Four students decided to draft documents to incorporate a limited liability company in Germany.

They want to formalise their relationship such as member of a pop band. Three of them

periodically play music in pubs and bars; the fourth one helps the others in looking for the

available pubs/bars, in contracting the fees with the owners, in setting up musical instruments

and all the technological supports to play. They are known as "The Watchers". So, all of them

effectively contributed to the band's success: the three musicians, writing new songs and

playing their music; the fourth one, acting as the agent of the others.

The articles of association already drafted contain many clauses: read them, think about their

scopes and their usefulness; try to make comments about the clauses marked in yellow, and

do it in light of the actual relationship between those guys as well as of the (desirably positive)

development of their musical activities.

Each group should deliver me a synthetic report on pros and cons of marked clauses

Articles of Association of "The Watchers" General provisions 1 Name of the Company The name of the company is " The Watchers GmbH". {52 R_ge istered Office The registered office of the company is in Monchengladbach. 3 Purpose of the Company (1) The first purpose of the company is the management of all the interests in the songs/music written andlor played by each shareholder of the Company while being member of the group \"The Watchers\". The second purpose is the management of all the interests related to the public performances of that group, including those related to recordings, copyrights as well as any other interest related to the image and the name of the group. (2) The company is authorised to take all actions required or beneficial to full the company's purpose. In paIticular, the company is authorised to establish branches or subsidiaries domestically and abroad, acquire or lease the same or similar companies or to participate in such companies. 4 Term of Establishment of the Company The company is formed for an indenite period. 10 Disposal of Shares (1) Shares may only be assigned in whole or in part with the consent of the company based on a resolution by the shareholders' meeting. The simple majority of the shareholders will pass the resolution. (2) The regulations in paragraphs (1) shall apply mutatfs mutandfs to encumbrances, in particular the pledging or collateral assignment of or the establishment of a usufruct over the shares as well as the granting of a sub-participation by shareholders. (3) If a shareholder intends to sell his shares in whole or in part to persons other than his spouse, children or the company (so named third party), he must rst offer them to the other shareholders. They shall be entitled to acquire the shares, in whole or in part, in accordance with their original share in the company's share capital. If a shareholder fails to make use of his right of acquisition within six weeks of the offer being made, this right shall pass to the other shareholders. If several shareholders exercise their rig ht of acquisition, they shall, among themselves, be entitled to acquire the shares in the percentage of their shareholding if they do not agree another percentage among themselves. The other shareholders may decide to accept or reject the offer within a further six-week period. If any shares that are available for sale have not been purchased by co-shareholders in whole or in part, the shareholder selling the shares is entitled to sell the shares to third parties under the conditions of the offer or conditions objectively more favourable for the seller. The shareholder is only permitted to sell the shares or partial shares at conditions objectively less favourable for the Seller only after he has offered them to the other shareholders without success under the same less favourable conditions; (4) Without prejudice for the right of first refusal, upon a shareholder receiving an offer for the purchase of up to 51% of the entire issued share capital of the company, if this leads to a new majority shareholding by the purchaser and any company afliated with it as ruled in sec. 15 German Stock Corporation Act and wishing to accept such offer then the Proposed Seller procure (and it shall be an express pre-condition of any such agreement for the sale and purchase of the Proposed Seller's shares) that the Purchaser shall have the option to purchase at the same time and on conditions no less favourable than those offered to the Proosed Seller all the remainin shares from each remaining shareholder. In case the Purchaser doesn't intend to exercise the option, the Proposed Seller shall not be entitled to sell. (5) Paragraph 4 is applicable for any purchase of shares done by any company affiliated with, as ruled in sec. 15 German Stock Corporation Act, the before mentioned purchaser. (6) In the event of the passing of a shareholder, his legal successor(s) appointed by will or by law is (are) entitled to become shareholder(s) of the Company if agreed by the latter with simple majority of the remaining shareholders. If the Company doesn't agree the new shareholder(s) or if the legal successor(s) do(es)n't intend to become shareholder of the Company, the aforementioned legal successor(s) shall transfer the shares to the remaining shareholders in the pro rata of the proportion of their original shares and he will receive compensation for this transfer of shares in line with sec. 12 and 13. 11 Redemption of Shares Exclusion of Shareholders, Compulsom Assignment (1) A shareholder may be excluded by means of a resolution passed by the other shareholders, if the Articles of Association provide for same or if the shareholder has culpably and grossly violated his shareholder duties. The exclusion shall become effective upon receipt of the exclusion resolution even if an agreement regarding the amount of the compensation has not yet been reached. The provisions of these Articles of Association regarding the compulsory assignment shall also apply mutatis mutandfs at the choice of the company. (2) The redemption of shares is permitted and shall be carried out by means of a resolution passed by the shareholders' meeting. a) In place of the exclusion, or b) If there is good cause, in particular if the shares of the relevant shareholders are pledged or insolvency proceedings have been applied for over the assets of the shareholder or if the shareholder has applied for the opening ofjudicial settlement proceedings, or c) lfthe company has satisfied a judgement creditor of the shareholder on the basis of enforcement measures instituted by a creditor of the shareholder in the shares