Exhibit 10.1

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

 

To:   (1)   

Lion Capital LLP

21 Grosvenor Place

London

SW1X 7HF

acting for and on behalf of each of:

(i) Lion Capital Fund I L.P.

(ii) Lion Capital Fund I A L.P.

(iii) Lion Capital Fund I B L.P.

(iv) Lion Capital Fund I C L.P.

(v) Lion Capital Fund I SBS L.P.; and

  (2)   

Lion Capital (Guernsey) Limited

c/o Aztec Financial Services

Second Floor

Tudor House

Le Bordage

St Peter Port

Guernsey GY1 3PP

 

(together, the “Lion Funds”)

From:     

Central European Distribution Corporation (“CEDC”)

ul. Bokserska 66

02-690 Warszawa

Poland

Date: 22 May 2008

Dear Sirs

Project Rally

 

1 We refer to:

 

  (i) the sale and purchase agreement (the “SPA”) to be entered into today
between, amongst others, Pasalba Limited (“Bidco”) and the Seller (as defined in
the SPA) relating to the acquisition by Bidco of the entire issued share capital
of certain direct and indirect subsidiaries of Cirey Holdings, Inc., which
together comprise the Russian Alcohol Group (“RAG”) (the “Acquisition”);

 

  (ii) the letter attached at Schedule 1 to this letter dated the same date as
this letter from CEDC to Bidco (as defined therein) (the “Bidco Commitment
Letter”);

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  (iii) the shareholders’ agreement attached at Schedule 2 to this letter, and
to be entered into between, amongst others, CEDC and Lion/Rally Cayman 1 LP
relating to the investment by CEDC and Lion/Rally Cayman 1 LP in [Lion/Rally
Cayman 2], a Cayman Islands company (the “Company”), to be formed specifically
for the purposes of the Acquisition (the “Shareholders’ Agreement”);

 

  (iv) the proposed memorandum of association and articles of association of the
Company, including the schedule thereto, in the form provided to and agreed upon
by the parties to this letter agreement on the date hereof (the “Articles”);

 

  (iv) the instrument attached at Schedule 3 to this letter, to be made between
the Company, [Lion/Rally Lux 1 S.A.], and [Lion/Rally Lux 3 S.à r.l.]
constituting $103,500,000 unsecured exchangeable loan notes (the “Loan Note
Instrument” and, together with the Shareholders’ Agreement and the Articles, the
“Equity Documents”); and

 

  (v) the financing commitment letter made between J.P. Morgan plc and JPMorgan
Chase Bank, N.A. and CEDC on the date hereof, a copy of which has been provided
to Bidco and the Seller by CEDC (the “JPM Bridge Financing Letter” and, together
with the Bidco Commitment Letter, the “CEDC Documents”).

 

2 This letter agreement is being entered into by the parties to:

 

  (i) provide comfort to the Lion Funds that CEDC has the ability to satisfy its
financial obligations under, and in accordance with, the Equity Documents;

 

  (ii) provide comfort to CEDC that the Lion Funds will allow CEDC to make the
investments contemplated by the Equity Documents on the terms and conditions set
forth therein (the “CEDC Investment”); and

 

  (iii) confirm the parties’ mutual understandings and agreements with respect
to the CEDC Investment and the Acquisition.

 

3 In consideration of the Lion Funds entering into the SPA and the Equity
Documents to which they are, or will be, parties, and in consideration of CEDC
providing the Bidco Commitment Letter and entering into the Equity Documents:

 

3.1 CEDC represents, warrants and undertakes to each of the Lion Funds that:

 

  (i)

(a) CEDC has the corporate power and authority required to enter into this
letter agreement and each of the Equity Documents and the CEDC Documents to
which it is or will be a party, (b) any subsidiary of CEDC to

 

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which the obligation to fund the Equity Investment is transferred (“CEDC
Investment Vehicle”) has or will have at the time of making the CEDC Investment
the corporate power and authority required to enter into each of the Equity
Documents and the CEDC Documents to which it is or will be a party, and (c) CEDC
has and the CEDC Investment Vehicle will have at the time of making the CEDC
Investment the corporate power and authority required to perform their
obligations under the Equity Documents and the CEDC Documents in accordance with
their terms;

 

  (ii) CEDC will, and shall procure that the CEDC Investment Vehicle, if any,
will (and in such case, both of them where the relevant Equity Document so
provides) upon Closing (as such term is defined in the SPA (“Closing”)) and
satisfaction of the conditions set forth in part 4 hereof: (x) enter into the
Shareholders’ Agreement and perform its, or their, obligations thereunder,
including (but not limited to) those under Clause 2 of the Shareholders’
Agreement; (y) subscribe for $156,500,000 of equity pursuant to the terms of the
Shareholders’ Agreement; and (z) subscribe for $103,500,000 of notes pursuant to
the terms of the Loan Note Instrument (together with (x) and (y), the
“Commitment”);

 

  (iii) it will have at Closing sufficient funds available to fund the
Commitment; and

 

  (iv) there is not in existence any document, agreement, arrangement or
understanding in relation to any aspect of the financing of the Acquisition to
which CEDC or any of its connected persons or affiliates is a party which might
prejudice the ability of CEDC to pay or procure to be paid the amounts payable
by them in connection with the Commitment, or to enter into the Equity Documents
or the CEDC Documents.

