Document:

exv10w2

Exhibit 10.2

EMPLOYMENT AGREEMENT

     THIS AGREEMENT (the “Agreement”) is entered into by and between FreightCar America, Inc., a
Delaware corporation (the “Company”), and Thomas McCarthy (the “Executive”), effective as of the
date set forth by the Executive on the signature page hereof (the “Effective Date”).

     WHEREAS, the Executive and the Company have reached agreement concerning the terms and
conditions of his employment and wish to formalize that agreement;

     NOW, THEREFORE, in consideration of the mutual terms, covenants and conditions stated in this
Agreement, the Executive and the Company agree as follows:

     1. Employment, Position and Duties. The Company shall employ the Executive, and the
Executive hereby agrees to serve the Company, as its Senior Vice President, Human Resources, and
the Executive shall have such responsibilities, duties and authority as are customarily associated
with such office. The Executive also hereby agrees to serve as an officer of such of the Company’s
subsidiaries (if any) as the Company’s Chief Executive Officer shall reasonably request.

     2. Term. The employment of the Executive by the Company pursuant to this Agreement
will commence as of the Effective Date and will terminate three (3) years thereafter; provided,
however, that this Agreement shall remain in effect from year to year thereafter unless, not less
than ninety (90) days prior to the then termination of the term of this Agreement, either the
Executive or the Company shall deliver to the other written notice of his or its intention not to
continue in effect this Agreement, in which case this Agreement shall terminate as of December 31
of the year in which such notice is given (the “Term”); and provided further that, if a Change in
Control (as defined below) shall have occurred during the Term, this Agreement shall continue in
effect and the Term shall be extended until at least the second anniversary of such Change in
Control.

     3. Duties. During the Term:

     (a) The Executive shall report to the Company’s Chief Executive Officer.

     (b) The Executive will devote substantially all his full working time and best efforts,
talents, knowledge and experience to serving the Company. However, the Executive may devote
reasonable working time to activities such as supervision of personal investments and
activities involving professional, charitable, educational, religious and similar types of
activities, speaking engagements and membership on other boards of directors, provided that
such activities do not interfere in any substantial way with the business of the Company;
and provided further, that the Executive may not serve on the board of directors of any
other for-profit company without the prior written approval of the Board or of a Board
committee to which such approval shall have been delegated. The time involved in such
activities shall not be treated as vacation time. The Executive shall be entitled to keep
any amounts paid to him in connection with such activities (e.g., director fees and
honoraria).

 

 

     (c) The Executive will perform his duties diligently and competently and shall act in
conformity with the Company’s written and oral policies and within the limits, budgets and
business plans set by the Board. The Executive will at all times during the Term adhere to
and obey all of the rules and regulations in effect from time to time relating to the
conduct of executives of the Company. Except as provided in (b) above, the Executive shall
not engage in consulting work or any trade or business for his own account or for or on
behalf of any other person, firm or company that competes, conflicts or interferes with the
performance of his duties hereunder in any way.

     4. Place of Performance. In connection with the Executive’s employment by the
Company, the Executive shall be based at the Company’s offices in Chicago, Illinois, except for
required travel on the Company’s business.

     5. Compensation and Related Matters. As compensation and consideration for the
performance by the Executive of the Executive’s duties, responsibilities and covenants pursuant to
this Agreement, the Company agrees to pay the Executive and the Executive agrees to accept in full
payment for such performance the amounts and benefits set forth below:

     (a) Salary. Commencing as of the Effective Date, the Company shall pay to the
Executive 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 for
setting the compensation of senior executive officers, shall review the Executive’s Base
Salary annually in January of each year, in light of competitive data, the Company’s
performance, and the Executive’s performance, and determine whether to increase the
Executive’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 of
this 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 the
Executive’s Base Salary according to payroll practices in effect for all senior executive
officers 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 “RONA
Plan”), 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 the
current RONA Plan, the Executive’s participation will have a potential payout at least equal
to his potential payout under the current RONA Plan. Notwithstanding anything in this
Agreement or the RONA Plan to the contrary, the Executive will participate in the RONA Plan
as if his employment with the Company began on January 1, 2007, such that any bonus that the
Executive 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 RONA
Plan. The Company intends that the Bonus will be paid within 21/2 months of the close of the
Company’s fiscal year, but in no event later than the end of the Company’s first fiscal
quarter. In the event that payments are not made within 21/2 months of the close of the
Company’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 Revenue
Code of 1986, as amended (the “Code”).

