Edgar Filing: BOS BETTER ONLINE SOLUTIONS LTD

FORM 6 - K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a - 16 or 15d -16
of the Securities Exchange Act of 1934

For the Month of June 2004

B.O.S. BETTER ON-LINE SOLUTIONS, LTD.
(Translation of Registrant's Name into English)

100 BOS ROAD, TERADION 20179, ISRAEL
(Address of Principal Corporate Offices)

Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.

Form 20-F [X] Form 40-F [_]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): ___________

Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): ___________

Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [_] No [X]

If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): N/A

THIS REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE
REGISTRANT'S REGISTRATION STATEMENTS ON FORM S-8 (NOS. 333-110696, 333-100971
AND 333-11650), AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS
SUBMITTED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY
FILED OR FURNISHED.

Attached hereto and incorporated by reference herein is the Registrant's notice
of meeting and proxy statement for the annual general meeting of shareholders to
be held on August 5, 2004.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

B.O.S. Better On-Line Solutions, Ltd.
(Registrant)

By: /s/ Nehemia Kaufman
-----------------------
Nehemia Kaufman
Chief Financial Officer

Dated: June 24, 2004

B.O.S. BETTER ON-LINE SOLUTIONS LTD.
BEIT RABIN
TERADION INDUSTRIAL ZONE
MISGAV, ISRAEL

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST 5, 2004

To our Shareholders:

You are invited to attend an Annual Meeting of Shareholders of B.O.S. Better
On-Line Solutions Ltd. (the "Company") to be held in Israel at the Company's
offices at Beit Rabin, Teradion Industrial Zone, Misgav, Israel, on August 5,
2004 at 11 a.m. local time, and thereafter as it may be adjourned from time to
time (the "Meeting") for the following purposes:

1. To elect Messrs. Edouard Cukierman, Adiv Baruch, Israel Gal, Avishai Gluck,
Andrea Mandel-Mantello, Yair Shamir, and Ronen Zavlik, to the Company's
Board of Directors, to serve until the next Annual General Meeting of
Shareholders and until their successors have been duly elected and
qualified.

2. To reappoint Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young
International, Ltd. as the Company's Independent Auditors.

3. To approve the Management Agreement between the Company, Signum Ltd, and
Adiv Baruch.

4. To approve the Service Agreement between BOScom Ltd. and Zvi Greengold.

5. To approve the grant of options to Israel Gal.

6. With respect to the shareholders' resolution adopted February 18, 2003
regarding remuneration and grant of options to Company directors:

a. To amend the exercise price of options to be granted to future
directors.

b. To approve the grant of remuneration and options to Edouard Cukierman.

c. To approve the tacking of holding periods of certain directors, for
purposes of vesting and exercise terms of options.

7. To amend the provision of the Company's Articles of Association in respect
of the necessary quorum for a shareholders' meeting.

8. To receive the Auditor's Reports and the Company's Consolidated Financial
Statements for the fiscal years ended December 31, 2002 and 2003.

9. To transact such other business as may properly come before the Meeting or
any adjournments thereof.

Pursuant to the Company's Articles of Association, the Board of Directors has
fixed the close of business on June 28, 2004 as the date for determining the
holders of record of Ordinary Shares entitled to notice of and to vote at the
Meeting and any adjournments thereof.

All the proposals are ordinary resolutions, which require the affirmative vote
of a majority of the Ordinary Shares of the Company voted in person or by proxy
at the Meeting on the matter presented for passage. The votes of all
shareholders voting on the matter will be counted.

The Board of Directors believes that the shareholders of the Company should be
represented as fully as possible at the Meeting and encourages your attendance.
Whether or not you plan to be present kindly complete, date and sign the
enclosed proxy exactly as your name appears on the envelope containing this
Notice of Annual General Meeting and mail it promptly so that your votes can be
recorded. No postage is required if mailed in the United States. Return of your
proxy does not deprive you of your right to attend the Meeting, to revoke the
proxy or to vote your shares in person. All proxy instruments and powers of
attorney must be delivered to the Company no later than 48 hours prior to the
meeting. The Company's Proxy Statement is furnished herewith.

Joint holders of Ordinary Shares should take note that, pursuant to Article
14.13 of the Articles of Association of the Company, the vote of the senior of
joint holders of any share who tenders a vote, whether in person or by proxy,
will be accepted to the exclusion of the vote(s) of the other joint holder(s) of
the share, and for this purpose seniority will be determined by the order in
which the names stand in the shareholders' register.

By Order of the Board of Directors,

Edouard Cukierman Adiv Baruch
Chairman of the Board of Directors President and Chief Executive Officer

June, 2004

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
DATE AND SIGN THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE FOR
WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOU CAN LATER
REVOKE YOUR PROXY, ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON. ALL PROXY
INSTRUMENTS AND POWERS OF ATTORNEY MUST BE DELIVERED TO THE COMPANY'S CORPORATE
OFFICE NO LATER THAN 48 HOURS PRIOR TO THE MEETING.

