Edgar Filing: INTELLI CHECK INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant |X|

Filed by a Party other than the Registrant |_|

Check the appropriate box:

| | Preliminary Proxy Statement |_| Confidential; for use
|X| Definitive Proxy Statement of the Commission Only
|_| Definitive Additional Materials (as permitted by Rule
|_| Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11 or Rule 14a-12

INTELLI-CHECK, INC.

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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Information Statement)

INTELLI-CHECK, INC.
246 Crossways Park West
Woodbury, New York 11797

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 11, 2001

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To the Shareholders of
INTELLI-CHECK, INC.

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
INTELLI-CHECK, INC. (the "Company"), a Delaware corporation, will be held at the
American Stock Exchange, 86 Trinity Place, New York, New York 10006, on
Wednesday, July 11, 2001, at 11:00 a.m., local time, for the following purposes:

1. To elect, subject to the provisions of the By-laws, two directors to
serve for a three-year term and one director for a two-year term,
until their re-elections and until their respective successors have
been duly elected and qualified;

2. To consider and act upon a proposal to approve the Company's 2001
Stock Option Plan;

3. To consider and act upon a proposal to approve the selection of
Arthur Andersen LLP as the Company's independent auditors for the
2001 fiscal year; and

4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.

The Board of Directors has fixed the close of business on June 1, 2001 as
the record date for the meeting and only holders of shares of record at that
time will be entitled to notice of and to vote at the Annual Meeting of
Shareholders or any adjournment or adjournments thereof.

By order of the Board of Directors.

Frank Mandelbaum
Chairman of the Board

Woodbury, New York
June 15, 2001

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IMPORTANT
IF YOU CANNOT PERSONALLY ATTEND THE MEETING, IT IS
REQUESTED THAT YOU INDICATE YOUR VOTE ON THE ISSUES
INCLUDED ON THE ENCLOSED PROXY AND DATE, SIGN AND MAIL
IT IN THE ENCLOSED SELF-ADDRESSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES

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INTELLI-CHECK, INC.
246 Crossways Park West
Woodbury, New York 11797

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P R O X Y S T A T E M E N T

for

ANNUAL MEETING OF SHAREHOLDERS

to be held July 11, 2001

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June 15, 2001

The enclosed proxy is solicited by the Board of Directors of
Intelli-Check, Inc., a Delaware corporation in connection with the Annual
Meeting of Shareholders to be held at the American Stock Exchange, 86 Trinity
Place, New York, New York 10006 on Wednesday, July 11, 2001, at 11:00 a.m.,
local time, and any adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting. Unless instructed to the contrary on the proxy,
it is the intention of the persons named in the proxy to vote the proxies:

o FOR the election as directors of the nominees listed below;

o FOR the adoption of the 2001 Stock Option Plan; and

o FOR the confirmation of the selection of Arthur Andersen LLP as the
Company's independent auditors for the 2001 fiscal year.

The record date with respect to this solicitation is the close of business
on June 1, 2001 and only shareholders of record at that time will be entitled to
vote at the meeting. The principal executive office of Intelli-Check is 246
Crossways Park West, Woodbury, New York 11797, and its telephone number is (516)
992-1900. The shares represented by all validly executed proxies received in
time to be taken to the meeting and not previously revoked will be voted at the
meeting. This proxy may be revoked by the shareholder at any time prior to its
being voted. This proxy statement and the accompanying proxy were mailed to you
on or about June 15, 2001.

QUORUM AND REQUIRED VOTE

The number of outstanding shares entitled to vote at the meeting is
7,827,923 common shares, par value $.001 per share. Each common share is
entitled to one vote. The presence in person or by proxy at the Annual Meeting
of the holders of a majority of such shares shall constitute a quorum. There is
no cumulative voting. Assuming the presence of a quorum at the Annual Meeting:

o directors shall be elected by a plurality of the votes cast;

o the affirmative vote of a majority of the common shares present at
the meeting and entitled to vote on each matter is required for:

o the approval of the 2001 Stock Option Plan;

o the confirmation of the selection of Arthur Andersen LLP, as
our independent auditors for fiscal 2001.

Votes shall be counted by one or more persons who shall serve as the
inspectors of election. The inspectors of election will canvas the shareholders
present in person at the meeting, count their votes and count the votes
represented by proxies presented. Abstentions and broker nonvotes are counted
for purposes of determining the number of shares represented at the meeting, but
are deemed not to have voted on the proposal. Broker nonvotes occur when a
broker nominee (which has voted on one or more matters at the meeting) does not
vote on one or more other matters at the meeting because it has not received
instructions to so vote from the beneficial owner and does not have
discretionary authority to so vote.

Proposal No. 1

ELECTION OF DIRECTORS

The persons named in the accompanying proxy will vote for the election of
the following three persons as directors, who are presently members of the Board
of Directors, to hold office for the terms set forth below or until their
respective successors have been elected and qualified. Unless specified to be
voted otherwise, each proxy will be voted for the nominees named below. All
three nominees have consented to serve as directors if elected.

Position With the Company Director Current Term
Name and Age and Principal Occupation Since Expires
------------ ------------------------ -------- ------------
Frank Mandelbaum, 67 Chairman, Chief Executive 1996 07/11/03
Officer and Director

Charles McQuinn, 60 Director 1999 07/11/03

Howard Davis, 45 Director 2000 07/11/01

In early May, 2001, Kevin Messina, a founder and director of our Company
since 1994 resigned from his position as our Senior Executive Vice President and
Chief Technology Officer. His term as director expires on July 11, 2001 and he
is not standing for election for another term. Due to these developments, our
corporate governance committee determined that Messrs.

Mandelbaum and McQuinn be nominated for three-year terms and Mr. Davis be
nominated for a two-year term.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During the fiscal year ended December 31, 2000, the board of directors
held five meetings. Only one of the directors did not attend all of the meetings
of the board of directors.

The board of directors has established a compensation committee which is
comprised of Mr. Davis, chairperson, Mr. Levy and Mr. Cohen. The compensation
committee reviews and determines the compensation for all officers and directors
of our company and reviews general policy matters relating to the compensation
and benefits of all employees. The compensation committee also administers the
stock option plans.

The board of directors has established a corporate governance committee,
which is comprised of Mr. McQuinn, chairperson, Ms. Berezin and Mr. Levy. The
corporate governance committee reviews our internal policies and procedures and
by-laws and acts as our nominating committee for the board of directors.

The board of directors has also established a technology oversight
committee comprised of Mr. Levy, chairperson, Ms. Berezin and Mr. McQuinn. The
technology oversight committee monitors the development of products and services
offered by our company and advises management in planning future development of
products and services within the framework of consumer, regulatory and
competitive environments. This committee also monitors actions taken to protect
our intellectual property and recommends appropriate actions in furtherance of
that protection.

The board of directors has established an audit committee which is
comprised of Ms. Berezin, chairperson, Mr. McQuinn and Mr. Davis. The audit
committee recommends to the board of directors the annual engagement of a firm
of independent accountants and reviews with the independent accountants the
scope and results of audits, our internal accounting controls and audit
practices and professional services rendered to us by our independent
accountants. In compliance with recent regulations, on May 8, 2000, the audit
committee adopted its charter which is attached as Exhibit A.

Report of the Audit Committee

The following shall not be deemed to be "soliciting material" or to be
"filed" with the Commission nor shall such information be incorporated by
reference into any future filing of Intelli- Check under the Securities Act of
1933 or the Securities and Exchange Act of 1934.

With respect to the audit of the fiscal year ended December 31, 2000, the
Audit Committee met once to review the fiscal year financial results and
Intelli-Check's audited consolidated financial statements.

In the course of this meeting, the Audit Committee discussed with the
Company's independent auditors those matters required to be discussed by
Statement on Accounting Standards No. 61, as amended, "Communication with Audit
Committees," by the Auditing Standards Board of the American Institute of
Certified Public Accountants.

We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, as amended,
"Independence Discussions with Audit Committee," by the Independence Standards
Board and have discussed with the auditors the auditors' independence.

Based on the reviews and discussions referred to above, we recommended to
the Board of Directors that the consolidated financial statements referred to
above be included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2000.

