Document:

Long Term Incentive Plan 2005

Exhibit
10.1

KERR-McGEE
CORPORATION 2005 LONG TERM INCENTIVE PLAN

KERR-McGEE
CORPORATION 2005 LONG TERM INCENTIVE PLAN

TABLE
OF CONTENTS

	
      Article
	 	
      Page

	
       
	
      Purpose
      
	
      1

       

	
      II
	
      Definitions..................................................................
	
      1

       

	
      III
	
      Administration............................................................
	
      3

       

	
      IV
	
      Eligibility....................................................................
	
      5

       

	
      V
	
      Limitations
      on Awards..................................................
	
      5

       

	
      VI
	
      Stock
      Options............................................................
	
      6

       

	
      VII
	
      Stock
      Appreciation Rights.............................................
	
      8

       

	
      VIII
	
      Restricted
      Stock.........................................................
	
      9

       

	
      IX
	
      Performance
      Awards...................................................
	
      9

       

	
      X
	
      Adjustment
      Upon Changes in Stock................................
	
      10

       

	
      XI
	
      Change
      in Control.......................................................
	
      10

       

	
      XI
	
      Miscellaneous............................................................
	
      12

       

	
      XIII
	
      Amendment
      and Termination.........................................
	
      13

       

	
      XIV
	
      Duration
      of the Plan.....................................................
	
      14

KERR-McGEE
CORPORATION 2005
LONG TERM INCENTIVE PLAN

Article
I

Purpose

The
purpose of the Kerr-McGee Corporation 2005 Long Term Incentive Plan (the "Plan")
is to provide incentive opportunities for Non-Employee Directors and key
employees, and to align their personal financial interest with the Company's
stockholders. The Plan includes provisions for stock options, stock appreciation
rights, restricted stock and performance related awards.

Article
II

Definitions

	a)  	
      "Award"
      shall mean an award under the Plan of Options, SARs, Restricted Stock or a
      Performance Award.

	b)  	
      "Board
      or Board of Directors"
      shall mean the Board of Directors of the
Company.

	c)  	
      "Cause"
      shall mean (i) the continued failure of the Employee to perform
      substantially all of his or her duties as an Employee (other than any such
      failure resulting from incapacity due to physical or mental
      illness); (ii)
      the willful engaging by the Employee in gross misconduct which is
      materially and demonstrably injurious to the Company; or (iii) the
      conviction of, or plea of guilty or nolo contendere to, a
      felony.

	d)  	
      "Code"
      shall mean the Internal Revenue Code of 1986, as amended from time to
      time.

	e)  	
      "Company"
      shall mean Kerr-McGee Corporation and any successor corporation by merger
      or otherwise.

	f)  	
      "Committee"
      shall mean a committee of two (2) or more members of the Board appointed
      by the Board of Directors to administer the Plan pursuant to Article III
      herein. A person may serve on the Committee only if he or she is a
      "non-employee director" for purposes of Rule 16b-3 under the Securities
      Exchange Act of 1934, as amended, and satisfies the requirements of an
      "outside director" for purposes of Section 162(m) of the Code.
      

	g)  	
      "Employee"
      shall mean any person employed by the Company, a Subsidiary or Limited
      Liability Company on a full-time salaried basis, including officers
      thereof. The term "Employee" shall not include a person hired as an
      independent contractor, leased employee, consultant or a person otherwise
      designated by the Company at the time of hire as not eligible to
      participate in the Plan, even if such person is determined to be an
      "employee" by any governmental or judicial authority.

	h)  	
      "Fair
      Market Value"
      of Stock shall mean the average of the highest price and the lowest price
      at which Stock shall have been sold on the applicable date as reported in
      the Wall Street Journal as New York Stock Exchange Composite Transactions
      for that date. In the event that the applicable date is a date on which
      there were no such sales of Stock, the Fair Market Value of Stock on such
      date shall be the average of the highest price and the lowest price at
      which Stock shall have been sold on the last trading day preceding such
      date.

	i)  	
      "Incentive
      Stock Option"
      or "ISO"
      shall mean an Option which complies with the terms and conditions set
      forth in Section 422 of the Code and applicable regulations thereunder.
      Options designated as ISOs shall be interpreted and administered in order
      to comply with all the provisions of Section 422 of the Code and
      applicable regulations, including without limitation the requirement that
      the aggregate Fair Market Value (determined at the time the Option is
      granted) of Stock with respect to which ISOs are exercisable for the first
      time by an individual during a calendar year under all plans of the
      Company, any Subsidiary and any LLC shall not exceed $100,000.
      

	j)  	
      "Indicators
      of Performance"
      shall mean the following criteria used by the Committee to establish a
      performance goal under Section 3.4: Pretax Income, Net Income, Earnings
      Per Share, Sales Volume, Revenue, Expenses, Return on Assets, Return on
      Equity, Return on Investment, Net Profit Margin, Operating Profit Margin,
      Cash Flow, Total Stockholder Return, Capitalization, Liquidity, Reserve
      Adds or Replacement, Finding and Development Costs, Production Volume,
      Results of Customer Satisfaction Surveys and other measures of Quality,
      Safety, Productivity, Cost Management or Process
    Improvement.

	k)  	
      "Limited
      Liability Company"
      or "LLC"
      shall mean any Limited Liability Company in which the Company or a
      Subsidiary owns fifty percent (50%) or more of the Limited Liability
      Company.

	l)  	
      "Non-Employee
      Director" shall
      mean any person serving as a director of the Company who is not an
      employee of the Company.

	m)  	
      "Option"
      or "Stock
      Option"
      shall mean a right granted under the Plan to an Optionee to purchase a
      stated number of shares of Stock at a stated exercise
    price.

	n)  	
      "Optionee"
      shall mean an Employee or Non-Employee Director who has received a Stock
      Option granted under the Plan.

	o)  	
      "Performance
      Award"
      shall mean an Award issued under Article
IX.

	p)  	
      "Performance
      Period"
      shall mean a period established by the Committee of not less than one year
      during which performance shall be measured under a Performance
      Award.

	q)  	
      "Restricted
      Stock"
      shall mean Stock which is issued pursuant to Article VIII of the
      Plan.

	r)  	
      "Restriction
      Period"
      shall mean that period of time as determined by the Committee during which
      Restricted Stock is subject to such terms, conditions and restrictions as
      shall be assigned by the Committee.

	s)  	
      "Retirement"
      shall mean retirement of an Employee after attaining age and service
      requirements of the Company pension plan in which the employee
      participates. For this purpose, "service" for U.S. Employees shall be
      measured under the rules for determining vesting service under the
      Kerr-McGee Corporation Retirement Plan for U.S. Employees. “Retirement”
      for Non-Employee Directors shall mean termination from service on the
      Board for any reason other than Total Disability or
  death.

	t)  	
      "Stock"
      shall mean the common stock of the Company.

	u)  	
      "Stock
      Appreciation Right"
      or "SAR"
      shall mean a right granted in accordance with Article VII of the
      Plan.

	v)  	
      "Subsidiary"
      shall mean any corporation (other than the Company) in which the Company,
      a Subsidiary or a Limited Liability Company of the Company owns fifty
      percent (50%) or more of the total combined voting power of all classes of
      stock, provided that, with regard to Incentive Stock Options, "Subsidiary"
      shall have the meaning provided under Section 424(f) of the Code.
      

	w)  	
      "Total
      Disability"
      and "Totally
      Disabled"
      shall have such meaning as that defined under the Company's group
      insurance plan covering total disability and determinations of Total
      Disability shall be made by the insurance company providing such coverage
      on the date on which the Employee, whether or not eligible for benefits
      under such insurance plan, becomes Totally Disabled. However, in the
      absence of such insurance plan or in the event the individual is a
      Non-Employee Director, the Committee shall make such
      determination.

Article
III

Administration

3.1 The
Committee. The
Plan shall be administered by the Committee. Subject to such approvals and other
authority as the Board may reserve to itself from time to time, the Committee
shall, consistent with the provisions of the Plan, from time to time establish
such rules and regulations and appoint such agents as it deems appropriate for
the proper administration of the Plan, and make such determinations under, and
such interpretations of, and take such steps in connection with the Plan or the
Awards as it deems necessary or advisable.