 

3.2 The Lion Funds represent, warrant and undertake to CEDC that:

 

  (i) (a) they have the power and authority required to enter into this letter
agreement, and (b) they have or will procure that any of their affiliates to
which their obligations in respect of the Acquisition and the Equity Documents
are transferred (the “Lion Parties”) have the power and authority to enter into
each of the Equity Documents to which they are or will be a party, and the SPA,
and to perform their obligations under each of them in accordance with their
terms, and to complete the Acquisition on the terms and conditions set forth in
the SPA;

 

  (ii) they will procure that the relevant Lion Parties will upon Closing:
(i) enter into the Shareholders’ Agreement and perform their obligations
thereunder, including (but not limited to) those under Clause 2 of the
Shareholders’ Agreement; and (ii) cause the subscription of $184,000,000 of
equity pursuant to the terms of the Shareholders’ Agreement (together with (i),
the “Lion Commitment”);

 

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  (iii) they will have at Closing sufficient funds available to fund the Lion
Commitment; and

 

  (iv) there is not in existence any document, agreement, arrangement or
understanding in relation to any aspect of the financing of the Acquisition to
which the Lion Funds or any of their connected persons or affiliates is a party
which might prejudice the ability of the Lion Funds to pay or procure to be paid
the amounts payable by them in connection with the Lion Commitment or to enter
into the Equity Documents, or to prejudice the ability of CEDC to make the CEDC
Investment.

 

4 CEDC’s obligations in respect of the Commitment are subject to the
satisfaction or waiver by CEDC (such waiver being in CEDC’s sole discretion) of
the following conditions on or before Closing:

 

  (i) the Lion Funds shall have provided evidence satisfactory to CEDC (acting
reasonably) that the Lion Funds, Lion Capital LLP, Lion Capital General Partner
LLP, Lion Capital General Partner II LLP, Lion Capital Carry LP, Lion Capital
Carry II LP, or Lion/Latimer GP II (Guernsey) Limited (or an affiliate of any of
them) has or will have at Closing sole effective control of Lion/Rally Cayman 1
LP and through their controlling interest in Lion/Rally Cayman 1 LP or otherwise
will have effective control of the Company;

 

  (ii) the Company, [Lion/Rally Lux 1 S.A.], [Lion/Rally Lux 3 S.à r.l.] and any
other subsidiary or affiliate thereof contemplated by the SPA or the Equity
Documents shall have been properly formed and have all corporate and legal
authority to carry out or participate in the transactions contemplated by the
SPA and the Equity Documents;

 

  (iii) except as agreed by CEDC (such agreement not to be unreasonably delayed,
withheld or conditioned), there having been no changes to (i) the SPA or the
schedules thereto; (ii) the Lion Commitment or (iii) the Equity Documents; and

 

  (iv) no existing order, writ, injunction, decree, statute, rule, regulation or
other requirement of any Governmental authority shall have been made,
promulgated or enacted that restrains, enjoins, invalidates or declares the CEDC
Investment ineffective or otherwise prohibits the CEDC Investment.

 

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5 CEDC hereby undertakes and agrees:

 

  (i) conditional upon Closing having occurred (and satisfaction of the
conditions set forth in paragraph 4 hereof on or before Closing), if CEDC shall
fail to enter into (or procure that the CEDC Investment Vehicle enter into) the
Shareholders’ Agreement and/or subscribe and pay for the Commitment, the Put
Option arrangements contained in Clause 9 of the Shareholders’ Agreement shall
be binding on CEDC from the date of Closing, as if CEDC had entered into the
Shareholders’ Agreement, and subject to the terms and conditions thereof;

 

  (ii) that any material public announcements made in connection with this
letter agreement, the Acquisition or the entry into the Equity Documents
(including but not limited to any announcements required to be made in
accordance with applicable law or regulation, to the extent permitted by law)
shall be made only following consultation as to the contents of such
announcements with the Lion Funds; and

 

  (iii) that it will use its reasonable efforts, including offering Direct
Financing Limited registration rights substantially similar to the rights of the
Lion Parties, to obtain, within 30 calendar days of the date of this letter
agreement or Closing, whichever is earlier, the consent of Direct Financing
Limited to (i) grant to the Lion Parties a second demand registration right
pursuant to the Registration Rights Agreement that has been agreed in form
between CEDC and the Lion Parties in connection with the Put Option in the
Shareholders’ Agreement and (ii) all other terms of such Registration Rights
Agreement which require the consent of Direct Financing Limited; provided that
if such consent is not obtained within the 30 calendar day period, unless CEDC
and the Lion Parties agree on mutually acceptable modifications of the
Registration Rights Agreement, the option of CEDC to settle the Put Option in
part with CEDC shares (as provided in the Shareholders’ Agreement) shall be
cancelled.

 

6 The Lion Funds hereby undertake and agree:

 

  (i) conditional upon CEDC having complied with its obligations under this
letter, to allow CEDC to make the CEDC Investment;

 

  (ii) that CEDC may transfer the obligation to fund the Commitment and to enter
into the Equity Documents to any subsidiary, provided that such subsidiary
undertakes to fund the Commitment on substantially similar terms to this letter
agreement and that CEDC provides a guarantee of such subsidiary’s obligations in
respect of the Shareholders’ Agreement (as contemplated in Clause 12 of the
Shareholders’ Agreement);

 

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  (iii) that any material public announcements made in connection with this
letter agreement, the Acquisition or the entry into the Equity Documents
(including but not limited to any announcements required to be made in
accordance with applicable law or regulation, to the extent permitted by law)
shall be made only following consultation as to the contents of such
announcements with CEDC; and

 

  (iv) to put in place the corporate structure and related contracts,
instruments and agreements contemplated by the Equity Documents (including,
without limitation, the Pledge Agreement in favour of CEDC (as defined in the
Shareholders’ Agreement)) prior to Closing.

 

7 The Lion Funds hereby grant to CEDC the right, but not the obligation, to
participate in any short-term bridge debt financing provided in relation to the
Acquisition by the Lion Funds (a “Bridge Loan”), up to an amount of 40% of any
such Bridge Loan.

 

8 The Lion Funds hereby undertake to CEDC that subject always to the provisions
of paragraphs 9 and 10, from the date of this letter until 31 January 2009, they
shall not, without CEDC’s consent, which shall not be unreasonably withheld or
delayed, enter into any agreement for loan facilities to be used for the
purposes of (a) financing the Acquisition by the Company or any subsidiary
thereof (a “Financing”) but excluding, for the avoidance of doubt, (i) any loan
notes issued to the Sellers or their affiliates pursuant to the terms of the SPA
and (ii) any shareholder debt, or (b) refinancing the debt of RAG outstanding at
Closing (a “Refinancing”). The right granted to CEDC pursuant to this paragraph
8 shall be known as the “CEDC Veto Right”.

 

9 The CEDC Veto Right shall not apply to: (a) the first US$80 million of loan
facilities utilised and applied to a Refinancing, and which have an interest
rate of (x) 10% or less if such loan facilities are denominated in Euros or US
dollars or (y) 11% or less if such loan facilities are denominated in Roubles
(together with (x), the “Maximum Applicable Rate”); (b) the rollover or renewal
of any debt of RAG at Closing which has an interest rate less than the Maximum
Applicable Rate; and (c) any Bridge Loan(s) made by the Lion Funds. For the
avoidance of doubt, CEDC shall have the right to participate in any such Bridge
Loan(s), in accordance with the provisions of paragraph 7. Loans falling within
(a), (b), and (c) of the preceding sentence are hereafter referred to as
“Interim Facilities”. The CEDC Veto Right shall apply to any subsequent
refinancing of the Interim Facilities, unless such refinancing takes the form of
further Interim Facilities, in which case the CEDC Veto Right shall not apply.
Notwithstanding the provisions of the foregoing, the CEDC Veto Right shall,
however, apply to any rollover of any Bridge Loan(s).

 

10

CEDC hereby undertakes to the Lion Funds not to exercise the CEDC Veto Right if
the Lion Funds or any affiliate thereof, in connection with a Financing or a

 

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Refinancing, enter into a financing package with Goldman Sachs which: (a) is in
accordance with the financial terms contained in the commitment documents
provided to, and identified by, the parties letter agreement on the date hereof
(the “GS Commitment Documents”), (b) is materially in accordance with all other
terms in the GS Commitment Documents, and (c) limits total net debt of the
banking group to 5.25x EBITDA.

 

11 In the event that the Company or any subsidiary thereof, including, for the
avoidance of doubt, RAG, utilises a mezzanine financing facility provided by
Goldman Sachs (pursuant to paragraph 10), in order to effect a Financing or a
Refinancing (a “Mezzanine Facility”) (whether such facility is drawn down at
Closing or thereafter), the parties agree that the rate of interest payable on
the loan notes issued to CEDC pursuant to the Loan Note Instrument shall be
increased from the date of such utilisation to “P” as calculated by the
following formula, with “P” to be known as the “Revised Percentage”:

 

I    =   

A x B x C

     P   =  

I

            D          103,500,000      

where

 

A

   =    the greater of (a) 0 and (b) (i) the cash margin on the Mezzanine
Facility plus (ii) the PIK coupon on the Mezzanine Facility minus (iii) 6.5%;

B

   =    the amount (expressed in US dollars) drawn down under the Mezzanine
Facility;

C

   =    40%; and

D

   =    60%.

 

12 The parties hereby undertake, in the event that the Revised Percentage
becomes payable, to make all necessary changes to the Loan Note Instrument
required to change of rate of interest payable on the loan notes issued pursuant
to the Loan Note Instrument to the Revised Percentage.

 

13 The Lion Funds hereby undertake to CEDC, conditional upon Closing and CEDC
subscribing the amounts contemplated by the Commitment, to procure that, at
Closing, payment of an amount of $4,722,500 is made to CEDC, by way of a fee for
its entering into this letter agreement.

 

14 CEDC acknowledges that the Lion Funds will be relying on the provisions of
this letter agreement in entering into the SPA. The Lion Funds acknowledge that
CEDC will be relying on the provisions of this letter agreement in entering into
the financing and corporate undertakings required to make the CEDC Investment.

 

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15 Notwithstanding anything that may be expressed or implied in this letter
agreement, CEDC and the Lion Funds, each by its acceptance of the benefits
hereof, covenants, agrees and acknowledges that no person other than CEDC and
the Lion Funds shall have any obligation hereunder and that no recourse
hereunder or under any documents or instruments delivered in connection herewith
shall be had against, and no personal liability whatsoever shall attach to, be
imposed on or otherwise be incurred by, any former, current or future director,
officer, employee, agent, general or limited partner, manager, member,
stockholder, affiliate or assignee of any of CEDC or the Lion Funds or any
former, current or future director, officer, employee, agent, general or limited
partner, manager, member, stockholder, affiliate or assignee of any of the
foregoing, whether by the enforcement of any assessment or by any legal or
equitable proceeding, or by virtue of any statue, regulation or other applicable
law, for any obligations of CEDC or any of the Lion Funds under this letter
agreement or any documents or instruments delivered in connection herewith or
for any claim based on, in respect of or by reason of such obligations or their
creation. This paragraph 15 does not exclude any liability for, or remedy in
respect of, fraudulent misrepresentation.

 

16 Each of the parties to this letter agreement hereby acknowledge that the
limited partners in the Lion Funds have limited liability (for the purposes of
this letter agreement and otherwise), except that such liability shall not
exclude any liability for, or remedy in respect of, fraudulent
misrepresentation, and, notwithstanding any other provision in this letter
agreement each party hereby agrees that the liability of the partners in any of
the parties which is constituted as a limited partnership shall be regulated in
accordance with the jurisdiction in which that limited partnership is registered
or otherwise constituted.

 

17 The parties hereto acknowledge that any liability of CEDC arising from its
failure to fund the Commitment (which the parties acknowledge is subject to
Closing and satisfaction of the conditions set forth in paragraph 4 hereof)
shall be reduced, pro rata, by any amounts recovered pursuant to the terms of
the Bidco Commitment Letter by Bidco or the Seller.

 

18 This letter agreement is confidential and may not be disclosed by a party to
any third party other than to the financial or professional advisers of the Lion
Funds or CEDC in connection with the Acquisition, or as may be required by law,
regulation or any governmental or competent regulatory authority, without the
prior written consent of the other party.

 

19 This letter shall be governed by and construed in accordance with English law
and the parties hereto hereby submit to the exclusive jurisdiction of the
English courts.

 

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Yours faithfully

 

/s/ William Carey

Name:   William Carey Title:   President for and on behalf of Central European
Distribution Corporation

Agreed and accepted on behalf of

Lion Capital Fund I L.P.

Lion Capital Fund I A L.P.

Lion Capital Fund I B L.P.

Lion Capital Fund I C L.P.

Lion Capital Fund I SBS L.P.

 

/s/ James Cocker

Name:   James Cocker Title:   Duly Authorized Attorney for and on behalf of Lion
Capital LLP

 

/s/ Rob Jones

Name:   Rob Jones Title:   Director for and on behalf of Lion Capital (Guernsey)
Limited

 

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SCHEDULE 1

BIDCO COMMITMENT LETTER

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SCHEDULE 2

SHAREHOLDERS’ AGREEMENT

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SCHEDULE 3

LOAN NOTE INSTRUMENT