Audit Committee: Evelyn Berezin
Charles McQuinn
Howard Davis

Fiscal 2000 Audit Firm Fee Summary
----------------------------------

During fiscal year ended December 31, 2000, the Company retained its principal
auditor, Arthur Andersen, to provide services in the following category and
amount:

Audit Fees $51,500
Other Services -0-

DIRECTORS AND EXECUTIVE OFFICERS

Our board of directors is a classified board with one-third of the
directors being elected each year for a term of three years. The following table
sets forth certain information with respect to each director and executive
officer as of May 31, 2001:

Position With the Company Held Office Current Term
Name and Age and Principal Occupation Since Expires
------------ ------------------------ ----- -------

Frank Mandelbaum, 67 Chairman, Chief Executive 1996 07/11/03
Officer and Director

Edwin Winiarz, 43 Senior Executive Vice 1999 07/11/02
President, Treasurer and Chief
Financial Officer and Director

W. Robert Holloway, 61 Senior Executive Vice 1999
President-Sales

Position With the Company Held Office Current Term
Name and Age and Principal Occupation Since Expires
------------ ------------------------ ----- -------

Russell T. Embry, 38 Vice President, Information 1998
Technology
Interim Chief Technology 2001
Officer

Kevin Messina, 35 Director 1994 07/11/01

Paul Cohen, 60 Director 1996 07/11/02

Evelyn Berezin, 76 Director 1999 07/11/02

Charles McQuinn, 60 Director 1999 07/11/03

Jeffrey Levy, 59 Director 1999 07/11/03

Howard Davis, 45 Director 2000 07/11/01

Business Experience
-------------------

Frank Mandelbaum has served as our Chairman of the Board and Chief
Executive Officer since July 1, 1996. He also served as Chief Financial Officer
until September 1999. From January 1995 through May 1997, Mr. Mandelbaum served
as a consultant providing strategic and financial advice to Pharmerica, Inc.
(formerly Capstone Pharmacy Services, Inc.), a publicly held company. Prior to
January 1995, Mr. Mandelbaum was Chairman of the Board, Chief Executive Officer
and Chief Financial Officer of Pharmerica, Inc. From July 1994 through December
1995, Mr. Mandelbaum served as Director and Chairman of the Audit and
Compensation Committees of Medical Technology Systems, Inc., also a publicly
held company. From November 1991 through January 1995, Mr. Mandelbaum served as
Director of the Council of Nursing Home Suppliers, a Washington, D.C. based
lobbying organization. From 1974 to date, Mr. Mandelbaum has been Chairman of
the Board and President of J.R.D. Sales, Inc., a privately held financial
consulting company. As required by his employment agreement, Mr. Mandelbaum
devotes substantially all his business time and attention to our business.

Edwin Winiarz was elected Senior Executive Vice President in July 2000,
director in August 1999, and became Executive Vice President, Treasurer and
Chief Financial Officer on September 7, 1999. From July 1994 until August 1999,
Mr. Winiarz was Treasurer and Chief Financial Officer of Triangle Service Inc.,
a privately held national service company. From November 1990 through July 1994,
Mr. Winiarz served as Vice President Finance/Controller of Pharmerica, Inc.
(formerly Capstone Pharmacy Services, Inc.). From March 1986 until November
1990, Mr. Winiarz was a manager with the accounting firm of Laventhal & Horwath.
Mr. Winiarz is a certified public accountant and holds an MBA in management
information systems from Pace University.

W. Robert Holloway was Vice President-Sales from October 1999 to July 2000
and was elected Senior Executive Vice President in July 2000. From April 1999 to
October 1999, Mr.

Holloway was Director of Sales for The IdentiScan Company LLC. In February and
March 1999, Mr. Holloway worked as an independent consultant. From August 1996
to January 1999, Mr. Holloway was Global Sales Manager for Welch Allyn, Inc.
From October 1994 to July 1996, Mr. Holloway was Vice President and Sales
Manager of Bowne & Company of New York. Mr. Holloway holds an AB in economics
from Columbia University and an MBA in finance from Boston University.

Russell T. Embry was appointed Interim Chief Technology Officer in May
2001. He has served as our Vice President, Information Technology, since July
1999. From January 1998 to July 1999, Mr. Embry was Lead Software Engineer with
RTS Wireless. From April 1995 to January 1998, he served as Principal Engineer
at GEC-Marconi Hazeltine Corporation. From August 1994 through April 1995, he
was a staff software engineer at Periphonics Corporation. From September 1989 to
August 1994, Mr. Embry served as Senior Software Engineer at MESC/Nav-Com. From
July 1985 through September 1989, he was a software engineer at Grumman
Aerospace. Mr. Embry holds a BS in Computer Science from Stony Brook and an MS
in Computer Science from Polytechnic University, Farmingdale.

Kevin Messina, a co-founder of Intelli-Check, was appointed as Chief
Technology Officer in June 1998, and was elected Senior Executive Vice President
in July 2000. Between June 1998 and July 2000, Mr. Messina served as our
President. From our company's inception in October 1994 to June 1998, Mr.
Messina served as our Executive Vice President, Chief Information Officer and
Secretary. Prior to October 1994, Mr. Messina was the founder and President of
K.M. Software, which served the banking and commodities industries. From 1998
through 2000, Mr. Messina was selected to serve on various industry councils for
AAMVA and various committees of ANSI and the International Standards
Organization (ISO). In August 1998, Mr. Messina was elected to the US delegation
representing ANSI, the National Committee for Information and Technical
Standards, the Information Technology Industry Council, the International
Electrotechnical Commission and various other national bodies that are members
of ISO. In November 1998, Mr. Messina was elected chairperson of the committee
which was in charge of recommending encryption and bar code formats. Since then,
AAMVA has adopted the recommendation as the standard for U.S. and Canadian
driver licenses and ID cards for the five-year period ending in 2005. Mr.
Messina resigned his position as Senior Executive Vice President and Chief
Technology Officer in early May, 2001. Mr. Messina's term as a director expires
on July 11, 2001 and he is not standing for reelection.

Paul Cohen has served as a director of Intelli-Check since November 1996.
From December 1990 to present, Mr. Cohen has been the director of
pharmaceuticals for Allou Health and Beauty Care, Inc, a public company. Paul
Cohen is the father of Todd Cohen, our former President.

Evelyn Berezin was elected a director in August 1999. She has been, since
October 1987, an independent management consultant to technology based
companies. From July 1980 to September 1987, Ms. Berezin was President of
Greenhouse Management Company, a venture capital fund dedicated to investment in
early-phase high-technology companies. Ms. Berezin holds an AB in Physics from
New York University and has held an Atomic Energy Commission Fellowship. Ms.
Berezin is currently a member of the Board of Directors of Bionova Corp., a
publicly held biotechnology company. In addition, she has served on the boards
of a number of other public

companies including Cigna Corp., Datapoint Corp., Koppers Company, Inc. and
Genetic Systems Inc., as well as more than fourteen private technology-based
companies.

Charles McQuinn was elected a director in August 1999. He has been, since
1997, an independent product development/marketing consultant for Internet based
products. Mr. McQuinn has also served as CEO of The McQuinn Group, Inc., a
system integration and institutional marketing company, from November 1998 to
the present. From 1995 to 1997, Mr. McQuinn was President of DTN West, a fixed
income price quote company with products for banks and governments. From 1990 to
1995, Mr. McQuinn was President of Bonneville Market Information, an equities
price quote company with products for traders and brokers. From 1985 to 1990,
Mr. McQuinn was President of Bonneville Telecommunications Company, a satellite
video and data company. Prior to 1985, he was with Burroughs Corporation in
various product development/marketing/management positions. Mr. McQuinn holds a
BS in marketing from Ball State University and an MBA in management from Central
Michigan University.

Jeffrey Levy was elected a director in December 1999. He has been, since
February 1977 President and Chief Executive Officer of LeaseLinc, Inc., a
third-party equipment leasing company and lease brokerage. Prior to 1977 Mr.
Levy served as President and Chief Executive Officer of American Land Cycle,
Inc. and Goose Creek Land Cycle, LLC, arboreal waste recycling companies. During
that time he also served as Chief Operating Officer of ICC Technologies, Inc.
and AWK Consulting Engineers, Inc. Mr. Levy has had a distinguished career as a
member of the United States Air Force from which he retired as a colonel in
1988. He serves as a board member of the Northern Virginia Chapter of Mothers
Against Drunk Driving, the Washington Regional Alcohol Program, the Zero
Tolerance Coalition and the National Drunk and Drugged Driving Prevention Month
Coalition and is a member of the Virginia Attorney General's Task Force on
Drinking by College Students and MADD's National Commission on Underage
Drinking. Mr. Levy holds a BS in International Relations from the United States
Air Force Academy, a graduate degree in Economics from the University of
Stockholm and an MBA from Marymount University.

Howard Davis was appointed a non-voting advisor to the Board in December
1999 and elected a director in March 2000. He has been, since 1997, Executive
Vice President of GunnAllen Financial Inc., where he is the executive
responsible for the investment banking and corporate finance division. From 1990
to 1997 Mr. Davis was President and Chief Executive Officer of Kensington
Securities, Inc. In 1997, when Mr. Davis joined GunnAllen the business of
Kensington changed and was ultimately sold to an unrelated third party. Mr.
Davis has also served as President of Wentworth Securities, Inc. from 1988 to
1990 and prior to that as President of Numero Uno Franchise Corporation. He has
attended the University of Southern California, California State University,
Northridge and Kent State University where he majored in Finance and Accounting.

