UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-51237
FREIGHTCAR AMERICA, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware |
|
25-1837219 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
125 South Wacker Drive, Suite 1500 Chicago, Illinois |
|
60606 |
(Address of principal executive offices) |
|
(Zip Code) |
(800) 458-2235
(Registrant’s telephone number, including area code)
|
|
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common stock, par value $0.01 per share |
RAIL |
The Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
Large accelerated filer |
|
|
Accelerated filer |
|
Non-accelerated filer |
|
|
Smaller reporting company |
|
|
|
|
Emerging growth company |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
As of May 1, 2022, there were 16,535,266 shares of the registrant’s common stock outstanding.
FREIGHTCAR AMERICA, INC.
INDEX TO FORM 10-Q
|
|
|
Item |
|
Page |
|
PART I – FINANCIAL INFORMATION |
|
1. |
|
|
|
Condensed Consolidated Balance Sheets (Unaudited) as of |
3 |
|
4 |
|
|
5 |
|
|
6 |
|
|
7 |
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited) |
8 |
2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
4. |
29 |
|
|
PART II – OTHER INFORMATION |
|
1. |
30 |
|
2. |
30 |
|
3. |
30 |
|
4. |
30 |
|
5. |
30 |
|
6. |
30 |
|
|
31 |
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
FreightCar America, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
|
|
March 31, |
|
|
December 31, |
|
||
Assets |
|
(in thousands, except for share and per share data) |
|
|||||
Current assets |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash equivalents |
|
$ |
41,011 |
|
|
$ |
26,240 |
|
Accounts receivable, net of allowance for doubtful accounts of $475 and $323 respectively |
|
|
22,088 |
|
|
|
9,571 |
|
VAT receivable |
|
|
32,941 |
|
|
|
31,136 |
|
Inventories, net |
|
|
58,476 |
|
|
|
56,012 |
|
Related party asset |
|
|
5,259 |
|
|
|
8,680 |
|
Prepaid expenses |
|
|
8,203 |
|
|
|
5,087 |
|
Total current assets |
|
|
167,978 |
|
|
|
136,726 |
|
Property, plant and equipment, net |
|
|
18,515 |
|
|
|
18,236 |
|
Railcars available for lease, net |
|
|
20,007 |
|
|
|
20,160 |
|
Right of use asset |
|
|
16,353 |
|
|
|
16,669 |
|
Other long-term assets |
|
|
7,897 |
|
|
|
8,873 |
|
Total assets |
|
$ |
230,750 |
|
|
$ |
200,664 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts and contractual payables |
|
$ |
46,482 |
|
|
$ |
41,185 |
|
Related party accounts payable |
|
|
6,815 |
|
|
|
8,870 |
|
Accrued payroll and other employee costs |
|
|
1,941 |
|
|
|
2,912 |
|
Reserve for workers' compensation |
|
|
1,594 |
|
|
|
1,563 |
|
Accrued warranty |
|
|
5,639 |
|
|
|
2,533 |
|
Customer deposits |
|
|
22,006 |
|
|
|
3,300 |
|
Deferred income state and local incentives, current |
|
|
649 |
|
|
|
1,291 |
|
Lease liability, current |
|
|
1,980 |
|
|
|
1,955 |
|
Other current liabilities |
|
|
4,798 |
|
|
|
5,711 |
|
Total current liabilities |
|
|
91,904 |
|
|
|
69,320 |
|
Long-term debt, net of current portion |
|
|
88,572 |
|
|
|
79,484 |
|
Warrant liability |
|
|
53,244 |
|
|
|
32,514 |
|
Accrued pension costs |
|
|
— |
|
|
|
35 |
|
Deferred income state and local incentives, long-term |
|
|
— |
|
|
|
1,216 |
|
Lease liability, long-term |
|
|
16,116 |
|
|
|
16,617 |
|
Other long-term liabilities |
|
|
6,942 |
|
|
|
3,134 |
|
Total liabilities |
|
|
256,778 |
|
|
|
202,320 |
|
Stockholders’ (deficit) equity |
|
|
|
|
|
|
||
Preferred stock, $0.01 par value, 2,500,000 shares authorized (100,000 shares each |
|
- |
|
|
- |
|
||
Common stock, $0.01 par value, 50,000,000 shares authorized, 16,525,266 and 15,947,228 |
|
|
196 |
|
|
|
190 |
|
Additional paid in capital |
|
|
85,127 |
|
|
|
83,742 |
|
Accumulated other comprehensive loss |
|
|
(5,438 |
) |
|
|
(5,522 |
) |
Accumulated deficit |
|
|
(105,913 |
) |
|
|
(80,066 |
) |
Total stockholders' (deficit) equity |
|
|
(26,028 |
) |
|
|
(1,656 |
) |
Total liabilities and stockholders’ (deficit) equity |
|
$ |
230,750 |
|
|
$ |
200,664 |
|
See Notes to Condensed Consolidated Financial Statements (Unaudited).
3
FreightCar America, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
Three Months Ended |
|
|
|||||
|
|
March 31, |
|
|
|||||
|
|
2022 |
|
|
2021 |
|
|
||
|
|
|
|||||||
Revenues |
|
$ |
93,236 |
|
|
$ |
32,370 |
|
|
Cost of sales |
|
|
83,178 |
|
|
|
31,054 |
|
|
Gross profit |
|
|
10,058 |
|
|
|
1,316 |
|
|
Selling, general and administrative expenses |
|
|
10,713 |
|
|
|
9,151 |
|
|
Restructuring and impairment charges |
|
|
- |
|
|
|
6,650 |
|
|
Operating loss |
|
|
(655 |
) |
|
|
(14,485 |
) |
|
Interest expense |
|
|
(5,705 |
) |
|
|
(2,502 |
) |
|
Loss on change in fair market value of warrant liability |
|
|
(20,730 |
) |
|
|
(22,128 |
) |
|
Other income |
|
|
1,496 |
|
|
|
115 |
|
|
Loss before income taxes |
|
|
(25,594 |
) |
|
|
(39,000 |
) |
|
Income tax provision |
|
|
253 |
|
|
|
132 |
|
|
Net loss |
|
$ |
(25,847 |
) |
|
$ |
(39,132 |
) |
|
Net loss per common share- basic |
|
$ |
(1.11 |
) |
|
$ |
(1.96 |
) |
|
Net loss per common share - diluted |
|
$ |
(1.11 |
) |
|
$ |
(1.96 |
) |
|
Weighted average common shares outstanding – basic |
|
|
23,218,647 |
|
|
|
20,001,505 |
|
|
Weighted average common shares outstanding – diluted |
|
|
23,218,647 |
|
|
|
20,001,505 |
|
|
See Notes to Condensed Consolidated Financial Statements (Unaudited).
4
FreightCar America, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
|
|
|||||
|
|
|
|
|
|
|
||
Net loss |
|
$ |
(25,847 |
) |
|
$ |
(39,132 |
) |
Other comprehensive loss net of tax: |
|
|
|
|
|
|
||
Pension and postretirement liability adjustments, net of tax |
|
|
84 |
|
|
|
156 |
|
Comprehensive loss |
|
$ |
(25,763 |
) |
|
$ |
(38,976 |
) |
|
|
|
|
|
|
|
||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
5
FreightCar America, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)
(in thousands, except for share data)
|
|
|
|
||||||||||||||||||||||||||||||
|
|
FreightCar America Shareholders |
|
|
|
|
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
||||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Stockholders' |
|
||||||||
|
|
Common Stock |
|
|
Paid In |
|
|
Treasury Stock |
|
|
Comprehensive |
|
|
Retained |
|
|
|
Equity |
|
||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Shares |
|
|
Amount |
|
|
Loss |
|
|
(Deficit) |
|
|
|
(Deficit) |
|
||||||||
Balance, December 31, 2020 |
|
|
15,861,406 |
|
|
$ |
159 |
|
|
$ |
82,064 |
|
|
|
(327,577 |
) |
|
$ |
(1,344 |
) |
|
$ |
(11,763 |
) |
|
$ |
(38,619 |
) |
|
|
|
30,497 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(39,132 |
) |
|
|
|
(39,132 |
) |
Other comprehensive income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
156 |
|
|
|
- |
|
|
|
|
156 |
|
Restricted stock awards |
|
|
177,953 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Employee stock settlement |
|
|
(1,378 |
) |
|
|
- |
|
|
|
(5 |
) |
|
|
(2,215 |
) |
|
|
(7 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
(12 |
) |
Forfeiture of restricted stock awards |
|
|
(4,500 |
) |
|
|
- |
|
|
|
431 |
|
|
|
(116,795 |
) |
|
|
(431 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Stock-based compensation recognized |
|
|
- |
|
|
|
- |
|
|
|
31 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
31 |
|
Balance, March 31, 2021 |
|
|
16,033,481 |
|
|
$ |
161 |
|
|
$ |
82,519 |
|
|
|
(446,587 |
) |
|
$ |
(1,782 |
) |
|
$ |
(11,607 |
) |
|
$ |
(77,751 |
) |
|
|
$ |
(8,460 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2021 |
|
|
15,947,228 |
|
|
|
190 |
|
|
|
83,742 |
|
|
|
- |
|
|
|
- |
|
|
|
(5,522 |
) |
|
|
(80,066 |
) |
|
|
|
(1,656 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25,847 |
) |
|
|
|
(25,847 |
) |
Other comprehensive income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
84 |
|
|
|
- |
|
|
|
|
84 |
|
Restricted stock awards |
|
|
296,857 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Employee stock settlement |
|
|
(3,438 |
) |
|
|
- |
|
|
|
(13 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
(13 |
) |
Forfeiture of restricted stock awards |
|
|
(500 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Stock-based compensation recognized |
|
|
- |
|
|
|
- |
|
|
|
404 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
404 |
|
Equity Fees |
|
|
285,119 |
|
|
|
3 |
|
|
|
997 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
1,000 |
|
Balance, March 31, 2022 |
|
|
16,525,266 |
|
|
$ |
196 |
|
|
$ |
85,127 |
|
|
|
- |
|
|
$ |
— |
|
|
$ |
(5,438 |
) |
|
$ |
(105,913 |
) |
|
|
$ |
(26,028 |
) |
See Notes to Condensed Consolidated Financial Statements (Unaudited).
6
FreightCar America, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash flows from operating activities |
|
(in thousands) |
|
|||||
Net loss |
|
$ |
(25,847 |
) |
|
$ |
(39,132 |
) |
Adjustments to reconcile net loss to net cash flows used in operating activities: |
|
|
|
|
|
|
||
Restructuring and impairment charges |
|
|
— |
|
|
|
6,650 |
|
Depreciation and amortization |
|
|
1,024 |
|
|
|
1,197 |
|
Non-cash lease expense on right-of-use assets |
|
|
316 |
|
|
|
440 |
|
Recognition of deferred income from state and local incentives |
|
|
(1,858 |
) |
|
|
(555 |
) |
Loss on change in fair market value for warrant liability |
|
|
20,730 |
|
|
|
22,128 |
|
Stock-based compensation recognized |
|
|
4,244 |
|
|
|
2,662 |
|
Non-cash interest expense |
|
|
3,721 |
|
|
|
982 |
|
Other non-cash items, net |
|
|
|
|
|
(36 |
) |
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
(12,517 |
) |
|
|
3,204 |
|
VAT receivable |
|
|
(1,853 |
) |
|
|
(8,754 |
) |
Inventories |
|
|
(2,154 |
) |
|
|
4,824 |
|
Other assets |
|
|
(3,839 |
) |
|
|
(7,658 |
) |
Related party asset, net |
|
|
1,366 |
|
|
|
334 |
|
Accounts and contractual payables |
|
|
4,798 |
|
|
|
1,594 |
|
Accrued payroll and employee benefits |
|
|
(971 |
) |
|
|
(1,166 |
) |
Income taxes payable |
|
|
252 |
|
|
|
131 |
|
Accrued warranty |
|
|
3,106 |
|
|
|
(1,208 |
) |
Lease liability |
|
|
(476 |
) |
|
|
(577 |
) |
Customer deposits |
|
|
18,706 |
|
|
|
— |
|
Other liabilities |
|
|
(1,124 |
) |
|
|
(7,114 |
) |
Accrued pension costs and accrued postretirement benefits |
|
|
21 |
|
|
|
(222 |
) |
Net cash flows provided by (used in) operating activities |
|
|
7,645 |
|
|
|
(22,276 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchase of property, plant and equipment |
|
|
(960 |
) |
|
|
(542 |
) |
Proceeds from sale of property, plant and equipment and railcars available for lease |
|
|
— |
|
|
|
373 |
|
Net cash flows used in investing activities |
|
|
(960 |
) |
|
|
(169 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Borrowings on revolving line of credit |
|
|
10,013 |
|
|
|
165 |
|
Repayments on revolving line of credit |
|
|
(1,910 |
) |
|
|
(165 |
) |
Employee stock settlement |
|
|
(13 |
) |
|
|
(7 |
) |
Payment for stock appreciation rights exercised |
|
|
(4 |
) |
|
|
(39 |
) |
Net cash flows provided by (used in) financing activities |
|
|
8,086 |
|
|
|
(46 |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
14,771 |
|
|
|
(22,491 |
) |
Cash, cash equivalents and restricted cash equivalents at beginning of period |
|
|
26,240 |
|
|
|
54,047 |
|
Cash, cash equivalents and restricted cash equivalents at end of period |
|
$ |
41,011 |
|
|
$ |
31,556 |
|
Supplemental cash flow information |
|
|
|
|
|
|
||
Interest paid |
|
$ |
1,984 |
|
|
$ |
1,180 |
|
Income tax refunds received, net of payments |
|
$ |
— |
|
|
$ |
5 |
|
Non-cash transactions |
|
|
|
|
|
|
||
Change in unpaid construction in process |
|
$ |
190 |
|
|
$ |
114 |
|
Accrued PIK interest paid through issuance of PIK Note |
|
$ |
364 |
|
|
$ |
256 |
|
Issuance of equity fee |
|
$ |
1,000 |
|
|
$ |
|
|
|
|
|
|
|
|
|
||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
7
FreightCar America, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except for share and per share data and unless otherwise noted)
Note 1 – Description of the Business
FreightCar America, Inc. (“FreightCar”) operates primarily in North America through its direct and indirect subsidiaries, and manufactures a wide range of railroad freight cars, supplies railcar parts and leases freight cars. The Company designs and builds high-quality railcars, including coal cars, bulk commodity cars, covered hopper cars, intermodal and non-intermodal flat cars, mill gondola cars, coil steel cars and boxcars, and also specializes in the conversion of railcars for re-purposed use. The Company is headquartered in Chicago, Illinois and has facilities in the following locations: Johnstown, Pennsylvania; Shanghai, People’s Republic of China, and Castaños, Coahuila, Mexico (“Castaños”).
On September 10, 2020, the Company announced its plan to permanently close its manufacturing facility in Cherokee, Alabama (the “Shoals Facility”). The closure reduced costs and aligned the Company’s manufacturing capacity with the current railcar market. The Company ceased production at the Shoals Facility in February 2021. See Note 14–Restructuring and Impairment Charges.
Note 2 – Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of FreightCar America, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The foregoing financial information has been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial reporting. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year. The accompanying interim financial information is unaudited; however, the Company believes the financial information reflects all adjustments (consisting of items of a normal recurring nature) necessary for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP. The 2021 year-end balance sheet data was derived from the audited financial statements as of December 31, 2021. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted. These interim financial statements should be read in conjunction with the audited financial statements contained in the Company’s annual report on Form 10-K for the year ended December 31, 2021.
Note 3 – Revenue Recognition
The following table disaggregates the Company’s revenues by major source:
|
Three Months Ended |
|
|||||
|
March 31, |
|
|||||
|
2022 |
|
|
2021 |
|
||
Railcar sales |
$ |
89,308 |
|
|
$ |
28,929 |
|
Parts sales |
|
3,111 |
|
|
|
2,366 |
|
Revenues from contracts with customers |
|
92,419 |
|
|
|
31,295 |
|
Leasing revenues |
|
817 |
|
|
|
1,075 |
|
Total revenues |
$ |
93,236 |
|
|
$ |
32,370 |
|
Contract Balances and Accounts Receivable
Accounts receivable payments for railcar sales are typically due within 5 to 10 business days of invoicing, while payments from parts sales are typically due within 30 to 45 business days of invoicing. The Company has not experienced significant historical credit losses.
Contract assets represent the Company’s rights to consideration for performance obligations that have been satisfied but for which the terms of the contract do not permit billing at the reporting date. The Company had no contract assets as of each of March 31, 2022 and December 31, 2021. The Company may receive cash payments from customers in advance of the Company satisfying performance obligations under its sales contracts resulting in deferred revenue or customer deposits, which are considered contract liabilities. Deferred revenue and customer deposits are classified as either current or long-term in the Consolidated Balance Sheet
8
based on the timing of when the Company expects to recognize the related revenue. Deferred revenue and customer deposits are included in customer deposits, other current liabilities and other long-term liabilities in the Company’s Condensed Consolidated Balance Sheet and were $23,101 and $4,807 as of March 31, 2022 and December 31, 2021, respectively.
Performance Obligations
The Company is electing not to disclose the value of the remaining unsatisfied performance obligation with a duration of one year or less as permitted by ASU 2014-09, Revenue from Contracts with Customers. The Company had remaining unsatisfied performance obligations as of March 31, 2022 with expected duration of greater than one year of $14,850.
Note 4 – Segment Information
The Company’s operations comprise two operating segments, Manufacturing and Parts, and one reportable segment, Manufacturing. The Company’s Manufacturing segment includes new railcar manufacturing, used railcar sales, railcar leasing and major railcar conversions and rebuilds. The Company’s Parts operating segment is not significant for reporting purposes and has been combined with corporate and other non-operating activities as Corporate and Other.
Segment operating income is an internal performance measure used by the Company’s Chief Operating Decision Maker to assess the performance of each segment in a given period. Segment operating income includes all external revenues attributable to the segments as well as operating costs and income that management believes are directly attributable to the current production of goods and services. The Company’s internal management reporting package does not include interest revenue, interest expense or income taxes allocated to individual segments and these items are not considered as a component of segment operating income. Segment assets represent operating assets and exclude intersegment accounts, deferred tax assets and income tax receivables. The Company does not allocate cash and cash equivalents and restricted cash and restricted cash equivalents to its operating segments as the Company’s treasury function is managed at the corporate level. Intersegment revenues were not material in any period presented.
