ARTICLES OF ASSOCIATION - STEF

1.1     The organisation is called the Performing Rights Society of Iceland, abbreviated STEF.
1.2     The address and venue of the organisation are in Reykjavík.

2.1     STEF is a copyright society that protects the copyright interests of Icelandic and foreign composers, lyricists, and other holders of copyright for musical compositions and accompanying texts. STEF operates solely as the agent of its members and provides service to them. It does not accumulate assets for its own benefit. STEF is authorised by the Ministry of Education, Science and Culture to collect royalties pursuant to the Copyright Act.

2.2     STEF's principal tasks in accordance with its purpose as described in Article 2.1 are as follows:

• A)    STEF shall support and promote the preservation and reinforcement of individual copyright through constant vigilance in this field, shall promote innovation in the field of copyright law, and shall preserve the existence of those rights with every means at its disposal.

• B)    STEF grants permission for music performance, collects royalties for such permission, and carries out any and all related tasks, including initiating legal action so as to preserve and protect these interests. In this context, STEF shall seek and conclude contractual agreements with radio stations and other parties that perform music. STEF may set tariffs for public performance of music. Such tariffs are subject to the approval of the Ministry of Education, Science and Culture.

• C)    STEF grants permission for the reproduction of music, collects royalties for such permission, and carries out any and all related tasks, including initiating legal action so as to preserve and protect these interests. STEF may entrust the Nordic collections agency for reproduction rights, the Nordisk Copyright Bureau (NCB), with the protection of these interests as its agent.

2.3     STEF is a member of the Collecting Society for Reproduction Rights (FJÖLÍS) and the Collecting Society for Private Copying (IHM), and may join other organisations that may be established in the future for the purpose of collecting royalties and other comparable fees pursuant to the Copyright Act or other legislation.

2.4     STEF engages in communications with parallel organisations representing foreign holders of copyright.

3.1     Member organisations within STEF are the following: the Society of Icelandic Composers (SIC) and the Icelandic Songwriters' Association (ISA). The role of these organisations is, among other things, to protect the interests of composers and other holders of copyright to musical compositions and accompanying texts in collaboration with STEF.

3.2     Membership to STEF member organisations is restricted to active music creators (composers and/or lyricists) or their heirs, who have previously been members of the organisation in question, in accordance with further stipulations in the Articles of Association of those organisations. It is required that all members of either member organisation have granted STEF explicit authority to protect their copyright with respect to musical compositions, as well as other related rights. Provisions to this effect shall be included in these organisations' Articles of Association, and their boards of directors must ensure that they are enforced. The Articles of Association of the member organisations may not contravene the Articles of Association of STEF in any way.

3.3     In addition to the member organisations, those copyright holders who are not members of those organisations may participate in the Board of Directors and Representative Council according to Articles 4 and 5.

4.1     The Board of Directors of STEF shall comprise seven members: two members and two alternates appointed by the Society of Ice-landic Composers; two members and two alternates appointed by the Icelandic Songwriters' Association; and three members and three alternates appointed by the Representative Council of STEF, according to Article 4.5.

4.2     The chairmen of the Society of Icelandic Composers and the Icelandic Songwriters' Association shall be ex officio members of the Board, and the deputy chairmen of those organisations shall serve as their alternates. Furthermore, after the general election of representatives to the Representative Council of STEF pursuant to Articles 5.2 and 5.3 has taken place, each of the two organisations shall appoint one member and one alternate to serve on the Board for a term of two years. Member organisations' representatives on the Board of STEF shall all be active music creators.

4.3     The Society of Icelandic Composers and the Icelandic Songwriters' Association shall appoint the chairman and vice-chairman of the Board of STEF from among their representatives on the Board; cf. Article 4.2. The chairman and vice-chairman shall always represent different member organisations and shall be appointed alternately by them for a term of two years.

4.4     Only those who meet the eligibility requirements for election to the Representative Council of STEF pursuant to Article 5.4 may serve as members or alternate members of the Board.

4.5     At the Annual General Meeting, the STEF Representative Council shall elect three members of the Representative Council to serve as Board members for a term of two years. At least one of these persons shall be a person who is not a member of either member organisation. Before the election takes place, candidates for election to the Board shall be solicited. If three persons declare their candidacy, they shall be considered automatically elected. Otherwise, election shall take place by secret ballot whereby each member of the Representative Council shall be given one ballot. Each member shall write the names of one or two candidates on his or her ballot. If a member votes for two candidates, at least one of them shall come from outside the STEF member organisations. If a member votes for two candidates, each of them shall receive one vote, and if the member votes for only one, that candidate shall also receive one vote. If the foregoing instructions are violated, the ballot shall be considered invalid unless it is blank. If two or more candidates receive an equal number of votes, lots shall be drawn to determine which shall be considered the lawfully elected Board member. It shall always be ensured, however, that at least one of the three Board members comes from outside the member organisations. Three alternate Board members shall be elected in the same manner, each for a term of two years.

