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<SEC-DOCUMENT>0001177651-02-000551.txt : 20021209
<SEC-HEADER>0001177651-02-000551.hdr.sgml : 20021209
<ACCEPTANCE-DATETIME>20021209154124
ACCESSION NUMBER:		0001177651-02-000551
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20021205
ITEM INFORMATION:		Other events
ITEM INFORMATION:		Financial statements and exhibits
FILED AS OF DATE:		20021209

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DATA SYSTEMS & SOFTWARE INC
		CENTRAL INDEX KEY:			0000880984
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROGRAMMING SERVICES [7371]
		IRS NUMBER:				222786081
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-19771
		FILM NUMBER:		02852298

	BUSINESS ADDRESS:	
		STREET 1:		200 RTE 17
		CITY:			MAHWAH
		STATE:			NJ
		ZIP:			07430
		BUSINESS PHONE:		2015292026

	MAIL ADDRESS:	
		STREET 1:		200 ROUTE 17
		CITY:			MAHWAH
		STATE:			NJ
		ZIP:			07430

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DEFENSE SOFTWARE & SYSTEMS INC
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>doc1.txt
<TEXT>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT
     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


     Date of Report (Date of earliest event reported)       December 5, 2002
                                                          ------------------


                          DATA SYSTEMS & SOFTWARE INC.
             (Exact name of Registrant as Specified in its Charter)


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


               Delaware                    0-19771               22-2786081
     ----------------------------   ----------------------  -------------------
     (State or Other Jurisdiction  (Commission file Number)     (IRS Employer
       of  Incorporation)                                   Identification  No.)



     200  Route  17,  Mahwah,  New  Jersey                         07430
     -----------------------------------------------------------------------
     (Address  of  Principal  Executive  Offices)                (Zip  Code)



        Registrant's telephone number, including area code (201) 529-2026
                                                           --------------
<PAGE>


Item  5.     Other  Events  and  Regulation  FD  Disclosure.
             ----------------------------------------------

     On  December 5, 2002, our subsidiary, Comverge Technologies, Inc., closed a
three-year  $2 million secured revolving line of credit from Laurus Master Fund,
Ltd.  The  available  line  of  credit  will  be  based  on  Comverge's accounts
receivables  and inventory, and will be secured by all of the assets of Comverge
and  by  the  accounts  receivables  of  our  subsidiary, Databit, Inc.  We have
guaranteed  the  repayment of any advances and payment of fees under the line of
credit.

     In  addition, Laurus may convert up to an aggregate of $600,000 of the line
of  credit into shares of our common stock at a fixed conversion price of $1.50.
We  also  issued  a five-year warrant, exercisable in three tranches at exercise
prices ranging from $2.00 to $3.34 per share. Under the terms of the agreements,
Laurus  cannot  to  sell any DSSI shares issuable upon conversion of the line of
credit  or  upon  exercise  of  the  warrants  before  June  5,  2003.

     We  have  agreed  to  file with the Securities and Exchange Commission, and
have  declared  effective by April 4, 2002, a registration statement registering
the  resale  of  the  shares of our common stock issuable upon conversion of the
line  of  credit  and  exercise  of  the  warrant.

     Comverge  intends  to  use the proceeds from the line of credit for general
corporate  purposes.

Item  7.  Financial  Statements,  Pro  Forma Financial Information and Exhibits.
          ---------------------------------------------------------------------

     (c)  Exhibits

     Exhibit  10.1  -  Purchase  and Security Agreement, dated as of December 4,
2002,  by and between Comverge Technologies, Inc. ("Comverge") and Laurus Master
Fund,  Ltd.  ("Laurus").

     Exhibit  10.2  -  Convertible  Note,  dated  December 4, 2002, by and among
Comverge,  Laurus  and,  as  to Articles III and V only, Data Systems & Software
Inc.  ("DSSI").

     Exhibit  10.3  -  Common  Stock  Purchase  Warrant, dated December 5, 2002,
issued  by  DSSI  to  Laurus.

     Exhibit 10.4 - Registration Rights Agreement, dated as of December 4, 2002,
by  and  between  DSSI  and  Laurus.

     Exhibit  10.5  - Guaranty, dated December 4, 2002, made by DSSI in favor of
Laurus.


<PAGE>



                                   SIGNATURES

     Pursuant  to  the  requirements of the Securities Exchange Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  hereunto  duly  authorized.


                         DATA  SYSTEMS  &  SOFTWARE  INC.



Date:  December  9,  2002               BY:     s/Sheldon  Krause
                                           ----------------------------
                                                Sheldon  Krause
                                                Secretary


<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>doc2.txt
<TEXT>




                            LAURUS MASTER FUND, LTD.

                                       and

                           COMVERGE TECHNOLOGIES, INC.



                            Dated:  December 4, 2002
<PAGE>
                               TABLE OF CONTENTS
                               ------------------
                                                                           Page
                                                                           -----


1.     (a)  General  Definitions. . . . . . . . . . . . . . . .. . . . .. . 1
       (b)     Accounting  Terms. . . . . . . . . . . . . . . .. . . . .. . 1
       (c)     Other  Terms. . . . . . . . . . . . . . . .. . . . .. . . . .1
       (d)     Rules  of  Construction. . . . . . . . . . . . . . . .. . . .1

2.     Credit  Advances.. . . . . . . . . . . . . . . .. . . . .. . . . . . 2

3.     Repayment  of  the  Loans. . . . . . . . . . . . . . . .. . . . .. . 3

4.     Procedure  for  Revolving  Credit  Advances. . . . . . . . . . . . . 4

5.     Interest  and  Fees.. . . . . . . . . . . . . . . .. . . . .. . .. . 4
       (a)     Interest.. . . . . . . . . . . . . . . .. . . . .. . .. . . .4
       (b)     Fees.. . . . . . . . . . . . . . . .. . . . .. . . . . . . . 4
               (i)     Closing  Fee. . . . . . . . . . . . . . . .. . . . ..5
               (ii)    Collateral  Management  Fee. . . . . . . . . . . . . 5
               (iii)   Unused  Line  Fee. . . . . . . . . . . . . . . .. . .5
               (iv)    Overadvance  Fee. . . . . . . . . . . . . . . .. . . 5
               (v)     Financial  Information  Default. . . . . . . . . . . 5
               (vi)    Remittance  Processing  Fee. . . . . . . . . . . . . 5

6.     Security  Interest.. . . . . . . . . . . . . . . .. . . . .. . . . . 5

7.     Representations, Warranties and Covenants Concerning the Collateral. 6

8.     Payment  of  Accounts.. . . . . . . . . . . . . . . .. . . . .. . . .9

9.     Collection  and  Maintenance  of  Collateral.. . . . . . . . . . . . 10

10.    Inspections  and  Appraisals. . . . . . . . . . . . . . . .. . . . ..10

11.    Financial  Reporting. . . . . . . . . . . . . . . .. . . . .. . .. . 11

12.    Additional  Representations,  Warranties  and  Covenants. . . . . .. 11

13.    Financial  Covenants.. . . . . . . . . . . . . . . .. . . . .. . .. .13

14.    Further  Assurances. . . . . . . . . . . . . . . .. . . . .. . .. . .16

15.    Power  of  Attorney. . . . . . . . . . . . . . . .. . . . .. . .. . .16

16.    Term  of  Agreement. . . . . . . . . . . . . . . .. . . . .. . .. . .16

17.    Termination  of  Lien. . . . . . . . . . . . . . . .. . . . .. . .. .17

18.    Events  of  Default. . . . . . . . . . . . . . . .. . . . .. . . . . 17

19.    Remedies. . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . .19

                                             ii
<PAGE>
20.    Waivers. . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . 19

21.    Expenses. . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . .20

22.    Assignment  By  Laurus. . . . . . . . . . . . . . . .. . . . .. . . .20

23.    No  Waiver;  Cumulative  Remedies. . . . . . . . . . . . . . . .. . .21

24.    Application  of  Payments. . . . . . . . . . . . . . . .. . . . .. . 21

25.    Indemnity. . . . . . . . . . . . . . . .. . . . .. . .. . . . . . . .21

26.    Revival. . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . 21

27.    Notices. . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . 22

28.    Governing  Law,  Jurisdiction  and  Waiver  of  Jury  Trial. . . .. .23

29.    Attorney  Fees.. . . . . . . . . . . . . . . .. . . . .. . . . . . . 23

30.    Limitation  of  Liability. . . . . . . . . . . . . . . .. . . . .. . 24

31.    Entire  Understanding. . . . . . . . . . . . . . . .. . . . .. . . . 24

32.    Severability. . . . . . . . . . . . . . . .. . . . .. . .  . . . . . 24

33.    Captions. . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . .24

34.    Counterparts;  Telecopier  Signatures. . . . . . . . . . . . . . . . 24

35.    Construction. . . . . . . . . . . . . . . .. . . . .. . . . . . . . .24

36.    Publicity. . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . 24

                                         iii
<PAGE>



                        PURCHASE AND SECURITY AGREEMENT

     This  Purchase and Security Agreement is made as of December 4, 2002 by and
among  LAURUS  MASTER  FUND,  LTD.,  a Cayman Islands corporation ("Laurus") and
COMVERGE  TECHNOLOGIES,  INC.,  a  Delaware  corporation  (the  "Company").

                                   BACKGROUND
                                   -----------

     The  Company  has  requested  that  Laurus  make  investments  and advances
available  to  the  Company;  and

     Laurus  has  agreed to make such investments and advances to the Company on
the  terms  and  conditions  set  forth  in  this  Agreement.

                                   AGREEMENT
                                   ----------

     NOW,  THEREFORE,  in consideration of the mutual covenants and undertakings
and  the  terms  and  conditions  contained  herein, the parties hereto agree as
follows:

     1.  (a) GENERAL DEFINITIONS. Capitalized terms used in this Agreement shall
have  the  meanings  assigned  to  them  in  Annex  A.

          (b)  ACCOUNTING  TERMS.  Any  accounting  terms used in this Agreement
which  are  not  specifically  defined shall have the meanings customarily given
them  in  accordance with GAAP and all financial computations shall be computed,
unless  specifically  provided  herein,  in  accordance  with  GAAP consistently
applied.

          (c) OTHER TERMS. All other terms used in this Agreement and defined in
the  UCC,  shall have the meaning given therein unless otherwise defined herein.

          (d)  RULES  OF  CONSTRUCTION.  All  Schedules,  Addenda,  Annexes  and
Exhibits  hereto  or  expressly  identified  to  this Agreement are incorporated
herein  by  reference  and  taken  together with this Agreement constitute but a
single  agreement. The words "herein", hereof" and "hereunder" or other words of
similar  import  refer  to  this  Agreement  as a whole, including the Exhibits,
Addenda,  Annexes  and  Schedules  thereto, as the same may be from time to time
amended,  modified, restated or supplemented, and not to any particular section,
subsection  or  clause contained in this Agreement. Wherever from the context it
appears  appropriate,  each  term  stated in either the singular or plural shall
include  the  singular  and  the  plural,  and pronouns stated in the masculine,
feminine  or  neuter  gender  shall  include the masculine, the feminine and the
neuter.  The  term  "or"  is  not  exclusive.  The term "including" (or any form
thereof)  shall  not  be  limiting  or exclusive. All references to statutes and

                                        1
<PAGE>


related  regulations  shall  include  any  amendments  of same and any successor
statutes  and regulations. All references in this Agreement or in the Schedules,
Addenda,  Annexes  and  Exhibits  to  this  Agreement  to  sections,  schedules,
disclosure schedules, exhibits, and attachments shall refer to the corresponding
sections,  schedules,  disclosure  schedules, exhibits, and attachments of or to
this  Agreement.  All  references  to  any  instruments or agreements, including
references  to  any  of this Agreement or the Ancillary Agreements shall include
any  and  all  modifications or amendments thereto and any and all extensions or
renewals  thereof.

          2.  CREDIT  ADVANCES.
              -----------------

          (a)  (i)  Subject  to the terms and conditions set forth herein and in
the  Ancillary  Agreements,  Laurus  shall  make  revolving credit advances (the
"Revolving  Credit  Advances")  to the Company from time to time during the Term
which,  in  the aggregate at any time outstanding, will not exceed the lesser of
(x)  (I)  the Capital Availability Amount minus (II) such reserves as Laurus may
reasonably  in  its  good  faith judgment deem proper and necessary from time to
time  (the  "Reserves") or (y) an amount equal to (I) the Borrowing Availability
minus  (II)  the  Reserves.  The  amount  derived  at  any  time  from  Section
2(a)(i)(y)(I) minus 2(a)(i)(y)(II) shall be referred to as the "Formula Amount".

                    (ii) Notwithstanding the limitations set forth above, Laurus
retains  the  right  to  lend  to  the Company from time to time such amounts in
excess  of  such  limitations  as  Laurus  may determine in its sole discretion.

                    (iii)  If the Company does not pay any interest, fees, costs
or  charges  to  Laurus  when  due,  the Company shall thereby be deemed to have
requested,  and Laurus is hereby authorized at its discretion to make and charge
to  the  Company's account, a Revolving Credit Advance to the Company as of such
date  in  an  amount  equal  to  such  unpaid  interest, fees, costs or charges.

                    (iv)  If the Company at any time fails to perform or observe
any  of  the  covenants  contained in this Agreement or any Ancillary Agreement,
Laurus  may, but need not, perform or observe such covenant on behalf and in the
name,  place  and  stead of the Company (or, at Laurus' option, in Laurus' name)
and  may,  but  need  not,  take any and all other actions which Laurus may deem
necessary  to  cure or correct such failure (including the payment of taxes, the
satisfaction  of  Liens, the performance of obligations owed to Account Debtors,
lessors  or  other  obligors,  the procurement and maintenance of insurance, the
execution  of assignments, security agreements and financing statements, and the
endorsement  of instruments); PROVIDED, HOWEVER, unless Laurus determines in the
exercise  of  its  reasonable  discretion  that the taking of any such action by
Laurus  is necessary to preserve or protect the Collateral or Laurus' rights and
remedies  under  this  Agreement and/or applicable law, the Company shall have a
period  of  not more than ten (10) Business Days to cure or correct such failure
prior  to  Laurus' taking any such action. The amount of all monies expended and
all  costs  and expenses (including attorneys' fees and legal expenses) incurred
by  Laurus in connection with or as a result of the performance or observance of
such  agreements  or the taking of such action by Laurus shall be charged to the
Company's account as a Revolving Credit Advance and added to the Obligations. To
facilitate  Laurus'  performance or observance of such covenants of the Company,
the  Company  hereby  irrevocably  appoints  Laurus, or Laurus' delegate, acting
alone,  as  the Company's attorney in fact (which appointment is coupled with an
interest)  with  the  right  (but  not  the  duty)  from time to time to create,
prepare,  complete,  execute, deliver, endorse or file in the name and on behalf
of  the  Company  any  and  all  instruments,  documents,  assignments, security

                                        2
<PAGE>


agreements,  financing  statements,  applications  for  insurance  and  other
agreements  and writings required to be obtained, executed delivered or endorsed
by  the  Company.

                    (v)  Laurus  will  account  to  the  Company  monthly with a
statement of all Loans and other advances, charges and payments made pursuant to
this  Agreement,  and  such  account  rendered  by Laurus shall be deemed final,
binding  and  conclusive  unless Laurus is notified by the Company in writing to
the  contrary  within  fifteen  (15)  days of the date each account was rendered
specifying  the  item  or  items  to  which  objection  is  made.

                    (vi)  During  the  Term,  the Company may borrow, prepay and
reborrow  Revolving  Credit  Advances,  all  in  accordance  with  the terms and
conditions  hereof.

                    (vii)  If  any  Eligible  Account is not paid by the Account
Debtor  within  ninety  (90)  days after the date that such Eligible Account was
invoiced  or  if  any  Account Debtor asserts a deduction, dispute, contingency,
set-off,  or  counterclaim  with  respect  to any Eligible Account, such Account
shall  cease to be an Eligible Account and shall reduce Accounts Availability by
the  net  face  amount  of  such  Account.

          (b)  Following  the  occurrence of an Event of Default, Laurus may, at
its  option,  elect  to  convert  the  credit facility contemplated hereby to an
accounts  receivable purchase facility. Upon such election by Laurus (subsequent
notice  of  which  Laurus  shall  provide  to the Company), the Company shall be
deemed  to  hereby  have  sold, assigned, transferred, conveyed and delivered to
Laurus,  and  Laurus  shall  be  deemed  to have purchased and received from the
Company,  all  right,  title  and interest of the Company in and to all Accounts
which  shall  at  any  time  constitute  Eligible  Accounts  (the  "Receivables
Purchase").  All  outstanding  Loans hereunder shall be deemed obligations under
such  accounts  receivable  purchase  facility.  The  conversion  to an accounts
receivable  purchase  facility  in accordance with the terms hereof shall not be
deemed  an  exercise by Laurus of its secured creditor rights under Article 9 of
the  UCC.  Immediately  following Laurus' request, the Company shall execute all
such  further documentation as may be required by Laurus to more fully set forth
the  accounts  receivable  purchase  facility  herein  contemplated,  including,
without  limitation,  Laurus'  standard  form  of  accounts  receivable purchase
agreement  and account debtor notification letters, but the Company's failure to
enter  into  any  such  documentation shall not impair or affect the Receivables
Purchase  in  any  manner  whatsoever.

          3. REPAYMENT OF THE LOANS. The Company shall be required to (a) make a
mandatory  prepayment  hereunder  at  any  time  that  the aggregate outstanding
principal balance of the Revolving Credit Advances made by Laurus to the Company
hereunder is in excess of the Formula Amount, in an amount equal to such excess;
and  (b)  repay on the expiration of the Term (i) the then aggregate outstanding
principal  balance of the Loans made by Laurus to the Company hereunder together
with  accrued  and  unpaid interest, fees and charges and (ii) all other amounts
owed  Laurus  under this Agreement and the Ancillary Agreements. Any payments of
principal,  interest,  fees  or any other amounts payable hereunder or under any
Ancillary Agreement shall be made prior to 12:00 noon (New York time) on the due
date  thereof  in  immediately  available  funds.

                                        3
<PAGE>


          4. PROCEDURE FOR REVOLVING CREDIT ADVANCES. The Company may by written
notice request a borrowing of Revolving Credit Advances prior to 12:00 noon (New
York time) on the Business Day of its request to incur, on that day, a Revolving
Credit Advance. Together with each request for a Revolving Credit Advance (or at
such other intervals as Laurus may request), the Company shall deliver to Laurus
a  Borrowing Base Certificate in the form of Exhibit A, which shall be certified
as true and correct by the Chief Executive Officer or Chief Financial Officer of
the  Company  together  with  all supporting documentation relating thereto. All
Revolving  Credit  Advances  shall  be  disbursed from whichever office or other
place  Laurus  may  designate  from  time  to  time  and shall be charged to the
Company's  account  on  Laurus'  books.  The  proceeds  of each Revolving Credit
Advance  made  by  Laurus shall be made available to the Company on the Business
Day following the Business Day so requested in accordance with the terms of this
Section  4  by  way of credit to the Company's operating account maintained with
such  bank  as the Company designated to Laurus. Any and all Obligations due and
owing  hereunder  may  be  charged to the Company's account and shall constitute
Revolving  Credit  Advances.