B.O.S. BETTER ON-LINE SOLUTIONS LTD.
BEIT RABIN
TERADION INDUSTRIAL ZONE
MISGAV, ISRAEL

ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST 5, 2004

PROXY STATEMENT

This Proxy Statement is furnished to the holders of Ordinary Shares, NIS 4.00
nominal value (the "Ordinary Shares"), of B.O.S. Better On-Line Solutions Ltd.
("BOS" or the "Company") in connection with the solicitation by the Board of
Directors for use at the Annual Meeting of Shareholders of the Company to be
held in Israel at the Company's offices at Beit Rabin, Teradion Industrial Zone,
Misgav, Israel, on August 5, 2004 at 11 a.m. local time, and thereafter as it
may be adjourned from time to time (the "Meeting"). At the Meeting, shareholders
of the Company will be asked, to vote upon the following matters:

2. To reappoint Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young
International, Ltd. as the Company's Independent Auditors.

3. To approve the Management Agreement between the Company, Signum Ltd, and
Adiv Baruch.

4. To approve the Service Agreement between BOScom Ltd. and Zvi Greengold.

5. To approve the grant of options to Israel Gal.

6. With respect to the shareholders' resolution adopted February 18, 2003
regarding remuneration and grant of options to Company directors:

a. To amend the exercise price of options to be granted to future
directors.

b. To approve the grant of remuneration and options to Edouard Cukierman.

c. To approve the tacking of holding periods of certain directors, for
purposes of vesting and exercise terms of options.

7. To amend the provision of the Company's Articles of Association in respect
of the necessary quorum for a shareholders' meeting.

8. To receive the Auditor's Reports and the Company's Consolidated Financial
Statements for the fiscal years ended December 31, 2002 and 2003.

9. To transact such other business as may properly come before the Meeting or
any adjournments thereof.

A form of proxy for use at the Meeting and a return envelope for the proxy
are also enclosed. By appointing "proxies," shareholders may vote their Ordinary
Shares at the Meeting whether or not they attend. Upon the receipt of a properly
signed and dated proxy in the form enclosed, the persons named as proxies
therein will vote the Ordinary Shares represented thereby in accordance with the
instructions of the shareholder indicated thereon, or, if no direction is
indicated, in accordance with the recommendations of the Board of Directors of
the Company. The Company knows of no other matters to be submitted at the
Meeting other than as specified in the Notice of Annual General Meeting of
Shareholders enclosed with this Proxy Statement. If any other business is
properly brought before the Meeting, however, it is the intention of the persons
named as proxies to vote in respect thereof in accordance with their best
judgment. Shares represented by executed and unrevoked proxies will be voted. On
all matters considered at the Meeting, abstentions and broker non-votes will not
be treated as either a vote "for" or "against" the matter, although they will be
counted to determine if a quorum is present.

The proxy solicited hereby may be revoked at any time prior to its exercise
by means of a written notice delivered to the Company at its mailing address,
which is c/o American Stock Transfer & Trust Company, 40 Wall Street, New York,
NY 10005, USA, by the substitution of a new proxy bearing a later date or by a
request for the return of the proxy at the Meeting. All proxy instruments and
powers of attorney must be delivered to the Company no later than 48 hours prior
to the meeting.

The Company expects to mail this Proxy Statement and the enclosed form of
proxy to shareholders on or about July 2, 2004. All expenses of this
solicitation will be borne by the Company. In addition to the solicitation of
proxies by mail, directors, officers and employees of the Company, without
receiving additional compensation therefore, may solicit proxies by telephone,
telegraph, in person or by other means. Brokerage firms, nominees, fiduciaries
and other custodians have been requested to forward proxy solicitation materials
to the beneficial owners of Ordinary Shares of the Company held of record by
such persons, and the Company will reimburse such brokerage firms, nominees,
fiduciaries and other custodians for reasonable out-of-pocket expenses incurred
by them in connection therewith.

SHAREHOLDERS ENTITLED TO VOTE. Only holders of record of Ordinary Shares at
the close of business on June 28, 2004 are entitled to notice of and to vote at
the Meeting. The Company had 4,167,509 Ordinary Shares issued and outstanding on
June 15, 2004, each of which is entitled to one vote on each matter to be voted
on at the Meeting (less 5,338 that were dormant shares). The Articles of
Association of the Company do not provide for cumulative voting for the election
of the directors or for any other purpose. The presence, in person or by proxy,
of at least two shareholders holding at least 25% of the voting rights, will
constitute a quorum at the Meeting.

VOTES REQUIRED. All proposals are ordinary resolutions, which require the
affirmative vote of a majority of the Ordinary Shares of the Company voted in
person or by proxy at the Meeting on the matter presented for passage. The votes
of all shareholders voting on the matter will be counted.

