LEGAL OPINION

To: Chill on the Hill Private Limited

Attention: [●]
[24 February 2024]

Sub: Legal Opinion regarding transaction structure to be adopted by Chill on the Hill Private
Limited

Dear Sir/Ma’am,

1 BACKGROUND

1.1 We are [lawfirm] practising and qualified to practise in the Republic of India and to advise on
the law of India. We are asked to provide an opinion to Chill on the Hill Pvt. Ltd. (the
“Company”), a company incorporated and registered under the Indian Companies Act, 2013,
in relation to the proposed acquisition of 66% of the shares of Jumble Mumble Private
Limited (“Target Company”) from Summer Usher Private Limited (“Seller”) for requisite
consideration (“Proposed Transaction”).

1.2 Family Fizz Private Limited (“Parent Company”) owns a 56% stake in the Company.
Additionally, the Parent Company’s ownership structure includes: (i) 18% of its shares on a
fully diluted basis owned by Cool Bros UK (“Cool Bros”), a private limited company located
in the UK; (ii) 52% of its shares owned by Mihir Shrivastava; (iii) 20% of its shares owned by
its co-founder Urvashi Master; and (iv) 10% of its shares owned by its employees obtained on
the exercise of the employee stock options.

1.3 The Target Company ownership structure includes (i) 66% of its shares owned by the Seller;
(ii) 24% of its shares owned by Dark Knight Capital, a Singapore based private equity fund;
and (iii) 10% of its shares owned by Ashish Master who also holds 56% of the shares in
Summer Usher.

1.4 The Pursuant capitalised terms used but not defined in this opinion shall have the meaning as
the context may require or permit.

2 INDIAN LAW

This opinion is limited to Indian law as applied by Indian courts and regulators and as
published and in effect on the date of this opinion. It is given on the basis that all matters
relating to it will be governed by, and that it (including all terms used in it) will be construed
in accordance with, Indian law. Any retroactive changes in Indian law may have an effect on
the validity of our conclusions.

3 SCOPE OF INQUIRY

For the purpose of this opinion, we have examined the following queries as put forth by the
Company:

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1.1 Proposed transaction structure for the acquisition of shares of the Target Company.

1.2 Guidance on the key regulatory and legal risks in the Proposed Transaction.

2. ASSUMPTIONS

For the purpose of this opinion, we have made the following assumptions:

2.1 The parties in the Proposed Transaction are yet to begin negotiations for structuring the
consideration as well payment thereof.

2.2 The Company as well as the Seller are listed companies in India as per the Indian Companies
Act, 2013.

2.3 The assests and turnover of both the Company and the Target Company exceed the statutory
limits prescribed under Section 5 of the Indian Competition Act, 2002.

3. OPINION

Based on the queries referred to in paragraph 3 and the assumptions in paragraph 4 subject to
the qualifications in paragraph 6 and to any matters not disclosed to us, we are of the opinion
that:

3.1 Term Sheet: The acquisition process for the Proposed Transaction will begin with
negotiations with the Seller. To facilitate the same, we recommend that the Company, Target
Company and the Seller after initial discussions, execute a term sheet, which is an agreement
on the basic terms and conditions on which the negotiation will take place. The following
binding clauses will be present in the term sheet:

(a) Access to Information – This clause will specify the obligations of the Target
Company and the Seller to provide all relevant information necessary for the Company and its
advisors to conduct due diligence. This includes financial statements, operational plans,
licenses, and other pertinent document;

(b) Exclusivity – This clause ensures that during the pendency of the negotiations, the
Seller agrees not to engage in discussions or agreements with any other parties regarding the
sale of shares in the Target Company;

(c) Non Disclosure Agreement – All parties will be bound by this clause, which prohibits
the disclosure of confidential information shared for the purpose of facilitating the Proposed
Transaction;

(d) Termination and Break Fee – his clause will outline the timeframe for negotiations
and the conditions under which the term sheet can be terminated. Additionally, it will specify
any costs that may be incurred if a party decides to withdraw from the negotiations
prematurely

(e) Interim restrictions on Seller’s Operations – This clause imposes certain restrictions
on the Seller to maintain the status quo of the Target Company's operations during

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negotiations. This helps protect the Company's interests by preventing any adverse effects on
the business of the Target Company due to significant managerial decisions made during the
negotiation period.

3.2 In addition to these binding clauses, the term sheet will also include several non-binding
clauses outlining proposed deal structures, pricing and payment terms, requirements for third-
party and regulatory approvals, non-solicitation and non-compete agreements, representations
and warranties, indemnities, and stake-building provisions.

3.3 Share Purhase Agreement: Upon successful negotiations, the parties will proceed to execute
a Share Purchase Agreement ("SPA"), which will act as the primary document governing the
terms and conditions of the Proposed Transaction. The SPA will cover all aspects of the
transaction, including pre-execution, execution, and post-execution phases, outlining the
essential terms, conditions, rights, and responsibilities of both the Company and the Seller
involved in the transaction.