          5.  INTEREST  AND  FEES.
          ------------------------

          (a)  Interest.
               --------

                    (i)  Except  as  modified  by  Section  5(a)(iii) below, the
Company  shall pay interest at the Contract Rate on the unpaid principal balance
of  each Loan until such time as such Loan is collected in full in good funds in
dollars  of  the  United  States  of  America.

                    (ii)  Interest  and  fees  shall be computed on the basis of
actual  days elapsed in a year of 360 days. At Laurus' option, Laurus may charge
the  Company  account  for  said  interest.

                    (iii)  Effective upon the occurrence of any Event of Default
and  for  so long as any Event of Default shall be continuing, the Contract Rate
shall  automatically  be  increased  to  five  percent  (5%) per annum above the
Contract  Rate  (such  increased  rate, the "Default Rate"), and all outstanding
Obligations,  including  unpaid interest, shall continue to accrue interest from
the  date  of  such  Event  of  Default  at  the Default Rate applicable to such
Obligations.

                    (iv)  In  no  event  shall  the  aggregate  interest payable
hereunder  exceed  the  maximum  rate  permitted  under  any  applicable  law or
regulation, as in effect from time to time (the "Maximum Legal Rate") and if any
provision  of  this  Agreement or Ancillary Agreement is in contravention of any
such law or regulation, interest payable under this Agreement and each Ancillary
Agreement shall be computed on the basis of the Maximum Legal Rate (so that such
interest  will  not  exceed  the  Maximum  Legal  Rate).

                    (v)  The Company shall pay principal, interest and all other
amounts  payable  hereunder,  or  under  any  Ancillary  Agreement,  without any
deduction  whatsoever,  including any deduction for any set-off or counterclaim.

          (b)  FEES.

                                        4
<PAGE>


                    (i)  CLOSING/ANNUAL FEE. Upon execution of this Agreement by
the  Company  and  Laurus,  the  Company shall pay to Laurus a closing fee in an
amount  equal to two percent (2%) of the Capital Availability Amount. On each of
the  first  and second anniversary of the Closing Date, the Company shall pay to
Laurus  an  annual  fee  equal  to  one percent (1%) of the Capital Availability
Amount. Such fees shall be deemed fully earned on the Closing Date but shall not
become  payable  until  the occurrence of the execution of this Agreement or the
anniversary  of  the  Closing  Date,  as  the  case  may  be.

                    (ii)  COLLATERAL  MANAGEMENT  PAYMENT.  For  underwriting,
processing  and  supervising  the  Company's  Accounts,  the Company shall pay a
monthly  collateral  management  payment of 0.65% of all Accounts created during
each  month  to  the  extent  that  at the time such Account is created it is an
Eligible  Account  and for which there are outstanding Revolving Credit Advances
against  such Account or against which a Revolving Credit Advance is made during
such  month.  ("Collateral  Accounts"). This payment shall be payable monthly in
arrears  by  a  charge  by Laurus to the Company's account, and shall be paid as
follows: (A) 0.50% of Collateral Accounts to Laurus, and (B) 0.15% of Collateral
Accounts  to  Laurus  Capital  Management,  LLC.

                    (iii)  UNUSED  LINE  FEE.  If,  for  any  month, the average
outstanding Revolving Advances (the "Average Revolving Amount") do not equal the
Capital  Availability Amount, the Company shall pay to Laurus at the end of such
month  a fee (calculated on a per annum basis) in an amount equal to 0.5% of the
amount  by  which  the Capital Availability Amount exceeds the Average Revolving
Amount.

                    (iv)  OVERADVANCE  FEE.  Without  affecting  the  Company's
obligation  to immediately repay any Loans which exceed the amounts permitted by
Section  2  ("Overadvances"),  in  the  event  an  Overadvance  occurs, all such
Overadvances  shall bear interest at a monthly rate equal to 2% of the amount of
such  Overadvances  for  each  month or portion thereof as such amounts shall be
outstanding;  PROVIDED,  HOWEVER, that an Overadvance Fee, or a portion thereof,
payable pursuant to this section attributable solely to a Reserve established by
Laurus  shall  not be payable by the Company if the Company has repaid to Laurus
such  Overadvance or portion thereof within three Business Days after Laurus has
notified  the  Company in writing that such Overadvance has occurred as a result
of  the  Reserve  which  notice  shall  also  include  in  reasonable detail the
calculation of such Overadvance.FINANCIAL INFORMATION DEFAULT. Without affecting
Laurus' other rights and remedies, in the event the Company fails to deliver the
financial  information  required by Section 11 on or before the date required by
this  Agreement, the Company shall pay Laurus a fee in the amount of $750.00 per
week  (or  portion thereof) for each such failure until such failure is cured to
Laurus'  satisfaction  or waived in writing by Laurus. Such fee shall be charged
to  the  Company's  account  upon  the  occurrence  of  each  such  failure.

          6.  SECURITY  INTEREST.
          -----------------------

          (a)  To  secure  the  prompt payment to Laurus of the Obligations, the
Company  hereby  assigns,  pledges  and  grants  to Laurus a continuing security
interest  in and Lien upon all of the Collateral. All of the Company's Books and
Records  relating  to  the  Collateral  shall,  until delivered to or removed by

                                        5
<PAGE>


Laurus,  be  kept  by the Company in trust for Laurus until all Obligations have
been  paid  in  full.  Each  confirmatory  assignment  schedule or other form of
assignment  hereafter  executed  by  the  Company shall be deemed to include the
foregoing  grant,  whether  or  not  the  same  appears  therein.

          (b)  As  additional  security  for  the payment and performance of the
Obligations,  the Company hereby assigns to Laurus any and all monies (including
proceeds  of  insurance  and  refunds of unearned premiums) due or to become due
under, and all other rights of the Company with respect to, any and all policies
of  insurance  now  or  at  any  time  hereafter  covering the Collateral or any
evidence  thereof or any business records or valuable papers pertaining thereto,
and  the  Company  hereby  directs the issuer of any such policy to pay all such
monies  directly  to  Laurus.  At any time, whether or not a Default or Event of
Default  then  exists,  Laurus  may  (but  need  not), in Laurus' name or in the
Company's  names,  execute  and deliver proof of claim, receive all such monies,
endorse  checks  and  other instruments representing payment of such monies, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.

          (c)  The  Company  hereby  (i) authorizes Laurus to file any financing
statements,  continuation statements or amendments thereto that (x) indicate the
Collateral  (1)  as  all  assets of the Company (or any portion of the Company's
assets)  or  words of similar effect, regardless of whether any particular asset
comprised  in  the  Collateral falls within the scope of Article 9 of the UCC of
such  jurisdiction,  or (2) as being of an equal or lesser scope or with greater
detail, and (y) contain any other information required by Part 5 of Article 9 of
the  UCC  for  the  sufficiency  or  filing  office  acceptance of any financing
statement,  continuation  statement  or  amendment  and  (ii)  ratifies  its
authorization  for  Laurus  to  have  filed any initial financial statements, or
amendments  thereto if filed prior to the date hereof.  The Company acknowledges
that  it  is  not  authorized  to  file  any financing statement or amendment or
termination  statement with respect to any financing statement without the prior
written  consent  of  Laurus and agrees that it will not do so without the prior
written  consent  of  Laurus,  subject  to  the  Company's  rights under Section
9-509(d)(2)  of  the  UCC.

          (d)  The Company hereby grants to Laurus an irrevocable, non-exclusive
license (exercisable upon the termination of this Agreement due to an occurrence
and  during the continuance of an Event of Default without payment of royalty or
other  compensation  to the Company) to use, transfer, license or sublicense any
Intellectual  Property  now  owned,  licensed  to,  or hereafter acquired by the
Company,  and  wherever  the  same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and  to  all computer and automatic machinery software and programs used for the
compilation  or  printout  thereof, and represents, promises and agrees that any
such  license  or  sublicense  is  not  and  will  not  be  in conflict with the
contractual  or  commercial  rights  of  any  third  Person; provided, that such
license  will  terminate on the termination of this agreement and the payment in
full  of  all  Obligations.

          7.  REPRESENTATIONS,  WARRANTIES  AND  COVENANTS  CONCERNING  THE
COLLATERAL. The Company represents, warrants (each of which such representations
and  warranties  shall  be deemed repeated upon the making of each request for a

                                        6
<PAGE>


Revolving  Credit  Advance  and  made as of the time of each and every Revolving
Credit  Advance  hereunder)  and  covenants  as  follows:

          (a)  All  of the Collateral (i) is owned by the Company free and clear
of  all  Liens  (including  any  claims of infringement) except those in Laurus'
favor  and  Permitted Liens and (ii) is not subject to any agreement prohibiting
the  granting  of  a Lien or requiring notice of or consent to the granting of a
Lien.

          (b)  The Company shall not encumber, mortgage, pledge, assign or grant
any  Lien  in any Collateral of the Company or any of the Company's other assets
to  anyone  other  than  Laurus  and  except  for  Permitted  Liens.

          (c)  The  Liens granted pursuant to this Agreement, upon completion of
the  filings  and other actions listed on EXHIBIT 7(C)(which, in the case of all
filings  and other documents referred to in said Exhibit, have been delivered to
Laurus  in  duly executed form) constitute valid perfected security interests in
all of the Collateral in favor of Laurus as security for the prompt and complete
payment  and  performance of the Obligations, enforceable in accordance with the
terms  hereof  against  any  and  all  creditors  of and any purchasers from the
Company,  except  (a)  as  limited  by  applicable  bankruptcy,  insolvency,
reorganization,  moratorium  or  other  laws  of  general  application affecting
enforcement  of  creditors'  rights,  and  (b) general principles of equity that
restrict  the  availability  of  equitable  or legal remedies, and such security
interest  is  prior  to  all  other  Liens  in  existence  on  the  date hereof.

          (d)  No  effective  security  agreement,  mortgage,  deed  of  trust,
financing  statement,  equivalent  security  or  Lien instrument or continuation
statement covering all or any part of the Collateral is or will be on file or of
record  in  any  public  office,  except  those  relating  to  Permitted  Liens.

          (e)  The Company shall not dispose of any of the Collateral whether by
sale, lease or otherwise except for the sale of Inventory in the ordinary course
of  business  and  for  the  disposition  or  transfer in the ordinary course of
business  during  any  fiscal  year of obsolete and worn-out Equipment having an
aggregate fair market value of not more than $25,000 and only to the extent that
(i)  the  proceeds  of  any  such  disposition  are  used to acquire replacement
Equipment  which  is subject to Laurus' first priority security interest or (ii)
the  proceeds  of  which are remitted to Laurus in reduction of the Obligations.

          (f)  The  Company shall defend the right, title and interest of Laurus
in  and  to  the  Collateral  against  the  claims  and  demands  of all Persons
whomsoever,  and take such actions, including (i) all actions necessary to grant
Laurus  "control" of any Investment Property, Deposit Accounts, Letter-of-Credit
Rights  or  electronic  Chattel  Paper owned by the Company, with any agreements
establishing  control  to  be in form and substance satisfactory to Laurus which
such  action  shall  be taken by the Company within two Business Days of Laurus'
request  therefor, (ii) the prompt (but in no event later than two Business Days
following  Laurus'  request  therefor)  delivery  to  Laurus  of  all  original
Instruments, Chattel Paper, negotiable Documents and certificated Stock owned by
a  Company  (in  each  case,  accompanied  by  stock  powers,  allonges or other
instruments  of  transfer  executed  in  blank),  (iii)  notification of Laurus'

                                        7
<PAGE>


interest  in  Collateral  at  Laurus' request within two Business Days following
Laurus'  request  therefor, and (iv) the institution of litigation against third
parties  as  shall be prudent in order to protect and preserve the Company's and
Laurus'  respective  and several interests in the Collateral; PROVIDED, HOWEVER,
in  the  event  Laurus requests that the Company institutes any such litigation,
such  litigation  shall  be  instituted within 5 Business Days following Laurus'
request  therefor.

          (g)  The  Company  shall  promptly,  and in any event within three (3)
Business  Days after the same is acquired by it, notify Laurus of any commercial
tort claim (as defined in the UCC) acquired by it and unless otherwise consented
by  Laurus, the Company shall enter into a supplement to this Agreement granting
to  Laurus  a  Lien  in  such  commercial  tort  claim.

          (h)  The  Company  shall place notations upon its Books and Records to
disclose  Laurus'  Lien  in  the  Collateral.

          (i)  If  the  Company  retains  possession  of  any  Chattel  Paper or
Instrument  with  Laurus'  consent,  such Chattel Paper and Instruments shall be
marked  with  the  following  legend: "This writing and obligations evidenced or
secured hereby are subject to the security interest of Laurus Master Fund, Ltd."

          (j)  The  Company  shall  perform in a reasonable time all other steps
requested  by  Laurus  to create and maintain in Laurus' favor a valid perfected
first  Lien  in  all  Collateral  subject  only  to  Permitted  Liens.

          (k)  The  Company shall notify Laurus promptly and in any event within
four  (4)  Business  Days  after obtaining knowledge thereof (i) of any event or
circumstance  that to the Company's knowledge would cause Laurus to consider any
then  existing  Account as no longer constituting an Eligible Account and/or any
then  existing  Inventory  as no longer constituting Eligible Inventory; (ii) of
any material delay in the Company's performance of any of its obligations to any
Account  Debtor;  (iii)  of  any assertion by any Account Debtor of any material
claims,  offsets or counterclaims; (iv) of any allowances, credits and/or monies
granted  by  the  Company  to  any  Account  Debtor; (v) of any material adverse
information  relating  to  the financial condition of an Account Debtor; (vi) of
any  material  return  of goods; and (vii) of any loss, damage or destruction of
any  of  the  Collateral.

          (l)  All  Accounts (i) represent complete bona fide transactions which
require  no  further  act  under any circumstances on the Company's part to make
such  Accounts  payable  by  the  Account  Debtors,  (ii) are not subject to any
present,  contingent  or,  to  the  Company's  knowledge,  future  offsets  or
counterclaims,  and  (iii) do not represent consignment sales, guaranteed sales,
sale  or  return or other similar understandings or obligations of any Affiliate
or Subsidiary of the Company. The Company has not made, and will not make except
in  the ordinary course of business consistent with past practice, any agreement
with  any  Account  Debtor  for  any  extension  of  time for the payment of any
Account, any compromise or settlement for less than the full amount thereof, any
release  of  any  Account  Debtor  from  liability  therefor,  or  any deduction
therefrom  except a discount or allowance for prompt or early payment allowed by
the  Company  in  the ordinary course of its business consistent with historical
practice  and  as  previously  disclosed  to  Laurus  in  writing.

                                        8
<PAGE>


          (m)  The  Company  shall  keep  and  maintain  the  Equipment  in good
operating  condition,  except  for  ordinary  wear  and tear, and shall make all
necessary  repairs  and  replacements  thereof  so  that the value and operating
efficiency shall at all times be maintained and preserved. The Company shall not
permit  any such items to become a Fixture to real estate or accessions to other
personal  property.

          (n)  The  Company shall maintain and keep all of its Books and Records
concerning  the  Collateral at the Company's executive offices listed in EXHIBIT
12(D).

          (o)  The  Company  shall  maintain  and  keep  the  Collateral  at the
addresses  listed  in  EXHIBIT 12(D), provided, that the Company may change such
locations  or  open a new location, provided that the Company provides Laurus at
least  twenty (20) days prior written notice of such changes or new location and
(ii)  prior to such change or opening of a new location it executes and delivers
to  Laurus such agreements as Laurus may request, including landlord agreements,
mortgagee  agreements  and  warehouse  agreements,  each  in  form and substance
satisfactory  to  Laurus.

          (p)  EXHIBIT  7(N)lists  all banks and other financial institutions at
which  the  Company  maintains  deposits and/or other accounts, and such Exhibit
correctly  identifies  the  name,  address  and  telephone  number  of each such
depository,  the name in which the account is held, a description of the purpose
of the account, and the complete account number. The Company shall establish any
depository  or  other  bank account of any with any financial institution (other
than  the  accounts  set  forth  on  EXHIBIT  7(N)without  Laurus' prior written
consent.

     8.  PAYMENT  OF  ACCOUNTS.
         ----------------------

          (a) The Company will direct all present and future Account Debtors and
other  Persons  obligated  to make payments constituting Collateral to make such
payments  directly to the lockbox maintained by the Company (the "Lockbox") with
North  Fork  Bank  pursuant to the terms of the Lockbox Agreement dated December
__,  2002  or  such other financial institution accepted by Laurus in writing as
may  be selected by the Company (the "Lockbox Bank"). On or prior to the Closing
Date,  the Company shall and shall cause the Lockbox Bank to enter into all such
documentation  acceptable  to  Laurus  (i)  to  perfect  Laurus'  first priority
security  interest in the Blocked Account and (ii) pursuant to which the Lockbox
Bank  agrees  to:  (a) sweep the Lockbox on a daily basis and deposit all checks
received  therein  to  deposit account number ___________ maintained by Borrower
with  North  Fork  Bank  (the  "Blocked  Account")  and (b) comply only with the
instructions  or  other  directions  of  Laurus  concerning  the Lockbox and the
Blocked  Account.  All  of  the Company's invoices, account statements and other
written  or  oral communications directing, instructing, demanding or requesting
payment  of  any  Account  of  the  Company  or  any  other  amount constituting
Collateral  shall  conspicuously direct that all payments be made to the Lockbox
or  such  other address as Laurus may direct in writing. If, notwithstanding the
instructions  to Account Debtors, the Company receives any payments, the Company
shall  immediately  remit such payments to the Blocked Account in their original
form  with all necessary endorsements. Until so remitted, the Company shall hold
all  such  payments  in  trust  for  and as the property of Laurus and shall not
commingle  such  payments  with  any of its other funds or property. The Company
                                        9
<PAGE>


shall  pay  Laurus five percent (5%) of the amount of any payment so received by
the  Company  and  not  delivered in kind to the Blocked Account within five (5)
Business  Days  following  the  Company's  receipt  thereof.

          (b)  At  Laurus'  election, if an Event of Default has occurred and is
continuing,  Laurus may notify the Company's Account Debtors of Laurus' security
interest  in the Accounts, collect them directly and charge the collection costs
and  expenses  thereof  to  the  Company's  account.

     9.  COLLECTION  AND  MAINTENANCE  OF  COLLATERAL.
         ---------------------------------------------

          (a)  Laurus  verify  the Company's Accounts utilizing an audit control
company  or any other agent of Laurus. So long as no Default or Event of Default
shall  have  occurred  and  be  continuing  and/or  Laurus does not believe such
verifications  are necessary to preserve or protect the Collateral or its rights
and  remedies  under  this Agreement and applicable law, Laurus shall not verify
the Company's Accounts more than four (4) times during any calendar year and not
more  than  two  (2)  times  during  any  consecutive  six  (6)  month  period.

          (b)  Laurus  will  credit  (conditional  upon  final  collection)  all
proceeds  of  Accounts  to  the  Company's account three (3) Business Days after
receipt  by  Laurus  of good funds in dollars of the United States of America in
Laurus'  account. Any amount received by Laurus after 12:00 noon (New York time)
on  any Business Day shall be deemed received on the next Business Day. Eligible
Accounts  for  which  proceeds thereof have been received by Laurus shall remain
Eligible  Accounts  until  such  proceeds are credited to the Company's account.

