Exhibit
10.4

    


    SEVERANCE
AGREEMENT

    


    This SEVERANCE AGREEMENT (the “Agreement”) is made
this 11th day of
September, 2009, by and between I.D. Systems, Inc., a Delaware corporation (the
“Company”) and
Michael Ehrman (“Executive”).

    


    BACKGROUND:

    


    WHEREAS, Executive is currently
employed as EVP of Engineering of the Company;
and

    


    WHEREAS, the Board of Directors of the
Company (the "Board") has
determined it is in the best interests of the Company to enter into this
Agreement to, among other things, help retain and motivate Executive in his
position with the Company.

    


    NOW, THEREFORE, in consideration of the
foregoing premises and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:

    


    1.           Certain
Definitions:  As used in the Agreement, the following terms
shall have the respective meanings set forth below:

    


    (a)           "Affiliate" of the
Company means any Person that controls, is controlled by, or is under common
control with, the Company.  A Person shall be deemed to be in control
of another Person if, and for so long as, it owns or controls more than 50% of
the voting power in the election of directors (or, in the case of an entity that
is not a corporation, for the election of the corresponding managing authority)
of such other Person.

    


    (b)           “Cause” means
Executive’s (i) conviction of, or plea of nolo contendere to, a felony or crime
involving moral turpitude; (ii) fraud on or misappropriation of any funds or
property of the Company; (iii) willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses or solely as a result
of vicarious liability) or breach of fiduciary duty which results in personal
profit to Executive.  Executive shall be given notice of the
termination of Executive's employment for Cause and shall have an opportunity to
be heard by the Board with respect thereto and, to the extent that the Board
deems the matter curable, shall have a reasonable period of time to cure the
matter to the Board's reasonable satisfaction.

    


    (c)           “Change in Control
Event” means the occurrence of any of the following events with respect
to the Company:

    


    (i) the consummation of any
consolidation or merger of the Company in which the holders of the Company's
common stock, par value $0.01 per share ("Common Stock")
immediately prior to such consolidation or merger own less than fifty percent
(50%) of the outstanding common stock of the surviving corporation immediately
after the merger; or


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (ii)           the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or Affiliate; or

    


    (iii)          any
action pursuant to which any person or group (as such terms are defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), shall
become the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of shares of capital stock entitled to
vote generally for the election of directors of the Company (“Voting Securities”)
representing more than thirty (30%) percent of the combined voting power of the
Company’s then outstanding Voting Securities (calculated as provided in Rule
13d-3(d) in the case of rights to acquire any such securities); or

    


    (iv)          the
individuals (x) who, as of the effective date of this Agreement, constitute the
Board (the “Original
Directors”) and (y) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of a
majority of the Original Directors then still in office (such Directors being
called “Additional
Original Directors”) and (z) who thereafter are elected to the Board and
whose election or nomination for election to the Board was approved by a vote of
a majority of the Original Directors and Additional Original Directors then
still in office, cease for any reason to constitute a majority of the members of
the Board.

    


    (d)           "Disability" means
that Executive is incapable of performing his principal duties due to physical
or mental incapacity or impairment for 120 consecutive days, or for 180
non-consecutive days, during any 12 month period.

    


    (e)           “Good Reason” means
(i) a material reduction in Executive’s base salary as in effect from time to
time; (ii) a material reduction in Executive's authority, duties or
responsibilities; (iii) Executive’s principal office location being moved to a
location which is more than 25 miles from the principal office location at which
Executive performs services on the date this Agreement is executed or (iv) a
material breach by the Company of the agreement under which Executive provides
services to the Company; provided, however, that Executive must notify the
Company, within 90 days of the occurrence of any of the foregoing conditions,
that he considers it to be a "Good Reason" condition, and provide the Company
with at least 30 days in which to cure the condition.  In addition,
the resignation may not occur later than 6 months after the occurrence of the
condition giving rise to the resignation.  If Executive fails to
provide such notice and cure period prior to his resignation, or his resignation
occurs later than 6 months after the initial occurrence of the condition, his
resignation shall not be deemed to be for "Good Reason" and Executive shall be
deemed to have waived any right to receive any of the payments or benefits set
forth in Section 2 hereof.

    


    (f)           “Person” means an
individual, a partnership, a limited liability company, a corporation, an
association, a joint stock corporation, a trust, a joint venture, an
unincorporated organization, or any court, administrative agency or commission
or other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission.


    
      
         


      

      
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    (g)           “Release” means a
general release agreement in the form annexed hereto as Exhibit A and made a
part hereof.

    


    (h)           “Trigger Event” means
the occurrence of either: (i) the termination of Executive’s employment by the
Company other than a termination for Cause; or (ii) Executive’s resignation for
Good Reason within 6 months following a Change in Control Event.  For
purposes of clarity, a termination of Executive's employment due to his death or
Disability shall not be considered a termination of Executive's employment by
the Company other than for Cause, and shall not constitute a Trigger
Event.

    


    2.           Trigger Event Payments and
Benefits.

    


    Within 45 days after the occurrence of
a Trigger Event (or such shorter period as may be required by the Release),
Executive shall execute and deliver to the Company the Release.  Upon
the sooner of the expiration of any applicable revocation period required for
the Release to be effective with respect to age discrimination claims and the
date on which it is otherwise permitted to be effective and irrevocable under
applicable law (such sooner date the “Release Effective
Date”), Executive shall be entitled to:

    


    (a)           cash
payments (collectively the "Severance Payment")
at the rate of Executive’s annual base salary as in effect immediately prior to
the Trigger Event for a period of 12 months (the "Severance Period"),
payable as set forth below.  The Severance Payment shall be made as a
series of separate payments in accordance with the Company's standard payroll
practices (and subject to all applicable tax withholdings and deductions),
commencing with the first regular payroll date on or immediately following the
60th day after the date of the Trigger Event.

