00 Ahold ANNUAL REPORT 2002 165
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
remedies, each of which could have a material adverse effect on the Company's consolidated financial condition, results of
operations and cash flows.
Arbitration and termination
Ahold's former Chief Executive Officer and Chief Financial Officer have each agreed in the context of his separation that
the determination of his severance package, if any, must be left to an impartial body, in this case an arbitration tribunal,
which will be comprised of persons with experience in this area and not having any relationship with either Ahold or the
former Chief Executive Officer and Chief Financial Officer, to ensure complete objectivity of the proceedings. Up until the
date of the issuance of the 2002 financial statements, no arbitration proceedings have been initiated.
The employment relationship between USF and its former Chief Executive Officer, Jim Miller, who resigned from this
position in May 2003, has been terminated as of October 1, 2003. No severance arrangement has been agreed. Mr. Miller
retains some contractual benefits that survive the termination of this employment relationship.
Bradlees Leases
In 1992, Stop Shop spun-off Bradlees Stores, Inc. ("Bradlees"). In connection with this spin-off, Stop Shop assigned
to Bradlees certain commercial real property leases. In connection with such assignments, Stop Shop, Bradlees and
Vornado, Inc. (or certain of its affiliates, collectively "Vornado"), a landlord on a number of the assigned leases, entered
into a Master Agreement and Guaranty, dated as of May 1, 1992 (the "Master Agreement"). The Master Agreement
concerns 18 leases for which Vornado is the landlord.
On December 26, 2000, Bradlees filed for bankruptcy protection to wind down its business and liquidate its assets. In
that bankruptcy, Stop Shop and Bradlees entered into an agreement (the "Lease Designation Agreement") for the sale
and disposition of 114 real estate property leases, including those leases under which Stop Shop may have potential
liability under the Master Agreement or otherwise. Stop Shop was responsible for damages Bradlees owed to landlords
arising out of Bradlees' rejection of any such leases to the extent such damages exceeded USD 30 (other than with respect
to certain specific leases designated as "Excluded Leases"). The disposition of all leases under the Lease Designation
Agreement now is complete. Of the 114 leases subject to the agreement, 53 have been assigned to third parties or
consensually returned to the respective landlords (no further payments currently are due under the leases returned to the
landlords), 21 leases were assigned to Stop Shop and 40 leases, including 15 Excluded Leases, have been rejected in
the bankruptcy proceeding. As a result of the continuing Stop Shop potential obligations from the initial spin-off of
Bradlees and/or the Lease Designation Agreement, Stop Shop may still retain or incur liability under certain of these
leases under certain circumstances.
On November 25, 2002, Vornado sent a written demand to Stop Shop to pay certain so-called "Rental Increases"
allegedly due under the Master Agreement in connection with certain leases. Stop Shop disputes that it owes these
amounts, and on December 31, 2002, instituted an action that now is pending in the U.S. District Court for the Southern
District of New York. In that action, Stop Shop seeks a declaration that it is not obligated to pay the Rental Increases
demanded by Vornado. On May 23, 2003, Vornado moved for summary judgment. On June 11, 2003, Stop Shop
opposed Vornado's motion for summary judgment and cross-moved for summary judgment in its favor. By letter, dated
June 25, 2003, and subsequent court order, the action has been held in abeyance until Vornado's motion to interpret
(discussed below) is decided.
In response to the action instituted by Stop Shop, on April 10, 2003, Vornado made a motion to interpret in the
Bradlees bankruptcy seeking an interpretation of certain court orders that Vornado claims would resolve the dispute
between Stop Shop and Vornado concerning the Master Agreement. Vornado alleges in the motion to interpret that the
Rental Increases are worth "tens of millions of dollars," comprised of USD 5 annually through January 31, 2012, and, if
certain renewal options are exercised, USD 6 annually thereafter through the expiration of the last lease covered by the
Master Agreement, which Vornado alleges could extend until 2031, depending upon whether renewal options are
exercised. Stop Shop has opposed the motion to interpret. The Company has not determined that a loss is probable,
although it is reasonably possible that the Company could incur losses or expenditures arising from this matter in amounts
that cannot be reasonably estimated.
Horn and Braziunas Arbitration
Arbitration proceedings were initiated on February 21, 2003, by Sverre Horn and Gediminias Braziunas (together, "Horn
c.s.") against ICA Norge AS (formerly Hakon Gruppen AS) and ICA Baltic AB (together, "ICA Norge"). Horn c.s. allege
breach of a contract under which they should perform certain services for ICA Norge in relation to real estate development
projects in Lithuania in consideration for a fee calculated as a percentage of total project costs. The total amount of the