I. PRINCIPAL SHAREHOLDERS

The following table sets forth, as of June 15, 2004, information to the
best of the Company's knowledge, as to each person known to the Company to be
the beneficial owner of more than five percent (5%) of the Company's outstanding
Ordinary Shares and as to all directors and officers of the Company as a group.
Except where indicated, to the best of the Company's knowledge based on
information provided by the owners, the beneficial owners of the Ordinary Shares
listed below have sole investment and voting power with respect to those shares
(subject to community property laws, where applicable). Applicable percentage
ownership in the following table is based on 4,167,509 shares outstanding (out
of which 5,338 are dormant shares) as of June 15, 2004.

Shares Beneficially Owned
-------------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ------ -------

Catalyst Fund, LP (1) 947,275 22.7%
3 Daniel Frisch Street,
Tel-Aviv 64731, Israel

Mr. Israel Gal (2) 321,332 7.7%
C/o B.O.S. Better OnLine Solutions Ltd.
100 Bos Drive
Teradion 20197, Israel

Ms. Yael Gal (3) 244,467 5.9%
C/o B.O.S. Better OnLine Solutions Ltd.
100 Bos Drive
Teradion 20197, Israel

M. Wertheim Holdings, Ltd. 279,958 6.7%
Twin Towers 2, 35 Zabotinski Street
Ramat-Gan, Israel

Hillswood Holdings Limited 310,119 7.4%
C/o Credit Suise Trust Limited
Guernsey Office
P.O. Box 122, Helvetia Court
South Esplanade, St. Peter Port
Guernsey, GY1 4EE Channel Islands

Officers and directors as a group (4) 321,332 7.7%

(1) Does not include options to purchase 7,500 Ordinary Shares that were
transferred to Catalyst by their executives who serve on the Company's Board of
Directors.

(2) Does not include indirect ownership of 244,467 Ordinary Shares owned by Ms.
Yael Gal, Mr. Israel Gal's spouse, as to which Mr. Gal disclaims beneficial
ownership. Does not include 93,750 options held by Mr. Gal.

(3) Does not include indirect ownership of 321,332 Ordinary Shares owned by Mr.
Israel Gal, Ms. Yael Gal's spouse, as to which Ms. Gal disclaims beneficial
ownership.

(4) Does not include indirect ownership of 244,467 Ordinary Shares owned by Ms.
Yael Gal, Mr. Israel Gal's spouse, as to which Mr. Gal disclaims beneficial
ownership. Does not include 221,250 options to purchase Ordinary Shares of the
Company granted and currently held by Officers and/or Directors of the Company.

II. RESOLUTIONS

1. ELECTION OF DIRECTORS

At the Meeting, seven (7) directors, out of the nine that currently serve
on the Board of Directors, will be nominated for reelection.

Section 239 of the Israeli Companies Law, 1999, requires that companies
whose shares are publicly traded have at least two external directors on the
board of directors. Dr. Yael Ilan (elected in November 2002) and Prof. Adi Raveh
(elected in February 2003) currently serve as external directors. Their term of
service is three years.

The rest of the directors are elected at the annual general meeting of
shareholders to serve until the next annual general meeting of shareholders and
until their respective successors are duly elected and qualified. It is the
intention of the persons named in the proxy to vote for the election of the
seven nominees named below, each to hold office until the next annual general
meeting of shareholders and until their respective successors are duly elected
and qualified, unless any office is vacated earlier pursuant to the relevant
provisions of the Articles of Association of the Company. The Company is unaware
of any reason why any nominee, if elected, should be unable to serve as a
director. If any of the nominees are unable to serve, the persons named in the
proxy will vote the shares for the election of such other nominees as the Board
of Directors may propose. All nominees listed below have advised the Board of
Directors that they intend to serve as directors if reelected.

NOMINEES FOR THE BOARD OF DIRECTORS

Certain information concerning the nominees:

ORDINARY SHARES PERCENTAGE OF
BENEFICIALLY BENEFICIAL
NAME AGE POSITION OWNED HOLDINGS
------------------ -- -------- --------------- -------------

Mr. Edouard Cukierman 39 Chairman of the Board of ------ ------
Directors

Mr. Adiv Baruch 41 Director, President and ------ ------
Chief Executive Officer

Mr. Israel Gal (3) 53 Director 321,332 7.7%

Mr. Avishai Gluck (2) 32 Director ------ ------

Mr. Andrea Mandel-Mantello 45 Director ------ ------

Mr. Yair Shamir 59 Director * *

Mr. Ronen Zavlik (1) 43 Director ------ ------

* Represents indirect holdings of less than 1%.

(1) Member of the Audit Committee.

(2) Member of the Remuneration Committee.

(3) Does not include indirect ownership of 244,467 Ordinary Shares owned by Ms.
Yael Gal, Mr. Israel Gal's spouse, as to which Mr. Gal disclaims beneficial
ownership. Does not include 93,750 options held by Mr. Gal.