    


    (b)           if
Executive timely elects "COBRA" coverage and provided Executive continues to
make contributions for such continuation coverage equal to Executive’s
contribution amount in effect immediately preceding the date of Executive’s
termination of employment, the Company shall waive the remaining portion of
Executive’s healthcare continuation payments under COBRA for the Severance
Period.  Notwithstanding the foregoing, in the event that Executive
becomes eligible to obtain alternate healthcare coverage from a new employer
before the end of the Severance Period, the Company’s obligation to waive the
remaining portion of Executive’s healthcare continuation coverage under COBRA
shall cease.  Executive understands and affirms that Executive is
obligated to inform the Company if Executive becomes eligible to obtain
alternate healthcare coverage from a new employer before the end of the
Severance Period.

    


    (c)           Executive's
previously granted Company stock options and restricted stock ("Retention Shares”)
shall (to the extent not already then "vested"), partially "vest" and a portion
of the stock options shall be exercisable, in each case on a pro-rated basis,
taking into account the number of months elapsed since the date of grant as
compared to the scheduled vesting date.  For example, if the total
number of months from the grant date until the vesting date is 36 months, and
the Trigger Event occurs at the end of the 12th month after the grant date, then
effective on the Release Effective Date, the total number of vested options and
vested Retention Shares should be equal to 1/3 (i.e., 12/36) of the total number of each
granted.  Notwithstanding anything to the contrary contained herein,
the terms of the I.D. Systems, Inc. 2007 Equity Compensation Plan (the “Plan”) shall govern
acceleration of vesting of stock options and restricted stock in the event of a
“Change of Control” as defined in the Plan.


    
      
         


      

      
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    (d)           The
“Performance
Shares” subject to the Restricted Stock Unit Award Agreement between
Executive and the Company dated as of June 29, 2009 shall be awarded in an
amount and to the extent of the sum of the “Interim Shares” determined (and
defined) in accordance with Exhibit A to that
agreement.  For example, if a Trigger Event occurs on May 1, 2010, and
the Administrator (as defined in the Plan) has determined that the Stock Price
Target of a stock price of $7.50 has been met with respect to the fiscal year
ended December 31, 2009, then the number of Performance Shares that shall be
awarded upon the Trigger Event (effective on the Release Effective Date) shall
be the number equal to 1/3 of the number of Performance Shares listed in the
table (contained in the Restricted Stock Unit Award Agreement) corresponding to
a stock price of $7.50.

    


    3.           Covenants
Agreement.  As a condition to the Company's obligations
hereunder, Executive shall execute and deliver to the Company an agreement in
the form of Exhibit
B annexed hereto and made a part hereof relating to confidentiality,
assignment of inventions, non-competition and non-solicitation.  The
non-competition and non-solicitation covenants shall apply for a period equal to
the Severance Period.

    


    4.           At Will
Employment.  Nothing in this Agreement shall alter Executive’s
status as an “at-will” employee.

    


    5.           Headings.  Headings
used in this Agreement are for convenience of reference only and do not affect
the meaning of any provision.

    


    6.           Counterparts.  This
Agreement may be executed as of the same effective date in one or more
counterparts, each of which shall be deemed an original.

    


    7.           Binding Agreement;
Assignment.  This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.

    


    8.           Governing Law;
Jurisdiction.  This Agreement and any and all matters arising
directly or indirectly herefrom shall be governed by, and construed in
accordance with, the internal laws of the State of New Jersey, without reference
to the choice of law principles thereof.  Any legal action, suit or
other proceeding arising out of or in any way connected with this Agreement
shall be brought in the courts of the State of New Jersey, or in the United
States courts for the District of New Jersey.  With respect to any
such proceeding in any such court: (i) each party generally and unconditionally
submits itself and its property to the exclusive jurisdiction of such court (and
corresponding appellate courts therefrom), and (ii) each party waives, to the
fullest extent permitted by law, any objection it has or hereafter may have the
venue of such proceeding as well as any claim that it has or may have that such
proceeding is in an inconvenient forum.


    
      
         


      

      
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    9.           Amendments.  This
Agreement may only be amended or otherwise modified, and the provisions hereof
may only be waived, by a writing executed by the parties hereto.

    


    10.           Entire
Agreement.  This Agreement shall constitute the entire
agreement of the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings between them with
respect to such matters.

    


    11.           Opportunity to Consult
Counsel.  Executive hereby acknowledges that he has read and
fully understands this Agreement, that he has been advised that Lowenstein
Sandler PC is counsel to
the Company and not to Executive, and that Executive has been advised to, and
has had the opportunity to, consult with counsel and Executive’s personal
financial or tax advisor with respect to this Agreement.

    


    12.           No Effect on Other
Benefits.  Notwithstanding anything contained herein to the
contrary, nothing contained herein shall adversely affect the rights of
Executive and his dependents and beneficiaries to any and all benefits to which
any of them may be entitled under the benefit plans and arrangements of the
Company in accordance with the terms of such benefit plans and
arrangements.

    


    13.           Section
409A.

    


    (a)           This
Agreement is intended to comply with the requirements of Section 409A of the
Code and regulations promulgated thereunder (“Section
409A”).  To the extent that any provision in this Agreement is
ambiguous as to its compliance with Section 409A, the provision shall be read in
such a manner so that no payments due under this Agreement shall be subject to
an "additional tax" as defined in Section 409A(a)(1)(B) of the
Code.  For purposes of Section 409A, each payment made under this
Agreement shall be treated as a separate payment.  In no event may
Executive, directly or indirectly, designate the calendar year of
payment.