3.2  Authority
of the Committee.
Subject to the provisions herein, the Committee shall have the full power (a) to
determine the Employees and Non-Employee Directors who shall receive Awards
under the Plan, (b) to determine the size and types of Awards to be issued under
the Plan, (c) to determine the terms and conditions of such Awards in a manner
consistent with the Plan, (d) to construe and interpret the Plan and any
agreement or instrument entered into under the Plan, and resolve any ambiguities
with respect to any of the terms and provisions hereof as written and as applied
to the operation of the Plan, (e) to establish, amend or waive rules and
regulations for the Plan's administration, and (f) to amend the terms and
conditions of any outstanding Award to the extent such terms and conditions are
within the sole discretion of the Committee as provided in the Plan and subject
to the limitations and restrictions otherwise applicable under the Plan,
including those contained in Article XIII which among other restrictions
prohibit the repricing of options without further shareholder approval.
Notwithstanding the foregoing, the Committee shall not amend an Award in a
manner that would have a materially adverse effect on the grantee's rights or
obligations under the Award without the consent of the grantee. 

The
Committee may take any action consistent with the terms of the Plan which the
Committee deems necessary to comply with any laws or regulatory requirements of
a foreign country or to avoid adverse tax consequences under any such law or
requirements. Such actions may include modifying the terms and conditions
governing any Awards, including issuing restricted stock units in lieu of
Restricted Stock, or establishing any local country plans as sub-plans to this
Plan, each of which may be attached as an appendix hereto.

As
permitted by law, the Committee may delegate its authority hereunder, including
without limitation delegating to a Company officer the authority to issue Awards
covering a specified number of shares of Stock to Employees who are not
officers. 

3.3  Decisions
Binding. All
determinations and decisions of the Committee as to any disputed question
arising under the Plan or an Award, including questions of construction and
interpretation, shall be final, binding and conclusive upon all
parties.

3.4  Awards
Subject to Performance Goals. The
Committee may determine that an Award shall be subject to the satisfaction of
such performance goals as established by the Committee. As determined by the
Committee, achievement of the performance goals may be measured (a)
individually, alternatively or in any combination, (b) with respect to the
Company, a subsidiary, division, business unit, product line, product, or any
combination of the foregoing, or (c) on an absolute basis, or relative to a
target, to a designated comparison group, to results in other periods, to an
index, or to other external measures.

In
determining whether a performance goal is met, the Committee may exclude the
impact of any event or occurrence which the Committee determines should
appropriately be excluded, such as a restructuring or other nonrecurring charge,
an event either not directly related to the operations of the Company or not
within the reasonable control of the Company's management, or a change in
accounting standards required by U. S. generally accepted accounting
principles.

For an
Award that is subject to performance goals and that is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, the following
additional provisions shall apply: (a) the applicable performance goals will be
based on one or more Indicators of Performance, (b) the Committee may adjust
downwards, but not upwards, the amount payable pursuant to such Award upon
attainment of the performance goals, (c) the Committee may not waive the
achievement of the applicable performance goals except in the case of the death
or disability of the grantee, or under such other conditions where such waiver
will not jeopardize the treatment of other Awards as “performance-based
compensation” under Section 162(m), and (d) the Award shall otherwise comply
with the requirements of Section 162(m), or any successor provision
thereto, and the regulations thereunder.

3.5  Effect
of Code Section 409A. To the
extent that any Award under this plan is or may be considered to involve a
nonqualified deferred compensation plan or deferral subject to Section 409A of
the Code, the terms and administration of such Award shall comply with the
provisions of such Section, applicable IRS guidance and good faith reasonable
interpretations thereof and, to the extent necessary, shall be modified,
replaced, or terminated in the discretion of the Committee.

Article
IV

Eligibility

Those
Employees who, in the judgment of the Committee, may contribute to the
profitability and growth of the Company, a Subsidiary, or Limited Liability
Company and all Non-Employee Directors, shall be eligible to receive Awards
under the Plan, provided that only Employees shall be eligible for grants of
ISOs.

 

Article
V

Limitations
on Awards

5.1 Limits
on Issuance of Shares. The
Stock to be distributed under the Plan may be either authorized and issued
shares or unissued shares, including but not limited to shares held as treasury
shares. The maximum number of shares of Stock which may be issued under the Plan
shall not exceed, in the aggregate, 10 million (10,000,000). The following
additional limitations shall apply to the issuance of Stock under the Plan
pursuant to various types of Awards:

	 	
      Type
      of Awards
	
      Maximum
      Issuance

       

	
          (a)    
	
      Restricted
      Stock and Performance Awards

      to
      Employees

       
	
      3,000,000
      shares

	
          (b)
	
      Stock
      Options and Restricted Stock to

      Non-Employee
      Directors, but no more

      than
      100,000 shares of Restricted Stock

       
	
      300,000
      shares

	
          (c)
	
      Incentive
      Stock Options
	
      1,000,000
      shares

Any
shares of Stock that are subject to an Award which for any reason lapses, is
cancelled, or is terminated without the issuance of such shares shall again be
available for Awards under the Plan. 

5.2 Limits
on Awards to Employees. No
Employee shall be awarded, during the term of the Plan, (a) Restricted Stock
covering more than 400,000 shares of Stock, or (b) Options and SARS covering
more than 1,750,000 shares of Stock. No Employee shall be granted Performance
Awards under Article IX during a calendar year that could result in a payment of
more than $5,000,000 in cash and/or shares of Stock, based on the Fair Market
Value of the Stock as of the first day of the performance period. 

Article
VI

Stock
Options

6.1 Grant
of Options.

(a) The
Committee may, at any time and from time to time, grant Options under the Plan
to eligible Employees or Non-Employee Directors, for such numbers of shares and
having such terms as the Committee shall designate, subject to the provisions of
the Plan. The Committee will also determine the type of Option granted (e.g.,
ISO, nonstatutory, other statutory Options as from time to time may be permitted
by the Code) or a combination of various types of Options. The date on which an
Option shall be granted shall be the date of the Committee's authorization of
such grant. Any individual at any one time and from time to time may hold more
than one Option granted under the Plan or under any other Stock plan of the
Company.

(b) Each
Option shall be evidenced by a Stock Option Agreement in such form and
containing such provisions consistent with the provisions of the Plan as the
Committee from time to time shall approve.

6.2 Exercise
Price. The
price at which shares of Stock may be purchased under an Option shall not be
less than 100% of the Fair Market Value of the Stock on the date the Option is
granted.

6.3 Option
Period. The
period during which an Option may be exercised shall be determined by the
Committee; provided, that such period will not be longer than ten years from the
date on which the Option is granted in the case of ISOs, and ten years and one
day in the case of other Options. The date or dates on which portion(s) of an
Option may be exercised during the term of an Option shall be determined by the
Committee and may vary from Option to Option. The Committee may also determine
to accelerate the time at which portion(s) of an outstanding Option may be
exercised. 

6.4 Termination
of Service. An
Option shall terminate and may no longer be exercised three months after the
Optionee ceases to be an Employee for any reason other than termination for
Cause, Total Disability, death or Retirement. Unless an Employee's Stock Option
Agreement provides otherwise, all Options shall terminate and may no longer be
exercised upon an Optionee's termination for Cause. If an Employee's employment
is terminated by reason of Total Disability or Retirement, all Options held by
the Employee will vest and may be exercised within the period not to exceed the
lesser of four years following such termination or the remaining term of the
Option award. If the Optionee is an Employee and dies while in the employ of the
Company, a Subsidiary or LLC, the vesting provisions of an Option held by the
Employee will lapse and such Option may, within the lesser of four years after
the Optionee's death or the remaining term of the Option award, be exercised by
the legal representative of the Optionee's estate, or if it has been distributed
as part of the estate, by the person or persons to whom the Optionee's rights
under the Option shall pass by will or by the applicable laws of descent and
distribution. If a Non-Employee Director’s service is terminated due to
Retirement or Total Disability, all Options held by the Non-Employee Director
will vest and such Options may be exercised within the remainder of the Option's
term. If a Non-Employee Director dies while in the service of the Company, all
Options held by the Non-Employee Director will vest and such Options may be
exercised within the remainder of the term of the Option by the legal
representative of the Optionee's estate, or if it has been distributed as part
of the estate, by the person or persons to whom the Optionee's rights under the
Option shall pass by will or by the applicable laws of descent and distribution.
In no event may an Option be exercised to any extent by anyone after the
expiration or termination of the Option.

