Rules of Procedure for Festi hf.'s Nomination Committee

Within Festi hf. there shall be a Nomination Committee, whose task is to prepare and propose candidates for the election to the Company's Board of Directors at its Annual General Meeting and at any shareholders' meetings where board elections are on the agenda. The committee's proposals shall aim to ensure that at any given time, the Board of Directors is composed of individuals who possess diverse knowledge and experience that can be effectively used by the Company in policy setting and supervision in the environment in which the Company operates at any given time.

The Nomination Committee works in accordance with the Company's Articles of Association and these Rules of Procedure. The committee shall also take into reference the guidelines of the Icelandic Chamber of Commerce, Nasdaq Iceland and the Confederation of Business on corporate governance (hereinafter referred to as "corporate governance guidelines") that are in force at any given time.

‍

The Nomination Committee shall be composed of three committee members elected at the Annual General Meeting for a term of one year at a time. Committee members must be independent of the Company and its day-to-day management. When evaluating the independence of committee members, the same points of view must be taken into account as when evaluating the independence of board members, cf. guidelines on corporate governance. At least one of the committee members must be independent of the Company's major shareholders. It must be ensured that the Nomination Committee includes committee members of both sexes. Board members are not eligible to sit on the Nomination Committee.

Along with an announcement of the Annual General Meeting, the Company's Board of Directors shall submit a suggestion for the confirmation of the appointment of members for the Nomination Committee. Shareholders shall also have the right to propose the appointment of committee members and such proposals shall be sent in writing to the Company's Board of Directors at least ten days before the start of the general meeting. If more than three people are nominated to sit on the Nomination Committee, an election must be held at the general meeting.

Following the general meeting, the newly elected Nomination Committee shall itself divide its tasks. The Board of Directors shall decide which board member will be a liaison to the Nomination Committee to ensure the necessary flow of information between these administrative units of the Company.

Committee members must have knowledge and experience in accordance with the committee's role, including knowledge of good governance and standards and practices regarding company boards. It is preferable that committee members have good communication skills and experience in identifying the competence factors that active participation in the Company's Board of Directors calls for. As a general rule, committee members should have extensive knowledge of business operations and Board of Directors duties and have a good reputation. Both genders should be represented on the committee.

The remuneration of committee members shall be decided at the Company's general meeting and shall take into account the remuneration of the sub-committees of the Board of Directors based on length of service.

If the committee becomes inactive during its term of office, the Board of Directors shall convene a special shareholders' meeting. The meeting shall discuss the Board of Directors' proposal for the appointment of new committee members to replace those who have resigned, for which shareholder confirmation is sought.

‍

The Nomination Committee has an advisory role during the selection of board members at Festi hf. and submits its proposals to a shareholders' meeting where board elections are on the agenda. The committee’s work shall be guided by the overall interests of all of the Company's shareholders.

The role of the committee is, among other things, as follows:

a. Establish a work plan to promote efficiency in their work.

b. Annual review of the committee's Rules of Procedure and submission of proposals for changes to the Rules of Procedure to the general meeting if the committee deems it necessary.

c. Define key competences and knowledge for the Company's Board of Directors and revise that definition as necessary.

d. Assessment of size, composition and success of the Board of Directors with regard to corporate governance guidelines and the results of the Board of Directors's performance assessment. The committee shall meet with all board members of the Company individually, as well as its CEO, in order to obtain information about the Company, the work of the Board of Directors during the past year and its composition. The Board of Directors's representative on the committee shall not attend the committee's meetings with other board members and the Company's CEO.

e. Call for proposals from shareholders for candidates for board elections as well as their candidacies and those of others. The committee shall advertise for nominations and candidacies for the Company's Board of Directors no later than 8-10 weeks before the general meeting. Attention must be drawn to the preparation of board elections through announcements to the stock exchange, an advertisement in a newspaper and online media such as the Company's website.

f. Evaluate nominations and candidacies for the Company's Board of Directors that are received within the deadline specified by the committee in the advertisement, cf. point e. of this article. The Nomination Committee is permitted on its own initiative to seek new candidates for board elections, after the candidacy deadline has expired, if it assesses the circumstances in such a way that it is necessary to strengthen the group of candidates for the Board of Directors. Nominations and candidacies for the Board of Directors that occur after the announced deadline must be directed to the Board of Directors, who assess their value and ensures that they are presented no later than two days before the shareholders' meeting. The committee shall maintain confidentiality regarding all nominations and candidacies it receives and give candidates who have been evaluated by the committee and who are not part of the committee's proposal, the option to withdraw their candidacy after the results are known. If the candidate does not withdraw his candidacy, the committee shall communicate the candidacy to the Board of Directors.

g. Submit a reasoned proposal for the election of board members, where, among other things, competence, experience and knowledge will be considered, also with regard to corporate governance guidelines and the results of the Board of Directors's performance evaluation. It must be ensured that the proposal complies with the provisions of the Act on Limited Companies and the Company's Articles of Association regarding the appointment of the Board of Directors.

h. The committee shall give a written account of how it has conducted its work and justify its nominations. In the case of a non-unanimous result by the committee, it shall also present the minority opinion. The proposals of the Nomination Committee must be presented in the general meeting announcement and be available to shareholders on the Company's website as soon as possible before the meeting. The Nomination Committee shall present its report at the general meeting.

Information about the role and composition of the committee must be published on the Company’s website, along with information on how comments, suggestions, and candidates can be communicated to the committee. There should also be an indication of how candidacies for the Board of Directors should be handled based on the committee's published recommendations. In the case of board elections at shareholders' meetings other than the Annual General Meeting, the Nomination Committee is authorized to deviate from the above-mentioned deadlines if necessary. However, the committee shall always endeavor to present its reasoned proposal for the election of directors in the Company as soon as possible and no later than one week before the shareholders' meeting.

‍

The Nomination Committee is authorized to consult the Board of Directors and sub-committees of the Board of Directors to obtain relevant information to fulfill its role. The committee is also authorized to have direct contact with the Company's shareholders in connection with the performance of its duties. It shall, through an advertisement on the Company's website, give shareholders the opportunity to present proposals to the committee. Equity of shareholders must always be ensured.

If the Nomination Committee wants data or information from the Company or access to the Company's employees, it must submit a request to the Company's CEO. If the committee considers a special reason to obtain advice on certain issues, it is allowed to incur related expenses, but before that it must obtain the approval of the Board of Directors.

‍

The committee shall hold meetings as necessary to carry out its role, and the Chairman of the committee is responsible for calling meetings. Efforts should be made to plan the committee's meetings in its work plan. The Chairman of the committee leads its meetings and appoints a meeting secretary. Meeting minutes must be written and approved by committee members. Minutes and submitted documents at committee meetings must be stored securely and be accessible to committee members.

The committee is competent to make decisions when the majority of committee members attend a meeting, provided that the meeting has been legally convened at least three days in advance. A simple majority of votes determines the outcome of all matters brought in front of the committee.

‍

Nomination Committee members have a duty of confidentiality regarding the affairs of the Company, the interests of its customers and other matters that they learn about in the course of their work and should remain confidential. Confidentiality remains in place, even after retirement.

‍

These Rules of Procedure must be published on the Company's website.

Provisional provisions: The provisions of paragraph 2 Article 2 takes effect in connection with the appointment of the Nomination Committee at the 2025 general meeting. The composition of the committee at the 2024 general meeting shall be in accordance with the previously valid provisions of paragraphs 2 and 3. of Article 2 until the 2025 general meeting.

‍

Approved at the Annual General Meeting of Festi hf. March 6, 2024.