Notes to the consolidated financial statements
33 Commitments and contingencies continued
U.S. Foodservice
31 www.ahold.com/reports2008
Financial statements
AHOLD ANNUAL REPORT 2008 104
In connection with the sale of U.S. Foodservice, which closed on July 3, 2007 (the "Completion"), Ahold indemnified U.S. Foodservice
against damages incurred after the Completion relating to matters including (i) the putative class actions filed in 2006 and 2007
and referred to below under "Waterbury litigation" and any actions that might be brought by any current or former U.S. Foodservice
customers that concern the pricing practices at issue in such litigation for sales made by U.S. Foodservice prior to the Completion
and (ii) the investigation commenced by the Civil Division of the U.S. Department of Justice into U.S. Foodservice's pricing practices
for sales made to the U.S. Government prior to the Completion. These investigations are described below.
Tops Markets, LLC
In connection with the sale of Tops in 2007, Ahold has certain post-closing indemnification obligations under the sale agreement
which Ahold believes are customary for transactions of this nature. Ahold retained certain liabilities in the sale, including contingent
liability for 54 leases which carry Ahold guarantees. Additionally, Ahold retained liabilities related to stores previously sold, including
guarantees on five Tops stores in Eastern New York, as well as liabilities related to the Tops convenience stores and the stores in
northeast Ohio as outlined below.
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 73 of such leases in the event of a future default by the tenant
under such leases.
Tops northeast Ohio stores
Tops closed all of its locations in northeast Ohio prior to year-end 2007. As of January 31, 2009, 30 of the total 55 closed locations
in northeast Ohio have been sold or subleased. An additional 11 leases have been terminated. 14 stores continue to be marketed.
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, Ahold may be contingently liable 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 Ahold
is able to assign the leases for the remaining northeast Ohio stores, then pursuant to applicable law, Ahold also 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 years
as described in the relevant pension plan.
Schuitema
In connection with the sale of Ahold's interest in Schuitema, Ahold has only given very limited guarantees. In addition, Albert Heijn
B.V. has acquired certain C1000 stores through a share purchase agreement. Effectively, Albert Heijn has acquired the shares
of approximately 12 newly established companies, in which the relevant assets, being stores and real estate, had been split off
from Schuitema.
Other contingent liabilities
ICA tax claims
The Swedish tax authorities have denied interest deductions made by ICA for interest on borrowings from an Irish subsidiary
of nearly SEK 1.8 billion (EUR 164 million) for the period 2001-2003. The Swedish tax authorities' claim amounts to
SEK 742 million (EUR 68 million), including penalties and interest. The Irish subsidiary's operations were wound up in 2003.
The County Administrative Court confirmed the tax authorities' decision in December 2008. In January 2009, the Swedish Tax
Agency announced that it would not allow ICA to delay the payment of this claim. ICA believes that the deductions were in
compliance with tax rules and is contesting the claim and penalties and has appealed the Court's ruling to the Administrative
Court of Appeal. ICA has paid the disputed amount in February 2009 and recorded a receivable for the paid amount.
In a separate case, the Swedish tax authorities have also denied interest deductions made by ICA for payments of interest to
a Dutch subsidiary for the period 2004-2007. The tax authorities' claim amounts to SEK 1.1 billion (EUR 98 million), including
penalties and interest. ICA believes that the deductions were in compliance with tax rules. ICA is contesting the claim and penalties
and has appealed the ruling to the County Administrative Court.