MR. EDOUARD CUKIERMAN, 39, has been a director since May 2003, and Chairman of
the Company since June 2003. He is the Chairman of Cukierman & Co. Investment
House and CEO of the Catalyst Fund. Former President and Managing Director of
the Astra Fund, Mr. Cukierman provides a key role in determining and
implementing Catalyst's investment selection and exit strategies for its
investments. Mr. Cukierman holds several Board positions in portfolio companies
including VCON, BOS and Orex CR. He is also the Vice Chairman of Citec
Environment and Services in Paris and a Board member of Lamina Technologies in
Switzerland. In addition, Mr. Cukierman is on the Board of Sar-El, an Israeli
Defense Forces volunteer organization and serves in the IDF Spokesman Unit
(Reserves). In 1997, Mr. Cukierman was awarded the Prize of Honor from the
Israel-France Chamber of Commerce as CEO of Astra. He was listed among the most
influential businessmen in the Israeli high-tech industry by Israel's most
widely read newspaper. Mr. Cukierman holds an M.B.A. from INSEAD, Fontainebleau,
France, and a B.Sc. from the Technion - Israel Institute of Technology.

MR. ADIV BARUCH, 41, has been a director since February 2004 and the Company's
President and CEO service provider since January 1, 2004. From June 2004 he also
serves as the CEO service provider of the Company's subsidiary, BOSom Ltd. From
1999 to 2003 he served as Executive VP Business Development of Ness
Technologies, and has expertise in the Telecom and High-tech industries. Mr.
Baruch is also a former partner and active director of IPEX, acquired by Ness.
He has served as founder and an executive or director for several IT companies
and Internet start-ups, and was significantly involved in the M&A process and in
assisting these companies in their global expansion. Mr. Baruch is actively
involved as the chairman of the Israeli Export Institute Hi-Tech and Telecom
Division, and serves as a director for Ramdor Ltd., an Israeli public company
traded on the TASE. He has a B.Sc. in Computer Science and Industrial
Engineering from the Technion - Israel Institute of Technology.

MR. ISRAEL GAL, 53, founder of the Company, served as the Company's Chief
Executive Officer and President from its inception in 1990 until January 2002,
and then again from September 2002 until December 2003. Mr. Gal was the Chairman
of the Board of Directors from 1990 until 2000 and also served as the CEO of one
of the Company's subsidiaries, BOScom Ltd. until June 2004. Mr. Gal is currently
the CTO of VOIP products in BOScom. From 1983 to 1989, Mr. Gal served as IBM
midrange product manager at IIS. In 1989, Mr. Gal served as the product manager
for sales and marketing of IIS in the United States. In 1979, Mr. Gal co-founded
Liad Electronics Ltd. where he worked until 1983. From 1976 to 1979, Mr. Gal
served as research and development engineer and product manager for Elbit Ltd.
Mr. Gal received a Bachelors of Science in Electronic Engineering from the
Technion-Israel Institute of Technology.

MR. AVISHAI GLUCK, 32, has been a director since February 2004. He serves as the
Executive Vice President of Catalyst Investments. Mr. Gluck brings with him over
6 years of financial management, accounting and tax consultation experience. He
has extensive knowledge of the Israeli high tech market, having screened
hundreds of companies for Catalyst and as a senior corporate consultant at E&Y
Israel. Mr. Gluck currently serves as a director in MTI Wireless-Edge Ltd. Prior
to joining Catalyst, he held the position of Corporate Finance Consultant and
accountant with Ernst & Young's Israeli affiliate Kost Forer & Gabbay, a leading
Israeli CPA firm with a dominant position among Israeli technology companies.
Mr. Gluck has a BA from Tel-Aviv University in Accounting and Economics and is a
licensed CPA.

MR. ANDREA MANDEL-MANTELLO, 45, has been a director since November 2003. Mr.
Mandel-Mantello is Founder and Partner of Advicorp PLC, a UK Investment Bank
regulated by the UK Financial Services Authority. He was an advisor on the first
high yield corporate bond issue in Italy. From 2000 to 2001 he was an advisor to
a US based private equity group on business development in Israel. Prior to his
work at Advicorp, Mr. Mandel Mantello spent 9 years at SBC Warburg (now known as
UBS) in London in various senior management positions including Executive
Director of SBC Warburg, member of the Board of SBC Warburg Italia SIM S.p.A,
and Country Head for Israel. Prior to working at SBCW Mr. Mandel-Mantello spent
2 years at Chemical Bank International Ltd. in London and 3 years at Banca
Nazionale dell'Agricoltura in Rome. He holds a Bachelors degree in Economics and
Political Science from Yale University.