9
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Assets: |
|
|
|
|
|
|
||
Manufacturing |
|
$ |
169,096 |
|
|
$ |
154,068 |
|
Corporate and Other |
|
|
61,572 |
|
|
|
46,417 |
|
Total operating assets |
|
|
230,668 |
|
|
|
200,485 |
|
Consolidated income taxes receivable |
|
|
82 |
|
|
|
179 |
|
Consolidated assets |
|
$ |
230,750 |
|
|
$ |
200,664 |
|
Geographic Information |
|
|||||||||||||||
|
|
Revenues |
Long Lived Assets(a) |
|
||||||||||||
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
March 31, |
|
|
March 31, |
|
|
December 31, |
|
|||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
United States |
|
$ |
93,236 |
|
|
$ |
32,370 |
|
|
$ |
24,446 |
|
|
$ |
24,967 |
|
Mexico |
|
|
- |
|
|
|
- |
|
|
|
30,429 |
|
|
|
30,098 |
|
Total |
|
$ |
93,236 |
|
|
$ |
32,370 |
|
|
$ |
54,875 |
|
|
$ |
55,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(a) Long lived assets include property plant and equipment, net, railcars available for lease, and ROU assets. |
|
|||||||||||||||
Note 5 – Fair Value Measurements
The following table sets forth by level within the fair value hierarchy the Company’s financial assets that were recorded at fair value on a recurring basis and the Company’s non-financial assets that were recorded at fair value on a non-recurring basis.
Recurring Fair Value Measurements |
|
As of March 31, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability |
|
$ |
- |
|
|
$ |
53,244 |
|
|
$ |
- |
|
|
$ |
53,244 |
|
Recurring Fair Value Measurements |
|
As of December 31, 2021 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability |
|
$ |
- |
|
|
$ |
32,514 |
|
|
$ |
- |
|
|
$ |
32,514 |
|
Non-recurring Fair Value Measurements |
|
During the Year Ended December 31, 2021 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Railcars available for lease, net |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
6,638 |
|
|
$ |
6,638 |
|
The fair value of the Company’s warrant liability recorded in the Company’s financial statements, determined using the quoted price of the Company’s common stock in an active market, exercise price ($0.01/share) and number of shares exercisable at March 31, 2022 and December 31, 2021, is a Level 2 measurement.
Note 6 – Restricted Cash
The Company establishes restricted cash balances when required by customer contracts and to collateralize standby letters of credit. The carrying value of restricted cash approximates fair value.
10
The Company’s restricted cash balances are as follows:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Restricted cash from customer deposit |
|
$ |
282 |
|
|
$ |
282 |
|
Restricted cash to collateralize standby letters of credit |
|
|
103 |
|
|
|
1,133 |
|
Restricted cash equivalents to collateralize standby letters of credit |
|
|
3,542 |
|
|
|
3,542 |
|
Restricted cash equivalents - other |
|
|
438 |
|
|
|
|
|
Total restricted cash and restricted cash equivalents |
|
$ |
4,365 |
|
|
$ |
4,957 |
|
Note 7 – Inventories
Inventories, net of reserve for excess and obsolete items, consist of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Raw materials |
|
|
40,392 |
|
|
|
34,885 |
|
Work in process |
|
|
10,961 |
|
|
|
11,306 |
|
Finished railcars |
|
|
2,133 |
|
|
|
4,696 |
|
Parts inventory |
|
|
4,990 |
|
|
|
5,125 |
|
Total inventories, net |
|
$ |
58,476 |
|
|
$ |
56,012 |
|
Inventory on the Company’s Condensed Consolidated Balance Sheets includes reserves of $1,734 and $1,621 relating to excess or slow-moving inventory for parts and work in process at March 31, 2022 and December 31, 2021, respectively.
Note 8 – Debt Financing and Revolving Credit Facilities
Term Loan Credit Agreement
On October 13, 2020, the Company entered into a Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, as guarantor, FreightCar North America (“Borrower” and together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”), CO Finance LVS VI LLC, as lender (the “Lender”), and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”). Pursuant to the Term Loan Credit Agreement, the Lender committed to the extension of a term loan credit facility in the principal amount of $40,000, consisting of a single term loan to be funded upon the satisfaction of certain conditions precedent set forth in the Term Loan Credit Agreement, including stockholder approval of the issuance of the common stock underlying the Warrant described below (the funding date of such term loan, the “Closing Date”). FreightCar America, Inc. stockholders approved the issuance of the common stock underlying the Warrant at a special stockholders’ meeting on November 24, 2020. The $40,000 term loan closed and was funded on November 24, 2020. The Company incurred $2,872 in deferred financing costs related to the Term Loan Agreement. The deferred financing costs are presented as a reduction of the long-term debt balance and amortized to interest expense over the term of the Term Loan Agreement.
The Term Loan Credit Agreement has a term ending five years following the Closing Date. The term loan outstanding under the Term Loan Credit Agreement bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of March 31, 2022, the interest rate on the original advance under the Term Loan Credit Agreement was 14.0%.
The Term Loan Credit Agreement has both affirmative and negative covenants, including, without limitation, minimum liquidity, limitations on indebtedness, liens and investments. The Term Loan Credit Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Term Loan Credit Agreement and the related loan documents, each of the Loan Parties granted to Agent a continuing lien upon all of such Loan Parties’ assets to secure the obligations of the Loan Parties under the Term Loan Credit Agreement.
On May 14, 2021, the Loan Parties entered into an Amendment No. 2 to the Term Loan Credit Agreement (the “Second Amendment” and together with the Term Loan Credit Agreement, the “Term Loan Credit Agreement”) with Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $16,000 to a total of $56,000, with such additional $16,000 (the “Additional Loan”) to be funded upon the satisfaction of certain conditions precedent set forth in the Second Amendment. The Additional Loan closed and was funded on May 17, 2021. The Company incurred $480 in deferred financing costs
11
related to the Amendment which are presented as a reduction of the long-term debt balance and amortized on a straight-line basis to interest expense over the term of the Second Amendment.
The Additional Loan bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of March 31, 2022, the interest rate on the Additional Loan was 14.0%.
Pursuant to the Second Amendment, in the event that the Additional Loan was not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender a warrant (the “March 2022 Warrant”) to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the March 2022 Warrant is exercised (after giving effect to such issuance). Because the Company believed that it was probable that the Additional Warrant would be issued the Company recorded an additional warrant liability of $7,351 during the third quarter of 2021. The Additional Warrant was issued on April 4, 2022. (see Note 16 Subsequent Event).
Pursuant to the Second Amendment, the Company was required to, among other things, i) obtain a term sheet for additional financing of no less than $15,000 by July 31, 2021 and ii) file a registration statement on Form S-3 registering Company securities, including the shares of Company common stock issuable upon exercise of the March 2022 Warrant, by no later than August 31, 2021. The Company has met each of the aforementioned obligations. The Form S-3 registering Company securities, including the shares of Company common stock issuable upon exercise of the March 2022 Warrant, was filed with the Securities and Exchange Commission on August 27, 2021 and became effective on September 9, 2021.
On July 30, 2021, the Loan Parties entered into an Amendment No. 3 to Credit Agreement (the “Third Amendment” and together with the Credit Agreement, as amended, the “Term Loan Credit Agreement”) with the Lender and the Agent, pursuant to which, among other things, Lender obtained a standby letter of credit (as may be amended from time to time, the “Third Amendment Letter of Credit”) from Wells Fargo Bank, N.A., in the principal amount of $25,000 for the account of the Company and for the benefit of Siena Lending Group LLC (the “Revolving Loan Lender”).
On December 30, 2021, the Loan Parties entered into an Amendment No. 4 to Credit Agreement (the “Fourth Amendment” and together with the Credit Agreement, the “Term Loan Credit Agreement”) with the Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $15,000 to a total of $71,000, with such additional $15,000 (the “Delayed Draw Loan”) to be funded, at the Borrower’s option, upon the satisfaction of certain conditions precedent set forth in the Fourth Amendment. The Borrower has the option to draw on the Delayed Draw Loan through January 31, 2023 and may choose not to do so.
The Delayed Draw Loan, if funded, will bear interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement.
Reimbursement Agreement
Pursuant to the Third Amendment, on July 30, 2021, the Company, the Lender, Alter Domus (US) LLC, as calculation agent, and the Agent entered into a reimbursement agreement (the “Reimbursement Agreement”), pursuant to which, among other things, the Company agreed to reimburse the Agent, for the account of the Lender, in the event of any drawings under the Third Amendment Letter of Credit by the Revolving Loan Lender.
In addition, pursuant to the Reimbursement Agreement, the Company shall make certain other payments as set forth below, so long as the Third Amendment Letter of Credit remains outstanding:
Letter of Credit Fee
The Company shall pay to Agent, for the account of Lender, an annual fee of $500, which shall be due and payable quarterly beginning on August 2, 2021, and every three months thereafter.
Equity Fee
Every three months (the “Measurement Period”), commencing on August 6, 2021, the Company shall pay to the Lender (or, so long as Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if Lender has timely notified the
12
Company in writing of such designation) a fee (the “Equity Fee”) payable in shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”). The Equity Fee shall be calculated by dividing $1,000 by the volume weighted average price of the Company’s Common Stock on the Nasdaq Capital Market for the ten (10) trading days ending on the last business day of the applicable Measurement Period. The Company can opt to pay the Equity Fee in cash, in the amount of $1,000, if, and only if, (x) the Company has already issued as Equity Fees a number of shares of its Common Stock equal to (I) 5.0% multiplied by (II) the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock, and (y) the Company has at least $15,000 of Repayment Liquidity after giving effect to such payment. The term Repayment Liquidity, as defined in the Term Loan Credit Agreement, means (a) all unrestricted and unencumbered cash and cash equivalents of the Loan Parties, plus (b) the undrawn and available portion of the commitments under that certain Amended and Restated Loan and Security Agreement by and among the Loan Parties and the Revolving Loan Lender (as described below), minus (c) all accounts payable of the Loan Parties that are more than 30 days past due.
The Equity Fee shall no longer be paid once the Company has issued to Lender and/or OC III LVS XII LP Equity Fees in an amount of Common Stock equal to 9.99% multiplied by the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock (the “Maximum Equity”). Through March 31, 2022, the Company has paid Equity Fees totaling 693,077 shares of the Company's Common Stock.
The issuance of each Equity Fee under the Reimbursement Agreement will be made in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act for offers and sales of securities that do not involve a “public offering.”
Cash Fee
The Company shall pay to the Agent, for the account of the Lender (or, so long as the Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if the Lender has timely notified the Company in writing of such designation) a cash fee (the “Cash Fee”) which shall be due and payable in cash quarterly beginning on the date that the Maximum Equity has been issued and thereafter on the business day immediately succeeding the last business day of the applicable Measurement Period. The Cash Fee shall be equal to $1,000, provided that, in the quarter in which the Maximum Equity is issued, such fee shall be equitably reduced by the value of any Equity Fee issued by the Company that quarter.
Warrant
In connection with the entry into the Term Loan Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020 (the “Warrant Acquisition Agreement”), by and between the Company and the Lender to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 23% of the outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance). The Warrant is exercisable for a term of ten years from the date of the issuance of the Warrant. The Warrant was issued on November 24, 2020 after the Company received stockholder approval of the issuance of the common stock issuable upon exercise of the Warrant by the Warrantholder. In connection with the issuance of the Warrant, the Company and the Lender entered into a registration rights agreement (the “Registration Rights Agreement”) as of the Closing Date of November 24, 2020. As of March 31, 2022 and December 31, 2021, the Warrant was exercisable for an aggregate of 6,289,754 and 6,098,217 shares, respectively, of common stock of the Company with a per share exercise price of $0.01. The Company determined that the Warrant should be accounted for as a derivative instrument and classified as a liability on its Consolidated Balance Sheets primarily due to the instrument obligating the Company to settle the Warrant in a variable number of shares of common stock. The Warrant was recorded at fair value and is treated as a discount on the term loan. The discount on the associated debt is amortized over the life of the Term Loan Credit Agreement and included in interest expense.
Pursuant to the Second Amendment, in the event that the Additional Loan was not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender the March 2022 Warrant to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the March 2022 Warrant is exercised (after giving effect to such issuance). Because the Company believed that it was probable that the March 2022 Warrant would be issued the Company recorded an additional warrant liability of $7,351 during the third quarter of 2021. The Additional Warrant was issued on April 4, 2022. (see Note 16 Subsequent Event).
Pursuant to the Fourth Amendment and a warrant acquisition agreement, dated as of December 30, 2021 (the “Warrant Acquisition Agreement”), the Company issued to the Lender a warrant (the “December 2021 Warrant”) to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the December 2021 Warrant is exercised (after giving effect to such issuance). The December 2021 Warrant has an exercise price of $0.01 and a term of ten years. As of March 31, 2022 and December 31, 2021, the December 2021 Warrant was
13
exercisable for an aggregate of 1,367,337 and 1,325,699 shares of common stock of the Company, respectively with a per share exercise price of $0.01.
In addition, to the extent the Delayed Draw Loan is funded, the Company has agreed to issue to the Lender a warrant (the “3% Additional Warrant”) to purchase up to a number of shares of the Company’s common stock, par value $0.01 per share, equal to 3% of the Company’s outstanding common stock on a fully-diluted basis at the time the 3% Additional Warrant is exercised (after giving effect to such issuance). The 3% Additional Warrant, if issued, will have an exercise price of $0.01 and a term of ten years.
The following schedule shows the change in fair value of the Warrant as of March 31, 2022.
Warrant liability as of December 31, 2021 |
|
$ |
32,514 |
|
Change in fair value |
|
|
20,730 |
|
Warrants issued |
|
|
- |
|
Warrant liability as of March 31, 2022 |
|
$ |
53,244 |
|
The change in fair value of the Warrant is reported on a separate line in the consolidated statement of operations. The Term Loan Credit Agreement is presented net of the unamortized discount and unamortized deferred financing costs.
Siena Loan and Security Agreement
On October 8, 2020, the Company entered into a Loan and Security Agreement (the “Siena Loan Agreement”) by and among the Company, as guarantor, and certain of its subsidiaries, as borrowers (together with the Company, the “Loan Parties”), and Siena Lending Group LLC, as lender (“Siena”). Pursuant to the Siena Loan Agreement, Siena provided an asset backed credit facility, in the maximum aggregate principal amount of up to $20,000, (the "Maximum Revolving Facility Amount") consisting of revolving loans (the Revolving Loans").
The Siena Loan Agreement provided for a revolving credit facility with maximum availability of $20,000, subject to borrowing base requirements set forth in the Siena Loan Agreement, which generally limited availability under the revolving credit facility to (a) 85% of the value of eligible accounts and (b) up to the lesser of (i) 50% of the lower of cost or market value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory, and as reduced by reserves established by Siena from time to time in accordance with the Siena Loan Agreement.
On July 30, 2021, the Loan Parties and Siena Lending Group LLC ( the "Revolving Loan Lender") entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan and Security Agreement”), which amended and restated the terms and conditions of the Siena Loan Agreement in its entirety.
Pursuant to the Amended and Restated Loan and Security Agreement, the Maximum Revolving Facility Amount was increased to $25,000, provided, however, that the outstanding balance of all Revolving Loans may not exceed the lesser of (A) the Maximum Revolving Facility Amount minus the Availability Block and (B) an amount equal to the issued and undrawn portion of the Third Amendment Letter of Credit (as defined above) minus the Availability Block. The term “Availability Block”, as defined in the Amended and Restated Loan and Security Agreement, means 3.0% of the issued and undrawn amount under the Third Amendment Letter of Credit.
The Amended and Restated Loan and Security Agreement has a term ending on October 8, 2023. Revolving Loans outstanding under the Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the Amended and Restated Loan and Security Agreement, at an interest rate of 2% per annum in excess of the Base Rate (as defined in the Siena Loan Agreement).
The Amended and Restated Loan and Security Agreement contains affirmative and negative covenants, including, without limitation, limitations on future indebtedness, liens and investments. The Amended and Restated Loan and Security Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Amended and Restated Loan and Security Agreement, each of the Loan Parties granted Siena a continuing lien upon certain assets of the Loan Parties to secure the obligations of the Loan Parties under the Amended and Restated Loan and Security Agreement.
On February 23, 2022, the Loan Parties and the Revolving Loan Lender entered into a First Amendment to Amended and Restated Loan and Security Agreement (the “First Amendment to Amended and Restated Loan and Security Agreement”), pursuant to which, among other things, the Maximum Revolving Facility Amount was increased to $35,000; provided, however, that after giving effect to each Revolving Loan and each letter of credit made available to the Loan Parties, (A) the outstanding balance of all Revolving Loans and the Letter of Credit Balance (which is defined in the Amended and Restated Loan and Security Agreement as the sum of (a) the aggregate undrawn face amount of all outstanding Letters of Credit and (b) all interest, fees and costs due or, in Lender’s estimation,
14
likely to become due in connection therewith) will not exceed the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base (as defined in the First Amendment to Amended and Restated Loan and Security Agreement), and (B) none of the other Loan Limits (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) for Revolving Loans will be exceeded.
Revolving Loans outstanding under the First Amendment to Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the First Amendment to Amended and Restated Loan and Security Agreement, at a rate of 2% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). Notwithstanding the foregoing, Revolving Loans made in respect of Excess Availability (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) arising from clause (b) of the definition of “Borrowing Base” bear interest, subject to the provisions of the First Amendment to Amended and Restated Loan and Security Agreement, at a rate of 1.5% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). As of March 31, 2022, the interest rate on outstanding debt under the First Amendment to Amended and Restated Loan and Security Agreement was 5.0%.
As of March 31, 2022, the Company had $32,339 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of 1,074. As of December 31, 2021, the Company had $24,026 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $122. The Company incurred $1,101 in deferred financing costs related to the Siena Loan Agreement and incurred $1,037 in additional deferred financing costs related to the Amended and Restated Loan and Security Agreement. The deferred financing costs are presented as an asset and amortized to interest expense on a straight-line basis over the term of the Siena Loan Agreement.
M&T Credit Agreement
On April 16, 2019, FreightCar America Leasing 1, LLC, an indirect wholly-owned subsidiary of the Company (“Freightcar Leasing Borrower”), entered into a Credit Agreement (the “M&T Credit Agreement”) with M & T Bank, N.A., as lender (“M&T”). Pursuant to the M&T Credit Agreement, M&T extended a revolving credit facility to Freightcar Leasing Borrower in an aggregate amount of up to $40,000 for the purpose of financing railcars which will be leased to third parties.
On April 16, 2019, Freightcar Leasing Borrower also entered into a Security Agreement (the “M&T Security Agreement”) pursuant to which it granted a security interest in all of its assets to M&T to secure its obligations under the M&T Credit Agreement.
On April 16, 2019, FreightCar America Leasing, LLC, a wholly-owned subsidiary of the Company and parent of Freightcar Leasing Borrower (“Freightcar Leasing Guarantor”), entered into (i) a Guaranty Agreement (the “M&T Guaranty Agreement”) pursuant to which Freightcar Leasing Guarantor guarantees the repayment and performance of certain obligations of Freightcar Leasing Borrower and (ii) a Pledge Agreement (the “M&T Pledge Agreement”) pursuant to which Freightcar Leasing Guarantor pledged all of the equity of Freightcar Leasing Borrower held by Freightcar Leasing Guarantor.