     (c) Equity Compensation. On the Effective Date, the Company shall award the
Executive three thousand five hundred (3,500) shares of Restricted Stock in accordance with
and 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 the
Effective Date, of 1166, 1167, and 1167 shares respectively. This Restricted Stock award
would become fully vested upon a Change in Control. During the Term the Executive shall be
eligible for future awards under the 2005 LTIP or any similar or successor plan, in the sole
discretion of the Board.

     (d) Other Benefits. The Executive shall be entitled to participate in or
receive benefits under any employee benefit plan, arrangement or perquisite made available
by the Company at any time during his employment hereunder to its executive employees
(collectively the “Benefit Plans”), including without limitation each retirement, 401(k) and
profit sharing plan, group life insurance and accident plan, medical and dental insurance
plan, and disability plan, subject to and on a basis consistent with the terms, conditions
and overall administration of such plans and arrangements. The Company reserves the right
to 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 such
changes do not result in a proportionately greater reduction in the rights of or benefits to
the Executive as compared with other executives of the Company or if such changes are
required by law or are technical changes.

     (e) Expenses. The Executive shall be entitled to receive an advance or prompt
reimbursement for all reasonable travel and entertainment expenses or other out-of-pocket
business expenses incurred by the Executive during the Term in fulfilling the Executive’s
duties and responsibilities under this Agreement, including all expenses of travel and
living expenses while away from home on business or at the request and in the service of the
Company, provided that such expenses are incurred and accounted for in accordance with the
policies and procedures established by the Company.

     (f) Vacation. During his employment hereunder, the Executive shall be entitled
to paid vacations in each calendar year, determined in accordance with the Company’s
vacation policy but not less than four weeks per year. The Executive shall also be entitled
to 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’s
employment hereunder under the following circumstances:

     (a) Death. The Executive’s employment hereunder shall terminate upon his
death.

     (b) Disability. The Company may terminate the Executive’s employment hereunder
in 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 mental
impairment that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, (i) unable to engage in any substantial
gainful activity, or (ii) receiving income replacement benefits for a period of not less
than 3 months under the Company’s disability plan.

     (c) Cause. The Company may terminate the Executive’s employment hereunder for
Cause. For purposes of this Agreement, the Company shall have “Cause” to terminate the
Executive’s employment hereunder upon the Executive’s (i) willful and continued failure
substantially to perform his material duties with Company (other than due to Disability), or
the commission of any activities constituting a material violation or material breach of any
federal, state or local law or regulation applicable to the activities of Company, in each
case, after notice thereof from the Board to the Executive and (where possible) a reasonable
opportunity for the Executive to cease and cure such failure, breach or violation in all
respects, (ii) fraud, breach of fiduciary duty, dishonesty, misappropriation or other act
that causes material damage to the Company’s property or business, (iii) repeated absences
from work such that the Executive is unable to perform his employment or other duties in all
material respects, other than due to Disability or a condition that with the passage of time
would 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’s
reputation 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 or
administrative, regulatory or judicial proceeding, after notice thereof from the Board to
the Executive and a reasonable opportunity for the Executive to cure such non-cooperation
or, (vi) act or omission by in violation or disregard of the Company’s policies, including
but not limited to the harassment and discrimination policies and Standards of Conduct of
the Company then in effect, in such a manner as to cause significant loss, damage or injury
to the property, reputation or employees of the Company. In addition, the Executive’s
employment shall be deemed to have terminated for Cause if, after the Executive’s employment
has terminated, facts and circumstances are discovered that would have justified a
termination for Cause. For purposes of this Agreement, no act or failure to act on the
Executive’s part shall be considered “willful” unless it is done, or omitted to be done, by
him in bad faith or without reasonable belief that his action or omission was in the best
interests of the Company. Any act or failure to act based upon authority given pursuant to
a resolution duly adopted by the Board or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, in good faith and in the
best interests of the Company.

     7. Compensation Upon Termination, Death or During Disability.

     (a) Termination for any Reason. If the Executive’s employment terminates for
any reason, the Company shall pay to him (or his representative) (i) the Executive’s earned
but unpaid Base Salary through the date of termination, (ii) any annual incentive plan
bonus, or other form of incentive compensation, for which the performance measurement period
has 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 those
plans, except as may be required under Code Section 401(a)(13), and (v) unreimbursed
business 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 to
his death or Disability, the Company shall pay the Executive the benefits and amounts under
Section 7(a), including life or long-term disability insurance benefits, and the Company
shall, thereafter, have no further obligations to the Executive under this Agreement.

     (c) Cause or By Executive Other than for Good Reason. If the Executive’s
employment is terminated by the Company for Cause or by the Executive for other than Good
Reason, the Company shall pay the Executive the benefits and amounts under Section 7(a), and
the Company shall, thereafter, have no further obligations to the Executive under this
Agreement. For purposes of this Agreement, “Good Reason” shall mean, without the
Executive’s written consent, the occurrence of any of the following conditions: (i) a Change
in Control pursuant to which the buyer does not either assume this Agreement or otherwise
agree to employ the Executive at or after the acquisition date on terms substantially
comparable in the aggregate to this Agreement, or (ii) unless such condition is fully
corrected within 60 days after written notice thereof, the Company (A) permanently and
materially diminishes the Executive’s authority, duties, or responsibilities, including
without limitation reporting responsibilities, (B) materially reduces the Executive’s
overall compensation, including Base Salary, Bonus opportunity and equity award
participation, (C) requires the Executive to relocate his principal business office to a
location not within 50 miles of the Company’s principal business office located in the
Chicago, Illinois metropolitan area, or (D) materially breaches the terms of this Agreement.
Notwithstanding anything in this Agreement to the contrary, a separation from service due
to Good Reason must occur, if at all, within 120 days after the Company receives written
notice of any one or more of the conditions set forth in this Section 7(c). The Executive
must provide the Company with written notice of any one or more of the conditions set forth
in this Section 7(c) within 90 days of the initial existence of the condition in order for
such condition to constitute Good Reason under this Agreement.

     For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have been
satisfied:

     (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including any securities beneficially owned by such
Person that were acquired directly from the Company or its affiliates) representing
fifty percent (50%) or more of the combined voting power of the Company’s then
outstanding securities; or

     (ii) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation and such shareholder approval results in
consummation of said merger or consolidation, other than (A) a merger or
consolidation that would result in the voting securities of the

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Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary holding
securities 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 such
surviving 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 of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company’s assets and such shareholder approval results in
consummation of said liquidation, sale or disposition.

     For purposes of this Agreement, “Beneficial Owner” shall have the meaning
defined 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 meaning
given 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 trustee
or other fiduciary holding securities under an employee benefit plan of the Company
or any of its subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (D) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company.

     (d) By Company Without Cause or By Executive for Good Reason. If the Company
terminates the Executive’s employment without Cause, or the Executive terminates his
employment for Good Reason, then the Company shall provide the following payments and
benefits, in addition to the payments and benefits under Section 7(a):

     (i) The Company shall pay the Executive’s Base Salary for twelve (12) months
following the date of termination, provided that, if these payments must be delayed
for six months following the Executive’s termination due to the restrictions of Code
Section 409A(a)(2)(A)(i), the full amount of the missed/delayed payments shall be
made on the first day of the seventh calendar month following the month in which the
Executive’s employment terminates;

     (ii) The Company shall make a payment to the Executive, equal to the
Executive’s target level Bonus under the RONA Plan, or any successor bonus plan, for
the year of termination, with the payment made on the first March 15 following the
year of the Executive’s termination, provided that if the payment must be delayed
for six months following the Executive’s termination due to the restrictions of Code
Section 409A(a)(2)(A)(i), the payment shall be made on the first day of the seventh
calendar 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’s
group health benefit plan to the Executive, and such members of his family who
participated in the group health plan at the time of Executive’s termination, for a
period of twelve (12) months at the same costs and coverage levels and under the
same general terms and provisions of such plan as apply to active employees after
the Executive’s termination; and

     (iv) No payments or benefits provided to the Executive hereunder shall be
reduced by any amount the Executive may earn or receive from employment with another
employer or from any other source.

     (e) The obligations of the Company to make payments and provide benefits under this
Section 7 shall survive the termination of this Agreement.

     8. Restrictive Covenants

     (a) Confidential Information. The Executive understands that the Company
possesses and will possess Confidential Information that is important to its business. The
Company devotes significant financial, human and other resources to the development of its
products, its customer base and the general goodwill associated with its business and the
Company diligently maintains the secrecy and confidentiality of its Confidential
Information. For purposes of this Agreement, “Confidential Information” is information that
was or will be developed, created, or discovered by or on behalf of the Company, or that
became or will become known by, or was or is conveyed to the Company, which has commercial
value in the Company’s business. Confidential Information is sufficiently secret to derive
economic value from its not being generally known to other persons. Confidential
Information also includes any and all financial, technical, commercial or other information
concerning the business and affairs of the Company that is confidential and proprietary to
the Company, including without limitation, (i) information relating to the Company’s past
and 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 or
otherwise produced, acquired or used by the Company; (iii) the Company’s proprietary
programs, processes or software, consisting of but not limited to, computer programs in
source or object code and all related documentation and training materials, including all
upgrades, updates, improvements, derivatives and modifications thereof and including
programs 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 incomplete
stages of design or research and development; and (v) other confidential and proprietary
information or documents relating to the Company’s products, business and marketing plans
and techniques, sales and distribution networks and any other information or documents which
the Company reasonably regards as being confidential.

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     The Executive understands that the Company possesses or will possess “Company
Materials” that are important to its business. For purposes of this Agreement, “Company
Materials” are documents or other media or tangible items that contain or embody
Confidential Information or any other information concerning the business, operations or
future/strategic plans of the Company, whether such documents have been prepared by the
Executive or by others. In consideration of the Executive’s employment by the Company, the
compensation received by the Executive from the Company, and the Company’s agreement to give
the Executive access to certain Confidential Information, the Executive agrees as follows:

     (i) All Confidential Information and trade secret rights, and other
intellectual property and rights (collectively “Rights”) in connection therewith
will be the sole property of the Company. At all times, both during the Executive’s
employment by the Company and after its termination for any reason, the Executive
will keep in confidence and trust and will not use or disclose any Confidential
Information or anything relating to it without the prior written consent of a then
current officer of the Company except as may be necessary and appropriate in the
ordinary course of performing Executive’s duties to the Company.

     (ii) All Company Materials will be the sole property of the Company. The
Executive agrees that during the Executive’s employment by the Company, the
Executive will not remove any Company Materials from the business premises of the
Company or deliver any Company Materials to any person or entity outside the
Company, except as the Executive is required to do so in connection with performing
the duties of his employment. The Executive further agrees that, immediately upon
the termination of the Executive’s employment by the Executive or by the Company for
any reason, or during the Executive’s employment if so requested by the Company, the
Executive will return all Company Materials, apparatus, equipment and other physical
property, or any reproduction of such property, excepting only the Executive’s copy
of this Agreement.

     (b) Noncompetition and Nonsolicitation. While employed by the Company and for
a period of twelve (12) consecutive months thereafter, the Executive will not, directly or
indirectly:

     (i) Contact, solicit, interfere with, or divert, or induce or attempt to
contact, 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 capacity
calling for the rendition of services, advice, or acts of management, operation or
control) 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, or
as the agent of another, or through others as an agent in any way, any person who is
employed by the Company for the purpose of encouraging that employee to join the
Executive as a partner, agent, employee or otherwise in any business activity which
is competitive with the Company.

     (c) Forfeitures. In the event that the Executive materially breaches any of
the restrictions in this Section 8, he shall forfeit all of the applicable payments and
benefits under this Agreement, including but not limited to such payments and benefits
pursuant to Section 7, and the Company shall have the right to recapture and seek repayment
of 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 or
jointly with others, during the term of the Executive’s employment, including during any
period prior to the date of this Agreement. Except as defined in this Agreement, all
Inventions that the Executive makes, conceives, reduces to practice or develops (in whole or
in part, either alone or jointly with others) during his employment will be the sole
property of the Company to the maximum extent permitted by law. The Executive agrees to
assign such Inventions and all Rights in them to the Company. Exemptions from this
agreement to assign may be authorized in those circumstances where the mission of the
Company is better served by such action, provided that overriding obligations to other
parties 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 a
particular Invention.

     (e) Injunction. The Executive acknowledges that monetary damages will not be
an adequate remedy for the Company in the event of a breach of this Section 8, and that it
would 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 the
Company may have, the Company is entitled to an injunction preventing the Executive from any
breach of this Section 8, and the Executive hereby waives any requirement that the Company
post any bond in connection with any such injunction. The Executive further agrees that
injunctive relief is reasonable and necessary to protect a legitimate, protectible interest
of the Company.

     (f) Blue Pencil. If any court determines that the covenants contained in this
Section 8, or any part hereof, are unenforceable because of the duration or geographic scope
of such provision, such court shall have the power to reduce the duration or scope of such
provision, 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 shall
survive the termination of this Agreement.

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     9. Miscellaneous.

     (a) Representations of the Executive. The Executive represents and warrants to
the Company that this Agreement when executed by the Executive will not conflict with any
other agreement or obligation of the Executive and that the Executive is not bound by any
agreement with any third party which would prohibit the Executive from his involvement with
the Company or result in any liability to the Executive or to the Company.

     (b) Binding Agreement. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, executors, administrators, successors, heirs, distributees, devisees
and legatees. If the Executive should die while any amounts would still be payable to him
hereunder 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 this
Agreement shall be in writing and shall be deemed to have been duly given when delivered, if
delivered personally, or (unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepaid, and when received if delivered
otherwise, addressed as follows:

If to the Executive:

Thomas McCarthy

154 South Fairfield Avenue

Elmhurst, IL 60126

If to the Company:

c/o FreightCar America, Inc.

Two North Riverside Plaza

Chicago, IL 60606

Attention: Chairman of the Board

or to such other address as any party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective only upon
receipt.

     (d) Amendments, Waivers, Governing Law, Validity, Counterparts and Entire
Agreement. No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing, signed by the Executive and
such officers of the Company as may be specifically designated by the Board. No waiver by
either party hereto (the Company on one hand, and the Executive, on the other hand) at any
time of any breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party

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shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Illinois without regard to its
conflicts of law principles. The invalidity or enforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. This Agreement
may be executed in one or more counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same instrument. This Agreement sets
forth the entire agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all other agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any officer,
employee or representative of any party hereto; and any prior agreement of the parties
hereto with respect to the subject matter contained herein is hereby terminated and
canceled.

     (e) Injunctive Relief. The Executive agrees that in addition to any other
remedy provided at law or in equity or in this Agreement, the Company shall be entitled to a
temporary restraining order and both preliminary and permanent injunctions restraining the
Executive from violating any provision of Section 8 of this Agreement.

     (f) Dispute Resolution. In the event of any dispute or claim relating to or
arising out of this Agreement, the Executive and the Company agree that all such disputes
shall be fully and finally resolved by binding arbitration conducted by the American
Arbitration Association (“AAA”) in Chicago, Illinois in accordance with the AAA’s National
Rules for the Resolution of Employment Disputes, provided, however, that this arbitration
provision shall not apply to, and the Company shall be free to seek, injunctive or other
equitable relief with respect to any actual or threatened breach or violation by the
Executive of his obligations under Section 8 hereof in any court having appropriate
jurisdiction. The Executive acknowledges that by accepting this arbitration provision he is
waiving any right to a jury trial in the event of a covered dispute. The arbitrator may,
but is not required to, order that the prevailing party shall be entitled to recover from
the losing party its attorneys’ fees and costs incurred in any arbitration arising out of
this Agreement. The Company and the Executive agree that the jurisdiction and venue for any
disputes arising under, or any action brought to enforce (or otherwise relating to), Section
8 of this Agreement shall be exclusively in the courts in the State of Illinois, Cook
County, including the Federal Courts located therein (should Federal jurisdiction exist),
and the Company and the Executive hereby submit and consent to said jurisdiction and venue.

     (g) Withholding. All payments made to the Executive pursuant to this Agreement
shall be subject to applicable withholding taxes, if any, and any amount so withheld shall
be deemed to have been paid to the Executive for purposes of amounts due to the Executive
under this Agreement.

     (h) Removal from any Boards and Positions. If the Executive’s employment is
terminated for any reason under this Agreement, he shall be deemed to resign (i) if a
member, from the Board or board of directors of any affiliate or any other board to which he
has been appointed or nominated by or on behalf of the Company and (ii) from any

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     position with the Company or any affiliate, including, but not limited to, as an
officer of the Company or any of its affiliates.

     (i) Insurance; Indemnification. During the Term and through at least the fifth
anniversary of the Executive’s termination of employment from the Company, the Company
agrees to maintain the Executive as an insured party on all directors’ and officers’
insurance maintained by the Company for the benefit of its directors and officers on at
least the same basis as all other covered individuals and to indemnify the Executive to the
maximum extent permitted under applicable law.

     (j) Voluntary Agreement. The Executive and the Company represent and agree
that each has reviewed all aspects of this Agreement, has carefully read and fully
understands all provisions of this Agreement, and is voluntarily entering into this
Agreement. Each party represents and agrees that such party has had the opportunity to
review any and all aspects of this Agreement with the legal, tax and other advisor and
advisors of such party’s choice before executing this Agreement, and have been fully advised
as to the same. This Agreement has been fully and freely negotiated by the parties hereto,
shall be considered as having been drafted jointly by the parties hereto, and shall be
interpreted and construed as if so drafted, without construction in favor of or against any
party on account of its or his participation in the drafting hereof.

     (k) Counterparts. The parties may execute this Agreement in one or more
counterparts, all of which together shall constitute but one Agreement.

[Signature Page to Follow]

- 12 -

 

     IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year
written by the Executive below.

FREIGHTCAR AMERICA, INC.

	 	 	 	 	 

	By:

	 	/s/ CHRISTIAN RAGOT
	 	/s/ THOMAS P. MCCARTHY
	 

	 	 
	 	 
	 

	 	Christian Ragot
	 	Thomas P. McCarthy
	 

	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 
	Date: June 4, 2007	 	Date: June 4, 2007

- 13 -exv10w4

Exhibit 10.4

AMENDMENT OF

EMPLOYMENT AGREEMENT OF THOMAS MCCARTHY

     This Amendment of Employment Agreement (the “Amendment”) is made and entered into as of the
29th day of December, 2008, by and between Thomas McCarthy (the “Executive”) and
FreightCar America, Inc., a Delaware corporation (the “Company”) (collectively, the “Parties”).

     WHEREAS, the Parties entered into an Employment Agreement effective as of June 4, 2007 (the
“Agreement”); and

     WHEREAS, the Parties now consider it desirable to amend the terms and conditions of the
Agreement by this Amendment to reflect the requirements of Internal Revenue Code Section 409A and
to clarify the rights of the Parties.

     NOW, THEREFORE, in accordance with Section 9(d) of the Agreement and in consideration of the
mutual promises herein made, the sufficiency of which is expressly acknowledged, the Parties agree
as follows:

     1. The second paragraph of Section 5(b) of the Agreement is hereby deleted in its entirety and
replaced with the following:

“The Company shall pay the Executive’s Bonus, if any, at the same time as annual
cash bonus payments for such year are made to other participants with respect to
such fiscal year, and in all events within the two and one half (21/2) months
following the end of the fiscal year in which the Bonus is earned. The Bonus is
intended to qualify for the short-term deferral exception to Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”).”

     2. The following sentence is hereby added to the end of Section 5(e) of the Agreement:

“All reimbursements of expenses shall be made to the Executive in accordance with
the policies and procedures established by the Company and in all events within the
two and one-half (21/2) months following the end of the year in which the expense is
incurred.”

     3. The following Section 6(d) is hereby added to the Agreement:

“For purposes of this Agreement, the Executive’s employment with the Company shall
be deemed to be terminated when the Executive has a “Separation from Service” within
the meaning of Code Section 409A, and references to termination of employment shall
be deemed to refer to a Separation from Service.”

     4. The language “within thirty (30) days” is hereby added to Section 7(a) of the Agreement
following the phrase “(or his representative)”.