3.4 Valuation of Target Company: A number of mechanisms for measuring the value of shares
being bought by the Company from the Seller will need to be undertaken. The following
methods are recommended:

(a) Discounted cash flow ratio – This determines the price value of the Target Company
and as such its shares as per the future cash flow of the Target Company.

(b) Comparative price-earning ratio – This determines the price value of the Target
Company by comparing it with other companies in the same industry/market.

3.5 Purchase Price Adjustment: Due to the potential duration of negotiations and SPA drafting,
it's prudent to incorporate a completion accounts price adjustment mechanism. This entails
adjusting the purchase price based on the variance between the total value of the Target
Company on the completion date and the valuation done at the initial stage. This adjustment
will align the price paid by the Company with the current actual value of the Target Company,
as per its latest independently audited financial statements, ensuring a fair reflection of its
value upon completion.

Additionally, this ensures compliance with the princing guidelines prescribed under Rule 21
of the Foreign Exchange Management [Non-Debt Instruments] Rules, 2019 [To understand
why the aforementioned rules are applicable, kindly refer paragraph 5.11].

3.6 Structuring of Consideration: We recommend the Proposed Transaction should be

structured in a four-fold method for payment of consideration for the acquisition of the shares
of Target Company from the Seller. The purchase price for the shares (“Purchase Price”)
shall be an amount equal to the aggregate of the following amounts:

(a) Initial Purchase Price – Herein it is advised that a lump sum cash payment of 50% of
the intial valuation of the Target Company is to be made by the Company to the Seller upon
closing of the Proposed Transaction.

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(b) Escrow payment – Herein it is advised that the remaining 50% of the initial valuation
of the Target Company is to made to an escrow account by the Company.

(c) Deffered Purchase Price – As per the Purchase Price Adjustment listed in para 5.4.,
the adjustment is to the take place and be binding on all parties. If the valuation of the Target
Company is greater post adjustment then the excess shall on a rupee for rupee basis be paid to
the Seller by the Company through the Escrow account created on an earn-out basis as put
forth below. If the valuation of the Target Company is lesser post adjustment, the difference
shall on a rupee for rupee basis be paid to the Company by the Seller through the Escrow
account created.

(d) Earn-Out – After the lump sum payment of 50% of the Initial Purchase Price and the
determination of the actual purchase price post deduction/addition of the Purchase Price
Adjustment, the remaining consideration for the shares is to be paid through an earn out
mechanism. Herein, the remaining consideration is to be paid in installments over a specified
period, contingent upon achieving pre-determined performance milestones or financial goals.

3.7 Advantage of Proposed Structuring Mechanism: Having this quadruplicate payment

structure will firstly ensure that payment is made on a fair price as per closing date,
incentivize the Company and the Seller to ensure that business of the company is conducted
equitably – without any profit withdrawals, and finally, would permit the retention of the
existing expertise and encourage the existing management to ensure the future success of the
business. This would allow the Company to retain the Target Company’s team and also
ensure that its business performance recovers from the pandemic.

3.8 No Material Adverse Chance: The Target Company derives its majority revenue from the
sale and supply agreements with major retailers. It is essential to confirm that the validity of
such material contracts and arrangements are retained and that the business of the Target
Company is running as is and that there has been no material adverse change in its business,
financial condition, operations, or prospects since the date of signing the SPA, which could
materially affect the transaction or the value of its shares.

3.9 Representations and Warranties: Representations and warranties must be secured by the
Company from the Seller and the Target Company. These include, but are not limited to:

(a) That the Seller the lawful owner of the shares of the Target Company being sold, free
and clear of any liens, encumbrances, or restrictions on transfer

(b) The Seller and the Target Company has full power and authority to enter into the SPA
and that the SPA will be legally binding on the Seller;

(c) There exist no no proceedings in relation to any compromise or arrangement with

creditors or any winding up, bankruptcy or other insolvency proceedings concerning any
group company and, so far as the Seller is aware, no events have occurred which, under any
Law, would justify such proceedings. Additionally, no pending or ongoing litigation or
proceedings are present against the Target Company;

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(d) All neccesary taxes, licenses, regulatory approvals required by the Seller have been
completed in full;

(e) The Target Company is in compliances with all laws;

(f) There exist no undisclosed liability of any kind on the Target Company.

3.10 Indemnification: The Company must ensure that it receives adequate indemnities from the
Buyer such as a non-reliance clause which would stipulate that the Proposed Trasaction has
been executed by only placing reliance on the Representations made by the Buyer. hese
indemnities should operate on a tipping basket basis, meaning the Company can start
receiving earn-out payments from the first rupee loss to offset its losses. Moreover, the
duration for actionable indemnification should be long term. Finally, the cap on
indemnification should exclude scenarios where liabilities could be overwhelming, such as
those related to environmental issues or fraud.

To further secure the interests of the Company, it would be beneficial to incorporate a

sandbagging provision, expressly disclaiming knowledge and investigation as potential
challenges to the right to be indemnified.

3.11 Foreign Investment: The Proposed Transaction is required to be in consonance with Foreign
Exchange Management (Non-Debt Instrument) Rules, 2019 (“NDI Rules”). As per Rule 23,
NDI Rules, the Proposed Transaction classifies as a ‘Downstream Investment’. The same is
due to the fact that Cool Bros, a foreign entity, has the power to appoint four out of five
directors and exercises veto power on certain management decisions of Parent Company.
Consequently, the following requirements must be met:

(a) The Proposed Transaction must have the approval of the Company’s Board of
Directors and be permitted by its shareholder’s agreement;

(b) The funds for this Proposed Transaction should be brought in from abroad, and funds
from the domestic market cannot be used. Unless, the investment is made through internal
accruals.

(c) Under Rule 23(6), NDI Rules, The Company, being the the first level Indian
company, shall be responsible for compliances in case of succeeding levels of downstream
investments. The Company must thus, obtain a certificate to this effect from its statutory
auditor on an annual basis and the compliance of these rules must be mentioned in the
Director’s report as part of the Annual Report.

3.12 Mode of Payment: The Foreign Exchange Management (Mode of Payment and Reporting of
Non-Debt Instruments) Regulations, 2019 requires the Company to file Form DI as well as
notify the Secretariat for Industrial Assistance (SIA), Department for Promotion of Industry
and Internal Trade regarding the execution of the Proposed Transaction

3.13 Antitrust Regulations: With both the Company and the Target Company operating in the
beverages industry, possible Antitrust concerns are required to be mitigated. The Proposed

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Transaction triggers Section 5 of the Competition Act as it potentially forms a ‘combination,’

requiring approval from the Competition Commission of India (“CCI”) for the execution of
the Proposed Transaction under Section 6 of the Competition Act. The Company is required
to notify the CCI of the particulars of the potentially formed combination, within thirty days
from the execution of the SPA and receive a favourable order.

3.14 Taxation Concerns: Withholding tax compliance is closely scrutinised by Indian tax
officials. The Company is as such required to withhold tax from the consideration payable to
the Seller, deposit it with the Indian tax authorities, and be in compliance with multiple
oligations, including but not limited to, obtaining a Tax Deduction Account Number, filing a
withholding tax return, and providing a withholding tax certificate to the Seller for them to be
able to recieve tax credit. Additionally, the Tax losses, if any, of the Company can be carried-
forward to reduce future tax liability.

3.15 Stamp Duty: The Company is liable to pay 0.5% of the total valuation of the SPA as stamp
duty on the execution of the SPA.

3.16 Licenses and Insurance: The Company must investigate from the documents and agreements
shared by the Seller and the Target Company whether their licenses are transferable upon sale
of securities. Additionally, it must review remaining term and renewal requirements for the
same. Simmilarly, the Company must investigate vis-à-vis insurance, what types and amounts
of coverage the Seller has, their transferablity, and expiry.

4. QUALIFICATIONS

4.1 This opinion is subject to the following qualifications:

4.2 The percentage division as per Para 5.5. for the payment of the consideration is indicative of
market practice and the industry trend generally seen in the beverages industry. The same is
subject to revision as per negotiations between the parties.

4.3 This opinion is subject to any limitations arising from accounting or banking principles,
bankruptcy, insolvency, liquidation, moratorium, reorganisation and other laws of general
application relating to or affecting financing of the Proposed Transaction.

4.4 The mechanisms for determining pricing and valuation are indicative and not exhaustive, and
will have to be corroborated by the Company based on factual evidence, along with the nature
and circumstances of the transaction. For the same, the assistance of independent financial
and accounting counsultants must be undertaken by the Company.

4.5 We have conducted no due diligence on the Company, the Parent Company, the Target
Company, the Seller, or any other parties involved in the Proposed Transaction and have
made no search of any public records regarding the past practices or transactions entered into
by any parties involved in the Proposed Transaction.

4.6 No opinion is expressed on any matters of fact.

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5. RELIANCE

5.1 This opinion is solely for the benefit and use of the Company and its successors and assigns
and solely for the purpose of assessing and entering into an agreement for the Proposed
Transaction and may only be relied upon by the addressees to this opinion.

5.2 A copy of this opinion may be provided only to:

5.3 your professional advisers, officers, employees and auditors;

5.4 any person to whom disclosure is required to be made by applicable law or court order or
pursuant to the rules or regulations of any supervisory or regulatory body or in connection
with any judicial proceedings;

5.5 on the basis that (i) such disclosure is made solely to enable any such person to be informed
that a letter has been given and to be made aware of its terms but not for the purpose of
reliance, and (ii) such person to whom a copy of this opinion is disclosed agrees not to further
disclose it or its content to any other person or quote or refer to in any public document or file
with anyone without our prior written consent.

5.6 Except as provided in paragraphs 7.1 and 7.2 above, this opinion is not to be transmitted to
anyone nor is it to be relied upon by anyone or for any other purpose or quoted or referred to
in any public document or filed with anyone without our written consent. We accept no
responsibility or legal liability to any person other than the parties referred to in paragraph 7.1
above in relation to the contents of this opinion.

Yours faithfully,
For [Lawfirm]

[Name]
Partner