Edgar Filing: ID SYSTEMS INC

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No.____)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]

Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12

I.D. SYSTEMS, INC.
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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

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I.D. SYSTEMS, INC.

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Notice of Annual Meeting
and
Proxy Statement

Friday, June 17, 2005
at 10:00 a.m.
At the offices of Lowenstein Sandler P.C.
1251 Avenue of the Americas, 18th Floor
New York, New York 10020

I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601

May 6, 2005

Dear Stockholder:

On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Meeting of Stockholders of I.D. Systems, Inc. (the
"Company") to be held on Friday, June 17, 2005, at 10:00 a.m. Eastern Daylight
Time, at the offices of the Company's counsel, Lowenstein Sandler P.C., located
at 1251 Avenue of the Americas, 18th Floor, New York, New York 10020.

The Notice of Annual Meeting of Stockholders and Proxy Statement
accompanying this letter describe the specific matters to be acted upon.

In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity for questions of
general interest to the stockholders.

It is important that your shares be represented at the meeting. Whether or
not you plan to attend in person, you are requested to vote, sign, date and
promptly return the enclosed proxy in the self-addressed envelope provided.

Thank you for your continued interest in I.D. Systems, Inc.

Sincerely,

/s/ Jeffrey M. Jagid
--------------------
Jeffrey M. Jagid
Chief Executive Officer

I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD JUNE 17, 2005

To the Stockholders of I.D. Systems, Inc.:

Notice is hereby given that the Annual Meeting of Stockholders of I.D.
Systems, Inc. (the "Company") will be held at the offices of the Company's
counsel, Lowenstein Sandler P.C., located at 1251 Avenue of the Americas, 18th
Floor, New York, New York 10020, on Friday, June 17, 2005, at 10:00 a.m. Eastern
Daylight Time, and thereafter as it may be postponed or adjourned from time to
time, for the following purposes:

1. To elect five (5) Directors, the names of whom are set forth on the
accompanying proxy statement, to serve until the next annual meeting
of stockholders and until their successors are duly elected and
qualified;

2. To adopt the Amended and Restated Stock Option Plan which is being
amended and restated to include restricted stock and restricted unit
awards;

3. To ratify the appointment of Eisner LLP as independent auditors of
the Company for 2005; and

4. To transact such other business as may properly come before the
Annual Meeting or at any adjournment or postponement thereof.

Only stockholders of record at the close of business on April 25, 2005,
are entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.

Whether you expect to attend the Annual Meeting or not, please vote, sign,
date and return the enclosed proxy card in the self-addressed envelope provided
as promptly as possible. If you attend the Annual Meeting, you may vote your
shares in person, even though you have previously signed and returned your
proxy.

By order of the Board of Directors,

/s/ Ned Mavrommatis
-------------------
Ned Mavrommatis
Secretary

Dated: May 6, 2005

I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601

May 6, 2005

Proxy Statement

GENERAL INFORMATION
-------------------

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of I.D. Systems, Inc., a Delaware corporation
(the "Company"), to be used at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the offices of the Company's counsel, Lowenstein Sandler
P.C., located at 1251 Avenue of the Americas, 18th Floor, New York, New York
10020, on Friday, June 17, 2005, at 10:00 a.m. Eastern Daylight Time, and any
adjournments or postponements thereof.

The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees, and fiduciaries for the out-of-pocket and
clerical expenses of transmitting copies of the proxy material to the beneficial
owners of shares held of record by such persons will be borne by the Company.
The Company does not intend to solicit proxies otherwise than by mail, but
certain officers and regular employees of the Company, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies. The Board of Directors has set April 25, 2005, as the record
date (the "Record Date") to determine those holders of record of common stock,
par value $.01 ("Common Stock") who are entitled to notice of, and to vote at
the Annual Meeting. On or about May 6, 2005, the Company's 2004 Annual Report,
including financial statements, this Proxy Statement and the proxy card (the
"Proxy Card" or "Proxy") are being mailed to stockholders of record as of the
close of business on the Record Date.

A stockholder signing and returning a proxy on the enclosed form has the
power to revoke it at any time before the shares subject to such proxy are voted
by notifying the Secretary of the Company in writing. If a stockholder specifies
how the proxy is to be voted with respect to any of the proposals for which a
choice is provided, the proxy will be voted in accordance with such
instructions. If a stockholder fails to so specify with respect to such
proposals, the proxy will be voted FOR Proposals No. 1, No. 2 and No. 3.

At least ten days before the Annual Meeting, the Company will make a
complete list of the stockholders entitled to vote at the meeting open to the
examination of any stockholder for any purpose germane to the Annual Meeting.
The list will be open for inspection during ordinary business hours at our
offices at One University Plaza, Hackensack, New Jersey 07601, and will also be
made available to stockholders present at the Annual Meeting.

Outstanding Voting Securities

Only stockholders of record at the close of business on the Record Date
are entitled to vote at the Annual Meeting. As of the close of business on the
Record Date, there were 7,667,591 shares of Common Stock outstanding. The
holders of record of Common Stock on the Record Date will be entitled to one
vote per share on each matter presented to the holders of Common Stock at the
Annual Meeting. The presence at the meeting, in person or by proxy, of the
holders of a majority of the total outstanding shares of Common Stock is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting.

If a quorum is present, in person or by proxy, all elections for Directors
shall be decided by a plurality of the votes cast in respect thereof. The
adoption of all other proposals will require the affirmative vote of a majority
of the shares present, either in person or by proxy, and entitled to vote with
respect to such proposals.

If no voting direction is indicated on the proxy cards, the shares will be
considered votes for the nominees. In accordance with Delaware law, stockholders
entitled to vote for the election of Directors can withhold authority to vote
for all nominees for Directors or can withhold authority to vote for certain
nominees for Directors.

Abstentions may be specified on all proposals submitted to a stockholder
vote other than the election of Directors. Abstentions will be counted as
present for purposes of determining the existence of a quorum regarding the
proposal on which the abstention is noted. Abstentions on the Company's proposal
to adopt the Company's Amended and Restated Stock Option Plan and to ratify the
appointment of the independent auditors will have a negative effect on the
outcome of such proposal.

Brokers holding shares of the Company's Common Stock in street name who do
not receive instructions are entitled to vote on the election of Directors and
the ratification of the appointment of the independent auditors. Under
applicable Delaware law, "broker non-votes" (where a broker submits a proxy but
does not have authority to vote a customer's shares on such proposal) on any
non-routine proposal would not be considered entitled to vote on that proposal
and will, therefore, have no legal effect on the vote of that particular matter.
Broker non-votes, however, will be counted as present for purposes of
determining the existence of a quorum.

Holders of Common Stock will not have any dissenters' rights of appraisal
in connection with any of the matters to be voted on at the Annual Meeting, and
there are no cumulative voting rights with respect to such matters.

How You Can Vote

You may vote your shares by signing the enclosed proxy or voting
instruction card and returning it in a timely manner. Please mark the
appropriate boxes on the card and sign, date and return the card promptly. A
postage-paid return envelope is enclosed for your convenience.

Stockholders' Proposals for Next Annual Meeting

SEC regulations permit stockholders to submit proposals for consideration
at annual meetings of stockholders. Any such proposals for the Company's 2005
Annual Meeting of Stockholders (to be held in 2006) must be submitted to the
Company on or before January 6, 2006, and must comply with applicable
regulations of the SEC in order to be included in proxy materials relating to
that meeting. Stockholder proposals submitted outside the SEC proxy rule
requirements must be received by the Company's Secretary in a timely fashion. To
be timely, such notice and information regarding the proposal and the
stockholder must be delivered to or mailed and received by the Company's
Secretary at its principal executive offices, One University Plaza, Hackensack,
New Jersey 07601, not less than 60 days nor more than 90 days prior to the first
anniversary of the annual meeting of stockholders for the previous year;
provided, however, that in the event that no annual meeting was held in the
immediately preceding year or the date of such annual meeting is more than 30
days prior to or more than 60 days after such anniversary date, a timely notice
by the stockholder must be delivered not earlier than the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which the
date of such meeting is first publicly announced.

Execution of the accompanying proxy card will not affect a stockholder's
right to attend the Annual Meeting and vote in person. Any stockholder giving a
proxy has the right to revoke it by giving written notice of revocation to the
Secretary of the Company at any time before the proxy is voted or by attendance
at the Annual Meeting and electing to vote in person.

Proposal No. 1.

Election of Five Directors

Five (5) directors will be elected at the Annual Meeting to serve for a
term of one year, until the next Annual Meeting and until their successors have
been duly elected and have qualified. If any nominee is unable to serve, which
the Board of Directors has no reason to expect, the persons named in the
accompanying proxy intend to vote for the balance of those named and, if they
deem it advisable, for a substitute nominee. The five (5) nominees for election
as directors to serve until the next Annual Meeting are Jeffrey M. Jagid,
Kenneth S. Ehrman, Lawrence Burstein, Michael Monaco and Beatrice Yormark.

Directors, Executive Officers and Key Employees of the Company

Set forth below are the names of the directors, executive officers and key
employees of the Company as of April 30, 2005.

Name Age Title
--------------------------- ---------- -----------------------------------------
Jeffrey M. Jagid 36 Chairman and Chief Executive Officer
Kenneth S. Ehrman 35 President, Chief Operating Officer and
Director
Ned Mavrommatis 34 Chief Financial Officer, Treasurer and
Corporate Secretary
Frederick F. (Rick) Muntz 52 Executive Vice President of Sales,
Marketing and Customer Satisfaction
Michael L. Ehrman 32 Executive Vice President of Engineering
Lawrence Burstein(1)(2)(3) 62 Independent Director
Michael Monaco (1)(2)(3) 57 Independent Director
Beatrice Yormark (1)(2)(3) 60 Independent Director

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(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Nominating Committee

Executive officers of the Company are appointed at the discretion of the
Board of Directors with no fixed term. The only family relationships between or
among any of the executive officers or directors of the Company are as follows:
(i) the relationship between Mr. Kenneth S. Ehrman and Mr. Michael L. Ehrman
(who are brothers), and (ii) the relationship between Ms. Beatrice Yormark and
Mr. Jeffrey M. Jagid (Ms. Yormark is Mr. Jagid's aunt).