    


    (b)           Notwithstanding
anything to the contrary contained herein, if necessary to comply with the
restriction in Section 409A(a)(2)(B) of the Code concerning payments to
“specified employees,” any payment on account of Executive’s separation from
service that would otherwise be due hereunder within six months after such
separation shall nonetheless be delayed until the first business day of the
seventh month following Executive’s date of termination and the first such
payment shall include the cumulative amount of any payments that would have been
paid prior to such date if not for such restriction, together with interest on
such cumulative amount during the period of such restriction at a rate, per
annum, equal to the applicable federal short-term rate (compounded monthly) in
effect under Section 1274(d) of the Code on the date of
termination.  For purposes of Section 2 hereof, Executive shall be a
“specified employee” for the 12-month period beginning on the first day of the
fourth month following each “Identification Date” if he is a “key employee” (as
defined in Section 416(i) of the Code without regard to Section 416(i)(5)
thereof) of the Company at any time during the 12-month period ending on the
“Identification Date.”  For purposes of the foregoing, the
Identification Date shall be December 31.  Notwithstanding anything
contained herein to the contrary, Executive shall not be considered to have
terminated employment with the Company for purposes of Section 2 hereof unless
he would be considered to have incurred a “termination of employment” from the
Company within the meaning of Treasury Regulation
§1.409A-1(h)(1)(ii).


    
      
         


      

      
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    (c)           Executive
acknowledges that any tax liability incurred by Executive under Section 409A of
the Code is solely the responsibility of Executive.

    


    14.           No
Mitigation.  Executive shall be under no obligation to seek
other employment after Executive's termination of employment with the Company,
and the obligations of the Company to Executive which arise pursuant to Section
2 of this Agreement shall not be subject to mitigation or offset.

    


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

    


    
      
        	 
      	 
      	
                I.D.
      SYSTEMS, INC.

              
	 
      	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                /s/ Ned Mavrommatis

              
	 
      	 
      	 
      	
                Name:  Ned
      Mavrommatis

              
	 
      	 
      	 
      	
                Title:  CFO

              
	 
      	 
      	 
      	
                Date:  9/22/09

              
	 
      	 
      	 
      	 
      
	
                WITNESS:

              	 
      	
                EXECUTIVE:

              
	 
      	 
      	 
      
	
                /s/ Ken Ehrman

              	 
      	
                /s/ Michael Ehrman

              
	
                Name:  Ken
      Ehrman

              	 
      	
                Name:  Michael
      Ehrman

              
	
                Date:  9/22/09

              	 
      	
                Date:  9/22/09

              


      

    


    
      
         


      

      
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    EXHIBIT
A

    FORM
OF RELEASE

    


    SEPARATION AND GENERAL
RELEASE AGREEMENT

    


    This Separation and General Release
Agreement (the "Agreement") is
entered into between _______________ with an address at
_____________________________ (the “Employee") and I.D.
Systems, Inc. ("ID
Systems"), together with its parent, divisions, affiliates, and
subsidiaries and their respective officers, directors, employees, shareholders,
members, partners, plan administrators, attorneys, and agents, as well as any
predecessors, future successors or assigns or estates of any of the foregoing
with an address at One University Plaza, 6th Floor,
Hackensack, New Jersey  07601 (the “Released
Parties”).

    


    1.           Separation of
Employment.  Employee acknowledges and understands that
Employee’s last day of employment with ID Systems was _______________ (the
“Separation
Date”).  Employee acknowledges and agrees that, except as
otherwise provided in this Agreement, Employee has received all compensation and
benefits to which Employee is entitled as a result of Employee’s
employment.  Employee understands that, except as otherwise provided
in this Agreement, Employee is entitled to nothing further from any of the
Released Parties, including reinstatement by ID Systems.

    


    2.           Employee General Release of
Released Parties.  In consideration of the payments and
benefits set forth in Section 4 below, Employee hereby unconditionally and
irrevocably releases, waives, discharges, and gives up, to the full extent
permitted by law, any and all Claims (as defined below) that Employee may have
against any of the Released Parties, arising on or prior to the date of
Employee’s execution and delivery of this Agreement to ID
Systems.  “Claims” means any and
all actions, charges, controversies, demands, causes of action, suits, rights,
and/or claims whatsoever for debts, sums of money, wages, salary, severance pay,
commissions, bonuses, unvested stock options, vacation pay, sick pay, fees and
costs, attorneys fees, losses, penalties, damages, including damages for pain
and suffering and emotional harm, arising, directly or indirectly, out of any
promise, agreement, offer letter, contract, understanding, common law, tort, the
laws, statutes, and/or regulations of the State of New Jersey or any other state
and the United States, including, but not limited to, federal and state
whistleblower laws, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Equal Pay Act, the Americans with Disabilities Act, the Family
and Medical Leave Act, the Employment Retirement Income Security Act (excluding
COBRA), the Vietnam Era Veterans Readjustment Assistance Act, the Fair Credit
Reporting Act, the Age Discrimination in Employment Act (“ADEA”), the Older
Workers’ Benefit Protection Act, the Occupational Safety and Health Act, the
Sarbanes-Oxley Act of 2002, the New Jersey Law Against Discrimination, the New
Jersey Family Leave Act, the New Jersey Civil Rights Act, and the New Jersey
Conscientious Employee Protection Act, as each may be amended from time to time,
whether arising directly or indirectly from any act or omission, whether
intentional or unintentional.   This Section 2 releases all
Claims including those of which Employee is not aware and those not mentioned in
this Agreement.  Employee specifically releases any and all Claims
arising out of Employee’s employment with ID Systems or separation
therefrom.  Employee expressly acknowledges and agrees that, by
entering into this Agreement, Employee is releasing and waiving any and all
Claims, including, without limitation, Claims that Employee may having arising
under ADEA, which have arisen on or before the date of Employee’s execution and
delivery of this Agreement to ID Systems.


