Exhibit
10.5

     

    I.D.
SYSTEMS, INC.

     

    2009
NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN

     

              1.
Purposes of the Plan.
The purposes of this I.D. Systems 2009 Non-Employee Director Equity Compensation
Plan are to attract qualified individuals for positions of responsibility as
outside directors of the Company, and to provide incentives for qualified
individuals to remain on the Board as outside directors.

     

              2.
Definitions. As used
herein, the following definitions shall apply:

     

              “Administrator” means
the Board or a committee designated by the Board to administer this Plan and
consisting solely of members of the Board.

     

              “Applicable Laws”
means the requirements relating to the administration of stock option plans
under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed
or quoted and the applicable laws of any foreign country or jurisdiction where
Options are, or will be, granted under the Plan.

     

              “Board” means the
Board of Directors of the Company.

     

              “Cause” means removal
from the Board by means of a resolution that recites that the Participant is
being removed solely for Cause.

     

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

     

    (A) the
consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which Common Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger own more than fifty percent (50%) of the outstanding common stock of the
surviving corporation immediately after the merger; or

     

    (B) 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

     

    (C) any
action pursuant to which any person (as such term is defined in Section 13(d) of
the Exchange Act), corporation or other entity 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 fifty (50%) 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

     

    (D) the
individuals (x) who, as of the Effective Date, 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

              “Code” means the
Internal Revenue Code of 1986, as amended.

     

              “Common Stock” means
the common stock, par value $.01 per share, of the Company.

     

              “Company” means I.D.
Systems, Inc., a Delaware corporation.

     

              “Director” means a
member of the Board.

     

              “Disability” means
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.

     

              “Effective Date” means
the date on which this Plan is approved by stockholders of the
Company.

     

              “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

              “Fair Market Value”
means, as of any date, the value of Common Stock determined as
follows:

     

    (i) if
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq Global Market or the
Nasdaq Capital Market of The Nasdaq Stock Market, the fair market value of a
share of Common Stock shall be the closing sales price of a share of Common
Stock as quoted on such exchange or system for such date (or the most recent
trading day preceding such date if there were no trades on such date), as
reported in The Wall
Street Journal or such other source as the Administrator deems
reliable;

     

    (ii) if
the Common Stock is regularly quoted by a recognized securities dealer but is
not listed in the manner contemplated by clause (i) above, the Fair Market Value
of a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or

     

    (iii) if
neither clause (i) above nor clause (ii) above applies, the Fair Market Value of
a share of Common Stock shall be determined in good faith by the Administrator
based on the reasonable application of a reasonable valuation
method.

     

              “Option” means a stock
option granted pursuant to the Plan.

     

              “Option Agreement”
means an agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Option grant. The Option Agreement is subject to the
terms and conditions of the Plan.

     

              “Optionee” means the
holder of an outstanding Option granted under the Plan.

     

              “Outside Director”
means any Director who, on the date such person is to receive a grant of an
Option or Restricted Shares hereunder is not an employee of the Company or any
of the Company’s subsidiaries.

     

              “Participant” shall
mean any Outside Director who holds an Option or a Restricted Stock Award
granted or issued pursuant to the Plan.

     

              “Plan” means this I.D.
Systems, Inc. 2009 Non-Employee Director Equity Compensation Plan.

     

              “Restricted Stock
Award” means a grant of Restricted Shares pursuant to Section 7 of the
Plan.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

             
“Restricted Stock
Agreement” means an agreement, approved by the Administrator, evidencing
the terms and conditions of a Restricted Stock Award.

     

              “Restricted Shares”
means Shares subject to a Restricted Stock Award.

     

              “Share” means a share
of Common Stock, as adjusted in accordance with Section 12 of the
Plan.

     

              3.
Stock Subject to the
Plan. Subject to the provisions of Section 12 of the Plan, the maximum
aggregate number of Shares that may be issued upon exercise of Options and/or as
Restricted Shares under the Plan is Three Hundred Thousand (300,000) Shares. The
Shares may be authorized, but unissued, or reacquired Common Stock. If an Option
expires or becomes unexercisable without having been exercised in full, the
unpurchased Shares that were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares
that have actually been issued under the Plan upon exercise of an Option shall
not be returned to the Plan and shall not become available for future
distribution under the Plan. Restricted Shares that have been transferred back
to the Company shall also be available for future grants of Options or
Restricted Shares under the Plan.

