RE:Taxation Decision on the Agreement - Baby's Breath Ltd. - Share Transfer in Accordance with Section 104 B of the Ordinance

RE:

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 32,388 shares have been allocated. 1

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 shall be attained with an undertaking to invest the comprehensive sum of USD 3.55 million.

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.

1.5

In accordance with your declaration, part of the foreign company shares shall be registered for trade on the U.S. stock exchange (OTCBB). The initial draft of the prospectus shall be submitted to the U.S. Securities Exchange following on and proximate to the share transfer.

1.6

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.

1.7

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

1.8

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 ”).

1.9

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

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.

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 (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 __________________ Ltd. (Deductions File ________________) (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 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.

3.8

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.

3.9

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.

3.10

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 sa