Document:

TRACEGUARD TECHNOLOGIES LTD.

                              EMPLOYMENT AGREEMENT
                              --------------------

This agreement is entered into on the 6th day of July,  2006 in effect as of the
1 day of  June,  2006  between  David  Ben  Yair  ("EMPLOYEE"),  and  TraceGuard
Technologies  Ltd., an Israeli  company with offices  located at 6 Ravnitzy St.,
Petach Tikva, Israel (the "COMPANY").

                              W I T N E S S E T H:

WHEREAS,  the Company is a technology  based  company  developing  and marketing
products geared currently to of the homeland  security market (the  "BUSINESS");
and

WHEREAS the Employee represents that he has the requisite skills, experience and
training to serve as the Chief  Financial  Officer of the Company  ("CFO" or the
"POSITION");

WHEREAS,  the Company desires to employ Employee and the Employee  desires to be
employed in the Company in the Position;

NOW  THEREFORE,   in  consideration  of  the  premises  and  mutual   agreements
hereinafter contained, the parties hereto agree as follows:

1. CONTENTS OF AGREEMENT/DEFINITIONS

1.1 The preamble and the exhibits to this Agreement  constitute an integral part
thereof and are hereby incorporated by reference.

1.2 The headings in this Agreement are for the purpose of  convenience  only and
shall not be used for the purposes of interpretation.

2. EMPLOYMENT AND POSITION

2.1 Employee's  employment with the Company shall commence in effect as of the 1
day of June, 2006 ("DATE OF  COMMENCEMENT")  and shall continue until terminated
in accordance with the provisions of Section 7 hereof.

2.2  Employee  shall be  engaged  as the CFO of the  Company  and  shall  report
regularly to the Chief  Executive  Officer  and/or the Board of Directors of the
Company as  instructed  by the Company  from time to time.  Notwithstanding  the
foregoing,  the Company shall be entitled to change the  Employee's  Position in
accordance with Company's requirements.

3. EMPLOYEE'S DUTIES

Employee affirms and undertakes throughout the term of this Agreement:

3.1 To devote his entire working time, know-how,  expertise,  talent, experience
and  best  efforts  to the  business  and  affairs  of the  Company  and for the
performance of his duties towards the Company, to perform and discharge well and
faithfully, with devotion, honesty and fidelity, his obligations pursuant to his
Position, and to comply with all Company's disciplinary regulations, work rules,
policies,  procedures and objectives,  as may be determined by Company from time
to time.  In addition,  it is agreed that employee will not use any of Company's
facilities  and/or  equipment to any other purpose except for the performance of
his duties under this Agreement.

3.2 To travel abroad from time to time if and as may be required pursuant to his
Position.

<PAGE>

3.3 Not to  receive,  at all times,  whether  during the term of this  Agreement
and/or at any time  thereafter,  directly or  indirectly,  any payment,  benefit
and/or  other  consideration,  from  any  third  party  in  connection  with his
employment with Company, without the Company's prior written authorization.

3.4 To immediately and without delay inform the Company of any affairs and/or
matters that might constitute a conflict of interest with Employee's position
and/or employment with Company.

3.5 Not to undertake or accept any other paid or unpaid employment or occupation
or engage in or be associated with, directly or indirectly, any other
businesses, duties or pursuits except for minor non-commercial or non-business
activities, without the prior written consent of the Company.

4. TIME AND ATTENTION

Employee shall work one hundred  percent  (100%)  position and such over time as
required for the adequately performance his duties and responsibilities.

5. CONSIDERATION, BENEFITS AND PAYMENTS

5.1 GROSS SALARY

During  the  term of this  Agreement,  and  subject  to the  performance  of the
services required to be performed  hereunder by Employee,  the Company shall pay
to  Employee  for all  services  rendered by Employee  under this  Agreement,  a
salary, payable not less often than monthly and in accordance with the Company's
normal and  reasonable  payroll  practices,  a monthly gross amount equal to NIS
thirty  thousand  (NIS 30,000) (the "GROSS  SALARY").  The Gross Salary shall be
reviewed  by the  Company  on an  annual  basis or on each  anniversary  of this
Agreement, at the Company's sole discretion.

The Gross Salary was agreed between the parties, inter alia, in view of the fact
that the Employee's  Position,  duties and  responsibilities  are of such nature
that require a special degree of trust and that the Company cannot keep track of
all overtime hours of the Employee.

5.2 SPECIAL BONUS

Employee shall be entitled to special bonuses each equal to one (1) Gross Salary
upon the successful  completions of each of the following events with respect to
each  period  of  twelve  (12)  months  commencing  on June 1,  2006  and  until
termination of this Agreement:

5.2.1 Timely  submission of annually and quarterly  financial  statements of the
      Company and the Parent  Company for the year 2006, in accordance  with the
      requirements of applicable law;

5.2.2 Complying  with the  Company's  annual  budget  approved  by the  Board of
      Directors  of the  Company  (as  amended  by the  Board of  Directors,  if
      amended)

5.2.3 Consummation  of an equity  investment  in the  Company in an amount of no
      less than US$ 5,000,000.

It is agreed  that  each year  during  the term of this  Agreement  the Board of
Directors  of the Company  shall  determine  Employee's  annual  targets for the
purpose of this Section 5.2.

                                       -2-
<PAGE>

5.3 ANNUAL VACATION

Employee  shall be entitled to twenty one (21) vacation days during each year of
Employee's  employment,  provided,  however,  that following each anniversary of
this Agreement, Employee shall be entitled to an additional vacation day up to a
total of no more than twenty four (24) days,  unless  Employee shall be entitled
to additional vacation days under applicable law. Statutory vacation time may be
accumulated to the extent required under applicable law.

5.4 MANAGERS INSURANCE OR OTHER PENSION PLAN

The Company and the Employee will obtain and maintain Managers Insurance with an
insurance  company  at  the  Employee's  choice  in  effect  as of the  Date  of
Commencement (the "PLAN").  After receiving the Employee's  request with respect
to the type of Plan to be obtained by the  Company,  the Company will inform the
Employee  in writing  the type of such Plan  obtained  by the  Company,  for the
exclusive  benefit of the Employee in the  customary  form with respect to which
the Company shall be the beneficiary.

The Company  shall  contribute an amount equal to thirteen and one third percent
(13.33%) of each monthly Gross Salary payment (out of which 8.33% are designated
for severance  payments and 5% are  designated  for premium  payments - "COMPANY
CONTRIBUTION")  and the  Employee  shall  contribute  five  percent  (5%) of the
monthly Gross Salary  payment  ("EMPLOYEE'S  CONTRIBUTION")  toward the premiums
payable in respect of such  insurance  (the  "INSURANCE  POLICY").  The Employee
hereby instructs the Company to transfer to the insurance  Company the amount of
the  Employee's  and the Company's  Contribution  from each monthly Gross Salary
payment, on account of the Insurance Policy.

It is hereby agreed that upon  termination of employment  under this  Agreement,
the Company shall release to the Employee all amounts accrued in accordance with
the Plan on account of both the Company's and  Employee's  Contributions.  It is
hereby agreed that if the Employee is dismissed under the circumstances in which
Employee is not  entitled to any  severance  pay  according to Section 16 and/or
Section 17 of the Severance Pay Law (as defined  below) - the Employee shall not
be entitled to any severance pay.

It is hereby  agreed  and  understood  that the  amounts  accrued in the Plan on
account  of the  Company's  Contribution  shall be in lieu and in full and final
substitution  of any severance pay the Employee  shall be or become  entitled to
under any applicable  Israeli law. This section is in accordance with Section 14
of the Severance Pay Law, and the General Approval of the Labor Minister,  dated
June 30, 1998,  issued in  accordance to the said Section 14, a copy of which is
attached hereby as EXHIBIT A.