6.5 Payment
for Shares.

To the
extent permitted under applicable law and the relevant Stock Option Agreement,
the exercise price of an Option shall be paid to the Company in full at the time
of exercise at the election of the Optionee (1) in cash, (2) in shares of Stock
having a Fair Market Value equal to the aggregate exercise price of the Option
and satisfying such other requirements as may be imposed by the Committee, (3)
partly in cash and partly in such shares of Stock, (4) to the extent permitted
by the Committee, through the withholding of shares of Stock (which would
otherwise be delivered to the Optionee) with an aggregate Fair Market Value on
the exercise date equal to the aggregate exercise price of the Option or (5)
through the delivery of irrevocable instructions to a broker to deliver promptly
to the Company an amount equal to the aggregate exercise price of the Option.
The Committee may limit the extent to which shares of Stock may be used in
exercising Options. No Optionee shall have any rights to dividends or other
rights of a stockholder with respect to shares of Stock subject to an Option
until the Optionee has given written notice of exercise of the Option, paid in
full for such shares of Stock and, if applicable, has satisfied any other
conditions imposed by the Committee pursuant to the Plan.

Article
VII

Stock
Appreciation Rights

7.1 Grant.  An
SAR shall represent a right to receive a payment in cash equal to the excess of
the Fair Market Value of a specified number of shares of Stock on the date the
SAR is exercised over an amount (the SAR exercise price) which shall be no less
than the Fair Market Value of the shares on the date the SAR was granted (or the
option price for SARs granted in tandem with an Option), as set forth in the
applicable Award agreement. Each SAR shall be evidenced by an Award agreement
that shall specify the SAR exercise price, the duration of the SAR, the number
of shares of stock to which the SAR pertains, whether the SAR is granted in
tandem with the grant of an Option or is freestanding, and such other provisions
as the Committee shall determine. SARs shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance approve and which shall be set forth in the applicable Award agreement,
which need not be the same for each grant of for each grantee. 

 

7.2 Exercise.  
SARs granted in tandem with the grant of an Option may be exercised for all or
part of the shares of Stock subject to the related Option upon the surrender of
the right to exercise the equivalent portion of the related Option. SARs granted
in tandem with the grant of an Option may be exercised only with respect to the
shares of Stock for which its related Option is then exercisable. SARs granted
independently from the grant of an Option may be exercised upon the terms and
conditions contained in the applicable Award agreement. 

 

7.3 Termination.  The
Award agreement for a SAR shall set
forth the extent to which a grantee shall have the right to exercise an SAR
following termination of the grantee's service. Such provisions shall be
determined in the sole discretion of the Committee, need not be uniform among
all SARs, and may reflect distinctions based on the reasons for termination.

Article
VIII

Restricted
Stock

8.1 Terms
of Grant. At
the time of making a grant of Restricted Stock or making payment of an Award in
Restricted Stock to an Employee or Non-Employee Director, the Committee shall
establish a Restriction Period and assign such terms, conditions and other
restrictions to the Restricted Stock as it shall determine. 

8.2 Restricted
Stock - Rights.
Restricted Stock will be represented by a Stock certificate registered in the
name of the Restricted Stock recipient. Such certificate, accompanied by a
separate duly endorsed stock power, shall be deposited with the Company. The
recipient shall be entitled to receive dividends during the Restriction Period
and shall have the right to vote such Restricted Stock and all other
stockholder's rights, with the exception that (i) the recipient will not be
entitled to delivery of the Stock certificate during the Restriction Period,
(ii) the Company will retain custody of the Restricted Stock during the
Restriction Period and (iii) a breach of the terms and conditions established by
the Committee pursuant to the Award will cause a forfeiture of the Restricted
Stock. The Committee may, in addition, prescribe additional restrictions, terms
and conditions upon or to the Restricted Stock.

8.3 Termination
of Service. If an
Employee or Non-Employee Director terminates service by reason of Total
Disability, death or Retirement prior to the expiration of a Restriction Period
for a grant of Restricted Stock, the Restriction Period will lapse and the
shares will be delivered to the recipient. Unless the Committee provides
otherwise, a termination of service for other reasons prior to the expiration of
the applicable Restriction Period will result in the forfeiture of the
Restricted Stock.

8.4 Restricted
Stock Agreement. Each
grant of, or payment of an Award in, Restricted Stock shall be evidenced by a
Restricted Stock Agreement in such form and containing such terms and conditions
not inconsistent with the provisions of the Plan as the Committee from time to
time shall approve.

Article
IX

Performance
Awards

9.1 Eligibility
for Awards. The
Committee shall designate Employees as eligible to receive Performance Awards
under the Plan and shall establish applicable Performance Periods and
performance goals for any such Awards.

9.2 Performance
Awards.
Performance Awards may be in the form of performance shares, which are units
valued by reference to shares of Stock or performance units, which are units
valued by reference to financial measures or property other than Stock, and
shall be subject to such terms and conditions and other restrictions as the
Committee shall assign. At the time of making grants of Performance Awards, the
Committee shall establish such terms and conditions as it shall determine
applicable to such Awards. Performance Awards may be paid out in cash, Stock,
Restricted Stock, other property or a combination thereof. Recipients of
Performance Awards are not required to provide consideration other than the
rendering of service.

9.3 Partial
Performance Period Participation.
Subject to applicable restrictions under Section 162(m) of the Code, the
Committee shall determine the extent to which an Employee shall participate in a
partial Performance Period because of becoming eligible after the beginning of
such Performance Period. In the event an Employee terminates employment due to
death, Total Disability or Retirement after completing at least one month of the
Performance Period for an Award, such Employee shall be entitled to a pro rata
portion of the Award if the applicable performance goals are met, payable in
accordance with procedures established by the Committee. Unless the Committee
provides otherwise, if an Employee terminates employment for any other reason
prior to the end of a Performance Period for an Award, he shall not be entitled
to any payment under the Award. 

 

Article
X

Adjustment
Upon Changes In Stock

Subject
to the limitations of Article XIII, the Committee shall appropriately adjust the
number of shares or kind of Stock which may be issued pursuant to this Plan, the
other limits on Stock issuable under the Plan under Article V, and the number of
shares covered by, and the exercise price of, each outstanding Award, for any
increase or decrease in the total number of issued and outstanding Stock (or
change in kind) resulting from any change in the Stock through a merger,
consolidation, reorganization, recapitalization, subdivision or consolidation of
shares or other capital adjustment or the payment of a stock dividend or other
increase or decrease (or change in kind) in such shares. In the event of any
such adjustment, fractional shares shall be eliminated. 

 

 

Article
XI

Change
In Control

Notwithstanding
anything to the contrary in the Plan, in the event of a Change in
Control:

(i) If
during a Restriction Period(s) applicable to Restricted Stock issued under the
Plan, all restrictions imposed hereunder on such Restricted Stock shall lapse
effective as of the date of the Change in Control; 

(ii) If
during a Performance Period(s) applicable to a Performance Award granted under
the Plan, an Employee shall earn the number of performance shares or performance
units which the Employee would have earned as if target performance under the
Award was obtained; and 

(iii) Any
outstanding Options or SARs that are not exercisable shall become exercisable
effective as of the date of a Change in Control. If a grantee's employment or
service is terminated within 24 months of the effective date of a Change in
Control, to the extent that any Option or SAR was exercisable at the time of the
grantee's termination, such Option or SAR may be exercised within four years
following the date of termination or expiration of the Award if
sooner.

For
purposes of the Plan, a "Change in Control" shall be deemed to have occurred
if:

(a) Any
person ("Person") as defined in Section 3(a)(9) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of the Exchange Act,
but excluding the Company and any subsidiary and any employee benefit plan
sponsored or maintained by the Company or any subsidiary (including any trustee
of such plan acting as trustee), directly or indirectly, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the
Company representing 25% or more of the combined voting power of the Company's
then outstanding securities (other than indirectly as a result of the Company's
redemption of its securities); or

(b) The
consummation of any merger or other business combination of the Company, sale of
50% or more of the Company's assets, liquidation or dissolution of the Company
or combination of the foregoing transactions (the "Transactions") other than a
Transaction immediately following which the shareholder of the Company and any
trustee or fiduciary of any Company employee benefit plan immediately prior to
the Transaction own at least 60% of the voting power, directly or indirectly, of
(A) the surviving corporation in any such merger or other business combination;
(B) the purchaser or successor to the Company's assets; (C) both the surviving
corporation and the purchaser in the event of any combination of Transactions;
or (D) the parent company owning 100% of such surviving corporation, purchaser
or both the surviving corporation and the purchaser, as the case may be;
or

(c) Within
any twenty-four month period, the persons who were directors immediately before
the beginning of such period (the "Incumbent Directors") shall cease (for any
reason other than death) to constitute at least a majority of the Board or the
board of directors of a successor to the Company. For this purpose, any director
who was not a director at the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or on the
recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors (so long as such director was not
nominated by a person who commenced or threatened to commence an election
contest or proxy solicitation by or on behalf of a Person (other than the Board)
or who has entered into an agreement to effect a Change in Control or expressed
an intention to cause such a Change in Control); or

(d) A
majority of the members of the Board of Directors in office immediately prior to
a proposed transaction determine by a written resolution that such proposed
transaction, if taken, will be deemed a Change in Control and such proposed
transaction is consummated.