          (c)  As  Laurus receives the proceeds of Accounts, it shall apply such
proceeds to (A) Revolving Credit Advances including Overadvances made by Laurus,
if  any,  (B)  the  interest  and  fees  earned  by  Laurus with respect to such
Accounts,  and  (C)  any  amounts  otherwise  due  Laurus  including,  without
limitation,  pursuant  to  Sections  2,  5(b),  21  and  25  hereof  which  have
theretofore  not  been  paid,  and  if  no  Revolving  Credit  Advances are then
outstanding,  pay  to  the  Company  in weekly intervals the aggregate amount so
collected.  Following  the  occurrence and during the continuance of an Event of
Default,  Laurus  shall  have the right to apply all proceeds of Accounts to the
Obligations  in  such  order  as  Laurus  shall  elect.

          10.  INSPECTIONS  AND  APPRAISALS. At all times during normal business
hours,  Laurus,  and/or  any  agent  of  Laurus shall have the right to (a) have
access  to,  visit, inspect, review, evaluate and make physical verification and
appraisals  of  the  Company's properties and the Collateral, (b) inspect, audit
and  copy  (or take originals if necessary) and make extracts from the Company's
Books  and  Records,  including  management  letters  prepared  by  independent
accountants,  and  (c)  discuss  with  the  Company's  principal  officers,  and
independent  accountants, the Company's business, assets, liabilities, financial
condition,  results  of  operations  and  business  prospects.  The Company will
deliver to Laurus any instrument necessary for Laurus to obtain records from any
service  bureau  maintaining records for the Company. If any internally prepared
financial  information,  including  that  required  under  this  paragraph  is
unsatisfactory  in any manner to Laurus, Laurus may request that the Accountants
review  the  same.

                                       10

<PAGE>


          11.  FINANCIAL  REPORTING.  The  Company  will deliver, or cause to be
delivered,  to  Laurus  each of the following, which shall be in form and detail
acceptable  to  Laurus:

          (a)  As  soon  as  available, and in any event within ninety (90) days
after  the  end  of  each  fiscal  year  of the Company, the Company's unaudited
financial  statements  reviewed  by  independent certified public accountants of
recognized  standing  selected  by  Company  and  acceptable  to  Laurus  (the
"Accountants"),which  annual  financial  statements  shall include the Company's
balance  sheet  as  at the end of such fiscal year and the related statements of
the  Company's income, retained earnings and cash flows for the fiscal year then
ended,  prepared,  if  Laurus  so  requests, on a consolidating and consolidated
basis  to  include  any  Affiliates,  all  in  reasonable detail and prepared in
accordance  with  GAAP  accepting  only  that  they  do  not  include all of the
information  and  footnotes required by accounting principles generally accepted
in  the United States of America for complete consolidated financial statements,
together with (i) copies of any management letters prepared by such accountants;
(ii)  a  report  signed  by  the  Accountants  stating  that  in  making  the
investigations  necessary for said opinion they obtained no knowledge, except as
specifically stated, of any Default or Event of Default; and (iii) a certificate
of the Company's Chief Executive Officer or Chief Financial Officer stating that
such financial statements have been prepared in accordance with GAAP and whether
or  not  such officer has knowledge of the occurrence of any Default or Event of
Default  hereunder  and,  if  so,  stating  in  reasonable detail the facts with
respect  thereto;

          (b)  As  soon  as  available  and in any event within thirty (30) days
after  the  end  of  each  quarter,  an  unaudited/internal  balance  sheet  and
statements  of income, retained earnings and cash flows of the Company as at the
end  of  and  for  such  quarter  and  for  the  year to date period then ended,
prepared,  if  Laurus  so requests, on a consolidating and consolidated basis to
include any Affiliates, in reasonable detail and stating in comparative form the
figures  for  the  corresponding  date  and  periods  in  the previous year, all
prepared  in  accordance  with  generally  accepted accounting principles in the
United  States  of  America  for  interim  financial  information and subject to
year-end  adjustments.  And  accordingly,  they  do  not  include  all  of  the
information  and  footnotes required by accounting principles generally accepted
in the United States of America for complete consolidated financial statements,;
and  accompanied  by  a certificate of the Company' President or Chief Financial
Officer,  stating  (i)  that  such  financial  statements  have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and (ii) whether or
not  such  officer  has  knowledge  of the occurrence of any Default or Event of
Default  hereunder  not theretofore reported and remedied and, if so, stating in
reasonable  detail  the  facts  with  respect  thereto;  and

          (c)  Within  fifteen  (15) days after the end of each month, agings of
the  Company's Accounts, unaudited trial balances and its accounts payable and a
calculation of the Company's Accounts, Eligible Accounts, Inventory and Eligible
Inventory  as  at  the  end  of  such  month  or  shorter  time  period.

          12.  ADDITIONAL REPRESENTATIONS AND WARRANTIES. The Company represents
and  warrants (each of which such representations and warranties shall be deemed
repeated upon the making of a request for a Revolving Credit Advance and made as
of  the  time  of  each  Revolving  Credit  Advance made hereunder), as follows:

                                       11
<PAGE>

          (a)  The  Company  is  a  corporation  duly  incorporated  and validly
existing  under  the  laws  of  the  jurisdiction  of its incorporation and duly
qualified and in good standing in every other state or jurisdiction in which the
nature  of  the  Company's  business  requires  such  qualification.

          (b)  The  execution,  delivery  and  performance of this Agreement and
the  Ancillary  Agreements  (i)  have  been  duly  authorized,  (ii)  are not in
contravention  of  the Company's certificate of incorporation, by-laws or of any
indenture,  agreement or undertaking to which the Company is a party or by which
the  Company  is  bound  and  (iii)  are  within the Company's corporate powers.

          (c)  This  Agreement  and  the  Ancillary  Agreements  executed  and
delivered by the Company are the Company's legal, valid and binding obligations,
enforceable  in  accordance  with  their  terms.

          (d)  EXHIBIT  12(D)sets  forth  the  Company's  name  as it appears in
official  filing  in  the  state of its incorporation, the type of entity of the
Company,  the organizational identification number issued by the Company's state
of  incorporation  or  a  statement  that  no  such  number has been issued, the
Company's  state  of  incorporation,  and  the  location  of the Company's chief
executive  office,  corporate offices, warehouses, other locations of Collateral
and  locations  where  records with respect to Collateral are kept (including in
each case the county of such locations) and, except as set forth in such EXHIBIT
12(D), such locations have not changed during the preceding twelve months. As of
the  Closing  Date,  during the prior five years, except as set forth in EXHIBIT
12(D), the Company has not been known as or conducted business in any other name
(including  trade  names).  The  Company  has  only  one state of incorporation.

          (e)  Based  upon  the  Employee  Retirement  Income  Security  Act  of
1974  ("ERISA"),  and  the regulations and published interpretations thereunder:
(i)  the  Company  has  not engaged in any Prohibited Transactions as defined in
Section  406 of ERISA and Section 4975 of the Internal Revenue Code, as amended;
(ii)  the  Company  has  met  all  applicable minimum funding requirements under
Section 302 of ERISA in respect of its plans; (iii) the Company has no knowledge
of  any  event  or  occurrence  which  would  cause the Pension Benefit Guaranty
Corporation  to  institute  proceedings under Title IV of ERISA to terminate any
employee  benefit  plan(s); (iv) the Company has no fiduciary responsibility for
investments  with  respect to any plan existing for the benefit of persons other
than  the Company's employees; and (v) the Company has not withdrawn, completely
or  partially,  from  any  multi-employer  pension plan so as to incur liability
under  the  Multiemployer  Pension  Plan  Amendments  Act  of  1980.

          (f)  The  Company  is  solvent,  able to pay its debts as they mature,
has  capital sufficient to carry on its business and all businesses in which the
Company is about to engage and the fair saleable value of its assets (calculated
on  a  going  concern  basis)  is  in  excess  of the amount of its liabilities.

          (g)  There  is  no  pending  or  threatened  litigation,  action  or
proceeding  which  involves the possibility of having a Material Adverse Effect.

<PAGE>


          (h)  All  balance  sheets  and  income  statements  which  have  been
delivered  to  Laurus  fairly state the Company's financial condition on a basis
consistent  with  that  of  previous  financial statements and there has been no
material  adverse  change  in  the Company's financial condition as reflected in
such statements since the balance sheet date of the statements last delivered to
Laurus and such statements do not fail to disclose any fact or facts which might
have  a  Material  Adverse  Effect  on  the  Company's  financial  condition.

          (i)  The  Company  possesses  all  of  the  Intellectual  Property
necessary  to  conduct  its  business.  There  has been no assertion or claim of
violation  or  infringement  with  respect to any Intellectual Property. EXHIBIT
12(I) sets  forth  all  Intellectual  Property  of  the  Company.

          (j)  Neither  this  Agreement,  the exhibits and schedules hereto, the
Ancillary  Agreements  nor any other document delivered by the Company to Laurus
or  its  attorneys  or  agents  in  connection herewith or therewith or with the
transactions  contemplated  hereby or thereby, contain any untrue statement of a
material  fact  nor omit to state a material fact necessary in order to make the
statements  contained  herein or therein, in light of the circumstances in which
they  are  made,  not  misleading. Any financial projections and other estimates
provided  to Laurus by the Company were based on the Company's experience in the
industry  and  on  assumptions of fact and opinion as to future events which the
Company,  at the date of the issuance of such projections or estimates, believed
to  be  reasonable. As of the date hereof no facts have come to the attention of
the Company that would, in its opinion, require the Company to revise or amplify
in  any  material  respect the assumptions underlying such projections and other
estimates  or  the  conclusions  derived  therefrom.

     13.  COVENANTS.  The  Company  covenants  as  follows:

          (a) The Company will not, without the prior written consent of Laurus,
change  (i)  its  name as it appears in the official filings in the state of its
incorporation  or  formation,  (ii)  the  type  of legal entity it is, (iii) its
organization  identification  number,  if  any,  issued  by  its  state  of
incorporation,  (iv)  its state of incorporation or (v) amend its certificate of
incorporation,  by-laws or other organizational document; provided, however, the
Company  may,  without  such  consent,  amend  its  certificate of incorporation
(subject to Section 13(a)(i)-(iv) above), by-laws or other organization document
in  connection  with  an equity investment in the Company, and the Company shall
provid  Laurus  with a copy of such amendment documentation not later than three
Business  Days  prior  to  the  effectiveness  thereof.

          (b) The operation of the Company's business is and will continue to be
in  compliance  in  all material respects with all applicable federal, state and
local  laws, rules and ordinances, including to all laws, rules, regulations and
orders relating to taxes, payment and withholding of payroll taxes, employer and
employee  contributions  and  similar items, securities, employee retirement and
welfare  benefits,  employee  health  safety  and  environmental  matters.

          (c)  The Company will pay or discharge when due all taxes, assessments
and  governmental  charges  or  levies  imposed  upon  the Company or any of the
Collateral  unless  such amounts are being diligently contested in good faith by
appropriate proceedings provided that (i) adequate reserves with respect thereto

                                       13
<PAGE>


are  maintained on the books of the Company in conformity with GAAP and (ii) the
related  Lien  shall  have  no  effect  on the priority of the Liens in favor of
Laurus  or  the  value  of  the  assets  in  which  Laurus  has  a  Lien.

          (d)  The  Company  will  promptly inform Laurus in writing of: (i) the
commencement  of  all  proceedings  and  investigations  by or before and/or the
receipt  of  any  notices from, any governmental or nongovernmental body and all
actions  and proceedings in any court or before any arbitrator against or in any
way concerning any event which might singly or in the aggregate, have a Material
Adverse  Effect;  (ii)  any  amendment  of  the  Company's  certificate  of
incorporation,  by-laws or other organizational document; (iii) any change which
has  had  or  might have a Material Adverse Effect; (iv) any Event of Default or
Default;  (v)  any default or any event which with the passage of time or giving
of notice or both would constitute a default under any agreement for the payment
of  money  to which the Company is a party or by which the Company or any of the
Company's properties may be bound which would have a Material Adverse Effect and
(vi)  any  change  in the Company's name or any other name used in its business.

          (e)  The Company will not (i) create, incur, assume or suffer to exist
any  indebtedness  (exclusive  of  trade debt and intercompany indebtedness with
Data  Systems  &  Software  Inc.)  whether  secured  or unsecured other than the
Company's  indebtedness  to  Laurus and as set forth on EXHIBIT 13(E)(I)attached
hereto  and  made  a  part hereof; (ii) cancel any debt owing to it in excess of
$50,000  in  the  aggregate during any 12 month period; (iii) assume, guarantee,
endorse  or  otherwise become directly or contingently liable in connection with
any  obligations  of  any  other  Person,  except  the endorsement of negotiable
instruments  by  a  Company for deposit or collection or similar transactions in
the  ordinary  course  of  business; (iv) directly or indirectly declare, pay or
make  any dividend or distribution on any class of its Stock or apply any of its
funds, property or assets to the purchase, redemption or other retirement of any
Stock  of  a  Company;  (v)  purchase  or  hold  beneficially any Stock or other
securities or evidences of indebtedness of, make or permit to exist any loans or
advances  to,  or make any investment or acquire any interest whatsoever in, any
other  Person,  including  any  partnership  or joint venture, except (x) travel
advances, (y) loans to the Company's officers and employees not exceeding at any
one  time  an  aggregate  of  $10,000  or (z) the Existing Loans; (vi) create or
permit  to  exist  any Subsidiary, other than any Subsidiary in existence on the
date  hereof  and  listed  in  EXHIBIT  13(E)(II)  unless such new Subsidiary is
designated  by  Laurus  as  either  a  co-borrower or guarantor hereunder; (vii)
directly  or  indirectly,  prepay  any  indebtedness  (other than to Laurus), or
repurchase, redeem, retire or otherwise acquire any indebtedness other than such
indebtedness  owed  to  Data  Systems  & Software Inc. or Bank Leumi USA; (viii)
enter  into  any  merger, consolidation or other reorganization with or into any
other Person or acquire all or a portion of the assets or Stock of any Person or
permit  any  other  Person to consolidate with or merge with it; (ix) materially
change  the  nature of the business in which it is presently engaged; (x) change
its  fiscal  year  or  make  any  changes  in accounting treatment and reporting
practices  without  prior written notice to Laurus except as required by GAAP or
in the tax reporting treatment or except as required by law; (xi) enter into any
transaction  with  any  employee,  director or Affiliate, except in the ordinary
course  on  arms-length  terms; or (xii) bill Accounts under any name except the
present  name  of  the  Company.

                                       14
<PAGE>


          (f)  None of the proceeds of the Loans hereunder will be used directly
or  indirectly  to "purchase" or "carry" "margin stock" or to repay indebtedness
incurred  to "purchase" or "carry" "margin stock" within the respective meanings
of  each of the quoted terms under Regulation U of the Board of Governors of the
Federal  Reserve  System  as  now  and  from  time  to time hereafter in effect.

          (g)  The  Company will bear the full risk of loss from any loss of any
nature  whatsoever with respect to the Collateral. At the Company's own cost and
expense in amounts and with carriers acceptable to Laurus, the Company shall (i)
keep  all  its  insurable  properties and properties in which it has an interest
insured  against  the  hazards  of fire, flood, sprinkler leakage, those hazards
covered  by  extended  coverage  insurance  and such other hazards, and for such
amounts,  as is customary in the case of companies engaged in businesses similar
to the Company's including business interruption insurance; (ii) maintain a bond
in  such  amounts as is customary in the case of companies engaged in businesses
similar  to  the  Company's  insuring  against  larceny,  embezzlement  or other
criminal  misappropriation  of  insured's  officers and employees who may either
singly  or jointly with others at any time have access to the assets or funds of
the  Company either directly or through Governmental Authority to draw upon such
funds  or  to  direct  generally  the disposition of such assets; (iii) maintain
public and product liability insurance against claims for personal injury, death
or  property  damage  suffered  by  others;  (iv)  maintain  all  such  worker's
compensation or similar insurance as may be required under the laws of any state
or  jurisdiction  in  which  the Company is engaged in business; and (v) furnish
Laurus  with  (x) copies of all policies and evidence of the maintenance of such
policies  at least thirty (30) days before any expiration date, (y) endorsements
to  such  policies  naming  Laurus  as  "co-insured" or "additional insured" and
appropriate  loss  payable  endorsements  in  form and substance satisfactory to
Laurus,  naming  Laurus  as  loss  payee, and (z) evidence that as to Laurus the
insurance coverage shall not be impaired or invalidated by any act or neglect of
the  Company  and the insurer will provide Laurus with at least thirty (30) days
notice  prior to cancellation. The Company shall instruct the insurance carriers
that  in  the  event of any loss thereunder, the carriers shall make payment for
such  loss to Laurus and not to the Company and Laurus jointly. If any insurance
losses  are  paid by check, draft or other instrument payable to the Company and
Laurus  jointly, Laurus may endorse the Company's name thereon and do such other
things as Laurus may deem advisable to reduce the same to cash. Laurus is hereby
authorized  to  adjust  and  compromise  claims. All loss recoveries received by
Laurus  upon any such insurance may be applied to the Obligations, in such order
as  Laurus  in its sole discretion shall determine. Any surplus shall be paid by
Laurus  to  the  Company  or  applied  as  may be otherwise required by law. Any
deficiency  thereon  shall  be  paid  by  the  Company  to  Laurus,  on  demand.

          (h)  The  Company shall not at any time permit any accounts payable to
remain  unpaid  more than sixty (60) days from the due date thereof unless there
exists  an  agreement in writing between the Company and any Person with respect
to  such payable permitting extended payment terms or a bona fide dispute exists
with  respect  to  such  accounts  payable,  such  amounts  are being diligently
contested  in  good  faith  and  adequate  reserves  with  respect  thereto  are
maintained  on  the  books  of  the  Company  in  conformity  with  GAAP.

          (i)  George Morgenstern, or another person acceptable to Laurus, shall
serve  as  Chief  Executive  Officer  or  Chairman  of  the  Board of Guarantor.

                                       15
<PAGE>


          14.  FURTHER  ASSURANCES.  At any time and from time to time, upon the
written  request  of  Laurus and at the sole expense of the Company, the Company
shall promptly and duly execute and deliver any and all such further instruments
and  documents  and take such further action as Laurus may request (a) to obtain
the  full  benefits  of  this  Agreement  and  the  Ancillary Agreements, (b) to
protect,  preserve  and maintain Laurus' rights in the Collateral and under this
Agreement or any Ancillary Agreement, or (c) to enable Laurus to exercise all or
any  of  the  rights  and  powers  herein  granted  or  any Ancillary Agreement.

          15.  POWER  OF  ATTORNEY.  The  Company hereby appoints Laurus, or any
other Person whom Laurus may designate as the Company's attorney, with power to:
(i)  endorse the Company's name on any checks, notes, acceptances, money orders,
drafts  or  other  forms  of  payment  or  security  that  may come into Laurus'
possession;  (ii)  sign  the  Company's  name  on  any invoice or bill of lading
relating  to  any  Accounts,  drafts  against  Account  Debtors,  schedules  and
assignments  of  Accounts, notices of assignment, financing statements and other
public records, verifications of Account and notices to or from Account Debtors;
(iii) verify the validity, amount or any other matter relating to any Account by
mail, telephone, telegraph or otherwise with Account Debtors; (iv) do all things
necessary  to  carry out this Agreement, any Ancillary Agreement and all related
documents;  and  (v)  on or after the occurrence and continuation of an Event of
Default,  notify  the post office authorities to change the address for delivery
of  the  Company's mail to an address designated by Laurus, and to receive, open
and  dispose  of  all mail addressed to the Company. The Company hereby ratifies
and  approves all acts of the attorney. Neither Laurus, nor the attorney will be
liable for any acts or omissions or for any error of judgment or mistake of fact
or  law.  This  power, being coupled with an interest, is irrevocable so long as
Laurus  has  a  security  interest  and  until  the  Obligations have been fully
satisfied.

