer) referred to in
this  Section  3,  this  Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property  receivable  on  the exercise of this Warrant after the consummation of
such  reorganization,  consolidation  or  merger  or  the  effective  date  of
dissolution  following  any  such  transfer,  as  the  case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case  of any such transfer, the person acquiring all or substantially all of the
properties  or  assets  of  the  Company,  whether or not such person shall have
expressly  assumed  the  terms of this Warrant as provided in Section 4.  In the
event  this  Warrant  does  not  continue  in  full  force  and effect after the
consummation  of  the transaction described in this Section 3, then only in such
event  will  the  Company's  securities  and  property  (including  cash,  where
applicable) receivable by the holders of the Warrant be delivered to the Trustee
as  contemplated  by  Section  3.2.

     4.     EXTRAORDINARY  EVENTS  REGARDING  COMMON  STOCK.  In  the event that
the  Company shall (a) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares  of  Common  Stock,  or  (c) combine its outstanding shares of the Common
Stock  into  a  smaller number of shares of the Common Stock, then, in each such
event,  the  Purchase  Price  shall,  simultaneously  with the happening of such
event,  be  adjusted  by  multiplying the then Purchase Price by a fraction, the

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numerator  of  which  shall  be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of  shares  of  Common  Stock  outstanding immediately after such event, and the
product  so  obtained shall thereafter be the Purchase Price then in effect. The
Purchase  Price, as so adjusted, shall be readjusted in the same manner upon the
happening  of any successive event or events described herein in this Section 4.
The  number  of  shares  of  Common  Stock that the holder of this Warrant shall
thereafter,  on  the  exercise  hereof  as provided in Section 1, be entitled to
receive  shall  be increased to a number determined by multiplying the number of
shares  of  Common  Stock  that  would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is  the  Purchase  Price  that  would  otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on  the  date  of  such  exercise.

     5.     CERTIFICATE  AS  TO  ADJUSTMENTS.  In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise  of  the  Warrant,  the  Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or  readjustment  in  accordance  with  the  terms  of the Warrant and prepare a
certificate  setting forth such adjustment or readjustment and showing in detail
the  facts  upon  which  such  adjustment  or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to  have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities)  outstanding or deemed to be outstanding, and (c) the Purchase Price
and  the  number  of shares of Common Stock to be received upon exercise of this
Warrant,  in  effect immediately prior to such adjustment or readjustment and as
adjusted  or  readjusted as provided in this Warrant. The Company will forthwith
mail  a  copy  of  each  such  certificate  to the holder of the Warrant and any
Warrant  agent  of  the  Company  (appointed  pursuant  to  Section  11 hereof).

     6.     RESERVATION  OF  STOCK,  ETC.  Issuable  on  Exercise  of  Warrant;
Financial  Statements. The Company will at all times reserve and keep available,
solely  for  issuance and delivery on the exercise of the Warrant, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the  Warrant.  This  Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders  of  the  Company's  Common  Stock.

     7.     ASSIGNMENT;  EXCHANGE  OF  WARRANT.  Subject  to  compliance  with
applicable  Securities  laws, this Warrant, and the rights evidenced hereby, may
be  transferred by any registered holder hereof (a "TRANSFEROR") with respect to
any  or  all  of the Shares. On the surrender for exchange of this Warrant, with
the  Transferor's  endorsement  in  the  form  of Exhibit B attached hereto (the
"TRANSFEROR  ENDORSEMENT  FORM")  and  together  with  evidence  reasonably
satisfactory  to the Company demonstrating compliance with applicable Securities
Laws,  which  shall  include,  without  limitation,  a  legal  opinion  fro  the
Transferor's  counsel  that  such  transfer  is  exempt  from  the  registration
requirements  of  federal  securities  laws, the Company at its expense but with
payment  by  the  Transferor  of  any  applicable transfer taxes) will issue and
deliver  to  or  on  the  order  of the Transferor thereof a new Warrant of like
tenor,  in the name of the Transferor and/or the transferee(s) specified in such
Transferor  Endorsement  Form (each a "TRANSFEREE"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the  face  or  faces  of  the  Warrant  so  surrendered  by  the  Transferor.

     8.     REPLACEMENT  OF  WARRANT.  On  receipt  of  evidence  reasonably
satisfactory  to  the  Company  of the loss, theft, destruction or mutilation of
this  Warrant  and,  in  the case of any such loss, theft or destruction of this
Warrant,  on  delivery  of  an  indemnity  agreement  or  security  reasonably
satisfactory  in  form  and  amount  to  the Company or, in the case of any such
mutilation,  on  surrender  and cancellation of this Warrant, the Company at its
expense  will execute and deliver, in lieu thereof, a new Warrant of like tenor.