The biographies of each of the five (5) director nominees of the Company
and the executive officers and key employees of the Company are set forth below.

Jeffrey M. Jagid, 36, has been Chairman of the Board since June 2001 and
Chief Executive Officer of the Company since June 2000. Prior thereto, he served
as the Company's Chief Operating Officer. Since he joined the Company in 1995,
Mr. Jagid has served as a Director of the Company as well as its General
Counsel. Mr. Jagid received a Bachelor of Business Administration from Emory
University in 1991 and a Juris Doctor degree from the Benjamin N. Cardozo School
of Law in 1994. Prior to joining the Company, Mr. Jagid was a corporate
litigation associate at the law firm of Tannenbaum Helpern Syracuse &
Hirschtritt LLP, in New York City. He is a member of the Bar of the States of
New York and New Jersey. Mr. Jagid is also a director of Coining Technologies,
Inc.

Kenneth S. Ehrman, 35, is a founder of the Company and has been its Chief
Operating Officer since June 2000. Mr. Ehrman has been President and a Director
of the Company since inception in 1993. He graduated from Stanford University in
1991 with a Bachelor of Science in Industrial Engineering. Upon his graduation,
and until the inception of the Company, Mr. Ehrman worked as a production
manager with Echelon Corporation. Mr. Ehrman is the brother of Michael L.
Ehrman, the Company's Executive Vice President of Engineering.

Ned Mavrommatis, 34, has served as the Chief Financial Officer since
joining the Company in August 1999, as Treasurer since June 2001 and as
Corporate Secretary since November 2003. Prior to joining the Company, he was a
Senior Manager at the accounting firm of Eisner LLP. Mr. Mavrommatis received a
Master of Business Administration in finance from New York University's Leonard
Stern School of Business and a Bachelor of Business Administration in accounting
from Bernard M. Baruch College, The City University of New York. Mr. Mavrommatis
is also a Certified Public Accountant.

Frederick F. (Rick) Muntz, 52, has served as the Executive Vice President
of Sales, Marketing and Customer Satisfaction since he joined the Company in
January 2003. Prior to joining the Company, he was Vice President of the
Americas for InVision Technologies. Mr. Muntz managed the introduction of
Explosives Detection Systems (EDS) in Canada, South America and the United
States Federal Aviation Administration and the newly formed Transportation
Security Administration. Mr. Muntz has a successful 25 year track record of
introducing and growing new technology products in a wide variety of markets. In
medical markets, Mr. Muntz was responsible for the commercialization of Magnetic
Resonance Imaging with Technicare, a subsidiary of Johnson & Johnson. Mr. Muntz
received a Bachelor of Arts degree in Government and Law from Lafayette College.

Michael L. Ehrman, 32, has served as the Company's Executive Vice
President of Engineering since August 1999. Prior to that, he served as its
Executive Vice President of Software Development since he joined the Company in
1995. Mr. Ehrman graduated from Stanford University in 1994 with a Master of
Science in Engineering - Economics Systems as well as a Bachelor of Science in
Computer Systems Engineering. Upon his graduation in 1994, Mr. Ehrman was
employed as a Consultant for Andersen Consulting in New York. Mr. Ehrman is the
brother of Kenneth S. Ehrman, the Company's Chief Operating Officer.

Lawrence Burstein, 62, has served as a Director of the Company since June
1999. Since March 1996, Mr. Burstein has served as President and a director of
Unity Venture Capital Associates, Ltd., a private investment company. From
January 1982 to March 1996, Mr. Burstein was Chairman of the Board and a
principal stockholder of Trinity Capital Corporation, a private investment
company. Mr. Burstein is also a director of THQ, Inc., CAS Medical Systems,
Inc., Traffix, Inc., Medical Nutrition, USA, Inc. and Trinity Partners
Acquisition Company Inc. Mr. Burstein received a Bachelor of Arts in Economics
from the University of Wisconsin and a Bachelor of Law from Columbia Law School.

Michael Monaco, 57, has served as a Director of the Company since June
2001. Mr. Monaco is a Senior Managing Director at Conway DelGenio Gries & Co.,
LLC, a New York based firm specializing in restructurings, mergers and
acquisitions and crisis and turnaround management. He served as Chairman and
Chief Executive Officer of Accelerator, LLC, a provider of outsource services
from 2000 to 2001. He served as a Vice Chairman of Cendant Corporation from 1996
to 2000 and as Chief Executive Officer of the Direct Marketing Division of
Cendant from 1998 to 2000. Mr. Monaco served as the Executive Vice President and
Chief Financial Officer of the American Express Company from 1990 to 1996. Mr.
Monaco is a Director of Washington Group International, Inc. Mr. Monaco received
a Bachelor of Science degree in Accounting from Villanova University and a
Master of Business Administration degree from Fairleigh Dickinson University.
Mr. Monaco is also a Certified Public Accountant.

Beatrice Yormark, 60, has served as a director of the Company since June
2001. Ms. Yormark is the President and Chief Operating Officer of Echelon
Corporation, a leader in networking every day devices. Ms. Yormark has been with
Echelon since 1990. Prior to becoming the President and Chief Operating Officer
in September 2001, she held the position of Vice President of Worldwide
Marketing and Sales. Before joining Echelon, she was the Chief Operating Officer
of Connect, Inc., an on-line information services company. Before joining
Connect, Ms. Yormark held a variety of positions, including executive director
of systems engineering for Telaction Corporation, director in the role of
partner at Coopers & Lybrand, vice president of sales at INTERACTIVE Systems
Corporation, and various staff positions at the Rand Corporation. Ms. Yormark
spent one-year teaching computer science at Purdue University, following the
completion of her MS degree in computer science. In addition to her graduate
degree, Ms. Yormark has a BS degree in mathematics from City College of New
York. Ms. Yormark is the aunt of Mr. Jeffrey M. Jagid, the Company's Chairman
and Chief Executive Officer.

The Board of Directors of the Company recommends a vote FOR the slate of
director nominees. The vote of a plurality of shares, present in person or
represented by proxy at the Annual Meeting and entitled to vote, is required to
elect each of the Directors.

BOARD AND COMMITTEE MEETINGS

The Board of Directors is responsible for the management and direction of
the Company and for establishing broad corporate policies. Members of the Board
of Directors are kept informed of the Company's business through various
documents and reports provided by the Chief Executive Officer and other
corporate officers, and by participating in Board of Directors and committee
meetings. Each Director has access to all books, records and reports of the
Company, and members of management are available at all times to answer their
questions. The Board of Directors held four meetings during 2004. No Director
attended fewer than 75% of the board meetings. The Board of Directors has a
standing Compensation Committee, a standing Audit Committee and a standing
Nominating Committee. The Company recently adopted a policy of encouraging, but
not requiring, its Board members to attend annual meetings of stockholders. Last
year all the board members attended the annual meeting of stockholders.

Compensation Committee

The Compensation Committee sets policies that govern executives' annual
compensation and long-term incentives, reviews management performance,
development and compensation, determines option grants and administers the
Company's incentive plans. The Compensation Committee is composed of Messrs.
Burstein, Monaco and Ms. Yormark, and all its are independent as defined in Rule
4200(a)(15) of the National Association of Securities Dealers' Marketplace Rules
and under the SEC's Rule 10A-3. The Compensation Committee held two meetings
during 2004 and through several unanimous written consents authorized stock
option grants to employees. The Compensation Committee meetings were attended by
all of the members.

In February 2005, the Compensation Committee approved and implemented an
Executive Compensation Plan for 2005. The plan includes a performance bonus,
which gives each executive the opportunity to earn 100% of his salary as a bonus
based on the Company's financial performance and the achievement of revenue
goals with a specific customer. The Company's financial performance accounts for
80% of the bonus and the two metrics are revenue and net income. The achievement
of revenue goals with a specific customer accounts for 20% of the bonus.

Audit Committee

The following disclosure about the Company's audit committee does not
constitute soliciting material and shall not be deemed filed or incorporated by
reference into any of the Company's other filings under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates the report by reference therein.

The Company's Audit Committee was established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934. During 2004, the Audit
Committee was composed of Messrs. Burstein, Monaco and Ms. Yormark. The Audit
Committee held five meetings during 2004. The Audit Committee meetings were
attended by all the members with the exception of one meeting, which Ms. Yormark
could not attend.

All of the Audit Committee members are "independent directors" pursuant to
the definition contained in Rule 4200(a)(15) of the National Association of
Securities Dealers' Marketplace Rules and under the SEC's Rule 10A-3. None of
the Audit Committee members is a current officer or employee of the Company or
any of its affiliates.

The Company's Board of Directors has determined that it has at least one
audit committee financial expert serving on its audit committee. Mr. Monaco
serves as the audit committee financial expert.

The Board of Directors has adopted a written charter for the audit
committee, which is publicly available on the Company's website at
www.id-systems.com. The charter has been approved and adopted by the Board of
Directors and is reviewed and reassessed annually by the Audit Committee. The
charter sets forth the responsibilities, authority and specific duties of the
Audit Committee. The charter specifies, among other things, the structure and
membership requirements of the Audit Committee, as well as the relationship of
the Audit Committee to the Company's independent auditors and management.

In accordance with its written charter, the Audit Committee assists the
Board in monitoring (1) the integrity of the Company's financial reporting
process including its internal controls regarding financial reporting, (2) the
compliance by the Company with legal and regulatory requirements, (3) the
independence and performance of the Company's internal and external auditors and
(4) an avenue of communication among the independent auditors, management and
the Board of Directors.

Audit Committee Report

The Audit Committee has reviewed the audited financial statements of the
Company for the year ended December 31, 2004 with management and Eisner LLP, the
Company's independent auditors.