Executive officers are elected by and serve at the discretion of the board
of directors at each annual meeting of the board of directors, or when their
successors are elected and qualified to serve.

EXECUTIVE COMPENSATION

The following table sets forth compensation paid to executive officers
whose compensation was in excess of $100,000 for any of the three fiscal years
ended December 31, 2000. No other executive officers received total salary and
bonus compensation in excess of $100,000 during any of such fiscal years.

SUMMARY COMPENSATION TABLE

Long-Term
Annual Compensation Compensation
---------------------- ---------------------
Securities Underlying
Name And Principal Position Year(s) Salary ($) Options/SARS (#)
--------------------------- ------- ---------- ----------------------

Frank Mandelbaum 2000 150,000 --
Chairman & CEO 1999 150,000 75,000
1998 150,000 50,000

Kevin Messina 2000 150,000 --
Senior Executive President 1999 150,000 75,000
1998 150,000 --

Edwin Winiarz 2000 125,000 25,000
Senior Executive Vice President, Chief 1999 37,981 50,000
Financial Officer 1998 -- --

W. Robert Holloway 2000 115,000 --
Senior Executive Vice President - Sales 1999 19,904 20,000
1998 -- --

Russell T. Embry 2000 104,052 25,000
Vice President, Information 1999 40,000 40,000
Technology, Interim Chief 1998 -- --
Technology Officer

The options shown above were granted under the 1998 and 1999 Stock Option
Plans. The options granted to Messrs. Mandelbaum and Messina are exercisable at
$3.00 per share. Of the options granted to Mr. Winiarz, 50,000 at $5.00 per
share are currently exercisable and 25,000 will become exercisable at $10.75 per
share on September 1, 2001. The options granted to Mr. Holloway are exercisable
at $7.50 per share. All options expire five years after the date of grant. Of
the options granted to Mr. Embry, 12,500 are currently exercisable at $8.75 per
share, 15,000 are currently exercisable at $7.50 per share 20,000 are currently
exercisable at $11.625 per share and 12,500 will become exercisable on July 13,
2001 at $8.75 per share.

Mr. Mandelbaum has an employment agreement expiring December 31, 2001,
which provides for a base annual salary of $225,000. Mr. Messina had an
employment agreement which, prior to his resignation in early May, 2001, would
have expired December 31, 2001, which provided for a base annual salary of
$225,000. Both agreements provided that until such time as we receive payment
for gross sales of at least $1,000,000, the salaries were capped at $150,000.
During April 2001, that sales milestone was reached, and salaries for each of
Mr. Mandelbaum and Mr. Messina were adjusted. Because of our limited resources
in the past, Messrs. Mandelbaum and Messina have from time to time agreed to
defer the receipt of substantial portions of their salaries. In May 1999, Mr.
Mandelbaum's deferred salary was reduced by $150,000 by the issuance to him of
75,000 shares of our common stock and warrants entitling him to purchase an
additional 75,000 shares of our common stock at a price of $3.00 per share at
any time prior to May 3, 2001. In May 1999, Mr. Messina's deferred salary was
reduced by $10,126 through the issuance to him of 5,063 shares of our common
stock and warrants to purchase 5,063 shares of our common stock at a purchase
price of $3.00 per share at any time prior to May 3, 2001. As of June 30, 1999,
Mr. Mandelbaum's deferred salary was approximately $375,000, Mr. Messina's
deferred salary was approximately $200,000 and our former President Mr. Todd
Cohen's deferred salary was approximately $110,000. In June 1999, Mr. Messina
received, in lieu of all deferred salary, options to purchase 207,000 shares of
common stock at an exercise price of $3.00 per share. Also in June 1999, Mr.
Mandelbaum received, in lieu of all deferred salary, options to purchase 375,000
shares of common stock at an exercise price of $3.00 per share.

In June 1999, Mr. Todd Cohen, who resigned as President in April 1998,
received, in lieu of all deferred salary, options to purchase 110,000 shares of
common stock at an exercise price of $3.00 per share.

All the options granted in exchange for deferred salary expire five years
after the date of grant.

The following table summarizes options granted during the year ended
December 31, 2000 to the named executive officers other than stock options
granted for deferred compensation:

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Individual Grants Potential
Realizable Value at
Assumed Annual Rates
of Stock Price
Appreciation
for Option Term
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% of Total
Number of Options
Securities Granted To
Underlying Employees
Options in 2000 Exercise Expiration
Granted Fiscal Year Price Date 5% 10%

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Individual Grants Potential
Realizable Value at
Assumed Annual Rates
of Stock Price
Appreciation
for Option Term
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Edwin
Winiarz 25,000 10.4% $10.75 9/1/05 $74,250 $164,075
-----------------------------------------------------------------------------------------------
Russell T. 25,000 10.4% $8.75 7/13/05 $60,436 $133,549
Embry
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Pursuant to their employment agreements, Messrs. Mandelbaum and Messina
each received a grant in August 1999 of options to purchase 75,000 shares of our
common stock at a purchase price of $3.00 per share. The options became
exercisable with respect to 25,000 shares of our common stock on January 1,
2000, an additional 25,000 shares became exercisable on January 1, 2001, and the
final 25,000 shares will become exercisable on January 1, 2002, provided they
are employed by us at that date. The options expire five years from the date of
grant. Due to Mr. Messina's resignation on May 3, 2001, the remaining 25,000
will not become exercisable and, upon the expiration of his term as director on
July 11, 2001, he will have ninety days to exercise the 50,000 vested options or
they will terminate. During the year ended December 31, 2000, we granted
employees other than the executive officers named above options to purchase
156,000 shares of common stock under the 1998 Stock Option Plan and 190,000
shares of common stock under the 1999 Stock Option Plan.

The amounts shown as potential realizable value represent hypothetical
gains that could be achieved for the respective options if exercised at the end
of the option term. The 5% and 10% assumed annual rates of compounded stock
price appreciation are mandated by rules of the Securities and Exchange
Commission and do not represent our estimate or projection of our future common
stock prices. These amounts represent certain assumed rates of appreciation in
the value of our common stock from the fair market value on the date of grant.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the common stock and overall stock market conditions. The amounts
reflected in the table may not necessarily be achieved.

EMPLOYMENT AGREEMENTS

Effective January 1, 1999, Mr. Mandelbaum and Mr. Messina each entered
into a three-year employment agreement with Intelli-Check. Mr. Mandelbaum's
agreement expires December 31, 2001, while Mr. Messina's expired upon his
resignation in early May 2001. Each of the agreements provided for a base salary
of $225,000. However, until such time as we received payment for gross sales of
at least $1,000,000, the salaries were capped at $150,000. During April 2001,
that sales milestone was reached and the salaries for each of Mr. Mandelbaum and
Mr. Messina were adjusted. The agreements also provide for the payment of a
bonus if our sales exceed $2,000,000 in the previous year. The bonus will be in
the amount of $50,000 plus 1% of the amount of sales in excess of $2,000,000 in
each year. In addition, for each fiscal year ending during the term

of the employment agreements, we will grant to each of the executives an option
to purchase the greater of 25,000 shares of our common stock at fair market
value on the date of grant or 10,000 shares of our common stock at fair market
value on the date of grant for each full $250,000 by which pre-tax profits for
each year exceeds pre-tax profits for the prior fiscal year. However, we are not
required to grant options to purchase more than 150,000 shares of our common
stock with respect to any one fiscal year.

If there shall occur a change of control, as defined in the employment
agreement, the employee may terminate his employment at any time and be entitled
to receive a payment equal to 2.99 times his average annual compensation,
including bonuses, during the three years preceding the date of termination,
payable in cash to the extent of three months' salary and the balance in shares
of our common stock based on a valuation of $2.00 per share. Included within the
definition of change of control for purposes of the employment agreements is the
first day on which a majority of the directors of the company do not consist of
individuals recommended by Messrs. Mandelbaum, Messina and one outside director.
In early May, 2001, Mr. Messina resigned his positions as an employee of our
company and his employment agreement is no longer applicable.

We have entered into a two-year employment agreement with Mr. Winiarz,
which became effective on September 7, 1999. The agreement provides for a base
salary of $125,000. In addition, we granted Mr. Winiarz an option to purchase
50,000 shares of common stock of which 30,000 options were immediately
exercisable at $5.00 per share and 20,000 options became exercisable on
September 7, 2000 at $5.00 per share.