     

              4.
Administration of the
Plan.

     

              (a)
Administration. The
Plan shall be administered by the Administrator. The Administrator shall have
the authority, in its discretion:

     

    (i) to
determine the Fair Market Value of Common Stock;

     

    (ii) to
approve forms of agreement for use under the Plan;

     

    (iii) to
determine the number of Options to be granted to any Outside Director and the
exercise price and other terms and conditions of Options;

     

    (iv) to
determine the number of Restricted Shares to be granted to any Outside Director
and the terms and conditions of Restricted Stock Awards;

     

    (v) to
construe and interpret the terms of the Plan;

     

    (vi) to
prescribe, amend and rescind rules and regulations relating to the
Plan;

     

    (vii) to
allow Participants to satisfy withholding tax obligations by having the Company
withhold from the shares of Common Stock to be issued upon exercise of an Option
or upon vesting of Restricted Shares that number of Shares having a Fair Market
Value equal to the amount required to be withheld, provided that withholding is
calculated at the minimum statutory withholding level. The Fair Market Value of
the Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined. All determinations to have Shares withheld
for this purpose shall be made by the Administrator in its
discretion;

     

    (viii) to
authorize any person to execute on behalf of the Company any instrument required
to effect the grant of an Option or Restricted Stock Award granted by the
Administrator; and

     

    (ix) to
make all other determinations deemed necessary or advisable for administering
the Plan.

     

              (b)
Effect of Administrator’s
Decision. The Administrator’s decisions, determinations and
interpretations shall be final and binding on all Participants and anyone else
who may claim an interest in Options or Restricted Shares.

     

              5.
Eligibility. The only
persons who shall be eligible to receive Options and/or Restricted Stock Awards
under the Plan shall be persons who, on the date such Options or Awards are
granted, are Outside Directors.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              6.
Term of the Plan. No
Option or Restricted Stock Award may be granted under the Plan more than ten
(10) years after the Effective Date.

     

              7.
Grants of Restricted Stock
Awards. Subject to Section 3 hereof, the Administrator may grant
Restricted Shares to Participants in such numbers and at such times as the
Administrator determines to be appropriate.

     

              8.
Terms of Restricted Stock
Awards. Except as provided herein, Restricted Shares shall be subject to
restrictions (“Restrictions”)
prohibiting such Restricted Shares from being sold, transferred, assigned,
pledged or otherwise encumbered or disposed of. The Administrator shall
determine the terms and conditions under which the Restrictions with respect to
each award of Restricted Shares shall lapse; provided, however, that except
as provided below, the Restrictions with respect to each award of Restricted
Shares shall not lapse with respect to more than 20% of the Restricted Shares
that are the subject of a particular award during any 12 month period commencing
from the date of grant of such award. Notwithstanding the foregoing, the
Restrictions with respect to a Participant’s Restricted Shares shall lapse
immediately in the event that (i) the Participant is removed from service as a
Director (other than for Cause) before his or her term has expired (and does not
continue as, or become, an employee of the Company or a subsidiary of the
Company), (ii) the Participant is nominated for a new term as an Outside
Director but is not elected by stockholders of the Company, (iii) the
Participant ceases to be a member of the Board due to death, disability or
mandatory retirement (if any), or (iv) if the Participant ceases to continue as
a member of the Board or of the board of directors of a successor company
following a Change in Control.

     

              The
Company shall issue, in the name of each Participant to whom Restricted Shares
have been granted, stock certificates representing the total number of
Restricted Shares granted to such Participant as soon as reasonably practicable
after the grant. However, the Company shall hold such certificates, properly
endorsed for transfer, for the Participant’s benefit until such time as the
Restriction Period applicable to such Restricted Shares lapses. Upon the
expiration or termination of the Restricted Period, 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 or her
beneficiary or estate, as the case may be. In the event that a Participant
ceases to be a member of the Board before the applicable Restriction Period has
expired or under circumstances in which the Restriction Period does not
otherwise lapse, the Restricted Shares granted to such Participant shall
thereupon be forfeited and transferred back to the Company.

     

              During
the Restriction Period, a Participant shall have the right to vote his or her
Restricted Shares and shall have the right to receive any cash dividends with
respect to such Restricted Shares. All distributions, if any, received by a
Participant with respect to Restricted Shares as a result of any stock split,
stock distribution, combination of shares, or other similar transaction shall be
subject to the same restrictions as are applicable to the Restricted Shares to
which such distributions relate.