The Audit Committee has discussed and reviewed with Eisner LLP all the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). It has also received the written
disclosures and the letter from Eisner LLP required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and has
discussed with Eisner LLP their independence.

Based on this review and discussions, the Audit Committee recommended to
the Board of Directors that the Company's audited financial statements be
included in its Annual Report on Form 10-KSB for the fiscal year ended December
31, 2004, for filing with the Securities and Exchange Commission.

The Audit Committee
Lawrence Burstein
Michael Monaco
Beatrice Yormark

Nominating Committee

The Nominating Committee was formed in March 2004 and is composed of
Messrs. Burstein and Monaco and Ms. Yormark. All members of the Nominating
Committee are independent as defined in Rule 4200(a)(15) of the National
Association of Securities Dealers' Marketplace Rules and under the SEC's Rule
10A-3.

The Board of Directors has adopted a Nominating Committee charter to
govern its Nominating Committee, which is publicly available on the Company's
website at www.id-systems.com. The Nominating Committee's charter authorizes the
committee to develop certain procedures and guidelines addressing certain
nominating matters, such as procedures for considering nominations made by
stockholders, minimum qualifications for nominees and identification and
evaluation of candidates for the Board, and the Nominating Committee has adopted
procedures addressing the foregoing.

Procedures for Considering Nominations Made by Stockholders. The
Nominating Committee has adopted guidelines regarding procedures for nominations
to be submitted by stockholders and other third-parties, other than candidates
who have previously served on the Board of Directors or who are recommended by
the Board of Directors. These guidelines provide that a nomination must be
delivered to the Secretary of the Company at the principal executive offices of
the Company not later than the close of business on the 90th day nor earlier
than the close of business on the 120th day prior to the first anniversary of
the preceding year's annual meeting; provided, however, that if the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice to be timely must be so delivered not earlier than the
close of business on the 120th day prior to such annual meeting and not later
than the close of business on the later of the 90th day prior to such annual
meeting or the close of business on the 10th day following the day on which
public announcement of the date of such meeting is first made by the Company.
The public announcement of an adjournment or postponement of an annual meeting
will not commence a new time period (or extend any time period) for the giving
of a notice as described above. The guidelines require a nomination notice to
set forth as to each person whom the proponent proposes to nominate for election
as a director: (a) all information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected), and (b) information that will enable the
Nominating Committee to determine whether the candidate or candidates satisfy
the criteria established pursuant to the charter for director candidates.

Qualifications. The Nominating Committee has adopted guidelines describing
the minimum qualifications for nominees and the qualities or skills that are
necessary for directors to possess. Each nominee:

o must satisfy any legal requirements applicable to members of the
Board of Directors;
o must have business or professional experience that will enable such
nominee to provide useful input to the Board of Directors in its
deliberations;
o must have a reputation, in one or more of the communities serviced
by the Company and its affiliates, for honesty and ethical conduct;
o must have a working knowledge of the types of responsibilities
expected of members of the board of directors of a public company;
and
o must have experience, either as a member of the board of directors
of another public or private company or in another capacity, that
demonstrates the nominee's capacity to serve in a fiduciary
position.

Identification and Evaluation of Candidates for the Board. Candidates to
serve on the Board of Directors will be identified from all available sources,
including recommendations made by stockholders. The Nominating Committee's
charter provides that there will be no differences in the manner in which the
Nominating Committee evaluates nominees recommended by stockholders and nominees
recommended by the Committee or management, except that no specific process
shall be mandated with respect to the nomination of any individuals who have
previously served on the Board. The evaluation process for individuals other
than existing Board members will include:

o a review of the information provided to the Nominating Committee by
the proponent;
o a review of reference letters from at least two sources determined
to be reputable by the Nominating Committee; and
o a personal interview of the candidate, together with a review of
such other information as the Nominating Committee shall determine
to be relevant.

Third Party Recommendations. In connection with the Annual Meeting, the
Nominating Committee did not receive any nominations from any stockholder or
group of stockholders which owned more than 5% of the Company's Common Stock for
at least one year.

Process for Sending Communications to the Board of Directors

The Board of Directors has established a procedure that enables
stockholders to communicate in writing with members of the Board of Directors.
Any such communication should be addressed to the Company's Secretary and should
be sent to such individual c/o One University Plaza, Hackensack, New Jersey
07601. Any such communication must state, in a conspicuous manner, that it is
intended for distribution to the entire Board of Directors. Under the procedures
established by the Board of Directors, upon the Secretary's receipt of such a
communication, the Company's Secretary will send a copy of such communication to
each member of the Board of Directors, identifying it as a communication
received from a stockholder. Absent unusual circumstances, at the next regularly
scheduled meeting of the Board of Directors held more than two days after such
communication has been distributed, the Board of Directors will consider the
substance of any such communication.

OWNERSHIP OF SHARES

The following table sets forth information with respect to the beneficial
ownership of shares of common stock as of March 31, 2005:

o each person or entity who is known by the Company to beneficially
own five percent or more of the common stock;
o each director and executive officer of the Company; and
o all directors and executive officers of the Company as a group.

Name of Beneficial Owner(1) Number of Shares Percentage(2)
-------------------------------------- ------------------------ ----------------

Jeffrey M. Jagid 595,875(3) 7.42%

Kenneth S. Ehrman 626,313(4) 7.94%

Michael L. Ehrman 424,650(5) 5.29%

Ned Mavrommatis 72,000(6) *

Frederick F. (Rick) Muntz 171,300(7) 2.21%

Lawrence Burstein 59,064(8) *

Michael Monaco 44,048(9) *

Beatrice Yormark 46,176(10) *

Martin Rosansky 517,027(11) 7.29%

N. Bert Loosmore 421,547(12) 5.95%

CQ Capital, LLC and E. Turner Baur 439,910(13) 5.73%

All Directors and Executive Officers 2,039,426(14) 23.17%
as a group (8 persons)

--------------------
* Less than one percent

(1) Unless otherwise indicated, the address for each named individual or group
is c/o I.D. Systems, Inc., One University Plaza, 6th Floor, Hackensack, NJ
07601.

(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of common stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days upon the exercise of options, warrants or convertible securities
(in any case, the "Currently Exercisable Options"). Each beneficial
owner's percentage ownership is determined by assuming that the Currently
Exercisable Options that are held by such person (but not those held by
any other person) have been exercised and converted.

(3) Includes 320,625 shares of common stock issuable upon exercise of
Currently Exercisable Options granted to Mr. Jagid, pursuant to the
Company's 1995 Employee Stock Option Plan and 1999 Stock Option Plan.

(4) Includes 184,750 shares of common stock issuable upon exercise of
Currently Exercisable Options granted to Mr. Ehrman pursuant to the
Company's 1995 Employee Stock Option Plan and 1999 Stock Option Plan.

(5) Includes 312,625 shares of common stock issuable upon exercise of
Currently Exercisable Options granted to Mr. Ehrman pursuant to the
Company's 1995 Employee Stock Option Plan and 1999 Stock Option Plan.

(6) Includes 72,000 shares of common stock issuable upon exercise of Currently
Exercisable Options to Mr. Mavrommatis pursuant to the Company's 1999
Stock Option Plan.

(7) Includes 16,000 shares held in a trust for Mr. Muntz's nieces and nephews
of which Mr. Muntz is the trustee. Also includes 10,300 shares held in
custodial accounts for his children and 3,000 shares owned of record by
his wife. Mr. Muntz currently exercises all voting and dispositive power
with regard to such shares. Includes 60,000 shares of common stock
issuable upon exercise of Currently Exercisable Options to Mr. Muntz
pursuant to the Company's 1999 Stock Option Plan.

(8) Includes 55,564 shares of common stock issuable upon exercise of Currently
Exercisable Options granted to Mr. Burstein pursuant to the Company's 1999
Director Option Plan.

(9) Includes 44,048 shares of common stock issuable upon exercise of Currently
Exercisable Options granted to Mr. Monaco pursuant to the Company's 1999
Stock Option Plan and its 1999 Director Option Plan.

(10) Includes 43,884 shares of common stock issuable upon exercise of Currently
Exercisable Options granted to Ms. Yormark pursuant to the Company's 1999
Director Option Plan.

(11) The address of the reporting person is 495 McKinley Drive, Sarasota,
Florida 34236. The foregoing information is derived from a Schedule 13G
filed on behalf of Mr. Rosansky on February 10, 2004.

(12) The address of the reporting person is 5950 6th Avenue South, Suite 212,
Seattle, WA 98108. The foregoing information is derived from a Schedule
13G filed on behalf of Mr. Loosmore on February 19, 2004.

(13) Includes (i) 369,226 shares held by CQ Capital, L.L.C. and beneficially
owned by E. Turner Baur and (ii) 70,684 shares beneficially owned by E.
Turner Baur. The address of the business office of each of the reporting
persons is 65 Locust Avenue, Second Floor, New Canaan, Connecticut 06840.
The foregoing information is derived from a Schedule 13G/A filed on behalf
of CQ Capital L.L.C. and E. Turner Baur on February 11, 2005.

(14) Includes 1,093,496 shares of common stock issuable upon exercise of
Currently Exercisable Options granted to such individuals pursuant to the
Company's 1995 Employee Stock Option Plan, 1999 Stock Option Plan and 1999
Directors Option Plan.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued, for the
fiscal years ended December 31, 2004, 2003 and 2002, for the Company's Chief
Executive Officer and four most highly compensated executive officers other than
its Chief Executive Officer, whose salary and bonus were in excess of $100,000
(the "Named Officers") who were employed by the Company on December 31, 2004.