     9.     REGISTRATION RIGHTS. The Holder of this Warrant has been granted
certain  registration  rights  by the Company. These registration rights are set

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forth  in  a  Registration  Rights Agreement entered into by the Company and the
Holder.

     10.     MAXIMUM  EXERCISE.   The  Holder  shall not be entitled to exercise
this  Warrant  on  an exercise date, in connection with that number of shares of
Common  Stock which would be in excess of the sum of (i) the number of shares of
Common  Stock beneficially owned by the Holder and its affiliates on an exercise
date,  and  (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made  on  an  exercise  date,  which would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock  of  the  Company  on  such  date.  For the purposes of the proviso to the
immediately  preceding  sentence,  beneficial  ownership  shall be determined in
accordance  with  Section  13(d)  of  the  Securities  Exchange  Act of 1934, as
amended,  and Regulation 13d-3 thereunder.  Subject to the foregoing, the Holder
shall  not  be limited to aggregate exercises which would result in the issuance
of  more than 4.99%.  The restriction described in this paragraph may be revoked
upon  75  days  prior notice from the Holder to the Company and is automatically
null  and  void  upon  an  Event  of  Default  under  the  Note.

     11.    WARRANT AGENT. The Company may, by written notice to the each holder
of  the  Warrant,  appoint  an agent for the purpose of issuing Common Stock (or
Other  Securities)  on  the  exercise  of  this  Warrant  pursuant to Section 1,
exchanging  this  Warrant  pursuant  to  Section  7,  and replacing this Warrant
pursuant  to  Section  8,  or  any  of  the  foregoing,  and thereafter any such
issuance,  exchange  or  replacement,  as the case may be, shall be made at such
office  by  such  agent.

     12.     TRANSFER ON THE COMPANY'S BOOKS.  Until this Warrant is transferred
on  the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

     13.     NOTICES,  ETC.  All notices and other communications from the
Company  to the holder of this Warrant shall be mailed by first class registered
or  certified  mail, postage prepaid, at such address as may have been furnished
to  the Company in writing by such holder or, until any such holder furnishes to
the  Company an address, then to, and at the address of, the last holder of this
Warrant  who  has  so  furnished  an  address  to  the  Company.

     14.     VOLUNTARY  ADJUSTMENT  BY THE COMPANY.  The Company may at any time
during  the  term  of this Warrant reduce the then current Exercise Price to any
amount  and  for any period of time deemed appropriate by the Board of Directors
of  the  Company.  Notwithstanding  the  foregoing,  unless  the  Company either
obtains shareholder approval, or an exemption from NASDAQ's corporate governance
rules as they may apply to the Company, the Holder may not receive upon exercise
of  this  Warrant more than the number of common shares that would result in the
Company  issuing  to  the  Holder  in  the  aggregate  greater than 19.9% of the
outstanding  shares  of  Common  Stock  of  the  Company  on  date  hereof.

     15.     MISCELLANEOUS.  This  Warrant  and  any term hereof may be changed,
waived,  discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is  sought.  This  Warrant shall be governed by and construed in accordance with
the laws of State of New York without regard to principles of conflicts of laws.
Any  action  brought  concerning  the  transactions contemplated by this Warrant
shall  be  brought only in the state courts of New York or in the federal courts
located  in  the  state  of New York.  The individuals executing this Warrant on
behalf  of  the  Company  agree to submit to the jurisdiction of such courts and
waive trial by jury.  The prevailing party shall be entitled to recover from the
other  party  its  reasonable  attorney's fees and costs.  In the event that any
provision  of  this  Warrant  is  invalid  or unenforceable under any applicable
statute  or  rule of law, then such provision shall be deemed inoperative to the
extent  that  it  may conflict therewith and shall be deemed modified to conform

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with such statute or rule of law.  Any such provision which may prove invalid or
unenforceable  under  any law shall not affect the validity or enforceability of
any  other  provision  of  this  Warrant.  The  headings in this Warrant are for
purposes  of  reference only, and shall not limit or otherwise affect any of the
terms  hereof.  The invalidity or unenforceability of any provision hereof shall
in  no  way  affect  the validity or enforceability of any other provision.  The
Company  acknowledges that legal counsel participated in the preparation of this
Warrant  and,  therefore,  stipulates  that  the  rule  of  construction  that
ambiguities  are  to be resolved against the drafting party shall not be applied
in  the  interpretation  of  this  Warrant  to favor any party against the other
party.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

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<PAGE>

IN  WITNESS  WHEREOF, the Company has executed this Warrant under seal as of the
date  first  written  above.