    
      
         


      

      
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    3.           Representations; Covenant
Not to Sue.  Employee hereby represents and warrants to the
Released Parties that Employee has not: (A) filed, caused or permitted to be
filed any pending proceeding (nor has Employee lodged a complaint with any
governmental or quasi-governmental authority) against any of the Released
Parties, nor has Employee agreed to do any of the foregoing; (B) assigned,
transferred, sold, encumbered, pledged, hypothecated, mortgaged, distributed, or
otherwise disposed of or conveyed to any third party any right or Claim against
any of the Released Parties that has been released in this Agreement; or (C)
directly or indirectly assisted any third party in filing, causing or assisting
to be filed, any Claim against any of the Released Parties.  Except as
set forth in Section 11 below, Employee covenants and agrees that he shall not
encourage or solicit or voluntarily assist or participate in any way in the
filing, reporting or prosecution by herself or any third party of a proceeding
or Claim against any of the Released Parties.

    


    4.           Payment.  As
good consideration for Employee’s execution, delivery, and non-revocation of
this Agreement, ID Systems shall provide Employee with the payments and benefits
set forth in Section 2 of the Severance Agreement between Employee and ID
Systems dated as of June 29, 2009, payable as set forth
therein.  Employee acknowledges that Employee is not otherwise
entitled to receive the payments and benefits described in this Section 4 and
acknowledges that nothing in this Agreement shall be deemed to be an admission
of liability on the part of any of the Released Parties.  Employee
agrees that Employee will not seek anything further from any of the Released
Parties.

    


    5.           Who is
Bound.  ID Systems and Employee are bound by this
Agreement.  Anyone who succeeds to Employee’s rights and
responsibilities, such as the executors of Employee’s estate, is bound, and
anyone who succeeds to ID Systems’s rights and responsibilities, such as its
successors and assigns, is also bound.

    


    6.           Cooperation.   
Employee agrees that, within five business days of the Separation Date, he shall
provide ID Systems (attention: _________) with a written comprehensive summary
of all outstanding work activities, current and prospective customer contact
information, and otherwise reasonably cooperate as necessary to effect a
transition of his responsibilities.  Employee also agrees that he will
cease from communicating with any current ID Systems employees (with the
exception of __________________) regarding ID Systems personnel or other
business-related matters.  Employee agrees to reasonably cooperate in
any ID Systems investigations and/or litigation regarding events that occurred
during Employee’s tenure with ID Systems.  ID Systems will compensate
Employee for reasonable expenses Employee incurs in extending such cooperation
regarding investigations and/or litigation, so long as Employee provides advance
written notice of Employee’s request for compensation.


    
      
         


      

      
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    7.           Non Disparagement and
Confidentiality.  Employee agrees not to make any defamatory or
derogatory statements concerning any of the Released
Parties.  Provided inquiries are directed to ID Systems’ Department of
Human Resources, ID Systems shall disclose to prospective employers information
limited to Employee’s dates of employment and last position held by
Employee.  Employee confirms and agrees that Employee shall not,
directly or indirectly, disclose to any person or entity or use for Employee’s
own benefit, any confidential information concerning the business, finances or
operations of ID Systems or its customers; provided, however, that Employee’s
obligations under this Section 7 shall not apply to information generally known
in ID Systems’ industry through no fault of Employee or the disclosure of which
is required by law after reasonable notice has been provided to ID Systems
sufficient to enable ID Systems to contest the
disclosure.  Confidential information shall include, without
limitation, trade secrets, customer lists, details of contracts, pricing
policies, operational materials, marketing plans or strategies, security and
safety plans and strategies, project development, and any other non-public or
confidential information of, or relating to, ID Systems or its
affiliates.  Employee also agrees that the amounts paid to Employee
and all of the other terms of this Agreement shall be kept confidential, unless
ID Systems discloses them in a public filing.  Employee acknowledges
that he continues to be bound by the Confidentiality, Assignment of
Contributions and Inventions, Non-Competition and Non-Solicitation Agreement
(the “Covenants
Agreement”).

     

    8.           Remedies.  If
Employee tells anyone the amount paid to Employee or any other term of this
Agreement (unless ID Systems has publicly disclosed the terms of this Agreement
in a public filing), breaches any other term or condition of this Agreement or
the Covenants Agreement, or any representation made by Employee in this
Agreement was false when made, it shall constitute a material breach of this
Agreement and, in addition to and not instead of the Released Parties’ other
remedies hereunder, under the Covenants Agreement or otherwise at law or in
equity, Employee shall be required to immediately, upon written notice from ID
Systems, return the payments paid by ID Systems hereunder, less
$500.  Employee agrees that if Employee is required to return the
payments, this Agreement shall continue to be binding on Employee and the
Released Parties shall be entitled to enforce the provisions of this Agreement
as if the payments had not been repaid to ID Systems and ID Systems shall have
no further payment obligations to Employee hereunder.  Further, in the
event of a material breach of this Agreement, Employee agrees to pay all of the
Released Parties’ attorneys’ fees and other costs associated with enforcing this
Agreement.

    


    9.           ID Systems
Property.  Employee represents that he has returned all ID
Systems property in Employee’s possession, custody or control, including, but
not limited to, all ID Systems equipment, samples, laptop computers, personal
digital assistants, cell phones, pass codes, keys, swipe cards, documents or
other materials that Employee received, prepared, or helped
prepare.  Employee represents that Employee has not retained any
copies, duplicates, reproductions, computer disks, or excerpts thereof of ID
Systems’ documents.