The loans under the M&T Credit Agreement are non-recourse to the assets of the Company or its subsidiaries other than the assets of Freightcar Leasing Borrower and Freightcar Leasing Guarantor.
The M&T Credit Agreement had a term ending on April 16, 2021 (the “Term End”). Loans outstanding thereunder will bear interest, accrued daily, at the Adjusted LIBOR Rate (as defined in the M&T Credit Agreement) or the Adjusted Base Rate (as defined in the M&T Credit Agreement). The M&T Credit Agreement has both affirmative and negative covenants, including, without limitation, maintaining an Interest Coverage Ratio (as defined in the M&T Credit Agreement) of not less than 1.25:1.00, measured quarterly, and limitations on indebtedness, loans, liens and investments. The M&T Credit Agreement also provides for customary events of default.
On April 20, 2021, FreightCar Leasing Borrower received a notice from M&T that an Event of Default had occurred due to all amounts outstanding under the M&T Credit Agreement having not be paid by the Term End.
On December 28, 2021 (the “Execution Date”), FreightCar Leasing Borrower, FreightCar Leasing Guarantor (together with FreightCar Leasing Borrower, the “Obligors”), the Company, FreightCar America Railcar Management, LLC, a Delaware limited liability company (“FCA Management”), and M&T, entered into a Forbearance and Settlement Agreement (the “Forbearance Agreement”) with respect to the M&T Credit Agreement and its related Credit Documents (as defined in the M&T Credit Agreement), as well as certain intercompany services agreements related thereto.
Pursuant to the Forbearance Agreement, the Obligors will continue to perform and comply with all of their performance obligations (as opposed to payment obligations) under certain provisions of the M&T Credit Agreement (primarily related to information obligations and the preservation of the collateral pledged by the Borrower to M&T pursuant to the M&T Security Agreement (the “Collateral”)) and all the provisions of the M&T Security Agreement. During the period from Execution Date until the termination of the Forbearance
15
Agreement, M&T may not take any action against the Obligors or exercise or enforce any rights or remedies provided for in the Credit Documents or otherwise available to it.
On December 1, 2023, or sooner if requested by the Lender (the “Turnover Date”), the Borrower shall execute and deliver to M&T documents required to deliver and assign to the Lender all the leased railcars and related leases serving as Collateral for the M&T Credit Agreement.
Upon the Turnover Date and the Obligors’ performance of their respective obligations under the Forbearance Agreement, including the delivery of certain Collateral to M&T upon the Turnover Date, all Obligations (as defined in the M&T Credit Agreement) shall be deemed satisfied in full, M&T shall no longer have any further claims against the Obligors under the Credit Documents and the Credit Documents shall automatically terminate and be of no further force or effect except for the provisions thereof that expressly survive termination.
The Forbearance Agreement contains customary releases at execution for all affiliates of the Company (other than the Obligors) and agreements to deliver final releases with respect to the Obligors upon their performance under the Forbearance Agreement. The Company also agreed to turn over to M&T on the Effective Date certain rents in the amount of $715 that it had previously collected as servicing agent for the Borrower, and to continue to provide such services through the Turnover Date without a service fee, and after the Turnover Date through the return of the railcars serving as Collateral, for a service fee.
As of March 31, 2022 and December 31, 2021, FreightCar Leasing Borrower had $7,707 and $7,917, respectively, in outstanding debt under the M&T Credit Agreement, which was collateralized by leased railcars with a carrying value of $6,594 and $6,638, respectively. As of March 31, 2022, the interest rate on outstanding debt under the M&T Credit Agreement was 4.50%.
Long-term debt consists of the following as of March 31, 2022 and December 31, 2021:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
M&T Credit Agreement outstanding |
|
$ |
7,707 |
|
|
$ |
7,917 |
|
Siena Loan Agreement outstanding |
|
|
32,339 |
|
|
|
24,026 |
|
Term Loan Credit Agreement outstanding |
|
|
57,641 |
|
|
|
57,278 |
|
Total debt |
|
|
97,687 |
|
|
|
89,221 |
|
Less Term Loan Credit Agreement discount |
|
|
(6,623 |
) |
|
|
(7,077 |
) |
Less Term Loan Credit Agreement deferred financing costs |
|
|
(2,492 |
) |
|
|
(2,660 |
) |
Total debt, net of discount and deferred financing costs |
|
|
88,572 |
|
|
|
79,484 |
|
Less amounts due within one year |
|
|
- |
|
|
|
- |
|
Long-term debt, net of current portion |
|
$ |
88,572 |
|
|
$ |
79,484 |
|
The fair value of long-term debt approximates its carrying value as of March 31, 2022 and December 31, 2021.
Note 9 – Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss consist of the following:
|
|
Pre-Tax |
|
|
Tax |
|
|
After-Tax |
|
|||
Three months ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|||
Pension liability activity: |
|
|
|
|
|
|
|
|
|
|||
Reclassification adjustment for amortization of net loss (pre-tax other income) |
|
$ |
84 |
|
|
$ |
- |
|
|
$ |
84 |
|
|
|
Pre-Tax |
|
|
Tax |
|
|
After-Tax |
|
|||
Three months ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|||
Pension liability activity: |
|
|
|
|
|
|
|
|
|
|||
Reclassification adjustment for amortization of net loss (pre-tax other |
|
$ |
156 |
|
|
$ |
- |
|
|
$ |
156 |
|
The components of accumulated other comprehensive loss consist of the following:
16
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Unrecognized pension cost, net of tax of $6,282 and $6,282, respectively |
|
$ |
(5,438 |
) |
|
$ |
(5,522 |
) |
Note 10 – Stock-Based Compensation
Total stock-based compensation was $4,244 and $2,662 for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was $1,626 of unearned compensation expense related to restricted stock awards, which will be recognized over the remaining weighed average requisite service period of 21 months. As of March 31, 2022, there was $2,063 of unearned compensation related to time-vested stock options, which will be recognized over the remaining requisite service period of 29 months.
2020 and 2021 Grants of Stock Appreciation Rights
During 2020 and 2021, the Company granted 1,139,464 and 1,735,500 cash settled stock appreciation rights to certain employees. Each stock appreciation right represents the right to receive a payment measured by the increase in the fair market value of one share of the Company’s stock from the date of grant of the stock appreciation right to the date of exercise of the stock appreciation right. The cash settled stock appreciation rights vest ratably over three years and have a contractual life of 10 years. Cash settled stock appreciation rights are classified as liabilities Vesting of the 2021 cash settled stock appreciation rights was contingent upon the achievement of a thirty-day trailing average fair market value of a share of the Company’s common stock of 133.3% ($3.17) or more of the exercise price per share ($2.38). When vesting of an award of stock-based compensation is dependent upon the attainment of a target stock price, the award is considered to be subject to a market condition. . During the first quarter of 2021, the market condition for the 2021 cash settled stock appreciation rights was met. The Company measures the fair value of unvested cash settled stock appreciation rights using the Black-Scholes option valuation model and remeasures the fair value of the award each reporting period until the award is vested. Once vested the Company immediately recognizes compensation cost for any changes in fair value of cash settled stock appreciation rights until settlement. Fair value of vested cash settled stock appreciation rights represents the fair market value of one share of the Company’s stock on the measurement date less the exercise price per share. Compensation cost for cash settled stock appreciation rights is trued up each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.
The estimated fair value of the cash settled stock appreciation rights as of March 31, 2022 was $6,163. Stock-based compensation for cash settled stock appreciation rights was $3,759 and $2,553 for the three months ended March 31, 2022 and 2021, respectively.
The fair value of unvested cash settled stock appreciation rights as of March 31, 2022 was estimated using the Black-Scholes option valuation model with the following assumptions:
|
|
|
|
|
|
|
|
Expected |
|
Risk Free |
|
|
|
|
|
|
|
|
|
|
Expected |
|
Dividend |
|
Interest |
|
Fair Value |
|
|
Grant Year |
|
Grant Date |
|
Expected Life |
|
Volatility |
|
Yield |
|
Rate |
|
Per Award |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
1/24/2020 |
|
4.3 years |
|
83.63% |
|
0.00% |
|
2.39% |
|
$ |
4.92 |
|
2020 |
|
9/14/2020 |
|
4.7 years |
|
81.13% |
|
0.00% |
|
2.41% |
|
$ |
4.79 |
|
2020 |
|
11/30/2020 |
|
4.9 years |
|
80.14% |
|
0.00% |
|
2.42% |
|
$ |
4.62 |
|
2021 |
|
1/5/2021 |
|
5.0 years |
|
79.52% |
|
0.00% |
|
2.11% |
|
$ |
4.70 |
|
Note 11 – Employee Benefit Plans
The Company has a qualified, defined benefit pension plan that was established to provide benefits to certain employees. The plan is frozen and participants are no longer accruing benefits. Generally, contributions to the plan are not less than the minimum amounts required under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and not more than the maximum amount that can be deducted for federal income tax purposes. The plan assets are held by an independent trustee and consist primarily of equity and fixed income securities.
17
The components of net periodic benefit cost (benefit) for the three months ended March 31, 2022 and 2021, are as follows:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
Pension Benefits |
|
2022 |
|
|
2021 |
|
||
Interest cost |
|
$ |
276 |
|
|
$ |
236 |
|
Expected return on plan assets |
|
|
(617 |
) |
|
|
(584 |
) |
Amortization of unrecognized net loss |
|
|
84 |
|
|
|
156 |
|
|
|
$ |
(257 |
) |
|
$ |
(192 |
) |
The Company made no contributions to the Company’s defined benefit pension plan for the three months ended March 31, 2022 and 2021. The Company expects to make no contributions to its pension plan in 2022.
The Company also maintains qualified defined contribution plans, which provide benefits to employees based on employee contributions and employee earnings with discretionary contributions allowed.
Note 12 – Contingencies and Legal Settlements
The Company is involved in various warranty and repair claims and, in certain cases, related pending and threatened legal proceedings with its customers in the normal course of business. In the opinion of management, the Company’s potential losses in excess of the accrued warranty and legal provisions, if any, are not expected to be material to the Company’s consolidated financial condition, results of operations or cash flows.
As part of a settlement agreement reached with one of its customers during 2019, the Company agreed to pay $7,500 to settle all claims related to a prior year’s commercial dispute. During the first quarter of 2022, the Company paid the remaining $1,000 of the settlement amount.
In addition to the foregoing, the Company is involved in certain other pending and threatened legal proceedings, including commercial disputes and workers’ compensation and employee matters arising out of the conduct of its business. The Company has reserved $0.4 million to cover probable and estimable liabilities with respect to these matters.
Note 13 – Loss Per Share
The weighted-average common shares outstanding are as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
||
Weighted average common shares outstanding |
|
|
15,678,143 |
|
|
|
14,702,964 |
|
Issuance of warrants |
|
|
7,540,504 |
|
|
|
5,298,541 |
|
Weighted average common shares outstanding - basic |
|
|
23,218,647 |
|
|
|
20,001,505 |
|
Weighted average common shares outstanding - diluted |
|
|
23,218,647 |
|
|
|
20,001,505 |
|
The Company computes earnings per share using the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities. The Company’s participating securities are its grants of restricted stock which contain non-forfeitable rights to dividends. The Company allocates earnings between both classes; however, in periods of undistributed losses, they are only allocated to common shares as the unvested restricted stockholders do not contractually participate in losses of the Company. The Company computes basic earnings per share by dividing net income allocated to common shareholders by the weighted average number of shares outstanding during the period. Warrants issued in connection with the Company's long-term debt were issued at a nominal exercise price and are considered outstanding at the date of issuance. Diluted earnings per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the period. Weighted average diluted common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options and the assumed vesting of nonvested share awards. For the three months ended March 31, 2022 and 2021, 1,694,483 and 1,383,191 shares, respectively, were not included in the weighted average common shares outstanding calculation as they were anti-dilutive.
18
Note 14 – Restructuring and Impairment Charges
On September 10, 2020, the Company announced its plan to permanently close its Shoals Facility in light of the ongoing cyclical industry downturn, which has been magnified by the COVID-19 pandemic. On October 8, 2020, the Company reached an agreement with the Shoals facility owner and landlord, to shorten the Shoals lease term by amending the expiration date to the end of February 2021. In addition, the landlord agreed to waive the base rent payable under the original lease for the months of October 2020 through February 2021. Property, plant and equipment with an estimated fair value of $10,148 was sold or transferred to the Shoals landlord during the three months ended March 31, 2021 as consideration for the landlord’s entry into the lease amendment and the aforementioned rent waiver. Restructuring and impairment charges related to the plant closure for the three months March 31, 2021 primarily represented costs related to relocating some of the facility’s equipment to Castaños.
Restructuring and impairment charges are reported as a separate line item on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, and are detailed below:
|
|
Three Months Ended |
|
|
|||||
|
|
March 31, |
|
|
|||||
|
|
2022 |
|
|
2021 |
|
|
||
Impairment and loss on disposal of machinery and equipment |
|
$ |
- |
|
|
$ |
269 |
|
|
Employee severance and retention |
|
|
- |
|
|
|
(57 |
) |
|
Other charges related to facility closure |
|
|
- |
|
|
|
6,438 |
|
|
Total restructuring and impairment costs |
|
$ |
- |
|
|
$ |
6,650 |
|
|
|
|
Accrued as of December 31, 2021 |
|
|
Cash |
|
|
Non-cash charges |
|
|
Cash payments |
|
|
Accrued as of March 31, 2022 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Impairment and loss on right of use asset |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|||
Employee severance and retention |
|
|
163 |
|
|
|
|
|
|
- |
|
|
|
(90 |
) |
|
|
73 |
|
|
Other charges related to facility closure |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Total restructuring and impairment costs |
|
$ |
163 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(90 |
) |
|
$ |
73 |
|
|
|
Accrued as of December 31, 2020 |
|
|
Cash |
|
|
Non-cash charges |
|
|
Cash payments |
|
|
Accrued as of March 31, 2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Impairment and loss on right of use asset |
|
$ |
- |
|
|
|
|
|
$ |
269 |
|
|
|
|
|
$ |
- |
|
||
Employee severance and retention |
|
|
1,596 |
|
|
|
|
|
|
(57 |
) |
|
|
(1,075 |
) |
|
|
464 |
|
|
Other charges related to facility closure |
|
|
251 |
|
|
|
6,438 |
|
|
|
|
|
|
(4,897 |
) |
|
|
1,792 |
|
|
Total restructuring and impairment costs |
|
$ |
1,847 |
|
|
$ |
6,438 |
|
|
$ |
212 |
|
|
$ |
(5,972 |
) |
|
$ |
2,256 |
|
19
Note 15 – Related Parties
The following persons are owners of Fasemex: Jesus Gil, VP Operations and director of the Company; Alejandro Gil and Salvador Gil, siblings of Jesus Gil. Fasemex provides steel fabrication services to the Company and is the lessor for the Company’s leased facility in Castaños. The Company paid $12,209 and $4,673 to Fasemex during the three months ended March 31, 2022 and 2021, respectively, related to rent payment, security deposit, fabrication services and royalty payments. Distribuciones Industriales JAS S.A. de C.V. (“Distribuciones Industriales”) is owned by Alejandro Gil and Salvador Gil. The Company paid $508 and $334 to Distribuciones Industriales related to material and safety supplies during the three months ended March 31, 2022 and 2021, respectively. Maquinaria y equipo de transporte Jova S.A. de C.V is owned by Jorge Gil, sibling of Jesus Gil. The Company paid $599 and $112 to Maquinaria y equipo de transporte Jova S.A. de C.V related to trucking services during the three months ended March 31, 2022 and 2021, respectively. Related party asset on the condensed consolidated balance sheet of $5,259 as of March 31, 2022 includes prepaid inventory of $713 and other receivables of $4,546 from Fasemex. Related party accounts payable on the condensed consolidated balance sheet of $6,815 as of March 31, 2022 includes $6,017 payable to Fasemex, $301 payable to Distribuciones Industriales and $497 payable to Maquinaria y equipo de transporte Jova S.A. de C.V. Related party asset on the condensed consolidated balance sheet of $8,680 as of December 31, 2021 includes prepaid inventory of $4,134 and other receivables of $4,546 from Fasemex. Related party accounts payable on the condensed consolidated balance sheet of $8,870 as of December 31, 2021 includes $8,291 payable to Fasemex, $291 payable to Distribuciones Industriales and $288 payable to Maquinaria y equipo de transporte Jova S.A. de C.V.
The Company paid $2,037 to the Warrantholder during the three months ended March 31, 2022, for term loan interest of which $1,673 was paid in cash and $364 was payment in kind. Additionally, the Company paid $1,000 in equity fees and $122 in cash fees to the Warrantholder related to the standby letter of credit described in Note 8 Debt Financing and Revolving Credit Facilities during the three months ended March 31, 2022.
Note 16 – Subsequent Event
As previously disclosed on May 14, 2021, the Loan Parties entered into an Amendment No. 2 to the Term Loan Credit Agreement (the “Second Amendment” and together with the Term Loan Credit Agreement, the “Term Loan Credit Agreement”) with Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $16,000 to a total of $56,000, with such additional $16,000 (the “Additional Loan”) to be funded upon the satisfaction of certain conditions precedent set forth in the Second Amendment. The Additional Loan closed and was funded on May 17, 2021. As of March 31, 2022, the Additional Loan was not repaid in full and, therefore, on April 4, 2022, pursuant to the Amendment and a warrant acquisition agreement, dated as of April 4, 2022 (the “Warrant Acquisition Agreement”), the Company issued the Additional Warrant to the Lender. The Additional Warrant has an exercise price of $0.01 and a term of ten (10) years.
The issuance of the Additional Warrant was, and the potential issuance of the common stock issuable upon exercise of the Additional Warrant will be, made in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act, because the offer and sale of such securities do not involve a “public offering” as defined in Section 4(a)(2) of the Securities Act.
In connection with the issuance of the Additional Warrant, on April 4, 2022, the Company and the Lender entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Lender may deliver to the Company a written notice (a “Demand”) requiring the Company as soon as reasonably practicable after receiving the Demand, but not more than sixty calendar days following the receipt of the Demand, to file a registration statement (the “Demand Registration Statement”) with the Securities and Exchange Commission with respect to all or a portion of the Registrable Shares (as defined in the Registration Rights Agreement). The Company will use commercially reasonable efforts to keep the Demand Registration Statement continuously effective (including the preparation and filing of any amendments and supplements necessary for that purpose) until the date on which all of the Registrable Shares registered for resale under the Demand Registration Statement have been sold or such earlier date on which all Registrable Shares are freely tradeable in a single transaction pursuant to Rule 144.