Summary Compensation Table
--------------------------

Long-Term
Annual Compensation Compensation
---------------------------------- -------------------------

Name and Securities Underlying
Principal Position Year Salary Bonus Options/SARs (#)(1)
---------------------------------- ------------- ---------------- ----------------- -------------------------

Jeffrey M. Jagid 2004 $226,500 $215,175 80,000
Chief Executive Officer 2003 $215,625 $53,668 ---
and General Counsel 2002 $187,500 $59,000 ---

Kenneth S. Ehrman 2004 $200,000 $190,000 70,000
President and Chief Operating 2003 $192,500 $42,350 ---
Officer 2002 $175,000 $55,067 ---

Ned Mavrommatis 2004 $181,000 $171,950 55,000
Chief Financial Officer, Treasurer 2003 $172,500 $43,125 ---
and Corporate Secretary 2002 $150,000 $47,200 ---

Michael L. Ehrman 2004 $175,000 $166,250 55,000
Executive Vice President 2003 $165,000 $48,675 ---
2002 $150,000 $47,200 ---

Frederick F. (Rick) Muntz 2004 $175,000 $166,250 ---
Executive Vice President 2003 $160,416 $53,890 300,000
2002 --- --- ---

--------------------
(1) Represents shares issuable pursuant to stock options granted under the
Company's stock option plans. These options vest 20% per year commencing
on the first anniversary of the date of grant.

Option Grants in 2004

The following table sets forth for the year ended December 31, 2004, those
Named Officers who received stock options to purchase the Company's common
stock:

# of
Securities % of Total Options
Underlying Granted to Exercise Expiration
Name Options(1) Employees in 2004 Price Date
---- ---------- ----------------- ----- ----

Jeffrey Jagid 80,000 12% $6.65 2/6/2014

Kenneth Ehrman 70,000 11% $6.65 2/6/2014

Ned Mavrommatis 55,000 8% $6.65 2/6/2014

Michael Ehrman 55,000 8% $6.65 2/6/2014

--------------------
(1) These options vest 20% per year commencing on the first anniversary of the
date of grant.

Option Exercises in 2004 and Fiscal Year End Option Values

The following table sets forth for the year ended December 31, 2004, those
Named Officers who exercised options to purchase the Company's common stock and
the fiscal year-end value of unexercised options:

Shares
Acquired on Value Number of Securities Value of Unexercised
Name Exercise Realized Underlying Options at Fiscal in-the-money Options at Fiscal
---- -------- -------- Year End Year End
(#) ($) (#) ($)(1)
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------

Jeffrey Jagid 87,500 $937,125 289,625 121,000 $4,500,753 $1,464,995

Kenneth Ehrman 62,500 $346,250 163,250 95,500 $2,538,765 $1,157,748

Ned Mavrommatis 43,000 $345,887 57,000 91,000 $722,502 $1,141,693

Michael L. Ehrman 70,500 $783,255 286,625 94,000 $4,461,953 $1,138,810

Frederick Muntz 60,000 $148,200 0 240,000 0 $3,494,400

--------------------
(1) Based on $18.66 per share, the closing price of the Common Stock, as
reported on the Nasdaq National Market, on December 31, 2004.

Directors' Compensation

The Company reimburses its Directors for reasonable travel expenses
incurred in connection with their activities on behalf of the Company.
Non-employee directors also receive:

o $2,500 per board meeting attended in person;
o $250 per board meeting participated via telephone;
o $5,000 per year for serving on the audit committee; and
o $1,000 per year for serving on the compensation committee.

Non-employee directors are entitled to participate in the Company's 1999
Director Option Plan. A total of 600,000 shares of Common Stock have been
reserved for issuance under such plan. The plan provides for the automatic grant
of 15,000 shares to each non-employee director at the time he or she is first
elected to the Board of Directors and an automatic grant of an option to
purchase 5,000 shares on the first day of each fiscal quarter, if on such date
he or she has served on the board for at least six months. Each option grant
under the plan has a term of 10 years and vests on a cumulative monthly basis
over a four-year period. The exercise price of all options equals the fair
market value of the Common Stock on the date of grant.

Employee directors are entitled to participate in the Company's 1999 Stock
Option Plan. A total of 2,812,500 shares have been reserved for issuance under
the plan. The plan provides for grants of incentive stock options and
non-qualified stock options. Options can be granted under the plan on terms and
at prices as determined by the Board of Directors, or a committee of the Board
of Directors, except that the exercise price of incentive options will not be
less than the fair market value of common stock on the date of grant. In the
case of an incentive stock option granted to a stockholder who owns more than
10% of the total combined voting power of all classes of the Company's stock,
the per share exercise price will not be less than 110% of the fair market value
on the date of grant. The aggregate fair market value, determined on the date of
grant, of the shares covered by incentive stock options granted under the plan
that become exercisable by a grantee for the first time in any calendar year is
subject to a $100,000 limit.

Employment Contracts and Termination of Employment, and Change In Control
Arrangements

None.

Certain Relationships and Related Transactions

None.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3 and 4 and amendments to these forms
furnished to the Company, all parties subject to the reporting requirements of
Section 16(a) of the Exchange Act filed all such required reports during and
with respect to the fiscal year ended December 31, 2004.

Code of Ethics

We have a code of ethics that applies to our Chief Executive Officer and
Chief Financial Officer, and other persons who perform similar functions. A copy
of our Code of Ethics can be found on our website at www.id-systems.com. Our
Code of Ethics is intended to be a codification of the business and ethical
principles which guide us, and to deter wrongdoing, to promote honest and
ethical conduct, to avoid conflicts of interest, and to foster full, fair,
accurate, timely and understandable disclosures, compliance with applicable
governmental laws, rules and regulations, the prompt internal reporting of
violations and accountability for adherence to this Code.

Proposal No. 2.

Adoption of Amended and Restated Stock Option Plan
To Include Restricted Stock and Restricted Unit Awards

In 1999, the Company's Board of Directors and shareholders adopted the
1999 Stock Option Plan of I.D. Systems, Inc. (the "Stock Option Plan"). The
Board continues to believe that the Stock Option Plan enables the Company to
attract and retain qualified directors, officers and employees, to facilitate
performance-based compensation for employees and to provide incentives for the
participants in the Stock Option Plan to enhance the value of the Company's
Common Stock. On April 20, 2005, the Company's Board approved, subject to
shareholder approval, an amendment and restatement of the Stock Option Plan (the
"Amended and Restated Stock Option Plan") to permit the grant of Restricted
Shares (as defined below).

At the Annual Meeting, shareholders will consider the adoption of an
Amended and Restated Stock Option Plan. The Board recommends that the
shareholders approve the adoption of the Amended and Restated Stock Option Plan.
The principal aspects of the Amended and Restated Stock Option Plan are
summarized below. Shareholders are urged to read the full text of the Amended
and Restated Stock Option Plan, which is attached to this proxy statement as
Exhibit A.

Administration

The Stock Option Plan provides that it is administered by the Board of
Directors or any duly created committee appointed by the Board and charged with
the administration of the Stock Option Plan (the "Committee"). The Compensation
Committee of the Board of Directors currently administers the Stock Option Plan
and serves as the Committee.

Eligibility

All directors, officers, employees and consultants of the Company and its
subsidiaries (approximately 55 persons as of December 31, 2004) are eligible to
receive options under the Stock Option Plan. All option grants under the Stock
Option Plan are discretionary, and the Company is unable, at the present time,
to determine the identity or number of directors, officers and other employees
who may be granted options under the Stock Option Plan in the future.

Types of Options and Other Awards

The Committee may designate any option granted under the Stock Option Plan
as either an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended or a nonqualified stock option, or the
Committee may designate a portion of the option as an incentive stock option and
the remaining portion as a nonqualified stock option. Any portion of an option
that is not designated as an incentive stock option will be a nonqualified stock
option.

The Stock Option Plan, as amended and restated, also permits the grant of
restricted stock awards and restricted stock unit awards. A restricted stock
award is a grant of shares of Common Stock, and a restricted stock unit award is
the grant of a right to receive shares of Common Stock in the future, with such
shares of Common Stock ("Restricted Shares") or right to future delivery of such
shares of Common Stock subject to a risk of forfeiture or other restrictions
that will lapse upon the achievement of one or more conditions relating to
completion of service by the participant, or achievement of performance goals or
such other objectives, as established and determined by the Committee.

Restricted Shares granted under the Stock Option Plan may not be sold,
transferred, pledged or otherwise encumbered or disposed of during the
restricted period established by the Committee. The Committee may also impose
additional restrictions on a recipient's right to dispose of or encumber
Restricted Shares.

It is intended that the vesting of Restricted Shares will be based upon
length of service and/or performance goals established by the Committee.

Holders of Restricted Shares that are the subject of restricted stock
awards may exercise the rights of a stockholder, such as the right to vote the
shares and to receive dividends and other distributions, unless otherwise
provided by the Committee. Holders of restricted stock unit awards on the other
hand, do not have any of the rights and privileges of a shareholder until the
Restricted Shares that are the subject of the award are issued.

Exercise Period

The term and exercise conditions of any option granted under the Plan will
be established by the Committee, but in no event may the term of any incentive
stock option exceed ten years (five years in the case of a person who is the
beneficial owner of more than 10% of the combined voting power of the Company's
capital stock) or be granted after May 13, 2009. The Committee may accelerate
the vesting of any option granted under the Stock Option Plan.

Exercise Price

Options granted under the Stock Option Plan will have an exercise or
payment price as established by the Committee, provided that the exercise price
of incentive stock options may not be less than the fair market value of the
underlying shares on the date of grant. However, if incentive stock options are
granted to a person who is the beneficial owner of more than 10% of the combined
voting power of the Company's capital stock, such options shall be granted at a
price of not less than 110% of the fair market value of the shares covered by
the option. If on the date of grant the Common Stock is listed on a stock
exchange or is quoted on the automated quotation system of Nasdaq, the fair
market value shall be the average of the highest and lowest sales prices (or if
such price is unavailable, the average of the highest bid price and the lowest
asked price) on such date. If no such prices are available, the fair market
value shall be determined in good faith by the Committee by any method
consistent with applicable U.S. Treasury regulations relating to stock options.
On April 15, 2005, the average of the highest and lowest sales prices of a share
of the Company's Common Stock on the Nasdaq National Market was $11.20.