Article
XII

Miscellaneous

12.1 Effect
on Other Plans.
Except as otherwise required by law, no action taken under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
thrift, profit sharing, group insurance or other benefit plan maintained by the
Company or any Subsidiaries, unless such other plan specifically provides for
such inclusion.

12.2 Transfer
Restrictions.
Except as provided in Article XII, Section 12.3, no Award shall be transferable
other than by will or the laws of descent and distribution. Any Option or SAR
shall be exercisable (i) during the lifetime of the grantee, only by the grantee
or, to the extent permitted by the Code, by an appointed guardian or legal
representative of the grantee, and (ii) after death of the grantee, only by the
grantee's legal representative or by the person who acquired the right to
exercise such Option or SAR by bequest or inheritance or by reason of the death
of the grantee.

12.3 Transfer
of Options. The
Committee may, in its discretion, authorize all or a portion of the Options to
be granted to an Optionee to be on terms which permit transfer by such Optionee
to an immediate family member of the Optionee who acquires the options from the
Optionee through a gift or a domestic relations order. For purposes of this
Article XII, Section 12.3, "family member" includes any 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, trusts for the exclusive benefit of these
persons and any other entity owned solely by these persons, provided that the
Stock Option Agreement pursuant to which such Options are granted must be
approved by the Committee and must expressly provide for transferability in a
manner consistent with this Section and provided further that subsequent
transfers of transferred options shall be prohibited except those in accordance
with Article XII, Section 12.2. Following transfer, any such Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. The events of termination of service of Article
VI, Section 6.4 hereof shall continue to be applied with respect to the original
Optionee, following which the options shall be exercisable by the Transferee
only to the extent and for the periods specified in Article VI, Section
6.4.

12.4 Withholding
Taxes. The
Company shall have the right to withhold from any settlement hereunder any
federal, state, or local taxes required by law to be withheld, or require
payment in the amount of such withholding. If settlement hereunder is in the
form of Stock, such withholding may be satisfied by the withholding of shares of
Stock by the Company, unless the grantee shall pay to the Company an amount
sufficient to cover the amount of taxes required to be withheld, and such
withholding of shares does not violate any applicable laws, rules or regulations
of federal, state or local authorities.

12.5 Transfer
of Employment and Leave of Absence.
Transfer of employment between the Company, a Subsidiary or Limited Liability
Company, or between Limited Liability Companies and Subsidiaries shall not
constitute termination of employment for the purpose of the Plan. Whether any
leave of absence shall constitute termination of employment for the purposes of
the Plan shall be determined in each case by the Committee.

12.6 Administrative
Expenses. All
administrative expenses associated with the administration of the Plan shall be
borne by the Company.

12.7 Titles
and Headings. The
titles and headings of the articles in this Plan are for convenience of
reference only and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.

12.8 No
Guarantee of Continued Employment. No
grant of an Award to an Employee under the Plan or any provisions thereof shall
constitute any agreement for or guarantee of continued employment by the Company
and no grant of an Award to a Non-Employee Director shall constitute any
agreement for or guarantee of continuing as a Non-Employee Director.

12.9 Proceeds. The
proceeds received by the Company from the sale of Stock under the Plan shall be
added to the general funds of the Company and shall be used for corporate
purposes as the Board shall direct.

12.10 Governing
Law. The
Plan shall be governed and construed in accordance with the laws of Delaware,
except to the extent that federal law applies.

12.11  Award
Deferrals.
Employees who are eligible to participate in the Kerr-McGee Corporation
Executive Deferred Compensation Plan (the "EDCP") may elect to defer receipt of
amounts under an Award in accordance with the terms of the EDCP. Non-Employee
Directors who are eligible to participate in the Kerr-McGee Corporation Deferred
Compensation Plan for Non-Employee Directors (the "Directors Plan") may elect to
defer receipt of amounts under an Award in accordance with the terms of the
Directors Plan.

Article
XIII

Amendment
And Termination

The
Board may at any time terminate or amend this Plan in such respect as it shall
deem advisable. Notwithstanding the foregoing, the Board may not, without
further approval of the stockholders of the Company, amend the Plan in a manner
that requires such approval under the rules of the New York Stock Exchange, the
Code, or any other applicable law, including any amendment that materially
increases the maximum number of shares of Stock issuable under the Plan or
results in the repricing of Options. No amendment or termination of the Plan
shall, without the consent of the grantee of an Award, have a materially adverse
effect on the grantee’s rights or obligations under the Award. 

Article
XIV

Duration
Of The Plan

The
effective date of this Plan shall be May 10, 2005. If not sooner terminated by
the Board, this Plan shall terminate on May 10, 2015. No Awards shall be made
after the Plan has terminated. Awards granted before the termination of the Plan
shall remain outstanding and the terms of the Plan shall continue to apply to
such Awards.Exhibit 10.1

                                 LOAN AGREEMENT

         This LOAN AGREEMENT (this "Agreement"), dated as of March 22, 2005, is
made by and between Shlomie Morgenstern, an individual with an address at 200
Route 17 South, Mahwah, New Jersey ("Lender"), and Databit, Inc., a Delaware
corporation ("Databit").

         WHEREAS, Databit requires additional working capital to enable it to
purchase inventory for sale to customers;

         WHEREAS, Databit and its parent company, Data Systems & Software Inc.
("DSSI"), have previously endeavored to obtaining financing from banks and
finance companies and have been unable to obtain such financing; and

         WHEREAS, Lender, President and Chief Executive Officer and director of
Databit, is willing to make one or more advances to Databit up to an aggregate
of $500,000, subject to the terms and conditions of this Agreement.

         In consideration of the foregoing and the covenants and conditions set
forth herein, and intending to be legally bound hereby, the parties hereby agree
as follows:

1. Credit Line.

         (a) Borrowings. Subject to the terms and conditions set forth herein,
(i) Lender shall upon and concurrently with the execution of this Agreement make
an advance to Databit in the amount of $250,000 (the "Initial Loan") and (ii)
Lender may, upon request of Databit, make available to Databit prior to the
Maturity Date (as defined below), at Lender's sole discretion, one or more
additional advances up to an aggregate additional principal amount not to exceed
$250,000 (the "Additional Loans"; and together with the Initial Loan, the
"Loans"). Databit shall use the proceeds from the Loans solely for purchase of
equipment and software for sale to customers.

         (b) Maturity Date. The principal amount of the Initial Loan and any
Additional Loans shall be due and payable thirty days after the date of the
drawdown (the "Maturity Date"), which date may be extended until the earlier of
(i) 60 days from the respective Maturity Date or (ii) to August 31, 2005 (the
"Final Maturity Date") upon the written notice thereof delivered by Databit to
Lender.

         2. Note. All Loans shall be evidenced by a promissory note of Databit
in the form of Exhibit A attached hereto (the "Note"). Lender is hereby
authorized to endorse the date and amount of each drawdown of each Loan and the
amount of each payment of principal and interest on the Loans on the schedule
annexed to and constituting a part of the Note which endorsement, together with
evidence of payment shall constitute prima facie evidence, absent demonstrated
error, of the accuracy of such information so endorsed. In lieu of endorsing
such schedule as hereinabove provided, Lender may record such transactions on
its books and records and such books and records, together with evidence of
payment shall constitute prima facie evidence, absent demonstrated error, of the
accuracy of the information contained therein. Failure by Lender, in either
case, to make such endorsement or recordation or any error with respect thereto,
shall not affect the obligations and liabilities of Databit under this Agreement
or under the Note.