In certain circumstances described in the Registration Rights Agreement, the Lender will have (i) piggyback registration rights with respect to the Registrable Shares and (ii) the right to request that the Company initiate an Underwritten Offering (as defined in the Registration Rights Agreement) of Registrable Shares.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain forward-looking statements including, in particular, statements about our plans, strategies and prospects. We have used the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “likely,” “unlikely,” “intend” and similar expressions in this report to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. However, forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties relate to, among other things, risks relating to the potential financial and operational impacts of the COVID-19 pandemic, the cyclical nature of our business, the competitive nature of our industry, our reliance upon a small number of customers that represent a large percentage of our sales, the variable purchase patterns of our customers and the timing of completion, delivery and customer acceptance of orders, fluctuating costs of raw materials, including steel and aluminum, and delays in the delivery of raw materials, the risk of lack of acceptance of our new railcar offerings by our customers, risks relating to our relationship with our unionized employees and their unions and other competitive factors. The factors listed above are not exhaustive. Other sections of this quarterly report on Form 10-Q include additional factors that could materially and adversely affect our business, financial condition and results of operations. New factors emerge from time to time and it is not possible for management to predict the impact of all of these factors on our business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events except to the extent required by applicable securities laws.
OVERVIEW
You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”
We are a diversified manufacturer of railcars and railcar components. We design and manufacture a broad variety of railcar types for transportation of bulk commodities and containerized freight products primarily in North America. We rebuild and convert railcars and sell forged, cast and fabricated parts for all of the railcars we produce, as well as those manufactured by others. We also lease freight cars. Our primary customers are financial institutions, railroads and shippers.
On September 10, 2020, we announced our plan to permanently close the Shoals Facility in light of the cyclical industry downturn, which was magnified by the global pandemic. The closure will reduce costs and align our manufacturing capacity with the current railcar market. We ceased production at the Shoals Facility in February 2021.
Total new orders received for railcars for the three months ended March 31, 2022 were 855 units, consisting of 657 new railcars and 198 rebuilt railcars, compared to orders for 300 units, consisting of 200 new railcars and 100 rebuilt railcars for the three months ended March 31, 2021. Total backlog of unfilled orders was 2,395 units at March 31, 2022, compared to 2,323 railcars as of December 31, 2021. The estimated sales value of the backlog was $250 million and $240 million, respectively, as of March 31, 2022, and December 31, 2021. The increase in the number of orders for new railcars for the three months ended March 31, 2022 compared to the prior year period is a reflection of improvement in the railcar equipment market.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021
Revenues
Our consolidated revenues for the three months ended March 31, 2022 were $93.2 million compared to $32.4 million for the three months ended March 31, 2021. Manufacturing segment revenues for the three months ended March 31, 2022 were $90.1 million compared to $30.0 million for the corresponding prior year quarter. The $60.1 million increase in Manufacturing segment revenues was largely driven by an increase in the volume of railcar units delivered, Railcar deliveries totaled 783 units for the first quarter of 2022, consisting of 437 new railcars and 346 rebuilt railcars, compared to 309 units, consisting of 160 new railcars and 149 rebuilt
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railcars, in the first quarter of 2021. Corporate and Other revenues were $3.1 million for the three months ended March 31, 2022 compared to $2.4 million for the three months ended March 31, 2021.
Gross Profit
Our consolidated gross profit was $10.1 million for the three months ended March 31, 2022 compared to $1.3 million for the three months ended March 31, 2021. Manufacturing segment gross profit was $9.3 million for the three months ended March 31, 2022 compared to $1.1 million for the three months ended March 31, 2021. The $8.7 million increase in consolidated gross profit and $8.2 million increase in Manufacturing segment gross profit reflect a favorable volume variance.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses for the three months ended March 31, 2022 were $10.7 million compared to $9.2 million for the three months ended March 31, 2021. The increase in consolidated selling, general and administrative expenses for the three months ended March 31, 2022 was primarily due to increases in stock-based compensation related to cash-settled stock appreciation rights awarded to employees in prior periods. Manufacturing segment selling, general and administrative expenses were $0.8 million for the three months ended March 31, 2022, compared to $0.5 million for the three months ended March 31, 2021. Manufacturing segment selling, general and administrative expenses for the three months ended March 31, 2022 were 0.9% of revenue, compared to 1.7% of revenue for the three months ended March 31, 2021. Corporate and Other selling, general and administrative expenses were $9.9 million for the three months ended March 31, 2022 compared to $8.6 million for the three months ended March 31, 2021. Corporate and Other selling, general and administrative expenses for the three months ended March 31, 2022 included increases in stock-based compensation of $1.6 million.
Restructuring and Impairment Charges
There were no restructuring and impairment charges for the three months ended March 31, 2022. Restructuring and impairment charges of $6.6 million for the three months ended March 31, 2021 primarily represented costs related to relocating some of the Shoals facility’s equipment to Castaños.
Operating Loss
Our consolidated operating loss for the three months ended March 31, 2022 was $0.7 million compared to $14.5 million for the three months ended March 31, 2021. Operating income for the Manufacturing segment was $8.5 million for the three months ended March 31, 2022 compared to an operating loss of $6.0 million for the three months ended March 31, 2021, reflecting the increase in railcars delivered during the three months ended March 31, 2022 compared to the 2021 period. Manufacturing segment operating income for the three months ended March 31, 2021 included restructuring and impairment charges of $6.6 million while there were no restructuring and impairment charges for the three months ended March 31, 2022. Corporate and Other operating loss was $9.2 million for the three months ended March 31, 2022 compared to $8.5 million for the three months ended March 31, 2021. The increase in operating loss is primarily a result of the previously described increases in Corporate and Other stock-based compensation costs.
Income Taxes
Our income tax provision was $0.3 million for the three months ended March 31, 2022 compared to $0.1 million for the three months ended March 31, 2021 .
Net Income (Loss)
As a result of the changes and results discussed above, net loss was $25.8 million for the three months ended March 31, 2022 compared to $39.1 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, basic and diluted net loss per share was $1.11 compared to $1.96 for the three months ended March 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are our cash and cash equivalent balances on hand and our credit and debt facilities outlined below.
Term Loan Credit Agreement
On October 13, 2020, the Company entered into a Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, as guarantor, FreightCar North America (“Borrower” and together with the Company and certain other subsidiary
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guarantors, collectively, the “Loan Parties”), CO Finance LVS VI LLC, as lender (the “Lender”), and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”). Pursuant to the Term Loan Credit Agreement, the Lender committed to the extension of a term loan credit facility in the principal amount of $40.0 million, consisting of a single term loan to be funded upon the satisfaction of certain conditions precedent set forth in the Term Loan Credit Agreement, including stockholder approval of the issuance of the common stock underlying the Warrant described below (the funding date of such term loan, the “Closing Date”). FreightCar America, Inc. stockholders approved the issuance of the common stock underlying the Warrant at a special stockholders’ meeting on November 24, 2020. The $40.0 million term loan closed and was funded on November 24, 2020. The Company incurred $2.9 million in deferred financing costs related to the Term Loan Agreement. The deferred financing costs are presented as a reduction of the long-term debt balance and amortized to interest expense over the term of the Term Loan Agreement.
The Term Loan Credit Agreement has a term ending five years following the Closing Date. The term loan outstanding under the Term Loan Credit Agreement bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of March 31, 2022, the interest rate on the original advance of $40.0 million under the Term Loan Credit Agreement was 14.0%.
The Term Loan Credit Agreement has both affirmative and negative covenants, including, without limitation, minimum liquidity, limitations on indebtedness, liens and investments. The Term Loan Credit Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Term Loan Credit Agreement and the related loan documents, each of the Loan Parties granted to Agent a continuing lien upon all of such Loan Parties’ assets to secure the obligations of the Loan Parties under the Term Loan Credit Agreement.
On May 14, 2021, the Loan Parties entered into an Amendment No. 2 to the Term Loan Credit Agreement (the “Second Amendment” and together with the Term Loan Credit Agreement, the “Term Loan Credit Agreement”) with Lender and the Agent pursuant to which the principal amount of the term loan credit facility was increased by $16.0 million to a total of $56.0 million, with such additional $16.0 million (the “Additional Loan”) to be funded upon the satisfaction of certain conditions precedent set forth in the Second Amendment. The Additional Loan closed and was funded on May 17, 2021. The Company incurred $0.5 million in deferred financing costs related to the Second Amendment which are presented as a reduction of the long-term debt balance and amortized on a straight-line basis to interest expense over the term of the Second Amendment.
The Additional Loan bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of March 31, 2022, the interest rate on the Additional Loan was 14.0%.
Pursuant to the Second Amendment, in the event that the Additional Loan was not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender a warrant (the “March 2022 Warrant”) to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the March 2022 Warrant is exercised (after giving effect to such issuance). The Additional Warrant was issued on April 4, 2022. (see Note 16 Subsequent Event).
Pursuant to the Second Amendment, the Company was required to among other things, i) obtain a term sheet for additional financing of no less than $15.0 million by July 31, 2021 and ii) file a registration statement on Form S-3 registering Company securities, including the shares of Company common stock issuable upon exercise of the March 2022 Warrant, by no later than August 31, 2021. The Company has met each of the aforementioned obligations. The Form S-3 registering Company securities, including the shares of Company stock issuable upon exercise of the March 2022 Warrant, was filed with the Securities and Exchange Commission on August 27, 2021 and became effective on September 9, 2021.
On July 30, 2021, the Loan Parties entered into an Amendment No. 3 to Credit Agreement with Lender and the Agent, pursuant to which, among other things, Lender obtained a standby letter of credit (as may be amended from time to time, the “Third Amendment Letter of Credit”) from Wells Fargo Bank, N.A., in the principal amount of $25,000 for the account of the Company and for the benefit of Siena Lending Group LLC (the “Revolving Loan Lender”).
On December 30, 2021, the Loan Parties entered into an Amendment No. 4 to Credit Agreement (the “Fourth Amendment” and together with the Credit Agreement, as amended, the “Term Loan Credit Agreement”) with Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $15.0 million to a total of $71.0 million, with such additional $15.0 million (the “Delayed Draw Loan”) to be funded, at the Borrower’s option, upon the satisfaction of certain conditions precedent
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set forth in the Fourth Amendment. The Borrower has the option to draw on the Delayed Draw Loan through January 31, 2023 and may choose not to do so.
The Delayed Draw Loan, if funded, will bear interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement.
Pursuant to the Reimbursement Agreement, the Company shall make certain other payments as set forth below, so long as the Third Amendment Letter of Credit remains outstanding:
Letter of Credit Fee
The Company shall pay to Agent, for the account of Lender, an annual fee of $0.5 million, which shall be due and payable quarterly beginning on August 2, 2021, and every three months thereafter.
Equity Fee
Every three months (the “Measurement Period”), commencing on August 6, 2021, the Company shall pay to the Lender (or, so long as Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if Lender has timely notified the Company in writing of such designation) a fee (the “Equity Fee”) payable in shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”). The Equity Fee shall be calculated by dividing $1.0 million by the volume weighted average price of the Company’s Common Stock on the Nasdaq Capital Market for the ten (10) trading days ending on the last business day of the applicable Measurement Period. The Company can opt to pay the Equity Fee in cash, in the amount of $1.0 million, if, and only if, (x) the Company has already issued as Equity Fees a number of shares of its Common Stock equal to (I) 5.0% multiplied by (II) the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock, and (y) the Company has at least $15.0 million of Repayment Liquidity after giving effect to such payment. The term Repayment Liquidity, as defined in the Term Loan Credit Agreement, means (a) all unrestricted and unencumbered cash and cash equivalents of the Loan Parties, plus (b) the undrawn and available portion of the commitments under that certain Amended and Restated Loan and Security Agreement by and among the Loan Parties and the Revolving Loan Lender (as described below), minus (c) all accounts payable of the Loan Parties that are more than 30 days past due.
The Equity Fee shall no longer be paid once the Company has issued to Lender and/or OC III LVS XII LP Equity Fees in an amount of Common Stock equal to 9.99% multiplied by the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock (the “Maximum Equity”). Through March 31, 2022, the Company has paid Equity Fees totaling 693,077 shares of the Company's Common Stock.
The issuance of each Equity Fee under the Reimbursement Agreement will be made in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act for offers and sales of securities that do not involve a “public offering.”
Cash Fee
The Company shall pay to the Agent, for the account of the Lender (or, so long as the Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if the Lender has timely notified the Company in writing of such designation) a cash fee (the “Cash Fee”) which shall be due and payable in cash quarterly beginning on the date that the Maximum Equity has been issued and thereafter on the business day immediately succeeding the last business day of the applicable Measurement Period. The Cash Fee shall be equal to $1.0 million, provided that, in the quarter in which the Maximum Equity is issued, such fee shall be equitably reduced by the value of any Equity Fee issued by the Company that quarter.
Warrant
In connection with the entry into the Term Loan Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020 (the “Warrant Acquisition Agreement”), by and between the Company and the Lender to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 23% of the outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance). The Warrant is exercisable for a term of ten years from the date of the issuance of the Warrant. The Warrant was issued on November 24, 2020 after the Company received stockholder approval of the issuance of the common stock issuable upon exercise of the Warrant by the Warrantholder. In connection with the issuance of the Warrant, the Company and the Lender entered into a registration rights agreement (the “Registration Rights Agreement”) as of the
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Closing Date of November 24, 2020. As of March 31, 2022 and December 31, 2021, the Warrant was exercisable for an aggregate of 6,289,754 and 6,098,217 shares, respectively, of common stock of the Company with a per share exercise price of $0.01.The Company determined that the Warrant should be accounted for as a derivative instrument and classified as a liability on its Consolidated Balance Sheets primarily due to the instrument obligating the Company to settle the Warrant in a variable number of shares of common stock. The Warrant was recorded at fair value and is treated as a discount on the term loan. The discount on the associated debt is amortized over the life of the Term Loan Credit Agreement and included in interest expense.
Pursuant to the Second Amendment, in the event that the Additional Loan was not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender the March 2022 Warrant to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the March 2022 Warrant is exercised (after giving effect to such issuance). Because the Company believed that it was probable that the March 2022 Warrant would be issued the Company recorded an additional warrant liability of $7.4 million during the third quarter of 2021. The Additional Warrant was issued on April 4, 2022. (see Note 16 Subsequent Event).
Pursuant to the Fourth Amendment and a warrant acquisition agreement, dated as of December 30, 2021 (the “Warrant Acquisition Agreement”), the Company issued to the Lender a warrant (the “December 2021 Warrant”) to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the December 2021 Warrant is exercised (after giving effect to such issuance). The December 2021 Warrant has an exercise price of $0.01 and a term of ten years. As of March 31, 2022 and December 31, 2021, the December 2021 Warrant was exercisable for an aggregate of 1,367,337 and 1,325,699 shares, respectively, of common stock of the Company with a per share exercise price of $0.01.
In addition, to the extent the Delayed Draw Loan is funded, the Company has agreed to issue to the Lender a warrant (the “3% Additional Warrant”) to purchase up to a number of shares of the Company’s common stock, par value $0.01 per share, equal to 3% of the Company’s outstanding common stock on a fully-diluted basis at the time the 3% Additional Warrant is exercised (after giving effect to such issuance). The 3% Additional Warrant, if issued, will have an exercise price of $0.01 and a term of ten years.
Siena Loan and Security Agreement
On October 8, 2020, the Company entered into a Loan and Security Agreement (the “Siena Loan Agreement”) by and among the Company, as guarantor, and certain of its subsidiaries, as borrowers (together with the Company, the “Loan Parties”), and Siena Lending Group LLC, as lender (“Siena”). Pursuant to the Siena Loan Agreement, Siena provided an asset backed credit facility, in the maximum aggregate principal amount of up to $20.0 million, (the "Maximum Revolving Facility Amount") consisting of revolving loans (the "Revolving Loans").
The Siena Loan Agreement provided for a revolving credit facility with maximum availability of $20.0 million, subject to borrowing base requirements set forth in the Siena Loan Agreement, which generally limited availability under the revolving credit facility to (a) 85% of the value of eligible accounts and (b) up to the lesser of (i) 50% of the lower of cost or market value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory, and as reduced by reserves established by Siena from time to time in accordance with the Siena Loan Agreement.
On July 30, 2021, the Loan Parties and Siena entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan and Security Agreement”), which amended and restated the terms and conditions of the Siena Loan Agreement in its entirety.
Pursuant to the Amended and Restated Loan and Security Agreement, the Maximum Revolving Facility Amount was increased to $25.0 million, provided, however, that the outstanding balance of all Revolving Loans may not exceed the lesser of (A) the Maximum Revolving Facility Amount minus the Availability Block and (B) an amount equal to the issued and undrawn portion of the Third Amendment Letter of Credit (as defined above) minus the Availability Block. The term “Availability Block”, as defined in the Amended and Restated Loan and Security Agreement, means 3.0% of the issued and undrawn amount under the Third Amendment Letter of Credit.
The Amended and Restated Loan and Security Agreement has a term ending on October 8, 2023. Revolving Loans outstanding under the Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the Amended and Restated Loan and Security Agreement, at an interest rate of 2% per annum in excess of the Base Rate (as defined in the Siena Loan Agreement).
The Amended and Restated Loan and Security Agreement contains affirmative and negative covenants, including, without limitation, limitations on future indebtedness, liens and investments. The Amended and Restated Loan and Security Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Amended and Restated Loan and Security
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Agreement, each of the Loan Parties granted Siena a continuing lien upon certain assets of the Loan Parties to secure the obligations of the Loan Parties under the Amended and Restated Loan and Security Agreement.
On February 23, 2022, the Loan Parties and the Revolving Loan Lender entered into a First Amendment to Amended and Restated Loan and Security Agreement (the “First Amendment to Amended and Restated Loan and Security Agreement”), pursuant to which, among other things, the Maximum Revolving Facility Amount was increased to $35 million; provided, however, that after giving effect to each Revolving Loan and each letter of credit made available to the Loan Parties, (A) the outstanding balance of all Revolving Loans and the Letter of Credit Balance (which is defined in the Amended and Restated Loan and Security Agreement as the sum of (a) the aggregate undrawn face amount of all outstanding Letters of Credit and (b) all interest, fees and costs due or, in Lender’s estimation, likely to become due in connection therewith) will not exceed the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base (as defined in the First Amendment to Amended and Restated Loan and Security Agreement), and (B) none of the other Loan Limits (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) for Revolving Loans will be exceeded.
Revolving Loans outstanding under the First Amendment to Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the First Amendment to Amended and Restated Loan and Security Agreement, at a rate of 2% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). Notwithstanding the foregoing, Revolving Loans made in respect of Excess Availability (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) arising from clause (b) of the definition of “Borrowing Base” bear interest, subject to the provisions of the First Amendment to Amended and Restated Loan and Security Agreement, at a rate of 1.5% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). As of March 31, 2022, the interest rate on outstanding debt under the First Amendment to Amended and Restated Loan and Security Agreement was 5.0%.
