(c) The Executive will perform his duties diligently and competently and shall act inconformity with the Company’s written and oral policies and within the limits, budgets andbusiness plans set by the Board. The Executive will at all times during the Term adhere toand obey all of the rules and regulations in effect from time to time relating to theconduct of executives of the Company. Except as provided in (b) above, the Executive shallnot engage in consulting work or any trade or business for his own account or for or onbehalf of any other person, firm or company that competes, conflicts or interferes with theperformance of his duties hereunder in any way.     4. Place of Performance. In connection with the Executive’s employment by theCompany, the Executive shall be based at the Company’s offices in Chicago, Illinois, except forrequired travel on the Company’s business.     5. Compensation and Related Matters. As compensation and consideration for theperformance by the Executive of the Executive’s duties, responsibilities and covenants pursuant tothis Agreement, the Company agrees to pay the Executive and the Executive agrees to accept in fullpayment for such performance the amounts and benefits set forth below:     (a) Salary. Commencing as of the Effective Date, the Company shall pay to theExecutive an annual base salary (“Base Salary”) of two hundred twenty-five thousand dollars($225,000). Thereafter, the Board, or such committee of the Board as is responsible forsetting the compensation of senior executive officers, shall review the Executive’s BaseSalary annually in January of each year, in light of competitive data, the Company’sperformance, and the Executive’s performance, and determine whether to increase theExecutive’s Base Salary on a prospective basis. The first review shall be in January 2008.Such adjusted annual salary then shall become the Executive’s “Base Salary” for purposes ofthis Agreement. The Executive’s annual Base Salary shall not be reduced at any time,including after any increase, without the Executive’s consent. The Company shall pay theExecutive’s Base Salary according to payroll practices in effect for all senior executiveofficers of the Company.     (b) Annual Bonus. The Executive will be eligible for an annual cash bonus (the“Bonus”) in accordance with the provisions of the Company’s Salaried Bonus Plan (the “RONAPlan”), based on performance, and calculated as a percentage of the Executive’s Base Salary.Initially, the Executive will participate in the RONA Plan at the Group A, forty percent(40%) of Base Salary target level. In any plan adopted by the Company to replace thecurrent RONA Plan, the Executive’s participation will have a potential payout at least equalto his potential payout under the current RONA Plan. Notwithstanding anything in thisAgreement or the RONA Plan to the contrary, the Executive will participate in the RONA Planas if his employment with the Company began on January 1, 2007, such that any bonus that theExecutive may be entitled to under the RONA Plan for the year 2007 will not be prorated.     The Company shall pay the Executive’s Bonus, if any, according to the terms of the RONAPlan. The Company intends that the Bonus will be paid within 21/2 months of the close of theCompany’s fiscal year, but in no event later than the end of the Company’s first fiscalquarter. In the event that payments are not made within 21/2 months of the close of theCompany’s fiscal year, it is the Company’s intent that this
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Agreement be construed in a manner consistent with Section 409A of the Internal RevenueCode of 1986, as amended (the “Code”).     (c) Equity Compensation. On the Effective Date, the Company shall award theExecutive three thousand five hundred (3,500) shares of Restricted Stock in accordance withand subject to the terms of the FreightCar America, Inc. 2005 Long Term Incentive Plan (the“2005 LTIP”), vesting in three annual installments beginning on the first anniversary of theEffective Date, of 1166, 1167, and 1167 shares respectively. This Restricted Stock awardwould become fully vested upon a Change in Control. During the Term the Executive shall beeligible for future awards under the 2005 LTIP or any similar or successor plan, in the solediscretion of the Board.     (d) Other Benefits. The Executive shall be entitled to participate in orreceive benefits under any employee benefit plan, arrangement or perquisite made availableby the Company at any time during his employment hereunder to its executive employees(collectively the “Benefit Plans”), including without limitation each retirement, 401(k) andprofit sharing plan, group life insurance and accident plan, medical and dental insuranceplan, and disability plan, subject to and on a basis consistent with the terms, conditionsand overall administration of such plans and arrangements. The Company reserves the rightto make changes to any plan, arrangement or perquisite in which the Executive participates,including termination of any such plan or arrangement, in its sole discretion, if suchchanges do not result in a proportionately greater reduction in the rights of or benefits tothe Executive as compared with other executives of the Company or if such changes arerequired by law or are technical changes.     (e) Expenses. The Executive shall be entitled to receive an advance or promptreimbursement for all reasonable travel and entertainment expenses or other out-of-pocketbusiness expenses incurred by the Executive during the Term in fulfilling the Executive’sduties and responsibilities under this Agreement, including all expenses of travel andliving expenses while away from home on business or at the request and in the service of theCompany, provided that such expenses are incurred and accounted for in accordance with thepolicies and procedures established by the Company.     (f) Vacation. During his employment hereunder, the Executive shall be entitledto paid vacations in each calendar year, determined in accordance with the Company’svacation policy but not less than four weeks per year. The Executive shall also be entitledto all paid holidays and personal days given by the Company to its executive employees.     6. Termination. The Company, upon action by the Board, may terminate the Executive’semployment hereunder under the following circumstances:     (a) Death. The Executive’s employment hereunder shall terminate upon hisdeath.     (b) Disability. The Company may terminate the Executive’s employment hereunderin the event of the Executive’s Disability. For purposes of this Agreement, “Disability”shall mean, in the written opinion of a qualified physician selected by the
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Company, the Executive is, by reason of any medically determinable physical or mentalimpairment that can be expected to result in death or can be expected to last for acontinuous period of not less than 12 months, (i) unable to engage in any substantialgainful activity, or (ii) receiving income replacement benefits for a period of not lessthan 3 months under the Company’s disability plan.     (c) Cause. The Company may terminate the Executive’s employment hereunder forCause. For purposes of this Agreement, the Company shall have “Cause” to terminate theExecutive’s employment hereunder upon the Executive’s (i) willful and continued failuresubstantially to perform his material duties with Company (other than due to Disability), orthe commission of any activities constituting a material violation or material breach of anyfederal, state or local law or regulation applicable to the activities of Company, in eachcase, after notice thereof from the Board to the Executive and (where possible) a reasonableopportunity for the Executive to cease and cure such failure, breach or violation in allrespects, (ii) fraud, breach of fiduciary duty, dishonesty, misappropriation or other actthat causes material damage to the Company’s property or business, (iii) repeated absencesfrom work such that the Executive is unable to perform his employment or other duties in allmaterial respects, other than due to Disability or a condition that with the passage of timewould become a Disability, (iv) admission or conviction of, or plea of *nolo contendere*to,any crime that, in the reasonable judgment of the Board, adversely affects the Company’sreputation or the Executive’s ability to carry out the obligations of his employment, (v)failure to reasonably cooperate with the Company in any internal investigation oradministrative, regulatory or judicial proceeding, after notice thereof from the Board tothe Executive and a reasonable opportunity for the Executive to cure such non-cooperationor, (vi) act or omission by in violation or disregard of the Company’s policies, includingbut not limited to the harassment and discrimination policies and Standards of Conduct ofthe Company then in effect, in such a manner as to cause significant loss, damage or injuryto the property, reputation or employees of the Company. In addition, the Executive’semployment shall be deemed to have terminated for Cause if, after the Executive’s employmenthas terminated, facts and circumstances are discovered that would have justified atermination for Cause. For purposes of this Agreement, no act or failure to act on theExecutive’s part shall be considered “willful” unless it is done, or omitted to be done, byhim in bad faith or without reasonable belief that his action or omission was in the bestinterests of the Company. Any act or failure to act based upon authority given pursuant toa resolution duly adopted by the Board or based upon the advice of counsel for the Companyshall be conclusively presumed to be done, or omitted to be done, in good faith and in thebest interests of the Company.     7. Compensation Upon Termination, Death or During Disability.     (a) Termination for any Reason. If the Executive’s employment terminates forany reason, the Company shall pay to him (or his representative) (i) the Executive’s earnedbut unpaid Base Salary through the date of termination, (ii) any annual incentive planbonus, or other form of incentive compensation, for which the performance measurement periodhas ended and the payment amount earned, but which is unpaid at the time of termination,(iii) any accrued but unpaid vacation, (iv) any amounts payable
