13.

COMMITMENTS AND CONTINGENT LIABILITIES

Supply contracts

The Company has various agreements covering its sources of supply, which, in some cases, may be terminated by either party on relatively short notice. Thus, there is a risk that a portion of the Company's supply of products could be curtailed at any time.

Bank Guarantees

In accordance with current legislation in Russia each producer of spirit beverages must acquire excise stamps and must pay excise tax in full before buying spirit for production purposes. For each lot of stamps purchased the alcohol producer must provide the relevant body with a bank guarantee in the full amount of payment for the excise tax to secure the legality of usage of the excise stamps. This bank guarantee serves as insurance against the illegal usage of excise stamps by an alcohol producer.

In addition, under new legislation effective since August 1, 2011 the producer purchasing spirit alcohol must a) prepay the excise tax in full or b) provide the relevant tax body with a bank guarantee in the full amount of the excise tax before purchasing to secure payment of the excise tax. This bank guarantee serves as insurance that the excise tax is paid in time.

Russian Alcohol signed a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 18.2 billion Russian rubles (approximately $620.8 million) for a period from 1 to 4 years, Bravo Premium signed a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 600.0 million Russian rubles (approximately $20.5 million) for a period from 1 to 2 years and Whitehall signed a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 1.7 billion Russian rubles (approximately $58.0 million) as insurance against the illegal usage of excise stamps.

According to the agreements, companies have the right to obtain bank guarantees during the agreement term for each purchase of excise stamps and for the purchase of spirit. The guarantees for excise stamps are held by Rosalkoregulirovanie (the Federal Service for Alcohol Market Regulation), during the whole production period for which the excise stamps were purchased. The guarantee for excise tax is held by the beneficiary (the tax body) for 6 months after the end of month the spirit was purchased.

As of March 31, 2012, the Company has bank guarantees related to customs duties on imported goods in Poland of $2.0 million.

Operating Leases and Rent Commitments

The Company makes rental payments for real estate, vehicles, office, computer, and manufacturing equipment under operating leases. The following is a schedule by years of the future rental payments under the non-cancelable operating lease as of March 31, 2012:


2012	$	8,753
2013		9,130
2014		8,722
2015		8,148
2016		5,536
Thereafter		2,976

Total	$	43,265

During the first quarter of 2012, the Company continued its policy of renewing its transportation fleet by way of capital leases. The future minimum lease payments for the assets under capital lease as of March 31, 2012 are as follows:


2012	$	1,194
2013		522
2014		171

Gross payments due	$	1,887
Less interest		(132	)

Net payments due	$	1,755

Legal proceedings

From time to time we are involved in legal proceedings arising in the normal course of our business, including opposition and cancellation proceedings with respect to trademarks similar to some of our brands, and other proceedings, both in the United States and elsewhere. Except as set forth below, we are not currently involved in or aware of any pending or threatened proceedings that we reasonably expect, either individually or in the aggregate, will result in a material adverse effect on our consolidated financial statements.

On October 24, 2011, a class action complaint titled Steamfitters Local 449 Pension Fund vs. Central European Distribution Corporation, et al., was filed in the United States District Court, District of New Jersey on behalf of a putative class of all purchasers of our common stock from August 5, 2010 through February 28, 2011 against us and certain of our officers. The complaint seeks unspecified money damages and alleges violations of federal securities law in connection with alleged materially false and misleading statements and/or omissions regarding our business, financial results and prospects in our public statements and public filings with the U.S. Securities & Exchange Commission for the second and third quarters of 2010, relating to declines in our vodka portfolio, our need to take an impairment charge relating to the deterioration in fair value of certain of our brands in Poland and negative financial results from the launch of ubrówka Biaa. Subsequent to the above complaint, a second, substantially identical class action complaint titled Tim Schuler v. Central European Distribution Corporation, et al., was filed in the same court. Motions to consolidate the two cases and for the appointment of lead plaintiff and lead counsel have been filed and are awaiting decision. As a result, no response to the complaints has yet been filed. The Company intends to mount a vigorous defense to the claims asserted. As of March 31, 2012 the original plaintiffs, Steamfitters Pension Fund and Tim Schuler, no longer remain in the lawsuits and the current plaintiffs are now the Prosperity Group and the Arkansas Pension Fund, however the names of the lawsuits have remained unchanged.

On November 11, 2011, a purported shareholder derivative action, titled Ying Yeung v. William V. Carey, et al., was filed in the United States District Court, District of New Jersey against the current members of our board of directors (and against the Company as the nominal defendant), seeking unspecified damages on behalf of the Company. A second, substantially identical shareholder derivative complaint, titled Russell Partch v. William V. Carey, et al., was subsequently filed in the same court. Plaintiff alleges that our directors breached their fiduciary duties of care, good faith and loyalty to the Company by failing to establish and maintain adequate internal controls and by failing to exercise proper oversight over management, which would have prevented the Company from disseminating the allegedly false and misleading statements to shareholders that are the subject of the securities class action litigation described above. The derivative actions are at a very preliminary stage, and no response to the complaints has yet been filed.

Although we believe the allegations in the class and derivative complaints are without merit, these types of lawsuits can be protracted, time-consuming, distracting to management and expensive and, whether or not the claims are ultimately successful, could ultimately have an adverse effect on our business.