MR. YAIR SHAMIR, 59, has been a director since May 2003. He has been the
Chairman of the Catalyst Fund since 1999. He served as VCON Communication's
Chief Executive Officer and Director since 1997. From 1995 to 1997, Mr. Shamir
served as Executive Vice President of the Challenge Fund-Etgar L.P., an Israeli
venture capital firm. From 1993 to 1995, he served as Chief Executive Officer of
Elite Food Industries Ltd., one of Israel's largest branded food product
companies. From 1988 to 1993, he served as Executive Vice President and General
Manager of Scitex Corporation Ltd., a leading supplier of computer graphic
systems. From 1963 to 1988, Mr. Shamir served in the Israeli Air Force as a
pilot and commander. During his term in the Air Force, he attained the rank of
colonel and then served as head of the Electronics Department, the highest
professional electronics position within the Air Force. Mr. Shamir currently
serves as a director of several public companies listed on the NASDAQ, including
Orckit Communications Ltd, Mercury Interactive Corporation and DSP Group
Corporation, as well as serving as a director of several private companies. Mr.
Shamir is the Chairman of The Catalyst Fund, an Israel-based venture capital
fund investing in late-stage companies mainly in the high technology sector. Mr.
Shamir holds a B.Sc. in Electronic Engineering from the Technion - Israel
Institute of Technology.

MR. RONEN ZAVLIK, 43, has been a director since May 2003. He is a partner in the
CPA firm of Grinberg-Zavlik, which he founded in 1987. His firm provides a wide
range of audit, tax consultancy and CFO services to a wide variety of companies.
Mr. Zavlik provides internal auditing services to a number of large companies
whose shares are traded on the Tel Aviv Stock Exchange, including Ma'ariv
Holdings Ltd, Extra Plastic Ltd., Israel Land Development Malls and Shopping
Centers Ltd and Israel Land Development Company Hotels Ltd. Mr. Zavlik holds a
B.A. in Accountancy and Business Management from the College of Management in
Tel-Aviv. Mr. Zavlik is a licensed CPA in Israel and a member of the Institute
of Certified Public Accountants in Israel.

INFORMATION REGARDING THE INCUMBENT EXTERNAL DIRECTORS:

DR. YAEL ILAN, 55, has been an external director since November 2002. Dr. Ilan
is the president of Yedatel Ltd., an economic consulting company, and serves as
a director of CI Systems in the technology sector. Until 1998 she served on the
board of Bezeq - Israel's Telecommunication Company in which she headed the
committee of technological policy and infrastructure and was a member of the
audit committee and the committee for strategic planning and investment. From
1998 through 2000 she served as an external director of Elron Industries. In
2000-01 she founded and managed Optichrom, an optical component start-up. From
1995 through 2000 Dr. Ilan served as the head of program of the Broad Band
Communication, a consortium of MAGNET - the Israeli Government hi-tech
cooperation initiative. Dr. Ilan holds a Ph.D. in industrial engineering from
Stanford University, a Ph.D. in physical chemistry from the Hebrew University
and a Masters degree in business administration from the Hebrew University.

PROF. ADI RAVEH, 56, has been an external director since February 2003. Prof.
Raveh is a professor and head of the B.A. Program at the School of Business
Administration, Hebrew University, Jerusalem. Since 1998 he served as an
external director at Clal Insurance Company Ltd. Since 2002 he has served as the
Chairman of the Board of Jerusalem Capital Markets Underwriting limited. He also
serves as a director of Meitav - a Mutual Funds Management company (since 1995),
and as a director of Peilim - a portfolio management company - part of Bank
Hapoalim Group (since 1996). Since 1992 he has represented Hebrew University on
the board of Hi-Tech - a Technology Entrepreneurship located at Har-Hahotzvim,
Jerusalem. Prof. Raveh also serves as a director of two start-up companies:
A.D.M (Advanced Dialysis Methods Ltd.) and Virtouch Ltd. Between 1994-1999 he
served as a director and a member of the executive committee of the Bank of
Jerusalem, Ltd. Between 1996-1998 he served as a member of an ad-hoc committee
of the Council of Higher Education. In 1999 he served as a member of the Budget
Committee for Research at the Israel Science Foundation. Prof. Raveh holds a
Ph.D. from the Hebrew University. He is the author of about 50 professional
publications, was a visiting professor at Stanford University, Columbia
University and Baruch College, N.Y., and has received a number of grants and
honors.

COMPENSATION OF DIRECTORS AND OFFICERS

The following table sets forth the aggregate compensation paid to or
accrued on behalf of all directors and officers of the Company as a group for
the year ended December 31, 2003:

Salaries, Directors'
Fees, Service Pension, Retirement
Fees, Commissions and Similar
and Bonuses Benefits
-------- --------

All directors and officers as a
group (then 13 persons) $370,000 $ 45,000
-------- --------

Such remuneration does not include amounts expended by the Company for
expenses, including business association dues and expenses, reimbursed to said
officers, and other fringe benefits commonly reimbursed or paid by companies in
the location at which the particular executive officer of the Company is
located, as the case may be.

