NOTE 24. COMMITMENTS AND CONTINGENCIES (CONT ’ D) 

## Claims 

## a) Adtranz 

Effective May 1, 2001, the Corporation acquired from DaimlerChrysler AG of Stuttgart, Germany (DaimlerChrysler) all of the common shares of its subsidiary Adtranz. Pursuant to the terms of the SPA, a purchase price of $725 million US ($1.1 billion) was agreed upon. The SPA also contemplates an adjustment to the purchase price for a maximum of € 150 million based on the carrying value of the adjusted net assets acquired, established under U.S. GAAP, as at April 30, 2001 (Net Asset Amount), provided that the minimum Net Asset Amount was delivered on the closing date. 

Starting in May 2001, Adtranz, under the ownership of the Corporation, prepared its April 30, 2001 closing balance sheet under U.S. GAAP, in accordance with the provisions of the SPA for the purpose of establishing the Net Asset Amount. The resulting Net Asset Amount did not meet the minimum value contemplated in the SPA due to significant adjustments pertaining to the application of U.S. GAAP and to unrecorded costs required to complete contracts with third parties. 

The Corporation announced on February 14, 2002 that discussions with DaimlerChrysler had failed to result in an agreement as to the value of the Net Asset Amount delivered at closing. In July 2002, the Corporation filed a request for arbitration with the International Chamber of Commerce in Paris. 

Under the SPA, DaimlerChrysler made contractual representations and guarantees to the Corporation, including a written confirmation that the minimum Net Asset Amount was met on the closing date of April 30, 2001. The Corporation’s claim for damages is largely based on material breaches of contractual representations and guarantees, including a significant deficiency in the value of the Net Asset Amount. The Corporation’s claim under the request for arbitration is for an amount of € 960 million ($1,542 million) plus interest and costs, and its resolution will result in a reduction of goodwill, $206 million ( € 150 million) of which was recorded during the year ended January 31, 2002. 

## b) Amtrak 

On November 8, 2001, the Corporation filed a claim against Amtrak in the United States District Court for the District of Columbia. The claim sought damages in excess of $200 million US ($265 million) as compensation for additional costs incurred in relation to the Acela high-speed trainset and locomotive contracts, including costs incurred as a result of Amtrak’s failure to upgrade its infrastructure to accommodate the new equipment. 

On November 20, 2002, Amtrak filed a counterclaim against the Corporation and a claim against Alstom Transport Inc., alleging damages in excess of $200 million US ($265 million). 

As a result of mediation and negotiations, the Corporation and Alstom Transport Inc. reached a settlement agreement with Amtrak on March 16, 2004. The settlement agreement provides for total payments of $42.5 million US ($56 million) by Amtrak to the Corporation and Alstom Transport Inc., $32.8 million US ($44 million) of which will be paid to the Corporation. The other main components of the agreement are: 

i) With respect to trainsets, locomotives and facilities: 

- For each type of equipment, a detailed list of items required to be completed by the consortium to obtain a Certificate of Acceptance; 

- Extension of the general warranty of the trainsets until October 1, 2006; and 

- Warranty on all modifications to be done on trainsets and/or locomotives until October 1, 2006. 

ii) With respect to management services: 

- The joint venture formed by the Corporation and Alstom Transport Inc. will continue to perform the maintenance of the fleet until October 1, 2006, at which time the maintenance of the fleet will be taken over by Amtrak; and 

- Additional training provided to Amtrak to ensure that it will be able to take over on October 1, 2006. 

A charge of $139 million related to this settlement was recorded in cost of sales for the year ended January 31, 2004. 

## c) Other litigations 

The Corporation is a defendant in certain legal cases currently pending before various courts in relation to product liability and contract disputes with customers and other third parties. 

The Corporation intends to vigorously defend its position in these matters. Management believes the Corporation has set up adequate provisions to cover potential losses and amounts not recoverable under insurance coverage, if any, in relation to these legal actions. 