          16.  TERM  OF  AGREEMENT.  Laurus'  agreement to make Loans and extend
financial  accommodations  under  and  in  accordance  with  the  terms  of this
Agreement  or  any  Ancillary  Agreement shall continue in full force and effect
until  the  expiration  of the Initial Term. If an Event of Default has occurred
and  is  continuing, Laurus may terminate this Agreement. The termination of the
Agreement  shall  not  affect  any  of Laurus' rights hereunder or any Ancillary
Agreement  and  the  provisions  hereof  and  thereof shall continue to be fully
operative  until  all transactions entered into, rights or interests created and
the  Obligations have been disposed of, concluded or liquidated. Notwithstanding
the  foregoing,  Laurus  shall  release its security interests at any time after
thirty  (30)  days  notice  upon payment to it of all Obligations if the Company
shall  have  (i)  provided Laurus with an executed release of any and all claims
which  the  Company  may  have  or  thereafter have under this Agreement and all
Ancillary  Agreements  and (ii) paid to Laurus an early payment fee in an amount
equal  to  five  percent (5%) of the Capital Availability Amount if such payment
occurs prior to the end of the first year of the Initial Term, four percent (4%)
if  such payment occurs after the first year but prior to the end of second year
of  the Initial Term and three percent (3%) thereafter if such early payment fee
occurs  prior  to  the  end  of  the  Initial Term; such early payment fee being
intended  to  compensate Laurus for its costs and expenses incurred in initially
approving  this  Agreement. Such early payment fee shall also be due and payable
by  the Company to Laurus upon termination of this Agreement by Laurus after the
occurrence  of  an  Event  of  Default.


                                       16
<PAGE>


          17.  TERMINATION  OF  LIEN.  The  Liens  and  rights granted to Laurus
hereunder  and  any  Ancillary  Agreements and the financing statements filed in
connection  herewith  or  therewith  shall  continue  in  full force and effect,
notwithstanding  the termination of this Agreement or the fact that The Company'
account may from time to time be temporarily in a zero or credit position, until
(a)  all  of  the Obligations of the Company have been paid or performed in full
after  the  termination  of  this  Agreement and (b) the Company has an executed
release  of  any  and  all  claims which the Company may have or thereafter have
under  this  Agreement  and  all  Ancillary Agreements. Accordingly, the Company
waives  any  rights  which  it  may  have  under the UCC to demand the filing of
termination  statements  with respect to the Collateral, and Laurus shall not be
required  to  send  such  termination statements to the Company, or to file them
with  any  filing  office,  unless  and  until  this Agreement and the Ancillary
Agreements  shall  have  been  terminated in accordance with their terms and all
Obligations  paid  in  full  in  immediately  available  funds.

          18.  EVENTS  OF  DEFAULT. The occurrence of any of the following shall
constitute  an  Event  of  Default:

          (a)  failure  to  make payment of any of the Obligations when required
hereunder;  provided, however, that in the event such failure to pay arises from
the  occurrence  of  an Overadvance, then the Company shall have 2 Business Days
from  the  notice  thereof  to  cure  such  failure;

               (b) failure to pay any taxes when due unless such taxes are being
contested  in  good  faith  by appropriate proceedings and with respect to which
adequate  reserves have been provided on the Company's books; provided, however,
that  in  the  event  that  such  failure  is  curable, the Company shall have 7
Business  Days  from  the  notice  thereof  to  cure  such  failure;

               (c)  failure  to perform under and/or committing any material (as
determined  by  Laurus  in  the exercise of its good faith discretion) breach of
this  Agreement  or  any  Ancillary Agreement or any other agreement between the
Company  and  Laurus;  provided, however, that in the event that such failure is
curable,  the Company shall have 7 Business Days from the notice thereof to cure
such  failure,  except  that  with  respect to Section 13(i) hereof, the Company
shall  have  6  months  to  cure  such  failure;

               (d)  the occurrence of a default under any agreement to which the
Company  is  a  party  with  third  parties which has a Material Adverse Effect;

               (e)  any material (as determined by Laurus in the exercise of its
good faith discretion) representation, warranty or statement made by the Company
hereunder,  in  any  Ancillary Agreement, any certificate, statement or document
delivered  pursuant  to the terms hereof, or in connection with the transactions
contemplated  by this Agreement should at any time be false or misleading in any
material respect; provided, however, that in the event that such breach shall be
curable,  the Company shall have 7 Business Days from the notice thereof to cure
such  breach;

               (f)  an  attachment  or  levy  is  made upon the Company's assets
having  an  aggregate  value  in  excess  of  $100,000 or a judgment is rendered
against the Company or the Company's property involving a liability of more than

                                       17
<PAGE>


$100,000 which shall not have been vacated, discharged, stayed or bonded pending
appeal  within  thirty  (30)  days  from  the  entry  thereof;

               (g)  any  change in the Company's condition or affairs (financial
or  otherwise)  which  in  Laurus'  reasonable,  good faith opinion, impairs the
Collateral  or  the ability of the Company to perform its Obligations; provided,
however,  that the Company shall have 7 Business Days from the notice thereof to
cure  such  breach;

               (h)  any  Lien created hereunder or under any Ancillary Agreement
for  any reason ceases to be or is not a valid and perfected Lien having a first
priority  interest;

               (i)  if  the Company shall (i) apply for, consent to or suffer to
exist the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii)  make  a  general assignment for the benefit of creditors, (iii) commence a
voluntary  case  under  the  federal  bankruptcy  laws  (as  now or hereafter in
effect),  (iv)  be  adjudicated  a  bankrupt  or  insolvent, (v) file a petition
seeking  to take advantage of any other law providing for the relief of debtors,
(vi)  acquiesce  to,  or  fail  to  have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii)  take  any  action  for  the  purpose  of  effecting any of the foregoing;

               (j)  the  Company  shall  admit  in  writing its inability, or be
generally  unable to pay its debts as they become due or cease operations of its
present  business;

               (k)  any  any Subsidiary, Guarantor or any significant subsidiary
of  Guarantor shall (i) apply for, consent to or suffer to exist the appointment
of, or the taking possession by, a receiver, custodian, trustee or liquidator of
itself  or  of  all or a substantial part of its property, (ii) admit in writing
its  inability,  or  be generally unable, to pay its debts as they become due or
cease  operations  of  its present business, (iii) make a general assignment for
the  benefit  of  creditors,  (iv)  commence  a voluntary case under the federal
bankruptcy  laws  (as now or hereafter in effect), (v) be adjudicated a bankrupt
or  insolvent,  (vi)  file a petition seeking to take advantage of any other law
providing  for  the  relief  of  debtors,  (vii)  acquiesce  to, or fail to have
dismissed,  within  thirty  (30)  days,  any  petition  filed  against it in any
involuntary  case  under  such bankruptcy laws or (viii) take any action for the
purpose  of  effecting  any  of  the  foregoing;

               (l) the Company directly or indirectly sells, assigns, transfers,
conveys,  or  suffers  or  permits  to  occur  any sale, assignment, transfer or
conveyance  of  any  assets  of  the  Company or any interest therein, except as
permitted  herein;

               (m)  a  default  by  the Company in the payment, when due, of any
principal  of  or  interest  on  any other indebtedness for money borrowed in an
amount  greater  than  $25,000, which is not cured within any applicable cure or
grace  period;

               (n)  the  occurrence  of a change in controlling ownership of the
Company;

               (o)  the  indictment or threatened indictment of the Company, any
officer of the Company under any criminal statute, or commencement or threatened
commencement  of criminal or civil proceeding against the Company or any officer
                                       18
<PAGE>


of  the  Company  pursuant  to which statute or proceeding penalties or remedies
sought  or  available  include forfeiture of any of the property of the Company;

               (p)  if  any  Guarantor  attempts  to  terminate,  challenges the
validity  of,  or  its  liability  under  any  Guaranty  Agreement;  or
               (q)  if  an  Event  of Default shall occur under the Note and the
Default  Notice  Period  (as  defined  in  the  Note)  has  expired.

               19.  REMEDIES.  If  an  Event  of  Default  has  occurred  and is
continuing,  Laurus  shall  have  the  right  to demand repayment in full of all
Obligations, whether or not otherwise due. Until all Obligations have been fully
satisfied, Laurus shall retain its Lien in all Collateral. Laurus shall have, in
addition  to  all  other  rights  provided  herein, the rights and remedies of a
secured party under the UCC, and under other applicable law, all other legal and
equitable  rights  to  which Laurus may be entitled, including the right to take
immediate  possession  of  the  Collateral, to require a Company to assemble the
Collateral,  at  the  Company's expense, and to make it available to Laurus at a
place designated by Laurus which is reasonably convenient to both parties and to
enter  any  of  the  premises  of  a Company or wherever the Collateral shall be
located, with or without force or process of law, and to keep and store the same
on  said  premises  until  sold  (and  if  said  premises be the property of the
Company,  the  Company agrees not to charge Laurus for storage thereof), and the
right  to  apply  for  the appointment of a receiver for the Company's property.
Further,  Laurus  may,  at any time or times after the occurrence of an Event of
Default,  sell  and  deliver  all  Collateral held by or for Laurus at public or
private  sale  for  cash, upon credit or otherwise, at such prices and upon such
terms  as  Laurus,  in  Laurus'  sole  discretion, deems advisable or Laurus may
otherwise  recover  upon the Collateral in any commercially reasonable manner as
Laurus,  in  its sole discretion, deems advisable. The requirement of reasonable
notice  shall  be met if such notice is mailed postage prepaid to the Company at
the Company's address as shown in Laurus' records, at least ten (10) days before
the  time  of  the  event  of  which  notice  is  being given. Laurus may be the
purchaser  at  any sale, if it is public. In connection with the exercise of the
foregoing  remedies,  Laurus  is  granted permission to use all of the Company's
trademarks,  tradenames,  tradestyles,  patents,  patent applications, licenses,
franchises  and  other proprietary rights. The proceeds of sale shall be applied
first  to  all costs and expenses of sale, including attorneys' fees, and second
to  the  payment (in whatever order Laurus elects) of all Obligations. After the
indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Laurus of any other amount required by any provision of
law, including Section 608(a)(1) of the Code (but only after Laurus has received
what  Laurus  considers  reasonable  proof  of  a  subordinate  party's security
interest),  the  surplus,  if  any,  shall  be  paid  to  the  Company  or  its
representatives or to whosoever may be lawfully entitled to receive the same, or
as a court of competent jurisdiction may direct. The Company shall remain liable
to  Laurus  for  any  deficiency.

               20.  WAIVERS. To the full extent permitted by applicable law, the
Company  waives  (a) presentment, demand and protest, and notice of presentment,
dishonor,  intent  to  accelerate,  acceleration,  protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all of
this  Agreement  and  the  Ancillary  Agreements  or any other notes, commercial

                                       19
<PAGE>


paper, Accounts, contracts, Documents, Instruments, Chattel Paper and guaranties
at  any  time  held by Laurus on which the Company may in any way be liable, and
hereby  ratifies  and  confirms  whatever  Laurus may do in this regard; (b) all
rights to notice and a hearing prior to Laurus' taking possession or control of,
or  to  Laurus'  replevy, attachment or levy upon, any Collateral or any bond or
security  that  might  be  required  by  any  court  prior to allowing Laurus to
exercise  any  of  its remedies; and (c) the benefit of all valuation, appraisal
and exemption laws. The Company acknowledges that it has been advised by counsel
of  its  choices  and  decisions  with  respect to this Agreement, the Ancillary
Agreements  and  the  transactions  evidenced  hereby  and  thereby.

               21.  EXPENSES. The Company shall pay all of Laurus' out-of-pocket
costs  and  expenses, including reasonable fees and disbursements of in-house or
outside  counsel  and  appraisers, in connection with the preparation, execution
and  delivery  of this Agreement and the Ancillary Agreements (which such amount
shall  not exceed $20,000), and in connection with the prosecution or defense of
any  action,  contest,  dispute, suit or proceeding concerning any matter in any
way arising out of, related to or connected with this Agreement or any Ancillary
Agreement.  The  Company  shall  also  pay  all  of  Laurus'  fees,  charges,
out-of-pocket costs and expenses, including reasonable fees and disbursements of
counsel  and  appraisers,  in connection with (a) the preparation, execution and
delivery of any waiver, any amendment thereto or consent proposed or executed in
connection with the transactions contemplated by this Agreement or the Ancillary
Agreements,  (b)  Laurus'  obtaining  performance  of the Obligations under this
Agreement  and  any  Ancillary  Agreements,  including,  but not limited to, the
enforcement  or defense of Laurus' security interests, assignments of rights and
Liens  hereunder  as  valid  perfected  security  interests,  (c) any attempt to
inspect,  verify,  protect, collect, sell, liquidate or otherwise dispose of any
Collateral,  (d)  any  appraisals  or  re-appraisals  of  any  property (real or
personal)  pledged  to  Laurus  by  the  Company as Collateral for, or any other
Person  as  security  for,  the  Company's  Obligations  hereunder  and  (e) any
consultations  in  connection  with any of the foregoing. The Company shall also
pay  Laurus'  customary  bank  charges  for  all  bank  services (including wire
transfers)  performed or caused to be performed by Laurus for the Company at the
Company's  request or in connection with the Company's loan account with Laurus.
All such costs and expenses together with all filing, recording and search fees,
taxes  and  interest payable by the Company to Laurus shall be payable on demand
and shall be secured by the Collateral. If any tax by any Governmental Authority
is  or  may  be imposed on or as a result of any transaction between the Company
and  Laurus  which  Laurus is or may be required to withhold or pay, the Company
agrees  to  indemnify and hold Laurus harmless in respect of such taxes, and the
Company will repay to Laurus the amount of any such taxes which shall be charged
to  the  Company's  account;  and  until  the  Company shall furnish Laurus with
indemnity  therefor  (or supply Laurus with evidence satisfactory to it that due
provision  for  the  payment  thereof  has  been  made), Laurus may hold without
interest  any  balance  standing to the Company's credit and Laurus shall retain
its  Liens  in  any  and  all  Collateral.

               22.  ASSIGNMENT  BY  LAURUS.  Laurus may assign any or all of the
Obligations together with any or all of the security therefor and any transferee
shall succeed to all of Laurus' rights with respect thereto. Upon such transfer,
Laurus  shall  be  released  from  all  responsibility for the Collateral to the
extent  same is assigned to any transferee. Laurus may from time to time sell or
otherwise  grant  participations in any of the Obligations and the holder of any

                                       20
<PAGE>


such  participation  shall, subject to the terms of any agreement between Laurus
and  such holder, be entitled to the same benefits as Laurus with respect to any
security  for the Obligations in which such holder is a participant. The Company
agrees  that  each such holder may exercise any and all rights of banker's lien,
set-off and counterclaim with respect to its participation in the Obligations as
fully  as though the Company were directly indebted to such holder in the amount
of  such  participation.

               23. NO WAIVER; CUMULATIVE REMEDIES. Failure by Laurus to exercise
any right, remedy or option under this Agreement, any Ancillary Agreement or any
supplement  hereto  or  thereto  or  any other agreement between the Company and
Laurus  or delay by Laurus in exercising the same, will not operate as a waiver;
no  waiver  by Laurus will be effective unless it is in writing and then only to
the extent specifically stated. Laurus' rights and remedies under this Agreement
and  the  Ancillary Agreements will be cumulative and not exclusive of any other
right  or  remedy  which  Laurus  may  have.

               24.  APPLICATION  OF PAYMENTS. The Company irrevocably waives the
right  to  direct  the  application of any and all payments at any time or times
hereafter  received  by  Laurus  from or on the Company's behalf and the Company
hereby  irrevocably agrees that Laurus shall have the continuing exclusive right
to  apply  and  reapply  any  and  all  payments  received  at any time or times
hereafter  against  the  Obligations hereunder in such manner as Laurus may deem
advisable  notwithstanding  any  entry  by  Laurus upon any of Laurus' books and
records.

               25.  INDEMNITY.  The Company agrees to indemnify and hold Laurus,
and  its  respective  affiliates,  employees,  attorneys  and  agents  (each, an
"Indemnified  Person"),  harmless  from  and against any and all suits, actions,
proceedings,  claims,  damages,  losses, liabilities and expenses of any kind or
nature  whatsoever  (including attorneys' fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) which may
be  instituted or asserted against or incurred by any such Indemnified Person as
the  result  of  credit having been extended, suspended or terminated under this
Agreement  or  any of the Ancillary Agreements or with respect to the execution,
delivery,  enforcement,  performance  and administration of, or in any other way
arising  out  of or relating to, this Agreement, the Ancillary Agreements or any
other documents or transactions contemplated by or referred to herein or therein
and  any actions or failures to act with respect to any of the foregoing, except
to  the  extent  that  any such indemnified liability is finally determined by a
court  of  competent  jurisdiction to have resulted solely from such Indemnified
Person's  gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE  OR LIABLE TO THE COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR,
ASSIGNEE  OR  THIRD  PARTY  BENEFICIARY  OR  ANY  OTHER  PERSON ASSERTING CLAIMS
DERIVATIVELY  THROUGH  SUCH  PARTY,  FOR  INDIRECT,  PUNITIVE,  EXEMPLARY  OR
CONSEQUENTIAL  DAMAGES  WHICH  MAY  BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED,  SUSPENDED  OR  TERMINATED  UNDER  THIS  AGREEMENT  OR  ANY  ANCILLARY
AGREEMENT  OR  AS  A  RESULT  OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.

               26.  REVIVAL.  The  Company further agrees that to the extent the
Company  makes a payment or payments to Laurus, which payment or payments or any

                                       21
<PAGE>


part  thereof  are  subsequently  invalidated,  declared  to  be  fraudulent  or
preferential,  set  aside and/or required to be repaid to a trustee, receiver or
any  other  party  under any bankruptcy act, state or federal law, common law or
equitable  cause,  then,  to  the  extent  of  such  payment  or  repayment, the
obligation  or  part  thereof  intended  to  be  satisfied  shall be revived and
continued  in  full  force  and  effect  as  if  said payment had not been made.

               27.  NOTICES. Any notice or request hereunder may be given to the
Company  or  Laurus  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.  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.

Notices  shall  be  provided  as  follows:

                                              Laurus  Master  Fund,  Ltd.
                If  to  Laurus:               C/o Laurus Capital Management, LLC
                                              152  West  57th  Street
                                              New  York,  New  York  10019
                                              Attention:  David  Grin
                                              Telephone:  (212)  541-4434
                                              Telecopier:  (212)  541-5800

                With  a  copy  to:            Loeb  &  Loeb  LLP
                                              345  Park  Avenue
                                              New  York, New  York  10154
                                              Attention: Scott J. Giordano, Esq.
                                              Telephone:  (212)  407-4000
                                              Telecopier:  (212)  407-4990

                If  to  the  Company:         Comverge  Technologies,  Inc.
                                              4497  Park  Drive
                                              Norcross,  Georgia  30093
                                              Attention:  Wayne  Wren
                                              Telephone:  (770)  696-7660
                                              Telecopier:  (770)  696-7665

                With  a  copy  to:            Ehrenreich Eilenberg & Krause LLP
                                              11  East  44th  Street
                                              New  York,  New  York,  10017
                                              Attention:  Sheldon  Krause,  Esq.
                                              Telephone:  212-986-9700
                                              Telecopier:  212-986-2399

                                       22
<PAGE>


               28.  GOVERNING  LAW,  JURISDICTION  AND WAIVER OF JURY TRIAL. (a)
THIS  AGREEMENT  AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
AND  ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS  MADE  AND  PERFORMED  IN  SUCH  STATE.