As of March 31, 2022, the Company had $32.3 million in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $1.1 million. As of December 31, 2021, the Company had $24.0 million in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $0.1 million .The Company incurred $1.1 million in deferred financing costs related to the Siena Loan Agreement and incurred $1.0 million in additional deferred financing costs related to the Amended and Restated Loan and Security Agreement. The deferred financing costs are presented as an asset and amortized to interest expense on a straight-line basis over the term of the Siena Loan Agreement.
M&T Credit Agreement
On April 16, 2019, FreightCar America Leasing 1, LLC, an indirect wholly-owned subsidiary of the Company (“Freightcar Leasing Borrower”), entered into a Credit Agreement (the “M&T Credit Agreement”) with M & T Bank, N.A., as lender (“M&T”). Pursuant to the M&T Credit Agreement, M&T extended a revolving credit facility to Freightcar Leasing Borrower in an aggregate amount of up to $40.0 million for the purpose of financing railcars which will be leased to third parties.
On April 16, 2019, Freightcar Leasing Borrower also entered into a Security Agreement with M&T (the “M&T Security Agreement”) pursuant to which it granted a security interest in all of its assets to M&T to secure its obligations under the M&T Credit Agreement.
On April 16, 2019, FreightCar America Leasing, LLC, a wholly-owned subsidiary of the Company and parent of Freightcar Leasing Borrower (“Freightcar Leasing Guarantor”), entered into (i) a Guaranty Agreement with M&T (the “M&T Guaranty Agreement”) pursuant to which Freightcar Leasing Guarantor guarantees the repayment and performance of certain obligations of Freightcar Leasing Borrower and (ii) a Pledge Agreement with M&T (the “M&T Pledge Agreement”) pursuant to which Freightcar Leasing Guarantor pledged all of the equity of Freightcar Leasing Borrower held by Freightcar Leasing Guarantor.
The loans under the M&T Credit Agreement are non-recourse to the assets of the Company or its subsidiaries other than the assets of Freightcar Leasing Borrower and Freightcar Leasing Guarantor.
The M&T Credit Agreement had a term ending on April 16, 2021 (the “Term End”). Loans outstanding thereunder will bear interest, accrued daily, at the Adjusted LIBOR Rate (as defined in the M&T Credit Agreement) or the Adjusted Base Rate (as defined in the M&T Credit Agreement). The M&T Credit Agreement has both affirmative and negative covenants, including, without limitation, maintaining an Interest Coverage Ratio (as defined in the M&T Credit Agreement) of not less than 1.25:1.00, measured quarterly, and limitations on indebtedness, loans, liens and investments. The M&T Credit Agreement also provides for customary events of default.
On August 7, 2020, FreightCar Leasing Borrower received notice (the “First Notice”) from M&T that, based on an appraisal (the “Appraisal”) conducted by a third party at the request of M&T with respect to the railcars in FreightCar Leasing Borrower’s Borrowing Base (as defined in the M&T Credit Agreement) under the M&T Credit Agreement, the unpaid principal balance under the M&T Credit Agreement exceeded the availability under the M&T Credit Agreement as of the date of the Appraisal by $5.1 million
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(the “Payment Demand Amount”). In the First Notice, M&T Bank: (a) asserted that an Event of Default under the M&T Credit Agreement has occurred because FreightCar Leasing Borrower did not pay the Payment Demand Amount to M&T within five days of the asserted change in availability; (b) demanded payment of the amount within five days of the date of the First Notice; and (c) terminated the commitment to advance additional loans under the M&T Credit Agreement.
On December 18, 2020, FreightCar Leasing Borrower received a revised notice (the “Second Notice,” and together with the First Notice, the “Notices”) from M&T asserting that: (a) as a result of the continuing Event of Default that M&T alleged to have occurred under the M&T Credit Agreement, M&T has declared a default and accelerated and demands immediate payment by FreightCar Leasing Borrower of $10.1 million (the “Outstanding Amount”); (b) FreightCar Leasing Borrower is liable for all interest that continues to accrue on the Outstanding Amount; and (c) FreightCar Leasing Borrower is liable for all attorneys’ fees, costs and expenses as set forth in the M&T Credit Agreement.
On April 20, 2021, FreightCar Leasing Borrower received a notice from M&T that an Event of Default had occurred due to all amounts outstanding under the M&T Credit Agreement not having been paid by the Term End.
On December 28, 2021 (the “Execution Date”), FreightCar Leasing Borrower, FreightCar Leasing Guarantor (together with the FreightCar Leasing Borrower, the “Obligors”), the Company, FreightCar America Railcar Management, LLC, a Delaware limited liability company (“FCA Management”), and M&T, entered into a Forbearance and Settlement Agreement (the “Forbearance Agreement”) with respect to the M&T Credit Agreement and its related Credit Documents (as defined in the M&T Credit Agreement), as well as certain intercompany services agreements related thereto.
Pursuant to the Forbearance Agreement, the Obligors will continue to perform and comply with all of their performance obligations (as opposed to payment obligations) under certain provisions of the M&T Credit Agreement (primarily related to information obligations and the preservation of the collateral pledged by the Borrower to M&T pursuant to the M&T Security Agreement, between the Borrower and M&T (the “Collateral”)) and all the provisions of the M&T Security Agreement. During the period from Execution Date until the termination of the Forbearance Agreement, M&T may not take any action against the Obligors or exercise or enforce any rights or remedies provided for in the Credit Documents or otherwise available to it.
On December 1, 2023, or sooner if requested by M&T (the “Turnover Date”), the Borrower shall execute and deliver to M&T documents required to deliver and assign to M&T all the leased railcars and related leases serving as Collateral for the M&T Credit Agreement.
Upon the Turnover Date and the Obligors’ performance of their respective obligations under the Forbearance Agreement, including the delivery of certain Collateral to M&T upon the Turnover Date, all Obligations (as defined in the M&T Credit Agreement) shall be deemed satisfied in full, M&T shall no longer have any further claims against the Obligors under the M&T Credit Documents and the Credit Documents shall automatically terminate and be of no further force or effect except for the provisions thereof that expressly survive termination.
The Forbearance Agreement contains customary releases at execution for all affiliates of the Company (other than the Obligors) and agreements to deliver final releases with respect to the Obligors upon their performance under the Forbearance Agreement. The Company also agreed to turn over to M&T on the Effective Date certain rents in the amount of $0.7 million that it had previously collected as servicing agent for the Borrower, and to continue to provide such services through the Turnover Date without a service fee, and after the Turnover Date through the return of the railcars serving as Collateral, for a service fee.
As of March 31, 2022 and December 31, 2021, FreightCar Leasing Borrower had $7.7 million and $7.9 million, respectively, in outstanding debt under the M&T Credit Agreement, which was collateralized by leased railcars with a carrying value of $6.6 million and $6.6 million, respectively. As of March 31, 2022, the interest rate on outstanding debt under the M&T Credit Agreement was 4.50%.
Additional Liquidity Factors
Our restricted cash, restricted cash equivalents and restricted certificates of deposit balances were $4.4 million and $5.0 million as of March 31, 2022 and December 31, 2021, respectively. Restricted deposits of $0.3 million as of each of March 31, 2022 and December 31, 2021, relate to a customer deposit for purchase of railcars. Restricted deposits of $3.6 million and $4.7 million as of March 31, 2022 and December 31, 2021, respectively, are used to collateralize standby letters of credit with respect to performance guarantees. The standby letters of credit outstanding as of March 31, 2022 are scheduled to expire at various dates through December 10, 2022.
Based on our current level of operations and known changes in planned volume based on our backlog, we believe that our cash balances will be sufficient to meet our expected liquidity needs for at least the next twelve months. Our long-term liquidity is contingent upon future operating performance and our ability to continue to meet financial covenants under our revolving credit
27
facilities, our Term Loan Credit Agreement and any other indebtedness and the availability of additional financing if needed. We may also require additional capital in the future to fund working capital as demand for railcars increases, payments for contractual obligations, organic growth opportunities, including new plant and equipment and development of railcars, joint ventures, international expansion and acquisitions, and these capital requirements could be substantial. Additionally, our Value Added Tax ("VAT") receivable has grown over the past year and has become a significant part of the Company’s working capital structure. We continue to work through the return process and have made progress in recovering VAT refunds.
Based upon our operating performance and capital requirements, we may, from time to time, be required to raise additional funds through additional offerings of our common stock and through long-term borrowings such as the $40.0 million term loan under the Term Loan Credit Agreement. There can be no assurance that long-term debt, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders and debt financing, if available, may involve restrictive covenants. Our failure to raise capital if and when needed could have a material adverse effect on our results of operations and financial condition.
Cash Flows
The following table summarizes our net cash provided by (used in) operating activities, investing activities and financing activities for the three months ended March 31, 2022 and 2021:
|
|
2022 |
|
|
2021 |
|
||
|
|
(In thousands) |
|
|||||
Net cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
7,645 |
|
|
$ |
(22,276 |
) |
Investing activities |
|
|
(960 |
) |
|
|
(169 |
) |
Financing activities |
|
|
8,086 |
|
|
|
(46 |
) |
Total |
|
$ |
14,771 |
|
|
$ |
(22,491 |
) |
Operating Activities. Our net cash provided by or used in operating activities reflects net loss adjusted for non-cash charges and changes in operating assets and liabilities. Cash flows from operating activities are affected by several factors, including fluctuations in business volume, contract terms for billings and collections, the timing of collections on our contract receivables, processing of bi-weekly payroll and associated taxes, payments to our suppliers and other operating activities. As some of our customers accept delivery of new railcars in train-set quantities, variations in our sales lead to significant fluctuations in our operating profits and cash from operating activities. We do not usually experience business credit issues, although a payment may be delayed pending completion of closing documentation.
Our net cash provided by operating activities for the three months ended March 31, 2022 was $7.6 million compared to net cash used in operating activities of $21.9 million for the three months ended March 31, 2021 . Our net cash provided by operating activities for the three months ended March 31, 2022 reflects changes in working capital, including increases in customer deposits of $18.7 million which were partially offset by increases in accounts receivable of $12.5 million. Increases in customer deposits for the three months ended March 31, 2022 represented customer prepayments for inventory to be used in production of railcars to be delivered during 2022. Our net cash used in operating activities for the three months ended March 31, 2021 reflects changes in working capital, including increases in VAT receivable of $8.8 million and decreases in customer deposits and deferred revenue of $6.9 million. Decreases in customer deposits and deferred revenue for the three months ended March 31, 2021 reflected delivery of railcars and recognition of revenue during the period.
Investing Activities. Net cash used in investing activities for the three months ended March 31, 2022 was $1.0 million and consisted of capital expenditures related to the construction in progress for our Mexico operations. Net cash used in investing activities for the three months ended March 31, 2021 was $0.2 million and included capital expenditures of $0.6 million related to the construction in progress for our Mexico operations and the $0.4 million proceeds from sale of equipment from our Shoals facility.
Financing Activities. Net cash provided by financing activities for the three months ended March 31, 2022 was $8.1 million and primarily consisted of net borrowings on our revolving line of credit. Net cash used in financing activities for the three months ended March 31, 2021 was not material.
Capital Expenditures
Our capital expenditures were $1.0 million in the three months ended March 31, 2022, compared to $0.5 million in the three months ended March 31, 2021. We anticipate capital expenditures during 2022 to be in the range of $7 million to $8 million, primarily related to the construction of our Mexico facility.
28
Item 4. Controls and Procedures.
Management’s Report on Internal Control over Financial Reporting
The Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange At of 1934, as amended (the “Exchange Act”)), as of March 31, 2022. Based on their evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2022.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
29
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The information in response to this item is included in Note 12 – Contingencies to our condensed consolidated
financial statements included in Part I, Item 1 of this Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
10.1 |
FreightCar America, Inc. Executive Severance Plan (As Amended and Restated January 17, 2022) |
10.2 |
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10.3 |
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10.4 |
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10.5 |
|
10.6 |
|
10.7 |
|
31.1 |
|
31.2 |
|
32 |
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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FREIGHTCAR AMERICA, INC. |
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|
Date: May 10, 2022 |
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By: |
/s/ JAMES R. MEYER |
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|
James R. Meyer, President and Chief Executive Officer (Principal Executive Officer) |
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|
|
|
|
By: |
/s/ MICHAEL A. RIORDAN |
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|
Michael A. Riordan, Vice President, Finance, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)
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|
31
Exhibit 10.1
FREIGHTCAR AMERICA, INC. EXECUTIVE SEVERANCE PLAN
(As Amended and Restated Effective January 17, 2022)
(And Summary Plan Description)
Article 1. Establishment and Term of the Plan
1.1 Establishment of the Plan. The Company has established and maintains this FreightCar America, Inc. Executive Severance Plan, as amended from time to time. The Plan provides Severance Benefits to certain eligible executives of the Company as designated from time to time by the Plan Administrator and set forth on Appendix A hereto (the “Executives”), subject to the terms and conditions of the Plan. No individuals other than the Executives shall be eligible to receive any Severance Benefits under the Plan. Severance Benefits for the Executives will be determined exclusively under the Plan.
The Plan, as set forth herein, is an employee welfare benefit plan within the meaning of ERISA Section 3(1), and the Company intends that the Plan be administered in accordance with the applicable requirements of ERISA and the regulations under ERISA. This Plan document, including the information provided in Appendix B hereto, is also the summary plan description of the Plan.
1.2 Plan Term. The Plan became effective on October 1, 2009 and shall continue in effect until terminated by the Company.
1.3 Administration. The Plan Administrator is the named fiduciary of the Plan. The Plan Administrator may, as it deems necessary or advisable, appoint an individual or committee to act as its representative in matters affecting the Plan. The Plan Administrator may adopt rules and regulations it deems consistent with the terms of the Plan and necessary or advisable to administer the Plan properly and efficiently. In administering the Plan and providing Severance Benefits, the Plan Administrator has full discretionary authority to construe and interpret the Plan’s terms and to make factual determinations under it, including the authority to determine an individual’s eligibility for Severance Benefits, the reason for employment termination, and the amount of Severance Benefits payable. Severance Benefits will be provided only if the Plan Administrator decides in its sole discretion that the person seeking such benefits is entitled to them under the terms of the Plan. Any interpretation of the Plan made in good faith by the Plan Administrator, and any decision made in good faith on any matter within the discretion of the Plan Administrator under the Plan, will be binding on all persons. Notwithstanding anything in this Section 1.3 to the contrary, following a Change in Control, the Plan Administrator shall administer the Plan in a manner consistent with the administration of the Plan prior to such Change in Control.
Article 2. Definitions
Wherever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
1
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 the Plan, 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 the Executive in bad faith or without reasonable belief that such 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
2
be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of the Company.
2.6 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:
2.7 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time.
2.8 “Code” means the U.S. Internal Revenue Code of 1986 and the regulations thereunder, as amended from time to time.
2.9 “Company” means FreightCar America, Inc., a Delaware corporation, and any successor thereto as provided in Article 8 herein.
2.10 “Company Materials” shall have the meaning given to such term in Section 5.1 herein.
2.11 “Confidential Information” shall have the meaning given to such term in Section 5.1 herein.
2.12 “Disability” means, in the written opinion of a qualified physician selected by the 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, (a) unable to engage in any substantial gainful activity, or (b) receiving
3
income replacement benefits for a period of not less than three months under the Company’s disability plan.
2.13 “ERISA” means the Employee Retirement Income Security Act of 1974 and the regulations thereunder, as amended from time to time.
2.14 “Exchange Act” means the Securities Exchange Act of 1934 and the regulations thereunder, as amended from time to time.
2.15 “Executive” means an eligible employee of the Company designated from time to time by the Company and set forth on Appendix A hereto. No individuals other than those set forth on Appendix A hereto shall be eligible to receive Severance Benefits under the Plan.
2.16 “Good Reason” means, without the Executive’s written consent, the occurrence of any of the following conditions, unless such condition is fully corrected within sixty (60) calendar days after written notice thereof:
Notwithstanding anything in the Plan to the contrary, a termination of employment due to Good Reason must occur, if at all, within one hundred twenty (120) calendar days after the Company receives written notice of any one or more of the conditions set forth in this Section 2.16. The Executive must provide the Company with written notice of any one or more of the conditions set forth in this Section 2.16 within ninety (90) calendar days of the initial existence of the condition in order for such condition to constitute Good Reason under the Plan.
2.17 “Inventions” shall have the meaning given to such term in Section 5.6 herein.
2.18 “Notice of Termination” means a written notice that shall indicate the specific termination provision in the Plan relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.
2.19 “Person” shall have the meaning given in Sections 13(d) and 14(d)(2) of the Exchange Act, as modified and used herein, provided that a Person shall not include (a) the
4
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 shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.
2.20 “Plan” means this FreightCar America, Inc. Executive Severance Plan.
2.21 “Plan Administrator” means the administrator of the Plan as designated by the Board.
2.22 “Plan Year” means the 12-month period that begins each January 1.
2.23 “Qualifying Retirement” means Executive terminating his or her employment by retiring on the later of (a) the last day of Executive’s retirement notice period (as set forth for the Executive on Appendix A) following Executive’s delivery of a Notice of Termination to the Company and (b) the date Executive has both (i) attained age 60 and (ii) completed at least 5 years of service with the Company and its affiliates.
2.24 “Qualifying Termination” shall have the meaning given to such term in Section 3.2 herein.
2.25 “Severance Benefits” shall have the meaning given to such term in Section 3.3 herein.
Article 3. Severance Benefits
3.1 Eligibility for Severance Benefits. Subject to the conditions and limitations of the Plan, an Executive who experiences a Qualifying Termination shall be entitled to receive Severance Benefits. Notwithstanding the preceding sentence, eligibility for the receipt of Severance Benefits under the Plan is expressly conditioned upon the execution by the Executive of a comprehensive release agreement and waiver of claims against the Company in a form to be determined in the sole discretion of the Company, as well as compliance with the restrictive covenants of Article 5. An Executive who does not execute a release agreement within the period specified, who revokes it, or who does not comply with the restrictive covenants of Article 5, will not be entitled to Severance Benefits under the Plan.
3.2 Qualifying Termination. The occurrence of any of the following events (a “Qualifying Termination”) shall entitle the Executive to receive Severance Benefits:
Notwithstanding the forgoing, an Executive shall not be deemed to have incurred a Qualifying Termination unless such Executive agrees to provide (and provides) transition services
5
to the Company as reasonably requested by the Board; provided that, the Executive shall not be required to devote an amount of time that exceeds twenty percent (20%) of the average level of services performed during the 36-month period immediately prior to Executive’s termination date (excluding, to the extent permissible under Code Section 409A, prior services as a member of the Board if the Executive was and remains a member of the Board prior to and following, respectively, the Executive’s termination date) and provided further that the duration that Executive may be required to perform such transition services shall not exceed twelve (12) months. For purposes of the Plan, an 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 such a separation from service.