At the Meeting, the Board of Directors will propose that the following
resolution be adopted:

"RESOLVED, to elect the following persons to serve as members of the Board of
Directors of the Company: Edouard Cukierman, Adiv Baruch, Israel Gal, Avishai
Gluck, Andrea Mandel-Mantello, Yair Shamir, and Ronen Zavlik, to serve until the
next Annual General Meeting of Shareholders and until their successors have been
duly elected and qualified."

Upon the receipt of a properly signed and dated proxy and unless otherwise
instructed in the proxy, the persons named in the enclosed proxy will vote the
shares represented thereby FOR the above-mentioned proposal.

2. APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors recommends that the shareholders reappoint Kost,
Forer, Gabbay & Kasierer, a member of Ernst & Young International, Ltd., as the
independent auditors of the Company, until the next annual general meeting of
shareholders. Kost, Forer, Gabbay & Kasierer have served as the Company's
independent auditors since the first quarter of 2002.

At the Meeting, the Board of Directors will propose that the following
resolution be adopted:

"RESOLVED, that Kost, Forer, Gabbay & Kasierer be, and they hereby are,
reappointed as independent auditors of the Company, until the next annual
general meeting of shareholders."

3. APPROVAL OF MANAGEMENT AGREEMENT BETWEEN THE COMPANY, SIGNUM LTD. AND ADIV
BARUCH

The Audit Committee and the Board of Directors have approved (subject to
Shareholder approval) an agreement with Signum Ltd. ("Signum") and Mr. Adiv
Baruch, to provide management services to the Company (exclusively through Adiv
Baruch who, pursuant to the agreement, serves in the capacity of President and
Chief Executive Officer of the Company and also, since February 2004, serves as
a director), effective January 1, 2004. Signum is entitled to a monthly gross
management fee of NIS 79,698, (approximately $18,000) plus Value Added Tax,
based on a NIS - US Dollar exchange rate of NIS4.4 to 1 US Dollar, that shall be
adjusted at the beginning of every calendar quarter in accordance with the NIS -
US Dollar exchange rate on the last day of the previous quarter. In connection
with the preparation by the Board of Directors of the annual work plan and
budget of the Company, the Board of Directors shall annually establish an annual
bonus to be paid to Signum provided that Signum shall have satisfied or exceeded
the goals or milestones established by the Board of Directors for the respective
year.

Additionally, Signum shall be granted options to purchase 216,282 ordinary
shares of the Company (equal to five percent (5%) of the Company's issued and
outstanding share capital, on a fully diluted and as converted basis, on
November 23, 2003), with a grant date of 1.1.2004. The options shall vest and
become exercisable in 36 equal monthly installments (fractions shall be rounded
up) at the end of each month following the date of grant and shall be
exercisable at any time during a period of ten years from the date of adoption
of the Company's stock option plan (22.5.2013). The exercise price shall be $3
per ordinary share. Notwithstanding the foregoing, all options shall immediately
vest and become exercisable upon (a) the occurrence of a merger, reorganization,
or sale of the Company or a sale all or substantially all of the Company's
shares or assets or (b) upon the termination by the Company of the management
agreement other than for Cause (as defined in the agreement), provided however
that no such immediate vesting shall occur in the event of termination due to
failure of Adiv Baruch to reach the annual goals set by the Company's Board of
Directors.

Furthermore, pursuant to the agreement, Signum will have PRO RATA
preemptive rights (taking into account all of the ordinary shares as if the
options had vested and Signum had exercised all such options) with regard to
future issuance of securities of the Company, under certain terms and
conditions.

Under the Israeli Companies Law, 1999, the remuneration of directors
(including remuneration for other positions they hold in the Company), must be
approved by the shareholders of the company. In compliance with the Companies
Law, at the Meeting, the Board of Directors will propose that the following
resolution (which has been approved by the Audit Committee and the Board of
Directors - excluding Adiv Baruch who has a personal interest in the decision),
be adopted:

"RESOLVED, to approve the management agreement between the Company, Signum Ltd.
and Adiv Baruch."

4. APPROVAL OF SERVICE AGREEMENT BETWEEN BOSCOM LTD. AND ZVI GREENGOLD

The Audit Committee and the Board of Directors have approved (subject to
Shareholder approval) a consulting service agreement, effective September 1,
2003, between BOScom Ltd, the Company's wholly-owned subsidiary, and Mr. Zvi
Greengold, a director of the Company (who will cease serving as a director on
August 5, 2004), and also a director of BOScom Ltd., and that the consulting fee
of 4,500 NIS per month (approximately $1,000) plus applicable VAT and
reimbursement of expenses, shall be in addition to the remuneration and options
Mr. Greengold receives as a director of the Company (as do all directors who are
not employees or consultants of the Company). The services include assisting
management in the formalization of managerial processes and providing consulting
services to the CEO. The agreement may be terminated by either party for any
reason by 30 day advance written notice.