(b)     THE  COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED  IN  THE  COUNTY  OF  NEW  YORK,  STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION  TO  HEAR  AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY
AND LAURUS PERTAINING TO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS OR TO
     ANY  MATTER  ARISING  OUT  OF  OR  RELATED  TO THIS AGREEMENT OR ANY OF THE
ANCILLARY AGREEMENTS; PROVIDED, THAT LAURUS AND THE COMPANY ACKNOWLEDGE THAT ANY
                      ---------
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE
COUNTY  OF  NEW  YORK,  STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN
                                           --------------------
THIS  AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM BRINGING SUIT
OR  TAKING  OTHER  LEGAL  ACTION  IN  ANY  OTHER  JURISDICTION  TO  COLLECT  THE
OBLIGATIONS,  TO  REALIZE  ON  THE  COLLATERAL  OR  ANY  OTHER  SECURITY FOR THE
OBLIGATIONS,  OR  TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LAURUS.
THE  COMPANY  EXPRESSLY  SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY  ACTION  OR  SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES
ANY  OBJECTION  WHICH  IT  MAY  HAVE  BASED  UPON LACK OF PERSONAL JURISDICTION,
IMPROPER  VENUE  OR  FORUM  NON  CONVENIENS.  THE COMPANY HEREBY WAIVES PERSONAL
                     ----------------------
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR
SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET
FORTH  IN SECTION 27 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
          ----------
EARLIER  OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN  THE  U.S.  MAILS,  PROPER  POSTAGE  PREPAID.

               (c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHTS  TO  TRIAL  BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY  DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS AND
THE  COMPANY  ARISING  OUT  OF,  CONNECTED  WITH,  RELATED  OR INCIDENTAL TO THE
RELATIONSHIP  ESTABLISHED  BETWEEN  THEM  IN CONNECTION WITH THIS AGREEMENT, ANY
ANCILLARY  AGREEMENT  OR  THE  TRANSACTIONS  RELATED  THERETO.

               29.  ATTORNEYS'  FEES.  In  the  event  that  any  suit  or
action  is instituted to enforce any provision in this Agreement, the prevailing
party  in  such  dispute  shall be entitled to recover from the losing party all

                                       23
<PAGE>


fees,  costs  and expenses of enforcing any right of such prevailing party under
or  with  respect  to  this  Agreement,  including,  without  limitation,  such
reasonable  fees and expenses of attorneys and accountants, which shall include,
without  limitation,  all  fees,  costs  and  expenses  of  appeals.

               30.  LIMITATION  OF  LIABILITY.  The  Company  acknowledges  and
understands  that  in  order  to  assure  repayment of the Obligations hereunder
Laurus  may  be  required to exercise any and all of Laurus' rights and remedies
hereunder  and  agrees  that  neither  Laurus nor any of Laurus' agents shall be
liable  for  acts  taken  or  omissions made in connection herewith or therewith
except  for  actual  bad  faith.

               31.  ENTIRE  UNDERSTANDING.  This  Agreement  and  the  Ancillary
Agreements  contain  the entire understanding between the Company and Laurus and
any  promises,  representations,  warranties  or guarantees not herein contained
shall  have  no  force and effect unless in writing, signed by the Company's and
Laurus'  respective  officers. Neither this Agreement, the Ancillary Agreements,
nor any portion or provisions thereof may be changed, modified, amended, waived,
supplemented,  discharged,  cancelled  or  terminated orally or by any course of
dealing,  or  in any manner other than by an agreement in writing, signed by the
party  to  be  charged.

               32.  SEVERABILITY.  Wherever  possible  each  provision  of  this
Agreement  or the Ancillary Agreements shall be interpreted in such manner as to
be  effective  and  valid  under  applicable  law,  but if any provision of this
Agreement  or  the  Ancillary Agreements shall be prohibited by or invalid under
applicable  law  such  provision  shall  be  ineffective  to  the extent of such
prohibition  or invalidity, without invalidating the remainder of such provision
or  the  remaining  provisions  thereof.

               33.  CAPTIONS.  All captions are and shall be without substantive
meaning  or  content  of  any  kind  whatsoever.

               34.  COUNTERPARTS;  TELECOPIER  SIGNATURES. This Agreement may be
executed in one or more counterparts, each of which shall constitute an original
and all of which taken together shall constitute one and the same agreement. Any
signature delivered by a party via telecopier transmission shall be deemed to be
any  original  signature  hereto.

               35. CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the  effect  that  any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules  or  exhibits  thereto.

               36.  PUBLICITY.  The  Company  hereby  authorize  Laurus  to make
appropriate  announcements  of  the  financial  arrangement  entered into by and
between  the  Company  and  Laurus, including, without limitation, announcements
which  are  commonly  known  as  tombstones,  in  such  publications and to such
selected  parties  as  Laurus  shall  in  its  sole and absolute discretion deem
appropriate.

                                       24
<PAGE>


IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first  above  written.

                                            COMVERGE  TECHNOLOGIES,  INC.
                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:


                                            LAURUS  MASTER  FUND,  LTD.
                                            By:
                                              ----------------------------------
                                              Name:
                                              Title:

                                       25
<PAGE>



                              Annex A - Definitions
                              ---------------------

               "ACCOUNT DEBTOR" means any Person who is or may be obligated with
respect  to,  or  on  account  of,  an  Account.

               "ACCOUNTANTS"  has  the  meaning  given  to  such term in Section
11(a).

               "ACCOUNTS"  means  all "accounts", as such term is defined in the
UCC,  now owned or hereafter acquired by any Person, including: (a) all accounts
receivable,  other receivables, book debts and other forms of obligations (other
than  forms of obligations evidenced by Chattel Paper or Instruments) (including
any  such  obligations that may be characterized as an account or contract right
under  the  UCC);  (b) all of such Person's rights in, to and under all purchase
orders or receipts for goods or services; (c) all of such Person's rights to any
goods  represented  by any of the foregoing (including unpaid sellers' rights of
rescission,  replevin,  reclamation  and  stoppage  in  transit  and  rights  to
returned, reclaimed or repossessed goods); (d) all rights to payment due to such
Person for Goods or other property sold, leased, licensed, assigned or otherwise
disposed  of,  for a policy of insurance issued or to be issued, for a secondary
obligation  incurred  or  to be incurred, for energy provided or to be provided,
for  the  use or hire of a vessel under a charter or other contract, arising out
of  the  use  of a credit card or charge card, or for services rendered or to be
rendered  by such Person or in connection with any other transaction (whether or
not  yet  earned  by  performance  on  the  part  of  such  Person); and (e) all
collateral  security of any kind given by any Account Debtor or any other Person
with  respect  to  any  of  the  foregoing.

               "ACCOUNTS  AVAILABILITY"  means  the  amount  of Revolving Credit
Advances  against  Eligible Accounts Laurus may from time to time make available
to  the  Company  up  to  ninety  percent  (90%)  of  the net face amount of the
Company's  Eligible  Accounts.

               "AFFILIATE"  of  any  Person  means  (a) any Person (other than a
Subsidiary)  which,  directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any  Person  described  in  clause  (a)  above. For purposes of this definition,
control  of  a Person shall mean the power, direct or indirect, (i) to vote five
percent  (5.00%)  or more of the securities having ordinary voting power for the
election  of  directors of such Person, or (ii) to direct or cause the direction
of  the management and policies of such Person whether by contract or otherwise.

               "ANCILLARY  AGREEMENTS"  means,  the  Note, Warrant, Registration
Rights  Agreement,  and all other agreements, instruments, documents, mortgages,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, trust agreements and guarantees whether heretofore, concurrently, or
hereafter  executed  by  or  on  behalf  of  the  Company or any other Person or
delivered  to  Laurus,  relating  to  this  Agreement  or  to  the  transactions
contemplated by this Agreement or otherwise relating to the relationship between
the  Company  and  Laurus.

                                       26
<PAGE>



               "BOOKS  AND  RECORDS"  means  all  books, records, board minutes,
contracts,  licenses,  insurance policies, environmental audits, business plans,
files,  computer  files,  computer discs and other data and software storage and
media  devices,  accounting  books and records, financial statements (actual and
pro  forma),  filings  with Governmental Authorities and any and all records and
instruments  relating to the Collateral or otherwise necessary or helpful in the
collection  thereof  or  the  realization  thereupon.

               "BORROWING  AVAILABILITY"  means  Accounts  Availability  plus
Inventory  availability.

               "BUSINESS  DAY"  means a day on which Laurus is open for business
and that is not a Saturday, a Sunday or other day on which banks are required or
permitted  to  be  closed  in  the  State  of  New  York.

               "CAPITAL  AVAILABILITY  AMOUNT"  means  $2,000,000.

               "CHATTEL  PAPER"  means  all  "chattel  paper,"  as  such term is
defined  in  the UCC, including electronic chattel paper, now owned or hereafter
acquired  by  any  Person.

               "CLOSING  DATE"  means  the date on which the Company shall first
receive  proceeds  of  the  initial  Loans.

               "COLLATERAL"  means  all  of  the  Company's property and assets,
whether  real  or  personal,  tangible  or  intangible, and whether now owned or
hereafter  acquired,  or  in  which  it now has or at any time in the future may
acquire any right, title or interests including all of the following property in
which  it  now  has or at any time in the future may acquire any right, title or
interest:

               (a)  all  Inventory;

               (b)  all  Equipment;

               (c)  all  Fixtures;

               (d)  all  General  Intangibles;

               (e)  all  Accounts;

               (f)  all  Deposit  Accounts, other bank accounts and all funds on
                    deposit  therein;

               (g)  all  Investment  Property;

               (h)  all  Stock;

               (i)  all  Chattel  Paper;

               (j)  all  Letter-of-Credit  Rights;

                                       27
<PAGE>


               (k)  all  Instruments;

               (l)  all  commercial  tort  claims  set  forth  on  Exhibit 1(A);

               (m)  all  Books  and  Records;

               (n)  all  Supporting  Obligations including letters of credit and
guarantees issued in support of Accounts, Chattel Paper, General Intangibles and
Investment  Property;

               (o)  (i)  all  money, cash and cash equivalents and (ii) all cash
held as cash collateral to the extent not otherwise constituting Collateral, all
other cash or property at any time on deposit with or held by Access Capital for
the  account  of Company (whether for safekeeping, custody, pledge, transmission
or  otherwise);  and

               (p)  all  products  and  Proceeds of all or any of the foregoing,
tort  claims  and  all  claims  and  other rights to payment including insurance
claims against third parties for loss of, damage to, or destruction of, and (ii)
payments  due  or to become due under leases, rentals and hires of any or all of
the  foregoing  and Proceeds payable under, or unearned premiums with respect to
policies  of  insurance  in  whatever  form.

               "CONTRACT  RATE"  means  an  interest rate per annum equal to the
Prime  Rate  plus  one  and  three-quarters  percent  (1.75%).

               "DEFAULT" means any act or event which, with the giving of notice
or  passage  of  time  or  both,  would  constitute  an  Event  of  Default.

               "DEFAULT  RATE"  has  the  meaning  given to such term in Section
5(a)(iii).

               "DEPOSIT  ACCOUNTS"  means all "deposit accounts" as such term is
defined  in the UCC, now or hereafter held in the name of any Person, including,
without limitation, Deposit Account number _________ maintained by Borrower with
North  Fork  Bank  and  all  replacements and substitutions thereof. "DOCUMENTS"
means  all  "documents",  as  such  term  is  defined  in  the UCC, now owned or
hereafter  acquired  by  any  Person,  wherever  located, including all bills of
lading, dock warrants, dock receipts, warehouse receipts, and other documents of
title,  whether  negotiable  or  non-negotiable.

               "ELIGIBLE  ACCOUNTS"  means  and  includes  each  Account  which
conforms  to  the  following  criteria:  (a)  shipment of the merchandise or the
rendition  of  services  has  been  completed;  (b)  no  return,  rejection  or
repossession  of the merchandise has occurred; (c) merchandise or services shall
not  have  been  rejected  or disputed by the Account Debtor and there shall not
have  been  asserted any offset, defense or counterclaim; (d) continues to be in
full  conformity  with the representations and warranties made by the Company to
Laurus  with  respect thereto; (e) there are no facts existing or threatened, to
the  knowledge  of the Company, which are likely to result in any adverse change
in an Account Debtor's financial condition; (f) is documented by an invoice in a
form  approved by Laurus and shall not be unpaid more than ninety (90) days from

                                       28
<PAGE>


invoice  date;  (g) not more than twenty-five percent (25%) of the unpaid amount
of  invoices  due  from such Account Debtor remains unpaid more than ninety (90)
days  from  invoice date; (h) is not evidenced by chattel paper or an instrument
of  any kind with respect to or in payment of the Account unless such instrument
is duly endorsed to and in possession of Laurus or represents a check in payment
of a Account; (i) the Account Debtor is located in the United States; (j) Laurus
has  a  first  priority  perfected  Lien in such Account and such Account is not
subject  to  any  Lien  other  than  Permitted  Liens; (k) does not arise out of
transactions  with  any  employee,  officer,  agent,  director,  stockholder  or
Affiliate  of the Company; (l) is payable to the Company; (m) does not arise out
of  a  bill  and hold sale prior to shipment and does not arise out of a sale to
any  Person  to  which  the  Company  is  indebted;  provided, however, that and
Eligible Account may arise out of a bill and hold sale if (i) the Account Debtor
has  manifested its approval (in a writing acceptable in all respects to Laurus)
to  such  sale  and  to  the  acceptable quality of the goods to be delivered in
connection therewith, (ii) the Account Debtor has agreed in a writing acceptable
in  all respects to Laurus that once delivered the Account Debtor may not return
such  bill  and  hold  goods  to  the  Company, (iii) Laurus shall have received
evidence  that  such  goods  are  covered  by insurance in amounts acceptable to
Laurus,  which  such  insurance  shall  name Laurus as loss payee and additional
insured,  and (iv) and the Account Debtor shall have delivered to the Company an
estoppel  certificate acceptable in all respects to Laurus pursuant to which the
Account Debtor agrees to pay for such goods in accordance with the express terms
of the applicable invoice; (n) is net of any returns, discounts, claims, credits
and allowances; (o) if the Account arises out of contracts between a Company and
the  United  States,  any state, or any department, agency or instrumentality of
any  of  them,  the  Company  has  so  notified Laurus, in writing, prior to the
creation  of  such  Account, and there has been compliance with any governmental
notice  or  approval  requirements,  including  compliance  with  the  Federal
Assignment  of  Claims  Act;  (p)  is  a  good and valid account representing an
undisputed  bona fide indebtedness incurred by the Account Debtor therein named,
for  a fixed sum as set forth in the invoice relating thereto with respect to an
unconditional  sale  and  delivery  upon  the  stated  terms  of goods sold by a
Company,  or  work,  labor  and/or  services rendered by a Company; (q) does not
arise  out  of  progress  billings  prior  to  completion  of the order; (r) the
Company's  right  to payment is absolute and not contingent upon the fulfillment
of  any  condition whatsoever; (s) the Company is able to bring suit and enforce
its  remedies  against the Account Debtor through judicial process; (t) does not
represent interest payments, late or finance charges or service charges owing to
a  Company;  and (u) is otherwise satisfactory to Laurus as determined by Laurus
in  the  exercise  of  its  reasonable,  good  faith  judgment.

               "ELIGIBLE  INVENTORY"  means  Inventory  which  Laurus,  in  its
reasonable  discretion,  determines:  (a) is subject to the security interest of
Laurus  and  is subject to no other liens or encumbrances whatsoever (other than
Permitted  Liens);  (b)  is in good condition and meets all standards imposed by
any  governmental  agency,  or  department or division thereof having regulatory
authority  over such Inventory, its use or sale including but not limited to the
Federal  Fair Labor Standards Act of 1938 as amended, and all rules, regulations
and  orders  thereunder, (c) is currently either usable or salable in the normal
course of Company's business; and (d) not to be ineligible for any other reason.

               "EQUIPMENT"  means all "equipment" as such term is defined in the
UCC,  now owned or hereafter acquired by any Person, wherever located, including
any  and  all  machinery,  apparatus,  equipment, fittings, furniture, fixtures,

                                       29
<PAGE>


motor  vehicles  and  other tangible personal property (other than Inventory) of
every  kind  and  description that may be now or hereafter used in such Person's
operations  or that are owned by such Person or in which such Person may have an
interest,  and  all  parts, accessories and accessions thereto and substitutions
and  replacements  therefor.

               "ERISA"  shall  have  the  meaning  given to such term in Section
12(g).

               "EVENT  OF DEFAULT" means the occurrence of any of the events set
forth  in Section  18.

               "EXISTING  LOANS"  means  loans  from  the  Company  to  George
Morgenstern,  Harvey  Eisenberger  and  Yacov  Kaufamn,  each  in  the amount of
$9,925.20,  and  a  loan  from the Company to Joseph D. Esteves in the amount of
$14,000.

               "FIXTURES"  means  all  "fixtures" as such term is defined in the
UCC,  now  owned  or  hereafter acquired by any Person. "Formula Amount" has the
meaning  set  forth  in  Section  2(a).

               "GAAP"  means generally accepted accounting principles, practices
and  procedures  in  effect  from  time to time in the United States of America.

               "GENERAL  INTANGIBLES"  means  all  "general intangibles" as such
term  is  defined  in  the  UCC,  now  owned or hereafter acquired by any Person
including  all  right,  title and interest that such Person may now or hereafter
have  in  or  under  any  contract,  all  Payment  Intangibles,  customer lists,
Licenses,  Intellectual  Property, interests in partnerships, joint ventures and
other  business  associations, permits, proprietary or confidential information,
inventions  (whether  or  not  patented  or  patentable), technical information,
procedures,  designs,  knowledge,  know-how,  Software, data bases, data, skill,
expertise,  experience,  processes,  models,  drawings,  materials,  Books  and
Records,  Goodwill  (including  the  Goodwill  associated  with any Intellectual
Property),  all  rights  and  claims  in  or under insurance policies (including
insurance  for  fire,  damage,  loss,  and  casualty,  whether covering personal
property,  real  property,  tangible rights or intangible rights, all liability,
life,  key-person,  and  business  interruption  insurance,  and  all  unearned
premiums), uncertificated securities, choses in action, deposit accounts, rights
to  receive  tax  refunds  and  other  payments,  rights  to received dividends,
distributions, cash, Instruments and other property in respect of or in exchange
for  pledged  Stock  and  Investment  Property,  and  rights of indemnification.

               "GOODS"  means  all  "goods", as such term is defined in the UCC,
now  owned  or  hereafter  acquired  by  any Person, wherever located, including
embedded  software  to  the  extent  included  in "goods" as defined in the UCC,
manufactured  homes, standing timber that is cut and removed for sale and unborn
young  of  animals.