     

              9.
Grants of Options.
Subject to Section 3 hereof, the Administrator may grant Options to Participants
in such numbers and at such times as the Administrator determines to be
appropriate. Options shall be in such form and shall contain such terms and
conditions as required by the Plan and the Administrator. Each Option shall
include (through incorporation of provisions hereof or by reference in the
Option Agreement or otherwise) the substance of each of the following
provisions:

     

              (a)
Term. Each Option shall
cease to be exercisable ten (10) years after the date on which it is
granted.

     

              (b)
Exercise Price. The per
share exercise price for the Shares to be issued pursuant to exercise of an
Option shall be 100% of the Fair Market Value per Share on the date of
grant.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              (c)
Vesting. The
Administrator shall determine the exercise terms of all Options; provided, however, that except
to the extent provided by Section 13 hereof or as the Administrator may
determine to be applicable in the event that a Participant ceases to be a member
of the Board due to death, disability or mandatory retirement (if any), no
Option granted hereunder shall be exercisable at a rate faster than would permit
the Option to be exercised for more than 20% of the Shares of Common Stock that
are subject to such Option during any 12 month period commencing from the date
of grant.

     

              (d)
Exercise Period. Unless
otherwise determined by the Administrator:

     

                        (i)
subject to subsection (iii) below, in the event that an Optionee ceases to be a
Director for any reason other than death or Disability, his or her Options, to
the extent exercisable as of the date his or her services as a Director cease,
shall remain exercisable for a period of ninety (90) days, but in no event
longer than the term of the Option set forth in Section 9(a) above;

     

                        (ii)
in the event that an Optionee ceases to be a Director due to death or
Disability, his or her Options, to the extent exercisable as of the date his or
her services as a Director cease, shall remain exercisable for a period of
twelve (12) months, but in no event longer than the term of the Option set forth
in Section 9(a) above.

     

                        (iii)
in the event that an Optionee is removed as a Director for Cause, his or her
Options, to the extent not exercised as of the date of the Optionee’s removal,
shall be forfeited and shall not thereafter be exercisable.

     

              10.
Method of Exercise; Rights as a
Shareholder.

     

              (a)
Procedure for Exercise.
An Option shall be deemed exercised when the Company receives: (i) written or
electronic notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and Section 10(b) of the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee. An
Option may not be exercised for a fraction of a Share. Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 13 of
the Plan. Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is
exercised.

     

              (b)
Form of Consideration.
The Administrator shall determine the acceptable form of consideration for
exercising an Option, including the method of payment. Such consideration may
consist entirely of:

     

                        (i)
cash;

     

                        (ii)
check;

     

    (iii)
promissory note;

     

    (iv)
other Shares;

     

    (v)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (vii) any
combination of the foregoing methods of payment; or

     

    (vii)
such other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws.

     

              11.
Non-Transferability of
Options. Unless determined otherwise by the Administrator, an Option may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option transferable, such Option shall contain such
additional terms and conditions as the Administrator deems
appropriate.

     

              12.
Adjustments Upon Changes in
Capitalization. Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each outstanding Option
or Restricted Stock Award, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options or
Restricted Stock Awards have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been “effected without receipt of consideration.” Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Restricted Stock Award.

     

              13.
Corporate
Transactions.

     

                        (a)
Dissolution or
Liquidation. In the event of the proposed dissolution or liquidation of
the Company, each Optionee shall have the right to exercise his or her Option
until ten (10) days prior to such transaction as to all of the Shares covered
thereby, including Shares as to which an applicable Option would not otherwise
be exercisable. To the extent it has not been previously exercised, an Option
will terminate immediately prior to the consummation of such proposed
action.

     

                        (b)
Merger or Asset Sale.
In the event of a merger or consolidation of the Company with or into another
corporation or any other entity or the exchange of substantially all of the
outstanding stock of the Company for shares of another entity or other property
in which, after any such transaction the prior stockholders of the Company own
less than fifty percent (50%) of the voting shares of the continuing or
surviving entity, or in the event of the sale of all or substantially all of the
assets of the Company, (any such event, a “Corporate
Transaction”), then, absent a provision to the contrary in any particular
Option Agreement, the Optionee shall fully vest in and have the right to
exercise each outstanding Option as to all of the Shares covered thereby,
including Shares which would not otherwise be vested or exercisable. In the
event that the Administrator determines that the successor corporation or a
parent of the successor corporation refuses to assume or substitute an
equivalent option, then the Administrator shall notify all Optionees that all
outstanding Options shall be fully exercisable for a period of fifteen (15) days
from the date of such notice and that any Options that are not exercised within
such period shall terminate upon the expiration of such period. For the purposes
of this paragraph, all outstanding Options shall be considered assumed if,
following the consummation of the Corporate Transaction, the Option confers the
right to purchase or receive, for each Share subject to the Option immediately
prior to the consummation of the Corporate Transaction, the consideration
(whether stock, cash, or other property) received in the Corporate Transaction
by holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type
chosen by the holders of a majority of the outstanding Shares); provided, however, that if such
consideration received in the Corporate Transaction is not solely common stock
of the successor corporation or its parent corporation, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share subject to the
Option, to be solely common stock of the successor corporation or its parent
corporation equal in fair market value to the per share consideration received
by holders of Common Stock in the Corporate Transaction.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              14.
Grant Agreement. Each
grant of an Option or Restricted Stock Award under the Plan will be evidenced by
a document in such form as the Administrator may from time to time approve. Such
document will contain such provisions as the Administrator may in its discretion
deem advisable, including without limitation additional restrictions or
conditions upon the exercise of an Option, provided that such provisions are not
inconsistent with any of the provisions of the Plan.

