BOS BETTER ONLINE SOLUTIONS LTD

Maximum Relationship Between Fixed and Variable Compensation

The percentages above represent each component as a percentage of total annual compensation. Equity-based compensation shall be measured at grant-date fair value and annualized on a linear basis over the applicable vesting period. Sales commissions and termination payments shall be included in Variable Compensation. All such payments shall also remain subject to the specific limits set forth in this Policy. For purposes of calculating the fixed-to-variable compensation ratio, a one-time payment shall be included in the year in which it is paid or recognized as compensation, and Base Salary and recurring benefits shall be calculated on an annualized basis. A payment shall not be counted more than once.

A non-material change in the compensation package of an Officer who reports to the Chief Executive Officer and who is not serving as a director of the Company may be approved solely by the Chief Executive Officer, provided that the terms of compensation of such Officer will continue to meet the requirements of this Compensation Policy.

For these purposes, an aggregate change that does not exceed 10% of the Officer’s total annual compensation, compared with the terms most recently approved by the Compensation Committee and the Board, shall be deemed non-material, provided that the change does not materially alter the structure of the Officer’s compensation and remains consistent with this Policy.

4.2. Base Salary for Officers

The Base Salary compensates the Officer for the time and effort devoted to performing the Officer’s duties and reflects the Officer’s role, skills, qualifications, experience and market value (the “Base Salary”).

The Base Salary for Officers will be set based on the following considerations:

• Role and the business responsibilities.

• Professional experience, education, expertise and qualifications.

• Previous compensation paid to the Officer, before joining the Company and/or for previous roles within the Company.

• Internal comparison: (a) the Base Salary of comparable BOS’ Officers; (b) the ratio between the overall compensation of the Officer and the average and median salary of other employees of the Company; and (c) the effect of the salary differences on the workforce atmosphere and relationships.

• External comparison — the Base Salary of each Officer shall be considered with reference to the applicable Market Benchmark and shall generally target a range between the median and the 75 th percentile for comparable positions. The Compensation Committee and the Board may approve compensation above such range based on the Officer’s responsibilities, experience, performance, unique qualifications, retention considerations or other documented circumstances, provided that the Base Salary does not exceed the 90 th-percentile ceiling set forth below.

The monthly gross Base Salary of an Officer shall not exceed the 90 th percentile of the applicable Market Benchmark for comparable positions, as determined by the Compensation Committee and the Board. In determining the applicable Market Benchmark, the Compensation Committee and the Board may take into account the Officer’s position, responsibilities, experience and geographic location, as well as the Company’s size, industry, complexity and financial condition.

When deciding on increasing an Officer’s Base Salary, the following considerations shall be applied:

• Changes to the Officer’s scope of responsibilities and business challenges.

• The Officer’s professional experience, education, expertise, qualifications and achievements in the Company.

• The need to retain the Officer, including related aspects such as competing job offers or the availability of alternative talent in the relevant labor market.

• Inflation rate since the last Base Salary update.

• The Company’s financial state.

• Internal comparison — (a) Base Salary of comparable BOS’ Officers; (b) the ratio between the overall compensation of the Officer and the average and median salary of other employees of the Company; and (c) the effect of the salary differences on the workforce atmosphere and relationships.

• External comparison — the applicable Market Benchmark, generally targeting a range between the median and the 75 th percentile for comparable positions, subject to the 90 th-percentile Base Salary ceiling and the documented considerations set forth in this Policy.

4.3. Benefits and Perquisites for Officers

BOS’ benefit plans are designed to supplement cash compensation, based on local market practice for comparable positions, and are subject to the Israeli labor laws.

The Company may provide its Officers with market-competitive benefit plans, which may include the following:

• Pension and savings — subject to applicable law, Officers may be offered a choice between any combination of executive insurance and pension fund.

• Disability insurance — the Company may purchase disability insurance for its Officers; premium will not exceed 2.5% of the monthly salary.

• Education fund — Officers may be entitled to employer contributions to an education fund (keren hishtalmut) of up to 7.5% of the applicable salary base, subject to applicable law and the approved terms of office and employment.

• Convalescence pay — Officers are entitled to convalescence pay according to applicable law.

• Vacation — Officers are entitled to annual vacation days pursuant to their employment agreement, up to 25 days per annum, and no less than the minimum number required under applicable law.

• Sick days quota — Officers are entitled to up to 18 paid sick days per annum, but no less than the minimum number required under applicable law.

• Vehicle — car leasing may be offered to Officers on top of their salaries. The Company may gross up the taxation cost.

• Meal reimbursements — in accordance with the Company’s policy as in effect from time to time. Any applicable tax shall be borne by the Officer.

• Medical health insurance — according to Company’s policy.

• Out-of-pocket expenses — reimbursement in accordance with the Company’s policy.

• Severance pay — the Company’s liability for severance pay shall be determined in accordance with the Israeli Severance Pay Law, 1963, and Section 14 thereof such that an Officer may be entitled to the release of severance funds even in the event of voluntary resignation.

4.4. Bonus — Variable Compensation for Officers

The Company’s incentive arrangements may include an annual variable incentive designed to reward Officers based on predetermined Company, division and individual goals (the “Annual Bonus”), as well as the one-time payments and sales commissions described below. Annual Bonus arrangements shall take into account the Company’s profitability, financial condition, cash flow, risk profile and long-term objectives.