    


    10.           Construction of
Agreement.  In the event that one or more of the provisions
contained in this Agreement shall for any reason be held unenforceable in any
respect under the law of any state of the United States or the United States,
such unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall then be construed as if such unenforceable provision or
provisions had never been contained herein or therein.  If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be enforced to the
maximum extent permitted by applicable law.  This Agreement and any
and all matters arising directly or indirectly herefrom or therefrom shall be
governed under the laws of the State of New Jersey, without reference to choice
of law rules.  ID Systems and Employee consent to the sole
jurisdiction of the federal and state courts of New Jersey.  ID SYSTEMS AND EMPLOYEE HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT
OR ANY AND ALL MATTERS ARISING DIRECTLY OR INDIRECTLY HEREFROM AND REPRESENT
THAT THEY HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE OR HAVE CHOSEN VOLUNTARILY
NOT TO DO SO SPECIFICALLY WITH RESPECT TO THIS WAIVER.


    
      
         


      

      
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    11.           Acknowledgments.  ID
Systems and Employee acknowledge and agree that:

    


    (A)  By entering into this
Agreement, Employee does not waive any rights or Claims that may arise after the
date that Employee executes and delivers this Agreement to ID
Systems;

    


    (B)  This
Agreement shall not affect the rights and responsibilities of the Equal
Employment Opportunity Commission (the “EEOC”) to enforce the
ADEA and other laws, and further acknowledge and agree that this Agreement shall
not be used to justify interfering with Employee’s protected right to file a
charge or participate in an investigation or proceeding conducted by the
EEOC.  Accordingly, nothing in this Agreement shall preclude Employee
from filing a charge with, or participating in any manner in an investigation,
hearing or proceeding conducted by, the EEOC, but Employee hereby waives any and
all rights to recover under, or by virtue of, any such investigation, hearing or
proceeding;

    


    (C)  Notwithstanding anything
set forth in this Agreement to the contrary, nothing in this Agreement shall
affect or be used to interfere with Employee’s protected right to test in any
court, under the Older Workers’ Benefit Protection Act, or like statute or
regulation, the validity of the waiver of rights under ADEA set forth in this
Agreement; and

    


    (D)   Nothing in this
Agreement shall preclude Employee from: exercising Employee’s rights, if any (i)
under Section 601-608 of the Employee Retirement Income Security Act of 1974, as
amended, popularly known as COBRA, or (ii) ID Systems’s pension
plan or 401(k) plan, if applicable.

    


    12.           Opportunity For
Review.

    


    (A)          Employee
represents and warrants that Employee: (i) has had sufficient opportunity to
consider this Agreement; (ii) has read this Agreement; (iii) understands all the
terms and conditions hereof; (iv) is not incompetent or had a guardian,
conservator or trustee appointed for Employee; (v) has entered into this
Agreement of Employee’s own free will and volition; (vi) has duly executed and
delivered this Agreement; (vii) understands that Employee is responsible for
Employee’s own attorney’s fees and costs; (viii) has had the opportunity to
review this Agreement with counsel of Employee’s choice or has chosen
voluntarily not to do so; (ix) understands the Employee has been given
twenty-one (21) days to review this Agreement before signing this Agreement and
understands that he is free to use as much or as little of the 21-day period as
he wishes or considers necessary before deciding to sign this Agreement; (x)
understands that if Employee does not sign and return this Agreement to ID
Systems within 21 days of his receipt, ID Systems shall have no obligation to
enter into this Agreement, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered; and (xi) this Agreement is valid, binding and enforceable against
the parties to this Agreement in accordance with its terms.


    
      
         


      

      
        -10-

        
          

        

      

      
         


      

    


    (B)           This
Agreement shall be effective and enforceable on the eighth (8th) day
after execution and delivery to ID Systems by Employee.  The parties
to this Agreement understand and agree that Employee may revoke this Agreement
after having executed and delivered it to ID Systems by so advising ID Systems
in writing no later than 11:59 p.m. on the seventh (7th) day
after Employee’s execution and delivery of this Agreement to ID
Systems.  If Employee revokes this Agreement, it shall not be
effective or enforceable, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered.

    


    
      
        
          	
                  Agreed
      to and accepted on this ____ day of ________, 20__.

                
	 
      	 	 
      	 
      
	
                  Witness:

                	 	
                  EMPLOYEE:

                	 
      
	 
      	 	 
      	 
      
	
                    

                	 	
                    

                	 
      
	 
      	 	
                  Name:

                	 
      
	 
      	 	 
      	 
      
	
                  Agreed
      to and accepted on this ____ day of ________, 20__.

                
	 
      	 	 
      	 
      
	 
      	 	
                  ID
      SYSTEMS, INC.

                	 
      
	 
      	 	 
      	 
      
	 
      	 	
                    

                
	 
      	 	
                  Name:

                	 
      
	 
      	 	
                  Title:

                	 
      


        

      

    


    
      
         


      

      
        -11-

        
          

        

      

      
         


      

    


    EXHIBIT
B

    FORM
OF COVENANTS AGREEMENT

    


    I.D.
SYSTEMS, INC.

    


    Confidentiality,
Assignment of Contributions and

    Inventions,
Non-Competition, and Non-Solicitation Agreement

    


    Background.  I
am a paid employee of I.D. Systems, Inc., a Delaware corporation (the “Company”).  I
am executing this Agreement in consideration of my continued employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.