5.5 DISABILITY INSURANCE

The Company shall obtain Disability Insurance ("OVDAN KOSHER AVODA"),  which may
be  included  within the  Insurance  Policy,  for the  exclusive  benefit of the
Employee and shall  contribute  therefore an amount not exceeding two and a half
percent (2.5%) of each monthly Gross Salary Payment,  or such amount required to
enable the payment of at least 75% of the Gross Salary.

5.6 EDUCATIONAL FUND

The Company and the Employee shall open and maintain an Educational Fund ("Keren
Hishtalmut")  (the "FUND").  The Company shall contribute to such Fund an amount
equal to seven and a half percent  (7.5%) and the Employee  shall  contribute to
such Fund an amount equal to two and a half percent (2.5%) of each monthly Gross
Salary  payment.  The Employee  hereby  instructs the Company to transfer to the
Fund the  amount of the  Employee's  and the  Company's  contribution  from each
monthly Gross Salary payment.

                                      -3-
<PAGE>

In the event of  termination of Employee's  employment  under this Agreement for
any  reason  other than a  termination  for  'cause'  (as  defined  hereinafter)
Employee shall be entitled to all sums  accumulated in the Fund. In the event of
termination  for 'cause'  Employee  shall not be  entitled  to any of  Company's
contributions to the Fund made during this Agreement.

5.7 COMPANY CAR

The Company  shall make  available  to the  Employee a company car of the type 3
(the "COMPANY  CAR").  The Company will cover all the operating  expenses of the
Company Car (including  reasonable  toll roads and parking  expenses  related to
Employee's engagement, but excluding other parking expenses, fines, and cases of
negligence  by the  Employee),  and will  deduct  tax from the Gross  Salary the
"SHOVI  RECHEV" as required  by  applicable  law.  The  payments  related to the
Company Car under this  paragraph are in lieu of traveling  expenses to and from
work as required by applicable law.

Employee shall take good care of such Company Car and ensure that the provisions
of the  insurance  policy  and  Company's  rules  relating  to  Company  Car are
strictly,  lawfully and carefully  observed.  Employee is aware that in order to
provide  Employee  with the Company Car the Company  shall lease the Company Car
from a leasing  company,  and Employee  undertakes  to strictly  comply with the
provisions of the leasing agreement.

Employee  shall  return  Company  Car  (together  with its  keys  and any  other
equipment  supplied and/or installed therein by Company) to Company's  principal
office upon  termination of Employee's  employment with Company.  Employee shall
have no rights of lien with  respect to Company  Car and/or any other  equipment
relating thereto as above mentioned.

5.8 MOBILE PHONE AND ADDITIONAL TERMS

The Company shall provide  Employee with,
and pay for the use of, a mobile  phone  for  Employee's  use in the  course  of
performing  Employee's   obligations  under  Employee's  Position  (the  "MOBILE
PHONE").  Employee  shall  bear any and all  taxes  applicable  to  Employee  in
connection  with the Mobile Phone and/or the use thereof.  Employee shall return
the Mobile Phone to Company's  principal  office upon  termination of Employee's
employment  with Company.  Employee shall have no rights of lien with respect to
the Mobile  Phone.  In any event of a delay in the  return of the  Mobile  Phone
after  termination of Employee's  employment,  all costs and expenses related to
the  Mobile  Phone  and its use shall be solely  borne by the  Employee  and the
Company  shall be  entitled to set off such  amounts  from any amount due to the
Employee.

In addition, in view of Employee's Position,  during the Term of this Agreement,
Employee shall be entitled to receive a daily economical  magazine at his choice
and  reimbursement  of fees related to  membership  in the Israeli  Institute of
Certified Public Accountants and the Public Accountants' Council.

5.9 STOCK COMPENSATION

Company  shall issue to Employee  170,000  Restricted  Stock Units of TraceGuard
Technologies Inc., the parent company of the Company ("RSUS"). The RSUs shall be
subject to the terms of the Company's 2006 Stock  Incentive  Compensation  Plan,
and the Restricted  Stock Units Agreement to be entered into between the Company
and the Employee,  following the adoption of a Stock Incentive Compensation Plan
by the Company.

5.10  Employee  shall be entitled to such number of working days of paid illness
      vacation during each year of employment, as provided by Israeli Labor Law.

5.11  The Employee shall be entitled to "DMEY  HAVRA'AH" in accordance  with any
      applicable law.

5.12  The Employee  shall receive the Gross Salary payable in respect of periods
      of the Employee's  military reserve duty. The Company shall be entitled to
      receive  and to retain  any  amounts  payable  by the  National  Insurance
      Institute or any other agency or entity in respect of such periods.

                                      -4-
<PAGE>

6. CONFIDENTIALITY, NON-COMPETE AND PROPRIETARY RIGHTS

The  Employee  shall,   simultaneously   herewith,   execute  the  Confidential,
Non-Compete and Proprietary Rights Agreement,  attached hereto as EXHIBIT B. For
the  removal of any  doubt,  execution  of such  Confidential,  Non-Compete  and
Proprietary Rights Agreement by the Employee - is a condition  precedent to this
Agreement becoming effective.

7. TERM AND TERMINATION OF EMPLOYMENT

7.1 Employee's  employment  under this  Agreement  shall commence on the Date of
Commencement and shall end on the earlier of: (i) termination by either party as
specified hereunder; (ii) the death or disability (as defined below) of Employee

For the  purposes of this  Agreement,  "DISABILITY"  shall mean any  physical or
mental illness or injury as a result of which Employee  remains absent from work
for a period of 2 (two) successive  months, or an aggregate of 2 (two) months in
any twelve-month period. Disability shall be deemed to have occurred on the last
day of such two-month period.

7.2 Company may terminate this agreement without cause, as hereinafter  defined,
by providing a prior  written  notice of one hundred and eighty (180) days,  and
Employee may terminate this agreement without cause, as hereinafter  defined, by
providing a prior written notice of ninety (90) days (the "NOTICE PERIOD").

7.3 During the Notice  Period,  whether  notice has been given by Employee or by
the  Company,  Employee  shall  continue  to render  Employee's  services to the
Company unless  instructed  otherwise in accordance with Section 7.4 below,  and
shall  cooperate with the Company and use Employee's  best efforts to assist the
integration  into the  Company  organization  of the person or persons  who will
assume Employee's responsibilities.

7.4 The Company  shall be entitled,  at any time prior to the  expiration of the
Notice Period, to relieve the Employee from the obligation to perform his duties
under this Agreement during the Notice Period,  in which event the Company shall
continue to pay to Employee  during the remainder of the Notice Period,  all the
payments  payable to  Employee  under  Section 5 above.  In such case,  Employee
shall,  at all times during the remainder of the Notice Period,  fully cooperate
with the  Company and perform any of  Employee's  duties  hereunder  as shall be
requested  by the  Company.  Alternatively,  the  Company  shall be  entitled to
terminate  Employee's  employment,  at any time prior to the  expiration  of the
Notice Period,  in which event,  according to applicable  law, the Company shall
pay Employee upon termination of Employee's  employment,  the value of the Gross
Salary  Employee  would have been entitled to during the remainder of the Notice
Period.

7.5  Notwithstanding  the  forgoing,  the Company shall be entitled to terminate
Employee's  employment  with  Company with  immediate  effect,  at any time,  by
providing  notice thereof to Employee,  where said  termination is a termination
for 'cause'. In such event,  without derogating from the rights of Company under
this Agreement and/or any applicable law,  Employee shall not be entitled to any
of the consideration specified in Section 7.4 above.

For the purpose of this Agreement,  "CAUSE" shall exist if Employee (i) breaches
any of the terms of Section 6 above or Exhibits B and C of this  Agreement,  or;
(ii)  engages in  willful  misconduct  or acts in bad faith with  respect to the
Company in connection  with and related to the  employment  hereunder;  (iii) is
convicted of a felony or is held liable by a court of competent jurisdiction for
fraud  against the Company;  (iv) fails to comply with the  instructions  of the
Company or its Board of Directors given in good faith; or (v) is dismissed under
the  circumstances  defined in Section 16 and/or Section 17 of the Severance Pay
Law, 1963 (hereinafter: "THE SEVERANCE PAY LAW").

7.6 At the termination of the employer-employee  relationship the Employee shall
return to the Company all the  property of the Company  that was provided to the
Employee by the Company.  Should the Employee  refuses and/or fail to do so, the
Company  shall offset the market value of such  property (as shall be determined
solely by the  Company)  from the  amounts (if any) that the  Employee  might be
entitled  to. The above dose not  derogate  from the  remedies  available to the
Company in accordance with any applicable law.

                                      -5-
<PAGE>

8. EMPLOYEE REPRESENTATIONS AND ACKNOWLEDGMENTS

The  Employee  represents  and warrants to the Company  that the  execution  and
delivery of this Agreement and the  fulfillment of the terms hereof (i) will not
constitute a default  under or breach of any  agreement or other  instrument  to
which he is a party or by which he is bound,  including without limitation,  any
confidentiality or non-competition agreement, (ii) do not require the consent of
any person or entity,  and (iii) shall not utilize during the term of Employee's
employment  any  proprietary  information  of any third party,  including  prior
employers of the Employee.

9. GENERAL PROVISIONS

9.1 Employee  shall not be entitled to any  additional  bonus,  payment or other
compensation in connection with Employee's  employment with Company,  other than
as provided in this Agreement.

9.2  Company  shall  withhold,  or  charge  Employee  with,  all taxes and other
compulsory  payments  as  required  under  applicable  law with  respect  to all
payments, benefits and/or other compensation paid to Employee in connection with
Employee's employment with Company.

9.3 Company  shall be  entitled to deduct from any and/or all  payments to which
Employee  shall be entitled  thereof,  any and/or all  amounts to which  Company
shall be entitled from Employee at such time.

9.4  Company's  failure  or delay in  enforcing  any of the  provisions  of this
Agreement  shall  not,  in any  way,  be  construed  as a  waiver  of  any  such
provisions,  or prevent  Company  thereafter from enforcing each and every other
provision of this Agreement which were previously not enforced.

9.5 Except as otherwise herein expressly provided, this Agreement shall inure to
the benefit of and be binding  upon the  Company,  its  successors  and assigns,
including,  without  limitation,  any subsidiary or affiliated  entity and shall
inure to the  benefit  of,  and be binding  upon,  Employee,  Employee's  heirs,
executors,   administrators  and  legal  representatives.   Notwithstanding  the
foregoing,  the  obligations  of Employee  hereunder  shall not be assignable or
delegable.

9.6 This Agreement  constitutes the entire  understanding  and agreement between
the parties  hereto,  supersedes any and all prior  discussions,  agreements and
correspondence with regard to the subject matter hereof, and may not be amended,
modified or supplemented in any respect, except by a subsequent writing executed
by both parties hereto.

9.7 All notices,  requests and other communications to any party hereunder shall
be given or made in writing and  facsimile,  mailed (by  registered or certified
mail) or delivered by hand to the  respective  party at the address set forth in
the caption of this Agreement or to such other address (or facsimile  number) as
such party may  hereafter  specify  for the purpose of notice to the other party
hereto. Each such notice,  request or other communication shall be effective (i)
if given by  facsimile,  when such  facsimile is  transmitted  to the  facsimile
number  specified  herein and the appropriate  answerback is received or (ii) if
given by any other means, when delivered at the address specified herein.

9.8 For the  purpose of Section 6 and  Exhibits B and C of this  Agreement,  the
term  "COMPANY"  shall  include also the  Company's  parent  company,  Company's
subsidiary or any company controlled or owned by the Company's parent company.

                                      -6-
<PAGE>

9.9 This  Agreement  shall  be  governed  by,  and  construed  and  enforced  in
accordance  with the laws of  Israel  without  giving  effect to  principles  of
conflicts of law and the courts of Israel shall have exclusive jurisdiction over
the parties hereto and subject matter hereof.

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

---------------------------                  ---------------------------
TRACEGUARD TECHNOLOGIES LTD.                 DAVID BEN YAIR

                                      -7-
<PAGE>

                                    EXHIBIT B
                                    ---------

               CONFIDENTIALITY, NON-COMPETE AND PROPRIETARY RIGHTS
               ---------------------------------------------------

This  agreement is entered into effect as of _____ ___,  2006 between  David Ben
Yair,  residing  at  _____________________________,   Israel  ("EMPLOYEE"),  and
TraceGuard  Technologies  Ltd.,  an Israeli  company with  offices  located at 6
Ravnitzy St., Petach Tikva, Israel (the "COMPANY").

                              W I T N E S S E T H:

WHEREAS,  the Employee is entering into an Employment Agreement with the Company
simultaneously to entering into of this Agreement (the "EMPLOYMENT  AGREEMENT");
and

WHEREAS,  pursuant  to  Section  6 of  the  Employment  Agreement  the  Employee
undertook to execute an  Confidentiality,  Non-Compete  and  Proprietary  Rights
Agreement  as  a  condition  precedent  to  the  Employment  Agreement  becoming
effective;

NOW THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties hereto agree as follows:

1. SECRECY AND NONDISCLOSURE

1.1 The Employee  shall treat as secret and  confidential  all of the processes,
methods, formulas, procedures, techniques, software, designs, data, drawings and
other  information which are not of public knowledge or record pertaining to the
Company's  Business   (existing,   potential  and  future),   including  without
limitation,  all business  information  relating to customers  and suppliers and
products  of  which  the  Employee  becomes  aware  during  and as a  result  of
Employee's  employment or association  with the Company,  and Employee shall not
disclose,  use, publish, or in any other manner reveal,  directly or indirectly,
at any time  during or after  the term of this  Agreement,  any such  processes,
methods, formulas, procedures, techniques, software, designs, data, drawings and
other  information  pertaining to the Company's  existing or future  Business or
products.  The Employee may disclose or use such  information,  if at all,  only
with the prior express written consent of the Company.

1.2 The Employee hereby undertakes to return, upon request, to the Company,  all
written and/or  electronic  materials,  records,  documents,  computer  software
and/or  hardware  or any other  material  which  belongs to the Company and that
might be in  Employee's  possession,  and if  requested by the Company to do so,
will execute a written statement confirming compliance with the above said.

1.3 The Employee acknowledges that all of the secrets, information, or documents
aforementioned  in Sub-Sections 1.1 and 1.2 above, are essential  commercial and
proprietary  information  of the Company,  or third  parties to whom the Company
owes a duty of confidentiality which is not public information and cannot easily
be discovered by others, whose confidentiality provides the Company a commercial
advantage over its competitors, and the Company is taking reasonable measures to
safeguard its confidentiality.

1.4 The  Employee's  undertakings  pursuant to this clause shall remain in force
after the termination of Employee's employment under this Agreement.

                                      -8-
<PAGE>

2. NON-COMPETITION

2.1 Employee  agrees that during the term of this  Agreement and for a period of
one (1) year after he ceases to be employed by the Company he will not, directly
or indirectly, for Employee's own account or as an employee,  officer, director,
partner, joint venturer, shareholder,  investor, consultant or otherwise (except
as an investor  in a  corporation  whose  stock is publicly  traded and in which
Employee  holds less than 5% of the  outstanding  shares)  and without the prior
written consent of the Company - interest  Employee in or engage in any business
or  enterprise,  anywhere,  that  competes,  directly  or  indirectly,  with the
Business of the Company, that exists now or in the future or is based on similar
technology to the technology that was developed by the Company.

2.2 Employee  agrees that during a period of twenty four (24) months  commencing
as of the termination of this  Agreement,  Employee shall not employ directly or
indirectly any individual employed by the Company and/or solicit any employee of
the  Company to leave the  Company  during the  twenty  four (24) month  period,
following such date of termination.

2.3 Employee  acknowledges  that the restricted  period of time specified  under
Sections 2.1 and 2.2 above are reasonable, in view of the nature of the business
in which the Company is engaged and Employee's knowledge of the Business.

2.4  Notwithstanding  anything contained in Section 2.3 to the contrary,  if the
period  of  time  under  this  Section  2  above  should  be  determined  to  be
unreasonable in any judicial proceeding, then the period of time and area of the
restriction shall be reduced so that this Agreement may be enforced in such area
and during such period of time as shall be  determined  to be reasonable by such
judicial proceeding.

2.5 The Employee declares and acknowledges that:

      2.5.1  Employee's   obligations  of  protecting  the  confidentiality  and
      non-competition   provisions   included  in  this   agreement   are  fair,
      reasonable,  proportional,  and designed to protect the Company's  secrets
      and its  confidential  information,  which  constitutes the essence of its
      protected business and commercial  advantage in which significant  capital
      investments were made.

      2.5.2 Breach of an obligation  under this Section - shall  contradict  the
      nature of the  special  trust and  relationship  of  loyalty  between  the
      parties,  the fair and proper business  practices,  the duty of good faith
      and  fairness  between  the  parties,  shall harm the  Company,  and shall
      constitute  a material  breach of this  Agreement  and the trade  secrets,
      confidential connections,  confidential information,  and other privileged
      interests of the Company.

      2.5.3  The  Employee  declares  that  Employee's  obligations  under  this
      section,  which are  reasonable  and  proportional  - do not  prevent  the
      employee from developing  Employee's  general  knowledge and  professional
      expertise in the area of Employee's business, with regard to those who are
      not  customers  and  employees of the Company and without  using its trade
      secrets.

      2.5.4  Employee's  Gross Salary includes a special  consideration  paid to
      Employee in view of his obligation under this Section 2.

                                      -9-
<PAGE>

3. DEVELOPMENT RIGHTS

The Employee agrees and declares that all proprietary  information including but
not limited to copyrights,  trade secrets and know-how, patents and other rights
in  connection  therewith  developed by or with the  contribution  of Employee's
efforts during  Employee's  employment by the Company shall be the sole property
of the Company, and the Employee shall execute all documents necessary to assign
any patents to the Company and otherwise transfer such proprietary rights to the
Company.

In  Addition,  Employee  agrees to be bound by the terms and  conditions  of the
Intellectual  Property  assignment  of  rights  attached  as  EXHIBIT  C to  the
Employment Agreement as an integral part thereof.

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

---------------------------                   ---------------------------
TRACEGUARD TECHNOLOGIES LTD.                  DAVID BEN YAIR

                                      -10-
<PAGE>

                                    EXHIBIT C
                                    ---------

                 INTELLECTUAL PROPERTY AND ASSIGNMENT OF RIGHTS
                 ----------------------------------------------

      1. For purposes of this Exhibit, the following definitions shall apply:

      "INVENTIONS" shall mean:

            A. All inventions,  improvements,  modifications,  and  enhancements
whether  or not  patentable,  made by the  Employee  during or in the  course of
employment,  or which  relate,  directly or  indirectly  to the  business of the
Company, or which were made using the Company' equipment, and

            B. All inventions, improvements, modifications and enhancements made
by the Employee,  during a period of twelve (12) months (or such lesser  maximum
period  permitted by applicable  law) after any  termination  of the  Employee's
employment, which relate, directly or indirectly, to the business of the Company
at the time they were so made.

      "WORK PRODUCT" shall mean all documentation, software, hardware, firmware,
creative works, artworks, know-how and information created, in whole or in part,
by the Employee during the Employee's employment by the Company,  whether or not
copyrightable or otherwise protectable, excluding Inventions.

      "TRADE  SECRETS" shall mean "Trade  Secrets" as defined in the Israeli Law
of Commercial Torts,  5759 - 1999, and all  documentation,  software,  hardware,
firmware,  customer lists,  know-how and other information of any kind or nature
relating  to the past,  present or future  business  of the Company or any plans
therefor,  or relating to the past,  present or future business of a third party
or plans therefor (including but not limited to any items and information in any
form  determined  by law as trade  secrets)  that are disclosed to the Employee,
which the Company does not disclose to third parties without restrictions on use
or further disclosure.

      2. Without derogating from any other provision of the law:

            A.  The  Employee  shall  promptly   disclose  to  the  Company  all
Inventions and keep accurate records relating to the conception and reduction to
practice  of all  Inventions.  Such  records  shall be the  sole  and  exclusive
property of the Company,  and the Employee  shall  surrender  possession of such
records to the Company upon any termination of the Employee's  relationship with
the Company.

            B. The Employee  hereby assigns to the Company,  without  additional
consideration  to the Employee,  the entire right,  title and interest in and to
the  Inventions and Work Product and in and to all  proprietary  and any and all
intellectual  property  rights  therein or based  thereon.  The  Employee  shall
execute all such assignments,  oaths, declarations and other documents as may be
prepared by the Company to effect the foregoing.

            C. During the term of this Agreement,  and thereafter,  the Employee
shall provide the Company with all  information,  documentation,  and assistance
the  Company  may  reasonably  request  to  perfect,   enforce,  or  defend  its
proprietary  rights in or based on the  Inventions,  Work  Product  and/or Trade
Secrets. The Company, in its sole discretion,  shall determine the extent of the
proprietary rights, if any, to be protected in or based on the Inventions and/or
Work Product.  All such  information,  documentation,  and  assistance  shall be
provided to the Company by the Employee at no additional expense to the Company,
except for  out-of-pocket  expenses which the Employee  incurred at the Company'
request.

            D. During the term of this Agreement,  and thereafter,  the Employee
shall treat Inventions and Work Product as Confidential  Information  under this
Agreement  and  shall not  disclose  them to others  without  the prior  written
permission of the Company,  or use such  Inventions  and/or Work Product for any
purpose, other than for the performance of services for the Company.

                                      -11-
<PAGE>

      3.  Remedies.  The Employee  acknowledges  that a breach of the  covenants
contained in this Employment Agreement and Exhibit C would result in substantial
injury and damage to the Company  for which there is no adequate  remedy at law.
Therefore,  in the event of an actual or threatened  breach of such covenants by
the Employee,  the Company  shall be entitled,  in addition to all other rights,
remedies  and damages  that may be available to the Company at law or in equity,
to a preliminary  restraining  order and an injunction,  or any other  available
equitable  remedy,  to restrain the  violation  or  attempted  violation of this
Employment  Agreement  (including  its exhibits) by the Employee or by any other
person or entity acting for Employee's  benefit or on Employee's  behalf. In the
event  there is any action to enforce the terms of such  restrictive  covenants,
the  prevailing  party,  in addition to any other  remedy,  shall be entitled to
recover  reasonable  attorney's fees and all other  reasonable  costs associated
with any such action both on the trial and appellate level and in any creditor's
proceedings.  In the event that a court of competent jurisdiction  determines by
final  non-appealable  judgment  that the scope,  time period,  or  geographical
limitations of any of the restrictive  covenants  specifically  set forth herein
are too broad to be capable of  enforcement,  said court is authorized,  and the
parties  hereto  stipulate  that  such  court  shall,  modify  said  restrictive
covenants and enforce such provisions as to scope,  time, and geographical areas
as the court deems equitable, just and appropriate considering the intent of the
parties hereto.

-----------------------
DAVID BEN YAIR

                                      -12-TRACEGUARD TECHNOLOGIES LTD.

                              EMPLOYMENT AGREEMENT
                              --------------------

This agreement is entered into on the 6th day of July,  2006 in effect as of the
1  day  of  June,  2006  between  Gil  Perlberg  ("EMPLOYEE"),   and  TraceGuard
Technologies  Ltd., an Israeli  company with offices  located at 6 Ravnitzy St.,
Petach Tikva, Israel (the "COMPANY").

                              W I T N E S S E T H:

WHEREAS,  the Company is a technology  based  company  developing  and marketing
products geared currently to of the homeland  security market (the  "BUSINESS");
and

WHEREAS the Employee represents that he has the requisite skills, experience and
training to serve as VP Product  Management  &  Engineering  of the Company (the
"POSITION");

WHEREAS,  the Company desires to employ Employee and the Employee  desires to be
employed in the Company in the Position;

NOW  THEREFORE,   in  consideration  of  the  premises  and  mutual   agreements
hereinafter contained, the parties hereto agree as follows:

1. CONTENTS OF AGREEMENT/DEFINITIONS

1.1 The preamble and the exhibits to this Agreement  constitute an integral part
thereof and are hereby incorporated by reference.

1.2 The headings in this Agreement are for the purpose of  convenience  only and
shall not be used for the purposes of interpretation.

2. EMPLOYMENT AND POSITION

2.1 Employee's  employment with the Company shall commence in effect as of the 1
day of June, 2006 ("DATE OF  COMMENCEMENT")  and shall continue until terminated
in accordance with the provisions of Section 7 hereof.

2.2 Employee shall be engaged as the VP Product  Management & Engineering of the
Company and shall report  regularly to the Chief  Executive  Officer  and/or the
Board of  Directors  of the Company as  instructed  by the Company  from time to
time. Notwithstanding the foregoing, the Company shall be entitled to change the
Employee's Position in accordance with Company's requirements.

3. EMPLOYEE'S DUTIES

Employee affirms and undertakes throughout the term of this Agreement:

3.1 To devote his entire working time, know-how,  expertise,  talent, experience
and  best  efforts  to the  business  and  affairs  of the  Company  and for the
performance of his duties towards the Company, to perform and discharge well and
faithfully, with devotion, honesty and fidelity, his obligations pursuant to his
Position, and to comply with all Company's disciplinary regulations, work rules,
policies,  procedures and objectives,  as may be determined by Company from time
to time.

3.2 To travel abroad from time to time if and as may be required pursuant to his
Position.

<PAGE>

3.3 Not to  receive,  at all times,  whether  during the term of this  Agreement
and/or at any time  thereafter,  directly or  indirectly,  any payment,  benefit
and/or  other  consideration,  from  any  third  party  in  connection  with his
employment with Company, without the Company's prior written authorization.

3.4 To  immediately  and without delay inform the Company of any affairs  and/or
matters that might  constitute a conflict of interest with  Employee's  position
and/or employment with Company.

3.5 Not to undertake or accept any other paid or unpaid employment or occupation
or  engage  in  or  be  associated  with,  directly  or  indirectly,  any  other
businesses,  duties or pursuits except for minor  non-commercial or non-business
activities, without the prior written consent of the Company.

4. TIME AND ATTENTION

Employee shall work one hundred  percent  (100%)  position and such over time as
required for the adequately performance his duties and responsibilities.

5. CONSIDERATION, BENEFITS AND PAYMENTS

5.1 GROSS SALARY

During  the  term of this  Agreement,  and  subject  to the  performance  of the
services required to be performed  hereunder by Employee,  the Company shall pay
to  Employee  for all  services  rendered by Employee  under this  Agreement,  a
salary, payable not less often than monthly and in accordance with the Company's
normal and  reasonable  payroll  practices,  a monthly gross amount equal to NIS
forty  thousand  (NIS  40,000) (the "GROSS  SALARY").  The Gross Salary shall be
reviewed  by the  Company  on an  annual  basis or on each  anniversary  of this
Agreement, at the Company's sole discretion.

The Gross Salary was agreed between the parties, inter alia, in view of the fact
that the Employee's  Position,  duties and  responsibilities  are of such nature
that require a special degree of trust and that the Company cannot keep track of
all overtime hours of the Employee.

5.2 SPECIAL BONUS

5.2.1 Employee  shall be entitled to two special  bonuses  each equal to one (1)
      Gross  Salary  upon the  successful  completions  of two of the  following
      events by no later than December 31, 2006:

      (i)   Finalization of a prototype of the CompuSafe;

      (ii)  Successful achievement of a working CarrySafe process module;

      (iii) Complete  a study on trace  harvesting  from bulk  (compared  to dry
            transfer).

5.2.2 In addition,  Employee  shall be entitled to an  additional  special bonus
      equal to one (1) Gross Salary upon the successful completion of one of the
      following events by no later than May 31, 2007:

      (i)   Successful  completion of a product  (i.e.,  Carrysafe or CompuSafe)
            test at an external laboratory;

      (ii)  Development  of an IP portfolio  of twelve (12)  patents  (including
            continuation and Continuation-In-Part (CIP) applications).

                                      -2-
<PAGE>

5.3 ANNUAL VACATION

Employee  shall be entitled to twenty one (21) vacation days during each year of
Employee's employment,  unless Employee shall be entitled to additional vacation
days under  applicable  law.  Statutory  vacation time may be accumulated to the
extent required under applicable law.

5.4 MANAGERS INSURANCE OR OTHER PENSION PLAN

The Company and the Employee will obtain and maintain Managers Insurance with an
insurance  company  at  the  Employee's  choice  in  effect  as of the  Date  of
Commencement (the "PLAN").  After receiving the Employee's  request with respect
to the type of Plan to be obtained by the  Company,  the Company will inform the
Employee  in writing  the type of such Plan  obtained  by the  Company,  for the
exclusive  benefit of the Employee in the  customary  form with respect to which
the Company shall be the beneficiary.

The Company  shall  contribute an amount equal to thirteen and one third percent
(13.33%) of each monthly Gross Salary payment (out of which 8.33% are designated
for severance  payments and 5% are  designated  for premium  payments - "COMPANY
CONTRIBUTION")  and the  Employee  shall  contribute  five  percent  (5%) of the
monthly Gross Salary  payment  ("EMPLOYEE'S  CONTRIBUTION")  toward the premiums
payable in respect of such  insurance  (the  "INSURANCE  POLICY").  The Employee
hereby instructs the Company to transfer to the insurance  Company the amount of
the  Employee's  and the Company's  Contribution  from each monthly Gross Salary
payment, on account of the Insurance Policy.

It is hereby agreed that upon  termination of employment  under this  Agreement,
the Company shall release to the Employee all amounts accrued in accordance with
the Plan on account of both the Company's and  Employee's  Contributions.  It is
hereby agreed that if the Employee is dismissed under the circumstances in which
Employee is not  entitled to any  severance  pay  according to Section 16 and/or
Section 17 of the Severance Pay Law (as defined  below) - the Employee shall not
be entitled to any severance pay.

It is hereby  agreed  and  understood  that the  amounts  accrued in the Plan on
account  of the  Company's  Contribution  shall be in lieu and in full and final
substitution  of any severance pay the Employee  shall be or become  entitled to
under any applicable  Israeli law. This section is in accordance with Section 14
of the Severance Pay Law, and the General Approval of the Labor Minister,  dated
June 30, 1998,  issued in  accordance to the said Section 14, a copy of which is
attached hereby as EXHIBIT A.

5.5 DISABILITY INSURANCE

The Company shall obtain Disability Insurance ("OVDAN KOSHER AVODA"),  which may
be  included  within the  Insurance  Policy,  for the  exclusive  benefit of the
Employee and shall  contribute  therefore an amount not exceeding two and a half
percent (2.5%) of each monthly Gross Salary Payment,  or such amount required to
enable the payment of at least 75% of the Gross Salary.

5.6 EDUCATIONAL FUND

The Company and the Employee shall open and maintain an Educational Fund ("Keren
Hishtalmut")  (the "FUND").  The Company shall contribute to such Fund an amount
equal to seven and a half percent  (7.5%) and the Employee  shall  contribute to
such Fund an amount equal to two and a half percent (2.5%) of each monthly Gross
Salary  payment.  The Employee  hereby  instructs the Company to transfer to the
Fund the  amount of the  Employee's  and the  Company's  contribution  from each
monthly Gross Salary payment.

In the event of  termination of Employee's  employment  under this Agreement for
any  reason  other than a  termination  for  'cause'  (as  defined  hereinafter)
Employee shall be entitled to all sums  accumulated in the Fund. In the event of
termination  for 'cause'  Employee  shall not be  entitled  to any of  Company's
contributions to the Fund made during this Agreement.

                                      -3-
<PAGE>

5.7 COMPANY CAR

The Company  shall make  available  to the  Employee a company car of the type 3
(the "COMPANY  CAR").  The Company will cover all the operating  expenses of the
Company Car (including  reasonable  toll roads and parking  expenses  related to
Employee's engagement,  but excluding other parking expenses, fines and cases of
negligence  by the  Employee),  and will  deduct  tax from the Gross  Salary the
"SHOVI  RECHEV" as required  by  applicable  law.  The  payments  related to the
Company Car under this  paragraph are in lieu of traveling  expenses to and from
work as required by applicable law.

Employee shall take good care of such Company Car and ensure that the provisions
of the  insurance  policy  and  Company's  rules  relating  to  Company  Car are
strictly,  lawfully and carefully  observed.  Employee is aware that in order to
provide  Employee  with the Company Car the Company  shall lease the Company Car
from a leasing  company,  and Employee  undertakes  to strictly  comply with the
provisions of the leasing agreement.

Employee  shall  return  Company  Car  (together  with its  keys  and any  other
equipment  supplied and/or installed therein by Company) to Company's  principal
office upon  termination of Employee's  employment with Company.  Employee shall
have no rights of lien with  respect to Company  Car and/or any other  equipment
relating thereto as above mentioned.

5.8 MOBILE PHONE The Company shall provide  Employee  with,  and pay for the use
of, a mobile phone for  Employee's  use in the course of  performing  Employee's
obligations  under  Employee's  Position up to a total  amount per month of five
hundred (500) NIS (the "MOBILE  PHONE").  Employee  shall bear any and all taxes
applicable  to  Employee  in  connection  with the Mobile  Phone  and/or the use
thereof.  Employee shall return the Mobile Phone to Company's  principal  office
upon termination of Employee's  employment with Company.  Employee shall have no
rights of lien with respect to the Mobile Phone.  In any event of a delay in the
return of the Mobile Phone after termination of Employee's employment, all costs
and  expenses  related to the Mobile  Phone and its use shall be solely borne by
the Employee and the Company  shall be entitled to set off such amounts from any
amount due to the Employee.

5.9 STOCK COMPENSATION

Company  shall issue to Employee  170,000  Restricted  Stock Units of TraceGuard
Technologies Inc., the parent company of the Company ("RSUS"). The RSUs shall be
subject to the terms of the Company's 2006 Stock  Incentive  Compensation  Plan,
and the Restricted  Stock Units Agreement to be entered into between the Company
and the Employee,  following the adoption of a Stock Incentive Compensation Plan
by the Company.

5.10  Employee  shall be entitled to such number of working days of paid illness
      vacation during each year of employment, as provided by Israeli Labor Law.

5.11  The Employee shall be entitled to "DMEY  HAVRA'AH" in accordance  with any
      applicable law.

5.12  The Employee  shall receive the Gross Salary payable in respect of periods
      of the Employee's  military reserve duty. The Company shall be entitled to
      receive  and to retain  any  amounts  payable  by the  National  Insurance
      Institute or any other agency or entity in respect of such periods.

                                      -4-
<PAGE>

6. CONFIDENTIALITY, NON-COMPETE AND PROPRIETARY RIGHTS

The  Employee  shall,   simultaneously   herewith,   execute  the  Confidential,
Non-Compete and Proprietary Rights Agreement,  attached hereto as EXHIBIT B. For
the  removal of any  doubt,  execution  of such  Confidential,  Non-Compete  and
Proprietary Rights Agreement by the Employee - is a condition  precedent to this
Agreement becoming effective.

7. TERM AND TERMINATION OF EMPLOYMENT

7.1 Employee's  employment  under this  Agreement  shall commence on the Date of
Commencement and shall end on the earlier of: (i) termination by either party as
specified hereunder; (ii) the death or disability (as defined below) of Employee

For the  purposes of this  Agreement,  "DISABILITY"  shall mean any  physical or
mental illness or injury as a result of which Employee  remains absent from work
for a period of 2 (two) successive  months, or an aggregate of 2 (two) months in
any twelve-month period. Disability shall be deemed to have occurred on the last
day of such two-month period.

7.2 Company may terminate this agreement without cause, as hereinafter  defined,
by providing a prior written  notice of two hundred and seventy (270) days,  and
Employee may terminate this agreement without cause, as hereinafter  defined, by
providing a prior written notice of ninety (90) days (the "NOTICE Period").

7.3 During the Notice  Period,  whether  notice has been given by Employee or by
the  Company,  Employee  shall  continue  to render  Employee's  services to the
Company unless  instructed  otherwise in accordance with Section 7.4 below,  and
shall  cooperate with the Company and use Employee's  best efforts to assist the
integration  into the  Company  organization  of the person or persons  who will
assume Employee's responsibilities.

7.4 The Company  shall be entitled,  at any time prior to the  expiration of the
Notice Period, to relieve the Employee from the obligation to perform his duties
under this Agreement during the Notice Period,  in which event the Company shall
continue to pay to Employee  during the remainder of the Notice Period,  all the
payments  payable to  Employee  under  Section 5 above.  In such case,  Employee
shall,  at all times during the remainder of the Notice Period,  fully cooperate
with the  Company and perform any of  Employee's  duties  hereunder  as shall be
requested  by the  Company.  Alternatively,  the  Company  shall be  entitled to
terminate  Employee's  employment,  at any time prior to the  expiration  of the
Notice Period,  in which event,  according to applicable  law, the Company shall
pay Employee upon termination of Employee's  employment,  the value of the Gross
Salary  Employee  would have been entitled to during the remainder of the Notice
Period.

7.5  Notwithstanding  the  forgoing,  the Company shall be entitled to terminate
Employee's  employment  with  Company with  immediate  effect,  at any time,  by
providing  notice thereof to Employee,  where said  termination is a termination
for 'cause'. In such event,  without derogating from the rights of Company under
this Agreement and/or any applicable law,  Employee shall not be entitled to any
of the consideration specified in Section 7.4 above.

For the purpose of this Agreement,  "CAUSE" shall exist if Employee (i) breaches
any of the terms of Section 6 above or Exhibits B and C of this  Agreement,  or;
(ii)  engages in  willful  misconduct  or acts in bad faith with  respect to the
Company in connection  with and related to the  employment  hereunder;  (iii) is
convicted of a felony or is held liable by a court of competent jurisdiction for
fraud  against the Company;  (iv) fails to comply with the  instructions  of the
Company or its Board of Directors given in good faith; or (v) is dismissed under
the  circumstances  defined in Section 16 and/or Section 17 of the Severance Pay
Law, 1963 (hereinafter: "THE SEVERANCE PAY LAW").

7.6 At the termination of the employer-employee  relationship the Employee shall
return to the Company all the  property of the Company  that was provided to the
Employee by the Company.  Should the Employee  refuses and/or fail to do so, the
Company  shall offset the market value of such  property (as shall be determined
solely by the  Company)  from the  amounts (if any) that the  Employee  might be
entitled  to. The above dose not  derogate  from the  remedies  available to the
Company in accordance with any applicable law.

                                      -5-
<PAGE>

8. EMPLOYEE REPRESENTATIONS AND ACKNOWLEDGMENTS

The  Employee  represents  and warrants to the Company  that the  execution  and
delivery of this Agreement and the  fulfillment of the terms hereof (i) will not
constitute a default  under or breach of any  agreement or other  instrument  to
which he is a party or by which he is bound,  including without limitation,  any
confidentiality or non-competition agreement, (ii) do not require the consent of
any person or entity,  and (iii) shall not utilize during the term of Employee's
employment  any  proprietary  information  of any third party,  including  prior
employers of the Employee.

9. GENERAL PROVISIONS

9.1 Employee  shall not be entitled to any  additional  bonus,  payment or other
compensation in connection with Employee's  employment with Company,  other than
as provided in this Agreement.

9.2  Company  shall  withhold,  or  charge  Employee  with,  all taxes and other
compulsory  payments  as  required  under  applicable  law with  respect  to all
payments, benefits and/or other compensation paid to Employee in connection with
Employee's employment with Company.

9.3 Company  shall be  entitled to deduct from any and/or all  payments to which
Employee  shall be entitled  thereof,  any and/or all  amounts to which  Company
shall be entitled from Employee at such time.

9.4  Company's  failure  or delay in  enforcing  any of the  provisions  of this
Agreement  shall  not,  in any  way,  be  construed  as a  waiver  of  any  such
provisions,  or prevent  Company  thereafter from enforcing each and every other
provision of this Agreement which were previously not enforced.

9.5 Except as otherwise herein expressly provided, this Agreement shall inure to
the benefit of and be binding  upon the  Company,  its  successors  and assigns,
including,  without  limitation,  any subsidiary or affiliated  entity and shall
inure to the  benefit  of,  and be binding  upon,  Employee,  Employee's  heirs,
executors,   administrators  and  legal  representatives.   Notwithstanding  the
foregoing,  the  obligations  of Employee  hereunder  shall not be assignable or
delegable.

9.6 This Agreement  constitutes the entire  understanding  and agreement between
the parties  hereto,  supersedes any and all prior  discussions,  agreements and
correspondence with regard to the subject matter hereof, and may not be amended,
modified or supplemented in any respect, except by a subsequent writing executed
by both parties hereto.

9.7 All notices,  requests and other communications to any party hereunder shall
be given or made in writing and  facsimile,  mailed (by  registered or certified
mail) or delivered by hand to the  respective  party at the address set forth in
the caption of this Agreement or to such other address (or facsimile  number) as
such party may  hereafter  specify  for the purpose of notice to the other party
hereto. Each such notice,  request or other communication shall be effective (i)
if given by  facsimile,  when such  facsimile is  transmitted  to the  facsimile
number  specified  herein and the appropriate  answerback is received or (ii) if
given by any other means, when delivered at the address specified herein.

9.8 For the  purpose of Section 6 and  Exhibits B and C of this  Agreement,  the
term  "COMPANY"  shall  include also the  Company's  parent  company,  Company's
subsidiary or any company controlled or owned by the Company's parent company.

9.9 This  Agreement  shall  be  governed  by,  and  construed  and  enforced  in
accordance  with the laws of  Israel  without  giving  effect to  principles  of
conflicts of law and the courts of Israel shall have exclusive jurisdiction over
the parties hereto and subject matter hereof.

                                      -6-
<PAGE>

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

----------------------------                 ----------------------------
TRACEGUARD TECHNOLOGIES LTD.                 GIL PERLBERG

                                      -7-
<PAGE>

                                    EXHIBIT B
                                    ---------

               CONFIDENTIALITY, NON-COMPETE AND PROPRIETARY RIGHTS
               ---------------------------------------------------

This  agreement  is  entered  into  effect as of _____  ___,  2006  between  Gil
Perlberg, residing at  _____________________________,  Israel ("EMPLOYEE"),  and
TraceGuard  Technologies  Ltd.,  an Israeli  company with  offices  located at 6
Ravnitzy St., Petach Tikva, Israel (the "COMPANY").

                              W I T N E S S E T H:

WHEREAS,  the Employee is entering into an Employment Agreement with the Company
simultaneously to entering into of this Agreement (the "EMPLOYMENT  AGREEMENT");
and

WHEREAS,  pursuant  to  Section  6 of  the  Employment  Agreement  the  Employee
undertook to execute an  Confidentiality,  Non-Compete  and  Proprietary  Rights
Agreement  as  a  condition  precedent  to  the  Employment  Agreement  becoming
effective;

NOW  THEREFORE,   in  consideration  of  the  premises  and  mutual   agreements
hereinafter contained, the parties hereto agree as follows:

1. SECRECY AND NONDISCLOSURE

1.1 The Employee  shall treat as secret and  confidential  all of the processes,
methods, formulas, procedures, techniques, software, designs, data, drawings and
other  information which are not of public knowledge or record pertaining to the
Company's  Business   (existing,   potential  and  future),   including  without
limitation,  all business  information  relating to customers  and suppliers and
products  of  which  the  Employee  becomes  aware  during  and as a  result  of
Employee's  employment or association  with the Company,  and Employee shall not
disclose,  use, publish, or in any other manner reveal,  directly or indirectly,
at any time  during or after  the term of this  Agreement,  any such  processes,
methods, formulas, procedures, techniques, software, designs, data, drawings and
other  information  pertaining to the Company's  existing or future  Business or
products.  The Employee may disclose or use such  information,  if at all,  only
with the prior express written consent of the Company.

1.2 The Employee hereby undertakes to return, upon request, to the Company,  all
written and/or  electronic  materials,  records,  documents,  computer  software
and/or  hardware  or any other  material  which  belongs to the Company and that
might be in  Employee's  possession,  and if  requested by the Company to do so,
will execute a written statement confirming compliance with the above said.

1.3 The Employee acknowledges that all of the secrets, information, or documents
aforementioned  in Sub-Sections 1.1 and 1.2 above, are essential  commercial and
proprietary  information  of the Company,  or third  parties to whom the Company
owes a duty of confidentiality which is not public information and cannot easily
be discovered by others, whose confidentiality provides the Company a commercial
advantage over its competitors, and the Company is taking reasonable measures to
safeguard its confidentiality.

1.4 The  Employee's  undertakings  pursuant to this clause shall remain in force
after the termination of Employee's employment under this Agreement.

                                      -8-
<PAGE>

2. NON-COMPETITION

2.1 Employee  agrees that during the term of this  Agreement and for a period of
one (1) year after he ceases to be employed by the Company he will not, directly
or indirectly, for Employee's own account or as an employee,  officer, director,
partner, joint venturer, shareholder,  investor, consultant or otherwise (except
as an investor  in a  corporation  whose  stock is publicly  traded and in which
Employee  holds less than 5% of the  outstanding  shares)  and without the prior
written consent of the Company - interest  Employee in or engage in any business
or  enterprise,  anywhere,  that  competes,  directly  or  indirectly,  with the
Business of the Company, that exists now or in the future or is based on similar
technology to the technology that was developed by the Company.