               "GOODWILL"  means  all  goodwill,  trade  secrets, proprietary or
confidential  information,  technical information, procedures, formulae, quality
control  standards, designs, operating and training manuals, customer lists, and

                                       30
<PAGE>


distribution  agreements  now  owned  or  hereafter  acquired  by  any  Person.

               "GOVERNMENTAL  AUTHORITY"  means  any  nation  or government, any
state  or  other  political  subdivision  thereof, and any agency, department or
other  entity  exercising  executive,  legislative,  judicial,  regulatory  or
administrative  functions  of  or  pertaining  to  government.

               "GUARANTOR" means, individually, Data Systems & Software Inc. and
any  other  Person  who may guarantee payment or performance of the whole or any
part  of the Obligations and "GUARANTORS" means, collectively, all such Persons.

               "GUARANTY  AGREEMENTS" means each Guaranty which is executed by a
Guarantor  in  favor  of  Laurus.

               "INDEMNIFIED PERSON" shall have the meaning given to such term in
Section  25.

               "INITIAL  TERM"  means  the  Closing  Date  through  the close of
business  on  the third anniversary of the Closing Date, subject to acceleration
at  the option of Laurus upon the occurrence of an Event of Default hereunder or
other  termination  hereunder.

               "INSTRUMENTS" means all "instruments", as such term is defined in
the  UCC,  now  owned  or  hereafter  acquired  by any Person, wherever located,
including  all  certificated  securities  and  all  promissory  notes  and other
evidences of indebtedness, other than instruments that constitute, or are a part
of  a  group  of  writings  that  constitute,  Chattel  Paper.

               "INTELLECTUAL  PROPERTY"  means  any  and  all Licenses, patents,
patent registrations, copyrights, copyright registrations, trademarks, trademark
registrations,  trade  secrets  and  customer  lists.

               "INVENTORY" means all "inventory", as such term is defined in the
UCC,  now owned or hereafter acquired by any Person, wherever located, including
all  inventory,  merchandise, goods and other personal property that are held by
or  on  behalf  of  such  Person for sale or lease or are furnished or are to be
furnished  under a contract of service or that constitute raw materials, work in
process,  finished  goods, returned goods, or materials or supplies of any kind,
nature  or  description  used  or  consumed  or  to  be used or consumed in such
Person's  business  or  in  the  processing,  production,  packaging, promotion,
delivery  or shipping of the same, including all supplies and embedded software.

               "INVENTORY  AVAILABILITY"  means  the  amount of Revolving Credit
Advances against Eligible Inventory Laurus may from time to time during the Term
make  available to the Company up to the lesser of (a) $800,000, (b) up to fifty
percent  (50%)  of  the  value  of Eligible Inventory (calculated at its orderly
liquidation  value)  and  (c)  fifty percent (50%) of the Accounts Availability;
PROVIDED,  HOWEVER,  until such time as Laurus shall have completed an appraisal
of  the Inventory, which appraisal shall be completed no later than December 31,
2002,  the  Inventory  Availability  shall  be  zero  ($0).

                                       31
<PAGE>


               "INVESTMENT  PROPERTY"  means  all "investment property", as such
term  is  defined  in  the  UCC,  now owned or hereafter acquired by any Person,
wherever  located.

               "LETTER-OF-CREDIT RIGHTS" means "letter-of-credit rights" as such
term  is  defined  in  the  UCC,  now owned or hereafter acquired by any Person,
including  rights to payment or performance under a letter of credit, whether or
not  such  Person, as beneficiary, has demanded or is entitled to demand payment
or  performance.

               "LICENSE"  means  any  rights  under any written agreement now or
hereafter  acquired  by any Person to use any trademark, trademark registration,
copyright,  copyright  registration  or  invention  for  which  a  patent  is in
existence or other license of rights or interests now held or hereafter acquired
by  any Person. "LIEN" means any mortgage, security deed, deed of trust, pledge,
hypothecation,  assignment,  security  interest,  lien  (whether  statutory  or
otherwise),  charge,  claim  or  encumbrance,  or  preference, priority or other
security  agreement  or  preferential arrangement held or asserted in respect of
any  asset  of  any  kind or nature whatsoever including any conditional sale or
other  title  retention  agreement,  any  lease  having  substantially  the same
economic  effect  as  any  of  the foregoing, and the filing of, or agreement to
give,  any  financing  statement  under  the  UCC  or  comparable  law  of  any
jurisdiction.

               "LOANS" means the Revolving Credit Advances and all extensions of
credit  hereunder  or  under  any  Ancillary  Agreement.

               "MATERIAL  ADVERSE EFFECT" means a material adverse effect on (a)
the condition, operations, assets, business or prospects of the Company, (b) the
Company's ability to pay or perform the Obligations in accordance with the terms
hereof or any Ancillary Agreement, (c) the value of the Collateral, the Liens on
the Collateral or the priority of any such Lien or (d) the practical realization
of  the  benefits  of  Laurus'  rights and remedies under this Agreement and the
Ancillary  Agreements.

               "MAXIMUM LEGAL RATE" shall have the meaning given to such term in
Section  5(a)(iv).

               "NOTE"  means  the  Convertible  Note  in  the original principal
amount  of  $2,000,000  made  by  the Company in favor of Laurus dated as of the
Closing Date, as the same may be amended, modified and supplemented from time to
time.

               "OBLIGATIONS"  means all Loans, all advances, debts, liabilities,
obligations,  covenants  and  duties  owing  by  the  Company  to Laurus (or any
corporation that directly or indirectly controls or is controlled by or is under
common  control  with  Laurus)  of  every  kind  and description (whether or not
evidenced  by any note or other instrument and whether or not for the payment of
money  or  the  performance  or non-performance of any act), direct or indirect,
absolute  or  contingent,  due  or  to  become  due,  contractual  or  tortious,
liquidated  or  unliquidated,  whether existing by operation of law or otherwise
now  existing  or  hereafter arising including any debt, liability or obligation
owing from the Company to others which Laurus may have obtained by assignment or
otherwise and further including all interest (including interest accruing at the

                                       32
<PAGE>


then  applicable rate provided in this Agreement after the maturity of the Loans
and  interest  accruing  at  the then applicable rate provided in this Agreement
after  the  filing  of  any  petition  in bankruptcy, or the commencement of any
insolvency,  reorganization  or  like  proceeding,  whether  or  not a claim for
post-filing or post-petition interest is allowed in such proceeding), charges or
any  other  payments the Company is required to make by law or otherwise arising
under  or  as  a result of this Agreement and the Ancillary Agreements, together
with  all  reasonable  expenses and reasonable attorneys' fees chargeable to the
Company's account or incurred by Laurus in connection with the Company's account
whether  provided  for  herein  or  in  any  Ancillary  Agreement.

               "PAYMENT  INTANGIBLES"  means  all  "payment intangibles" as such
term  is  defined  in  the  UCC,  now owned or hereafter acquired by any Person,
including,  a  General  Intangible  under  which  the Account Debtor's principal
obligation  is  a  monetary  obligation.

               "PERMITTED  LIENS"  means  (a)  Liens  of carriers, warehousemen,
artisans,  bailees, mechanics and materialmen incurred in the ordinary course of
business securing sums not overdue; (b) Liens incurred in the ordinary course of
business  in  connection  with workmen's compensation, unemployment insurance or
other  forms  of  governmental  insurance  or  benefits,  relating to employees,
securing  sums  (i) not overdue or (ii) being diligently contested in good faith
provided that adequate reserves with respect thereto are maintained on the books
of the applicable Company in conformity with GAAP; (c) Liens in favor of Laurus;
(d)  Liens  for taxes (i) not yet due or (ii) being diligently contested in good
faith  by  appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the applicable Company in conformity with
GAAP  PROVIDED,  THAT, the Lien shall have no effect on the priority of Liens in
favor  of  Laurus  or  the  value  of the assets in which Laurus has a Lien; (e)
Purchase  Money  Liens  securing  Purchase  Money  Indebtedness  to  the  extent
permitted  in  this  Agreement  and  (f)  Liens  specified  on EXHIBIT 2 hereto.

               "PERSON"  means any individual, sole proprietorship, partnership,
limited  liability  partnership,  joint  venture,  trust,  unincorporated
organization,  association, corporation, limited liability company, institution,
public  benefit  corporation,  entity  or  government  (whether  federal, state,
county,  city,  municipal or otherwise, including any instrumentality, division,
agency,  body or department thereof), and shall include such Person's successors
and  assigns.

               "PRIME  RATE"  means the "base rate" or "prime rate" published in
the  Wall Street Journal from time to time. The Prime Rate shall be increased or
decreased  as the case may be for each increase or decrease in the Prime Rate in
an  amount  equal to such increase or decrease in the Prime Rate; each change to
be  effective  as  of  the  day  of  the  change  in  such  rate.

               "PROCEEDS"  means  "proceeds", as such term is defined in the UCC
and,  in  any  event,  shall include: (a) any and all proceeds of any insurance,
indemnity,  warranty or guaranty payable to the Company or any other Person from
time  to  time  with respect to any Collateral; (b) any and all payments (in any
form  whatsoever)  made  or  due and payable to the Company from time to time in
connection  with  any  requisition,  confiscation,  condemnation,  seizure  or
forfeiture  of  any Collateral by any governmental body, governmental authority,
bureau  or  agency (or any person acting under color of governmental authority);
(c)  any  claim  of  the  Company against third parties (i) for past, present or

                                       33
<PAGE>


future  infringement  of  any Intellectual Property or (ii) for past, present or
future  infringement  or  dilution  of any trademark or trademark license or for
injury  to the goodwill associated with any trademark, trademark registration or
trademark  licensed  under  any  trademark  License;  (d)  any recoveries by the
Company  against  third  parties  with  respect  to  any  litigation  or dispute
concerning  any  Collateral,  including  claims  arising  out  of  the  loss  or
nonconformity  of,  interference with the use of, defects in, or infringement of
rights  in,  or  damage  to,  Collateral;  (e)  all  amounts  collected  on,  or
distributed  on  account  of,  other  Collateral, including dividends, interest,
distributions  and  Instruments  with respect to Investment Property and pledged
Stock;  and  (f) any and all other amounts , rights to payment or other property
acquired  upon  the  sale,  lease,  license,  exchange  or  other disposition of
Collateral  and  all  rights  arising  out  of  Collateral.

               "PURCHASE MONEY INDEBTEDNESS" means (a) any indebtedness incurred
for the payment of all or any part of the purchase price of any fixed asset, (b)
any  indebtedness  incurred for the sole purpose of financing or refinancing all
or  any  part  of  the  purchase price of any fixed asset, and (c) any renewals,
extensions  or  refinancings  thereof  (but  not  any increases in the principal
amounts  thereof  outstanding  at  that  time).

               "PURCHASE  MONEY  LIEN" means any Lien upon any fixed assets that
secures  the  Purchase  Money Indebtedness related thereto but only if such Lien
shall  at  all times be confined solely to the asset the purchase price of which
was  financed  or  refinanced  through  the  incurrence  of  the  Purchase Money
Indebtedness  secured  by  such  Lien  and  only  if such Lien secures only such
Purchase  Money  Indebtedness.

               "REVOLVING  CREDIT ADVANCES" shall have the meaning given to such
term  in  Section  2(a)(i).

               "SOFTWARE"  means  all  "software" as such term is defined in the
UCC,  now  owned  or  hereafter  acquired  by any Person, including all computer
programs  and  all  supporting  information  provided  in  connection  with  a
transaction  related  to  any  program.

               "STOCK"  means  all  certificated  and  uncertificated  shares,
options,  warrants,  membership  interests,  general  or  limited  partnership
interests,  participation or other equivalents (regardless of how designated) of
or in a corporation, partnership, limited liability company or equivalent entity
whether  voting  or  nonvoting,  including common stock, preferred stock, or any
other  "equity  security" (as such term is defined in Rule 3a11-1 of the General
Rules  and  Regulations  promulgated  by  the Securities and Exchange Commission
under  the  Securities  Exchange  Act  of  1934).

               "SUBSIDIARY"  of  any  Person means a corporation or other entity
whose  shares of stock or other ownership interests having ordinary voting power
(other  than stock or other ownership interests having such power only by reason
of  the happening of a contingency) to elect a majority of the directors of such
corporation,  or other Persons performing similar functions for such entity, are
owned,  directly  or  indirectly,  by  such  Person.

                                       34
<PAGE>


               "SUPPORTING  OBLIGATIONS"  means  all "supporting obligations" as
such  term  is  defined  in  the  UCC.

               "TERM"  means  the  Initial  Term.

               "UCC"  means  the  Uniform  Commercial Code as the same may, from
time be in effect in the State of New York; provided, that in the event that, by
reason  of mandatory provisions of law, any or all of the attachment, perfection
or  priority  of, or remedies with respect to, Laurus' Lien on any Collateral is
governed  by  the  Uniform  Commercial Code as in effect in a jurisdiction other
than  the  State  of  New York, the term "UCC" shall mean the Uniform Commercial
Code  as  in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and
for  purposes  of definitions related to such provisions; provided further, that
to  the  extent  that  UCC is used to define any term herein or in any Ancillary
Agreement  and  such  term  is  defined  differently  in  different  Articles or
Divisions  of  the  UCC,  the  definition  of  such term contained in Article or
Division  9  shall  govern.

                                    EXHIBITS
                                    --------

Exhibit  1(A)  -  Commercial  Tort  Claims
Exhibit  2  -  Permitted  Liens
Exhibit  7(c)  -  Actions  for  Perfection
Exhibit  7(n)  -  Bank  Accounts
Exhibit  12(d)  -  Corporate  Information  and  Locations  of  Collateral
Exhibit  12(i)  -  Licenses,  Patents,  Trademarks  and  Copyrights
Exhibit  13(e)(i)  -  Permitted  Indebtedness
Exhibit  13(e)(ii)  -  Existing  Subsidiaries
Exhibit  A  -  Form  of  Borrowing  Base  Certificate


                                       35

<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>doc3.txt
<TEXT>


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


                                CONVERTIBLE NOTE
                                ----------------

               FOR  VALUE  RECEIVED,  COMVERGE  TECHNOLOGIES,  INC.,  a Delaware
corporation  (the  "BORROWER"),  hereby  promises  to pay to LAURUS MASTER FUND,
LTD.,  c/o  Ironshore  Corporate  Services  Ltd., P.O. Box 1234 G.T., Queensgate
House, South Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the
"HOLDER") or its registered assigns or successors in interest, on order, without
demand,  the outstanding principal amount of all loans made by the Holder to the
Borrower  under  the  terms of this Note (each an "Advance" and collectively the
"Advances").  The  aggregate  principal  amount  of  all  Advances  outstanding
hereunder  shall  not exceed TWO MILLION AND 00/100 DOLLARS ($2,000,000), and no
Advance  shall  be made after December 4, 2005 (the "Maturity Date"). The amount
and  date  of each Advance shall be entered by the Holder into Holder's records,
which  records shall be conclusive evidence of the subject matter thereof absent
manifest  error.

               Capitalized  terms  used herein without definition shall have the
meanings  ascribed  to such terms in the Purchase and Security Agreement between
the  Borrower  and  the Holder dated the date hereof (the "PURCHASE AGREEMENT").

               The  following  terms  shall  apply  to  this  Note:


                                    ARTICLE I

                                    INTEREST

               1.1  INTEREST  RATE.  Interest payable on the Advances made under
this  Note shall accrue at the Contract Rate, but in no event shall be less than
an  annual  rate  of 7%, and be payable in arrears commencing one month from the
date  hereof  and  on  the first business day of each consecutive calendar month
thereafter,  and on the Maturity Date, accelerated or otherwise, due and payable
as  described  below.
                                        1
<PAGE>

               1.2 PAYMENT GRACE PERIOD. The Borrower shall have a three (3) day
grace  period to pay any monetary amounts due under this Note, after which grace
period a default interest rate of five percent (5%) per annum above the Contract
Rate  hereunder  shall  apply  to  the  amounts  owed  hereunder.


                                   ARTICLE II

                               ADVANCES UNDER NOTE

               2.1  AUTHORIZED  PERSON.

               (a)  Any  officer  of  the Borrower who has been disclosed to the
Holder  in  writing  as  an authorized officer for such purposes (an "AUTHORIZED
PERSON")  may  request  an  Advance  on any day other than a Saturday, Sunday or
other  day  when commercial banks located in New York, New York are not open for
commercial banking business.  Such request shall be made in writing delivered to
the  Holder  by  not  later than 12:00 p.m. on the day of the requested Advance.

               (b)  The  Borrower  hereby authorizes the Holder to rely upon the
written  instructions  of  any  person  identifying  himself  or  herself  as an
Authorized  Person  and  upon  any  signature  which  the  Holder believes to be
genuine,  and  the Borrower shall be bound thereby in the same manner as if such
person  were  authorized  or  such  signature  were  genuine.

               2.2  LIMITATION  ON ADVANCES. It is expressly understood that the
Holder  is  under  no  obligation to make any Advance to the Borrower under this
Note (whether by reason of any provision hereof or otherwise) (i) if an Event of
Default, as hereinafter defined, has occurred and is continuing, or (ii) if such
Advance  or  any  part  thereof would cause the aggregate amount of all Advances
made  hereunder  to  exceed  the  Collateral  Availability.

                                   ARTICLE III

                                CONVERSION RIGHTS


               3.1.  CONVERSION  INTO  THE  BORROWER'S  COMMON  STOCK.

               (a)  To  the  extent  that Advances have been made hereunder, the
Holder  shall  have  the  right, but not the obligation, from and after the date
hereof,  and  then  at  any  time  until  the Maturity Date, to convert up to an
aggregate  of  no greater than $600,000 of the principal portion of the Advances
made hereunder and/or interest due and payable into fully paid and nonassessable
shares  of  common  stock of Data Systems & Software Inc. ("DSSI") as such stock
exists  on  the date of issuance of this Note, or any shares of capital stock of
DSSI  into  which  such  stock  shall  hereafter be changed or reclassified (the
"COMMON  STOCK")  at  the  Fixed Conversion Price as defined below. In the event
that  the  Holder  elects  to convert this Note into Common Stock (to the extent
permitted  herein),  the Holder shall give notice of such election by delivering

                                        2
<PAGE>
an  executed and completed notice of conversion ("NOTICE OF CONVERSION") to DSSI
and  such Notice of Conversion shall provide a breakdown in reasonable detail of
the  amount  of  Note  principal, interest and fees that are being converted. On
each  Conversion Date (as hereinafter defined) and in accordance with its Notice
of  Conversion, the Holder shall make the appropriate reduction to the Advances,
interest  and  fees  as  entered in its records and shall provide written notice
thereof  to  the Borrower within 2 business days after the Conversion Date. Each
date  on  which  a  Notice  of  Conversion is delivered or telecopied to DSSI in
accordance  with  the  provisions  hereof shall be deemed a Conversion Date (the
"CONVERSION  DATE").  A form of Notice of Conversion that may be employed by the
Holder  is  annexed  hereto  as Exhibit A. DSSI will cause the transfer agent to
transmit  the  certificates representing the shares of the Common Stock issuable
upon  conversion  of  the  Note  to  the  Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within four (4) business
days  after  receipt  by DSSI of the Notice of Conversion (the "DELIVERY DATE").
The  Holder  shall  include in the Notice of Conversion all information required
for crediting the account of the Holder's designated broker at DTC through DWAC,
including,  but  not  limited  to,  the name of the broker, and the broker's DTC
number  and  account  numberThe  Holder  undertakes that all sales of the Common
Stock by DWAC will be in compliance with the prospectus delivery requirements of
the  Securities  Act  and  will  direct  its  broker  to  do  the  same.

