Capital Restructuring of Faiveley Transport and Faiveley SA

Regulatory News:

Faiveley SA (Paris:LEY), Sagard, and the other direct and indirect shareholders of Faiveley Transport today signed agreements relating to their respective holdings in the capital of Faiveley Transport.

These agreements provide for the transfer and sale to Faiveley SA of all shares in Faiveley Transport (shares and warrants) not currently held by Faiveley SA, in exchange for 286.5 million euros in cash and 2,111,000 new shares in Faiveley SA. Specifically:

• for the holdings of venture capital mutual funds (fonds communs de placement à risques) managed by Sagard (referred to hereinafter as "Sagard"), payment of the sum of 229.0 million euros and issuance of 1,400,000 new shares in Faiveley SA ¹, and
• for the holdings of the other direct and indirect shareholders in Faiveley Transport, including mainly 46 directors and officers of the Faiveley group located in the investment structures of Faiveley Management SAS and Faiveley M2 SAS, payment of the sum of 51.6 million euros (plus the assumption of 5.8 million euros in debt) and issuance of 711,000 new shares in Faiveley SA. The shares contributed by the directors and officers of the Faiveley group will represent more than 40% of the value of their investment in Faiveley Transport, and the shares of Faiveley SA they receive in exchange will be covered by lock-up agreements with a duration of two to three years.

These transactions will take place during the concerted liquidity period provided for in the agreements signed at the time of Sagard’s entry in the capital de Faiveley Transport. ²

Faiveley SA currently holds 61.7% of the share capital and voting rights of Faiveley Transport, and its share capital and voting rights are distributed as follows:

At the conclusion of these transactions of sale and transfer, Faiveley SA will hold all of the share capital and voting rights of Faiveley Transport, and its capital will be distributed as follows:

Provision has also been made for the establishment of a stock ownership plan for the directors and officers of the Faiveley group through the granting of stock options or bonus shares. This plan will result in the attribution in each of the next four years of stock options on roughly 1% of the share capital of Faiveley SA or bonus shares on the order of 0.4% of share capital. ³

Credit lines totalling 407 million euros and 50 million dollars, which will be used to reimburse the existing debt of the Faiveley group and to finance the acquisition of shares in Faiveley Transport, will be made available by a banking syndicate composed of nine banks.⁴ In addition to these fixed credit lines, a revolving credit of 49 million euros will be available to cover the general needs of the group. Faiveley SA has obtained a firm commitment from the members of the syndicate covering the entire amount of these fixed credit lines and of the revolving credit. This commitment is subject to the usual conditions for this type of financing.⁵

The transactions relating to the acquisition and to the contribution of shares in Faiveley Transport will take place during the second half of December 2008, immediately after the General Meeting which will be called to approve the contributions and their compensation.⁶ The execution of these transactions will be subject to the drawing of bank financing as well as to certain additional suspensive conditions (including the registration by the Autorité des Marchés Financiers of document E describing the transactions leading to the issuance of new shares in Faiveley SA).

The shareholder agreements concerning Faiveley Transport will terminate ipso jure upon Faiveley SA’s acquisition of all of the capital of its subsidiary.

Dominique Ledouble and Didier Faury have been designated by order of the Tribunal de Commerce of Bobigny as auditors for the capital contributions and the merger for all of the transactions. They will be responsible for assessing the valuation of the contributions in kind and for pronouncing on the compensation in Faiveley SA shares.

Faiveley SA’s acquisition of all of the share capital of its Faiveley Transport subsidiary should also result in:

• a simplification in holding structures, with Faiveley Transport being merged into Faiveley SA (which will be renamed Faiveley Transport) by 31 March 2009;
• maintenance of family control of the Faiveley group;
• a significant investment on the part of the management team in Faiveley SA, representing nearly 5% of its capital; and
• optimal use of the capital of the Faiveley group through the use of debt.

Analyst presentation: The presentation which will be made to "sell-side” analysts is available on the website of Faiveley SA: www.faiveley.com

Next event: Publication of consolidated third quarter 2008 sales on 22 October 2008 (after stock market closing).

FAIVELEY, A WORLD LEADER IN THE RAILWAY INDUSTRY

About Faiveley SA

The Faiveley Group is one of the world’s leading suppliers of high-technology railway systems and services, offering a wide range of products in eight business lines: air conditioning, electro-mechanics, platform doors, platform gates, on-board electronics, braking systems, couplers, and customer services.

Profiting from a booming international market, Faiveley is using its industrial and commercial power on a global level to strengthen its position with major rail builders and operators.

¹ Sagard will have the right, upon request made no later than two days before the General Meeting called to approve the capital contributions, to increase the cash portion to 239.2 million euros and reduce the portion in shares to 1,170,000 new shares in Faiveley SA.

² See Faiveley SA press release of 16 November 2004.

³ The stock ownership plan will be subject each year to authorisation by the General Shareholders Meeting. Faiveley SA plans to comply with the recommendations on compensation for directors and officers published in October 2008 by AFEP and MEDEF.

⁴ These credit lines require the Faiveley group to satisfy covenants that set ceilings on the ratio of financial debt to EBITDA and the ratio of financial debt to capital. These ceilings are set at 3.5 and 1.8 respectively for 31 March 2009, and decrease over the life of the credits.

⁵ Including a condition which conditions the extension of financing on the absence of a material adverse change affecting the national or international market for loans that is likely to prevent lenders from extending credit lines.

⁶ François Faiveley Participations, the holding company of the Faiveley family and controlling shareholder of Faiveley SA, committed for Sagard to vote in the General Meetings for the resolutions necessary to carry out these operations.