Payment

Upon exercise of an option granted under the Stock Option Plan, the
participant will be required to provide the payment price in full in cash or by
certified check or, if permitted by the Committee, in shares of previously
acquired Common Stock having an aggregate fair market value on the date of
exercise equal to the exercise price, or by a combination of checks and shares.
In connection with any exercise of options, the Company will have the right to
collect or withhold from any payments under the Stock Option Plan all taxes
required to be withheld under applicable law.

Transferability

Options and Restricted Shares granted under the Stock Option Plan
generally will be nontransferable, except by will or by the laws of descent and
distribution. During the lifetime of a participant, an option generally may be
exercised only by the participant and after the participant's death only by the
participant's executor, administrator or personal representative.

Termination of Employment

If a participant's relationship with the Company as an employee or a
consultant ceases for cause, then all options shall terminate immediately. In
all other termination circumstances (except death or disability), unless
otherwise provided by the Committee, options may be exercised, to the extent
exercisable on the date of termination, up until 90 days after the date of
termination.

If a participant dies while employed by or while rendering consulting
services to the Company, or within three months after such relationship ends
(unless such relationship was terminated for cause), or within one year
following termination of such relationship by reason of disability, then, unless
otherwise provided by the Committee, the participant's options may be exercised,
to the extent exercisable on the date of death, at any time within one year
after the date of death (but not later than the date the option would otherwise
have expired).

If a participant's relationship with the Company as an employee or a
consultant ceases due to the participant's disability, then, unless otherwise
provided by the Committee, the participant's options may be exercised, to the
extent exercisable on the date of death, at any time within one year after the
effective date of the participant's termination (but not later than the date the
option would otherwise have expired).

Unless otherwise provided by the Committee, any Restricted Shares of a
participant will be forfeited upon termination of employment or service with the
Company if the restrictions applicable to such Restricted Shares had not lapsed
as of the date of such termination.

Amendment and Termination

The Stock Option Plan may be amended or terminated at any time by the
Board of Directors, except that no amendment may be made without shareholder
approval if such amendment would increase the maximum number of shares of Common
Stock available for issuance under the Stock Option Plan, change the eligibility
requirements, or make any other change for which shareholder approval is
required by applicable law. In addition, no termination, suspension or amendment
of the Stock Option Plan may adversely affect the rights of a participant under
an outstanding option or award without the consent of the holder thereof.

Shares Subject to the Plan

A total of 2,812,500 shares of Common Stock (subject to adjustment as
described below) may be issued under the Stock Option Plan. Any shares delivered
pursuant to the Stock Option Plan may be authorized and unissued shares or
treasury shares.

Adjustments

The number of shares of Common Stock available for option and award grants
and the shares covered by options and awards shall be adjusted equitably for
stock splits, stock dividends, recapitalizations, mergers and other changes in
the Company's capital stock. Comparable changes shall be made to the exercise
price of outstanding options. If any option should terminate for any reason
without having been exercised in full, or if any Restricted Shares are
forfeited, the shares subject to such option and such Restricted Shares will
again become available for option and award grants.

Change In Control

The Stock Option Plan provides that all outstanding stock options will
become immediately exercisable, and the restrictions with respect to outstanding
Restricted Shares will lapse, upon the occurrence of a "change in control". The
Stock Option Plan provides in general that a "change in control event" shall be
deemed to have occurred if any of the following events occur: (a) the
consummation of any merger of the Company with any other company unless the
combined voting power of the Company's voting securities outstanding immediately
prior thereto continue to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 70% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; (b) the
consummation of any sale or other disposition of all or substantially all of the
assets of the Company; (c) approval by the shareholders of the Company of a plan
of liquidation of the Company; (d) any action pursuant to which any person or
group (as defined in Sections 3(a)(9) and 13(d) of the Securities Exchange Act
of 1934) shall become the beneficial owner of 20% or more of the Company's
outstanding voting securities; or (e) the individuals who were members of the
Company's Board of Directors on May 14, 1999 (the date on which the Stock Option
Plan was initially adopted by the Board), including any individuals who became
or become directors after that date and whose election or nomination for
election was approved by at least two-thirds of the directors of the Board,
cease to constitute a majority of the members of the Company's Board of
Directors.

Additional Limitation

No participant may receive incentive stock options that first become
exercisable in any calendar year in an amount exceeding $100,000. In addition,
no one person may receive incentive stock options for more than 300,000 shares
of Common Stock in any fiscal year. Under the Stock Option Plan, as amended and
restated, the maximum number of shares of Common Stock with respect to which any
stock options may be granted to any individual during any fiscal year of the
Company is 700,000.

Federal Income Tax Consequences

BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE
APPLICATION OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX
CONSEQUENCES IS GENERAL IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX
MATTERS. PARTICIPANTS ARE ADVISED TO CONSULT THEIR PERSONAL TAX ADVISORS BEFORE
EXERCISING AN OPTION OR DISPOSING OF ANY STOCK RECEIVED PURSUANT TO THE EXERCISE
OF ANY SUCH OPTION. IN ADDITION, THE FOLLOWING SUMMARY IS BASED UPON AN ANALYSIS
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS CURRENTLY IN EFFECT,
EXISTING LAWS, JUDICIAL DECISIONS, ADMINISTRATIVE RULINGS, REGULATIONS AND
PROPOSED REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE.

The Internal Revenue Code of 1986, as amended (the "Code"), treats
incentive stock options and nonqualified stock options differently. A
participant's individual consequences will depend upon the nature of the option
received. However, as to both types of options, no income will be recognized to
the optionee at the time of the grant of an option, nor will the Company be
entitled to a tax deduction at that time.

Upon the exercise of a nonqualified stock option, the optionee will
recognize ordinary income tax on the excess of the fair market value of the
stock on the exercise date over the exercise price, if any. The Company
generally will be entitled to a tax deduction in an amount equal to the ordinary
income recognized by the optionee. If shares acquired upon such exercise are
held for more than one year before disposition, any gain on disposition of such
shares will be treated as long-term capital gain.

An optionee will not recognize any federal income tax in respect of
incentive stock options at the time of exercise. However, the excess of the fair
market value of the stock on the date of exercise over the exercise price will
be taken into account in determining whether the "alternative minimum tax" will
apply for the year of exercise. If the shares acquired upon the exercise are not
disposed of within two years from the date the options were granted nor within
one year after the shares are transferred, any gain or loss upon the sale of
such shares will be treated as long-term capital gain or loss (measured by the
difference between the sales price of the stock and the exercise price). If the
two-year and one-year holding period requirements are not met (a "disqualifying
disposition"), an optionee will recognize ordinary income in the year of
disposition in an amount equal to the lesser of (i) the fair market value of the
stock on the date of exercise minus the exercise price or (ii) the amount
realized on disposition minus the exercise price. The remainder of the gain will
be treated as long-term or short-term capital gain, depending upon whether the
stock has been held for more than one year. If an optionee makes a disqualifying
disposition, the Company will be entitled to a tax deduction equal to the amount
of ordinary income recognized by the optionee.

In general, if an optionee in exercising an option tenders shares of
Common Stock in partial or full payment of the option price, no gain or loss
will be recognized on the tender. However, if the tendered shares were
previously acquired upon the exercise of an incentive stock option and the
tender is within two years from the date the option was granted or one year
after the date of exercise of the other option, the tender will be a
disqualifying disposition of the tendered shares.

As noted above, the exercise of an incentive stock option could subject
the optionee to the alternative minimum tax. The application of the alternative
minimum tax to any particular optionee depends upon the particular facts and
circumstances which exist with respect to the optionee in the year of exercise.
However, as a general rule, the amount by which the fair market value of the
Common Stock on the date of exercise of an option exceeds the exercise price of
the option will constitute an item of "adjustment" for purposes of determining
the alternative minimum tax that may be imposed. As such, this item will enter
into the tax base on which the alternative minimum tax is computed, and may
therefore cause the alternative minimum tax to become applicable in a given
year.

Generally, absent an election to be taxed currently under Section 83(b) of
the Code (a "Section 83(b) Election"), there will be no federal income tax
consequences to either the recipient or the Company upon the grant of Restricted
Shares. At the expiration of the restriction period and the satisfaction of any
other restrictions applicable to the Restricted Shares, the recipient will
recognize ordinary income and the Company generally will be entitled to a
corresponding deduction equal to the fair market value of the Common Stock at
that time. If a Section 83(b) Election is made within 30 days after the date the
Restricted Shares are received, the recipient will recognize an amount of
ordinary income at the time of the receipt of the Restricted Shares, and the
Company generally will be entitled to a corresponding deduction, equal to the
fair market value (determined without regard to applicable restrictions) of the
shares at such time. If a Section 83(b) Election is made, no additional income
will be recognized by the recipient upon the lapse of restrictions on the shares
(and prior to the sale of such shares), but, if the shares are subsequently
forfeited, the recipient may not deduct the income that was recognized pursuant
to the Section 83(b) Election at the time of the receipt of the shares.

Code Section 162(m) denies a deduction to any publicly held corporation
for compensation paid to certain "covered employees" in a taxable year to the
extent that compensation exceeds $1 million for a covered employee. It is
possible that compensation attributable to stock options and award granted in
the future under the 2005 Plan, when combined with all other types of
compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year. Certain kinds of compensation,
including qualified "performance-based compensation," are disregarded for
purposes of the deduction limitation. In accordance with Treasury regulations
issued under Code Section 162(m), compensation attributable to stock options
will qualify as performance-based compensation, provided that: (i) the stock
award plan contains a per-employee limitation on the number of shares for which
stock options may be granted during a specified period; (ii) the per-employee
limitation is approved by the stockholders; (iii) the award is granted by a
compensation committee comprised solely of "outside directors"; and (iv) the
exercise price of the option is no less than the fair market value of the stock
on the date of grant.

Option and Award Grants

The grant of options and awards under the Stock Option Plan is
discretionary, and the Company cannot determine now the number or type of
options and awards to be granted in the future to any particular person or
group.