               In  the  case  of the exercise of the conversion rights set forth
herein  the  conversion privilege shall be deemed to have been exercised and the
shares  of  Common  Stock  issuable upon such conversion shall be deemed to have
been  issued  upon  the date of receipt by DSSI of the Notice of Conversion. The
Holder  shall  be  treated  for all purposes as the record holder of such Common
Stock,  unless  the  Holder  provides DSSI written instructions to the contrary.

               (b)  Subject  to adjustment as provided in Section 3.1(e) hereof,
the  Conversion  Price  per share shall be $1.50 (the "FIXED CONVERSION PRICE.")
If  after  the  Default  Notice  Period  (as defined below) the Borrower has not
repaid  in  full  the  amounts then due hereunder or cured the Event of Default,
then  the  Conversion  Price shall be reduced and shall be equal to the lower of
(i)  the Fixed Conversion Price; or (ii) seventy percent (70%) of the average of
the three lowest closing prices for the Common Stock on NASD OTC Bulletin Board,
NASDAQ  SmallCap Market, NASDAQ National Market System, American Stock Exchange,
or  New  York  Stock  Exchange  (whichever  of  the foregoing is at the time the
principal  trading  exchange  or  market  for  the  Common Stock, the "PRINCIPAL
MARKET"),  or on any securities exchange or other securities market on which the
Common  Stock  is  then being listed or traded, for the thirty (30) trading days
prior  to  but  not  including  the  Conversion  Date.

               (c)  Notwithstanding  anything  contained herein to the contrary,
the  Holder  shall not be entitled to convert pursuant to the terms of this Note
an  amount  that would be convertible into that number of shares of Common Stock
which  would  exceed  the  difference between (i) the number of shares of Common
Stock  beneficially  owned  by such holder or issuable upon exercise of warrants
held by such holder and 4.99% of the outstanding shares of Common Stock of DSSI.
For  the  purposes  of  the immediately preceding sentence, beneficial ownership
shall  be  determined  in  accordance with Section 13(d) of the Exchange Act and
Regulation  13d-3  thereunder.  The  Holder  may  void the conversion limitation
described  in this section upon 75 days prior notice to DSSI or upon an Event of
Default  hereunder.

                                        3
<PAGE>

               (d)  DSSI  understands that a delay in the delivery of the shares
of  Common  Stock  in  the  form  required  pursuant  to this Article beyond the
Delivery  Date  could  result  in economic loss to the Holder. In the event that
DSSI fails to direct its transfer agent to deliver the shares of Common Stock to
the Holder via the DWAC system within the time frame set forth in Section 3.1(a)
above  and  such  shares  of Common Stock are not delivered to the Holder by the
Delivery  Date,  as compensation to the Holder for such loss, DSSI agrees to pay
late  payments  to  the  Holder for late issuance of the such shares in the form
required  pursuant  to this Article 4 upon conversion of the Note, in the amount
equal  to  the  greater  of (i) $500 per business day after the Delivery Date or
(ii)  the  Borrower's  actual damages from such delayed delivery. DSSI shall pay
any  payments  incurred  under  this Section in immediately available funds upon
demand  and,  in  the  case  of  actual  damages,  accompanied  by  reasonable
documentation  of  the  amount  of  such  damages.

               (e)  The  Conversion Price and number and kind of shares or other
securities to be issued upon conversion shall be subject to adjustment from time
to time upon the happening of certain events while this conversion right remains
outstanding, as follows, subject, in each case to the Adjustment Cap (as defined
below):

                    A.  Merger,  Sale  of  Assets,  etc.  DSSI at any time shall
consolidate  with  or  merge into or sell or convey all or substantially all its
assets  to  any other corporation, this Note, as to the unpaid principal portion
thereof  and  accrued  interest thereon subject to a limitation of $600,000 less
amounts  of  principal  and interest (i) previously converted by the Holder into
Common  Stock  and (ii) deemed converted into shares of Common Stock pursuant to
Sections  3.1(e)(A)  and  (B) hereof (the "Adjustment Cap"), shall thereafter be
deemed to evidence the right to purchase such number and kind of shares or other
securities  and property as would have been issuable or distributable on account
of  such  consolidation, merger, sale or conveyance, upon or with respect to the
number  of  shares  of  Common  Stock the Holder could have acquired immediately
prior  to  such  consolidation,  merger,  sale  or conveyance based on the Fixed
Conversion  Price  and  subject  to  the  Adjustment  Cap as of the closing date
thereof.  The  foregoing  provision  shall  similarly  apply  to  successive
transactions  of  a  similar  nature by any such successor or purchaser. Without
limiting  the  generality of the foregoing, the provisions of this Section shall
apply  to  such  securities  of  such  successor  or  purchaser  after  any such
consolidation,  merger,  sale  or  conveyance.

                    B.  Reclassification,  etc.  If  DSSI  at any time shall, by
reclassification  or  otherwise,  change  the  Common  Stock  into the same or a
different  number  of  securities  of any class or classes, this Note, as to the
unpaid  principal  portion  thereof  and  accrued  interest  thereon  up  to the
Adjustment  Cap, shall thereafter be deemed to evidence the right to purchase an
adjusted  number  of  such  securities and kind of securities as would have been
issuable  as  the  result of such change with respect to the number of shares of
Common  Stock  into which the Note would have been convertible immediately prior
to  such  reclassification  or  other  change  at the Fixed Conversion Price and
subject to the Adjustment Cap as of the effective date for such reclassification
or  change.

                    C.  Stock  Splits, Combinations and Dividends. If the shares
of  Common  Stock are subdivided or combined into a greater or smaller number of
shares  of  Common Stock, or if a dividend is paid on the Common Stock in shares
of  Common Stock, the Fixed Conversion Price shall be proportionately reduced in
case  of subdivision of shares or stock dividend or proportionately increased in
the  case  of  combination  of  shares, in each such case by the ratio which the

                                        4
<PAGE>

total  number of shares of Common Stock outstanding immediately after such event
bears  to  the  total  number  of shares of Common Stock outstanding immediately
prior  to  such  event.

                    D.  Share  Issuance.  Subject  to  the  provisions  of  this
Section, if DSSI at any time shall issue any shares of Common Stock prior to the
conversion  of  the  portion  of  the  principal amount of the Note permitted by
Section  3.1(a) (otherwise than as: (i) provided in Sections 3.1(e)A, 3.1(e)B or
3.1(e)C or this subparagraph D; or (ii) pursuant to warrants or options that may
be  granted  in  the  future  under  any  option  plan  of  the Borrower, or any
employment  agreement,  joint  venture,  credit,  leasing  or  other  financing
agreement  or any joint venture or other strategic arrangement, in each case now
or  hereinafter  entered  into  by the Borrower, (iii) pursuant to any agreement
entered  into  by  the Company or any of its subsidiaries for the acquisition of
another  business  (whether  by  stock  purchase  or  asset  purchase, merger or
otherwise;  ((i),  (ii)  and  (iii)  above,  are  hereinafter referred to as the
"EXCLUDED  ISSUANCES")) for a consideration less than the Fixed Conversion Price
that  would  be  in  effect  at  the  time  of  such issue, then, and thereafter
successively  upon  each such issue, the Fixed Conversion Price shall be reduced
as  follows:  (i)  the  number of shares of Common Stock outstanding immediately
prior  to such issue shall be multiplied by the Fixed Conversion Price in effect
at  the  time  of  such  issue  and  the product shall be added to the aggregate
consideration,  if any, received by DSSI upon such issue of additional shares of
Common  Stock;  and  (ii)  the sum so obtained shall be divided by the number of
shares  of  Common Stock outstanding immediately after such issue. The resulting
quotient  shall  be the adjusted Fixed Conversion Price. Except for the Excluded
Issuances  for purposes of this adjustment, the issuance of any security of DSSI
carrying  the  right  to convert such security into shares of Common Stock or of
any  warrant,  right  or  option  to  purchase  Common  Stock shall result in an
adjustment  to  the Conversion Price upon the issuance of shares of Common Stock
upon  exercise  of  such  conversion  or  purchase  rights.

               (f)  During  the  period  the  conversion right exists, DSSI will
reserve  from  its  authorized  and unissued Common Stock a sufficient number of
shares  to  provide for the issuance of Common Stock upon the conversion of this
Note  to  the  extent  permitted  by  Section  3.1(a). DSSI represents that upon
issuance,  such  shares  will  be  duly  and  validly  issued,  fully  paid  and
non-assessable.  DSSI  agrees  that  the  Borrower's issuance of this Note shall
constitute  full  authority  to DSSI's officers, agents, and transfer agents who
are charged with the duty of executing and issuing stock certificates to execute
and  issue  the  necessary  certificates  for  shares  of  Common Stock upon the
conversion  of  this  Note.

               3.3  REGISTRATION  RIGHTS.  The  Holder  has  been  granted
registration  rights  with  respect  to the shares of Common Stock issuable upon
conversion  of  this  Note  as  more  fully  set  forth in a Registration Rights
Agreement  dated  the  date  hereof  (the  "REGISTRATION  RIGHTS  AGREEMENT.")

               3.4  SALES  LIMITATION. During the six month period commencing on
the date hereof, the Holder shall not sell or otherwise dispose of, on a monthly
basis, the number of shares Common Stock issued upon the conversion of this Note
that  exceeds  25%  of  the average daily trading volume of the shares of Common
Stock on the Principal Market for such month (as determined on a rolling basis).

                                   ARTICLE IV

                                EVENT OF DEFAULT

                                        5
<PAGE>
               If  an  Event of Default occurs and is continuing, the Holder may
make  all  sums  of  principal, accrued but unpaid interests and other fees then
remaining  unpaid hereon and all other amounts payable hereunder due and payable
within  10  days  of  written  notice  from  the  Holder  to  the Borrower (each
occurrence  being  a "DEFAULT NOTICE PERIOD") of an Event of Default (as defined
below).  If  during  the  Default Notice Period, the Borrower cures the Event of
Default, the Event of Default will no longer exist and any rights the Holder had
pertaining  to  the  Event  of  Default  will  no  longer  exist.

               The  occurrence  of  any  of  the following events is an Event of
Default  ("EVENT  OF  DEFAULT"):

               4.1  FAILURE  TO  PAY  PRINCIPAL,  INTEREST  OR  OTHER  FEES. The
Borrower  fails  to  pay  any  installment  of principal, interest or other fees
hereon  or  on  any  other  promissory  note  issued  pursuant  to  the Purchase
Agreement,  Registration  Rights  Agreement  and  this  Note  when  due.

               4.2  FAILURE  TO DELIVER COMMON STOCK OR REPLACEMENT NOTE. DSSI's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required  by  this  Note.

               4.3  DEFAULT  UNDER RELATED AGREEMENT. An Event of Default occurs
under  and  as  defined  in  the Purchase Agreement, dated as of the date hereof
between  Borrower  and  Holder,  as  such agreement may be amended, modified and
supplemented  from  time  to  time.

               4.4  NON-REGISTRATION  EVENT.  An  Event,  as  defined  in  the
Registration  Rights  Agreement shall have occurred and be continuing; provided,
however,  that the Company shall have thirty (30) days to cure an Event pursuant
to  Section  2(b)(ii)  of  the  Registration  Rights  Agreement.


               If  an  Event of Default occurs and is continuing, the Holder may
make all sums of principal, interest and other fees then remaining unpaid hereon
and all other amounts payable hereunder immediately due and payable, all without
demand,  presentment  or  notice,  or  grace  period,  all  of  which hereby are
expressly  waived.  In the event of an acceleration, the amount due and owing to
the  Holder  shall be 130% of the outstanding principal amount of the Note (plus
accrued  and  unpaid  interest  and  fees, if any). The remedies under this Note
shall  be  cumulative.


                                    ARTICLE V

                                  MISCELLANEOUS

               5.1  FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part  of  the  Holder  hereof  in  the exercise of any power, right or privilege
hereunder  shall  operate  as  a waiver thereof, nor shall any single or partial
exercise  of  any  such  power,  right  or  privilege  preclude other or further
exercise  thereof  or  of  any  other  right, power or privilege. All rights and
remedies  existing hereunder are cumulative to, and not exclusive of, any rights
or  remedies  otherwise  available.

                                        6
<PAGE>

               5.2  NOTICES. Any notice herein required or permitted to be given
shall  be  in  writing  and shall be deemed effectively given: (a) upon personal
delivery to the party notified, (b) when sent by confirmed telex or facsimile if
sent  during  normal  business  hours of the recipient, if not, then on the next
business  day,  (c)  five days after having been sent by registered or certified
mail,  return  receipt  requested, postage prepaid, or (d) one day after deposit
with  a  nationally  recognized overnight courier, specifying next day delivery,
with  written  verification  of receipt. All communications shall be sent to (i)
the  Borrower  at the address as set forth on the signature page to the Purchase
Agreement  executed  in  connection herewith and, as the case may be, to DSSI at
the  address  as set forth in Section 6(g) of the Registration Rights Agreement,
in each case, with a copy to Sheldon Krause, Esq., Ehrenreich Eilenberg & Krause
LLP,  11  East 44th Street, New York, NY 10017, facsimile number (212) 986-2399,
and  (ii)  the  Holder  at  the  address  set forth on the signature page to the
Purchase  Agreement  for such Holder, with a copy to Daniel M. Laifer, Esq., 152
West  57th  Street,  4th Floor, New York, New York 10019, facsimile number (212)
541-4434,  or  at  such  other  address  as the Borrower, DSSI or the Holder may
designate  by  ten  days advance written notice to the other parties hereto made
and  delivered  in  accordance  with  this  Section  5.2.

               5.3  AMENDMENT  PROVISION.  The  term  "Note"  and  all reference
thereto,  as  used  throughout  this  instrument,  shall mean this instrument as
originally  executed, or if later amended or supplemented, then as so amended or
supplemented.

               5.4  ASSIGNABILITY.  This  Note (except for Article III) shall be
binding upon the Borrower and its successors and assigns, and shall inure to the
benefit of the Holder and its successors and assigns, and may be assigned by the
Holder.  Article  III and Article V of this Note (excluding Section 5.6 and 5.7)
shall  be  binding  upon  DSSI  and  its  successors  and  assigns.

               5.5  GOVERNING  LAW. 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. Any action brought by either party against the
other  concerning  the  transactions  contemplated  by  this  Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the  state of New York; provided, however that the Purchaser may choose to waive
this  provision  and bring an action outside the state of New York. Both parties
and  the  individual  signing  this Note on behalf of the Borrower, DSSI and the
Holder  agree to submit to the jurisdiction of such courts. 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  Note  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 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  unenforceability of any other provision of this Note.

               5.6 MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish  or  require  the  payment  of  a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest  required  to  be  paid  or  other charges hereunder exceed the maximum
permitted  by such law, any payments in excess of such maximum shall be credited
against  amounts  owed  by  the  Borrower to the Holder and thus refunded to the
Borrower.

               5.7 SECURITY INTEREST. The holder of this Note has been granted a
security  interest in certain assets of the Borrower more fully described in the
Purchase  Agreement.

                                        7
<PAGE>

               5.8  CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Note 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 Note to favor any party
against  the  other.

                                        8
<PAGE>

IN  WITNESS WHEREOF, each Borrower has caused this Note to be signed in its name
effective  as  of  this     4th  day  of  December,  2002.


                                    COMVERGE  TECHNOLOGIES,  INC.


                                    By:--------------------------------


                                    LAURUS  MASTER  FUND,  LTD.


                                    By:--------------------------------





                                    AS  TO  ARTICLES  III  AND  V  ONLY:

                                    DATA  SYSTEMS  &  SOFTWARE  INC.


                                    By:--------------------------------


                                    AS  TO  SECTION  3.4  ONLY

                                    LAURUS  MASTER  FUND,  LTD.

                                    By:--------------------------------


                                        9
<PAGE>
                              NOTICE OF CONVERSION
                              --------------------

(To be executed by the Holder in order to convert the Note)


     The  undersigned  hereby  elects to convert $-------- of the principal and
$-------- of the interest due on the Note issued by COMVERGE TECHNOLOGIES, INC.
on  December  --,  2002  into Shares of Common Stock of DATA SYSTEMS & SOFTWARE
INC.  (the  "Company") according to the conditions set forth in such Note, as of
the  date  written  below.



Date  of Conversion:----------------------------------------------------------

Conversion Price:-------------------------------------------------------------


Shares  To  Be Delivered:-----------------------------------------------------

DTC Number:-------------------------------------------------------------------

Account Number:---------------------------------------------------------------

Signature:--------------------------------------------------------------------


Print Name:-------------------------------------------------------------------


Address:----------------------------------------------------------------------
        ----------------------------------------------------------------------

                                       10

<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>doc4.txt
<TEXT>




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.

                                        1
<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

                                        2
<PAGE>
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

                                        3
<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

                                        4
<PAGE>

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

                                        5
<PAGE>

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

                                        6
<PAGE>

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]

                                        7
<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:


______________________________

                                        8
<PAGE>
                                                       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)

                                        9
<PAGE>
                                              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>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>doc5.txt
<TEXT>


                          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>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>doc6.txt
<TEXT>


     The  Company  is  required  to  pay  all  fees and expenses incident to the
registration  of  the  shares.  The  Company has agreed to indemnify the selling
stockholders  against certain losses, claims, damages and liabilities, including
liabilities  under  the  Securities  Act.

                                       16

<PAGE>

                                    GUARANTY
                                   (Corporate)

New  York,  New  York
                                                              December  4,  2002


     FOR  VALUE RECEIVED, and in consideration of investments made or to be made
or  credit  otherwise  extended  or  to  be extended by Laurus Master Fund, Ltd.
("Laurus")  to or for the account of Comverge Technologies, Inc. ("Debtor") from
time  to  time  and  at  any time pursuant to that certain Purchase and Security
Agreement,  dated as of the date hereof (the "Purchase Agreement") and for other
good  and  valuable  consideration  and  to  induce Laurus to make such loans or
extensions of credit and to make or grant such renewals, extensions, releases of
collateral or relinquishments of legal rights as Laurus may deem advisable or as
required by the Purchase Agreement or the Note, the undersigned (the "Guarantor"
or  "the  undersigned")  unconditionally  guaranties  to Laurus, its successors,
endorsees  and  assigns  the prompt payment when due (whether by acceleration or
otherwise)  of all present and future obligations and liabilities of any and all
kinds  of Debtor to Laurus under the Note (as defined in the Purchase Agreement)
and  of  all  instruments  of  any  nature  evidencing  or  relating to any such
obligations  and  liabilities under the Note  upon which Debtor is or may become
liable to Laurus, whether secured or unsecured, absolute or contingent, joint or
several,  or  arising  under  the  Note  or  under any documents, instruments or
agreements relating to or executed in connection with the Note or any documents,
instruments  or  agreements referred to therein (together with the Note, as each
may  be  amended,  modified,  restated  or  supplemented  from time to time, the
"Documents"),  or otherwise (all of which are herein collectively referred to as
the "Obligations"), and irrespective of the genuineness, validity, regularity or
enforceability  of of any instrument evidencing any of the Obligations or of any
collateral  therefor  or  of  the  existence  or  extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any or all of the
Obligations  in  any  case commenced by or against Debtor under Title 11, United
States  Code,  including,  without  limitation,  obligations  or indebtedness of
Debtor  for  post-petition  interest,  fees,  costs  and charges that would have
accrued  or been added to the Obligations but for the commencement of such case.
In  furtherance  of  the  foregoing,  the  undersigned hereby agrees as follows:

     1.     NO IMPAIRMENT.  Laurus may at any time and from time to time, either
before  or  after  the maturity thereof, without notice to or further consent of
the  undersigned,  extend  the  time  of  payment  of, exchange or surrender any
collateral  for,  renew or extend any of the Obligations or increase or decrease
the  interest  rate thereon, and may also make any agreement with Debtor or with
any  other  party  to  or person liable on any of the Obligations, or interested
therein,  for  the extension, renewal, payment, compromise, discharge or release
thereof, in whole or in part, or for any modification of the terms thereof or of
any  agreement  between  Laurus and Debtor or any such other party or person, or
make  any  election  of rights Laurus may deem desirable under the United States
Bankruptcy  Code,  as  amended,  or  any  other  federal  or  state  bankruptcy,
reorganization,  moratorium  or  insolvency  law  relating  to  or affecting the
enforcement of creditors' rights generally (any of the foregoing, an "Insolvency
Law")  without in any way impairing or affecting this Guaranty.  This instrument
shall  be  effective  regardless  of  the  subsequent  incorporation,  merger or
consolidation  of Debtor, or any change in the composition, nature, personnel or
location of Debtor and shall extend to any successor entity to Debtor, including
a  debtor  in  possession  or  the  like  under  any  Insolvency  Law.