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under any of the Company’s employee benefit plans in accordance with the terms of thoseplans, except as may be required under Code Section 401(a)(13), and (v) unreimbursedbusiness expenses incurred by the Executive on the Company’s behalf under Section 5(e).     (b) Death or Disability. If the Executive’s employment is terminated due tohis death or Disability, the Company shall pay the Executive the benefits and amounts underSection 7(a), including life or long-term disability insurance benefits, and the Companyshall, thereafter, have no further obligations to the Executive under this Agreement.     (c) Cause or By Executive Other than for Good Reason. If the Executive’semployment is terminated by the Company for Cause or by the Executive for other than GoodReason, the Company shall pay the Executive the benefits and amounts under Section 7(a), andthe Company shall, thereafter, have no further obligations to the Executive under thisAgreement. For purposes of this Agreement, “Good Reason” shall mean, without theExecutive’s written consent, the occurrence of any of the following conditions: (i) a Changein Control pursuant to which the buyer does not either assume this Agreement or otherwiseagree to employ the Executive at or after the acquisition date on terms substantiallycomparable in the aggregate to this Agreement, or (ii) unless such condition is fullycorrected within 60 days after written notice thereof, the Company (A) permanently andmaterially diminishes the Executive’s authority, duties, or responsibilities, includingwithout limitation reporting responsibilities, (B) materially reduces the Executive’soverall compensation, including Base Salary, Bonus opportunity and equity awardparticipation, (C) requires the Executive to relocate his principal business office to alocation not within 50 miles of the Company’s principal business office located in theChicago, Illinois metropolitan area, or (D) materially breaches the terms of this Agreement.Notwithstanding anything in this Agreement to the contrary, a separation from service dueto Good Reason must occur, if at all, within 120 days after the Company receives writtennotice of any one or more of the conditions set forth in this Section 7(c). The Executivemust provide the Company with written notice of any one or more of the conditions set forthin this Section 7(c) within 90 days of the initial existence of the condition in order forsuch condition to constitute Good Reason under this Agreement.     For purposes of this Agreement, a “Change in Control” shall be deemed to have occurredif the conditions set forth in any one of the following paragraphs shall have beensatisfied:     (i) any Person is or becomes the Beneficial Owner, directly or indirectly, ofsecurities of the Company (not including any securities beneficially owned by suchPerson that were acquired directly from the Company or its affiliates) representingfifty percent (50%) or more of the combined voting power of the Company’s thenoutstanding securities; or     (ii) the shareholders of the Company approve a merger or consolidation of theCompany with any other corporation and such shareholder approval results inconsummation of said merger or consolidation, other than (A) a merger orconsolidation that would result in the voting securities of the
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Company outstanding immediately prior thereto continuing to represent (either byremaining outstanding or by being converted into voting securities of the survivingentity), in combination with the ownership of any trustee or other fiduciary holdingsecurities under an employee benefit plan of the Company, at least sixty percent(60%) of the combined voting power of the voting securities of the Company or suchsurviving entity outstanding immediately after such merger or consolidation, or (B)a merger or consolidation effected to implement a recapitalization of the Company(or similar transaction) in which no Person acquires more than fifty percent (50%)of the combined voting power of the Company’s then outstanding securities; or     (iii) the shareholders of the Company approve a plan of complete liquidation ofthe Company or an agreement for the sale or disposition by the Company of all orsubstantially all the Company’s assets and such shareholder approval results inconsummation of said liquidation, sale or disposition.     For purposes of this Agreement, “Beneficial Owner” shall have the meaningdefined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the“Exchange Act”). For purposes of this Agreement, “Person” shall have the meaninggiven in Section 3(a)(9) of the Exchange Act, as modified and used herein; however,a Person shall not include (A) the Company or any of its subsidiaries, (B) a trusteeor other fiduciary holding securities under an employee benefit plan of the Companyor any of its subsidiaries, (C) an underwriter temporarily holding securitiespursuant to an offering of such securities, or (D) a corporation owned, directly orindirectly, by the stockholders of the Company in substantially the same proportionsas their ownership of stock of the Company.     (d) By Company Without Cause or By Executive for Good Reason. If the Companyterminates the Executive’s employment without Cause, or the Executive terminates hisemployment for Good Reason, then the Company shall provide the following payments andbenefits, in addition to the payments and benefits under Section 7(a):     (i) The Company shall pay the Executive’s Base Salary for twelve (12) monthsfollowing the date of termination, provided that, if these payments must be delayedfor six months following the Executive’s termination due to the restrictions of CodeSection 409A(a)(2)(A)(i), the full amount of the missed/delayed payments shall bemade on the first day of the seventh calendar month following the month in which theExecutive’s employment terminates;     (ii) The Company shall make a payment to the Executive, equal to theExecutive’s target level Bonus under the RONA Plan, or any successor bonus plan, forthe year of termination, with the payment made on the first March 15 following theyear of the Executive’s termination, provided that if the payment must be delayedfor six months following the Executive’s termination due to the restrictions of CodeSection 409A(a)(2)(A)(i), the payment shall be made on the first day of the seventhcalendar month following the month in which the Executive’s employment terminates;