<PAGE>

          3. Interest Rate. Databit shall pay interest on the outstanding unpaid
principal amount of the Loans from the date of drawdown of each Loan until its
Maturity Date at a floating rate per annum which, subject to the terms hereof,
shall be equal to the rate listed in the Wall Street Journal as the prime rate,
plus 3% (the "Interest Rate").
..
         4. Payments and Interest.

         (a) Pre-Payments. Prior to a Maturity Date, Databit may pre-pay, in
whole or in part, all or any portion of the Loans (together with interest
accrued thereon) without penalty or premium; provided, however, that the Loans,
together with the interest accrued thereon, shall be repaid by Databit in full
no later than the Final Maturity Date.

         (b) Computation of Interest. Interest on the Loans shall be computed on
the basis of a year of 365 days, for the actual number of days elapsed and the
rate shall be adjusted daily to reflect changes in the prime rate.

         (c) Payments. All payments to be made hereunder shall be made in
immediately available funds in United States Dollars, by check to Lender at the
address set forth in Section 10 hereof, or by wire transfer to the account of
Lender at such bank as Lender shall notify Databit in writing. If the date for
any payment due hereunder would otherwise fall on a Saturday, Sunday or legal
bank holiday in the State of New York, such payment shall be extended to the
next following business day with interest payable at the applicable rate
specified herein during such extension.

         (f) Full Recourse Obligation. Repayment of the outstanding balance of
the principal of, and the accrued interest on, the Loans shall be a
full-recourse obligation of Databit.

         (g) Guarantee and Security. The Loans will be (i) guaranteed by DSSI
pursuant to a Guarantee (as defined in Section 6 hereof), and (ii) secured by
the inventory and accounts receivable of Databit pursuant to the Security
Agreement (as defined in Section 6 hereof).

         5. Borrowing Procedures for Additional Loans. Databit may from time to
time request that Lender make one or more Additional Loans. Such request shall
be made in writing and shall specify (i) the funding date of the requested
Additional Loan, which shall be a business day, (ii) the amount of the
Additional Loan. Such request shall hereinafter be referred to as a "Request for
Borrowing". No Request for Borrowing shall be made on or after June 30, 2005.
Upon receipt of the Request for Borrowing, Lender shall promptly notify Databit
in writing whether or not the Additional Loan will be made pursuant to the
Request for Borrowing. The Request for Borrowing shall be revocable at any time
prior to such notification by Lender.

                                      -2-
<PAGE>

         6. Conditions to the Initial Loan and any Additional Loan(s).

         (a) The Initial Loan. Lender shall make the Initial Loan upon receipt
of (i) the Note dated the date hereof executed by Databit, (ii) a Security
Agreement, dated the date hereof, substantially in the form of Exhibit B
attached hereto (the "Security Agreement") executed by Databit, and (iii) an
executed guarantee substantially in the form of Exhibit C attached hereto (the
"Guarantee"), executed by DSSI.

         (b) All Additional Loans. All Additional Loans shall be made at the
sole discretion of the Lender and Databit acknowledges that it shall have no
reasonable basis for relying on the availability of any Additional Loan unless
and until such Additional Loan has been made.

         7. Remedies.

         (a) Upon the occurrence of an Insolvency Event (as defined below) or an
Event of Default (as defined below) by Databit and at any time thereafter,
Lender may at any time declare all obligations and liabilities of Databit
hereunder then outstanding immediately due and payable, and Lender's commitment
to make any Additional Loans shall be terminated, whereupon all Loans shall
immediately become due and payable and terminated without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by
Databit.

         (b) As used herein, an "Insolvency Event" shall mean that Databit shall
suspend or discontinue its business, or shall make an assignment for the benefit
of, or composition with, creditors, or shall become insolvent or be unable (or
admit in writing its inability) or generally fail to pay its debts when due, or
becomes in any jurisdiction a party or subject to (voluntarily or involuntarily)
any liquidation or dissolution action or proceeding, or any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors is commenced with respect to it, or a receiver, liquidator,
custodian or trustee shall be appointed for it, or a substantial part of its
assets (and with respect to any involuntary action or proceeding, an order
entered in the proceeding is not dismissed within 30 days) or it shall take any
action to effect or which indicates its acquiescence in any of the foregoing.

         (c) As used herein, "Event of Default" shall mean the lapse of 10 days
after written notice by Lender to Databit of (i) Databit's failure to make
timely payment of any amounts due and payable under the Loans, (ii) Databit's
breach of a representation, warranty or covenant set forth in this Agreement,
the Note, the Security Agreement, a Request for Borrowing, or any other
agreements, certificates or instruments entered into or delivered from time to
time in connection herewith and therewith (the "Financing Documents"), (iii) any
money judgment in excess of $15,000 shall be entered against Databit and shall
not have been paid or bonded within 10 days.

         8. Representations and Warranties of Databit. Databit hereby represents
and warrants to Lender that (i) Databit is duly incorporated, validly existing
and in good standing in the State of Delaware, and is duly qualified to do
business in the State of New York, (ii) this Agreement has been duly authorized,
executed and delivered by Databit, and constitutes Databit's valid and legally
binding obligation, enforceable against Databit in accordance with its terms,
(iii) Databit is not in breach of any material agreement to which it is a party,
(iv) Databit is not a defendant in any material litigation, and (v) Databit has
conducted its business in compliance with applicable laws. The statements set
forth in any Request for Borrowing, or in any certificate or instrument included
in the Financing Documents delivered by Databit to Lender from time to time
shall be deemed to be representations and warranties on the part of Databit.

                                      -3-
<PAGE>

         9. Covenants. So long as this Agreement shall be in effect, and so long
as any amounts shall be outstanding hereunder, Databit shall conduct its
business in the usual and ordinary course, in compliance with applicable laws;
maintain its corporate existence and qualifications; and maintain at all times
true and complete books, records and accounts in accordance with generally
accepted accounting principles applied on a consistent basis.

         10. Miscellaneous.

         (a) No Waiver. No failure or delay on the part of Lender in exercising
any right, power or privilege hereunder and no course of dealing between the
parties shall operate as a waiver therefor, nor preclude the ability of Lender
to insist at any future time on strict performance of the same or any other
provision, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other rights or remedies which Lender would otherwise have. No
notice to or demand on Databit in any case shall entitle Databit to any other or
future notice or demand in similar or other circumstances or constitute the
waiver of the rights of Lender to any other or future action in any
circumstances.

         (b) Maximum Interest Rate. It is the express intention of Lender and
Databit that nothing contained in this Agreement or in the Note shall require
Databit to pay any interest (before or after an Insolvency Event, an Event of
Default, as scheduled, compounded, or otherwise accrued or charged) on any of
the Loans at a rate exceeding the maximum permissible rate (which means the rate
that if exceeded could, under applicable law, result in civil or criminal
penalties being imposed on Lender or result in Lender being unable to enforce
payment or repayment of all or part of the principal of, or the interest due or
to become due on such Loans). If Databit should pay or Lender should collect or
receive any interest in excess of the rate specified in the preceding sentence,
such payment shall be deemed to be the property of Databit in all regards, and
shall be held in trust by Lender for the benefit of Databit, and shall be repaid
to Databit with interest accrued thereon from the date of receipt by Lender to
the date of repayment to Databit, at the overnight federal funds rate as
determined by Lender.

         (c) Successors and Assigns. Neither party may assign or transfer this
Agreement or any of its rights and obligations hereunder without the prior
written consent of the other party. Any attempted assignment or transfer without
such prior consent shall be void and without effect. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Notwithstanding the foregoing, after the
occurrence of an Event of Default or an Insolvency Event, Lender shall have the
right to assign, transfer and endorse over the Note to any third party
whatsoever, who shall thereupon have all of the rights, powers and privileges
with regard to the Note as Lender has hereunder.

         (d) Notices. All notices, consents or other communications (each being
a "Notice") to either party under this Agreement shall be in writing and shall
be deemed to be sufficiently given (i) if delivered by overnight courier, in
which case the Notice shall be deemed to have been received one business day
after the sending thereof, (ii) if delivered in person, against receipt, to a
representative of such party, in which case the Notice shall be deemed to have
been received on the date of delivery thereof, or (iii) if sent by confirmed
telecopier to such party, in which case the Notice shall be deemed to have been
received on the date of delivery if delivered during the recipient's normal
business hours, and if not so delivered shall be deemed to have been received on
the business day following the sending thereof, in each case addressed as
follows:

                                      -4-
<PAGE>

         (i) If to Databit, to it at:

                  200 Route 17 South
                  Mahwah, New Jersey 07430
                  Attn: Neil Fogel, Director of Finance
                  Fax: 201-529-3163

         (ii) if to Lender, to him at:

                  200 Route 17 South
                  Mahwah, New Jersey  07430
                  Fax: 201-529-3163

or to such other address as the party to whom Notice is to be given may have
furnished to the other party in accordance with the terms hereof.