We entered into a two-year employment agreement with Mr. Holloway, which
became effective on October 25, 1999. The agreement provides for a base salary
of $115,000. In addition, we granted Mr. Holloway an option to purchase 50,000
shares of common stock at $7.50 per share, of which 20,000 shares are
immediately exercisable and 5,000 shares become exercisable for each 10,000
units of ID-Check sold that exceed 10,000. The maximum options that can be
earned in any calendar year may not exceed 100,000. Any options earned above the
initial 50,000 options will be at fair market value on the date of grant.

Under the terms of the agreements, each of the executives has the right to
receive his compensation in the form of shares of common stock valued at 50% of
the closing bid price of our shares of common stock as of the date of the
employee's election, which is to be made at the beginning of each quarter. In
addition, each of the employment agreements requires the executive to devote
substantially all his time and efforts to our business and contains
non-competition and nondisclosure covenants of the officer for the term of his
employment and for a period of two years thereafter. Each employment agreement
provides that we may terminate the agreement for cause.

COMPENSATION OF DIRECTORS

Non-employee directors receive a fee of $500 for attending board meetings
and $250 for attendance at such meetings held telephonically. They also receive
a fee of $250 for each committee meeting held on a date other than that of a
board meeting and are reimbursed for expenses incurred in connection with the
performance of their respective duties as directors. In August 1999, each
non-employee director, Messrs. Paul Cohen and McQuinn and Ms. Berezin,

received a grant of a non-qualified stock option to purchase an aggregate of
45,000 shares of our common stock upon their election as a director at an
exercise price of $3.00 per share. Of these options, 30,000 are immediately
exercisable and an additional 15,000 will be exercisable on the next anniversary
of the date of grant, provided the director is re-elected or continues to serve
the term to which he or she was elected. On December 13, 1999, Mr. Levy and Mr.
Davis were each granted non-qualified options to purchase 15,000 shares of our
common stock at an exercise price of $11.625, the fair market value on the date
of grant. These options are immediately exercisable. In addition, in July 2000,
they were each granted non-qualified options to purchase an aggregate of 30,000
shares of our common stock for serving as a director at an exercise price of
$8.25 per share. Of these options, 15,000 are immediately exercisable and 15,000
will be exercisable at the time of the annual meeting for Mr. Levy, and for Mr.
Davis provided he is re-elected. Options granted to non-employee directors
expire three months after the date his or her service terminates. Mr. Paul Cohen
had previously been granted options to purchase 30,000 shares of common stock
exercisable at $3.00 per share. Mr. Cohen also received an option to purchase
50,000 shares of common stock exercisable at $3.00 per share in connection with
a one-year consulting agreement dated November 1, 1997.

In addition, non-employee directors who are members of a committee are
entitled to receive grants of stock options for each year served. Each
chairperson of a committee receives options to purchase 2,500 shares of our
common stock, while a committee member receives options to purchase 1,500 shares
of our common stock. In March 2000 and July 2000, the following non-qualified
options were granted to committee chairpersons:

Name Committee Number of Options
---- --------- -----------------

March 2000 July 2000
---------- ---------

Ms. Berezin Audit 2,500 2,500
Mr. McQuinn Corporate Governance 2,500 2,500
Mr. Levy Technology Oversight 2,500 2,500
Mr. Davis Compensation 2,500

The following non-qualified options were granted to committee members:

March 2000 July 2000
---------- ---------

Mr. Cohen Compensation, Audit 3,000 1,500

Ms. Berezin Corporate Governance,
Technology Oversight 3,000 3,000

Mr. McQuinn Audit, Technology Oversight 3,000 3,000

Mr. Levy Corporate Governance, Compensation 3,000

Mr. Davis Audit 1,500 1,500

These options, which are exercisable at $12.125 for options granted in
March 2000 and $8.75 for options granted in July 2000, the fair market value on
the date of grant, are immediately exercisable during the committee member's
term and expire five years from date of grant.

COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION

The full Board of Directors made all decisions concerning executive
compensation during fiscal 2000. No executive officers of the Corporation served
as a member of the board of directors of another entity during fiscal 2000.

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of May 31, 2001 certain information
regarding beneficial ownership of Intelli-Check's common stock by each person
who is known by us to beneficially own more than 5% of our common stock. The
table also identifies the stock ownership of each of our directors, each of our
officers, and all directors and officers as a group. Except as otherwise
indicated, the stockholders listed in the table have sole voting and investment
powers with respect to the shares indicated.

Unless otherwise indicated, the address for each of the named individuals
is c/o Intelli-Check, Inc., 246 Crossways Park West, Woodbury, New York 11797.

Shares of common stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise or conversion of options, warrants or
other similar convertible or derivative securities are deemed to be outstanding
for the purpose of computing the percentage ownership of such individual or
group, but are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person shown in the table.

The applicable percentage of ownership is based on 7,827,923 shares
outstanding as of May 31, 2001.

--------------------------------------------------------------------------------
Name Shares Beneficially Owned
Percent
--------------------------------------------------------------------------------
Frank Mandelbaum 1,257,000 15.2
--------------------------------------------------------------------------------
Kevin Messina 1,367,836 16.7
--------------------------------------------------------------------------------
Edwin Winiarz 50,000 *
--------------------------------------------------------------------------------
W. Robert Holloway 22,000 *
--------------------------------------------------------------------------------
Russell T. Embry 47,500 *
--------------------------------------------------------------------------------
Paul Cohen 291,385 3.7
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Name Shares Beneficially Owned
Percent
--------------------------------------------------------------------------------
Evelyn Berezin 41,000 *
--------------------------------------------------------------------------------
Charles McQuinn 41,000 *
--------------------------------------------------------------------------------
Jeffrey Levy 38,300 *
--------------------------------------------------------------------------------
Howard Davis 35,500 *
--------------------------------------------------------------------------------
Todd Cohen 1,055,800 13.3
--------------------------------------------------------------------------------
Empire State Development, formerly 550,000 7.0
New York State Science and Technology
Foundation
--------------------------------------------------------------------------------
All Executive Officers and Directors as a group 3,216,521 35.1
(10 persons)
--------------------------------------------------------------------------------

* Indicates beneficial ownership of less than one percent of the total
outstanding common stock.

The amounts shown for Mr. Mandelbaum do not include 31,400 shares held by
Mr. Mandelbaum's wife, for which Mr. Mandelbaum disclaims beneficial ownership.

The amounts shown for Mr. Paul Cohen do not include 50,000 shares held by
Mr. Cohen's wife and 2,500 shares held by Mr. Cohen's daughter, for which Mr.
Cohen disclaims beneficial ownership.

Mr. Todd Cohen's address is P. O. Box 20054, Huntington Station, New York
11746.

Due to recent legislation, all assets of the New York State Small Business
Technology Investment Fund which were located in the New York State Science and
Technology Foundation were transferred to The Urban Development Corporation
d/b/a Empire State Development. The Commissioner of Empire State Development is
Charles A. Gargano. The members of the Board of Directors are Charles A.
Gargano, J. Patrick Barrett, Charles E. Dorkey, III, David Feinberg, Anthony
Gioia, Deborah Weight and Elizabeth McCaul. The address for that fund is 633
Third Avenue, New York, NY 10017.

The amounts shown in the table above for the following persons include the
right to acquire the number of shares shown pursuant to currently exercisable
stock options and/or warrants at the exercise price shown:

--------------------------------------------------------------------------------
NAME NUMBER OF SHARES EXERCISE PRICE
--------------------------------------------------------------------------------
Frank Mandelbaum 550,000 $ 3.00
--------------------------------------------------------------------------------
Kevin Messina 382,000 $ 3.00
--------------------------------------------------------------------------------
Edwin Winiarz 50,000 $ 5.00
--------------------------------------------------------------------------------
W. Robert Holloway 20,000 $ 7.50
--------------------------------------------------------------------------------
Russell T. Embry 15,000 $ 7.50
20,000 11.625
12,500 8.75
--------------------------------------------------------------------------------
Paul Cohen 110,000 $ 3.00
3,000 12.125
1,500 8.75
--------------------------------------------------------------------------------
Evelyn Berezin 29,500 $ 3.00
5,500 12.125
5,500 8.75
--------------------------------------------------------------------------------
Charles McQuinn 29,000 $ 3.00
5,500 12.125
5,500 8.75
--------------------------------------------------------------------------------
Jeffrey Levy 15,000 $11.625
2,500 12.125
20,500 8.75
--------------------------------------------------------------------------------
Howard Davis 15,000 $11.625
1,500 12.125
19,000 8.75
--------------------------------------------------------------------------------
Todd Cohen 110,000 $ 3.00
--------------------------------------------------------------------------------

CERTAIN TRANSACTIONS

In October 1994, Messrs. Todd Cohen and Kevin Messina co-founded
Intelli-Check and each purchased 975,000 shares of common stock for $975. In
April 1998, Mr. Todd Cohen resigned as an officer of our company for personal
reasons and in August 1999, he completed his term as a director. In May 2001,
Mr. Messina resigned as an officer of our company for personal reasons and will
complete his term as director on July 11, 2001.