4.6     The Board of Directors directs the activities of STEF in accordance with the decisions of the Representative Council pursuant to Article 5.5. The Board shall attempt to ensure that the organisation and activities of STEF are in good and proper order at all times. Board meetings shall be called with suitable prior notice when the Chairman of the Board decides or when three Board members request a meeting.

4.7     A Board meeting shall be deemed lawful if the majority of Board members are in attendance. The number of votes shall determine the outcome of matters subjected to a vote at Board meetings. If two or more Board members consider that a decision of the Board of Directors is in violation of the law or the rules governing STEF's activities, they may seek a ruling from the Ministry of Education, Science and Culture on the matter in question. Such an appeal shall not postpone the implementation of the decision; cf., however, Article 4.8.

4.8     The Board of Directors shall engage the Managing Director of STEF. The Managing Director shall engage other staff members. The Managing Director directs the day-to-day operations of STEF in accordance with the decisions of the Board and the Representative Council. If the Managing Director considers that a decision of the Board of Directors or the Representative Council is in violation of the law or the rules governing STEF's activities, he or she may refuse to implement that decision but must refer the matter to the Ministry of Education, Science and Culture for a final ruling as soon as possible. The Managing Director has the right and the duty to attend meetings of the Board of Directors and Representative Council and shall have the right to speak and present proposals at those meetings.

4.9     The signatures of four Board members are sufficient to obligate STEF.

5.1     The Representative Council of STEF shall comprise 21 members: four Board members who are appointed by the member organisations pursuant to Article 4.2; five members and five alternates who are also appointed by each of the member organisations; and seven members and seven alternates who are elected pursuant to Articles 5.2 and 5.3. Representative Council members who are appointed by member organisations shall all be active music creators.

5.2     Seven members of the STEF Representative Council shall be elected for a term of two years in a general election taking place in March every other year. At least three of the seven representatives that are elected in this matter shall come from outside the STEF member organisations. All rights holders who have assigned STEF the authority to represent their interests shall have voting rights, irrespective of whether they are members of either member organisation or come from outside the member organisations, provided that they have received a minimum of ISK 120 thousand from STEF in the past three years. Music creators or other rights holders shall control their own voting rights even though they have assigned the protection of their copyright to another party unless the rights holder is a recognised music publisher. If the creator or rights holder is deceased, his or her heirs or their representative who is registered as the recipient of payments according to the STEF register of rights holders shall control the entire voting rights on behalf of the deceased. An advertisement for candidates shall be published no later than 1 February of the year that the election is to take place, and the deadline for declaring candidacy shall be four weeks. If seven persons declare their candidacy by the deadline, they shall be considered automatically elected. If the number of candidates is greater than seven, voting shall take place as is provided for in Article 5.3. If fewer than seven persons declare their candidacy by the deadline, the deadline shall be extended by one week.

5.3     A three-person election board selected by the STEF Board of Directors shall administer the general election and shall rule on all matters of doubt or dispute in connection with it. Each rights holder with voting rights according to Article

5.2 shall control one vote in the election. If total royalties received by the rights holder in the past three years exceed ISK 180 thousand, the rights holder shall control one additional vote; if royalty payments exceed ISK 300 thousand, he or she shall control two additional votes; if royalty payments exceed ISK 1.5 million, the additional votes shall be three in number; if royalty payments exceed ISK 3 million, the additional votes shall be four; and if royalty payments exceed ISK 6 million, the additional votes shall be five. According to this provision, no rights holder may control more than six votes in the election. Each rights holder may vote for one candidate; however, rights holders controlling more than one vote may vote for more than one candidate. The election shall be carried out as follows: each rights holder with voting rights shall be sent a number of ballots equal to the number of votes he or she controls. The names of the candidates shall be listed on the ballot in alphabetical order, and the rights holder shall place an X next to the name of one candidate. He or she shall then place the ballot in an envelope and seal it. The envelopes containing the ballots shall be received by the STEF office within three weeks from the date they were sent out. The election board shall count the votes. If a ballot is received from a person without voting rights, if the ballot is different than those sent out, if the name of more than one candidate is marked, or if the ballot bears any identifying marks that could indicate who the voter is, the ballot shall be deemed invalid unless it is blank. If two or more candidates receive an equal number of votes, lots shall be drawn to determine which shall be considered the lawfully elected member of the Representative Council. It shall always be ensured, however, that at least three of the seven Representative Council members come from outside the member organisations. When the results of the election have been determined, those elected to the Representative Council shall appoint their alternates. The alternates must meet the requirements for Representative Council membership according to Article 5.3, and the alternates for Representative Council members from outside the member organisations shall also come from outside the member organisations.

5.4     Only those who meet the requirements for voting and controlling voting rights pursuant to Article 5.2. are eligible for election to the Representative Council and for Council membership. Rights holders with substantial interests at stake as STEF counterparties with respect to royalties are not eligible for election to the Representative Council, nor are those who have been found guilty of major copyright violations or other infractions against STEF.