                                           DATA  SYSTEMS  &  SOFTWARE  INC.

                                          By:___________________________________

Witness:

______________________________

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                                                       EXHIBIT  A
                              FORM OF SUBSCRIPTION
                   (To be signed only on exercise of Warrant)

TO:  Data  Systems  &  Software  Inc.

The  undersigned,  pursuant  to the provisions set forth in the attached Warrant
(No.____),  hereby  irrevocably  elects  to  purchase  (check  applicable  box):

___     ________  shares  of  the  Common  Stock  covered  by  such  Warrant; or

___     the  maximum  number  of  shares of Common Stock covered by such Warrant
pursuant  to  the  cashless  exercise  procedure  set  forth  in  Section  2.

The  undersigned  herewith  makes  payment  of  the full purchase price for such
shares  at  the  price  per  share  provided  for  in  such  Warrant,  which  is
$___________.  Such  payment  takes the form of (check applicable box or boxes):

___     $__________  in  lawful  money  of  the  United  States;  and/or

___     the  cancellation  of  such  portion  of  the  attached  Warrant  as  is
exercisable  for  a total of _______ shares of Common Stock (using a Fair Market
Value  of  $_______  per  share  for  purposes  of  this  calculation);  and/or

___     the  cancellation  of  such  number  of  shares  of  Common  Stock as is
necessary,  in  accordance  with the formula set forth in Section 2, to exercise
this  Warrant  with  respect  to  the  maximum  number of shares of Common Stock
purchaseable pursuant to the cashless exercise procedure set forth in Section 2.

The  undersigned requests that the certificates for such shares be issued in the
name  of,  and  delivered  to  ____________________  whose  address  is_________
_________________________________________________________________.

The  undersigned  represents  and  warrants  that  all  offers  and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933,  as  amended  (the  "Securities  Act")  or  pursuant  to an exemption from
registration  under  the  Securities  Act.

Dated:___________________               _______________________________________
                                        (Signature  must  conform  to  name  of
                                        holder  as  specified on the face of the
                                        Warrant)
                                        _____________________________________
                                        (Address)

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                                              Exhibit  B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

     For  value  received,  the undersigned hereby sells, assigns, and transfers
unto  the  person(s)  named  below  under  the  heading  "Transferees" the right
represented  by  the  within  Warrant  to  purchase the percentage and number of
shares  of  Common  Stock  of  Data  Systems & Software Inc. to which the within
Warrant  relates  specified  under  the  headings  "Percentage  Transferred" and
"Number  Transferred,"  respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Data Systems & Software Inc. with full power of substitution in the premises.

                                Percentage     Number
Transferees      Transferred     Transferred

Dated: __,  ___                         ________________________________________
                                        (Signature  must  conform  to  name  of
                                        holder  as  specified on the face of the
                                        warrant)

Signed in the presence of:

_______________________________         ________________________________________
     (Name)                              (address)

                                        ________________________________________
ACCEPTED  AND  AGREED:                    (address)
[TRANSFEREE]

_________________________________
     (Name)

                                       10

<PAGE>REGISTRATION RIGHTS AGREEMENT

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

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

    The  Company  and  the  Purchaser  hereby  agree  as  follows:

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

     2.  REGISTRATION.

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

                                        2
<PAGE>
earlier  date  of when (i) all Registrable Securities have been sold or (ii) all
Registrable  Securities  may  be sold immediately without registration under the
Securities  Act  and  without  volume  restrictions  pursuant to Rule 144(k), as
determined by the counsel to the Company pursuant to a written opinion letter to
such  effect,  addressed  and acceptable to the Company's transfer agent and the
affected  Holders  (the  "EFFECTIVENESS  PERIOD").

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

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

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

                                        3
<PAGE>
          (b)  prepare  and file with the SEC such amendments and supplements to
such  registration  statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until the earlier
of:  (i)  six  months after the latest exercise period of the Warrant; (ii) four
years  after  the  Closing  Date,  or  (iii) the date on which the Purchaser has
disposed  of  all  of  the  Registrable  Securities covered by such registration
statement  in accordance with the Purchaser's intended method of disposition set
forth  in  such  registration  statement  for  such  period;

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

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

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

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

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

                                        4
<PAGE>
insurance  are  called  "REGISTRATION  EXPENSES". All underwriting discounts and
selling  commissions applicable to the sale of Registrable Securities, including
any  fees  and  disbursements of any special counsel to the Holders beyond those
included  in  Registration  Expenses,  are  called  "SELLING  EXPENSES."