In June 1996, Mr. Messina's company, K.M. Software, assigned two
copyrights covering certain software employed by ID-Check and a patent
application covering the ID-Check technology to Intelli-Check for an agreement
to pay $98,151 plus interest. The agreement also gave K.M. Software, or its
successor, the right to reclaim the rights to the copyrights and the patent
under certain specified conditions. In May 1999, the prior agreement was
superseded and in exchange Mr.

Messina received 69,937 shares of our common stock and warrants to purchase
69,937 shares of our common stock, at $3.00 per share, exercisable at any time
prior to May 3, 2001. The May 1999 agreement provides for the payment by
Intelli-Check of royalties equal to 0.005% of gross sales from $2,000,000 to
$52,000,000 and 0.0025% of gross sales in excess of $52,000,000. Also, in May
1999, Mr. Messina's deferred salary was reduced by $10,126 through the issuance
to him of 5,063 shares of our common stock and warrants to purchase 5,063 shares
of our common stock at a purchase price of $3.00 per share at any time prior to
September 30, 2001. In June 1999, the balance of Mr. Messina's deferred salary
was reduced to zero by the issuance of options to purchase 207,000 shares of our
common stock at a purchase price of $3.00 per share at any time prior to June
30, 2004.

In June 1996, Frank Mandelbaum, Intelli-Check's Chief Executive Officer
and Chairman of the Board of Directors, purchased 950,000 shares of common stock
for $50,000. From time to time since then, Mr. Mandelbaum loaned money to
Intelli-Check totaling $142,000. In November 1997, Mr. Mandelbaum converted his
outstanding loans into 71,000 shares of our common stock and warrants to
purchase 71,000 shares of our common stock at $3.00 per share expiring on June
30, 2000. In May 1999, Mr. Mandelbaum's deferred salary was reduced by $150,000
through the issuance to him of 75,000 shares of our common stock and warrants to
purchase 75,000 shares of our common stock at a purchase price of $3.00 per
share at any time prior to September 30, 2001. In June 1999, Mr. Mandelbaum's
deferred salary was reduced to zero by the issuance of options to purchase
375,000 shares of our common stock at an exercise price of $3.00 per share at
any time prior to June 30, 2004. In December 2000, Mr. Mandelbaum exercised
71,000 warrants.

In November 1997, one of our directors, Paul Cohen, received an option to
purchase 50,000 shares of common stock exercisable at $3.00 per share in
connection with a one-year consulting agreement. Also in November 1997, Mr.
Cohen's wife purchased 25,000 units consisting of one share of common stock and
one warrant to purchase an additional share of common stock for $3.00 in
connection with one of our private placements. The purchase price was $50,000.
In August 1999, Mr. Cohen purchased one unit in connection with our most recent
private placement. The unit consists of a promissory note having a principal
amount of $50,000, bearing interest at the annual rate of 10% and a warrant to
purchase 2,500 shares of our common stock for $3.00 per share. In December 2000,
Mr. Cohen exercised 37,500 warrants.

In June 1999, all deferred compensation due to Todd Cohen, our former
President and director, was eliminated by the issuance of options to purchase
110,000 shares of common stock at an exercise price of $3.00 per share at any
time prior to June 30, 2004.

Proposal No. 2

PROPOSED 2001 STOCK OPTION PLAN

There is being submitted to the shareholders for approval at the Annual
Meeting, the Intelli-Check, Inc. 2001 Stock Option Plan which authorizes the
issuance not later than December 31, 2011 of options to purchase up to 500,000
of our common shares. The 2001 Plan

was approved by our board of directors at a meeting held on May 7, 2001 subject
to shareholder approval.

Our board of directors believes that Intelli-Check and our shareholders
have benefitted from the grant of stock options in the past and that similar
benefits will result from the adoption of the 2001 Plan. We believe that stock
options play an important role in providing eligible employees with an incentive
and inducement to contribute fully to the further growth and development of our
company because of the opportunity to acquire a proprietary interest in our
company on an attractive basis.

All stock options granted under the 2001 Plan will be exercisable at such
time or times and in such installments, if any, as our compensation committee or
the board of directors may determine and expire no more than ten years from the
date of grant. The exercise price of the stock option will be the fair market
value of our common shares on the date of grant and must be paid in cash. The
fair market value of our shares at May 31, 2001 was $8.55. Options are
non-transferable except by will or by the laws of descent and distribution. Each
option to be granted under the 2001 Plan will be evidenced by an agreement
subject to the terms and conditions set forth above.

Options granted under the 2001 Plan terminate three months after the
optionee's relationship with us is terminated except if termination is by reason
of death or disability. In the case of death or disability, the option
terminates twelve months after the optionee's death or termination of employment
by reason of disability. If an employee's employment is terminated for cause,
then any unexercised options held by the employee are cancelled upon termination
of employment. In the case of a non-employee director who has served his or her
full term, all vested options remain exercisable until the termination date set
forth in the stock option agreement to which such options relate.

Our board of directors has a limited right to modify or amend the 2001
Plan which does not include the right to increase the number of shares which is
available for the grant of options.

During the term of the 2001 Plan, our eligible employees will receive, for
no consideration prior to exercise, the opportunity to profit from any rise in
the market value of the common stock. This will dilute the equity interest of
our other shareholders. The grant and exercise of the options also may affect
our ability to obtain additional capital during the term of any options.

The 2001 Plan will be administered by the compensation committee appointed
by the board of directors. The compensation committee currently consists of
Messrs. Davis, Chair, Levy and Paul Cohen. None of Mr. Cohen, Mr. Levy or Mr.
Davis is an employee of our company.

Our board of directors is recommending the adoption of the 2001 Plan. The
description of the proposed 2001 Plan set forth above is qualified in its
entirety by reference to the text of the 2001 Plan as set forth in Exhibit B.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the Federal income tax treatment of the
stock options which may be granted under the 2001 Plan based upon the current
provisions of the Internal Revenue Code.

An option holder who exercises a non-qualified stock option will recognize
taxable compensation at the date of exercise with respect to the difference
between the fair market value of the option shares at exercise and the exercise
price paid to purchase such shares. Intelli-Check generally will be entitled to
a corresponding deduction for such compensation. At such time as the option
stock is sold, the option holder will recognize either short-term or long-term
capital gain income (depending upon the length of time such stock has been held)
in an amount equal to the difference between the amount realized on such sale
and the tax basis of the shares sold. In general, the option holder's tax basis
in the shares will be equal to their fair market value on the date of exercise,
and the holding period of the shares will begin at exercise with respect to the
excess of the option stock sale price over the exercise price paid to purchase
such shares.

An option holder which exercises an incentive stock option will not
realize any regular taxable income. At the date of exercise, the option holder
may, depending on his or her personal tax situation, be subject to Alternative
Minimum Tax ("AMT") because the difference between the fair market value of the
shares at exercise and the exercise price represents an AMT preference item.

The tax consequences of a disposition of incentive stock option depends
upon the length of time the stock has been held by the employee. If the employee
holds the option stock for at least two years after the option is granted and
one year after the exercise of the option, any gain realized on the sale is
long-term capital gain. In order to receive long-term capital gain treatment,
the employee must remain in Intelli-Check's employ from the time the option is
granted until three months before its exercise (twelve months in the event of
termination due to the death of disability of the employee). Intelli-Check will
not be entitled to a deduction in this instance.

If the option stock is not held for the requisite holding period described
above, a "disqualifying disposition" will occur. A disqualifying disposition
results in the employee recognizing ordinary compensation income to the extent
of the lesser of: (1) the fair market value of the option stock on the date of
exercise less the option price ("the spread"), or (2) the amount realized on
disposition of the option stock less the option price. Intelli-Check will be
entitled to a deduction at this time for such ordinary compensation income. The
option holder's basis in such shares will be the fair market value on the date
of exercise.

The exercise of an option through the exchange of common shares already
owned by the option holder generally will not result in any taxable gain or loss
on the unrealized appreciation of the shares so used and so long as the shares
were held by the optionee for at least six months prior to exercise of the
option and Intelli-Check will not realize any tax consequences.

If an option holder transfers previously owned stock that was acquired
other than by exercising incentive stock options to exercise a non-qualified
option or an incentive stock option, this may be done in a manner that will not
result in taxation up to the fair market value of the surrendered stock. This
transaction is viewed as a tax-free exchange of stock in the same corporation up
to an equal value of option stock. In this situation, there is no taxation to
the option holder or to Intelli-Check on any appreciation in value of the
previously held stock. However, if additional shares of option stock are
received by the option holder, they are treated as taxable compensation for
services

includible in his or her gross income. Intelli-Check is entitled to a
corresponding tax deduction for such compensation.

