Note 35
proceeding which is presently pending and which covers, among other things, claims for severance payments, reimbursement
for bonus amounts and forfeiture of options. Ahold has filed several counterclaims in these cases.
In February 2004, James L. Miller, former Chief Executive Officer of U.S. Foodservice, filed an action in the U.S. District Court
for the District of Maryland, Northern Division (the "Federal Court") against Ahold, Ahold U.S.A., U.S. Foodservice and various
executive officers and directors of Ahold, asserting various causes of action in connection with U.S. Foodservice's termination
of his employment as of October 1, 2003 and seeking compensatory damages of USD 10 (EUR 8), punitive damages,
attorneys' fees, injunctive relief and a declaratory judgment that he is entitled to post-termination benefits and severance pay.
The executive officers and directors named in this case have been dismissed from the case with prejudice. In May, 2004,
Ahold and the other named defendants filed a counterclaim alleging that Mr. Miller had breached the fiduciary duties he owed
to Ahold and U.S. Foodservice and the terms of employment agreement with U.S. Foodservice, and seeking compensatory
and exemplary damages and restitution of compensation paid to Mr. Miller during his tenure at U.S. Foodservice. In December
2005, the Federal Court issued a memorandum opinion directing U.S. Foodservice to pay Mr. Miller's legal fees and expenses
incurred in connection with this litigation pursuant to the terms of a letter agreement executed with U.S. Foodservice prior to
his termination. U.S. Foodservice is presently evaluating the merits of appealing from this ruling. The Federal Court has issued
a scheduling order, which contemplates the litigation proceeding to trial in 2007.
Uruguayan and Argentine litigation
Ahold, together with Disco S.A. ("Disco") and Disco Ahold International Holdings N.V. ("DAIH"), is a party to certain legal
proceedings in Uruguay and Argentina related to Ahold's acquisition of Velox Retail Holdings' shares in the capital of DAIH
in 2002. The plaintiffs have obtained provisional remedies in Uruguay, which were executed in Argentina and have affected
the sale and transfer of the remaining 15% of the outstanding shares of Disco to Cencosud S.A. ("Cencosud"). During 2005,
various attempts by plaintiffs to expand the provisional remedies and/or to challenge the transfer of Disco's shares to Cencosud
before courts in Argentina and Uruguay have been unsuccessful. On October 11, 2005, one of the plaintiffs withdrew its
USD 20 (EUR 17) claim against Ahold, DAIH and Disco, thereby reducing the aggregate amount of alleged damages in the
remaining proceedings to approximately USD 72 (EUR 61) plus interest and costs. Ahold continues to believe that these legal
proceedings are without merits and will continue to vigorously oppose plaintiffs' claims.
On March 23, 2005 Ahold received from escrow the final purchase amount for the approximately 85% of the shares of Disco,
after reaching an agreement with Cencosud on the final purchase price adjustment resulting from the closing balance sheet of
Disco. The transaction still requires Argentine antitrust approval, although this will not affect Ahold's retention of the purchase
amount. The purchase amount for the remaining approximately 15% of the Disco shares that currently have not been transferred
by Ahold to Cencosud remains in escrow until such shares can legally be transferred to Cencosud. As referred to above, these
shares are subject to certain Uruguayan court orders processed and executed in Argentina.
Argentine tax assessment claims
On July 17, 2003, the Administración Federal de Ingresos Publicos ("AFIP") served Disco with a Vista de la Determinación
de Oficio ("Vista") - a formal assessment notice - for the period from 1998 through May 2002 for taxes allegedly owed in
connection with a USD 100 Disco bond issue due May 2003, which was repaid at maturity, and a USD 250 Disco bond issue
due May 2008, which was redeemed in July 2003 (the "Disco Bonds"). The AFIP alleges that Disco improperly failed to pay
VAT on both bond issues and failed to withhold tax on the interest paid to foreign holders of its allegedly non-public bonds.
On September 1, 2003, Disco responded that the bonds were placed through a public offer and that taxes have been withheld
and paid in compliance with applicable Argentine laws and regulations. On December 29, 2003, the AFIP issued its tax ruling,
essentially confirming its assessment in Vista. Disco appealed this ruling on February 19, 2004 with the Argentine Tax Court
(Tribunal Fiscal de la Nación). Also on February 19, 2004, the AFIP issued Pré-vista de la Determinación de Oficio
("Prévista") relating to the same bonds based on similar allegations as in Vista for the period from May 2002 to the respective
repayment and redemption dates of the bonds. Disco has responded to Prévista with the same defenses as it did with respect
to Vista. The proceedings in the Argentine Tax Court is still in the initial stages of discovery (prueba) and has been suspended,
at the AFIP's request and consented to by Disco, pending a new analysis by the AFIP of the evidence submitted by Disco on its
position. The aggregate amount claimed from Disco under Vista and the related ruling and Prévista, including penalties and
interest up to December 31, 2005, totaled approximately ARS 753 (EUR 210), which amount is continuing to accrue interest
of approximately ARS 6.1 (EUR 1.7) each month. Under the terms of the share purchase agreement with Cencosud on the sale
AHOLD ANNUAL REPORT 2005 171