1

 

     5. The following language is hereby deleted in its entirety from Section 7(d)(i) of the
Agreement:

“, provided that, if these payments must be delayed for six months following the
Executive’s termination due to the restrictions of Code Section 409A(a)(2)(A)(i),
the full amount of the missed/delayed payments shall be made on the first day of the
seventh calendar month following the month in which the Executive’s employment
terminates;”

     6. The following language is hereby deleted in its entirety from Section 7(d)(ii) of the
Agreement:

“, provided that if the payment must be delayed for six months following the
Executive’s termination due to the restrictions of Code Section 409A(a)(2)(A)(i),
the payment shall be made on the first day of the seventh calendar month following
the month in which the Executive’s employment terminates”

     7. The following new Section 10 is hereby added to the Agreement:

“Code Section 409A

(a) The Agreement is intended to comply with Code Section 409A and the
interpretative guidance thereunder, including the exceptions for short-term
deferrals, separation pay arrangements, reimbursements, and in-kind distributions,
and shall be administered accordingly. The Agreement shall be construed and
interpreted with such intent.

(b) Each payment under the Agreement or any Company benefit plan is intended to be
treated as one of a series of separate payments for purposes of Code Section 409A
and Treasury Regulation §1.409A-2(b)(2)(iii) (or any similar or successor
provisions).

(c) To the extent that payments under the Agreement are subject to Code Section 409A
and are on account of a Separation from Service and the Executive is a “Specified
Employee” (as defined below) as of the date of termination, distributions to the
Executive may not be made before the date that is six (6) months after the date of
Separation from Service or, if earlier, the date of the Executive’s death (the “Six
Month Delay Rule”). Payments to which the Executive would otherwise be entitled
during the first six (6) months following the date of termination (the “Six Month
Delay”) will be accumulated and paid on the first day of the seventh month following
the date of termination (or the Executive’s death, if earlier).

(d) During the Six-Month Delay, the Company will pay to the Executive any applicable
payments to the extent any of the following exceptions to the Six-Month Delay Rule
apply:

2

 

	 	(i)	 	the short-term deferral rule of Code Section 409A and
Treasury Regulation §1.409A-1(b)(4) (or any similar or successor
provisions),

	 	(ii)	 	payments permitted under the separation pay exception
of Code Section 409A and Treasury Regulation §1.409A-1(b)(9)(iii) (or
any similar or successor provisions), and

	 	(iii)	 	payments permitted under the limited payments
exception of Code Section 409A and Treasury Regulation
§1.409A-1(b)(9)(v)(D) (or any similar or successor provisions),

provided that the amount paid under this paragraph will count toward, and will not
be in addition to, the total payment amount required to be made to the Executive by
the Company on account of the Separation from Service and any applicable Company
benefit plan.

(e) For purposes of this Agreement, the term “Specified Employee” has the meaning
given to that term in Code Section 409A and Treasury Regulation §1.409A-1(i) (or any
similar or successor provisions).

(f) The Executive agrees that the Company may amend this Agreement to the minimum
extent necessary to satisfy the applicable provisions of Code Section 409A and the
Treasury Regulations or other guidance issued thereunder. The Company cannot
guarantee that the payments and benefits that may be paid or provided pursuant to
this Agreement will satisfy all applicable provisions of Code Section 409A.”

The execution of copies of this Amendment by facsimile or other electronic transmission shall
constitute effective execution and delivery of this Amendment as to the parties and may be used in
lieu of the original Amendment for all purposes. Signatures of the parties transmitted by
facsimile or other electronic transmission shall be deemed to be their original signatures for all
purposes.

3

 

     IN WITNESS WHEREOF, the parties have executed this Amendment as of the 29th day of
December, 2008.

	 	 	 	 	 	 	 	 	 
	FREIGHTCAR AMERICA, INC.	 	 	 	EXECUTIVE	 	 
	 
	By:

	 	/s/ CHRISTIAN RAGOT
 

Christian Ragot 

President and Chief Executive Officer
	 	   
	 	/s/ THOMAS MCCARTHY
 

Thomas McCarthy 
	 	   
	 
	 	 	 	 	 	 	 	 
	Date: December 29, 2008	 	 	 	Date: December 22, 2008	 	 

4

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