<PAGE>

     2.     GUARANTY  ABSOLUTE.  The undersigned guarantees that the Obligations
will  be paid strictly in accordance with the terms of the Note and/or any other
document,  instrument  or  agreement  creating  or  evidencing  the Obligations,
regardless  of  any  law,  regulation or order now or hereafter in effect in any
jurisdiction  affecting  any  of such terms or the rights of Debtor with respect
thereto.  Guarantor  hereby knowingly accepts the full range of risk encompassed
within  a  contract of "continuing guaranty" which risk includes the possibility
that  Debtor  will  contract  additional indebtedness for which Guarantor may be
liable hereunder after Debtor's financial condition or ability to pay its lawful
debts  when  they  fall due has deteriorated, whether or not Debtor has properly
authorized incurring such additional indebtedness.  The undersigned acknowledges
that  any  extension  of  credit  to  the Debtor shall be governed solely by the
provisions  of  the  Documents.  The  liability  of  the  undersigned under this
Guaranty  shall be absolute and unconditional, in accordance with its terms, and
shall  remain  in  full  force  and  effect  without regard to, and shall not be
released,  suspended,  discharged,  terminated  by  (to  the extent permitted by
law):  (a) any waiver, indulgence, renewal, extension, amendment or modification
of or addition, consent or supplement to or deletion from or any other action or
inaction  under  or  in  respect  of  the  Documents or any other instruments or
agreements  relating  to  the  Obligations  or any assignment or transfer of any
thereof,  (b)  any  lack  of  validity  or enforceability of any Document or any
assignment  or  transfer  of  any  thereof, (c) any furnishing of any additional
security  to Laurus or its assignees or any acceptance thereof or any release of
any  security  by Laurus or its assignees, (d) any assignment or transfer of any
thereof  or any invalidity or unenforceability, in whole or in part, of any such
Document,  instrument  or  agreement  or  any  term thereof, (e) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other  like  proceeding  relating to Debtor, or any action taken with respect to
this  Guaranty  by  any  trustee  or  receiver,  or  by  any  court, in any such
proceeding, whether or not the undersigned shall have notice or knowledge of any
of  the foregoing, (f) any exchange, release or nonperfection of any collateral,
or  any  release,  or  amendment  or  waiver of or consent to departure from any
security,  for all or any of the Obligations or (g) any other circumstance which
would  otherwise  constitute  a  defense  available  to,  or a discharge of, the
undersigned.  Obligations  include post-petition interest whether or not allowed
or  allowable.

     3.     WAIVERS.  (a)     This  Guaranty is a guaranty of payment and not of
collection  or  performance.  Laurus  shall  be under no obligation to institute
suit, exercise rights or remedies or take any other action against Debtor or any
other  person  liable  with  respect  to any of the Obligations or resort to any
collateral  security  held by it to secure any of the Obligations as a condition
precedent  to  the  undersigned  being obligated to perform as agreed herein and
Guarantor  hereby  waives  any  and  all  rights which it may have by statute or
otherwise  which  would  require  Laurus  to do any of the foregoing.  Guarantor
further  consents and agrees that Laurus shall be under no obligation to marshal
any  assets in favor of Guarantor, or against or in payment of any or all of the
Obligations.  The  undersigned  hereby  waives  all  suretyship defenses and any
rights  to  interpose  any  defense,  counterclaim  or  offset of any nature and
description  which the undersigned may have or which may exist between and among
Laurus,  Debtor  and/or  the  undersigned  with  respect  to  the  undersigned's
obligations  under  this  Guaranty, or which Debtor may assert on the underlying
debt, including but not limited to failure of consideration, breach of warranty,
fraud, payment (other than cash payment in full of the Obliga-tions), statute of
frauds,  bankruptcy,  infancy,  statute of limitations, accord and satisfaction,
and  usury.

               (b)  The  undersigned further waives (i) notice of the acceptance
of  this  Guaranty, of the making of any such loans or extensions of credit, and
of all notices and demands of any kind to which the undersigned may be entitled,
including,  without  limitation,  notice of adverse change in Debtor's financial
condition  or  of any other fact which might materially increase the risk of the

                                        2
<PAGE>
undersigned  and  (ii)  presentment  to  or demand of payment from Debtor or the
Guarantor, protest, notices of presentment, non-payment or protest and notice of
any  sale  of  collateral  security  or  any  default  of  any  sort.

               (c)  Notwithstanding  any  payment  or  payments  made  by  the
undersigned  hereunder, or any setoff or application of funds of the undersigned
made by Laurus, the undersigned shall not be entitled to be subrogated to any of
the  rights  of  Laurus against Debtor or against any collateral or guarantee or
right of offset held by Laurus for the payment of the Obligations, nor shall the
undersigned  seek  or be entitled to seek any contribution or reimbursement from
Debtor  in  respect  of  payments  made  by the undersigned hereunder, until all
amounts owing to Laurus by Debtor on account of the Obligations are paid in full
and  the  Documents have been terminated. If, notwithstanding the foregoing, any
amount paid to the undersigned on account of such subrogation rights at any time
when  all  of the Obligations shall not have been paid in full and the Documents
shall  not have been terminated, such amount shall be held by the undersigned in
trust  for  Laurus,  segregated  from  other funds of the undersigned, and shall
forthwith  upon,  and  in any event within three (3) business days of receipt by
the  undersigned,  be  turned  over  to Laurus in the exact form received by the
undersigned  (duly  endorsed  by  the undersigned to Laurus, if required), to be
applied  against the Obligations, whether matured or unmatured, in such order as
Laurus  may  determine,  subject to the provisions of the Documents. Any and all
present and future debts and obligations of Debtor to the undersigned are hereby
waived  and  postponed  in  favor  of,  and subordinated to the full payment and
performance  of,  all  Obligations  of  Debtor  to  Laurus.

     4.     REPRESENTATIONS  AND  WARRANTIES.  The undersigned hereby represents
and  warrants  (all  of which representations and warranties shall survive until
all  Obligations  are  satisfied in full and the Documents have been irrevocably
terminated),  that:

               (a)  CORPORATE  STATUS.  The  undersigned  is  a corporation duly
          organized, validly existing and in good standing under the laws of the
          State of Delaware and has full power, authority and legal right to own
          its  property  and  assets and to transact the business in which it is
          engaged,  except  where  such failure does not have a material adverse
          effect  on the business, operations, assets or condition, financial or
          otherwise,  of  the  undersigned  ("Material  Adverse  Effect").

               (b)  AUTHORITY  AND  EXECUTION.  The  undersigned has full power,
          authority  and  legal right to execute and deliver, and to perform its
          obligations under, this Guaranty and has taken all necessary corporate
          and  legal action to authorize the execution, delivery and performance
          of  this  Guaranty.

               (c) LEGAL, VALID AND BINDING CHARACTER. This Guaranty constitutes
          the legal, valid and binding obligation of the undersigned enforceable
          in  accordance with its terms, except as enforceability may be limited
          by  applicable  Insolvency  Law.

               (d)  VIOLATIONS.  The execution, delivery and performance of this
          Guaranty will not violate, in any material respect, any requirement of
          law  applicable to the undersigned or any material contract, agreement
          or  instrument  to  which  the  undersigned is a party or by which the
          undersigned  or  any property of the undersigned is bound or result in
          the  creation or imposition of any mortgage, lien or other encumbrance
          other  than  to  Laurus  on  any  of  the  property  or  assets of the
          undersigned  pursuant  to  the  provisions  of  any  of the foregoing.

                                        3
<PAGE>
               (e)  CONSENTS  OR  APPROVALS.  No  consent of any other person or
          entity  (including,  without  limitation,  any  creditor  of  the
          undersigned)  and  no  consent,  license,  permit,  approval  or
          authorization  of, exemption by, notice or report to, or registration,
          filing  or declaration with, any governmental authority is required in
          connection  with  the  execution,  delivery,  performance, validity or
          enforceability  of  this  Guaranty.

               (f)  LITIGATION.  No  litigation,  arbitration,  investigation or
          administrative  proceeding  of  or  before  any  court,  arbitrator or
          governmental  authority,  bureau or agency is currently pending or, to
          the  best knowledge of the undersigned, threatened (i) with respect to
          this Guaranty or any of the transactions contemplated by this Guaranty
          or  (ii)  against  or affecting the undersigned, or any of property or
          assets  of the undersigned, which, if adversely determined, would have
          a  Material  Adverse  Effect.

               (g)  FINANCIAL BENEFIT. The undersigned has derived or expects to
          derive  a  financial  or  other  advantage  from  each and every loan,
          advance  or  extension  of  credit  made  under the Documents or other
          Obligation  incurred  by  Debtor  to  Laurus.

     5.     ACCELERATION.  (a)     If  the undersigned should at any time become
insolvent,  or  make  a  general  assignment, or if a proceeding in or under any
Insolvency  Law  shall  be  filed  or  commenced  by,  or  in  respect  of,  the
undersigned,  or if a notice of any lien, levy, or assessment is filed of record
with respect to any assets of the undersigned by the United States of America or
any  department,  agency,  or  instrumentality thereof, or if any taxes or debts
owing  at  any  time  or  times  hereafter  to any one of them becomes a lien or
encumbrance  upon  any  assets  of  the  undersigned  in Laurus's possession, or
otherwise,  except  if  any  such  lien or encumbrances does not have a Material
Adverse  Effect,  any and all Obligations shall for purposes hereof, at Laurus's
option,  be  deemed due and payable without notice notwithstanding that any such
Obligation  is  not  then  due  and  payable  by  Debtor.

               (b) The undersigned will promptly notify Laurus of any default by
the undersigned in the performance or observance of any term or condition of any
agreement  to  which the undersigned is a party if the effect of such default is
to  cause, or permit the holder of any obligation under such agreement to cause,
such obligation to become due prior to its stated maturity and, if such an event
occurs  except  for  any  such  defaults  that  does not have a Material Adverse
Effect,  Laurus shall have the right to accelerate the undersigned's obligations
hereunder.

     6.     COSTS.  The  undersigned  shall  pay  on demand, all costs, fees and
expenses  (including  expenses  for  legal  services  of every kind) relating or
incidental  to  the enforcement or protection of the rights of Laurus hereunder.

     7.     NO TERMINATION.  This is a continuing irrevocable guaranty and shall
remain  in  full  force  and effect and be binding upon the undersigned, and the
undersigned's  successors  and  assigns,  until all of the Obligations have been
paid  in  full and the Documents have been terminated.  If any of the present or
future  Obligations  are  guarantied by persons, partnerships or corporations in
addition to the undersigned, the death, release or discharge in whole or in part
or  the  bankruptcy,  merger,  consolidation,  incorporation,  liquidation  or
dissolution of one or more of them shall not discharge or affect the liabilities
of  the  undersigned  under  this  Guaranty.

     8.     RECAPTURE.  Anything  in  this  Guaranty  to  the  contrary
notwithstanding,  if  Laurus  receives any payment or payments on account of the
liabilities guaranteed hereby, which payment or payments or any part thereof are

                                        4
<PAGE>
subsequently  invalidated,  declared to be fraudulent or preferential, set aside
and/or  required  to  be repaid to a trustee, receiver, or any other party under
any  Insolvency Law, common law or equitable doctrine, then to the extent of any
sum  not  finally  retained  by  Laurus, the undersigned's obligations to Laurus
shall  be reinstated and this Guaranty shall remain in full force and effect (or
be reinstated) until payment shall have been made to Laurus, which payment shall
be  due  on  demand.

     9.     BOOKS  AND  RECORDS.  The  books  and  records of Laurus showing the
account  between Laurus and Debtor shall be admissible in evidence in any action
or  proceeding,  shall  be  binding  upon  the  undersigned  for  the purpose of
establishing  the items therein set forth and shall constitute prima facie proof
thereof.

     10.     NO  WAIVER.  No  failure  on the part of Laurus to exercise, and no
delay  in  exercising,  any  right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Laurus of any right,
remedy  or  power  hereunder  preclude any other or future exercise of any other
legal  right,  remedy  or  power.  Each and every right, remedy and power hereby
granted  to  Laurus  or allowed it by law or other agreement shall be cumulative
and  not  exclusive of any other, and may be exercised by Laurus at any time and
from  time  to  time.

     11.     WAIVER  OF  JURY  TRIAL.  THE  UNDERSIGNED  DOES  HEREBY KNOWINGLY,
             -----------------------
VOLUNTARILY  AND INTENTIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING  BASED ON OR WITH RESPECT TO THIS GUARANTY OR ANY OF THE TRANSACTIONS
CONTEMPLATED  HEREBY  OR  RELATING  OR  INCIDENTAL HERETO.  THE UNDERSIGNED DOES
HEREBY  CERTIFY  THAT  NO  REPRESENTATIVE  OR  AGENT  OF LAURUS HAS REPRESENTED,
EXPRESSLY  OR OTHERWISE, THAT LAURUS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO  ENFORCE  THIS  WAIVER  OF  RIGHT  TO  JURY  TRIAL  PROVISION.

     12.     GOVERNING LAW; JURISDICTION; AMENDMENTS.  THIS INSTRUMENT CANNOT BE
             ---------------------------------------
CHANGED  OR  TERMINATED ORALLY, AND SHALL BE GOVERNED, CONSTRUED AND INTERPRETED
AS  TO  VALIDITY,  ENFORCEMENT  AND IN ALL OTHER RESPECTS IN ACCORDANCE WITH THE
LAWS  OF  THE  STATE  OF  NEW  YORK.  THE  UNDERSIGNED EXPRESSLY CONSENTS TO THE
JURISDICTION  AND VENUE OF THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF
NEW  YORK,  AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW  YORK  FOR  ALL PURPOSES IN CONNECTION HEREWITH.  ANY JUDICIAL PROCEEDING BY
THE  UNDERSIGNED  AGAINST LAURUS INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR
CLAIM  IN  ANY  WAY  ARISING  OUT  OF, RELATED TO OR CONNECTED HEREWITH SHALL BE
BROUGHT  ONLY  IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK
OR  THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.  THE
UNDERSIGNED  FURTHER  CONSENTS  THAT  ANY  SUMMONS, SUBPOENA OR OTHER PROCESS OR
PAPERS (INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION
TO  EITHER  OF  THE  AFOREMENTIONED  COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN
CONNECTION  WITH  ANY  PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF
THE  STATE  OF  NEW  YORK  OR THE SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR
CERTIFIED  MAIL,  RETURN  RECEIPT  REQUESTED,  OR BY PERSONAL SERVICE PROVIDED A
REASONABLE  TIME  FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE
PERMISSIBLE  UNDER  THE  RULES  OF  SAID  COURTS.  THE  UNDERSIGNED  WAIVES  ANY

                                        5
<PAGE>
OBJECTION  TO  JURISDICTION  AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL
NOT  ASSERT  ANY  DEFENSE  BASED  ON LACK OF JURISDICTION OR VENUE OR BASED UPON
FORUM  NON  CONVENIENS.
- -----  ---  ----------

     13.     SEVERABILITY.  To  the  extent  permitted  by  applicable  law, any
provision  of  this  Guaranty  which  is  prohibited  or  unenforceable  in  any
jurisdiction  shall,  as  to  such jurisdiction, be ineffective to the extent of
such  prohibition  or  unenforceability  without  invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or  unenforceability  in  any
jurisdiction  shall not invalidate or render unenforceable such provision in any
other  jurisdiction.

     14.     AMENDMENTS,  WAIVERS.  No  amendment  or waiver of any provision of
this Guaranty nor consent to any departure by the undersigned therefrom shall in
any  event  be  effective  unless  the  same shall be in writing executed by the
undersigned  and  Laurus.

     15.     NOTICE.  All  notices,  requests  and  demands  to  or  upon  the
undersigned,  shall be in writing and shall be deemed to have been duly given or
made  (a)  when  delivered,  if  by  hand,  (b) three (3) days after being sent,
postage  prepaid,  if  by  registered  or  certified mail, (c) when transmission
confirmed  electronically  or  by  a transaction report, if by facsimile, or (d)
when  delivered,  if by a reputable overnight delivery service in each event, to
the  numbers  and/or address set forth beneath the signature of the undersigned,
with  a copy to Sheldon Krause, Esq., Ehrenreich Eilenberg & Krause LLP, 11 East
44th  Street,  17th  Floor,  New  York,  NY  10017,  facsimile:  212-986-2399.

     16.     SUCCESSORS.  Laurus  may,  from time to time, without notice to the
undersigned,  sell,  assign, transfer or otherwise dispose of all or any part of
the  Obligations  and/or  rights  under  this  Guaranty.  Without  limiting  the
generality  of the foregoing, Laurus may assign, or grant participations to, one
or  more  banks, financial institutions or other entities all or any part of any
of  the  Obligations.  In  each  such event, Laurus, its Affiliates and each and
every  immediate and successive purchaser, assignee, transferee or holder of all
or any part of the Obligations shall have the right to enforce this Guaranty, by
legal  action  or  otherwise, for its own benefit as fully as if such purchaser,
assignee,  transferee  or  holder  were  herein  by name specifically given such
right.  Laurus  shall  have an unimpaired right to enforce this Guaranty for its
benefit  with  respect  to  that portion of the Obligations which Laurus has not
disposed  of,  sold,  assigned,  or  otherwise  transferred.

     17.     RELEASE.  Nothing  except  the  termination of this Guaranty as set
forth  in  Section  8  hereof shall release the undersigned from liability under
this  Guaranty.

                                        6
<PAGE>

     IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned this
 4TH day  of  December,  2002.


                                    DATA  SYSTEMS  &  SOFTWARE  INC.


                                    By:_________________________________________
                                    Name:  George  Morgenstern
                                    Title: President and Chief Executive Officer

                                    Address:     200  Route  17  South
                                                 Mahwah,  New  Jersey  07430
                                    Facsimile  No.:  201-529-3163


                                        7
















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</DOCUMENT>
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