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     (iii) The Company shall make available continued participation in the Company’sgroup health benefit plan to the Executive, and such members of his family whoparticipated in the group health plan at the time of Executive’s termination, for aperiod of twelve (12) months at the same costs and coverage levels and under thesame general terms and provisions of such plan as apply to active employees afterthe Executive’s termination; and     (iv) No payments or benefits provided to the Executive hereunder shall bereduced by any amount the Executive may earn or receive from employment with anotheremployer or from any other source.     (e) The obligations of the Company to make payments and provide benefits under thisSection 7 shall survive the termination of this Agreement.     8. Restrictive Covenants     (a) Confidential Information. The Executive understands that the Companypossesses and will possess Confidential Information that is important to its business. TheCompany devotes significant financial, human and other resources to the development of itsproducts, its customer base and the general goodwill associated with its business and theCompany diligently maintains the secrecy and confidentiality of its ConfidentialInformation. For purposes of this Agreement, “Confidential Information” is information thatwas or will be developed, created, or discovered by or on behalf of the Company, or thatbecame or will become known by, or was or is conveyed to the Company, which has commercialvalue in the Company’s business. Confidential Information is sufficiently secret to deriveeconomic value from its not being generally known to other persons. ConfidentialInformation also includes any and all financial, technical, commercial or other informationconcerning the business and affairs of the Company that is confidential and proprietary tothe Company, including without limitation, (i) information relating to the Company’s pastand existing customers and vendors and development of prospective customers and vendors,including without limitation specific customer product requirements, pricing arrangements,payments terms, customer lists and other similar information; (ii) inventions, designs,methods, discoveries, works of authorship, creations, improvements or ideas developed orotherwise produced, acquired or used by the Company; (iii) the Company’s proprietaryprograms, processes or software, consisting of but not limited to, computer programs insource or object code and all related documentation and training materials, including allupgrades, updates, improvements, derivatives and modifications thereof and includingprograms and documentation in incomplete stages of design or research and development; (iv)the subject matter of the Company’s patents, design patents, copyrights, trade secrets,trademarks, service marks, trade names, trade dress, manuals, operating instructions,training materials, and other industrial property, including such information in incompletestages of design or research and development; and (v) other confidential and proprietaryinformation or documents relating to the Company’s products, business and marketing plansand techniques, sales and distribution networks and any other information or documents whichthe Company reasonably regards as being confidential.
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     The Executive understands that the Company possesses or will possess “CompanyMaterials” that are important to its business. For purposes of this Agreement, “CompanyMaterials” are documents or other media or tangible items that contain or embodyConfidential Information or any other information concerning the business, operations orfuture/strategic plans of the Company, whether such documents have been prepared by theExecutive or by others. In consideration of the Executive’s employment by the Company, thecompensation received by the Executive from the Company, and the Company’s agreement to givethe Executive access to certain Confidential Information, the Executive agrees as follows:     (i) All Confidential Information and trade secret rights, and otherintellectual property and rights (collectively “Rights”) in connection therewithwill be the sole property of the Company. At all times, both during the Executive’semployment by the Company and after its termination for any reason, the Executivewill keep in confidence and trust and will not use or disclose any ConfidentialInformation or anything relating to it without the prior written consent of a thencurrent officer of the Company except as may be necessary and appropriate in theordinary course of performing Executive’s duties to the Company.     (ii) All Company Materials will be the sole property of the Company. TheExecutive agrees that during the Executive’s employment by the Company, theExecutive will not remove any Company Materials from the business premises of theCompany or deliver any Company Materials to any person or entity outside theCompany, except as the Executive is required to do so in connection with performingthe duties of his employment. The Executive further agrees that, immediately uponthe termination of the Executive’s employment by the Executive or by the Company forany reason, or during the Executive’s employment if so requested by the Company, theExecutive will return all Company Materials, apparatus, equipment and other physicalproperty, or any reproduction of such property, excepting only the Executive’s copyof this Agreement.     (b) Noncompetition and Nonsolicitation. While employed by the Company and fora period of twelve (12) consecutive months thereafter, the Executive will not, directly orindirectly:     (i) Contact, solicit, interfere with, or divert, or induce or attempt tocontact, solicit, interfere with or divert, any of the Company’s customers;     (ii) Participate or engage in (as an owner, partner, employee, officer,director, independent contractor, consultant, advisor or in any other capacitycalling for the rendition of services, advice, or acts of management, operation orcontrol) any business engaged in the manufacture of railcars in North America; and