3.3 Description of Severance Benefits. In the event that the Executive experiences a Qualifying Termination, the Company shall pay to the Executive (or the Executive’s representative) and provide the Executive (or the Executive’s representative) with the following “Severance Benefits”:
No Severance 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
6
other source following the Executive’s termination of employment with the Company and during the period Severance Benefits are being provided.
Notwithstanding anything in this Plan to the contrary, Severance Benefits under the Plan are contingent upon the Executive executing and delivering to the Company (and not revoking during the revocation period) a release and waiver of claims acceptable to the Company (the “Release”) by the Release Deadline. For purposes of the Plan, the “Release Deadline” means the date that is sixty (60) calendar days after the Executive’s separation from service. Payment of any Severance Benefits that are not exempt from Code Section 409A shall be delayed until the Release Deadline, irrespective of when the Executive executes the Release; provided, however, that where the Executive’s separation from service and the Release Deadline occur within the same calendar year, the payment may be made up to thirty (30) calendar days prior to the Release Deadline, and provided further that where the Executive’s separation from service and the Release Deadline occur in two separate calendar years, payment may not be made before the later of January 1 of the second year or the date that is thirty (30) calendar days prior to the Release Deadline. An Executive who performs transition services pursuant to Section 3.2 shall be required to enter into an additional Release within sixty (60) days after the conclusion of the Executive’s performance of transition services. If an Executive fails to comply with the terms and conditions of the Release or with the restrictive covenants of Article 5, as determined by the Plan Administrator, while receiving Severance Benefits under the Plan, the Company will cease payment of Severance Benefits to the Executive.
3.4 Death or Disability. If the Executive’s employment is terminated due to the Executive’s death or Disability, the Company shall pay the Executive (or the Executive’s representative) the benefits and amounts under Section 3.3(a) herein in accordance with that Section (including without limitation life or long-term disability insurance benefits), and the Company shall have no further obligations to the Executive (or the Executive’s representative) under the Plan.
3.5 Termination for Cause or by the Executive Other Than for Good Reason. If the Executive’s employment is terminated either (a) by the Company for Cause or (b) by the Executive other than for Good Reason, the Company shall pay the Executive the benefits and amounts under Section 3.3(a) herein in accordance with that Section and the Company shall have no further obligations to the Executive under the Plan, except with respect to the treatment of Executive’s equity incentive awards described in Section 3.7 upon Executive’s termination for a Qualifying Retirement.
3.6 Notice of Termination. Any termination of the Executive’s employment by the Company for Cause, by the Executive for Good Reason or by the Executive for a Qualifying Retirement shall be communicated by Notice of Termination to the other party. Notwithstanding anything in this Plan to the contrary, the earliest date the Executive may deliver a Notice of Termination with respect to a termination of Executive’s employment by the Executive for a Qualifying Retirement is January 1, 2022.
3.7 Qualifying Retirement. If Executive’s employment is terminated by Executive for a Qualifying Retirement, following such termination of employment, Executive and Executive’s equity incentive awards under the FreightCar America, Inc. 2005 Long Term
7
Incentive Plan, as amended, and the FreightCar America, Inc. 2018 Long Term Incentive Plan, as amended (and any successor plan adopted by the Company or the Company’s successor) shall be eligible for the following treatment:
Notwithstanding the continued vesting of Executive’s equity incentive awards in connection with a Qualifying Retirement provided in this Section 3.7, the Executive’s equity incentive awards shall otherwise continue to be subject to the same terms and conditions as applied prior to the Executive’s termination for a Qualifying Retirement. In addition, to the extent the application of this Section 3.7 would result in any equity incentive award no longer being exempt from or complying with Code Section 409A, this Section 3.7 shall not apply to such award.
Article 4. Other Amendments
The definition of “Change in Control” applicable to Executive’s outstanding unvested equity incentive awards will be deemed to also include any event that qualifies as a Change in Control, as defined in this Plan; provide, that, to the extent the application of this Article 4 would result in any equity incentive award no longer being exempt from or complying with Code Section 409A, this Article 4 shall not apply to such award.
Article 5. Restrictive Covenants
Severance Benefits under the Plan are expressly conditioned on the Executive’s compliance with each of the restrictive covenants of this Article 5.
5.1 Confidential Information and Company Materials. 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 the Plan, “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, that has commercial value in the Company’s business. Confidential Information is
8
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, (a) 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, payment terms, customer lists and other similar information; (b) inventions, designs, methods, discoveries, works of authorship, creations, improvements or ideas developed or otherwise produced, acquired or used by the Company; (c) 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; (d) 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 (e) 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 that the Company reasonably regards as being confidential.
The Company possesses or will possess “Company Materials” that are important to its business. For purposes of the Plan, “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.
5.2 Noncompetition and Nonsolicitation. For a period of 12 consecutive months after termination of the Executive’s employment for any reason, the Executive will not, directly or indirectly:
9
5.3 Non-Disparagement. For a period of 12 consecutive months after termination of the Executive’s employment for any reason, the Executive will not, directly or indirectly, except as provided in Section 5.5 below, make any statements, written or verbal, or cause or encourage others to make any statements, written or verbal, that defame, disparage or in any way criticize the personal or business reputation, practices, or conduct of the Company, its employees, directors, or officers. The Executive acknowledges and agrees that this prohibition extends to statements, written or verbal, made to anyone, including but not limited to the news media, investors, potential investors, any board of directors, industry analysts, competitors, strategic partners, vendors, employees (past and present), and customers.
5.4 Forfeitures. To the maximum extent permitted by applicable law, the Executive shall forfeit all of the Severance Benefits, and the Company shall have the right to recapture and seek repayment of any such Severance Benefits in the event that:
(a) The Executive breaches any of the restrictions or covenants in this Article 5; or
(b) The Company’s financial results are significantly restated and the Board determines that fraud, intentional misconduct, or negligence by the Executive caused or contributed to the need for the restatement.
5.5 Whistleblower Claims and Other Government Investigations. Nothing in this Article 5 or elsewhere in the Plan shall limit or impede the Executive’s right (with or without prior notice to the Company) to (i) raise in good faith or participate in an investigation regarding any potential violation of law or regulation with any governmental or regulatory agency, including the Securities and Exchange Commission (“SEC”), or (ii) make any disclosure protected by law under the whistleblower provisions of any state or federal statutes or regulations. Any disclosure of Confidential Information (as defined above) made to any governmental or regulatory agency will be limited to Confidential Information that is reasonably related to the alleged violation and/or specifically requested by the investigating agency. The Executive will make any such disclosure(s) only to such parties authorized to investigate the potential violation.
5.6 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 the Plan. Except as defined in the Plan, all Inventions that the Executive makes, conceives,
10
reduces to practice or develops (in whole or in part, either alone or jointly with others) during the Executive’s employment will be the sole property of the Company to the maximum extent permitted by law.
5.7 Remedies. Monetary damages will not be an adequate remedy for the Company in the event of a breach or threatened breach of any provision of this Article 5 and it would be impossible for the Company to measure damages in the event of such a breach or threatened breach. Therefore, in addition to other rights and remedies that the Company may have, the Company shall be entitled to an injunction preventing the Executive from any breach or threatened breach of any provision of this Article 5, and the Executive shall waive any requirement that the Company post any bond in connection with any such injunction. The existence of any claim by an Executive against the Company, except for a claim that an Executive was terminated without Cause, shall not constitute a defense to the enforcement by the Company of any provision of this Article 5.
5.8 Blue Pencil. If any court determines that the covenants contained in this Article 5, 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.
Article 6. Code Section 409A
6.1 The Plan 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 Plan shall be construed and interpreted with such intent.
6.2 Each payment under the Plan or any Company benefit plan is intended to be treated as one of a series of separate payments for purposes of Code Section 409A. To the extent any reimbursements or in-kind benefit payments under the Plan are subject to Code Section 409A, such reimbursements and in-kind benefit payments will be made in accordance with Treasury Regulation §1.409A-3(i)(1)(iv) (or any similar or successor provisions).
6.3 Notwithstanding anything in the Plan to the contrary, to the extent the Executive is considered a “specified employee” (as defined in Code Section 409A) and would be entitled to a payment during the six-month period beginning on the Executive’s date of termination that is not otherwise excluded under Code Section 409A under the exception for short-term deferrals, separation pay arrangements, reimbursements, in-kind distributions, or any otherwise applicable exemption, the payment will not be made to the Executive until the earlier of the six-month anniversary of the Executive’s date of termination or the Executive’s death and will be accumulated and paid on the first day of the seventh month following the date of termination.
6.4 The Company may amend the Plan to the minimum extent necessary to satisfy the applicable provisions of Code Section 409A.
6.5 The Company cannot guarantee that the Severance Benefits provided pursuant to the Plan will satisfy all applicable provisions of Code Section 409A.
11
Article 7. Claims Procedure
7.1 Claims Procedure. Severance Benefits shall be paid without the necessity of formal claims. If any person believes he or she is being denied any rights or benefits under the Plan or receives an adverse benefit determination, such person (or the person’s duly authorized representative) may file a claim in writing with the Plan Administrator within one year following the applicable Executive’s date of termination. An adverse benefit determination is a denial, reduction, or termination of, rescission (including for a disability claim, a retroactive termination), or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of a participant’s or beneficiary’s eligibility to participate in the Plan.
(a) All Claims Incurred Prior to April 1, 2018, and Non-Disability Related Claims Incurred on or After April 1, 2018. If any such claim is wholly or partially denied, the Plan Administrator will notify the claimant of its decision in writing. The notification will set forth, in a manner calculated to be understood by the claimant, the following: (a) the specific reason or reasons for the adverse determination, (b) reference to the specific Plan provisions on which the determination is based, (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and (d) a description of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following the final benefit determination on appeal. Such notification will be given within ninety (90) calendar days after the claim is received by the Plan Administrator, or within one hundred eighty (180) calendar days, if the Plan Administrator determines that special circumstances require an extension of time for processing the claim. If the Plan Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial ninety (90)-calendar day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render a benefit determination.
(b) Disability Related Claims Incurred on or after April 1, 2018. If any such claim is a disability related determination for a claim incurred on or after April 1, 2018, and is approved or wholly or partially denied, the Plan Administrator will notify the claimant of its decision in writing. The notification shall be provided in a culturally and linguistically appropriate manner and will contain the following: (1) the specific reason or reasons for the adverse determination, including the basis for disagreeing with or not following (if applicable) (i) the views presented by the claimant to the Plan Administrator of health care professionals treating the claimant and vocational professionals who evaluated the claimant; (ii) the views of medical or vocational experts whose advice was obtained on behalf of the Plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and (iii) a disability determination regarding the claimant presented by the claimant to the Plan made by the Social Security Administration, (2) reference to the specific Plan provisions on which the benefit determination is based, (3) a statement that the claimant is entitled to receive, upon written request to the Plan Administrator and free
12
of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits, (4) if an internal rule, guideline, protocol or similar criterion was relied on in making the decision, a copy of that document will be furnished, free of charge, upon written request to the Plan Administrator. If no internal rule, guideline, protocol or similar criterion was relied on in making the decision, a statement that no such document was relied upon will be furnished, (5) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances will be furnished, free of charge, upon written request to the Plan Administrator, and (6) a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following the final benefit determination on appeal, or if the claim appeal occurs on or after April 1, 2018, and the Plan Administrator failed to comply with the claims procedures herein, (unless the failure is due to a minor error). Such notification will be given within a reasonable period of time, but not later than forty-five (45) calendar days after the claim is received by the Plan Administrator, or within ninety (90) calendar days, if the Plan Administrator determines that special circumstances require an extension of time for processing the claim. If the Plan Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial forty-five (45) calendar day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render a benefit determination.
7.2 Review Procedure.
(a) All Appeals Incurred Prior to April 1, 2018, and Non-Disability Related Appeals Incurred on or After April 1, 2018. Within sixty (60) calendar days after the receipt of notification of an adverse benefit determination, a claimant (or the claimant’s duly authorized representative) may file a written request with the Plan Administrator for a review of the claimant’s adverse benefit determination and submit written comments, documents, records, and other information relating to the claim for benefits. A request for review shall be deemed filed as of the date of receipt of such written request by the Plan Administrator. A claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits. The Plan Administrator will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Plan Administrator will notify the claimant of its decision on review in writing. Such notification will be written in a manner calculated to be understood by the claimant and will contain the following: (a) the specific reason or reasons for the adverse determination, (b) reference to the specific Plan provisions on which the benefit determination is based, (c) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits, and (d) a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following the final benefit determination on appeal. The decision on review will be made within sixty (60) calendar days after the request for review is received by the Plan Administrator, or within
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one hundred twenty (120) calendar days if the Plan Administrator determines that special circumstances require an extension of time for processing the claim. If the Plan Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial sixty (60) calendar day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review. The Plan Administrator’s decision on review shall be final and binding on the claimant.
(b) Disability Related Appeals Incurred on or after April 1, 2018. Within one hundred and eighty (180) calendar days after the receipt of notification of an adverse benefit determination, a claimant (or the claimant’s duly authorized representative) may file a written request with the Plan Administrator for an appeal. The claimant may submit written comments, documents, records, and other information relating to the claim for benefits. A request for review shall be deemed filed as of the date of receipt of such written request by the Plan Administrator. A claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits. The Plan Administrator will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Plan Administrator will notify the claimant of its decision on review in writing, however prior to issuing such a decision for a claim determination, the Plan Administrator will provide the claimant, free of charge, with any new or additional evidence or any new or additional rationale considered, relied upon, or generated by the Plan or person making the benefit determination, as soon as possible in advance of the date on which the benefit decision shall be made, and the claimant shall be provided a reasonable opportunity to respond prior to that date. Such notification will be written in a manner calculated to be understood by the claimant and the notification shall also be provided in a culturally and linguistically appropriate manner and will contain the following: (1) the specific reason or reasons for the adverse determination including the basis for disagreeing with or not following (if applicable) (i) the views presented by the claimant to the Plan Administrator of health care professionals treating the claimant and vocational professionals who evaluated the claimant; (ii) the views of medical or vocational experts whose advice was obtained on behalf of the Plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and (iii) a disability determination regarding the claimant presented by the claimant to the Plan made by the Social Security Administration, (2) reference to the specific Plan provisions on which the benefit determination is based, (3) a statement that the claimant is entitled to receive, upon written request to the Plan Administrator and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits, (4) if an internal rule, guideline, protocol or similar criterion was relied on in making the decision, a copy of that document will be furnished, free of charge, upon written request to the Plan Administrator. If no internal rule, guideline, protocol or similar criterion was relied on in making the decision, a statement that no such document was relied upon will be furnished, (5) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, the scientific or clinical judgment
14
for the determination, applying the terms of the Plan to the claimant’s medical circumstances will be furnished, free of charge, upon written request to the Plan Administrator, and (6) a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) if the Plan Administrator failed to comply with the claims procedures herein, (unless the failure is due to a minor error) or following the final benefit determination on appeal. Such notification will be given within a reasonable period of time, but not later than forty-five (45) calendar days after the claim is received by the Plan Administrator, or within ninety (90) calendar days, if the Plan Administrator determines that special circumstances require an extension of time for processing the claim. If the Plan Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial forty-five (45) calendar day period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render a benefit determination.
7.3 Legal Actions. The claims and review procedures described in this Article 7 must be exhausted before a legal action may be brought against the Board, the Company, the Plan Administrator, or the Plan. If the claim is a disability claim appeal and occurs on or after April 1, 2018, and the claimant believes that the Plan Administrator failed to comply with the claims procedures herein, the claimant may request a written explanation of the violation from the Plan Administrator, and the Plan Administrator will provide such explanation within ten (10) calendar days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies available under the Plan to be deemed exhausted. Any legal action must be filed within one (1) year of receiving final notice of a denied claim.
Article 8. Successors
8.1 Successors to the Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) of all or a significant portion of the assets of the Company by agreement, in form and substance satisfactory to the Executive, to expressly assume and agree to maintain the Plan in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place, subject to Section 10.1 hereof. Regardless of whether such agreement is executed, the Plan shall be binding upon any successor in accordance with the operation of law and such successor shall be deemed the “Company” for purposes of the Plan.
8.2 Assignment by the Executive. The Plan 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 dies while any Severance Benefits would still be owed to the Executive hereunder had the Executive continued to live, all such Severance Benefits, unless otherwise provided herein, shall be paid in accordance with the terms of the Plan to the Executive’s devisee, legatee, or other designee, or if there is no such designee, to the Executive’s estate.
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Article 9. Miscellaneous
9.1 Employment Status. The Plan is not a contract of employment, and participation in the Plan does not give an Executive the right to be rehired or retained in the employ of the Company on a full-time, part-time or any other basis, or to receive any benefit under any other plan of the Company. Participation in the Plan does not give any Executive any right or claim or legal entitlement to any benefit under the Plan, unless that right or claim has specifically accrued under the terms of the Plan.
9.2 Effect of Receiving Severance Benefits. Receipt of Severance Benefits or continued equity award vesting under Section 3.7 does not constitute any sort of extension or perpetuation of employment beyond the Executive’s actual date of employment termination.
9.3 Interests Not Transferable. The interests of persons entitled to Severance Benefits are not subject to their debts or other obligations and, except as may be required by the tax withholding provisions of the Code or any state’s income tax act, or pursuant to an agreement between an Executive and the Company, may not be voluntarily sold, transferred, alienated, assigned, or encumbered.
9.4 Entire Plan. The Plan contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. The Severance Benefits under this Plan shall be in lieu of and reduced by any severance pay or the like that may be payable under any plan or practice of the Company, or that may be payable by any Federal, state or foreign law, statute, regulation, or the like (including the WARN Act or any similar state or foreign law).
9.5 Conflicting Plans. The Plan supersedes any other generally applicable severance-related plan or policy of the Company in effect on the date the Company adopts the Plan. Payments or benefits provided to an Executive under any Company stock, deferred compensation, savings, retirement, or other employee benefit plan, including but not limited to each Executive’s offer letter or employment agreement and that certain Successful Transaction Severance Plan dated November 20, 2019 by and between the Company and James R. Meyer, are governed solely by the terms of that plan, other than the continued vesting of equity incentive awards as described in Section 3.7 and the amendment to unvested equity incentive awards described in Article 4 herein. Any obligations or duties of an Executive pursuant to any non-competition or other agreement with the Company will be governed solely by the terms of that agreement, and will not be affected by the terms of the Plan, except to the extent that agreement expressly provides otherwise. Severance Benefits paid under the Plan are not taken into account for purposes of contributions or benefits under any other employee benefit plans, except as expressly provided therein. Further, the period of coverage under any employee benefit plan is not extended due to the payment of Severance Benefits under the Plan.