If an employee transfers previously owned incentive stock option stock to
exercise an incentive stock option, this may be done in a tax-free manner unless
a disqualifying disposition of such previously owned incentive stock option
shares, incentive stock option "pyramiding rules" apply whereby the
post-acquisition gain in value of such shares is taxed to the employee as
compensation. In addition, compensation is attributed to the employee to the
extent of the spread at the acquisition date of such previous owned incentive
stock option shares. Intelli-Check is entitled to a corresponding tax deduction
for such compensation.

For purposes of determining whether shares have been held for the
long-term capital gain holding period, the holding period of shares received
will generally include the holding period of shares surrendered only if the
shares received have the same basis, in whole or in part, in the employee's
hands as the shares surrendered.

Whenever under the 2001 Plan shares are to be delivered upon exercise of a
stock option, Intelli-Check shall be entitled to require as a condition of
delivery that the option holder remit to Intelli-Check an amount sufficient to
satisfy all Federal, state, and other governmental withholding tax requirements
related thereto.

Proposal No. 3

RATIFICATION OF SELECTION OF AUDITORS

Our board of directors recommends the selection of Arthur Andersen LLP as
independent auditors to examine Intelli-Check's financial statements for the
fiscal year ending December 31, 2001.

Representatives of Arthur Andersen LLP are expected to be present at the
annual meeting of shareholders with the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.

OTHER MATTERS

The Board of Directors does not know of any matters other than those
mentioned above to be presented to the meeting.

SHAREHOLDER PROPOSALS

Proposals by any shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by Intelli-Check for inclusion in
material relating to such meeting not later than March 14, 2002.

EXPENSES

All expenses in connection with solicitation of proxies will be borne by
Intelli-Check. Officers and regular employees of Intelli-Check may solicit
proxies by personal interview and telephone and telegraph. Brokerage houses,
banks and other custodians, nominees and fiduciaries will be reimbursed for
out-of-pocket and reasonable expenses incurred in forwarding proxies and proxy
statements.

By Order of the Board of Directors,

Frank Mandelbaum
Chairman

Exhibit A

INTELLI-CHECK, INC.

AUDIT COMMITTEE

Charter

The Audit Committee of the Board of Directors (the "Committee") shall assist the
Board of Directors in fulfilling its fiduciary and other obligations with
respect to accounting and financial matters. Specifically, and without limiting
the generality of the foregoing, the Committee shall:

1. Consist of three Qualified Independent members of the Board of
Directors ("Board") appointed by the Board. The Board also appoints
the chairperson of the Committee.

2. Review the qualification, performance and independence of the
Corporation's independent auditors and recommend independent
auditors for appointment annually by the Board.

3. Establish an open avenue of communications among the independent
accountants, financial and senior management and the Board of
Directors. Affirm that the independent accountants report directly
to the Audit Committee and the Board.

4. Review with the auditors the adequacy and effectiveness of the
Corporation's system of internal financial controls and accounting
practices to achieve reliability and integrity in the Corporation's
financial statements, and initiate such examinations of such
controls and practices as the Committee deems advisable. As part of
this process, the Committee shall review the auditor's management
review letter each year.

5. Review the authority and duties of the Corporation's chief financial
officer and chief accounting officer and the performance by each of
them of their respective duties.

6. Prior to the commencement of the Corporation's annual external
audit, review with the Corporations' independent auditors the scope
of their audit function and estimated audit fees.

7. Subsequent to the completion of the Corporation's annual external
audit, review the report and recommendations of the independent
auditors with the independent auditors and the Corporations'
management, as well as any difficulties encountered during the
course of the audit.

8. Review the annual and quarterly consolidated financial statements of
the Corporation and other financial disclosures of the Corporation
and the accounting principles being applied in such statements and
disclosures.

Exhibit A

9. Prior to public release, review with management and the independent
accountants, the financial results for the prior year including the
Corporation's annual report on Form 10-K.

10. Meet with the chief financial officer and the independent
accountants, in separate executive sessions, to discuss any matters
that the committee or these groups believe should be considered
privately.

11. Review the insurance programs of the Corporation including
professional malpractice, general liability, director and officer
liability and property insurance, and the insurers carrying the
Corporation's insurance.

12. Oversee the establishment and thereafter periodically review a
corporate code of conduct and the Corporation's policies on ethical
business practices.

13. Review the committee's charter annually and revise as appropriately.

14. Define a policy on corporate securities trading.

Exhibit B

Intelli-Check, Inc.
2001 Stock Option Plan

1. Purpose of the Plan. The purpose of this 2001 Stock Option Plan is to
attract and retain the best available personnel for positions of
responsibility within the Company, to provide additional incentive to
Employees, Directors, Consultants and other Independent Contractors of the
Company, and to promote the success of the Company's business through the
grant of options to purchase shares of the Company's Common Stock. Options
granted hereunder may be either Incentive Stock or Non-Qualified Stock
Options, at the discretion of the Board. The type of options granted shall
be reflected in the terms of written Stock Option agreements. The Company
intends that the Plan meet the requirements of Rule 16b-3 under the
Exchange Act and that the transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors
of the Company pursuant to the Plan will be exempt from the operation of
Section 16(b) of the Exchange Act. Further, the Plan is intended to
satisfy the performance-based exception to the limitation on the Company's
tax deductions imposed by Section 162(m) of the Code. In all cases, the
terms, provisions, conditions and limitations of the Plan shall be
construed and interpreted consistent with the Company's intent as stated
in this Section 1.

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

a. "Board" shall mean the Board of Directors of the Company or, when
appropriate, the Committee administering the Plan, if one has been
appointed.

b. "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.

c. "Common Stock" shall mean the common stock of the Company described
in the Company's Certificate of Incorporation, as amended.

d. "Company" shall mean Intelli-Check, Inc., a Delaware corporation,
and shall include any parent or subsidiary corporation of the
Company as defined in Sections 425 (e) and (f), respectively, of the
Code.

e. "Committee" shall mean the Compensation Committee composed of two or
more directors who are Non-Employee Directors and Outside Directors
and who shall be elected by and shall serve at the pleasure of the
Board and shall be responsible for administering the Plan in
accordance with paragraph (a) of Section 4 of the Plan.

f. "Employee" shall mean key employees, including salaried officers and
directors and other key individuals employed by the Company. The
payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company, except as provided in
Section 9(b) of the Plan.

g. "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended.

h. "Fair Market Value" shall mean, with respect to the date a given
Option is granted or exercised, the value of the Common Stock
determined by the Board in such manner as it may deem equitable for
Plan purposes but, in the case of an Incentive Stock Option, no less
than is required by applicable laws or regulations; provided,
however, that

Exhibit B

where there is a public market for the Common Stock, the Fair Market
Value per Share shall be the average of the bid and asked prices of
the Common Stock on the date of grant, as reported in the Wall
Street Journal (or, if not so reported, as otherwise reported in the
National Association of Securities Dealers Automated Quotation
System) or, in the event the Common Stock is listed on the New York
Stock Exchange or the NASDAQ Stock Market, the American Stock
Exchange, the NASDAQ/National Market System the Fair Market Value
per Share shall be the closing price on such exchange on the date of
grant of the Option, as reported in the Wall Street Journal.

i. "Incentive Stock Option" shall mean an Option which is intended to
qualify as an incentive stock option within the meaning of Section
422 of the Code.

j. "Non-Employee Director" shall mean a non-employee director as
defined in Rule 16b-3.

k. "Non-Qualified Stock Option" shall mean an Option, which is not an
Incentive Stock Option.

l. "Option" shall mean a stock option granted under the Plan.

m. "Optioned Stock" shall mean the Common Stock subject to an Option.

n. "Optionee" shall mean an Employee of the Company who has been
granted one or more Options.

o. "Outside Director" shall mean an outside director as defined in
Section 162(m) of the Code or rules and regulations promulgated
thereunder.

p. "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 425(e) of the Code.

q. "Plan" shall mean this 2001 Stock Option Plan.

r. "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.

s. "Stock Option Agreement" shall mean the written agreement between
the company and the Optionee relating to the grant of an Option.

t. "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 425(f) of the Code.

u. "Tax Date" shall mean the date an Optionee is required to pay the
Company an amount with respect to tax withholding obligations in
connection with the exercise of an option.

3. Common Stock Subject to the Plan. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of the shares which may be
optioned and sold under the Plan is Five Hundred Thousand (500,000) Shares
of Common Stock. The Shares may be authorized, but unissued, or previously
issued Shares acquired by the Company and held in treasury.