For the avoidance of doubt, as BOScom Ltd. is a wholly-owned subsidiary of
the Company, and since, according to the Israeli Companies Law 1999, the
remuneration of directors (including remuneration for other positions they hold
in the Company), must be approved by the shareholders of the company, the
Company is seeking shareholder approval of the service agreement, for the period
of September 1, 2003 to August 5, 2004. Therefore, at the meeting, the Board of
Directors will propose that the following resolution (which has been approved by
the Audit Committee and the Board of Directors - excluding Zvi Greengold who has
a personal interest in the decision) be adopted:

"RESOLVED, to approve the service agreement between BOScom Ltd. and Zvi
Greengold, and that the consulting fee provided thereunder be in addition to the
remuneration and options Mr. Greengold receives as a director of the Company."

5. GRANT OF OPTIONS TO ISRAEL GAL

The Audit Committee and the Board of Directors approved (subject to
Shareholder approval) in August 2003, the grant of 12,805 options to purchase
Ordinary Shares of the Company, under the Company's 2003 Stock Option Plan, to
Mr. Israel Gal. Mr. Gal is a Company director, who served as the Company's Chief
Executive Officer and President from its inception in 1990 until January 2002,
and then again from September 2002 until December 2003. He also served as the
CEO of one of the Company's subsidiaries, BOScom Ltd., until June 2004, and is
currently the CTO of VOIP products in BOScom. The options were approved in
conjunction with an 18% salary cut, that was part of the Company's
cost-reduction plan. The terms of the grant are as follows: Date of grant -
August 31, 2003; Vesting terms - 50% vesting on August 31 2004, and 50% on
August 31 2005; Exercise price - $2; Maximum exercise period - August 31, 2013.

As Mr. Gal is a director of the Company, and since, under the Israeli
Companies Law, 1999, his conditions of service with the company, including the
issuance of share options, must be approved by the shareholders of the Company,
at the Meeting, the Board of Directors will propose that the following
resolution (which has been approved by the Audit Committee and the Board of
Directors - excluding Israel Gal who has a personal interest in the decision),
be adopted:

"RESOLVED, to approve the grant of options to Israel Gal, under the
above-mentioned terms and conditions."

6. REMUNERATION AND GRANT OF OPTIONS TO COMPANY DIRECTORS

On February 18, 2003, the Company's shareholders approved remuneration to
all directors of the Company (including directors appointed in the future) who
are not employees or paid consultants of the Company in accordance with the
rates paid to the Company's external directors1. Additionally, the Company's
shareholders approved the issuance of 7,500 options to purchase Ordinary Shares
of the Company (the "Options") to each director of the Company (including the
external directors) and any future first-time director, who is not an employee
or paid consultant of the Company, subject to the following terms and
conditions:

EXERCISE PRICE - $1.84 (the closing price of the Company's Shares on the Nasdaq
National Market on the date of the adoption of the resolution by shareholders).

OPTION TERMS- The Options will vest and become exercisable over a period of
three years, in three equal parts as follows: 33.33% after one year from the
date of grant, with an additional 33.33% becoming exercisable upon the
expiration of each of the two years thereafter.

MAXIMUM OPTION TERM - Five years from grant.

PAYMENT - Payment for Ordinary Shares purchased upon exercise of Options must be
made in full upon exercise of the Option, by cash or check or cash equivalent,
or by the assignment of the proceeds of a sale of some or all of the shares
being acquired upon exercise of an Option, or by any combination of the
foregoing.

RESTRICTIONS ON TRANSFER OF PLAN SHARES - Options are exercisable in whole or in
part at such times after the date of grant as set forth above. Options are
exercisable during the lifetime of the Option holder only by such Option holder,
and may not be assigned or transferred except by an advance approval of the
Company's Audit Committee, by will or by the laws of descent and distribution.
Options shall be exercisable during the term the Option holder holds office as a
director of the Company or within 60 days after leaving this position, with
certain exceptions in the case of the Option holder's death or disability.

--------

1 At the Annual General Meeting held March 13, 2002 the shareholders resolved to
remunerate the external directors according to the maximum rate permitted (now
and in the future) by Israeli law and regulations. The current rates for
companies the size of the Company, are an annual fee of approximately $5,520,
and a participation fee in meetings of approximately $290 per meeting. On June
26, 2003, the Board of Directors resolved to reduce the annual fee for all
directors by 18%, effective July 1, 2003, as part of a cost-reduction plan.

With respect to this prior resolution, the Board of Directors recommends
adopting the following resolutions:

A. AMENDMENT OF EXERCISE PRICE OF THE OPTIONS

As the share price has fluctuated over the past year, the Audit Committee
and the Board of Directors have approved (subject to Shareholder approval) that
future issuances to new directors will have an exercise price equal to the
average closing price of the shares on the Nasdaq National Market on the 20
trading days preceding their appointment.