Since adoption of the Stock Option Plan in May 1999, the following options
have been granted to the following persons and groups under the Stock Option
Plan:

No. of Options
Optionee Granted
-------- -------
Jeffrey Jagid 280,000
Kenneth Ehrman 203,500
Ned Mavrommatis 269,000
Frederick Muntz 330,000
Michael Ehrman 247,000
All Current Executive Officers as a Group 1,329,500
All Current Directors who are not Executive Officers as a Group 16,800
All Employees, Including all Current Officers Who are Not 905,500
Executive Officers, as a Group

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

The following table provides information about the Company's Common Stock
that may be issued upon the exercise of options under the Company's Stock Option
Plan, the 1995 Stock Option Plan and the 1999 Directors Stock Option Plan as of
December 31, 2004. These plans were the Company's only equity compensation plans
in existence as of December 31, 2004. No warrants or rights may be granted, or
are outstanding, under the Stock Option Plan.

(c)
Number Of Securities
(a) (b) Remaining Available For
Number Of Securities To Weighted-Average Exercise Future Issuance Under Equity
Be Issued Upon Exercise Price Of Outstanding Compensation Plans
Of Outstanding Options, Options, Warrants and (Excluding Securities
Plan Category Warrants and Rights Rights Reflected In Column (a)(1))
------------- ------------------- ------ ---------------------------

Equity Compensation Plans
Approved by Shareholders 2,291,000 $5.04 1,366,000

Equity Compensation Plans
Not Approved by Shareholders 0 0 0

TOTAL 2,291,000 $5.04 1,366,000

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

The Board of Directors recommends that the stockholders vote FOR approval
of this proposal. The affirmative vote of the majority of the votes cast at the
Annual Meeting is required for the adoption of the Amended and Restated Stock
Option Plan.

Proposal No. 3.

Ratification of Appointment of Independent Auditors

The Board of Directors has reappointed Eisner LLP as independent auditors
to audit the financial statements of the Company for the current fiscal year,
subject to the ratification of such appointment by the Company's stockholders.

Representatives of the firm of Eisner LLP are expected to be present at
the Annual Meeting and will have an opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions.

Audit Fees

The aggregate fees billed by Eisner LLP for professional services rendered
for the audit of the Company's annual financial statements for the fiscal years
ended December 31, 2004 and 2003, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-QSB for fiscal
years 2004 and 2003 were $61,000 and $57,788, respectively.

Audit Related Fees

Other than the fees described under the caption "Audit Fees" above, Eisner
LLP did not bill any fees for services rendered to us during fiscal years 2004
and 2003 for assurance and related services in connection with the audit or
review of our consolidated financial statements.

Tax Fees

There were no fees billed by Eisner LLP for professional services rendered
for tax compliance, tax advice or tax planning during fiscal years 2004 and
2003.

All Other Fees

There were no fees billed by Eisner LLP for other professional services
rendered during fiscal years 2004 and 2003.

Pre-Approval of Services

The Audit Committee pre-approves all services, including both audit and
non-audit services, provided by our independent accountants. For audit services,
each year the independent auditor provides the Audit Committee with an
engagement letter outlining the scope of the audit services proposed to be
performed during the year, which must be formally accepted by the Committee
before the audit commences. The independent auditor also submits an audit
services fee proposal, which also must be approved by the Committee before the
audit commences.

The Board of Directors recommends that the stockholders vote FOR approval
of this proposal. The affirmative vote of the majority of the votes cast at the
Annual Meeting is required for the ratification of the appointment of the
independent auditors.

MISCELLANEOUS
-------------

Annual Report

The Company's Annual Report to Shareholders accompanies delivery of this
Proxy Statement.

Other Business

As of the date of this proxy statement, the Board of Directors is not
informed of any matters, other than those stated above, that may be brought
before the meeting. The persons named in the enclosed form of proxy or their
substitutes will vote with respect to any such matters in accordance with their
best judgment.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Stockholders may read and copy any reports, statements
or other information that we file at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information about the public reference rooms. Our
public filings are also available from commercial document retrieval services
and at the Internet Web site maintained by the SEC at http://www.sec.gov.

Upon the request of a stockholder, the Company shall provide to such
person, without charge, a copy of the Company's annual report on Form 10-KSB for
the fiscal year ended December 31, 2004.

STOCKHOLDERS SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT TO VOTE THEIR SHARES AT THE ANNUAL MEETING.
NO ONE HAS BEEN AUTHORIZED TO PROVIDE ANY INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED MAY 6,
2004. STOCKHOLDERS SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE.

By order of the Board of Directors,

/s/ Ned Mavrommatis
-------------------
Ned Mavrommatis
Secretary

Dated: May 6, 2005

PROXY
-----

This Proxy is Solicited

on Behalf of the Board of Directors

I.D. SYSTEMS, INC.
ONE UNIVERSITY PLAZA
HACKENSACK, NEW JERSEY 07601

The undersigned hereby appoints Michael L. Ehrman and Ned Mavrommatis as
proxy to represent the undersigned at the Annual Meeting of Stockholders to be
held at the offices of the Company's counsel, Lowenstein Sandler P.C., located
at 1251 Avenue of the Americas, 18th Floor, New York, New York 10020, on Friday
June 17, 2005, at 10:00 a.m., local time, and at any adjournments thereof, and
to vote the shares of Common Stock of I.D. Systems, Inc. the undersigned would
be entitled to vote if personally present, as indicated below.

1. Election of Directors.

|_| FOR ALL NOMINEES LISTED BELOW |_| WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees below

(INSTRUCTION: To withhold authority to vote
for any individual nominee strike a line
through the nominee's name in the list below)

Nominees: Jeffrey M. Jagid, Kenneth S. Ehrman, Lawrence Burstein,
Michael Monaco, Beatrice Yormark

2. Adoption of the Amended and Restated Stock Option Plan which is being
amended and restated to include restricted stock and restricted unit
awards

FOR |_| AGAINST |_| ABSTAIN |_|

3. Ratification of the appointment of Eisner LLP as the Company's independent
auditors.

FOR |_| AGAINST |_| ABSTAIN |_|

The shares represented by this proxy will be voted in the manner directed. In
the absence of any direction, the shares will be voted FOR each nominee named in
Proposal 1 and FOR Proposals 2 and 3 and in accordance with their discretion on
such other matters as may properly come before the meeting.

Dated ________________, 2005

______________________________

______________________________
Signature(s)

(Signature(s) should conform to names as registered. For jointly owned shares,
each owner should sign. When signing as attorney, executor, administrator,
trustee, guardian or officer of a corporation, please give full title of a
partnership, please sign in partnership name by authorized person.)

EXHIBIT A
---------

1999 STOCK OPTION PLAN
of
I.D. SYSTEMS, INC.

As Amended and Restated Effective April 20, 2005

1. Purposes of the Plan. This stock incentive plan (the "Plan") is
designed to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants who are not employees of I.D.
Systems, Inc., a Delaware corporation (the "Company"), and to offer an
additional inducement in obtaining the services of such persons. The Plan
provides for the grant of "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonqualified stock options which do not qualify as ISOs ("NQSOs"), restricted
stock awards ("Restricted Stock Awards") and restricted stock unit awards
("Restricted Stock Units" and, together with Restricted Stock Awards, "Stock
Awards"). The Company makes no representation or warranty, express or implied,
as to the qualification of any option as an "incentive stock option" under the
Code.

2. Stock Subject to the Plan. Subject to the provisions of Paragraph 12,
the aggregate number of shares of Common Stock, $.01 par value per share, of the
Company ("Common Stock") for which options or Stock Awards may be granted under
the Plan shall not exceed 2,812,500 (taking into account a 1.25 stock split to
be effected prior to or contemporaneous with the Company's initial public
offering). Such shares of Common Stock may, in the discretion of the Board of
Directors of the Company (the "Board of Directors"), consist either in whole or
in part of authorized but unissued shares of Common Stock or shares of Common
Stock held in the treasury of the Company. Subject to the provisions of
Paragraph 13, any shares of Common Stock subject to an option or Stock Award
which for any reason expires, is canceled or is terminated unexercised or which
ceases for any reason to be exercisable, shall again become available for the
granting of options and Stock Awards under the Plan. The Company shall at all
times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan.

The maximum number of shares with respect to which options may be granted
under the Plan to any individual in any fiscal year shall be 750,000.

3. Administration of the Plan. The Plan shall be administered by the Board
of Directors or a committee of the Board of Directors (collectively, the
"Committee"). A majority of the members of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, and any acts approved in writing by all members
without a meeting, shall be the acts of the Committee.

-1-

Subject to the express provisions of the Plan, the Committee shall have
the authority, in its sole discretion, to make all determinations relating to
the Plan, including, but not limited to, the right to determine: the key
employees and consultants who shall be granted options and Stock Awards; the
type(s) of options or Stock Awards to be granted to a key employee; the times
when an option or Stock Award shall be granted; the number of shares of Common
Stock to be subject to each option and Stock Award; the term of each option and
Stock Award; the date each option shall become exercisable; whether an option
shall be exercisable in whole, in part or in installments and, if in
installments, the number of shares of Common Stock to be subject to each
installment, whether the installments shall be cumulative, the date each
installment shall become exercisable and the term of each installment; the terms
of the restricted period and other conditions and restrictions applicable to
Stock Awards; whether to accelerate the date of exercise of any option or to
accelerate the lapse of any restrictions applicable to a Stock Award or any
installment thereof; whether shares of Common Stock may be issued upon the
exercise of an option as partly paid and, if so, the dates when future
installments of the exercise price shall become due and the amounts of such
installments; the exercise price of each option; the form of payment of the
exercise price; whether to require the optionee to enter into a stockholder's
agreement with the Company as a condition to exercising any option; whether to
restrict the sale or other disposition of the shares of Common Stock acquired
upon the exercise of an option or Stock Award and, if so, whether and under what
conditions to waive any such restriction; whether and under what conditions to
subject all or a portion of the grant or exercise of an option or the shares
acquired pursuant to the exercise of an option or a Stock Award to the
fulfillment of certain restrictions or contingencies as specified in the
contract referred to in Paragraph 12 hereof (the "Contract"), including without
limitation, restrictions or contingencies relating to entering into a covenant
not to compete with the Company, to financial objectives for the Company or a
division of any of the foregoing, a product line or other category, and/or to
the period of continued employment of the participant with the Company, and to
determine whether such restrictions or contingencies have been met; whether a
participant is Disabled (as defined in Paragraph 20); the amount, if any,
necessary to satisfy the obligation of the Company, to withhold taxes or other
amounts; the fair market value of a share of Common Stock; to construe the
respective Contracts and the Plan; with the consent of the participant, to
cancel or modify an option or Stock Award, provided, that the modified provision
is permitted to be included in an option granted under the Plan on the date of
the modification, and further, provided, that in the case of a modification
(within the meaning of Section 424(h) of the Code) of an ISO, such option as
modified would be permitted to be granted on the date of such modification under
the terms of the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; and to make all other determinations necessary or
advisable for administering the Plan. Any controversy or claim arising out of or
relating to the Plan, any option or Stock Award granted under the Plan or any
Contract shall be determined unilaterally by the Committee in its sole
discretion. The determinations of the Committee on the matters referred to in
this Paragraph 3 shall be conclusive and binding on the parties. No member or
former member of the Committee shall be liable for any action, failure to act or
determination made in good faith with respect to the Plan, any Contract or any
option or Stock Award hereunder.