         (e) Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes any
previous agreement or understanding between the parties, whether written or
oral.

         (f) Amendments and Waivers. This Agreement may not be amended except by
a written instrument signed by the parties hereto. No waiver or release of any
provision of this Agreement shall be effective unless made in writing by the
party against which the same is to be enforced, and no such waiver or release
shall extend to anything other than the specific subject matter thereof.

         (g) Severability. If any provision of this Agreement shall be held
invalid or unenforceable to any extent in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision (or such portion thereof,
if less than the full provision) in such jurisdiction and shall not in any
manner affect such provision or render it invalid or unenforceable in any other
jurisdiction or affect any other provision of this Agreement in any
jurisdiction.

         (h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.

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

                                      -5-
<PAGE>

         (j) Descriptive Headings. The descriptive headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.

                        [Signatures appear on next page]

                                      -6-
<PAGE>

         IN WITNESS WHEREOF each of the parties hereto has executed this
Agreement as of the date first above written.

                               /s/ SHLOMIE MORGENSTERN
                               -----------------------
                               Shlomie Morgenstern

                               DATABIT, INC.

                               By: /s/ ALICE KNOLL
                               -----------------------
                               Name: Alice Knoll
                               Title: Treasurer

AGREED AS TO SECTIONS 4(g) AND 10 ONLY:

DATA SYSTEMS & SOFTWARE INC.

By: /s/ YACOV KAUFMAN
-------------------------------
Name:  Yacov Kaufman
Title:  Chief Financial Officer

                                      -7-
<PAGE>

                            EXHIBIT A - FORM OF NOTE

                                 PROMISSORY NOTE

                                                              Mahwah, New Jersey
                                                                  March 22, 2005

         FOR VALUE RECEIVED, the undersigned, DATABIT, INC. (the "Borrower")
hereby unconditionally promises to pay to SHLOMIE MORGENSTERN (the "Lender") at
the Lender's offices located at 200 Route 17 South, Mahwah, New Jersey 07430 or,
at the Lender's option, at such other place as may be designated from time to
time by the Lender, on the Maturity Date, the principal sum of Five Hundred
Thousand Dollars ($500,000.00) or, if less, the unpaid principal amount of all
Loans, in accordance with the terms of the Loan Agreement (as defined below).

         This Note evidences the Loans and is the Note referred to in, and is
entitled to the benefits and subject to the terms and conditions of, the Loan
Agreement dated the date hereof (the "Loan Agreement") among the Borrower and
the Lender.

         Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Loan Agreement.

         This Note shall bear interest on the unpaid outstanding principal
amount of Loans evidenced hereby, at a fluctuating rate per annum equal to the
rate listed in the Wall Street Journal as the prime rate, plus 3% (the "Interest
Rate").

         Interest will be calculated based on a year of 365 days for the actual
number of days elapsed and the rate shall be adjusted daily to reflect changes
in the prime rate. Payment of all accrued and unpaid interest shall be due and
payable on the respective Maturity Date on which the entire outstanding
principal amount of a Loan shall be due and payable.

         The date and amount of each Loan shall be set forth and entered in the
Lender's books and records and/or endorsed by the Lender on the grid attached to
and made a part of this Note. The treatment of such recordation and endorsement
is set forth in the Loan Agreement.

         If an Event of Default or an Insolvency Event on the part of the
Borrower shall occur, the principal of, accrued interest on and all other
amounts due under this Note may be declared to be immediately due and payable,
in the manner set forth in and pursuant to the terms and conditions of the Loan
Agreement.

         The Borrower shall have the right to repay at any time, without premium
or penalty, all or any portion of the principal indebtedness evidenced by this
Note, together with accrued interest on the principal so prepaid to the date of
such prepayment.

         No failure by the Lender hereof to exercise, and no delay in
exercising, any right or remedy hereunder precludes any other or further
exercise thereof or the exercise of any other right or remedy. The rights and
remedies of the Lender as herein specified are cumulative and not exclusive or
any other rights of remedies which such holder may otherwise have.

<PAGE>

         No rescission, waiver, forbearance, release or amendment of any
provision of this Note shall be made, except by a written agreement duly
executed by the Borrower and the Lender.

         It is the express intention of the Lender and the Borrower that nothing
contained in this Note shall require Databit to pay any interest (before or
after an Insolvency Event, an Event of Default, as scheduled, compounded, or
otherwise accrued or charged) on any of the Loans at a rate exceeding the
maximum permissible rate (which means the rate that if exceeded could, under
applicable law, result in civil or criminal penalties being imposed on Lender or
result in Lender being unable to enforce payment or repayment of all or part of
the principal of, or the interest due or to become due on such Loans). If the
Borrower should pay, or Lender should collect or receive any interest in excess
of the rate specified in the preceding sentence, such payment shall be deemed to
be the property of the Borrower in all regards, and shall be held in trust by
Lender for the benefit of the Borrower, and shall be repaid to the Borrower with
interest accrued thereon from the date of receipt by Lender to the date of
repayment to the Borrower, at the overnight Federal federal funds rate as
determined by Lender.

         This Note shall be governed by and construed in accordance with the
laws of the State of New York, without regard to principles of conflicts of
laws. This Note may not be assigned by the Borrower and shall be binding upon
the successors and assigns of the Borrower and inure to the benefit of the
Lender and his successors, endorsees and assigns.

         The Borrower agrees to pay all costs and expenses incurred by the
holder hereof in enforcing this Note, including, without limitation, attorneys'
fees and disbursements incurred in connection therewith, to the extent permitted
by law.

                                      -2-
<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first above written.

                                                     DATABIT, INC.

                                                     By:________________________
                                                     Name:  Alice Knoll
                                                     Title:    Treasurer

ACKNOWLEDGED:
DATA SYSTEMS & SOFTWARE INC.

---------------------------------------------------
Name:  Yacov Kaufman
Title:  Vice President and Chief Financial Officer

                                      -3-
<PAGE>

                                  GRID TO NOTE
                                       OF
                                  DATABIT, INC.

<TABLE>
<CAPTION>
------------------- ---------------- -------------------------- ------------------- --------------------------
                                                                                      Aggregate Outstanding
       Date            Drawdown           Principal Paid          Interest Paid             Principal
------------------- ---------------- -------------------------- ------------------- --------------------------
<C>                 <C>              <C>                        <C>                     <C>
3/22/05             $250,000
------------------- ---------------- -------------------------- ------------------- --------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

------------------- ---------------- -------------------------- ------------------- --------------------------
</TABLE>

                                      -4-
<PAGE>

                     EXHIBIT B - FORM OF SECURITY AGREEMENT

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT, dated as of March 22, 2005 ("Security
Agreement"), is made by and between Shlomie Morgenstern (the "Secured Party")
and Databit, Inc., a Delaware corporation, with a principal place of business at
200 Route 17, Mahwah, New Jersey 07430 (the "Borrower").

                              W I T N E S S E T H:

         WHEREAS, pursuant to the Loan Agreement dated today's date between the
parties hereto (the "Loan Agreement") the Secured Party has agreed to make an
initial loan in the principal amount of $250,000 and may from time to time make
$250,000 of additional loans up to an aggregate of $500,000 in Loans to the
Borrower (hereinafter the "Loans");

         WHEREAS, the Loans are to be evidenced by the Note (hereinafter the
"Note");

         WHEREAS, it is a condition precedent to the Loan Agreement and to the
Secured Party making the Loans, that this Security Agreement be executed by the
Borrower and duly delivered to the Secured Party; and

         WHEREAS, the Secured Party will derive substantial direct and indirect
benefit from the Loans:

         NOW, THEREFORE, in consideration of the foregoing and to induce the
Secured Party to make the Loans to the Borrower evidenced by the Note, the
Borrower hereby agrees with the Secured Party as follows:

         SECTION I. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the meaning given thereto in the Loan Agreement, and
the following terms shall have the following meanings:

         "Collateral" shall mean and include all of the Borrower's right, title
and interest in and to the following property of Borrower whether now or
hereafter existing, tangible and intangible, now owned or hereafter acquired and
wherever located:

            (a) all accounts, instruments, documents, notes, claims, contract
rights, deposit accounts, inventory (including, but not limited to, finished
goods, returned goods, goods held for display or demonstration or out on lease
or consignment, in transit goods, goods under letters of credit or trust
receipts, and bill and hold goods), demands and the proceeds (including any
insurance proceeds), products and accessions of and to any thereof; and

            (b) all books and records pertaining to all of the foregoing, all of
which are and shall at all times remain, free and clear of all Liens (as defined
herein).