If an Option should expire or become unexercisable for any reason without having
been exercised in full, the unpurchased Shares covered by such Option shall,
unless the Plan shall have been terminated, be available for future grants of
Options. The maximum number of Shares that may be subject to options granted
under the Plan to any individual in any calendar year shall not exceed 150,000
Shares and the method of counting such Shares shall conform to any requirements

Exhibit B

applicable to performance-based compensation under Section 162(m) of the Code or
the rules and regulations promulgated thereunder.

4. Administration of the Plan

(a) Procedure.

i) The Plan shall be administered by the Board in accordance with
Rule 16b-3 under the Exchange Act ("Rule 16b-3"); provided,
however, that the Board may appoint a Committee to administer
the Plan at any time or from time to time, and provide
further, that if the Board is not "disinterested" within the
meaning of Rule 16b-3, the Plan shall be administered by a
Committee in accordance with Rule 16b-3.

ii) Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause),
appoint new members in substitution therefor, and fill
vacancies however caused; provided, however, that at no time
may any person serve on the Committee if that person's
membership would cause the Committee not to satisfy the
"disinterested administration" requirements of Rule 16b-3.

(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant
Incentive Stock Options and Non-Qualified Stock Options; (ii) to
determine, upon review of relevant information and in accordance
with Section 2 of the Plan, the Fair Market Value of the Common
Stock; (iii) to determine the exercise price per Share of Options to
be granted, which exercise price shall be determined in accordance
with Section 8(a) of the Plan; (iv) to determine the Employees to
whom, and the time or times at which, Options shall be granted and
the number of Shares to be represented by each Option; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and
provisions of each Option granted including, without limitation, the
terms of exercise (including the period of exercisability) or
forfeiture of Options granted hereunder upon termination of the
employment of an Employee; (viii) to accelerate or defer (with the
consent of the Optionee) the exercise date of any Option; (ix) to
authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously
granted by the Board; (x) to accept or reject the election made by
an Optionee pursuant to Section 17 of the Plan; and (xi) to make all
other determinations deemed necessary or advisable for the
administration of the Plan.

(c) Effects of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all
Optionees and any other holders of any Options granted under the
Plan.

(d) Inability of Committee to Act. In the event that for any reason the
Committee is unable to act or if the Committee at the time of any
grant, award or other acquisition under the Plan of options or
Shares does not consist of two or more Non-Employee Directors,

Exhibit B

than any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of
Rule 16b-3.

5. Eligibility.

(a) Consistent with the Plan's purposes, Options may be granted only to
Employees, Directors, Consultants and other Independent Contractors
of the Company as determined by the Board. An Employee who has been
granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options. Incentive Stock Options may be granted
only to those Employees who meet the requirements applicable under
Section 422 of the Code.

(b) Unless otherwise provided in the applicable Stock Option Agreement,
all Options granted to the Employees of the Company under the Plan
will be subject to forfeiture until such time as the Optionee has
been continuously employed by the Company for one year after the
date of the grant of the Options, and may not be exercised prior to
such time. At such time as the Optionee has been continuously
employed by the Company for one year, the foregoing restriction
shall lapse and the Optionee may exercise the Options at any time
otherwise consistent with the Plan.

(c) With respect to Incentive Stock Options, the aggregate Fair Market
Value (determined at the time the Incentive Stock Option is granted)
of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the employee during any
calendar year (under all employee benefit plans of the Company)
shall not exceed One Hundred Thousand Dollars ($100,000).

6. Effective Date of Plan; Termination of the Plan and Stock Options. The
Plan shall become effective upon approval of the Board provided, however,
that the Plan shall be subject to the affirmative vote of the holders of a
majority of the common stock of the Company on or before December 31,
2001. No Option may be granted under the Plan after July 31, 2011 (ten
years from the effective date of the Plan); provided, however that the
Plan and all outstanding Options shall remain in effect until such Options
have expired or until such Options are canceled.

7. Term of Option. Unless otherwise provided in the Stock Option Agreement,
the term of each Option shall be five (5) years from the date of grant
thereof. In no case shall the term of any Option exceed ten (10) years
from the date of grant thereof. Notwithstanding the above, in the case of
an Incentive Stock Option granted to an Employee who, at the time the
Incentive Stock Option is granted, owns ten percent (10%) or more of the
Common Stock as such amount is calculated under Section 422(b)(6) of the
Code ("Ten Percent Stockholder"), the term of the Incentive Stock Option
shall be five (5) years from the date of grant thereof or such shorter
time as may be provided in the Stock Option Agreement. If an option
granted to the Company's chief executive officer or to any of the
Company's other four most highly compensated officers is intended to
qualify as "performance-based" compensation under

Exhibit B

Section 162(m) of the Code, the exercise price of such option shall not be
less than 100% of the Fair Market Value of a Share on the date such option
is granted.

8. Exercise Price and Payment.

(a) Exercise Price. The per Share exercise price for Shares to be issued
pursuant to exercise of an Option shall be determined by the Board,
but in the case of an Incentive Stock Option shall be no less than
one hundred percent (100%) of the Fair Market Value per Share on the
date of grant, and in the case of Non-Qualified Stock Option shall
be no less than eighty-five percent (85%) of the Fair Market Value
per Share on the date of the grant. Notwithstanding the foregoing,
in the case of an Incentive Stock Option granted to an Employee who,
at the time of the grant of such Incentive Stock Option, is a Ten
Percent Stockholder, the per Share exercise price shall be no less
than one hundred ten percent (110%) of the Fair Market Value per
Share on the date of grant.

(b) Payment. The price of an exercised Option and the Employee's portion
of any taxes attributable to the delivery of Common Stock under the
Plan, or portion thereof, shall be paid in United States dollars in
cash or by check, bank draft or money order payable to the order of
the Company.

9. Exercise of an Option.

(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance
criteria with respect to the Company and/or the Optionee, and as
shall be permissible under the terms of the Plan. Unless otherwise
determined by the Board at the time of grant, an Option may be
exercised in whole or in part. An Option may not be exercised for a
fraction of a Share.

An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the
Option. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan.

Exhibit B

Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares to which the Option is exercised.

(b) Termination of Status as an Employee. Unless otherwise provided in
the applicable Stock Option Agreement, if an Employee's employment
by the Company is terminated for cause, then any Option held by the
Employee shall be immediately canceled upon termination of
employment and the Employee shall have no further rights with
respect to such Option. Unless otherwise provided in the Stock
Option Agreement, if an Employee's employment by the Company is
terminated for reasons other than cause, and does not occur due to
death or disability, then the Employee may, with the consent of the
Board, for ninety (90) days after he ceases to be an Employee of the
Company, exercise his Option to the extent that he was entitled to
exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of such
termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein or in the
applicable Stock Option Agreement, the Option shall terminate. For
the purposes of this plan only, a Non-Employee Director is deemed to
be an Employee.

(c) Disability. Unless otherwise provided in the applicable Stock Option
Agreement, notwithstanding the provisions of Section 9(b) above, in
the event an Employee is unable to continue his employment with the
Company as a result of his permanent and total disability (as
defined in Section 22(e)(3) of the Code), he may, but only within
twelve (12) months from the date of termination, exercise his Option
to the extent he was entitled to exercise at the date of such
termination. To the extent that he was not entitled to exercise the
Option at the date of such termination, or if he does not exercise
such Option (which he was entitled to exercise) within the time
specified herein or in the applicable Stock Option Agreement, the
Option shall terminate.

(d) Death. Unless otherwise provided in the Stock Option Agreement, if
an Employee dies during the term of the Option and is at the time of
his death an Employee of the Company who shall have been in
continuous status as an Employee since the date of grant of the
Option, the Option may be exercised at any time within twelve (12)
months following the date of death (or such other period of time as
is determined by the Board) by the Employee's estate or by a person
who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that an Employee was entitled to
exercise the Option on the date of death. To the extent the Employee
was not entitled to exercise the Option on the date of death, or if
the Employee's estate, or person who acquired the right to exercise
the Option by bequest or inheritance, does not exercise such Option
(which he was entitled to exercise) within the time specified herein
or in the applicable Stock Option Agreement, the Option shall
terminate.

10. Non-Transferability of Options. 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

Exhibit B

distribution, or pursuant to a "qualified domestic relations order" under
the Code and ERISA, and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

11. Adjustments Upon Changes in Capitalization, Merger or Change of Control.

(a) Subject to any required action by the stockholders of the Company,
the number of shares of Common Stock covered by each outstanding
Option, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options
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 Board, 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.