At the Meeting, the Board of Directors will propose that the following
resolution be adopted:

"RESOLVED, that the exercise price of options to be granted to any future
directors, pursuant to the resolution adopted on February 18, 2003, be, from
hereon, equal to the average closing price of the shares on the Nasdaq National
Market on the 20 trading days preceding his or her appointment."

B. REMUNERATION AND OPTION GRANT TO EDOUARD CUKIERMAN

Mr. Edouard Cukierman is the Chairman of the Board of Directors of the
Company. The Audit Committee and the Board of Directors have approved (subject
to Shareholder approval), that Mr. Cukierman will receive remuneration
(retroactively from the date of his nomination in May 2003) as a Board member,
and 7,500 options (with a grant date of August 31, 2003), under the same terms
as all other directors, despite his being (indirectly) a controlling shareholder
and senior executive of Cukierman & Co. Investment House Ltd. (a service
provider to the Company), and therefore not eligible for remuneration and
options according to the shareholder resolution adopted on February 18, 2003.
Mr. Cukierman is an executive of the Catalyst Fund ("Catalyst"), one of the
Company's shareholders, and has indicated that he intends to transfer his
remuneration and options to Catalyst.

At the Meeting, the Board of Directors will propose that the following
resolution (which has been approved by the Audit Committee and the Board of
Directors - excluding Edouard Cukierman who has a personal interest in the
decision), be adopted:

"RESOLVED, to approve the remuneration and grant of options to Edouard
Cukierman, under the above-mentioned terms and conditions."

C. TACKING OF HOLDING PERIODS OF CERTAIN DIRECTORS

The Audit Committee and the Board of Directors have approved, retroactive
from August 2003 (and subject to Shareholder approval), that if executives of
Catalyst on the Company's Board of Directors (currently: Edouard Cukierman and
Avishai Gluck), transfer their right to be granted options to Catalyst (the
Audit Committee and Board of Directors have approved such transfer), then for
purposes of vesting and exercise terms of the options, the holding period of a
successor Catalyst executive on the Company's Board will be tacked to that of
his predecessor, provided that the service on the Board is consecutive. As of
the date of this report, one Catalyst executive, Avishai Gluck, who was granted
options on February 5, 2004, has transferred his options to Catalyst. In the
event shareholder approval is received, the grant date of the options that were
transferred to Catalyst by Avishai Gluck, will be August 31, 2003 (and not
February 5, 2004), as Avishai Gluck replaced Boaz Harel, another Catalyst
executive, on the Company's Board of Directors, and Boaz Harel was granted
options on August 31, 2003.

At the Meeting, the Board of Directors will propose that the following
resolution (which has been approved by the Audit Committee and the Board of
Directors - excluding Edouard Cukierman and Avishai Gluck (Catalyst executives)
and Yair Shamir (Chairman of Catalyst) who have a personal interest in the
decision), be adopted:

"RESOLVED, to approve the tacking of holding periods of certain directors, as
recommended by the Board of Directors."

7. AMENDMENT TO THE COMPANY'S ARTICLES OF ASSOCIATION

Currently, article 13.1 of the Company's Articles of Association states as
follows: "No discussion may be commenced at the general meeting unless a quorum
is present at the time of the dicussion's commencement. A quorum is the presence
of at least two shareholders holding at least 25% of the voting rights
(including the presence through a proxy or voting instrument), within half an
hour of the time fixed for the meeting's commencement".

The Board of Directors recommends amending article 13.1 by replacing the
figure "25%" (which is the minimum requirement under the Israeli Companies Law,
1999) with "33 1/3%" (thirty three and one-third percent), in accordance with
the NASDAQ rules. Therefore, at the meeting, the Board of Directors will propose
that the following resolution be adopted:

"RESOLVED, to amend article 13.1 of the Company's Articles of Association, as
recommended by the Board of Directors. "

8. RECEIPT OF AUDITOR'S REPORT AND FINANCIAL STATEMENTS

At the Meeting the shareholders shall receive and consider the Auditor's
Reports and the Consolidated Financial Statements of the Company for the fiscal
years ended December 31, 2002 and 2003.

9. OTHER BUSINESS

The Meeting is called for the purposes set forth in the Notice accompanying
this Proxy Statement. As of the date of the Notice, the Board of Directors knows
of no business which will be presented for consideration at the Meeting other
than the foregoing matters. If other matters not now known properly come before
the Meeting, however, it is intended that the persons named as proxies or their
substitutes will vote the Ordinary Shares in accordance with their best judgment
with respect to such matters.

By Order of the Board of Directors,

Edouard Cukierman Adiv Baruch
Chairman of the Board of Directors President and Chief Executive Officer

June, 2004