            Notwithstanding the foregoing, the term "Collateral" shall exclude
any of the foregoing in which the Borrower is contractually precluded from
granting a security interest.

<PAGE>

         "Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.

         "Obligations" shall mean the unpaid principal of and interest on the
Note and all other obligations and liabilities of the Borrower to the Secured
Party, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Note, this Security Agreement, the Loan Agreement, or
otherwise.

         "Security Interest" shall have the meaning set forth in Section 2(b).

         "UCC" shall mean the Uniform Commercial Code as in effect in the State
of New York from time to time.

         SECTION 2. Grant of Security Interest. (a) In order to secure the
prompt performance and indefeasible payment of the Obligations, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower hereby grants to the Secured Party a first, prior,
continuing security interest in all of the Collateral.

            (b) The security interest granted pursuant to this Section 2 (the
"Security Interest") is granted as security only and shall not subject the
Secured Party to, or transfer or in any way affect or modify, any obligation or
liability of the Borrower under any of the Collateral or any transaction which
gave rise thereto.

            (c) To the extent the granting of a Security Interest in any
contract rights of the Borrower would, with or without the giving of notice or
the passage of time or both, conflict with the contract giving rise to such
rights or result in a default or loss of rights, or give rise to any right of
termination, cancellation or acceleration, under such contract, the Borrower
agrees to take any action, other than the payment of money, which the Secured
Party may reasonably request in order to obtain any necessary consent of the
parties to such contract to allow for the granting of a Security Interest in the
rights arising thereunder. Failure to obtain such consent will not constitute a
default under the Note or this Security Agreement; provided that Borrower agrees
to use reasonable commercial efforts to do so.

                                      -2-
<PAGE>

         SECTION 3. Filing; Further Assurances. The Borrower, at its expense,
will execute, deliver, file (in such manner and form as the Secured Party may
reasonably require), or permit the Secured Party to file and record, any
financing statements, any carbon, photographic or other reproduction of a
financing statement or this Security Agreement (which shall be sufficient as a
financing statement hereunder), any specific assignments or other paper that may
be reasonably necessary or desirable, or that the Secured Party may reasonably
request, in order to create, preserve, perfect or validate any Security Interest
or to enable the Secured Party to exercise and enforce its rights hereunder with
respect to any of the Collateral. The Borrower hereby appoints the Secured
Party, which appointment is irrevocable and coupled with an interest, as its
attorney-in-fact to execute in the name and on behalf of Borrower such
additional financing statements as the Secured Party may reasonably request.

         SECTION 4. Representations and Warranties of the Borrower. The Borrower
hereby represents and warrants to the Secured Party that (a) this Security
Agreement has been duly authorized, executed and delivered by the Borrower, and
constitutes the Borrower's valid and legally binding obligation, enforceable
against the Borrower in accordance with its terms, and (b) the Collateral is
free and clear of any Liens other than the Lien created by the Financing
Documents.

         SECTION 5. Covenants of the Borrower. The Borrower hereby covenants and
agrees with the Secured Party that it:

            (a) will defend the Collateral against all claims and demands of all
persons at any time claiming any interest therein senior to that of the Secured
Party;

            (b) will promptly, in accordance with its normal business practices,
pay any and all taxes, assessments and governmental charges upon the Collateral
prior to the date penalties are attached thereto, except to the extent otherwise
permitted by the Loan Agreement, the Note or the Secured Party;

            (c) will immediately notify the Secured Party of any event which
affects the value of the Collateral, the ability of the Borrower or the Secured
Party to dispose of the Collateral, the ability of the Borrower to repay the
Loans, or the rights and remedies of the Secured Party with regard to the Loans
or the Collateral;

            (d) will have and maintain insurance on the Collateral in such
amounts as is commercially reasonable;

            (e) will not sell or offer to sell or otherwise assign, transfer or
dispose of the Collateral or any interest therein (other than the sale of
inventory, or licensing in the ordinary course of business), without the written
consent of the Secured Party, which consent shall not be unreasonably withheld;

            (f) will keep the Collateral free from any adverse Lien and will not
waste or destroy the Collateral or any material part thereof;

            (g) will not knowingly use the Collateral in violation of any
statute or ordinance, the violation of which could materially impair the value
of the Collateral; and

            (h) will immediately notify the Secured Party of any change in the
location of the Collateral or the Borrower's name, location or corporate
structure.

         SECTION 6. Records Relating to Collateral. The Borrower will keep its
records concerning the Collateral at its address indicated on the signature page
hereof or at such other place or places of which the Secured Party shall have
been notified in writing upon no less than ten (10) days advance written notice.
The Borrower will hold and preserve such records and will permit, upon
reasonable advance notice, representatives of the Secured Party, during normal
business hours without disrupting Borrower's business, to examine, inspect and
make abstracts from such records and will furnish to the Secured Party such
information and reports regarding the Collateral as the Secured Party may from
time to time reasonably request; provided, however, that the Secured Party and
its representatives shall keep such abstracts, records, information and reports
confidential.

                                      -3-
<PAGE>

         SECTION 7. Rights and Remedies. (a) Upon the occurrence of any
Insolvency Event or Event of Default, such default not having previously been
remedied or waived, the Secured Party shall have the following rights and
remedies:

                           (i)      The right, at its option, by written notice
                                    to the Borrower, to declare the entire
                                    unpaid balance of the Note to be immediately
                                    due and payable and thereupon such amount
                                    together with all costs, fees and expenses
                                    incurred in connection therewith, shall be
                                    immediately due and payable,

                           (ii)     All rights and remedies provided by law,
                                    including, without limitation, those
                                    provided by the UCC.

                           (iii)    The right to take possession of the
                                    Collateral and, in addition thereto, the
                                    right to enter upon any premises, during
                                    normal business hours, on which the
                                    Collateral or any part thereof may be
                                    situated, without notice, and remove the
                                    same therefrom, and to complete any
                                    uncompleted inventory in the process of
                                    completion. The Secured Party may require
                                    the Borrower to make the Collateral (to the
                                    extent the same is moveable) available to
                                    the Secured Party at a place to be
                                    designated by the Secured Party which is
                                    convenient to the Secured Party.

                             (iv)   Sell the Collateral or any part thereof in
                                    one or more parcels at public or private
                                    sale, for cash, on credit or for future
                                    delivery, and upon such other terms as the
                                    Secured Party may deem commercially
                                    reasonable. Unless the Collateral is
                                    perishable or threatens to decline speedily
                                    in value or is of a type customarily sold on
                                    a recognized market, the Secured Party will
                                    give the Borrower at least ten (10) days'
                                    prior written notice at the address of the
                                    Borrower set forth above (or at such other
                                    address or addresses as the Borrower shall
                                    specify in writing to the Secured Party) of
                                    the time and place of any public sale
                                    thereof or of the time after which any
                                    private sale or any other intended
                                    disposition thereof is to be made. Any such
                                    notice shall be deemed to meet any
                                    requirement hereunder or under any
                                    applicable law (including the UCC) that
                                    reasonable notification be given of the time
                                    and place of such sale or other disposition.

                                      -4-
<PAGE>

                                    After deducting all costs and expenses of
                                    collection, storage, custody, sale or other
                                    disposition and delivery (including
                                    reasonable legal costs and attorneys' fees)
                                    and all other charges against the
                                    Collateral, the remaining proceeds of any
                                    such sale or disposition shall be applied to
                                    the payment of the Obligations in such order
                                    of priority as the Secured Party shall
                                    determine and any surplus shall be returned
                                    to the Borrower or to any person or party
                                    lawfully entitled thereto (including, if
                                    applicable, any subordinated creditors of
                                    the Borrower). In the event the proceeds of
                                    any sale, lease or other disposition of the
                                    Collateral hereunder are insufficient to pay
                                    all of the Obligations in full, the Borrower
                                    will be liable for the deficiency, together
                                    with interest thereon at the highest rate of
                                    interest provided in the Note, and the costs
                                    and expenses of collection of such
                                    deficiency, including (to the extent
                                    permitted by law), without limitation,
                                    reasonable attorneys' fees, expenses and
                                    disbursements. The Secured Party shall have
                                    the right upon any public sale, and to the
                                    extent permitted by law in any private sale,
                                    to purchase for its own benefit the whole or
                                    any part of the Collateral so sold, free of
                                    any right or equity of redemption of the
                                    Borrower, which right or equity is hereby
                                    waived and released by the Borrower.

