34 Commitments and contingencies (continued)
Ahold Annual Report 2012 138
Ahold at a glance
Our strategy
Our performance
Governance
Financials
Investors
Notes to the consolidated
financial statements
U.S. Foodservice
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 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. See also below.
Tops Markets, LLC
In connection with the sale of Tops in 2007, Ahold has certain post-closing indemnification obligations under the sale agreement (the 2007 Tops Sale Agreement) that Ahold believes are
customary for transactions of this nature. Ahold retained certain liabilities in the sale, including contingent liability for 47 leases that carry Ahold guarantees. Additionally, Ahold retained liabilities
related to stores previously sold, including guarantees on five Tops stores in eastern New York state, 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. Ahold may also be contingently liable to landlords under the guarantees of 71 such leases in the event of a future default by
the tenant under these leases.
Tops northeast Ohio stores
Tops closed all of its locations in northeast Ohio prior to year-end 2006. As of January 12013, 34 of the total 55 closed locations in northeast Ohio have been sold, subleased or partially
subleased. An additional 15 leases have been terminated or have terms due to expire within one year. Six 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 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.
In January 2011, Tops Holdings, LLC, an Ahold subsidiary, was notified that a mass withdrawal had occurred under the International Brotherhood of Teamsters Local 400 Food Terminal
Employees' Pension Plan, which covered workers of a warehouse in northeast Ohio previously owned by Tops Markets LLC and divested to Erie Logistics, LLC in 2002. This warehouse was
closed in 2006 in connection with the closing of the Tops stores in northeast Ohio. Ahold earlier assessed that Tops Markets, LLC might have contractual liability to Erie Logistics, LLC for this
mass withdrawal liability and, pursuant to the 2007 Tops Sale Agreement, Tops Holdings, LLC might have also indemnified Tops Markets, LLC for this liability. Based on Ahold's assessment of
this potential loss contingency, at year end 2010 Ahold recognized a provision of $27 million (€20 million) relating to this potential liability. In 2012, this matter has been resolved and a
payment in the amount of $21 million (€1 7 million) was made to the fund in full and final settlement of all claims.
Other contingent liabilities
ICA tax claims
The Swedish Tax Authority decided in 2008 to disallow deductions related to intra-Group interest payments during 2004-2008. After an appeal to the County Administrative Court, the
Administrative Court of Appeal announced its final ruling in the Tax Authority's favor in October 2012. ICA recognized a tax expense of SEK 1.3 billion (€150 million) in 2012 in accordance
with the ruling. Ahold's share is €90 million and is reflected in share in income of joint ventures.
