Note 34
Financial statements - Notes to the consolidated financial statements
Residual liabilities from disposals in 2004, 2005 and 2006
For a discussion of Ahold's contingent liabilities with respect
to the divestments, see "Contingent liabilities-Sale of Ahold's
operations" below in this note. Under customary provisions
in the agreements regarding disposals, Ahold has
indemnified certain claims brought against its former
subsidiaries and has guaranteed certain representations
and warranties given in the disposal transactions. During
2004, 2005 and 2006 Ahold has received a number of
claims from the relevant parties with respect to such
indemnifications and guarantees. Although ultimate liability
cannot be determined at present, Ahold is currently of the
opinion that the amount of any such liability from these
claims will not have a material adverse effect on its financial
position or results. Adequate provisions have been taken for
pending or threatened litigations where deemed necessary.
Other legal proceedings
In addition to the legal proceedings described above, Ahold
and its subsidiaries are parties to a number of other legal
proceedings arising out of their business operations. Ahold
believes that the ultimate resolution of these other
proceedings will not, in the aggregate, have a material
adverse effect on Ahold's consolidated financial position,
results of operations, or cash flows. Such other legal
proceedings, however, are subject to inherent uncertainties
and the outcome of individual matters is not predictable. It is
possible that Ahold could be required to make expenditures,
in excess of established provisions, in amounts that cannot
reasonably be estimated.
Contingent liabilities
Sale of Ahold's operations
Related to the sale of the assets of Ahold's operations in
Brazil (Bompreqo/Hipercard), Argentina, Spain (Ahold
Supermercados), the United States (BI-LO/Bruno's,
Tops' Wilson Farms and SugarCreek convenience stores
and Tops' stores in Northeast Ohio), Poland (hypermarkets)
and the Netherlands and Belgium (Deli XL), as further
described in Note 12, Ahold has provided in the relevant
sales agreements certain customary representations and
warranties including but not limited to, completeness of
books and records, title to assets, schedule of material
contracts and arrangements, litigation, permits, labor matters
and employee benefits and taxes. These representations and
warranties will generally terminate, depending on the specific
representations and warranties, one to three years after the
date of the relevant agreement. The claims under the
representations and warranties are, with certain exceptions,
capped at EUR 38 for Bompreqo/Hipercard, EUR 50 for
Spain, USD 33 (EUR 25) for BI-LO/Bruno's, USD 5 (EUR 4)
for Wilson Farms and SugarCreek convenience stores, PLN
120 (EUR 31) for the Polish hypermarkets and EUR 40 for
Deli XL. In addition, specific, limited representations and
warranties were given with respect to the divestment of Paiz
Ahold. The claims under those representations and
warranties were capped at the sale price, but the impact of
any claim under such representations and warranties is not
expected to be material.
With respect to Disco, the claims under the representation
and warranties are capped at USD 15 (EUR 11). In addition,
Ahold is required to indemnify the buyers of Disco for
(i) certain claims made in relation to the mandatory
conversions into Argentine pesos of certain U.S. dollar debts
of Disco, (ii) the assessment of taxes made by the
Argentinean tax authorities related to certain bonds issued
by Disco and (iii) certain claims made by creditors of certain
Uruguayan and other banks. For additional information on
these legal proceedings, see "Legal proceedings" above.
Ahold's indemnification obligations relating to these legal
proceedings are not capped at a certain amount nor
restricted to a certain time period.
Similar representations and warranties exist for certain of
the Company's smaller divestments in 2004, 2005 and 2006
as described in Note 12. The aggregate impact of a claim
under such representations and warranties is not expected
to be material.
BI-LO/Bruno's
In connection with the sale of BI-LO and Bruno's, Ahold may
be contingently liable to landlords under guarantees of 215
BI-LO or Bruno's operating or finance leases, which existed
at the time of the sale in the event of a future default by the
tenant under such leases.
Tops convenience stores
Pursuant to applicable law Tops may be contingently liable to
landlords under 193 leases assigned in connection with the
sale of the Tops' Wilson Farms and SugarCreek convenience
stores in the event of a future default by the tenant under
such leases and Ahold may be contingently liable to
landlords under guarantees of 69 of such leases in the event
of a future default by the tenant under such leases.
Tops Northeast Ohio stores
On July 7, 2006, Tops announced that it would close 46 stores
in Northeast Ohio. On December 8, 2006, those stores were
closed, and as of March 12007 28 of the 46 locations had
been sold. Giant Eagle, Inc. purchased 19 of the 46 stores and
9 others were sold to third-party operators or real estate
developers. With respect to the remaining stores, Tops
currently has two pending lease termination agreements and
is in varying stages of negotiations or marketing of the others.
In connection with the store sales, Tops and Ahold have
certain post-closing indemnification obligations under the sale
agreements, which Ahold believes are customary for
transactions of this nature. Pursuant to applicable law,
Tops may be contingently liable to landlords under the
21 leases which have been assigned to various third-party
operators and two leases where premises have been sublet
to third party operators. Ahold may be contingently lia ble to
landlords under guarantees of 14 of such leases in the event
of a future default by the tenant under such leases. In the
event Tops is able to assign the leases for the remaining
Northeast Ohio stores, then pursuant to applicable law,
Tops also may be contingently liable to landlords under these
remaining leases in the event of a future default by the tenant
under such leases. Similarly, Ahold may be contingently liable
to landlords under guarantees of certain of such remaining
leases in the event of a future default by the tenant under such
leases. Additionally, under U.S. pension law, the buyers of
certain of Tops stores assumed the pension withdrawal liability
associated with the underfunding of certain pension funds
and Tops remains secondarily liable in the event the buyer
defaults within five-plan years.
116 Ahold Annual Report 2006