9.6 Notices. All notices, requests, demands, and other communications hereunder shall be sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if sent by registered or certified mail to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its principal offices.
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9.7 Tax Withholding. The Company shall withhold from any Severance Benefits payable under the Plan all Federal, state, city, or other taxes as legally required to be withheld, as well as any other amounts authorized or required by policy, including, but not limited to, withholding for garnishments and judgments or other court orders. Any Severance Benefit payable under the Plan will be offset against any severance, notice or termination pay required to be paid by the Company pursuant to foreign, Federal, state, or local law or ordinance.
9.8 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of the Plan are not part of the provisions hereof and shall have no force and effect. Notwithstanding anything in the Plan to the contrary, the Company shall have no obligation to provide any Severance Benefits to the Executive hereunder to the extent, but only to the extent, that such provision is prohibited by the terms of any final order of a Federal, state, or local court or regulatory agency of competent jurisdiction, provided that such an order shall not affect, impair, or invalidate any provision of the Plan not expressly subject to such order.
9.9 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein shall include the feminine; the plural shall include the singular and the singular shall include the plural.
9.10 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of Illinois shall be the controlling law in all matters relating to the Plan without giving effect to principles of conflicts of laws. The jurisdiction and venue for any disputes arising under, or any action brought to enforce, or otherwise relating to, the Plan shall be exclusively in the courts in State of Illinois, Cook County, including the Federal Courts located therein (should Federal jurisdiction exist).
9.11 Action by Company. Any action required of or permitted to be taken by the Company under the Plan will be by resolution of the Board, by resolution of a duly authorized committee of the Board, by a person or persons authorized by resolutions of the Board, or a by duly authorized committee.
9.12 Plan Funding. The Company will pay all Severance Benefits due and owing under the Plan directly out of its general assets. To the extent that an Executive acquires a right to receive Severance Benefits under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any Severance Benefits hereunder.
9.13 Indemnification. Each person who is or has been a member of the Board, and any individual or individuals to whom the Company has delegated authority under Section 1.4 of the Plan, shall be indemnified and held harmless by the Company from and against any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or as a result of any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken, or failure to act, under the Plan. Each such person will also be indemnified and held harmless by the Company from and against
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any and all amounts paid by him or her in a settlement approved by the Company, or paid by him or her in satisfaction of any judgment, of or in a claim, action, suit or proceeding against him or her and described in the previous sentence, so long as he or she gives the Company an opportunity, at its own expense, to handle and defend the claim, action, suit or proceeding before he or she undertakes to handle and defend it. The foregoing right of indemnification will not be exclusive of any other rights of indemnification to which a person may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify him or her or hold him or her harmless.
9.14 Cooperation. An Executive must reasonably cooperate with the Company and the Plan Administrator by furnishing any and all information reasonably requested by the Company or the Plan Administrator, in order to facilitate the payment of benefits hereunder, and taking such other actions as may be requested by the Company. If an Executive refuses to cooperate, the Company shall have no further obligation to such Executive under the Plan.
Article 10. Amendment and Termination
10.1 Amendment and Termination. The Company reserves the right, on a case-by-case basis or on a general basis, to amend the Plan at any time and to thereby alter, reduce or eliminate any benefit under the Plan, in whole or in part, at any time. Notwithstanding the foregoing, any amendment or termination of the Plan will not reduce the amount of benefits payable (if any) to any Executive who terminates employment before the effective date of the amendment or termination. Further notwithstanding the foregoing, during the two-year period following the consummation of a Change in Control, any amendment or termination of the Plan will not reduce the amount of benefits payable (if any) to any Executive or the rights of any Executive under the Plan, or cause any individual who is an Executive at the time of the Change in Control to cease being an Executive, without the express written consent of such Executive.
10.2 Notice of Amendment or Termination. Executives receiving Severance Benefits under the Plan will be notified of any material amendment or termination of the Plan within a reasonable time.
In Witness Whereof, the Company has caused the Plan to be executed by the undersigned duly authorized officer this 17th day of January, 2022.
FreightCar America, Inc.
By: /s/ James R. Meyer__________________
Its: President and Chief Executive Officer
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Appendix A
Executives Eligible to Participate in the
FreightCar America, Inc. Executive Severance Plan
Appendix A
Appendix B
Additional Information for Summary Plan Description
This Appendix B, together with the Plan document, constitutes the summary plan description of the Plan. References in this Appendix B to “you” or “your” are references to the Executive. Any term capitalized but not defined in this Appendix B will have the meaning set forth in the Plan.
Your Rights Under ERISA
As a participant in the Plan, you are entitled to certain rights and protections under ERISA. ERISA provides that all Plan participants will be entitled to:
· Receive information about the Plan and benefits offered under the Plan.
· Examine, without charge, at the Company’s office and at other specified locations, all documents governing the Plan, and a copy of the latest annual report filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefit Security Administration.
· Obtain, upon written request to the Company, copies of documents governing the operation of the Plan, and copies of the latest annual report and updated summary plan description. The Company may make a reasonable charge for the copies.
· Obtain a statement telling you whether you have a right to receive a benefit and, if so, what your benefit would be if you stop working under the Plan now. If you do not have a right to a benefit, the statement will tell you how many more years you have to work to get a right to a benefit. This statement must be requested in writing and is not required to be given more than once every 12 months. The Plan must provide the statement free of charge.
Prudent Action by Plan Fiduciaries
In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate your Plan, called fiduciaries of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including the Company, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from exercising your rights under ERISA.
Enforce Your Rights
If your claim for a benefit is denied in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan and do not receive them within
Appendix B
30 calendar days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or Federal court. If you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.
Assistance With Your Questions
If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You also may obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.
General Plan Information
Appendix B
Plan Sponsor |
FreightCar America, Inc. Two North Riverside Plaza, Suite 1250 Chicago, Illinois 60606
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Plan Name |
FreightCar America, Inc. Executive Severance Plan
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Type of Plan |
Welfare plan
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Source of Funds |
The Company will pay all benefits due and owing under the Plan directly out of its general assets. To the extent that an Executive acquires a right to receive benefits under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company.
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Company’s Employer Identification Number
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25-1837219 |
Plan Administrator |
FreightCar America, Inc. Two North Riverside Plaza, Suite 1250 Chicago, Illinois 60606 (312) 928-0850
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Agent for Service of Legal Process
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Plan Administrator |
Plan Year |
Calendar Year (January 1 – December 31)
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Controlling Law |
Illinois, to the extent not preempted by Federal law
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Appendix B
FREIGHTCAR AMERICA, INC. EXECUTIVE SEVERANCE PLAN
ACKNOWLEDGMENT AND ACCEPTANCE OF
THE TERMS AND CONDITIONS OF THE PLAN
FreightCar America, Inc. (the “Company”) has established the FreightCar America, Inc. Executive Severance Plan (the “Plan”). The Plan provides “severance benefits” to certain eligible executives in the event of employment termination by the Company without “cause,” or termination by the executive for “good reason” (each as defined in the Plan). The Plan also provides for special equity vesting treatment with respect to your equity incentive awards upon a “qualifying retirement” (as defined in the Plan). You are eligible to participate in the Plan.
By the signatures below of the representative of the Company and the Executive named herein, the Company and the Executive agree that the Company hereby designates the Executive as eligible to participate in the Plan, and the Executive hereby acknowledges and accepts such participation, subject to the terms and conditions of the Plan, and agrees to the terms of the Plan, which is attached hereto and made a part hereof.
Name of Executive: «FirstName» «LastName»
Date of Eligibility and Participation: «Date_2»
At Will Employment. Nothing in this Acknowledgement and Acceptance or in the Plan shall confer upon the Executive any right to continue in employment for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the Executive, which rights are hereby expressly reserved by each, to terminate the Executive’s employment at any time for any reason.
The Company reserves the right to amend or terminate the Plan at any time prior to a Change in Control, including an amendment that would alter, reduce or eliminate benefits under the Plan, except that no amendment or termination of the Plan would reduce the amount of benefits payable (if any) to any Executive who terminates employment before the effective date of the amendment or termination.
EXECUTIVE:
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FREIGHTCAR AMERICA, INC.
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By: |
[Signature] |
Title: |
Attachment:
FreightCar America, Inc. Executive Severance Plan
Exhibit 10.2
FIRST AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of February 23, 2022, is entered into by and among JAC Operations, Inc., a Delaware corporation (“JAC”), Freight Car Services, Inc., a Delaware corporation (“Freight”), JAIX Leasing Company, a Delaware corporation (“JAIX”), FreightCar Short Line, Inc., a Delaware corporation (“Short”), Johnstown America, LLC, a Delaware limited liability company (“Johnstown”), FreightCar Alabama, LLC, a Delaware limited liability company (“Alabama”), FreightCar Rail Services, LLC, a Delaware limited liability company (“Rail”), FreightCar Rail Management Services, LLC, a Delaware limited liability company (“Management”), FreightCar North America, LLC, a Delaware limited liability company (“FCNA”), FCA-Fasemex, LLC, a Delaware limited liability company (“FCA” and, together with JAC, Freight, JAIX, Short, Johnstown, Alabama, Rail, Management, FCNA, and any other Person who from time to time becomes a Borrower under the Loan Agreement, collectively, the “Borrowers” and each individually, a “Borrower”), each of the Guarantors signatory hereto and SIENA LENDING GROUP LLC (“Lender”). Terms used herein without definition shall have the meanings ascribed to them in the Loan Agreement defined below.
RECITALS
A. Lender, Borrowers and Guarantors have previously entered into that certain Amended and Restated Loan and Security Agreement dated July 30, 2021 (as amended, modified and supplemented from time to time, the “Loan Agreement”), pursuant to which Lender has made certain loans and financial accommodations available to Borrowers.
B. Lender, Borrowers and Guarantors now wish to amend the Loan Agreement on the terms and conditions set forth herein.
C. The Loan Parties are entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Lender’s rights or remedies as set forth in the Loan Agreement or any other Loan Document is being waived or modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
Amount of Loans / Letters of Credit. Subject to the terms and conditions contained in this Agreement, including Sections 1.3 and 1.6, Lender shall, from time to time prior to the Maturity Date, at Borrowing Agent’s request, (i) make revolving loans to Borrowers (“Revolving Loans”), and (ii) make, or cause or permit a Participant (as defined in Section 10.10) to issue, letters of credit (“Letters
of Credit”) available to Borrowers; provided, that after giving effect to each such Revolving Loan and each such Letter of Credit, (A) the outstanding balance of all Revolving Loans and the Letter of Credit Balance will not exceed the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base, and (B) none of the other Loan Limits for Revolving Loans will be exceeded. All Revolving Loans shall be made in and repayable in Dollars.
1.2 Reserves re Revolving Loans / Letters of Credit. Lender may, with or without notice to Borrowing Agent, from time to time establish and revise Reserves against the Borrowing Base and/or the Maximum Revolving Facility Amount in such amounts and of such types as Lender deems appropriate in its Permitted Discretion. Such Reserves shall be available for Borrowing Agent to view in Passport 6.0 simultaneously with the imposition thereof; provided, that, unless an Event of Default has occurred and is continuing, Lender shall provide email notice advising Borrowing Agent of such Reserves two (2) Business Days prior to the imposition of such Reserves (during which period (x) Lender shall be available to discuss any such proposed Reserves with the Borrowing Agent to afford the Borrowing Agent an opportunity to take such action as may be required so that the event, condition or circumstance that is the basis for such Reserve no longer exists in the manner and to the extent satisfactory to the Lender in its Permitted Discretion and (y) Borrowers may not obtain any new Revolving Loan or Letter of Credit to the extent that, after giving pro forma effect to such proposed Reserves, such Revolving Loan or Letter of Credit would cause the outstanding balance of all Revolving Loans and the Letter of Credit Balance to exceed the lesser of (a) the Maximum Revolving Facility Amount minus Reserves and (b) the Borrowing Base). The amount of any Reserve established by the Lender shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve as determined by the Lender (provided that the circumstances, conditions, events or contingencies existing or arising prior to the First Amendment Effective Date and known to the Lender, in each case, prior to the First Amendment Effective Date, shall, to the extent not reserved for as of the First Amendment Effective Date, not be the basis for the establishment of any Reserves after the First Amendment Effective Date, unless such circumstances, conditions, events or contingencies shall have changed since the First Amendment Effective Date) in good faith and to the extent that such Reserve is in respect of amounts that may be payable to third parties. Without limiting the foregoing, references to Reserves shall include the Dilution Reserve. In no event shall the establishment of a Reserve in respect of a particular actual or contingent liability obligate Lender to make advances to pay such liability or otherwise obligate Lender with respect thereto.
(i) Borrowers shall have provided to Lender such information as Lender may require in order to determine the Borrowing Base, as of such borrowing or issue date, after giving effect to such Loans and/or Letters of Credit, as applicable;
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(i) the sum of the outstanding balance of all Revolving Loans and the Letter of Credit Balance exceeds the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base, or
Voluntary Termination of Loan Facilities. Borrowers may, solely after the six (6) month anniversary of the First Amendment Effective Date and on at least fifteen (15) days prior and irrevocable written notice received by Lender, permanently terminate the Loan facilities by repaying all of the outstanding Obligations, including all principal, interest and fees with respect to the Revolving Loans, and an Early Payment/Termination Premium in the amount specified in the paragraph under the heading “Early Payment/Termination Premium” in the Fee Letter. If, on the date of a voluntary termination pursuant to this Section 1.8, there are any outstanding Letters of Credit, then on such date, and as a condition precedent to such termination, Borrowers shall provide to Lender cash collateral in an amount equal to 103% of the Letter of Credit Balance to secure all of the Obligations (including reasonable attorneys’ fees and other expenses) relating to said Letters of Credit, pursuant to a cash pledge agreement in form and substance reasonably satisfactory to Lender. From and after such date of termination, Lender shall have no obligation whatsoever to extend any additional Loans or Letters of Credit and all of its lending commitments hereunder shall be terminated.
4.1 Cash Management. Each Loan Party hereby represents and warrants that all Deposit Accounts (other than Excluded Accounts) and all other depositary and other accounts maintained by each Loan Party (other than Excluded Accounts) as of the Closing Date are described in Section 34 of the Information Certificate, which description includes for each such account the name of the Loan Party maintaining such account, the name of the financial institution at which such account is maintained, the account number, and the purpose of such account. After the Closing Date, within forty-five (45) days after the establishment of a Deposit Account (other than an Excluded Account) (or such later date as the Lender may agree in writing in its sole discretion), the applicable Loan Party shall cause such Deposit Account to be subject to a control agreement by and among the applicable Loan Party, the Lender and the depositary institution, in form and substance satisfactory to the Lender in its Permitted Discretion; provided, that, any existing Deposit Account (other than Excluded Accounts) shall not be closed prior to the establishment of a control agreement on such new Deposit Account. Each Loan Party will, at its expense, establish (and revise from time to time as Lender may require in its Permitted Discretion) procedures acceptable to Lender, in Lender’s Permitted Discretion, for the collection of checks, wire transfers and all other
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proceeds of all of such Loan Party’s Accounts and other Collateral (“Collections”), which shall include depositing all Collections received by such Loan Party into one or more bank accounts maintained in the name of such Loan Party (but as to which upon the occurrence and during the continuance of a Springing DACA Event, Lender will have exclusive access) (each, a “Springing DACA Account”), under an arrangement acceptable to Lender in its Permitted Discretion with a depository bank satisfactory to Lender in its Permitted Discretion, pursuant to which all funds deposited into each Springing DACA Account are, upon the occurrence and during the continuance of a Springing DACA Event, to be transferred to Lender in such manner, and with such frequency, as Lender shall specify. Each Borrower agrees to execute, and to cause its depository banks and other account holders to execute, such springing deposit account control agreements and other documentation as Lender shall require in its Permitted Discretion from time to time in connection with the foregoing, all in form and substance satisfactory to Lender in its Permitted Discretion, and in any event such arrangements and documents must be in place on the Closing Date with respect to accounts in existence on the Closing Date, in each case excluding Excluded Accounts. Prior to the Closing Date, Borrower shall deliver to Lender a complete and executed Authorized Accounts form regarding Borrower’s operating account(s) into which the proceeds of Loans are to be paid in the form of Exhibit D annexed hereto.
(g) SEVENTH, to the payment of any other outstanding Obligations; and after payment in full in cash of all of the outstanding monetary Obligations, any further amounts paid to or received by Lender in respect of the Obligations (so long as no monetary Obligations are outstanding) shall be paid over to Borrowers or such other Person(s) as may be legally entitled thereto. For purposes of determining the Borrowing Base, such amounts will be credited to the Loan Account and the Collateral balances to which they relate upon Lender’s receipt of an advice from Lender’s Bank (set forth in Section 5 of Schedule A) that such items have been credited to Lender’s account at Lender’s Bank (or upon Lender’s deposit thereof at Lender’s Bank in the case of payments received by Lender in kind), in each case subject to final payment and collection. However, for purposes of computing interest on the Obligations, such items shall be deemed applied by Lender two (2) Business Days after Lender’s receipt of advice of deposit thereof at Lender’s Bank.
4.7 Access to Collateral, Books and Records. At reasonable times during normal business hours, Lender and/or its representatives or agents shall have the right to inspect the Collateral, and the right to examine and copy each Loan Party’s books and records not more than two (2) times per year (the scope of which shall be determined in Lender’s reasonable discretion), upon reasonable advance notice to the Borrowers; provided, however, that when an Event of Default exists the Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrowers at any time during normal business hours as often as may be desired and without advance notice. Each Loan Party agrees to give Lender access to any
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or all of such Loan Party’s, and each of its Subsidiaries’, premises to enable Lender to conduct such inspections and examinations. Such inspections and examinations shall be at Borrowers’ expense and the charge therefor shall be $1,500 per person per day (or such higher amount as shall represent Lender’s then current standard charge), plus out-of-pocket expenses. Upon the occurrence and during the continuance of an Event of Default and in the event Lender elects to exercise remedies hereunder, Lender may, at Borrowers’ expense, use each Loan Party’s personnel, computer and other equipment, programs, printed output and computer readable media, supplies and premises for the collection, sale or other disposition of Collateral to the extent Lender, in its sole discretion, deems appropriate. Each Loan Party hereby irrevocably authorizes all accountants and other financial professional third parties to disclose and deliver to Lender, at Borrowers’ expense, all financial information, books and records, work papers, management reports and other information in their possession regarding the Loan Parties.