(b) Anything herein to the contrary notwithstanding, upon the
dissolution or liquidation of the Company or upon a merger,
consolidation or reorganization of the Company with one or more
other entities in which the Company is not the surviving entity, or
upon a sale of substantially all of the assets of the Company to
another entity, or upon any transaction (including, without
limitation, a merger or reorganization in which the Company is the
surviving entity) approved by the Board that results in any person
or entity (or person or entities acting as a group or otherwise in
concert, owning fifty percent (50%) or more of the combined voting
power of all classes of securities of the Company) (collectively, a
"Change of Control"), the Board, in its discretion, may determine
that all Stock Options outstanding hereunder shall become
immediately exercisable prior to the scheduled consummation of the
event for a period to be determined by the Board (the "Change of
Control Exercise Period"). Any exercise of a Stock Option during the
Change of Control Exercise Period shall be conditioned upon the
consummation of the event and shall be effective only immediately
before the consummation of the event. Upon consummation of any such
event, the Plan and all outstanding but unexercised Stock Options
shall terminate, except to the extent provision is made in writing
in connection with such transaction for the continuation of the Plan
or the assumption of such Stock Options theretofore granted, or for
the substitution for such Stock Options for new options covering the
stock of a successor entity, or a parent or subsidiary thereof, with
appropriate adjustments as to the number

Exhibit B

and kinds of shares and exercise prices, in which event the Plan and
Stock Options theretofore granted shall continue in the manner and
under the terms so provided. The Board shall send written notice of
an event that will result in such a termination to all individuals
who hold Stock Options not later than the time at which the Company
gives notice thereof to its shareholders.

12. Grants of Options.

(a) The date of grant of an Option shall, for all purposes, be the date
on which the Board makes the determination granting such Option.
Notice of the determination shall be given to each Employee to whom
an Option is so granted within a reasonable time after the date of
such grant.

(b) Officers, employee directors, other key employees of the Company or
any subsidiary, consultants and independent contractors shall be
eligible to be selected by the Board to receive stock option grants.

i) Stock Options shall be granted to each of the Non-Employee
Directors to purchase forty-five thousand (45,000) shares of
Common Stock on the first day of his/her three-year term as
director, at a purchase price equal to the fair market value
on the date of grant. If the term is less than three years,
the option grant shall be prorated.

ii) Stock Options granted to Non-Employee Directors shall be
exercisable to the extent of one-third on the date of grant
and an additional one-third on each of the succeeding two
anniversaries of the date of grant provided such Non-Employee
Director is re-elected to the Board.

iii) In the event a Non-Employee Director ceases to serve as a
member of the Board of Directors of the Company any time for
any reason except the expiration of their current term, the
portion of his Stock Option which is exercisable at the date
of termination and all rights thereunder shall be exercisable
by him at any time within three months thereafter, but in no
event later than the termination date of his Stock Option.

iv) In the event a Non-Employee Director has served his full term,
his vested options shall be exercisable until the termination
date of his Stock Option.

v) If a Non-Employee Director shall die while serving as a
director of the Company, the portion of his Stock Option which
is exercisable at the date of

Exhibit B

death may be exercised by his designated beneficiary or
beneficiaries (or, a person who has been effectively
designated, by his executor, administrator or the person to
whom his rights under his Stock Option shall pass by his will
or by the laws of descent and distribution) at any time within
one year after the date of his death, but not later than the
termination date of his Stock Option.

vi) Nothing in the Plan or in any Stock Option granted pursuant
hereto shall confer on any Non-Employee Director any right to
continue as a director of the Company.

13. Amendment and Termination of the Plan.

(a) Amendment and Termination. The board may amend from time to time or
terminate the Plan in such respects as the Board may deem advisable;
provided, however, that the following revisions or amendments shall
require approval of the Stockholders of the Company, to the extent
required by law, rule, or regulation:

i) Any material increase in the number of Shares subject to the
Plan, other than in connection with an adjustment under
Section 11 of the Plan;

ii) Any material change in the designation of the Employees
eligible to be granted Options; or

iii) Any material increase in the benefits accruing to participants
under the Plan.

(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and
such Options shall remain in full force and effect as if this Plan
had not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.

14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the option of counsel for the
company, such a representation is required by any aforementioned relevant
provisions of law.

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.

In the case of an Incentive Stock Option, any Optionee who disposes of Shares of
Common Stock acquired upon the exercise of an Option by sale or exchange (a)
either within two (2) years after the date of the grant of the Option under
which the Common Stock was acquired or (b) within one (1) year after the
acquisition of such Shares of Common Stock shall notify the Company of such
disposition and of the amount realized upon such disposition.

15. Reservation of Shares. The Company will at times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

16. Option Agreement. Options shall be evidenced by Stock Option Agreements in
such form as the Board shall approve.

17. Withholding Taxes. Subject to Section 4(b)(x) of the Plan and prior to the
Tax Date, the Optionee may make an irrevocable election to have the
Company withhold from those Shares that would otherwise be received upon
the exercise of any Option, a number of Shares having Fair Market Value
equal to the minimum amount necessary to satisfy the Company's federal,
state, local and foreign tax withholding obligations and FICA and FUTA
obligations with respect to the exercise of such Option by the Optionee.

An Optionee who is also an officer of the Company must take the above described
election:

(a) at least six months after the date of grant of the Option (except in
the event of death or disability); and

(b) either:

(i) six months prior to the Tax Date, or

(ii) prior to the Tax Date and during the period beginning on the
third business day following the date the Company releases its
quarterly or annual statement of sales and earnings and ending
on the twelfth business day following such date.

18. Miscellaneous Provisions.

(a) Plan Expense. Any expense of administering this Plan shall be borne
by the Company.

(b) Use of Exercise Proceeds. The payment received from the Optionees
from the exercise of Options shall be used for the general corporate
purposes of the Company.

(c) Construction of Plan. The place of administration of the Plan shall
be in the State of New York, and the validity, construction,
interpretation, administration and effect of the Plan and of its
rules and regulations, and rights relating to the Plan, shall be
determined in accordance with the laws of the State of New York
without regard to conflict of law principles and, where applicable,
in accordance with the Code.

(d) Taxes. The Company shall be entitled if necessary or desirable to
pay or withhold the amount of any tax attributed to the delivery of
Common Stock under the Plan from other amounts payable to the
Employee after giving the person entitled to receive such Common
Stock notice as far in advance as practical, and the Company may
defer making delivery of such Common Stock if any such tax may be
pending unless and until indemnified to its satisfaction.

(e) Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board, the members of the Board
shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be party by reason of
any action taken or failure to act under or in connection with the
Plan or any Option, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgement in any such action, suite or
proceeding, except a judgement based upon a finding of bad faith;
provided that upon the institution of any such action, suite or
proceeding a Board member shall, in writing, give the Company notice
thereof and an opportunity, at its own expense, to handle and defend
the same before such Board member undertakes to handle and defend it
on her or his own behalf.

Exhibit B

(f) Gender. For purposes of this Plan, words used in the masculine
gender shall include the female and neuter, and the singular shall
include the plural and vice versa, as appropriate.

(g) No Employment Agreement. The Plan shall not confer upon any Optionee
any right with respect to continuation of employment with the
Company, nor shall it interfere in any way with his right or the
Company's right to terminate his employment at any time.

PROXY INTELLI-CHECK, INC.

Annual Meeting of Shareholders -- Wednesday, July 11, 2001.

The undersigned shareholder of Intelli-Check, Inc. (the "Company") hereby
appoints Frank Mandelbaum the attorney and proxy of the undersigned, with full
power of substitution, to vote, as indicated herein, all the common shares of
the Company standing in the name of the undersigned at the close of business on
June 1, 2001 at the Annual Meeting of Shareholders of the Company to be held at
the American Stock Exchange, 86 Trinity Place, New York, New York 10006 at 11:00
a.m., local time, on Wednesday, July 11, 2001, and at any and all adjournments
thereof, with all the powers the undersigned would possess if then and there
personally present and especially (but without limiting the general
authorization and power hereby given) to vote as indicated on the proposals, as
more fully described in the Proxy Statement for the meeting.

(Please fill in the reverse side and return promptly in the enclosed envelope.)
Please mark boxes X or |X| in blue or black ink.

1. Election of Directors.

FOR all nominees | |

WITHHOLD authority only for those nominees whose name(s) I
have crossed out below | |

WITHHOLD authority for ALL nominees | |

Nominees for Directors are: Frank Mandelbaum - 3 year term
Charles McQuinn - 3 year term
Howard Davis - 2 year term

2. Proposal to approve the 2001 Stock Option Plan.

(Please fill in the reverse side and return promptly in the enclosed envelope.)

3. Proposal to approve the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 2001.

4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
adjournments thereof.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED FOR THE
ELECTION OF THE PROPOSED DIRECTORS AND FOR THE ABOVE PROPOSALS UNLESS OTHERWISE
INDICATED.

SIGNATURE(S) should be exactly as name
or names appear on this proxy. If
stock is held jointly, each holder
should sign. If signing is by
attorney, executor, administrator,
trustee or guardian, please give full
title.

Dated __________________________, 2001

Signature ____________________________

Print Name ___________________________

Signature ____________________________

Print Name ___________________________

[Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope]