Document:

ex103.htm

    Department
of Mergers and Divisions

    9 Kislev
5769

    November
23, 2009

    

    

    Shekel
and Associates, Attorneys

    3 Azrieli
Center

    Tel Aviv
67023

    

    

    Dear
Sir/Madam:

    

    
      	
              RE:

            	
              Taxation
      Decision on the Agreement – Baby’s Breath Ltd. – Share Transfer in Accordance
      with Section 104 B of the
Ordinance_____

            

    

    (Reference:
Your letter of July 1, 2009)

    

    

    1.           The
facts as they have been delivered to us by you:

    

    
      	
               
      

            	
              1.1

            	
              Baby’s
      Breath Co. Ltd., Private Co. 51-3076943 (hereinafter: “the Company”) is a
      private company, domiciled in Israel, and established on February 5, 2001.
      The Company develops and markets medical devices. The Company has
      developed an innovative device to treat breathing problems in infants and
      children, and it holds the sole intellectual property rights to this
      device.

            

    

    

    
      	
               
      

            	
              1.2

            	
              The
      registered share capital of the Company comprises 1,000,000 ordinary
      shares with a nominal value of NIS 1 each, of which 31,403 shares have
      been allocated.1

            

    

    

    1.3           Several
shareholders hold shares in the Company, as follows:

    

    1.3.1           10
residents of Israel hold 97.23% of Company shares

    

    1.3.2           A
resident of Canada holds 2.77% of Company shares

    

    Detailed
information of Company shareholders, accurate to the date of the share transfer
as defined below in Section 3.4, is attached hereto as Appendix
B
to this taxation decision.

    

    Outline of Change in
Structure

    

    
      	
               
      

            	
              1.4

            	
              Capital
      funds in the U.S. propose to invest in Company shares a sum that will
      grant them holdings of 20% of the Company’s share capital, provided that
      the investment thereof shall be in a company domiciled in the United
      States and registered for trade on the U.S. stock exchange (OTCBB). At
      this point, preliminary authorization was attained verbally by a few
      investment funds with an undertaking to invest the comprehensive sum of
      USD 3.55 million.

            

    

    
      	
               
      

            	
              1.5

            	
              Accordingly,
      Company shareholders shall transfer the entirety of shares in the Company
      (hereinafter: “the
      Transferred Shares”) to the New Air Co. Inc., a private company
      domiciled in the United States, set up on July 10, 2009, especially for
      this purpose (hereinafter: “the Foreign Company”).
      In return, Company shareholders shall be allocated shares solely in the
      foreign company (hereinafter: “the Allocated Shares”),
      in accordance with section 104 B (a) of the Income Tax Ordinance (New
      Version) 5721-1961 (hereinafter: “the Share Transfer”). Therefore,
      following the share transfer, the foreign company shall hold the fully
      paid share capital of the Company and the shareholders in the Company
      shall hold in full the paid share capital of the foreign
      company.

            

    

    ______________

    
      1
Currently, the Company has one type of share granting equal rights to all
shareholders.

    

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    
 

    
      	
               
      

            	
              1.6

            	
              In
      accordance with your declaration, the shareholders are acting to register
      foreign company shares for trade on the U.S. stock exchange (OTCBB). The
      initial draft of the prospectus is expected to be submitted to the U.S.
      Securities Exchange following the share
  transfer.

            

    

    

    
      	
               
      

            	
              1.7

            	
              In
      accordance with your declaration, the provisions of the Encouragement of
      Capital Investments Law 5719-1959 (hereinafter: “Encouragement of Capital
      Investments Law”) failed to apply and fail to apply to the Company,
      as of the date of the share transfer, as stated in sub-section 3.4 herein
      below.

            

    

    

    
      	
               
      

            	
              It
      should be noted that on December 29, 2004, the Company was given a letter
      of authorization for an alternate track (development area A), however the
      Company failed to meet the conditions of the letter of authorization.
      Accordingly, the Company was not entitled to any tax benefits whatsoever
      by virtue of the Encouragement of Capital Investments
  Law.

            

    

    

    
      	
               
      

            	
              1.8

            	
              In
      accordance with your declaration, up to the date of the share transfer, as
      defined in section 3.4 below, no loss in Company shares transferred to the
      foreign company is latent.

            

    

    

    
      	
               
      

            	
              1.9

            	
              According
      to your declaration, Company shareholders have not been given and shall
      not be given any proceeds whatsoever, whether directly or indirectly, for
      the share transfer, save for the allocated shares, as to be specified
      herein below.

            

    

    

    
      	
               
      

            	
              1.10

            	
              The
      Company and any party proximate thereto failed to take part in a change in
      structure, according to Part II of the Ordinance, in the five years prior
      to issuing this taxation decision.

            

    

    

    
      	
               
      

            	
              On
      this matter, “proximate” – as defined in section 88 of the Income Tax (New
      Version) Ordinance 5721-1961 (hereinafter: “the
      Ordinance”).

            

    

    

    
      	
               
      

            	
              1.11

            	
              The
      Appendices attached to this taxation decision constitute an inseparable
      part thereof.

            

    

    

    

    2.           The
Application:

    

    
      	
               
      

            	
              2.1

            	
              To
      authorize that the share transfer, as specified in section 1.4 above,
      fulfills the conditions of section 104B of the
  Ordinance.

            

    

    

    
      	
               
      

            	
              2.2

            	
              To
      authorize that the foreign company is “a company” in accordance with the
      provisions of section 104 of the
Ordinance.

            

    

    

    
      	
               
      

            	
              2.3

            	
              To
      authorize that the date of the share transfer shall be the date of the
      actual transfer thereof.

            

    

     

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

    

    3.           Tax
Arrangement and Conditions Thereof

    

    
      	
               
      

            	
              3.1

            	
              Each
      term in this taxation decision shall have the definition assigned thereto
      in Part II of the Ordinance, as long as it is not otherwise explicitly
      stated.

            

    

    

    
      	
               
      

            	
              3.2

            	
              Following
      the review of your Application, and subject to the accuracy of the facts
      as they have been presented to me and as they appear above, and on the
      fulfillment of all conditions determined herein in this taxation decision,
      I hereby authorize that the share transfer shall not be charged tax, in
      accordance with the provisions of section 104B of the Ordinance and the
      Regulations enacted by virtue thereof for the assessing officer, and
      subject to the fulfillment of all conditions of Part II of the Ordinance,
      as well as additional conditions appearing herein in this taxation
      decision.

            

    

    

    
      	
               
      

            	
              3.3

            	
              I
      hereby authorize that the foreign company shall be deemed a “company,” as
      defined in section 104 of the Ordinance, for the purpose of the share
      transfer, in accordance with the provisions of section 104B of the
      Ordinance, and subject to the conditions specified herein in this taxation
      decision.

            

    

    

    
      	
               
      

            	
              3.4

            	
              I
      hereby authorize that the date of the share transfer shall be the date
      whereon the transferred shares are actually transferred, i.e. on September
      7, 2009 (hereinafter: “the Date of the Share
      Transfer”).

            

    

    

    
      	
               
      

            	
              It
      is hereby clarified that in the event that the share transfer fails to be
      carried out within 90 days of the date of signature of this taxation
      decision, this taxation decision shall be void
    retroactively.

            

    

    

    
      	
               
      

            	
              3.5

            	
              All
      shares allocated to shareholders of the Company, which would have been
      taxable in Israel in respect of the share transfer had this taxation
      decision not been given (hereinafter: “the Obligated
      Shareholders”) as well as all the transferred shares shall be
      deposited with Yardeni-Gelfand Trustees (2000) Ltd., (Deductions File
      935580209) (hereinafter: “the Trustee”), proximate
      to the date of the share transfer. The Trustee shall be liable vis-à-vis
      the Tax Authorities for the full payment of the tax ensuing from the share
      transfer, the conditions of this taxation decision and the provisions of
      any law, in respect of the allocated shares to the obligated shareholders
      and in respect of the transferred shares. This obligation shall remain in
      effect until the receipt of authorization from the assessing officer of
      the full payment of tax owing in
Israel.

            

    

    

    
      	
               
      

            	
              3.6

            	
              The
      Trustee shall hold the allocated shares for the obligated shareholders in
      the foreign company as well as the entirety of the transferred shares, as
      aforesaid in sub-section 3.5 above, until the sale thereof and the tax
      deduction at source due to the sale, as aforesaid, at the tax rate stated
      in sections 91(a) or 91(b) of the Ordinance, as the case may be, for the
      profit of the capital or at a lower rate, as the assessing officer shall
      determine, in accordance with a detailed report of the capital profit to
      be presented to him. The Trustee shall transfer the deduction of tax at
      source, as aforesaid, to the assessing officer within 30 days of the date
      of the sale to the assessing
officer.

            

    

    

    
      	
               
      

            	
              As
      regards this sub-section herein, “sale” includes the requisite sale,
      encumbrance or transfer of the rights to the holder of the
      rights.

            

    

    

    
      	
               
      

            	
              3.7

            	
              The
      Trustee may not encumber the shares allocated to obligated shareholders
      and the transferred shares it holds in any manner whatsoever or use them
      and may not take any step signifying a sale of such shares and/or the
      rights by virtue thereof and/or the rights to acquire them, directly
      and/or indirectly, unless subject to the full payment of tax, as required,
      due to such rights and subject to the restrictions determined in
      law.

            

    

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
               
      

            	
              3.8

            	
              Notwithstanding
      the contents of section 3.7 above, the foreign company shall be permitted
      to encumber the transferred shares to GAPI (one of the transferring
      shareholders, as stipulated in Appendix B), in all or in part, in favor of
      the State of Israel, in accordance with the instructions of the Chief
      Scientist, with regard to the project for dispensing medication by spray.
      It shall be clarified that said encumbrance will not be considered as a
      sale with respect to section 3.6
above.

            

    

    

    
      	
               
      

            	
              3.9

            	
              The
      Trustee is to submit a report to the assessing officer on behalf of the
      obligated shareholders to include all details as required pursuant to
      section 91 (d) of the Ordinance, including the calculation of the capital
      profit or capital loss to be created as a result of the sale of the
      allocated shares.

            

    

    

    
      	
               
      

            	
              3.10

            	
              For
      the avoidance of doubt, it is hereby clarified that the obligated
      shareholders shall be taxed in Israel on the sale of the allocated shares
      and the deduction of tax at source, as aforesaid, shall constitute solely
      an advance payment on account of the tax
debt.

            

    

    

    
      	
               
      

            	
              3.11

            	
              The
      Trustee undertakes to report to the assessing officer, within 7 days of
      the date of distribution, any distribution of dividends by the foreign
      company to shareholders thereof. In addition, this includes any
      distribution of dividends by the Company to the foreign company and the
      deduction of tax, in accordance with the provisions of this taxation
      decision.

            

    

    

    
      	
               
      

            	
              3.12

            	
              The
      Trustee undertakes to report any transaction of the sale of allocated
      shares to obligated shareholders as well any sales transaction of
      transferred shares, including the sale to a relative of an obligated
      shareholder, from the date of the share transfer until the date of the
      full payment of tax ensuing from the share transfer, and this within 30
      days of the date of the sales
transaction.

            

    

    

    
      	
               
      

            	
              As
      regards this matter, “Relative” – as defined in section 88 of the
      Ordinance.

            

    

    

    
      	
               
      

            	
              3.13

            	
              With
      respect to this taxation decision, shares allocated by virtue of the
      transferred shares or the allocated shares shall also be deemed as
      transferred shares or allocated shares, as the case may be, inclusive of
      benefit shares, splits, issuing of rights, etc., allocated prior to the
      provision of this taxation decision or following
    thereafter.

            

    

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              3.14

            	
              The
      parties hereby agree that on the sale of transferred shares by the foreign
      company, the full tax required in respect of the sale shall be paid, as
      specified herein below:

            

    

    

    

    
      	
               
      

            	
              3.14.1

            	
              The
      sale of transferred shares by the foreign company shall be deemed as if
      delivered by the company domiciled in Israel in accordance with Part V of
      the Ordinance, without any right of deduction, offset, exemption,
      spreading and credit, including credit regarding foreign tax,
      whatsoever.

            

    

    

    
      	
               
      

            	
              3.14.2

            	
              The
      parties agree that notwithstanding the contents of the provisions of any
      law, the sale of the transferred shares by the foreign company shall be
      taxed in Israel even if the rate of foreign company holdings in the
      company of the transferred rights shall be less than
  10%.

            

    

    

    
      	
               
      

            	
              3.14.3

            	
              The
      parties agree that in calculating capital profit from the sale of the
      transferred shares by the foreign company, with respect to the date of
      purchase and original price, the sale of the shares, as aforesaid, shall
      be made pro rata.

            

    

    

    
      	
               
      

            	
              3.15

            	
              The
      parties agree that the sale of the allocated shares by the obligated
      shareholders requires the payment of full tax owing in respect of the
      sale, as specified herein below:

            

    

    

    
      	
               
      

            	
              3.15.1

            	
              In
      respect of the sale of each share, full tax is to be paid in accordance
      with the provisions of Part V of the
Ordinance.

            

    

    

    
      	
               
      

            	
              3.15.2

            	
              The
      original price and date of purchase of the allocated shares shall be in
      accordance with and subject to the provisions of section 104 (f) of the
      Ordinance.

            

    

    

    
      	
               
      

            	
              3.15.3

            	
              When
      calculating the capital profit ensuing from the sale of the allocated
      shares by the obligated shareholders, none of the following shall be
      given: credit, inclusive of credit for foreign tax, exemptions, nor any
      deduction whatsoever that failed to exist proximate to and prior to the
      share transfer.

            

    

    

    
      	
               
      

            	
              3.15.4

            	
              It
      is hereby clarified that the tax obligation, as aforesaid, fails to
      establish that this is the final tax owing in respect of the sale of
      allocated shares by the obligated shareholders. This determination is
      under the authority of the assessing
officer.

            

    

    

    
      	
               
      

            	
              3.16

            	
              The
      parties agree that on distributing dividends from the Company to the
      foreign company, the Trustee shall deduct tax at source from the amount of
      the dividend divided by the rate determined in section 125B (5) of the
      Ordinance. Tax deduction at source, as aforesaid, shall be transmitted
      within 7 days to the assessing
officer.

            

    

    

    
      	
               
      

            	
              3.17

            	
              The
      parties further agree that on distributing dividends from the foreign
      company to obligated shareholders, derived from the dividend distributed
      from the Company to the foreign company and wherefore tax was deducted, as
      specified in sub-section 3.15 above, the obligated shareholders shall be
      required to pay tax in Israel, in accordance with the provisions of the
      Ordinance. When calculating the tax debt in respect of the dividend, as
      aforesaid, no deduction, offset, exemption, spreading and credit shall be
      made or given, inclusive of credit for foreign tax, whatsoever, save for
      credit up to the amount of tax paid in Israel at the time of payment of
      the dividend from the Company to the foreign company, as a proportion of
      the sum of the dividend distributed by the foreign company to the
      obligated shareholders (the source whereof lies in the dividend
      distributed by the Company to the foreign company), to the sum of the
      dividend distributed by the Company to the foreign company, as aforesaid.
      It is underscored that in any event, tax deducted at source by the
      Trustee, at the time of payment of the dividend by the Company to the
      foreign company, shall not be refunded, as aforesaid in sub-section 3.16
      above.

            

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
               
      

            	
              3.18

            	
              It
      is hereby clarified that any payment the Company pays in any manner or by
      any means, directly or indirectly, to the foreign company as well as any
      payment the foreign company pays in any manner or by any means, directly
      or indirectly, to the obligated shareholders, save for a repayment of
      loans, shall be deemed the distribution of profits and shall be treated as
      a taxable dividend in Israel, in accordance with the provisions of the
      Ordinance and in accordance with the provisions of this taxation decision.
      The provisions of this section shall not apply with respect to payments
      made during the ordinary course of business and at market price, as it was
      determined for parties who are not connected. For the avoidance of doubt,
      it is clarified that payments, as aforesaid, shall be subject to the
      assessment and authorization of the assessing
  officer.

            

    

    

    
      	
               
      

            	
              3.19

            	
              It
      is hereby clarified that each of the obligated shareholders may sell up to
      10% of the rights it holds in the foreign company or, with the agreement
      of the other obligated shareholders – a higher percentage – provided that
      the total rights in the foreign company being sold by obligated
      shareholders shall not exceed 10% of all obligated shareholder rights in
      the foreign company, as of the date of the change in structure, subject to
      the contents determined in section 104D (b) of the Ordinance, mutatis
      mutandi.

            

    

    

    
      	
               
      

            	
              3.20

            	
              The
      parties agree that concerning the application of this taxation decision,
      even if the residency of an obligated holder of rights has changed, this
      would fail to affect the obligation thereof to pay tax, as specified
      herein in this taxation decision, up to the full payment of tax in
      accordance with this taxation decision and the fulfillment of all
      undertakings specified herein.

            

    

    

    
      	
               
      

            	
              3.21

            	
              The
      parties agree that in the event that additional rights in the Company
      and/or the foreign company are acquired following the date of this
      taxation decision (hereinafter: “the Newly Acquired
      Rights”), by obligated shareholders or by the foreign company, as
      the case may be, the sale of rights in the companies, as aforesaid, shall
      be made pro rata, that is, in each sale, the share of the newly acquired
      rights deemed as sold shall be proportional to the share of the rights
      held forthwith following the share
transfer.

            

    

    

    
      	
               
      

            	
              3.22

            	
              For
      the avoidance of doubt, it is hereby clarified that in the event the
      Company demands benefits in accordance with the Encouragement of Capital
      Investments Law, the Company shall not be deemed a company with capital
      investment as a result of the share transfer and the investors therein
      shall not be deemed foreign investors, for the purpose of the
      Encouragement of Capital Investments Law. It is hereby clarified that
      should the Company in future be entitled to benefits by virtue of the
      Encouragement of Capital Investments Law, “the rate of foreign
      investment,” as defined in section 47 (A1) of the Encouragement of Capital
      Investments Law, shall be determined by the professional section of the
      Tax Authority in Israel.

            

    

    

    
      	
               
      

            	
              3.23

            	
              For
      the avoidance of doubt, nothing stated in this taxation decision
      constitutes the making of an assessment and/or authorization of the facts
      you have presented. The facts presented, as aforesaid, may yet be verified
      by the assessing officer.

            

    

    

    
      	
               
      

            	
              3.24

            	
              For
      the avoidance of doubt, nothing in this taxation decision constitutes
      authorization of the fulfillment of the conditions of section 104B of the
      Ordinance, a subject, which may yet be verified by the assessing
      officer.

            

    

    

    
      	
               
      

            	
              3.25

            	
              For
      the avoidance of doubt, nothing in this taxation decision constitutes any
      authorization for a tax exemption according to the provisions of sections
      97 (B1) or 97 (B3) of the Ordinance, a subject that may yet be verified by
      the assessing officer.

            

    

    

    
      	
               
      

            	
              3.26

            	
              For
      the avoidance of doubt, nothing in this taxation decision constitutes any
      determination whatsoever regarding the residency of the shareholders in
      the Company, a subject that may yet be verified by the assessing
      officer.

            

    

    

    
      	
               
      

            	
              3.27

            	
              For
      the avoidance of doubt, nothing in this taxation decision constitutes any
      determination whatsoever regarding approval of the original price and/or
      purchase dates detailed in this taxation decision and/or
      in Appendix B, attached to this taxation
  decision.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
               
      

            	
              3.28

            	
              The
      Company undertakes to include in the financial statements thereof and in
      the Tax Adjustment reports an explanation for the actual implementation of
      the change in structure. This explanation shall specify the conditions of
      this taxation decision. This requirement shall enter into force commencing
      with the first reports to be filed following receipt of this taxation
      decision.

            

    

    

    
      	
               
      

            	
              3.29

            	
              If
      it appears that any of the conditions determined in Part II of the
      Ordinance and/or any of the conditions specified herein in this taxation
      decision have failed to be fulfilled on time (hereinafter: “the Breach”), the
      provisions of section 104G of the Ordinance shall apply. The Trustee, the
      Company and the shareholders in the Company shall submit to an assessing
      officer, within 30 days of the date of the breach, an assessment of the
      value of the shares being transferred for the date of the share transfer
      and the date of the breach.

            

    

    

    
      	
               
      

            	
              3.30

            	
              This
      taxation decision is given based on representations and documents
      presented to us in writing and verbally, inclusive of those specified in
      this taxation decision and subject to the provisions determined in Part II
      of the Ordinance. This taxation decision shall be canceled retroactively
      if it appears that the information and facts delivered within the context
      of the application are significantly inaccurate or incomplete or it
      becomes apparent that essential particulars specified failed to be
      fulfilled or conditions stipulated by the director in this taxation
      decision failed to be fulfilled.

            

    

    

    
      	
               
      

            	
              3.31

            	
              It
      is hereby clarified that no expenses involved, directly and/or indirectly,
      in this change of structure shall be permitted for deduction, whether
      directly or indirectly, for the parties participating in the share
      transfer specified herein in this taxation decision and/or a party who is
      a relative thereto, inclusive of legal expenses, and costs of auditing,
      experts, consultants and other charges of various kinds, as a deduction or
      as an expense, according to section 17 of the
  Ordinance.

            

    

    

    
      	
               
      

            	
              3.32

            	
              The
      Trustee, the Company, the foreign company and the obligated shareholders
      in the Company undertake, jointly and severally, to authorize in writing
      to the Department of Mergers and Splits at the Tax Authority and to the
      assessing officer, within 30 days of the date of receiving this taxation
      decision, that they agree to accept all conditions of this taxation
      decision, word for word as written therein, with no reservations. In the
      event that such authorization, as aforesaid, fails to be received on time,
      this taxation decision shall be deemed void
  retroactively.

            

    

    

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    

    
      	
              Sincerely
      yours,

            	 

    

    
      	
               
      

            	
              [sig.]

            

    

    
      	
               
      

            	
              Aharon
      Eliahu, CPA

            

    

    
      	
               
      

            	
              Senior
      Deputy Director, Professional
Affairs

            

    

    

    

    

    

    cc:

    Mr.
Shimon Lerner, CPA, Assessment Clerk, Hadera

    Mr. Avi
Behar, CPA, Assessment Clerk  Tel Aviv 5

    Mr. Eldad
Noah, Adv., Director of the Professional Department, Income Tax
Authority

    Mr. Moshe
Caesar, CPA (Legal), Director of the Mergers and Dissolutions
Department

    Mr. Harel
Israeli, Adv., Legal Advisor for the Mergers and Dissolutions
Department

    Mr. Yossi
Yeshua, CPA, (Adv.), Legal Department

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

     

    Appendix A – Structure of
Holdings Prior to the Share Transfer

    and Following
Thereafter

    

    

    Structure
of Holdings Prior to the Change in Structure:

     

    
    

     

    
      	 	
               

               

               Shareholders
      in the Company

               

               

            	 
	 	 	
               

               

               

              100%

               

               

            	 
	 	
               

               

               The
      Company

               

               

            	 

    

     

    

    Structure
of Holdings Following the Share Transfer:

     

    
       

    

    
      
        	 	
                 

                 

                 Shareholders
      in the Company

                 

                 

              	 
	 	 	
                 

                 

                 

                100%

                 

                 

              	 
	 	
                 

                 

                Foreign
      Company 

                 

                 

              	 
	 	 	
                 

                100%

                 

              	 
	 	
                 

                 

                The Company

                 

              	 

      

       

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Appendix B : List of
Shareholders in the Company

    Prior to the Share
Transfer

    

    
      	
              No.

            	
              Name

            	
              I.D.
      / Private Co. / Passport

            	
              Country
      of 

              residence

            	
              Relation
      to

            	
              No.
      of shares

            	
              No.
      of options

            	
              Date
      of Investment

            	
              Original
      Price

            	
              Percentage
      of Current Holdings

            	
              Percentage
      of Holdings Fully Diluted

            	
              Price
      per share

            	
              Holder
      of rights

              Obl./not
      obl.

            
	
              1. 

            	
              Dr.
      Israel Amirav

            	
              45140932

            	
              Israel

            	 
      	
              1,658

            	
              0

            	
              Feb.
      5, 2001

            	
              NIS
      1,658

            	
              5.12%

            	
              5.12%

            	 
      	
              Oblig.

            
	
              2. 

            	
              Prof.David
      Groshar

            	
              81376060

            	
              Israel

            	 
      	
              1,222

            	
              0

            	
              Feb.
      5, 2001

            	
              NIS
      1,222

            	
              3.77%

            	
              3.77%

            	 
      	
              Oblig.

            
	
              3. 

            	
              Assaf
      Halamish

            	
              050678796

            	
              Israel

            	 
      	
              3,533

            	
              0

            	
              Feb.
      5, 2001

            	
              NIS
      3,533

            	
              10.91%

            	
              10.91%

            	 
      	
              Oblig.

            
	
              4. 

            	
              GPI

            	
              511664260

            	
              Israel

            	 
      	
              2,717

            	
              0

            	
              Jul.
      30, 2002

            	
              NIS
      610,555

            	
              8.39%

            	
              8.39%

            	 
      	
              Oblig.

            
	
              5. 

            	
              Prof.
      Michael Newhouse

            	
              JW797870

            	
              Canada

            	 
      	
              870

            	
              0

            	
              Feb.
      5, 2001

            	
              NIS
      870

            	
              2.69%

            	
              2.69%

            	 
      	
              Not
      oblig.

            
	
              6. 

            	
              Life
      Support

            	
              513331215

            	
              Israel

            	 
      	
              8,543

            	
              0

            	
              Apr.
      4, 2004

            	
              $443,000

            	
              26.10%

            	
              26.10%

            	 
      	
              Oblig.

            
	
              7. 

            	
              Ramport
      Finance

            	
              474849

            	
              BVI

            	 
      	
              3,530

            	
              0

            	
              Nov.27,
      2005

            	
              $150,000

            	
              10.90%

            	
              10.90%

            	 
      	
              Oblig.

            
	
              8. 

            	
              A.M.
      Maagal Marketing &

              Business
      Dev’t Ltd.

            	
              51265648-9

            	
              Israel

            	 
      	
              464

            	
              0

            	
              Apr.
      4, 2004

              May
      15, 2008

            	
              $25,000

              $164,000

            	
              1.43%

            	
              1.43%

            	 
      	
              Oblig.

            
	
              9. 

            	
              Microdel

            	
              513577874

            	
              Israel

            	 
      	
              9,488

            	
              0

            	
              Apr.
      26, 2009

              Jun.
      30, 2009

            	
              $228,000

              $80,000

            	
              29.29%

            	
              29.29%

            	 
      	
              Oblig.

            
	
              10. 

            	
              Orni
      Elad

            	
              004161238

            	
              Israel

            	 
      	
              193

            	
              0

            	
              To
      be issued prior to and proximate to the share transfer

               

            	
              NIS
      193

            	
              0.60%

            	
              0.60%

            	 
      	
              Oblig.

            
	
              11. 

            	
              Boaz
      Gruener

            	
              057931313

            	
              Israel

            	 
      	
              260

            	
              0

            	
              To
      be issued prior to and proximate to the share transfer

               

            	
              $40,000

            	
              0.80%

            	
              0.80%

            	 
      	
              Oblig.

            

    

    
 

     

     

    10ex104.htm

     

    EXHIBIT
10.4 

    CURRENT SHAREHOLDERS
AGREEMENT OF JULY 2009

     

    AGREEMENT

    

    
      Made
and executed in Tel Aviv on the 5 day of July 2009

    

    

    Between:                           Dr.
Israel Amirav, I.D. 5140932-4 (hereinafter: “Dr. Amirav”)

    The first
party

    And
between:                    Prof.
David Grusher, I.D. 1376060-8 (hereinafter: “Prof. Grusher”)

    The
second party

    And
between:                    Assaf
Halamish, I.D. 050678796 (hereinafter: “Assaf”)

    The third
party

    
      	
              And
      between:

            	
              GPI
      Granot Development Enterprises Ltd., PC: 51-166426-0 (hereinafter:
      “GPI”)

            	 
      

    

    The
fourth party

    
      	
              And
      between:

            	
              Life
      Support Ltd., PC 513331915 (hereinafter: “Life
Support”)

            
	 
      	
              The
      fifth party

            

    

    

    
      	
              And
      between:

            	
              Ramport
      Ltd. _____________________((hereinafter:
  “Ramport”)

            

    

    The sixth
party

    And
between:                    Microdel
Ltd., PC: 513577874 ((hereinafter: “Microdel”)

    
      	 
      	
              The
      seventh party

            
	
              And
      between:

            	
              A.M.
      Maagal Ltd., PC: ____________((hereinafter:
  “Amado”)

            

    

    The
eighth party

    

    All of
the above mentioned parties, the first through the seventh (with the exception
of Amado) shall be referred to hereinafter as the “Shareholders” or the “Current
Shareholders”

    

    WHEREAS

    

    
      	
              a.

            	
              Microdel
      is involved in mobilizing funds for the Babies’ Breath Co. Ltd., Private
      Co. 51-307694-3 (hereinafter: “the Company”)
      particularly by way of setting up a new company in the U.S. (hereinafter:
      “the Offered
      Company”) which shall hold all the share capital of the Company and
      the shares whereof shall be registered for “over the counter” trading on
      the Nasdaq Stock Exchange in the United States. The source of the decisive
      majority of the funds of the offering is institutional bodies in the U.S.,
      which will invest sums of money in the offered company that will serve to
      continue to finance the ongoing activity of the Company (hereinafter: “the
      Offering”).

            

    

    

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    
      	
              b.

            	
              For
      the purpose of the Offering, the Articles of Incorporation of the Company
      must be changed so that all Company shares shall be shares of equal rights
      and the right of first refusal in the Articles of Incorporation of the
      Company must be updated so that it applies and obligates solely
      shareholders who hold at least 5% of the allocated capital of the
      Company.

            

    

    

    
      	
              c.

            	
              Within
      the context of the Offering procedure, all Company shareholders are to
      transfer all their shares in the Company to the Offered Company. And
      shares of equal rights are to be allotted to several private investors who
      are to invest in the Company together the sum of $150,000 (hereinafter:
      “the Private Investors”) in order to
      meet the threshold demands of the
Offering.

            

    

    

    
      	
              d.

            	
              The
      current Articles of Incorporation of the Company (hereinafter: “the Current Articles”)
      comprise three types of shares, all as specified in the current Articles
      of Incorporation.

            

    

    

    
      	
              e.

            	
              The
      parties agree to amend the Current Articles and at the shareholders’
      General Meeting to pass a special resolution to amend the Articles so that
      all rights attached to Company shares shall be identical and to amend the
      section concerning the right of first refusal so that it applies and
      obligates solely shareholders who hold at least 5% of the allocated
      capital of the Company, all as specified herein in this
      agreement.

            

    

    

    
      	
              f.

            	
              At
      the same time as the signature of this agreement, “A Pre-Offering
      Agreement” between Microdel and the Company has been signed (hereinafter:
      “the Pre-Offering Agreement”).

            

    

    

    
      	
              g.

            	
              The
      parties would like to preserve, to the extent possible and in the event
      that the offering fails to succeed, the rights between them concerning all
      that is connected to the rights to receive dividends in future from the
      Company, in the event of the failure of the Offering, so that they may
      remain as close as possible to the rights thereof pursuant to the current
      Articles in the event the Offering fails to succeed, all as specified
      herein in this agreement and in accordance with the conditions and
      arrangements specified therein.

            

    

    

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    
      	
              h.

            	
              The
      shares owing to Amado in the Company prior to the signature of this
      agreement are 564 ordinary C shares which have yet to be allocated to
      Amado in practice.

            

    

     

    
      	 
      	
              Accordingly,
      the parties have declared, agreed and stipulated as
    follows:

            

    

     

    
      	
              1.

            	
              Preamble and
  Interpretations

            

    

    

    
      	
              1.1

            	
              The
      preamble to this agreement constitutes an integral part
      thereof.

            

    

    

    
      	 
      	
              1.2

            	
              The
      section titles are solely for the sake of convenience and shall not be
      relied on in the interpretation or clarification of this
      agreement.

            

    

    

    
      	 
      	
              1.3

            	
              A
      definition given in this agreement in the plural shall have the same
      meaning also in the event that it appears in the singular and vice
      versa.

            

    

    

    
      	 
      	
              1.4

            	
              Unless
      otherwise stated explicitly, the terms in this agreement shall have the
      same meaning as the terms in the Pre-Offering
  Agreement.

            

    

     

    2.           Definitions
and Appendices

    

    
      	 
      	
              2.1

            	
              In
      this agreement, the following terms shall have the meaning specified
      alongside thereof insofar as this meaning fails to contradict the contents
      of matters or context thereof.

            

    

    

    
      	 
      	
              2.1.1

            	
              “Dollar,
      $” – A United States dollar. If the reference is to payment in dollars –
      the payment shall be performed in shekels according to the representative
      rate of the dollar publicized by the Bank of Israel and known on the date
      of actual payment.

            

    

    

    
      	 
      	
              2.12

            	
              “Future Dividends”
      – Dividends to be distributed by the Company in future if the Offering
      should fail.

            

    

    

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    
      	 
      	
              2.1.3

            	
              “Attributed Future
      Dividends” – The total amount of dividends that the Company is to
      distribute from time to time to all current shareholders and/or the
      alternates thereof. (For example: If the Company decides to distribute
      dividends in any given year in the amount of $200,000 and the percentage
      of holdings of current shareholders in the Company is 60%, then the sum of
      the attributed dividends with respect to the same distribution shall be
      $120,000.)

            

    

    

    
      	 
      	
              2.2

            	
              In
      the event of a conflict between the provisions of this agreement and one
      of the appendices thereof, the provisions of this agreement shall
      prevail.

            

    

    

    
      	 
      	
              2.3

            	
              The
      appendices attached hereto to this agreement shall constitute an integral
      part of the agreement.

            

    

     

    3.           Percentage
of Holdings of Current Shareholders in the Company

    

    
      	 
      	
              3.1

            	
              At
      the time of signing this agreement the holdings of the shareholders in the
      Company are as follows:

            

    

    
    

     

    
      	§	Dr.
      Amirav  	 1,658 Type A
      ordinary shares
	§	Prof. Grusher	– 1,222 Type A
      ordinary shares
	§	Assaf      	– 3,533 Type A
      ordinary shares
	§	GPI	– 2,717 Type A
      ordinary shares
	§	Prof. M.
      Neuhouse   	– 870 Type A
      shares
	§	Life
      Support  	– 8,453 Type A
      ordinary shares
	§	Ramport    	– 1,765 Type A
      ordinary shares and
	 	 	

              –
      1,765 Type B shares

            
	§	Microdel	– 187 Type A
      ordinary shares and 188 Type B shares (which constitute the “Unconditional
      Shares” as defined in the Pre-Offering Agreement)
	§	Amado   	– 564 Type C shares
      (which have yet to be allocated to Amado)

    

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    All
holders of Type A ordinary shares shall be called together herein in this
agreement “Holders of Ordinary
A Shares” and all holders of Type B ordinary shares shall be called
together herein in this agreement “Holders of Ordinary B Shares.”
This will be so even after all the shares of the Company become shares of the
same type. The distribution between holders of ordinary A shares among
themselves shall be according to the proportion of ordinary A shares that each
of the shareholders held prior to the signature of this agreement in relation to
all the ordinary A shares that were allocated and paid up prior to the signature
of this agreement. The distribution between holders of ordinary B shares among
themselves shall be according to the proportion of ordinary B shares that each
of the shareholders held prior to the signature of this agreement in relation to
all the ordinary B shares allocated and paid up prior to the signature of this
agreement.

    

    
      	 
      	
              3.2

            	
              According
      to the current Articles, the rights attached to the various shares
      are:

            

    

    

    
      	 
      	
              3.2.1

            	
              The
      rights attendant on Ordinary A Shares and Ordinary
      B Shares shall
      grant the holders thereof the following
rights:

            

    

    

    
      	 
      	
              With respect to the
      distribution of dividends:

            

    

    

    
      	 
      	
              3.2.1.1

            	
              To
      receive dividends and participate in the distribution of Company revenues
      at a proportion of 60% for holders of Ordinary A Shares and 40% for
      holders of Ordinary B Shares, until all the holders of A shares receive
      the sum of $500,000.

            

    

    

    
      	 
      	
              3.2.1.2

            	
              Following
      the distribution of dividends of $500,000 to all holders of Ordinary A
      Shares, holders of Ordinary A Shares will not be entitled to receive any
      dividends until the holders of Ordinary B Shares receive dividends in the
      amount of the difference between the sum of the investment in cash and the
      sum of the dividend paid them by virtue of section 3.2.1.1 above, and they
      will be paid the sum of suppliers’ credit and the holders of Ordinary B
      Shares will be paid any other owners’ loan that they placed in favor of
      the Company. For the avoidance of doubt, it is clarified that the sum of
      dividends the holders of Ordinary B Shares will receive by virtue of
      combining the sums subject of sections 3.2.1.1 and 3.2.1.2 above together
      with the sum of suppliers’ credit that is refunded shall be equal to the
      sum of the comprehensive
investment.

            

    

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
      	 
      	
              3.2.1.3

            	
              Following
      payment of the sums as aforesaid in section 3.2.1.2 above, all holders of
      Ordinary A shares shall be entitled to receive 60% “of the differential in
      Company profits” to be distributed during a period of 4 (four) years
      commencing on the date of payment of the final sum, according to section
      3.2.1.2 above. In the event that during the aforesaid 4-year period, no
      profit that may be distributed according to standard accounting rules,
      which accrued during the aforesaid 4-year period, are distributed
      (hereinafter: “the
      Undistributed Sum of Profits”), then the sum
      of the undistributed profits shall be distributed on the first date of
      dividend distribution at the Company in a division of 60% “of the
      differential of Company profits” to holders of Ordinary A Shares and 40%
      to holders of Ordinary B Shares until the entire amount of undistributed
      profits is distributed, even if the distribution, as aforesaid, shall be
      subsequent to the 4-year period, as
aforesaid.

            

    

    

    
      	 
      	
              “Company Profits
      Differential” signifies: all Company profits that are distributed
      as dividends with the deduction of the sums that are distributed as
      dividends to holders of Ordinary C
Shares.

            

    

    

    
      	 
      	
              3.2.1.4

            	
              Following
      the occurrence of the aforesaid condition in subsection 3.2.1.3 above
      (including subsequent to the distribution of the sum of undistributed
      profits), the rights of the holders of Ordinary A Shares and the holders
      of Ordinary B Shares and the holders of Ordinary C Shares in relation to
      the right to receive dividends, shall be
  identical.

            

    

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

     

    
      	 
      	
              With respect to the remaining
      rights

            

    

    

    
      	 
      	
              3.2.1.5

            	
              Save
      with respect to the right to receive dividends as aforesaid, the rights
      attendant on the Ordinary A and B Shares shall be identical and shall
      grant the holders thereof the right to receive invitations and participate
      and vote at members’ meetings of the Company, the right to participate in
      receiving excess Company assets at the time of liquidation thereof and the
      right to receive face value of shares at the time of liquidation
      thereof.

            

    

    

    
      	 
      	
              3.2.1.6

            	
              Whoever
      holds 5% or more or any group of holders of 5% (five percent) or more of
      the ordinary A and B share capital allotted by the Company shall be
      entitled to appoint one director to the Board of Directors of the Company,
      to dismiss any director who was appointed as aforesaid and to appoint
      another director in lieu thereof. A shareholder holding more than 5% as
      aforesaid may appoint one director by virtue of every 5% of ordinary A and
      B share capital allotted by the Company. The weight of each director’s
      vote shall be the relative weight of the number of ordinary A and/or B
      shares by virtue whereof he was appointed in relation to the total number
      of A and B shares allocated in the
Company.

            

    

    

    
      	 
      	
              3.2.1.7

            	
              The
      supplementary rights for holders of ordinary C shares shall be solely to
      receive dividends and participate in Company profits, following payment of
      the sums aforesaid in section 3.1.2.2, in accordance with the relative
      share thereof in the total number of ordinary shares of the Company.
      Subsequent to the occurrence of the condition aforesaid in subsection
      3.2.1.2 above, the supplementary rights to all the ordinary shares, A, B
      and C, will be equal solely with respect to the distribution of dividends,
      subject to the priority given to holders of ordinary A shares as opposed
      to holders of ordinary B shares, according to subsection
      3.2.1.3.

            

    

    

    
      	 
      	
              Apart
      from the aforesaid right (i.e., to participate in Company profits, as
      aforesaid), the ordinary C shares shall not grant the holder thereof any
      rights whatsoever – neither rights to vote at general meetings of
      shareholders nor rights to appoint directors to the Board of Directors of
      the Company and/or any other supplementary
  right.

            

    

    

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    4.           Agreement
with Respect to the Distribution of Future Dividends

    

    
      	 
      	
              4.1

            	
              Current
      shareholders hereby give their agreement to vote at a general meeting of
      shareholders to pass a special resolution to amend the Articles of
      Incorporation of the Company so that all Company shares shall be shares of
      equal rights. Furthermore, current shareholders hereby agree irrevocably
      that in the event of the
      failure of the Offering, all attributed future dividends shall be
      divided among them according to the principles in section 3.2.1 above so
      that each of the current shareholders and the alternates thereof shall
      receive a share in the attributed future dividends that reflects his
      portion and the type of shares he held at the time of signature of this
      agreement (i.e., prior to the Offering and prior to the amendment of the
      Articles of Incorporation of the Company). Thus, among the current
      shareholders, the provisions of section 3.2 above shall be read with the
      following amendments specified herein
below:

            

    

    

    
      	 
      	
              4.1.1.1

            	
              To
      receive dividends and participate in the distribution of attributed future
      dividends at a rate of 60% for holders of ordinary A shares and 40% for
      holders of ordinary B shares, until all holders of ordinary A shares shall
      receive the sum of $500,000.

            

    

    

    
      	 
      	
              4.1.1.2

            	
              Following
      the distribution of $500,000 of dividends from all the attributed future
      dividends to all holders of ordinary A shares, the ordinary A shares shall
      not be entitled to receive any dividends from the funds of the attributed
      future dividends until holders of ordinary B shares shall receive
      dividends in the amount of the difference between the sum of the
      investment in cash (i.e., $_______) and the sum of the dividend paid them
      by virtue of section 4.1.1.1 above and shall be paid the sum of suppliers’
      credit (i.e., the sum of $_______) and holders of ordinary B shares shall
      have any other loans from shareholders paid up, which they placed at the
      Company’s disposal (i.e., $_________). For the avoidance of doubt, it is
      clarified that the sum of the dividends that holders of ordinary B shares
      shall receive by virtue of combining the amounts subject of sections
      4.1.1.1 and 4.1.1.2 above together with the sum of suppliers’ credit to be
      refunded shall be equal to the sum of the comprehensive investment (i.e.,
      $ ____________).

            

    

    

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    
      	 
      	
              4.1.1.3

            	
              Following
      payment of the sums aforesaid in subsection 4.1.1.2, all holders of
      ordinary A shares shall be entitled to receive 60% of all attributed
      future dividends to be distributed during a period of four (4) years
      commencing on the date of payment of the final sum, pursuant to section
      3.2.1.2 above. In the
      event that during the aforesaid 4-year period, no profits that may be
      distributed according to standard accounting rules are distributed, which
      accrued during the aforesaid 4-year period (hereinafter: “the Sum of
      Undistributed Profits”), then the sum of
      undistributed profits shall be distributed on the first date of the
      distribution of dividends in the Company with a distribution of 60% to holders
      of ordinary A shares and 40% to holders of ordinary B shares, until the
      entire sum of undistributed profits shall be distributed, even if the
      distribution, as aforesaid, shall take place following the 4-year period,
      as aforesaid.

            

    

    

    
      	 
      	
              “Company
      Profits Difference” signifies all attributed
      future dividends to be distributed with the deduction of the sums that
      will be distributed as dividends to holders of the other shares in the
      Company, who are not listed as current
  shareholders.

            

    

    

    
      	 
      	
              4.1.1.4

            	
              Following
      the occurrence of the condition aforesaid in subsection 4.1.1.3 (including
      after the distribution of the sum of undistributed profits), the rights of
      ordinary shareholders in the Company (including ordinary A and B shares)
      shall be the same in relation to the right to receive
      dividends.

            

    

    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
      	 
      	
              4.2

            	
              If
      the Offering procedure fails, the parties shall give the Company an
      irrevocable instruction to divide the attributed future dividends among
      the current shareholders and the alternates thereof in accordance with the
      provisions of section 4.1.1 above. This section constitutes an irrevocable
      instruction to the Company to act in accordance with the provisions of
      section 4.1 above in the event of the failure of the Offering. All current
      shareholders may contact the Company at any time and instruct it to act in
      accordance with the provisions of this section. In addition, the contents
      of this section shall apply with respect to any alternate of a current
      shareholder and current shareholders undertake to have anyone who comes in
      place thereof sign this agreement as a party thereto with respect to the
      shares being transferred. There shall be no validity to the transfer of
      shares in the Company of a current shareholder unless the transferee
      shareholder has signed this agreement as a party thereto and as one who
      enters in place of the transferring shareholder, for the purposes of this
      agreement.

            

    

    

    
      	 
      	
              4.3

            	
              The
      parties are aware that if the Offering succeeds, then all Company shares
      shall be held by the offered company and the current shareholders shall
      hold shares in the offered company while all shares of the parties in the
      offered company shall be of equal rights. Accordingly, the current
      shareholders who hold ordinary A shares in this case waive their
      preferential right pursuant to the current
  Articles.

            

    

     

    
      	
              5.

            	
              Amendment of the Articles of Incorporation with
      Respect to the Right of First
Refusal

            

    

    

    
      	 
      	
              Current
      shareholders hereby give their agreement to vote at a general meeting of
      shareholders to pass a special resolution to amend Regulation 32A of the
      Articles of Incorporation of the Company concerning the right of refusal
      of shareholders in the Company to purchase the shares of another member,
      so that this right shall obligate any shareholder to offer them first
      solely to whoever holds at least 5% of the allocated capital of the
      Company such that the offerees pursuant to this regulation shall be solely
      holders of at least 5% of the allocated capital of the
      Company.

            

    

    

    
      	 
      	
              The
      text of the special resolution to amend Regulation 32A shall be signed at
      the same time as the signature of the Pre-Offering
    agreement.

            

    

    

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
      	
              6.

            	
              Lock-Up of Shares and Registration for Trade
      Rights

            

    

    

    
      	 
      	
              The
      parties agree that the Offering as defined above shall not obligate a
      shareholder to diverge from the two following
  principles:

            

    

    

    
      	 
      	
              6.1

            	
              All
      shareholders shall be subject to a contractual Lock-Up provision that
      applies to the shares thereof, which fails to exceed the lock-up period
      required by American law and the provisions of the Israeli Income Tax
      Ordinance as a result of the transfer of their shares in the Company to
      the offered company against receiving shares in the offered company. Each
      lock-up period or restriction beyond this with respect to the shares of a
      current shareholder in the offered company shall require the advance
      written agreement thereof.

            

    

    

    
      	 
      	
              6.2

            	
              The
      shares of all current shareholders in the offered company shall benefit
      from the same “Registration for Trade Rights” as the shares to be
      allocated to institutional investors and to shareholders to whom Company
      shares will be allocated within the context of the Offering. Any variation
      from this principle with respect to shares of current shareholders in the
      offered company shall require the advance written agreement
      thereof.

            

    

    

    
      	 
      	
              6.3

            	
              Notwithstanding
      the aforesaid, all current shareholders, save for Microdel, hereby
      undertake vis-à-vis GPI (hereinafter: “the Incubator”) as
      follows:

            

    

    

    
      	 
      	
              (1)

            	
              Insofar
      as there is a restriction on the registration of Incubator shares for
      trade and/or the sale thereof (such as the Lock-up period in American law)
      as a result of the Offering (insofar as it will be implemented), then the
      current shareholders shall instruct the Company to take steps so that the
      Incubator shares will be registered for trade at the first opportunity
      wherein the shares of the other shareholders in the Company are registered
      following conclusion of the aforesaid
  restriction.

            

    

    

    
      	 
      	
              (2)

            	
              Notwithstanding
      the aforesaid in subsection (1), the current shareholders (save for
      Microdel) undertake vis-à-vis the Incubator that insofar as there will be
      a restriction on the number of shares that may be registered for trade
      within the confines of the Offering, which will preclude the registration
      of all current shareholders for trade, the current shareholders (with the
      exception of Microdel) shall waive their right to register the relative
      share of their shares for trade and will allow the Incubator to register
      all the shares thereof for trade prior to the registration of their shares
      for trade. The waiver of the current shareholders (save for Microdel)
      strictly among themselves shall be relative to the percentage of holdings
      of the current shareholders (save for Microdel and the
      Incubator).

            

    

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
      	 
      	
              (3)

            	
              In
      the event that there is a restriction according to the Israeli tax laws on
      the sale of the shares of the current shareholders (i.e., a lock-up period
      which precludes the sale of shares) and it is not possible to be released
      from such restriction against the payment of the tax that the Incubator
      will be charged to pay or in the event the tax authorities in Israel
      demand that all current shareholders shall be subject to restrictions it
      shall impose within the context of the “Early Authorization” procedure,
      without exception, without the possibility of the “release” of the
      Incubator from this demand (even “at the price” of its payment of the tax,
      a demand whereto the Incubator agrees), then despite the Incubator joining
      the  aforesaid arrangement with the Income Tax Authorities, the
      provisions of subsection (1) and (2) above shall apply in the event of the
      imposition of a restriction, pursuant to the tax laws in
      Israel.

            

    

    

    
      	 
      	
              (4)

            	
              The
      agreement specified herein in this section above shall apply also in the
      event that the Offering is implemented by way of a different structure
      using the same Offering consultant, as aforesaid in section 10 of the
      Pre-Offering agreement between the Company and Microdel. Nonetheless, it
      shall not apply in the event that the Offering or the mobilization of
      capital is executed not by way of the Offering consultant, as aforesaid,
      and/or anyone on behalf thereof and it shall not apply to any other
      offering that occurs in the event that the Offering, pursuant to this
      agreement, is not executed and the Company opts to undertake another
      offering procedure.

            

    

    

    
      	 
      	
              (5)

            	
              For
      the avoidance of doubt, the rights of the Incubator, pursuant to this
      section, shall apply also in the event that prior to the Offering, the
      Incubator transfers the shares thereof in the Company to a third party,
      subject to the provisions of the Articles of Incorporation of the Company.
      In such event, the third party transferee shall be entitled to rights
      pursuant to this section as a result of the implementation of the Offering
      (insofar as it is implemented). However, the said rights shall expire in
      the event of the sale of the shares to a third party following the
      Offering.

            

    

    

    
      	
              7.

            	
              Temporary Right of Microdel to Appoint Two
      Directors and the Weight of their
Votes

            

    

    

    At the
request of Microdel, the parties agree that Microdel shall appoint two directors
to the Board of Directors of the Company as long as the Offering proceeding
remains unaltered – Mr. Yossi De Levi and Mr. Alon Zifroni, notwithstanding the
fact that according to the Articles of Incorporation of the Company, Microdel
may not appoint two directors. It is clarified that the weight of the votes of
these two directors together shall be as the relative weight of the number of
unconditional shares in relation to the entire number of shares allocated in the
Company. If the Offering proceeding should fail, this right of Microdel shall
expire of its own accord and forthwith, the directors on its behalf shall cease
to serve as such and Microdel shall be able to appoint directors in accordance
with the Articles of Incorporation of the Company. The same is the rule in the
event the Offering succeeds. In the event the Offering succeeds, this section
shall expire and the appointment of the directors shall be in accordance with
the Articles of Incorporation of the Company.

    

    
      	
              8.

            	
              Agreement to Restrictions to be Imposed by the Tax
      Authorities in Israel as a Condition to the
  Offering

            

    

    

    
      	 
      	
              It
      is hereby clarified that within the context of the tax arrangement
      pertaining to the transfer of shares of the shareholders in the Company to
      the offered company, prior to the Offering procedure, provisions that
      restrict the shareholders may be included, including a two-year
      restriction on the sale of shares in the offered company and a provision
      with respect to a trustee holding shares of shareholders in the offered
      company, to be appointed on behalf thereof. The trustee shall be liable to
      pay the tax in the event of the sale of shares of current shareholders in
      the offered company. The current shareholders agree to take on, within the
      confines of the Offering procedure if it should succeed, the restrictions
      in the appendix indicated above (of a lock-up of shares and deposit with a
      trustee) and undertake to take steps to apply them insofar as the matter
      relates to shares held in the Company by each of the current shareholders.
      The current shareholders further agree to transfer, within the confines of
      the Offering procedure, the shares thereof in the Company to the offered
      company, provided that they are allocated shares in the offered company at
      the same rate as the quantity of shares transferred, so that the
      percentage of holdings of the shareholders in the offered company is the
      same as the percentage of their holdings in the Company, prior to the
      transfer.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
              In Witness Whereof the Parties Have
      Signed:

            

    

    

    

    
      	
              ____________________________

            	
              ____________________________

            
	
              Microdel

            	
              Life
      Support

            

    

    

    
      	
              ____________________________

            	
              ____________________________

            
	
              Dr.
      Israel Amirav

            	
              Prof.
      David Grusher

            

    

    

    
      	
              ____________________________

            	
              ____________________________

            
	
              Assaf
      Halamish

            	
              GPI
      Granot Development Enterprises Ltd.

            

    

    

    
      	
              ____________________________

            	
              _____________________________

            
	
              Prof.
      Michael Neuhouse

            	
              Ramport

            

    

    

    

    
      	 
      	
              _____________________________

            
	 
      	
              A.
      A. Maagal Ltd. (Amado)

            

    

    

     

     

     

    
      	 
      	
              Company
  Authorization

            

    

    The
Company is aware of the agreement of the shareholders indicated above and
undertakes to take steps to implement the provisions thereof with respect to all
that pertains to the relations between current shareholders in connection with
the registration rights for trade of the Company shares and the sale thereof as
explained in the agreement above.

    

    

    
      	 
      	
              _____________________________

            
	 
      	
              Babies’
      Breath Co. Ltd.

            

    

    

     

    
      
        
        

      

      
        13

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