    


    1.  Confidentiality.  While
working for the Company, I may have previously developed or acquired, or may in
the future develop or acquire, knowledge in my work or from my colleagues or
otherwise of Confidential Information relating to the Company, its business,
potential business or that of its customers or its or their
respective affiliates.  “Confidential
Information” includes information concerning the identity of customers or
their requirements or key contacts within the customer’s organization,
suppliers, distributors, software programs, demonstration programs, routines,
algorithms, computer systems, plans, strategies, research, formulations,
processes, production methods and sources, products and specifications,
equipment manufacturing and other techniques, designs, know-how, show how, trade
secrets, inventions, improvements, discoveries, concepts, methodology, formulas,
drawings, maps, manuals, models, specifications, records, files, memoranda,
notes, reports, files, correspondence, financial and sales data, pricing lists
or terms, trading terms, training materials and methods, marketing,
distribution, and merchandising techniques and strategies, evaluations, opinions
and interpretations, together with all other writings or materials of any type
embodying any of the foregoing and any and all other technical, operating,
financial, and business information or materials relating to the Company, its
customers or its or
their respective affiliates, whether or not reduced to writing or other medium
and whether or not marked or labeled confidential, proprietary, or the like,
regardless of whether created by me, others or both.  Confidential
Information does not include information that is or becomes public domain
without fault on my part.  I will have the burden of proof with
respect to the exclusion of any information from the definition of “Confidential
Information.”

    


    With respect to Confidential
Information of the Company, its customers and its or their respective
affiliates, I agree that:

    


    (a)  The Confidential
Information is and will continue to be the sole and exclusive property of the
Company;


    
      
         


      

      
        -12-

        
          

        

      

      
         


      

    


    


    (b)  Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will use the Confidential Information only in the
performance of my duties for the Company.  I will not use the
Confidential Information at any time (during or after my employment with the
Company or any of its affiliates) for my personal benefit, for the benefit of
any other Person or in any manner adverse to the interests of the Company, its
customers or its or their respective affiliates;

    


    (c)  Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will not disclose the Confidential Information at any
time (during or after my employment with the Company or any of its affiliates)
except to authorized Company personnel, unless the Company consents in advance
in writing or unless the Confidential Information indisputably becomes of public
knowledge or enters the public domain (without fault on my part);

    


    (d)  I will safeguard the
Confidential Information by all reasonable steps and abide by all policies and
procedures of the Company and its customers in effect from time to time
regarding storage, copying, destroying, publication or posting, or handling of
such Confidential Information, in whatever medium or format that Confidential
Information takes;

    


    (e)  Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will execute and abide by all confidentiality agreements
that the Company reasonably requests me to sign or abide by, whether those
agreements are for the benefit of the Company, an affiliate or an actual or a
potential customer or supplier thereof;

    


    (f)  I will return all
materials containing or relating to Confidential Information, together with all
other Company or customer property, to the Company when my employment with the
Company or any of its affiliates terminates (either voluntary or involuntary) or
upon the Company’s earlier request.  I shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, or other documents relating in any way to the business or affairs
of the Company, its customers or its or their respective affiliates;
and

    


    (g)  Upon any termination of
my employment with the Company, I will acknowledge to the Company, in writing
and under oath, in the form attached hereto as Exhibit A that I have
complied with this Agreement.

    


    As used herein, the term “Person” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or department, agency or subdivision of
the government entity.

    


    For purposes of clauses (b), (c) and
(e), in the event of any required disclosure, I will promptly notify the Company
and reasonably cooperate and assist the Company in resisting such disclosure in
the event it chooses to do so.


    
      
         


      

      
        -13-

        
          

        

      

      
         


      

    


    


    2.  Contributions
and Inventions.
While employed by the Company, I may make Contributions and Inventions
deemed by the Company to have value to it.  The terms “Contributions” and
“Inventions”
are understood to include all information, ideas, concepts, technology,
improvements, discoveries, formulae, inventions, creations, discoveries,
techniques, designs, methods, trade secrets, technical specifications and data,
works, modifications, processes, know-how, show-how, concepts, expressions,
improvements, works of authorship (including computer programs), ideas and other
developments, whether or not they are patentable or copyrightable or subject to
analogous protection and regardless of their form or state of development and
whether or not I have made them alone or with others, together with any and all
rights to U.S. or foreign applications for patents, inventor’s certifications or
other industrial rights that may be filed thereon, including divisions,
continuations-in-part, reissues and/or extensions thereof.

    


    This Agreement covers Contributions and
Inventions of any kind that are conceived or made by me, alone or with others,
while I am employed by the Company, regardless of whether they are conceived or
made during regular working hours or at my place of work (whether located at the
Company, customer facilities, at home or elsewhere) and that (i) relate to the
Company’s business or potential business or that of its affiliates, (ii) result
from tasks assigned to me by the Company, or (iii) are conceived or made with
the use of the Company’s time, facilities, resources, or
materials.  With respect to Contributions or Inventions covered by
this Agreement, I agree that:

    


    (a)  I will disclose them
promptly to the Company.  I will not disclose them to anyone other
than authorized Company personnel;

    


    (b)  They will belong solely
to the Company from conception as “works made for hire” (as that term is used
under U.S. copyright law) or otherwise. To the extent that title to any such
Contributions and Inventions do not, by operation of law, vest in the Company, I
hereby irrevocably assign to the Company all right, title and interest,
including, without limitation, tangible and intangible rights such as patent
rights, trademarks, and copyrights, that I may have or may acquire in and to all
such Contributions and Inventions, benefits and/or rights resulting therefrom,
and agree to promptly execute any further specific assignments related to such
Contributions or Inventions, benefits and/or rights at the request of the
Company.  If the Company wants more specific or formal evidence of
this, I will sign written documents of assignment at the Company’s
request.  I also hereby assign to the Company, or waive if not
assignable, all “moral rights” in and to any Contributions and Inventions and
agree promptly to execute any further specific assignments or waivers related to
moral rights at the request of the Company; and

    


    (c)  I will, at any time,
either during the time I am employed by the Company or thereafter, assist the
Company in obtaining and maintaining patent, copyright, trademark, mask works
and other protection for them, in all countries and territories, at the
Company’s expense.  In the event that the Company is unable to secure
my signature after reasonable effort in connection with any patent, trademark,
copyright, mask work or other similar protection relating to a Contribution or
an Invention, I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as my agent and attorney-in-fact, to act for
and on my behalf and stead to execute and file any such application and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents, trademarks, copyrights, mask works or other similar protection thereon
with the same legal force and effect as if executed by me.