-2-

4. Eligibility. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant options or Stock
Awards to (a) key employees (including officers and directors who are key
employees) of the Company or any of its Subsidiaries and (b) consultants to the
Company or any of its Subsidiaries. An individual to whom an option or a Stock
Award has been granted is referred to under the Plan as a "participant".

Options and Stock Awards granted hereunder shall cover such number of
shares of Common Stock as the Committee may determine, in its sole discretion,
as set forth in the applicable Contract; provided, however, that the aggregate
market value (determined at the time the option is granted in accordance with
Paragraph 5) of the shares of Common Stock for which any eligible employee may
be granted ISOs under the Plan or any other plan of the Company which are
exercisable for the first time by such optionee during any calendar year shall
not exceed $100,000; provided further, that the maximum number of shares with
respect to which ISOs may be granted under the Plan to any eligible employee in
any fiscal year shall be 300,000. Such ISO limitation shall be applied by taking
ISOs into account in the order in which they were granted. Any option granted in
excess of such ISO limitation amount shall be treated as a NQSO to the extent of
such excess.

5. Exercise Price. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee, in its sole discretion, as set
forth in the applicable Contract; provided, however, that the exercise price of
an ISO shall not be less than the fair market value of the Common Stock subject
to such option on the date of grant; and further, provided, that if, at the time
an ISO is granted, the optionee owns (or is deemed to own under Section 424(d)
of the Code) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company, the exercise price of such ISO shall not
be less than 110% of the fair market value of the Common Stock subject to such
ISO on the date of grant.

The fair market value of a share of Common Stock on any day shall be (a)
if the principal market for the Common Stock is a national securities exchange,
the average of the highest and lowest sales prices per share of Common Stock on
such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange, (b) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on The
Nasdaq Stock Market ("Nasdaq"), and (i) if actual sales price information is
available with respect to the Common Stock, the average of the highest and
lowest sales prices per share of Common Stock on such day on Nasdaq, or (ii) if
such information is not available, the average of the highest bid and lowest
asked prices per share of Common Stock on such day on Nasdaq, or (c) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is not quoted on Nasdaq, the average of the highest bid and
lowest asked prices per share of Common Stock on such day as reported on the OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; provided, however, that if clauses (a), (b) and (c) of this
Paragraph are all inapplicable, or if no trades have been made or no quotes are
available for such day, the fair market value of the Common Stock shall be
determined by the Board of Directors or the Committee by any method consistent
with applicable regulations adopted by the Treasury Department relating to stock
options.

-3-

6. Term. The term of each option granted pursuant to the Plan shall be
such term as is established by the Committee, in its sole discretion, as set
forth in the applicable Contract; provided, however, that the term of each ISO
granted pursuant to the Plan shall be for a period not exceeding 10 years from
the date of grant thereof; and further, provided, that if, at the time an ISO is
granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company the term of the ISO shall be for a period not
exceeding five years from the date of grant. Options shall be subject to earlier
termination as hereinafter provided.

7. Exercise. An option (or any part or installment thereof), to the extent
then exercisable, shall be exercised by giving written notice to the Company at
its principal office stating which option is being exercised, specifying the
number of shares of Common Stock as to which such option is being exercised and
accompanied by payment in full of the aggregate exercise price therefor (or the
amount due on exercise if the applicable Contract permits installment payments)
(a) in cash or by certified check or (b) if the applicable Contract permits,
with previously acquired shares of Common Stock having an aggregate fair market
value on the date of exercise (determined in accordance with Paragraph 5) equal
to the aggregate exercise price of all options being exercised, or with any
combination of cash, certified check or shares of Common Stock having such
value. The Company shall not be required to issue any shares of Common Stock
pursuant to any such option until all required payments, including any required
withholding, have been made.

A person entitled to receive Common Stock upon the exercise of an option
shall not have the rights of a stockholder with respect to such shares of Common
Stock until the date of issuance of a stock certificate for such shares or in
the case of uncertificated shares, an entry is made on the books of the
Company's transfer agent representing such shares; provided, however, that until
such stock certificate is issued or book entry is made, any optionee using
previously acquired shares of Common Stock in payment of an option exercise
price shall continue to have the rights of a stockholder with respect to such
previously acquired shares.

In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.

8. Stock Awards.

(a) The Committee may from time to time cause the Company to grant
Restricted Stock Awards and/or Restricted Stock Unit Awards under the Plan. A
Restricted Stock Award is a grant of shares of Common Stock, and a Restricted
Stock Unit Award is the grant of a right to receive shares of Common Stock in
the future, with such shares of Common Stock or right to future delivery of such
shares of Common Stock subject to a risk of forfeiture or other restrictions
that will lapse upon the achievement of one or more conditions relating to
completion of service by the participant, or achievement of performance goals or
such other objectives, as established and determined by the Committee. The
Committee may designate whether any Stock Award is intended to be
"performance-based compensation" within the meaning of Section 162(m) of the
Code. Any Stock Award intended to be "performance-based compensation" shall be
conditioned on the achievement of one or more performance goals established by
the Committee in a manner that is consistent with Section 162(m) of the Code.

-4-

(b) At the time a grant of a Stock Award is made, the Committee shall
establish a period of time (the "Restricted Period") applicable to the shares of
Common Stock that are the subject of such Stock Award ("Restricted Shares").
Each grant of Restricted Shares may be subject to a different Restricted Period.
The Committee may, in its sole discretion, at the time a grant is made,
prescribe restrictions in addition to or other than the expiration of the
Restricted Period, including the satisfaction of corporate or individual
performance objectives, which shall be applicable to all or any portion of the
Restricted Shares. The Committee may also, in its sole discretion, shorten or
terminate the Restricted Period or waive any other restrictions applicable to
all or a portion of such Restricted Shares. None of the Restricted Shares may be
sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Committee with respect to such Restricted Shares.

(c) The Company shall issue, in the name of each participant to whom
Restricted Shares under a Restricted Stock Award have been granted, stock
certificates representing the total number of Restricted Shares granted to such
person, as soon as reasonably practicable after the grant. Stock certificates
with respect to the Restricted Shares under a Restricted Stock Unit Award shall
be issued when such shares are no longer subject to forfeiture. The Company, at
the direction of the Committee, shall hold such certificates, properly endorsed
for transfer, for the participant's benefit until such time as the Restricted
Shares are forfeited to the Company, or the restrictions lapse.

(d) Unless otherwise provided by the Committee, holders of Restricted
Shares shall have the right to vote such shares and have the right to receive
any cash dividends with respect to such shares. All distributions, if any,
received by a participant with respect to Restricted Shares as a result of any
stock split, stock distribution, a combination of shares, or other similar
transaction shall be subject to the restrictions of this Paragraph 8. A
participant shall not have any rights of a shareholder with respect to
Restricted Shares that are the subject of a Restricted Stock Unit Award until
such Shares are issued by the Company.

(e) Except as may otherwise be expressly provided by the Committee in the
applicable Contract, if a participant's relationship as an employee of, or
consultant to, the Company, terminates for any reason (including death or
Disability), all Restricted Shares for which the restrictions have not
previously lapsed shall thereupon immediately be forfeited to the Company.

(f) Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee, the
restrictions applicable to the Restricted Shares shall lapse and a stock
certificate for the number of Restricted Shares with respect to which the
restrictions have lapsed shall be delivered, free of all such restrictions, to
the participant or his beneficiary or estate, as the case may be.

-5-

9. Termination of Relationship - Effect on Options. Except as may
otherwise be expressly provided in the applicable Contract, an optionee whose
relationship with the Company, as an employee or a consultant has terminated for
any reason (other than as a result of the death or Disability of the optionee)
may exercise his options, to the extent exercisable on the date of such
termination, at any time within three months after the date of termination, but
not thereafter and in no event after the date the option would otherwise have
expired; provided, however, that if such relationship is terminated either (a)
for Cause (as defined in Paragraph 19), or (b) without the consent of the
Company, such option shall terminate immediately. Except as may otherwise be
expressly provided in the applicable Contract, options granted under the Plan to
an employee or consultant shall not be affected by any change in the status of
the optionee so long as the optionee continues to be an employee of, or a
consultant to, the Company.

For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and the Company if at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company, is guaranteed either by statute or by contract.
If the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.

10. Death or Disability of an Optionee. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant to, the Company, (b) within three months after
the termination of such relationship (unless such termination was for Cause or
without the consent of the Company) or (c) within one year following the
termination of such relationship by reason of his Disability, the options that
were granted to him as an employee or consultant may be exercised, to the extent
exercisable on the date of his death, by his Legal Representative (as defined in
Paragraph 20) at any time within one year after death, but not thereafter and in
no event after the date the option would otherwise have expired.