2.2 Employee  agrees that during a period of twenty four (24) months  commencing
as of the termination of this  Agreement,  Employee shall not employ directly or
indirectly any individual employed by the Company and/or solicit any employee of
the Company to leave the Company  during the twenty four (24) month period after
the date of termination.

2.3 Employee  acknowledges  that the restricted  period of time specified  under
Sections 2.1 and 2.2 above are reasonable, in view of the nature of the business
in which the Company is engaged and Employee's knowledge of the Business.

2.4  Notwithstanding  anything contained in Section 2.3 to the contrary,  if the
period  of  time  under  this  Section  2  above  should  be  determined  to  be
unreasonable in any judicial proceeding, then the period of time and area of the
restriction shall be reduced so that this Agreement may be enforced in such area
and during such period of time as shall be  determined  to be reasonable by such
judicial proceeding.

2.5 The Employee declares and acknowledges that:

      2.5.1  Employee's   obligations  of  protecting  the  confidentiality  and
      non-competition   provisions   included  in  this   agreement   are  fair,
      reasonable,  proportional,  and designed to protect the Company's  secrets
      and its  confidential  information,  which  constitutes the essence of its
      protected business and commercial  advantage in which significant  capital
      investments were made.

      2.5.2 Breach of an obligation  under this Section - shall  contradict  the
      nature of the  special  trust and  relationship  of  loyalty  between  the
      parties,  the fair and proper business  practices,  the duty of good faith
      and  fairness  between  the  parties,  shall harm the  Company,  and shall
      constitute  a material  breach of this  Agreement  and the trade  secrets,
      confidential connections,  confidential information,  and other privileged
      interests of the Company.

      2.5.3  The  Employee  declares  that  Employee's  obligations  under  this
      section,  which are  reasonable  and  proportional  - do not  prevent  the
      employee from developing  Employee's  general  knowledge and  professional
      expertise in the area of Employee's business, with regard to those who are
      not  customers  and  employees of the Company and without  using its trade
      secrets.

      2.5.4  Employee's  Gross Salary includes a special  consideration  paid to
      Employee in view of his obligation under this Section 2.

                                       -9-
<PAGE>

3. DEVELOPMENT RIGHTS

The Employee agrees and declares that all proprietary  information including but
not limited to copyrights,  trade secrets and know-how, patents and other rights
in  connection  therewith  developed by or with the  contribution  of Employee's
efforts during  Employee's  employment by the Company shall be the sole property
of the Company, and the Employee shall execute all documents necessary to assign
any patents to the Company and otherwise transfer such proprietary rights to the
Company.

In  Addition,  Employee  agrees to be bound by the terms and  conditions  of the
Intellectual  Property  assignment  of  rights  attached  as  EXHIBIT  C to  the
Employment Agreement as an integral part thereof.

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

----------------------------                 ----------------------------
TRACEGUARD TECHNOLOGIES LTD.                 GIL PERLBERG

                                      -10-
<PAGE>

                                    EXHIBIT C
                                    ---------

                 INTELLECTUAL PROPERTY AND ASSIGNMENT OF RIGHTS
                 ----------------------------------------------

      1. For purposes of this Exhibit, the following definitions shall apply:

      "INVENTIONS" shall mean:

            A. All inventions,  improvements,  modifications,  and  enhancements
whether  or not  patentable,  made by the  Employee  during or in the  course of
employment,  or which  relate,  directly or  indirectly  to the  business of the
Company, or which were made using the Company' equipment, and

            B. All inventions, improvements, modifications and enhancements made
by the Employee,  during a period of twelve (12) months (or such lesser  maximum
period  permitted by applicable  law) after any  termination  of the  Employee's
employment, which relate, directly or indirectly, to the business of the Company
at the time they were so made.

      "WORK PRODUCT" shall mean all documentation, software, hardware, firmware,
creative works, artworks, know-how and information created, in whole or in part,
by the Employee during the Employee's employment by the Company,  whether or not
copyrightable or otherwise protectable, excluding Inventions.

      "TRADE  SECRETS" shall mean "Trade  Secrets" as defined in the Israeli Law
of Commercial Torts,  5759 - 1999, and all  documentation,  software,  hardware,
firmware,  customer lists,  know-how and other information of any kind or nature
relating  to the past,  present or future  business  of the Company or any plans
therefor,  or relating to the past,  present or future business of a third party
or plans therefor (including but not limited to any items and information in any
form  determined  by law as trade  secrets)  that are disclosed to the Employee,
which the Company does not disclose to third parties without restrictions on use
or further disclosure.

      2. Without derogating from any other provision of the law:

            A.  The  Employee  shall  promptly   disclose  to  the  Company  all
Inventions and keep accurate records relating to the conception and reduction to
practice  of all  Inventions.  Such  records  shall be the  sole  and  exclusive
property of the Company,  and the Employee  shall  surrender  possession of such
records to the Company upon any termination of the Employee's  relationship with
the Company.

            B. The Employee  hereby assigns to the Company,  without  additional
consideration  to the Employee,  the entire right,  title and interest in and to
the  Inventions and Work Product and in and to all  proprietary  and any and all
intellectual  property  rights  therein or based  thereon.  The  Employee  shall
execute all such assignments,  oaths, declarations and other documents as may be
prepared by the Company to effect the foregoing.

            C. During the term of this Agreement,  and thereafter,  the Employee
shall provide the Company with all  information,  documentation,  and assistance
the  Company  may  reasonably  request  to  perfect,   enforce,  or  defend  its
proprietary  rights in or based on the  Inventions,  Work  Product  and/or Trade
Secrets. The Company, in its sole discretion,  shall determine the extent of the
proprietary rights, if any, to be protected in or based on the Inventions and/or
Work Product.  All such  information,  documentation,  and  assistance  shall be
provided to the Company by the Employee at no additional expense to the Company,
except for  out-of-pocket  expenses which the Employee  incurred at the Company'
request.

            D. During the term of this Agreement,  and thereafter,  the Employee
shall treat Inventions and Work Product as Confidential  Information  under this
Agreement  and  shall not  disclose  them to others  without  the prior  written
permission of the Company,  or use such  Inventions  and/or Work Product for any
purpose, other than for the performance of services for the Company.

                                      -11-
<PAGE>

      3.  Remedies.  The Employee  acknowledges  that a breach of the  covenants
contained in this Employment Agreement and Exhibit C would result in substantial
injury and damage to the Company  for which there is no adequate  remedy at law.
Therefore,  in the event of an actual or threatened  breach of such covenants by
the Employee,  the Company  shall be entitled,  in addition to all other rights,
remedies  and damages  that may be available to the Company at law or in equity,
to a preliminary  restraining  order and an injunction,  or any other  available
equitable  remedy,  to restrain the  violation  or  attempted  violation of this
Employment  Agreement  (including  its exhibits) by the Employee or by any other
person or entity acting for Employee's  benefit or on Employee's  behalf. In the
event  there is any action to enforce the terms of such  restrictive  covenants,
the  prevailing  party,  in addition to any other  remedy,  shall be entitled to
recover  reasonable  attorney's fees and all other  reasonable  costs associated
with any such action both on the trial and appellate level and in any creditor's
proceedings.  In the event that a court of competent jurisdiction  determines by
final  non-appealable  judgment  that the scope,  time period,  or  geographical
limitations of any of the restrictive  covenants  specifically  set forth herein
are too broad to be capable of  enforcement,  said court is authorized,  and the
parties  hereto  stipulate  that  such  court  shall,  modify  said  restrictive
covenants and enforce such provisions as to scope,  time, and geographical areas
as the court deems equitable, just and appropriate considering the intent of the
parties hereto.

---------------------
GIL PERLBERG

                                      -13-

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