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     (iii) Solicit or induce or attempt to solicit or induce, by or for himself, oras the agent of another, or through others as an agent in any way, any person who isemployed by the Company for the purpose of encouraging that employee to join theExecutive as a partner, agent, employee or otherwise in any business activity whichis competitive with the Company.     (c) Forfeitures. In the event that the Executive materially breaches any ofthe restrictions in this Section 8, he shall forfeit all of the applicable payments andbenefits under this Agreement, including but not limited to such payments and benefitspursuant to Section 7, and the Company shall have the right to recapture and seek repaymentof any such applicable payments and benefits under this Agreement.     (d) Intellectual Property. “Inventions” includes all improvements, inventions,designs, formulas, works of authorship, trade secrets, technology, computer programs,compositions, ideas, processes, techniques, know-how and data, whether or not patentable,made or conceived or reduced to practice or developed by the Executive, either alone orjointly with others, during the term of the Executive’s employment, including during anyperiod prior to the date of this Agreement. Except as defined in this Agreement, allInventions that the Executive makes, conceives, reduces to practice or develops (in whole orin part, either alone or jointly with others) during his employment will be the soleproperty of the Company to the maximum extent permitted by law. The Executive agrees toassign such Inventions and all Rights in them to the Company. Exemptions from thisagreement to assign may be authorized in those circumstances where the mission of theCompany is better served by such action, provided that overriding obligations to otherparties are met and such exemptions are not inconsistent with other Company policies.Further, the Executive may petition the Company for license to make, market or sell aparticular Invention.     (e) Injunction. The Executive acknowledges that monetary damages will not bean adequate remedy for the Company in the event of a breach of this Section 8, and that itwould be impossible for the Company to measure damages in the event of such a breach.Therefore, the Executive agrees that, in addition to other rights and remedies that theCompany may have, the Company is entitled to an injunction preventing the Executive from anybreach of this Section 8, and the Executive hereby waives any requirement that the Companypost any bond in connection with any such injunction. The Executive further agrees thatinjunctive relief is reasonable and necessary to protect a legitimate, protectible interestof the Company.     (f) Blue Pencil. If any court determines that the covenants contained in thisSection 8, or any part hereof, are unenforceable because of the duration or geographic scopeof such provision, such court shall have the power to reduce the duration or scope of suchprovision, as the case may be, to as close to the terms hereof as shall be enforceable and,in its reduced form, such provision shall then be enforceable.     (g) Survival. The restrictive covenants contained in this Section 8 shallsurvive the termination of this Agreement.
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     9. Miscellaneous.     (a) Representations of the Executive. The Executive represents and warrants tothe Company that this Agreement when executed by the Executive will not conflict with anyother agreement or obligation of the Executive and that the Executive is not bound by anyagreement with any third party which would prohibit the Executive from his involvement withthe Company or result in any liability to the Executive or to the Company.     (b) Binding Agreement. This Agreement and all rights of the Executivehereunder shall inure to the benefit of and be enforceable by the Executive’s personal orlegal representatives, executors, administrators, successors, heirs, distributees, deviseesand legatees. If the Executive should die while any amounts would still be payable to himhereunder if he had continued to live, all such amounts, unless otherwise provided herein,shall be paid in accordance with the terms of this Agreement to the Executive’s devisee,legatee, or other designee or, if there be no such designee, to the Executive’s estate.     (c) Notice. Notices, demands and all other communications provided for in thisAgreement shall be in writing and shall be deemed to have been duly given when delivered, ifdelivered personally, or (unless otherwise specified) mailed by United States certified orregistered mail, return receipt requested, postage prepaid, and when received if deliveredotherwise, addressed as follows:If to the Executive:Thomas McCarthy