5.5     The Representative Council holds the ultimate authority regarding the affairs of STEF.

5.6     The Annual General Meeting of the Representative Council shall be held in May of each year. The following matters shall be addressed at the meeting:

• 1.    The report of the Board of Directors and the Managing Director for the previous year.

• 2.    Approval of the audited accounts of STEF for the previous year.

• 3.    Announcement of the election of the Board of Directors for the coming operational year; cf., however, Item 4.
• 4.    The election, every other year, of three members to the STEF Board of Directors; cf. Article 4.5.
• 5.     The election of two examiners and two alternates for the coming operational year. One of the examiners shall be a member of the Society of Icelandic Composers, and the other shall be a member of the Icelandic Songwriter's Association.
• 6.     The election of the chairman of the Representative Council.
• 7.    Other business.

5.7     Other meetings of the Representative Council shall be called at the decision of the Board, or at the request of the examiners or three Council members.

5.8     The Board of STEF shall call meetings of the Representative Council in writing and shall specify the agenda in the call to the meeting. The Annual General Meeting shall be called with two weeks' notice, and other meetings shall be called with one week's notice.

5.9     The chairman of the Representative Council shall preside over the Council's meetings. No business not specified in the call to the meeting will be addressed without the approval of 4/5 of the attendees. The number of votes shall determine the outcome of matters subjected to a vote at meetings of the Representative Council unless otherwise specified in these Articles of Association.

6.1     STEF's revenues shall be disposed of as follows:

• A)    Gross revenues shall be allocated first towards the payment of public levies, if any, and then towards the payment of STEF's total operating expenses.
• B)    A contribution totalling 10% of the remaining amount shall be paid to the STEF Music Culture Fund, in accordance with further decisions taken by the Annual General Meeting of the Representative Council. It is permissible to allocate capital from that Fund for the operation of the STEF member organisations. Allocations to the two member organisations must be in equal amounts.
• C)    The remainder shall be divided among those holding the performance rights for the works for which STEF collects royalties, in accordance with the rules set by STEF pursuant to the rules of parallel organisations in countries that are parties to the Berne Convention. In the interest of efficiency, these rules may provide for a simplification of the rules for royalty allocations to Icelandic and foreign rights holders in accordance with established custom in such matters.

6.2     Comments and complaints concerning royalty allocations by STEF shall be sent to the office of the organisation within three months of the date the allocation notice was sent to the rights holder. STEF is not obliged to consider comments and complaints received after that time.

6.3     STEF's accounting year shall be the calendar year.

6.4     STEF's annual accounts shall be audited each year by a chartered auditor and sent to its elected examiners, who shall then send the accounts to the Board of Directors with their comments. The annual accounts are then submitted to the Annual General Meeting of the Representative Council for approval, together with other financial statements for STEF. Representative Council members who so request may receive a copy of the annual accounts the day before the Annual General Meeting.

6.5     Subsidies from funds related to STEF, including funds based on agreements between STEF and other parties, shall be granted in accordance with the nature and objectives of the projects concerned, irrespective of the recipient's membership to member organisations. Subsidies shall be awarded on professional grounds.

7.1     These Articles of Association, STEF's rules on allocation of royalty payments, and the administrative structure and objectives of the funds specified in Article 6.5 may only be amended at an Annual General Meeting of the Representative Council attended by at least 50% of representatives, provided that 3/4 of attendees approve the amendment. A proposed amendment to the Articles of Association that receives 2/3 of votes cast at the Annual General Meeting shall be considered approved if that same proposal is presented at the Annual General Meeting one year later and also receives 2/3 of votes cast at that meeting. Otherwise, the proposal shall be considered defeated.

7.2     STEF shall therefore be dissolved only if the dissolution is approved at a meeting of the Representative Council in accordance with the rules specified in Article 7.1. In that instance, that meeting shall dispose of the organisation's assets and take other necessary action pertaining to dissolution.

7.3     These Articles of Association shall take effect forthwith.

Changes made to the structure of the Board and Representative Council of STEF since the previous Articles of Association took effect, including changes concerning the disposal of business by those bodies, will take effect at the Annual General Meeting in the spring of 2010. A general election wherein seven representatives to the STEF Representative Council are elected for a term of two years shall take place in March 2010, as is provided for in greater detail in Articles 5.2 and 5.3.
The effective date of the provision in Article 7.1, which states that the Articles of Association and other documents and structural elements mentioned therein shall be amended if approved with 2/3 of votes cast at two consecutive Annual General Meetings of the Representative Council, shall be deferred so that these items may first be amended in the specified manner at the Annual General Meeting in 2012, subject to approval of the amendments at the Annual General Meeting for the prior year.

Approved at the Annual General Meeting of STEF, 16 May 2009.

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