     

              15.
Amendment and Termination of
the Plan.

     

              (a)
Amendment and
Termination. The Board may at any time amend, alter, suspend or terminate
the Plan.

     

              (b)
Stockholder Approval.
The Company shall obtain stockholder approval of any Plan amendment to the
extent necessary to comply with Applicable Laws.

     

              (c)
Effect of Amendment or
Termination. No amendment, alteration, suspension or termination of the
Plan shall impair the rights of any Participant, unless mutually agreed
otherwise between the Participant and the Administrator, which agreement must be
in writing and signed by the Participant and the Company. Termination of the
Plan shall not affect the Administrator’s ability to exercise the powers granted
to it hereunder with respect to Options or Restricted Shares granted under the
Plan prior to the date of such termination.

     

              16.
Repricing of Options.
Except in connection with a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, or exchange of shares), the terms of
outstanding Options may not be amended to reduce the exercise price of
outstanding Options or to cancel outstanding Options in exchange for cash, other
awards or Options with an exercise price that is less than the exercise price of
the original Options without stockholder approval.

     

              17.
Conditions Upon Issuance of
Shares.

     

              (a)
Legal Compliance.
Shares shall not be issued pursuant to a Restricted Stock Award or the exercise
of an Option unless the exercise of such Option and the issuance and delivery of
such Shares shall comply with Applicable Laws and shall be further subject to
the approval of counsel for the Company with respect to such
compliance.

     

              (b)
Investment
Representations. As a condition to the exercise of an Option or the
issuance of Restricted Shares, the Company may require the Participant to
represent and warrant at the time of any such exercise or issuance that the
Shares are being purchased or acquired, as the case may be, only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required. Not in
limitation of any of the foregoing, in any such case referred to in the
preceding sentence the Administrator may also require the Participant to execute
and deliver documents containing such representations (including the investment
representations described in this Section 16(b)), warranties and agreements as
the Administrator or counsel to the Company shall deem necessary or advisable to
comply with any exemption from registration under the Securities Act of 1933, as
amended, any applicable State securities laws, and any other applicable law,
regulation or rule.

     

              (c)
Additional Conditions.
The Administrator shall have the authority to condition the grant of any Option,
the issuance of Shares pursuant to the exercise of an Option, or the grant of
any Restricted Shares, in such other manner that the Administrator determines to
be appropriate, provided that such condition is not inconsistent with the terms
of the Plan.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

              18.
Inability to Obtain
Authority. The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

     

              19.
Reservation of Shares.
The Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     

              20.
Stockholder Approval.
The Plan shall be subject to approval by the stockholders of the Company. Such
stockholder approval shall be obtained in the manner and to the degree required
under Applicable Laws.

     

              21.
Withholding; Notice of
Sale. Each Participant shall, no later than the date as of which the
value of an Option or Restricted Stock Award or of any Shares or other amounts
received thereunder first becomes includable in the gross income of the
Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such income. The Company shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due to
the Participant. The Company’s obligation to deliver stock certificates to any
Participant is subject to and conditioned on any such tax obligations being
satisfied by the Participant. Subject to approval by the Administrator, a
Participant may elect to have the minimum required tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold from
Shares to be issued pursuant to any Option or Restricted Stock Award a number of
Shares with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii) transferring to
the Company Shares owned by the Participant with an aggregate Fair Market Value
(as of the date the withholding is effected) that would satisfy the minimum
withholding amount due.

     

              22.
Governing Law. This Plan
shall be governed by the laws of the State of Delaware.