    
      
         


      

      
        -14-

        
          

        

      

      
         


      

    


    (d)  Any Contributions or
Inventions relating to the business of the Company and disclosed to the Company
within 6 months following the termination of my employment shall be deemed to
fall within the provisions of this Section 2.  The “business of the
Company’ as used in this Section 2 includes the actual business conducted by the
Company or any of its affiliates at any time during my employment with the
Company, as well as any business in which the Company or any of its affiliates,
at any time during my employment with the Company, proposes or proposes to
engage.

    


    


    3.  Obligations
to Prior Employers or Others.  I do not have any
non-disclosure, non-compete, non-solicitation or other obligations to any
previous employer or other Person that would prohibit, limit, conflict or
interfere with my obligations under this Agreement or the performance of my
duties for the Company.  I will not disclose to the Company or its
customers or induce the Company or its customers to use any secret or
confidential information or material belonging to others, including my former
employers, if any.

    


    4.  Excluded
Information.  A complete list, by non-confidential descriptive
title of all Contributions, Inventions, ideas, reports or other creative works,
if any, made or conceived by me prior to my employment by the Company and
intended to be excluded from this Agreement, is attached as Exhibit B.  I shall
not assert any rights under any Contributions, Inventions, ideas, reports or
other creative works as having been made or acquired by me prior to my being
employed by the Company, unless such Contributions, Inventions, ideas, reports
or other creative works are identified on Exhibit B.  If,
after the date of this Agreement, I believe that any Contribution or Invention
is excluded from this Agreement, I agree to obtain written authorization from
the Company, prior to applying for any patent on the Contribution or Invention,
and prior to taking any steps to commercially exploit the Contribution or
Invention.

    


    5.  Covenant
Against Competition and Solicitation.

    


    (a)  I acknowledge and
understand that, in view of my position as an employee of the Company, I may
have previously been afforded, or in the future may be afforded, access to the
Company’s Confidential Information and that of its affiliates.  I
therefore agree that during the course of my employment with the Company or any
of its affiliates and for a period of 12 months after termination of my
employment with the Company and all of its affiliates (for any reason or no
reason) (the “Restricted Period”),
I will not, anywhere within the United States of America or any other country or
territory in which the Company or its affiliates conducts business, either
directly or indirectly, whether alone or as an employee, employer, consultant,
independent contractor, agent, principal, partner, joint venturer, stockholder,
member, officer, director or otherwise of any company or other business
enterprise, or in any other individual or representative capacity, engage in,
assist in, participate in, or otherwise be connected to or benefit from any
Competitive Business.  As used in this Agreement, “Competitive Business”
shall mean any individual, entity, or business enterprise that is engaged in or
is seeking to engage in: (i) the development, design, manufacture, marketing,
sale and/or distribution of tracking and monitoring products; or  (ii)
the development, design, manufacture, marketing, sale and/or distribution of any
products that are directly competitive with products that (a) represent at least
10% of the Company’s consolidated product revenues, (b) were first sold or
distributed by the Company or any of its affiliates during the preceding
12-month period, or (c) are being developed, produced, marketed and/or
distributed by the Company or any of its affiliates and are scheduled to be
first sold or distributed by the Company within a 12-month period; provided,
however, that for purposes of this definition, a business shall be a
“Competitive Business,” as it applies during the 12 month period after
termination of my employment only if the Company is engaged or is actively
seeking to engage in that business on the date of my termination of employment
with the Company or was engaged or actively seeking to engage in that business
at any time during the preceding 12 months.


    
      
         


      

      
        -15-

        
          

        

      

      
         


      

    


    (b)  During the Restricted
Period, I will not, without the express prior written consent of the Company,
directly or indirectly:  (i) solicit, induce, or assist any third
person in soliciting or inducing any Person that is (or was at any time within
the 12 months prior to the solicitation or inducement) an employee, consultant,
independent contractor or agent of the Company or any of its affiliates to leave
the employment of the Company or any of its affiliates or cease performing
services as an independent contractor, consultant or agent of the Company or any
of its affiliates; (ii) hire, engage, or assist any third party in hiring or
engaging, any individual that is or was (at any time within the 12 months prior
to the attempted hiring) an employee of the Company or any of its affiliates; or
(iii) contact, communicate, solicit, or transact any business with or assist any
third party in contacting, communicating, soliciting, or transacting any
business with any Person that is or was (at any time within 12 months prior to
the contact, communication, solicitation, or transaction) a customer,
distributor or supplier of the Company or its affiliates (or Person who, at any
time during the 12 months prior to the contact, communication, solicitation, or
transaction, the Company or its affiliates contacted, communicated with or
solicited for the purposes of becoming a customer, distributor, or supplier of
the Company or its affiliates and I was in any way involved or otherwise had
knowledge of or reasonably should have had knowledge of such contact,
communication, or solicitation) for the purposes of inducing such customer,
distributor, or supplier or potential customer, distributor, or supplier to be
connected to or benefit from any business competitive with that of the Company
or its affiliates or terminate its or their business relationship with the
Company or its affiliates.

    


    6.  Non-Disparagement.  I
will not at any time (during or after my employment with the Company) disparage
the reputation of the Company, its affiliates, or any of its or their respective
officers and directors.