Except as may otherwise be expressly provided in the applicable Contract,
any optionee whose relationship as an employee of, or consultant to, the
Company, has terminated by reason of such optionee's Disability may exercise the
options that were granted to him as an employee or consultant, to the extent
exercisable upon the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.

11. Compliance with Securities Laws. The Committee may require, in its
sole discretion, as a condition to the exercise of any option or Stock Award
that either (a) a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Common Stock to be
issued upon such exercise or as a result of such Stock Award shall be effective
and current at the time of exercise or grant, or (b) there is an exemption from
registration under the Securities Act for the issuance of the shares of Common
Stock that are subject to such option or Stock Award. Nothing herein shall be
construed as requiring the Company to register shares subject to any option or
Stock Award under the Securities Act or to keep any Registration Statement
effective or current.

-6-

The Committee may require, in its sole discretion, as a condition to the
receipt of an option or Stock Award or the exercise of any option that the
optionee execute and deliver to the Company his representations and warranties,
in form, substance and scope satisfactory to the Committee, which the Committee
determines are necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirement, including without limitation
that (a) the shares of Common Stock to be issued upon the exercise of the option
or grant or lapse of restrictions with respect to a Stock Award are being
acquired by the participant for his own account, for investment only and not
with a view to the resale or distribution thereof, and (b) any subsequent resale
or distribution of shares of Common Stock by such participant will be made only
pursuant to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock subject to such
option or Stock Award, or (ii) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption, the
participant shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.

In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to any option or Stock Award on any securities exchange, Nasdaq or under
any applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or Stock Award or the issuing of shares of
Common Stock thereunder, such option or Stock Award may not be granted and such
option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.

12. Contracts. Each option and Stock Award shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee. The terms of each
option, Stock Award and Contract need not be identical.

13. Adjustments Upon Changes in Common Stock. Notwithstanding any other
provisions of the Plan:

(a) a stock dividend, recapitalization, merger or consolidation in which
the Company is the surviving corporation, or a spin-off, split-up, combination
or exchange of shares or the like which results in a change in the number or
kind of shares of Common Stock which is outstanding immediately prior to such
event, the Committee shall appropriately adjust the aggregate number and kind of
shares subject to the Plan, the aggregate number and kind of shares subject to
each outstanding option and the exercise price thereof and the aggregate number
and kind of shares subject to each Stock Award. Such adjustments shall be
conclusive and binding on all parties and may provide for the elimination of
fractional shares which might otherwise be subject to options without payment
therefor.

-7-

(b) in the event of the liquidation or dissolution of the Company, or a
merger to which the Company is a party whether or not it is the surviving
corporation or a consolidation or a sale by the Company of all or substantially
all of its assets, then, except as set forth below, (i) the options granted
hereunder which are outstanding or unvested as of the date of such event, shall
continue to be outstanding and the optionee shall be entitled to receive an
option in the surviving corporation for the same number of shares as he would
have been entitled to receive if he had exercised the options granted hereunder
immediately prior to the transaction and actually owned the shares of common
stock subject to such option, and (ii) all restrictions and conditions with
respect to Restricted Shares shall lapse. The exercise price of the option in
the surviving corporation shall be such that the aggregate consideration for the
shares of stock subject to the option in the surviving corporation shall be
equal to the aggregate consideration payable with respect to the option granted
under the Plan.

Notwithstanding the foregoing, the Company shall have the right, by
written notice, provided to an optionee sent no later than 15 days prior to the
proposed liquidation, dissolution, merger or other transaction, to advise the
optionee that upon consummation of the transaction all options granted to any
optionee under the Plan shall terminate and be void, in which event, the
optionee shall have the right to exercise all options then currently exercisable
in accordance with the terms of the applicable option Contract within 10 days
after the date of the notice from the Company.

Upon a Change of Control of the Company (as defined below), each option
shall become immediately exercisable with respect to all shares of Common Stock
subject thereto and all restrictions and conditions with respect to Restricted
Shares shall lapse, unless the provisions of Paragraphs 13(a) or (b) are
operative. For purposes hereof, a "Change in Control" shall be deemed to have
occurred if: (i) any "person" or "group" (as such terms are used in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Act")), except if an employee stock ownership trust (or any of the trustees
thereof) or any of the executive officers as of the date of stockholder approval
of the Plan become a "beneficial owner" (as such term is used in Rule 13d-3
promulgated under the Act), after the date hereof, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities; (ii) a change in "control" of the
Company (as the term "control" is defined in Rule 12b-2 or any successor rule
promulgated under the Act) shall have occurred; (iii) individuals who, as of the
date this Plan was first adopted by the Board of Directors (the "Effective
Date"), constitute the Board of Directors (the "Incumbent Board") cease for any
reason to constitute a majority of the members of the Board of Directors,
provided, however, that any person becoming a director subsequent to the
Effective Date whose election or nomination for election was approved by a vote
of at least two-thirds of the directors constituting the Incumbent Board shall
be considered a member of the Incumbent Board, provided, further, however, that
no individual initially elected or nominated as a director of the Board of
Directors as a result of an actual or threatened election contest with respect
to directors or any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board of Directors shall
be deemed to be a member of the Incumbent Board; (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets; or (v) the stockholders of the Company approve a merger or
consolidation of the Company with any other company, other than a merger or
consolidation which would result in the combined voting power of the Company's
voting securities outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 70% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation.

-8-

14. Amendments and Termination of the Plan. The Plan was adopted by the
Board of Directors on May 14, 1999. No ISO may be granted under the Plan after
May 13, 2009. The Board of Directors, without further approval of the Company's
stockholders, may at any time suspend or terminate the Plan, in whole or in
part, or amend it from time to time in such respects as it may deem advisable,
including, without limitation, in order that ISOs granted hereunder meet the
requirements for "incentive stock options" under the Code, to comply with any
change in applicable law, regulations, rulings or interpretations of any
administrative agency; provided, however, that no amendment shall be effective
without the requisite prior or subsequent stockholder approval which would (a)
except as contemplated in Paragraph 13, increase the maximum number of shares of
Common Stock for which options or Stock Awards may be granted under the Plan,
(b) change the eligibility requirements to receive options or Stock Awards
hereunder or (c) make any other change for which applicable law requires
stockholder approval. No termination, suspension or amendment of the Plan shall,
without the consent of the participant, adversely affect his rights under any
option or Stock Award granted under the Plan. The power of the Committee to
construe and administer any option or Stock Award granted under the Plan prior
to the termination or suspension of the Plan nevertheless shall continue after
such termination or during such suspension.

15. Non-Transferability. No option or Stock Award granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the optionee,
only by the optionee or his Legal Representatives. Except to the extent provided
above, options, Stock Awards, and the shares of Common Stock subject thereto may
not be assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process, and any such attempted assignment,
transfer, pledge, hypothecation or disposition shall be null and void ab initio
and of no force or effect.

16. Withholding Taxes. The Company, may withhold (a) cash, (b) shares of
Common Stock to be issued upon exercise of an option or with respect to which
forfeiture restrictions lapse having an aggregate fair market value on the
relevant date (determined in accordance with Paragraph 5), or (c) any
combination thereof, in an amount equal to the amount which the Committee
determines is necessary to satisfy the obligation of the Company, to withhold
Federal, state and local income taxes or other amounts incurred by reason of the
grant, vesting, exercise or disposition of an option or Stock Award, as
applicable, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand.

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17. Legends; Payment of Expenses. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued under the Plan
and may issue such "stop transfer" instructions to its transfer agent in respect
of such shares as it determines, in its discretion, to be necessary or
appropriate to (a) prevent a violation of, or to perfect an exemption from, the
registration requirements of the Securities Act and any applicable state
securities laws, (b) implement the provisions of the Plan or any agreement
between the Company and the optionee with respect to such shares of Common
Stock, including any stockholder's agreement, or (c) permit the Company to
determine the occurrence of a "disqualifying disposition," as described in
Section 421(b) of the Code, of the shares of Common Stock issued or transferred
upon the exercise of an ISO granted under the Plan. Each participant may, in the
Committee's discretion, be required to execute a stockholders' agreement as a
condition to receiving a grant of options or a Stock Award hereunder.

The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock under the Plan, as well as all fees and expenses incurred
by the Company in connection with such issuance.

18. Use of Proceeds. The cash proceeds received upon the exercise of an
option under the Plan shall be added to the general funds of the Company and
used for such corporate purposes as the Board of Directors may determine.

19. Substitutions and Assumptions of Options of Certain Constituent
Corporations. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
20) or assume the prior options of such Constituent Corporation.

20. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:

(a) "Cause" shall mean (i) in the case of an employee or consultant, if
there is a written employment or consulting agreement between the optionee and
the Company, any of its Subsidiaries or a Parent which defines termination of
such relationship for cause, cause as defined in such agreement, and (ii) in all
other cases, cause as defined by applicable state law.

(b) "Constituent Corporation" shall mean any corporation which engages
with the Company, any of its Subsidiaries or a Parent in a transaction to which
Section 424(a) of the Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.

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(d) "Legal Representative" shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a deceased
or incapacitated optionee with respect to an option granted under the Plan.

(e) "Parent" shall have the same definition as "parent corporation" in
Section 424(e) of the Code.

(f) "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.

21. Governing Law; Construction. The Plan, the options and Contracts
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions. Neither the Plan nor any Contract shall be construed or
interpreted with any presumption against the Company by reason of the Company
causing the Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.

22. No Right to Continued Employment or Service. Nothing in the Plan or in
any option or Stock Award granted under the Plan shall confer on any participant
any right to continue in the employ of, or as a consultant to, the Company or as
a director of the Company, or interfere in any way with any right of the Company
to terminate the participant's relationship at any time for any reason
whatsoever without liability to the Company.

23. Partial Invalidity. The invalidity, illegality or unenforceability of
any provision in the Plan, any option or Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.

24. Stockholder Approval. The Plan shall be subject to approval by the
Company's stockholders.

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