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

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

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

                                        6
<PAGE>
Section  10(f)  of  the Act) will be entitled to contribution from any person or
entity  who  was  not  guilty  of  such  fraudulent  misrepresentation.

     6.  REPRESENTATIONS  AND  WARRANTIES

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

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

          (c)  Neither  the  Company,  nor any of its affiliates, nor any person
acting  on  its  or  their behalf, has directly or indirectly made any offers or
sales  of  any  security  or  solicited  any  offers  to  buy any security under
circumstances  that  would cause the offering of the Securities pursuant to this
Agreement  to  be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Common Stock
pursuant  to  Rule  506  under  the  Securities  Act,  or  any  applicable
exchange-related stockholder approval provisions. Nor will the Company or any of
its  affiliates  or  subsidiaries  take any action or steps that would cause the
offering  of  the  Securities  to  be  integrated  with  other  offerings.
                                        7
<PAGE>
          (d)  The  Registrable  Securities  are restricted securities under the
Securities Act as of the date of this Agreement.  The Company will not issue any
stop  transfer order or other order impeding the sale and delivery of any of the
Registrable Securities at such time as the Registrable Securities are registered
for  public  sale  or  an  exemption  from  registration is available, except as
required  by  federal  or  state  securities  laws.

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

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

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

     7.  MISCELLANEOUS

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

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

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

                                        8
<PAGE>
     (d)  DISCONTINUED  DISPOSITION.  Each  Holder  agrees by its acquisition of
such  Registrable  Securities that, upon receipt of a notice from the Company of
the  occurrence  of  a  Discontinuation  Event,  such  Holder  will  forthwith
discontinue  disposition  of  such Registrable Securities under the Registration
Statement  until  such  Holder's  receipt  of  the  copies  of  the supplemented
Prospectus  and/or  amended  Registration  Statement  or  until it is advised in
writing  (the "Advice") by the Company that the use of the applicable Prospectus
may  be  resumed,  and, in either case, has received copies of any additional or
supplemental  filings  that  are  incorporated  or  deemed to be incorporated by
reference  in such Prospectus or Registration Statement. The Company may provide
appropriate  stop  orders  to  enforce  the  provisions  of  this paragraph. For
purposes  of  this Section 7(d), a "Discontinuation Event" shall mean (i) when a
Prospectus  or  any  Prospectus  supplement  or  post-effective amendment to the
Registration  Statement  is  proposed  to  be  filed;  (ii)  when the Commission
notifies  the  Company  whether  there  will  be a "review" of such Registration
Statement  and  whenever the Commission comments in writing on such Registration
Statement  (the  Company  shall provide true and complete copies thereof and all
written  responses  thereto  to  each  of the Holders); (iii) any request by the
Commission  or  any other Federal or state governmental authority for amendments
or  supplements  to  the  Registration Statement or Prospectus or for additional
information;  (iv)  the  issuance by the Commission of any stop order suspending
the  effectiveness  of  the  Registration  Statement  covering any or all of the
Registrable  Securities  or  the initiation of any Proceedings for that purpose;
(v)  the  receipt  by  the  Company  of  any  notification  with  respect to the
suspension  of  the  qualification or exemption from qualification of any of the
Registrable  Securities  for  sale  in  any  jurisdiction,  or the initiation or
threatening  of  any Proceeding for such purpose; and (vi) the occurrence of any
event  or  passage  of  time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement made in
the  Registration Statement or Prospectus or any document incorporated or deemed
to  be  incorporated therein by reference untrue in any material respect or that
requires  any  revisions  to  the  Registration  Statement,  Prospectus or other
documents  so that, in the case of the Registration Statement or the Prospectus,
as  the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading.

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

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

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

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

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

                              Facsimile:  201-529-3163

                              With  a  copy  to:

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

                              Facsimile:  212-986-2399

          If  to  a           To  the  address  set  forth  under  such

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

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

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

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

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

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

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

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

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

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

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

                                       12
<PAGE>

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

                                DATA  SYSTEMS  &  SOFTWARE  INC.

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

                                       13
<PAGE>

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

                                   LAURUS  MASTER  FUND,  LTD.

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

                                   Address  for  Notice:

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

                                       14
<PAGE>

ANNEX  A

PLAN  OF  DISTRIBUTION

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

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

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

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

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

                                       15
<PAGE>

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