The Companies Law allows the compensation committee and the board of directors to provide the final decision concerning compensation of executive officers, and authorizes such organs to approve the compensation policy for Company's executive officers even in circumstances were it was not approved by the general meeting of the shareholders of the Company, since said organs are the appropriate professional functions for making final decisions concerning the Company's best interests.

The Updated Compensation Policy only sets the cap for executive officers compensation, while the actual engagement terms of each executive officer are subject to the approval of the appropriate corporate organs according to the Companies Law.

Other than the increase to the annual base salary limits for executive officers, the Updated Compensation Policy includes no change to the main terms of the original Compensation Policy, which was previously approved by the General Meeting of the Shareholders of the Company during April 2020.

Several updates made in the Updated Compensation Policy, compared to the originally adopted Compensation Policy, are immaterial and are only structural and of a technical nature. This includes the updates made in the following provisions of the Updated Compensation Policy: 1, 3, 4, 8, 9.2, 10.2, as well as updating references throughout the entire Updated Compensation Policy, which are all designed to provide more coherence and accuracy to the Compensation Policy.

Section 5 to the Updated Compensation Policy only provides an updated factual data concerning the ratio between employment cost associated with the engagement of the executive officers and directors and the average and median employer cost associated with the engagement of the other employees of the InMode group, which is required to be updated given the fact a period of 5 years has lapsed since the previous data referred to therein and which are not up to date, and the significant changes the InMode Group went through during these 5 years in which it transitioned from a private company to a global leader public company, including the significant increase in employees headcount from less than 200 employees in Q4 2018 to 581 in Q4 2023, and in annual revenues from approximately US $100M in 2018 to approximately US $500M in 2023.

Section 7.1 to the Updated Compensation Policy provides additional examples of customary benefits which may be granted to executive officers, to align them with the practice of other companies in the market.

The provisions concerning Clawback, which were moved from Section 11.2 to Section 12, provides certain updates to the current clawback provisions to also cover performance-based equity compensation, and clarifies that the compensation recovery provisions included in the Updated Compensation Policy does not derogate from any other “Clawback” or similar provisions regarding recovery of compensation and/or disgorging of profits, imposed on executive officers by virtue of applicable securities laws and/or Nasdaq rules and standards and/or any separate contractual obligation, or from any other separate policy of the Company concerning compensation recovery. Such change was made according to the recommendation of the Company's legal counsels, in order to comply with the new Clawback Listing Standards adopted by the SEC in June 2023, and provides the Company with a better position to recover erroneously awarded compensation.

The updates made in Section 6.2 to the Updated Compensation Policy, provides an increase of 50% to the maximum annual base salary which may be granted to Executive Officers. The compensation committee and board of directors believe that such an increase promotes the Company's objectives, business plan and long-term policy, and creates appropriate incentive for the Company's executive officers in the competitive market in the industry in which the Company operates, while also taking into account the Company's size and nature of operations, and will put the Company in a better position to hire, retain and motivate leading candidates to serve as executive officers. Such update takes into account the compensation of the existing executive officers as well as potential future candidates, while maintaining reasonable and proportional compensation which provides an appropriate balance between the interests of the shareholders from one side and an appropriate compensation of executive officers from the other side. Such change is also required due to the fact that certain existing executive officers are already provided with compensation packages which are very close to the maximum limits set by the original Compensation Policy, and not making said change may therefore significantly limit the Company's ability to continue and retain such executive officers in the short and long term if not changed. The Company must be committed to provide appropriate and competitive salary rates to its executive officers, to prevent talented and professional executive officers from frequently leaving the Company, as well as to prevent the significant resources, costs and management attention which may be required for identifying and recruiting of suitable candidates. Therefore, in the view of the compensation committee and board of directors, allowing a sufficient additional amount for compensating executive officers is crucial and vital to the operations of the Company.

The Updated Compensation Policy maintains the appropriate balance between the different compensation components – fixed and variable, short term vs. long term components, in accordance with the position of the executive officer.

The Updated Compensation Policy is in the best interests of the Company and corresponds to the Company's general strategy in a manner which appropriately reflects the practice in the industry in which the Company operates and the Company's financial position, and will assist the Company in promoting its business plans, objectives and long-term policy.