    


    7.  Interpretation
and Scope of this Agreement.

    


    (a)          In
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions contained in this Agreement shall be unenforceable in
any respect, then such provision shall be deemed limited and restricted to the
extent that the court shall deem the provision to be enforceable.  It
is the intention of the parties to this Agreement that the covenants and
restrictions in this Agreement be given the broadest interpretation permitted by
law.  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
hereof.  The covenants and restrictions contained in this Agreement
shall be deemed a series of separate covenants and restrictions.  If,
in any judicial proceeding, a court of competent jurisdiction should refuse to
enforce all of the separate covenants and restrictions in this Agreement, then
such unenforceable covenants and restrictions shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants and restrictions to
be enforced in such proceeding.


    
      
         


      

      
        -16-

        
          

        

      

      
         


      

    


    (b)          I
acknowledge that the restrictions on the activities in which I may engage that
are set forth in this Agreement and the location and period of time for which
such restrictions apply are reasonable and necessary to protect the legitimate
business interests of the Company and shall survive the termination of my
employment.  I understand that the Company’s business is global and,
accordingly, the restrictions cannot be limited to any particular geographic
area.  I further acknowledge that the restrictions contained in this
Agreement will not prevent me from earning a livelihood during the applicable
period of restriction.

    


    (c)          I
understand and agree that if I breach or threaten to breach any of the
provisions of this Agreement, including, without limitation, the provisions of
Sections 1, 2, 5 or 6 hereof, the Company would suffer irreparable harm and
damages would be an inadequate remedy.  Accordingly, I acknowledge
that, in the event of any breach or threatened breach by me of any of the
provisions of this Agreement, the Company shall be entitled to temporary,
preliminary and permanent injunctive or other equitable relief in any court of
competent jurisdiction (without being required to post a bond or other
collateral) and to an equitable accounting of all earnings, profits and other
benefits arising, directly or indirectly, from such violation, which rights
shall be cumulative and in addition to (rather than instead of) any other rights
or remedies to which the Company may be entitled at law or in
equity.  In addition (and not instead of those rights), I further
covenant that I shall be responsible for payment of the reasonable fees and
expenses of the Company’s attorneys and experts, as well as the Company’s court
costs, pertaining to any suit, arbitration, mediation, action or other
proceeding (including the costs of any investigation related thereto) in which
the Company prevails, arising directly or indirectly out of my violation or
threatened violation of any of the provisions of this Agreement.  If
the Company does not prevail in any suit, arbitration, mediation, action or
other proceeding arising directly or indirectly out of my purported violation of
any of the provisions of this Agreement, the Company shall be responsible for
payment of the reasonable fees and expenses of attorneys and experts that I
incur, as well as my court costs, pertaining to any such suit, arbitration,
mediation, action or other proceeding (including the costs of any investigation
related thereto).

    


    (d)          This
Agreement shall be binding upon me, my heirs, assigns and personal
representatives and shall inure to the benefit of the Company, its affiliates
and their respective successors and assigns (including, without limitation, the
purchaser of all or substantially all of its assets).

    


    (e)          This
Agreement shall constitute the entire agreement between Company and myself with
respect to the matters covered hereby and shall supersede all previous written,
oral or implied understandings between us with respect to such
matters.


    
      
         


      

      
        -17-

        
          

        

      

      
         


      

    


    (f)          I
acknowledge that my employment with the Company is “at-will.”  I
understand that nothing contained in this Agreement shall give me a right to
continue in the employ of the Company, and the right to terminate my employment
with the Company, at any time, with or without cause, is specifically reserved
to the Company.  I also understand that I may resign from employment
with the Company at any time in my discretion.

    


    (g)          Any
and all actions or controversies arising out of this Agreement, Employee’s
employment by the Company or termination therefrom, including, without
limitation, tort claims, shall be construed and enforced in accordance with the
internal laws of the State of New Jersey, without regard to the choice of law
principles thereof.

    


    I represent and warrant
that:  (a) I have read this Agreement; (b) I understand all the terms
and conditions hereof; (c) I have entered into this Agreement of my own free
will and volition; (d) I have been advised by the Company to seek and have, to
the extent I have deemed necessary, received the advice of counsel of any own
selection; and (e) the terms of this Agreement are fair, reasonable and are
being agreed to voluntarily in exchange for my continued employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.

    


    
      
        
          
            
              
                	
                        Date:

                      	
                        9/22/09

                      	 
      	
                        /s/
      Michael Ehrman

                      
	 
      	 
      	 
      	
                        Name:  Michael
      Ehrman

                      


              

            

          

        

      

    

    


    Accepted:

    


    
      
        
          	
                  I.D.
      SYSTEMS, INC.

                
	 
      	 
      
	
                  By:

                	
                  /s/
      Ned Mavrommatis

                


        

      

    


    
      
         


      

      
        -18-

        
          

        

      

      
         


      

    


    EXHIBIT
A

    


    STATE OF
NEW JERSEY

    COUNTY OF
_________________

    


    The undersigned, being duly sworn, does
hereby certify that he/she has complied with, and will continue to comply with,
for the applicable period set forth therein, all of the terms of the
Confidentiality, Assignment of Contributions and Inventions, Non Competition and
Non-Solicitation Agreement dated _______ __, 200_ by the Undersigned in favor of
I.D. Systems, Inc. (the “Company”).  I have returned all Company
property and all materials relating to or containing Confidential Information to
the Company and I have not retained any copies or reproductions of any
correspondence, memoranda, reports, notebooks, drawings, photographs or other
documents or materials relating to the affairs of the Company, its customers and
its or their affiliates.

    


    
      
        
          	
                    

                
	
                  Name:

                


        

      

    

    


    Sworn and
Subscribed to

    before me
this ____ day of

    ______________,
______

    


    
      
        
          	
                    

                


        

      

    


    
      
         


      

      
        -19-

        
          

        

      

      
         


      

    


     EXHIBIT
B

    


    Excluded
Information

    (See
Section 4.  If None, type “NONE”)

    


    NONE

     

    
      
         


      

      
        -20-