                           (v)      Any cash held by the Secured Party as
                                    Collateral and all cash proceeds received by
                                    the Secured Party in respect of any sale of,
                                    collection from, or other realization upon
                                    all or any part of the Collateral may, in
                                    the discretion of the Secured Party, be held
                                    by the Secured Party as collateral for,
                                    and/or then or at any time thereafter be
                                    applied in whole or in part by the Secured
                                    Party against all or any part of the
                                    Obligations in such order as the Secured
                                    Party may elect.

            (b) The Borrower hereby appoints, which appointment is irrevocable
and coupled with an interest, the Secured Party its lawful attorney with full
power of substitution, in its name, for the sole use and benefit of the Secured
Party, but at the Borrower's expense, to exercise, all or any of the foregoing
powers with respect to all or any of the Collateral following an Event of
Default or an Insolvency Event.

            (c) All rights and remedies available to the Secured Party pursuant
to the provisions of this Security Agreement, applicable law and otherwise are
cumulative, not exclusive, and enforceable alternatively, successively and/or
concurrently by Secured Party.

         SECTION 8. Expenses; Secured Party's Lien. The Borrower will forthwith
upon demand pay to the Secured Party:

                                      -5-
<PAGE>

            (a) the amount of any taxes which the Secured Party may have been
required to pay by reason of the Security Interest (including any applicable
transfer and personal property taxes but excluding taxes in respect of the
Secured Party's income, profits and business activities) or to free any of the
Collateral from any Lien thereon; and

            (b) the amount of any and all reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of its counsel and of any agents
not regularly in their employ, which the Secured Party may incur in connection
with (i) the collection, sale or other disposition of any of the Collateral,
(ii) the exercise by the Secured Party of any of the powers conferred upon it
hereunder, or (iii) any default on the part of the Borrower hereunder.

         SECTION 9. Termination of Security Interest; Release of Collateral.
Upon the final and full repayment and performance of all the Obligations, the
Security Interest shall terminate and all rights to the Collateral shall revert
to the Borrower. Upon any such termination of the Security Interest or release
of Collateral, the Secured Party, at the Borrower's expense, will execute and
deliver to the Borrower such documents as the Borrower shall reasonably request
to evidence the termination of the Security Interest or the release of such
Collateral, as the case may be.

         SECTION 10. Notices. All notices, demands and other communications
pursuant hereto shall be given to the parties in accordance with Section 10(d)
of the Loan Agreement.

         SECTION 11.  Miscellaneous.

            (a) No failure on the part of the Secured Party to exercise, and no
delay in exercising, and no course of dealing with respect to, any right, power
or remedy under this Security Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise by the Secured Party of any right, power or
remedy under this Security Agreement preclude any other right, power or remedy.
The remedies in this Security Agreement are cumulative and are not exclusive of
any other remedies provided by law. Neither this Security Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally but
only by a statement in writing signed by the party against which the enforcement
of the change, waiver, discharge or termination is sought. Such amendment,
waiver, or discharge shall be effective only in the specific instance and for
the specific purpose for which given.

            (b) This Security Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to any
principles of conflicts of laws.

            (c) This Security Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same Security Agreement.

            (d) The Borrower hereby agrees to execute and deliver such further
instruments and documents as may be reasonably requested by the Secured Party in
order to carry out fully the intent and accomplish the purposes of this Security
Agreement. The Borrower agrees to take any action which the Secured Party may
reasonably request in order to obtain and enjoy the full rights and benefits
granted to the Secured Party by this Security Agreement including specifically,
at the Borrower's own cost and expense, the use of diligent efforts to assist in
obtaining the consent of any agency or governmental authority for an action or
transaction contemplated by this Security Agreement which is then required by
law.

                                      -6-
<PAGE>

            (e) If any provision of this Security Agreement shall be held
invalid or unenforceable to any extent in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision (or such portion thereof,
if less than the full provision) in such jurisdiction and shall not in any
manner affect such provision or render it invalid or unenforceable in any other
jurisdiction or affect any other provision of this Security Agreement in any
jurisdiction.

            (f) This Security Agreement is separate, distinct and in addition to
any liability and/or obligation that the Borrower may have under any other
agreement executed by the Borrower in connection with the Loans.

            (g) In any action brought by the Secured Party under this Security
Agreement, the Secured Party waives its right to a jury trial in connection
therewith.

            (h) This Security Agreement shall be binding upon the respective
successors and assigns of the Borrower and shall inure to the benefit of the
Secured Party and its successors and assigns.

                        [Signatures appear on next page]

                                      -7-
<PAGE>

         IN WITNESS WHEREOF, this Security Agreement has been executed by the
parties hereto as of the day and year first above written.

                                               Secured Party:

                                               -------------------------
                                               Shlomie Morgenstern

                                               Borrower:

                                               DATABIT, INC.

                                               By:_________________________
                                                   Name: Alice Knoll
                                                   Title:  Treasurer

                                               Address:         200 Route 17
                                                                Mahwah, NJ 07403

                                      -8-
<PAGE>

                          EXHIBIT C - FORM OF GUARANTEE

                                    GUARANTEE

         In consideration of Shlomie Morgenstern ("Lender") making that one or
more loans of up to an aggregate of $500,000 to Databit, Inc. pursuant to that
certain Loan Agreement, dated as of the date hereof, by and between Databit Inc.
and Lender (the "Loan Agreement") and the Note (as defined in the Loan
Agreement), the undersigned does unconditionally guarantee to Lender the prompt
payment of all sums to be paid under the Note (including, but not limited to all
unpaid principal and accrued but unpaid interest thereon), together with the
legal rate of judgement interest from the date of default and the reasonable
costs of collection. This is a guarantee of payment, not of collection. The
undersigned waives notice of any demand to which the undersigned might be
entitled. Neither the changing of the terms or forms of the Note, nor the
illegality thereof, nor the lack of diligence on any party in exercising any
remedies against the undersigned shall release the undersigned from its absolute
and unconditional liability hereunder.

         The undersigned shall pay or repay to Lender within thirty (30) days
after receiving written demand for payment from Lender of any and all past due
payments and accelerated payments in respect of the Note as specified in such
written demand.

         This Guarantee shall remain in full force and effect until the earlier
of (i) the date on which this Guarantee is terminated pursuant to a written
agreement between the undersigned and Lender, or (ii) the date on which (A) the
Note has been irrevocably paid and satisfied in full, or (B) the undersigned has
irrevocably satisfied and discharged all of its duties, obligations, and
liabilities hereunder.

         The undersigned shall not assign this guarantee or delegate any of its
duties hereunder without the express written consent of Lender.

         This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York (without regard to the principles of conflicts
of laws). This writing is the complete and exclusive statement of the terms of
this Guarantee and supersedes all prior oral or written representations,
understandings, and agreements between Lender and the undersigned with respect
to the subject matter hereof.

         All notices (including demands for payment hereunder) and other
communications under this Guarantee must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile transmission (with written confirmation of
receipt), provided that a copy is also mailed to such party, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested) or by certified mail (return receipt requested), in
the case of the undersigned to the appropriate address and facsimile number set
forth below in this Guarantee and in the case of Lender to the appropriate
address and facsimile number set forth in the Loan Agreement (or to such other
addresses and facsimile numbers as the undersigned and Lender may designate to
one another).

<PAGE>

         IN WITNESS WHEREOF, the undersigned has duly signed this Guarantee on
this 22nd day of March, 2005.

                                                DATA SYSTEMS & SOFTWARE INC.

                                                By:__________________________
                                                Name:  Yacov Kaufman
                                                Title:  Chief Financial Officer
                                                200 Route 17 South
                                                Mahwah, New Jersey 07430
                                                Facsimile: 201-529-3163

                                      -2-

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