5.4 Accounts, Chattel Paper and Inventory. As of each date reported by Borrowers, all Accounts which Borrowers have then reported to Lender as then being Eligible Accounts comply in all material respects with the criteria for eligibility set forth in the definition of Eligible Accounts. All such Accounts and Chattel Paper are genuine and in all respects what they purport to be, arise out of a completed, bona fide and unconditional and non-contingent sale and delivery of goods or rendition of services by Borrowers in the ordinary course of their business and in accordance with the terms and conditions of all purchase orders, contracts or other documents relating thereto, each Account Debtor thereunder had the capacity to contract at the time any contract or other document giving rise to such Accounts and Chattel Paper were executed, and the transactions giving rise to such Accounts and Chattel Paper comply in all material respects with all applicable laws and governmental rules and regulations.
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(iv) monitor, manage and perfect security interests in all Collateral for the Obligations, including without limitation, to make the determination of whether any Accounts constitute Eligible Accounts or whether to impose, modify or release any Reserve;
“Accounts Advance Rate” means the percentage set forth in Section 1(c) of Schedule A.
“Accounts Sublimit” means the amount set forth in Section 1(d) of Schedule A.
“Borrowing Base” means, as of any date of determination, the Dollar Equivalent amount as of such date of determination of (a) the aggregate amount of Eligible Accounts multiplied by the Accounts Advance Rate (but in no event to exceed the Accounts Sublimit); plus (b) an amount equal to the original face amount of the Standby Letter of Credit minus (c) all Reserves which Lender has established pursuant to Section 1.2 (including those to be established in connection with any requested Revolving Loan or Letter of Credit); minus (d) the Availability Block, if any, set forth in Section 1(b) of Schedule A.
“Dilution” means, as of any date of determination, a percentage, based upon the experience of the immediately prior twelve (12) months, that is the result of dividing the Dollar Equivalent amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to Borrowers’ Accounts during such period, by (b) Borrowers’ billings with respect to Accounts during such period.
“Dilution Reserve” has the meaning set forth in Section 1(c) of Schedule A.
“Eligible Account” means, at any time of determination, an Account owned by a Loan Party which satisfies the general criteria set forth below and which is otherwise acceptable to Lender in its Permitted Discretion (provided, that Lender may, in its Permitted Discretion, change the general criteria for acceptability of Eligible Accounts and shall notify Loan Parties of such change promptly thereafter). An Account shall be deemed to meet the general criteria if:
(b) neither the Account Debtor nor any of its Affiliates is an Affiliate, creditor or supplier of the applicable Loan Party (with Accounts to be ineligible to the extent of any amounts owed by such applicable Loan Party to such Person as a creditor or supplier);
(b) it does not remain unpaid more than the earlier to occur of (i) the number of days after the original invoice date set forth in Section 4(a) of Schedule A or (ii) the number of days after the original invoice due date set forth in Section 4(b) of Schedule A;
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(c) the Account Debtor or its Affiliates are not past due (or past any of applicable dates referenced in clause (b) above) on other Accounts owing to the applicable Loan Party comprising more than 50% of all of the Accounts owing to the applicable Loan Party by such Account Debtor or its Affiliates;
(d) all Eligible Accounts owing by any single account debtor and its Subsidiaries and Affiliates (other than those other account debtors who are listed from time to time on Schedule F annexed hereto, which may be updated from time to time upon the mutual written (which may be electronic) agreement of Lender and Borrowers) do not represent more than 50% of all otherwise Eligible Accounts (provided, that Accounts which are deemed to be ineligible solely by reason of this clause (d) shall be considered Eligible Accounts to the extent of the amount thereof which does not exceed 50% of all otherwise Eligible Accounts); provided that Lender will consider upon written request from Borrowers, in its sole discretion, additional investment-grade companies for inclusion hereunder;
(e) the Account complies with each covenant, representation or warranty contained in this Agreement or any other Loan Document with respect to Eligible Accounts (including any of the representations set forth in Section 5.4);
(f) the Account is not subject to any contra relationship, counterclaim, dispute or set-off; provided, that such Account shall be deemed to be ineligible only to the extent of such contra, counterclaim, dispute or set-off;
(g) the Account Debtor’s chief executive office or principal place of business is located in the United States or Canada, unless (i) the sale is fully backed by a letter of credit, guaranty or acceptance acceptable to Lender in its Permitted Discretion, and if backed by a letter of credit, such letter of credit has been issued or confirmed by a bank satisfactory to Lender in its Permitted Discretion, is sufficient to cover such Account, and if required by Lender, the original of such letter of credit has been delivered to Lender or Lender’s agent and the issuer thereof notified of the assignment of the proceeds of such letter of credit to Lender or (ii) such Account is subject to credit insurance payable to Lender issued by an insurer and on terms, conditions and in an amount acceptable to Lender in its Permitted Discretion;
(h) the Account is payable solely in Dollars;
(i) the Account is absolutely owing to such Loan Party and does not arise from a sale on a bill-and-hold, guarantied sale, sale-or-return, sale-on-approval, consignment, retainage or any other repurchase or return basis or consist of progress billings;
(j) [reserved];
(k) the Account Debtor is not the United States of America or any state or political subdivision (or any department, agency or instrumentality thereof) (“Governmental Account Debtor”), unless the applicable Loan Party has complied with the Assignment of Claims Act of 1940 (31 U.S.C. §203 et seq.) or other applicable similar state or local law in a manner reasonably satisfactory to Lender;
(l) the Account is at all times subject to Lender’s duly perfected, first priority security interest and to no other Lien that is not a Permitted Lien, and the goods giving rise to such Account (i) were not, at the time of sale, subject to any Lien except
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Permitted Liens and (ii) have been sold by the applicable Loan Party to the Account Debtor in the ordinary course of the applicable Loan Party’s business and delivered to and accepted by the Account Debtor, or the services giving rise to such Account have been performed by the applicable Loan Party and accepted by the Account Debtor in the ordinary course of the applicable Loan Party’s business;
(m) the Account is not evidenced by Chattel Paper or an Instrument of any kind (unless delivered to Lender in accordance with Section 3.2 of this Agreement) and has not been reduced to judgment;
(n) the Account Debtor’s total indebtedness to the applicable Loan Party does not exceed the amount of any credit limit established by the applicable Loan Party or Lender in its Permitted Discretion and the Account Debtor is otherwise deemed to be creditworthy by Lender (provided, that Accounts which are deemed to be ineligible solely by reason of this clause (n) shall be considered Eligible Accounts to the extent the amount of such Accounts does not exceed the lower of such credit limits);
(o) there are no facts or circumstances existing, or which could reasonably be anticipated to occur, which might result in any adverse change in the Account Debtor’s financial condition or impair or delay the collectability of all or any portion of such Account;
(p) Lender has been furnished with all documents and other information pertaining to such Account which Lender has reasonably requested, or which the applicable Loan Party is obligated to deliver to Lender, pursuant to this Agreement;
(q) the applicable Loan Party has not made an agreement with the Account Debtor to extend the time of payment thereof beyond the time periods set forth in clause (b) above;
(r) the applicable Loan Party has not posted a surety or other bond in respect of the contract under which such Account arose; and
(s) the Account Debtor is not subject to any proceeding seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar applicable law.
“First Amendment Effective Date” means February 23, 2022.
“Springing DACA Event” means (a) any date on which Borrower has Minimum Liquidity of less than $2,000,000 or (b) the occurrence and during the continuance of an Event of Default.
“Excess Availability” means the amount, as determined by Lender, calculated at any date, equal to the difference of (a) the lesser of (x) the Maximum Revolving Facility Amount and all Reserves and (y) the Borrowing Base, minus (b) the outstanding balance of all Revolving Loans and the Letter of Credit Balance;
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provided that if any of the Loan Limits for Revolving Loans is exceeded as of the date of calculation, then Excess Availability shall be zero.
“Minimum Liquidity” means on any date of determination, an amount equal to (a) Excess Availability plus (b) immediately available unrestricted cash on hand less outstanding or held checks plus (c) the aggregate amount of the undrawn portion of the Term Debt Permitted Indebtedness.
“Reserves” means, as of any date of determination, without duplication of any other reserves or items that are otherwise addressed or excluded through eligibility criteria, reserves in amounts that the Lender deems necessary or appropriate, in each case including, but not limited to, in its Permitted Discretion and subject to Section 1.2 to establish and maintain (a) to reflect any impediments to the Lender’s ability to realize upon the Collateral included in the Borrowing Base or the proceeds thereof, (b) to reflect claims and liabilities that the Lender determines will need to be satisfied in connection with the realization upon the Collateral included in the Borrowing Base or the proceeds thereof, (c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base or the proceeds thereof, or (d) to reflect matters that adversely affect the enforceability or priority of the Lender on the Collateral (including, (x) reserves with respect to sums that any Borrowers are required to pay under any Section of this Agreement or any other Loan Document (such as taxes, assessments, insurance premiums, or, in the case of leased personal property assets, rents or other amounts payable under such leases) and has failed to pay, (y) reserves for slow-moving Inventory and Inventory shrinkage, and (z) reserves for rebates, discounts, warranty claims and returns); provided, further that, to the extent that any Reserve is in respect of amounts that may be payable to third parties, the Lender may, at its option, but without duplication, deduct such Reserve from the Maximum Revolving Facility Amount at any time that the Maximum Revolving Facility Amount is less than the amount of the Borrowing Base.
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[Remainder of page Intentionally Blank]
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
BORROWERS: |
[JAC OPERATIONS, INC.
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[FREIGHT CAR SERVICES, INC.
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[JAIX LEASING COMPANY
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[FREIGHTCAR SHORT LINE, INC.
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[JOHNSTOWN AMERICA, LLC
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[FREIGHTCAR ALABAMA, LLC
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[FREIGHTCAR RAIL SERVICES, LLC
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[Signature Page for First Amendment to Loan and Security Agreement]
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FREIGHTCAR RAIL MANAGEMENT SERVICES, LLC
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[FREIGHTCAR NORTH AMERICA, LLC
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[FCA-FASEMEX, LLC
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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GUARANTORS: |
[FREIGHTCAR AMERICA, INC.
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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[FCA-FASEMEX, S. DE R.L. DE C.V.
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
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FCA-FASEMEX ENTERPRISE, S. DE R.L. DE C.V.
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By: |
/s/ Terence R. Rogers |
Name: |
Terence R. Rogers |
Title: |
Chief Financial Officer and Secretary |
[Signature Page for First Amendment to Loan and Security Agreement]
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SIENA LENDING GROUP LLC
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By: |
/s/ Keith Holler |
Name: |
Keith Holler |
Title: |
Authorized Signatory |
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By: |
/s/ Steve Sanicola |
Name: |
Steve Sanicola |
Title: |
Authorized Signatory |
[Signature Page for First Amendment to Loan and Security Agreement]
Exhibit A
Schedule A
Description of Certain Terms
Exhibit D
Schedule D
Provide Lender with each of the documents set forth below at the following times in form satisfactory to Lender:
Exhibit F
Schedule F
Execution Version
Exhibit 10.3
FIRST AMENDMENT TO
ROYALTY AGREEMENT
THIS FIRST AMENDMENT TO ROYALTY AGREEMENT (the “Amendment”) is made as of February 8, 2022 (the “Effective Date”) by and among FreightCar America, Inc., a Delaware corporation with offices at 125 S. Wacker Drive, Suite 1500, Chicago, Illinois 60606 (“FCA”), Fabricaciones y Servicios de México, S.A. de C.V., an entity formed under the laws of Mexico, with offices at Carretera 57 Km 178, Castaños Coahuila, 25780, Mexico (“Fasemex MX”), Agben de Mexico, S.A. de C.V., an entity organized under the laws of Mexico, with offices at Carretera 57 Km 178, Castaños Coahuila, 25780, Mexico (“Agben”), Industrial Mexicana Fasemex, S.A. de C.V., an entity formed under the laws of Mexico, with offices at Carretera 57 Km 178, Castaños Coahuila, 25780, Mexico (“IM Fasemex”), Proveedora Industrial para el Manejo de Materiales, S.A. de C.V., an entity formed under the laws of Mexico, with offices at Carretera 57 Km 178, Castaños Coahuila, 25780, Mexico (“Proveedora”), and Fasemex, Inc., a Texas corporation with offices at Carretera 57 Km 178, Castaños Coahuila, 25780, Mexico (“Fasemex US”). Fasemex MX, Agben, and Fasemex US are collectively referred to herein as the “Strategic Partners,” and FCA and the Strategic Partners are collectively referred to herein as the “Parties.” Capitalized but undefined terms used herein shall have the meanings ascribed thereto in the Royalty Agreement (as defined below).
RECITALS
A. The Parties entered into that certain Royalty Agreement dated as of October 16, 2020 (as amended or supplemented from time to time, the “Royalty Agreement”).
B. Certain of the direct or indirect owners of the Strategic Partners and the Royalty Payees (namely, Alejandro Gil Benavides and Salvador Gil Benavides) are also parties to that certain Debt Assignment Agreement dated as of November 5, 2021 by and among Alejandro Gil Benavides and Salvador Gil Benavides (together, the “Debt Assignees”), Fasemex MX, and FCA-Fasemex, S. de R.L. de C.V. (“FCA MX”), as amended on the Effective Date (the “Debt Assignment Agreement”).
C. The Parties wish to amend the Royalty Agreement in connection with the amendment to the Debt Assignment Agreement.
AGREEMENT
Now, therefore, in consideration of the mutual promises and covenants herein contained, the Parties hereto agrees as follows:
The Parties agree to amendment the Royalty Agreement by adding the following section thereto:
1
Execution Version
22. Right of Set-off/Deduction. If any default or breach by the Debt Assignees shall have occurred under the Debt Assignment Agreement, including any failure to make a timely reimbursement of Security Deposit A or Security Deposit B (as such terms are defined thereunder), FCA is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off, deduct and/or apply from any amount payable or to be payable to the any Royalty Payee or Strategic Partner under this Agreement, including any Royalty, any and all the obligations of the Debt Assignees now or hereafter existing under the Debt Assignment Agreement with respect to the Security Deposit A or Security Deposit B (as such terms are defined thereunder), irrespective of whether or not FCA (or its affiliates) shall have made any demand under the Debt Assignment Agreement or this Agreement. The rights of FCA under this Section are in addition to any other rights and remedies (including other rights of set-off) which FCA (or its affiliates) may have under the Royalty Agreement or the Debt Assignment Agreement.
Each Strategic Partner and Royalty Payee represents and warrants that such Strategic Partner and Royalty Payee: (i) is an entity duly incorporated or organized, as applicable, validly existing, and in good standing under the laws of the State of Texas or under the laws of Mexico, as applicable, and (ii) has full power and authority to enter into this Amendment and perform its obligations hereunder.
[Signature Pages Follow]
2
Execution Version
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of the Effective Date.
FCA: |
STRATEGIC PARTNERS AND ROYALTY PAYEES:
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FREIGHTCAR AMERICA, INC.
By: /s/ James R. Meyer Name: James R. Meyer Title: CEO
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FABRICACIONES Y SERVICIOS DE MÉXICO, S.A. DE C.V.
By: /s/ Alejandro Gil Benavides Name: Alejandro Gil Benavides Title: Legal Representative
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AGBEN DE MEXICO, S.A. DE C.V.
By: /s/ Jesus Gil Benavides Name: Jesus Gil Benavides Title: Owner
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INDUSTRIAL MEXICANA FASEMEX, S.A. DE C.V.
By: /s/ Alejandro Gil Benavides Name: Alejandro Gil Benavides Title: Legal Representative
PROVEEDORA INDUSTRIAL PARA EL MANEJO DE MATERIALES, S.A. DE C.V.
By: /s/ Salvador Gil Benavides Name: Salvador Gil Benavides Title: Legal Representative
FASEMEX, INC.
By: /s/ Jesus Gil Benavides Name: Jesus Gil Benavides Title: President |
Execution Version
Exhibit 10.4
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT.
AMENDED AND RESTATED
WARRANT TO PURCHASE COMMON STOCK
OF
FREIGHTCAR AMERICA, INC.
NO. W-001 March 1, 2022
THIS AMENDED AND RESTATED WARRANT CERTIFIES THAT, for value received, OC III LVS XII LP, a Delaware limited partnership, or its assigns (the “Holder”), is entitled to subscribe for and purchase from FreightCar America, Inc., a Delaware corporation (the “Company”), a number of shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), equal to (a) 23.0% of the Common Stock Deemed Outstanding on the date of any exercise of this Warrant less (b) the aggregate number of shares of Common Stock previously issued from time to time as a result of any partial exercise of this Warrant in accordance with the terms set forth herein (collectively, the “Exercise Shares”), at a purchase price per share of $0.01 (the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Amended and Restated Warrant (this “Warrant”).
This Warrant was originally issued pursuant to the terms of the Warrant Acquisition Agreement, dated as of October 13, 2020 (the “Warrant Agreement”), by and between the Company and CO Finance LVS VI LLC, a Delaware limited liability company and Affiliate of the Holder (“COF LVS”), and then assigned to Holder on November 24, 2020. Certain capitalized terms used herein are defined in Section 1 hereof. Capitalized terms not otherwise defined herein shall have the meaning given to such terms in the Warrant Agreement. The Exercise Shares are subject to adjustment as provided herein.
This Warrant represents a complete amendment and restatement of that certain warrant assigned to the Holder on November 24, 2020 (the “Original Warrant”).
This Warrant is subject to the following terms and conditions:
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Execution Version
Common Stock Deemed Outstanding = A ÷ (1 – B)
Provided that, for the avoidance of doubt, as of January 31, 2022, “Common Stock Deemed Outstanding” shall mean 25,522,593.
For purposes of the foregoing formula, the following definitions shall apply:
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Execution Version
“A” shall mean, as of any time of determination, the sum of, without duplication, (i) the number of shares of Common Stock actually outstanding at such time, plus (ii) the number of shares of Common Stock reserved for issuance at such time under any equity incentive plans approved by the Board of Directors of the Company, regardless of whether the shares of Common Stock are actually subject to outstanding options or other rights to acquire shares, plus (iii) the number of shares of Common Stock issuable upon exercise of any other options, warrants or rights to acquire shares of Common Stock actually outstanding at such time (excluding the shares of Common Stock issuable upon exercise of this Warrant and each other warrant (such other warrants, together with this Warrant, the “CSDO Warrants”) that has a definition of “Common Stock Deemed Outstanding” substantially similar to this definition), plus (iv) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities (excluding all CSDO Warrants) actually outstanding at such time, in each case, regardless of whether the options, warrants, or Convertible Securities are actually exercisable at such time; plus (v) 774,407 shares of Common Stock, which represents 5.0% of the total number of shares of Common Stock outstanding as of July 30, 2021, to the extent such shares of Common Stock have not already been issued as an equity fee and are not currently outstanding; provided that, for the avoidance of doubt, as of January 31, 2022, “A” equals 18,376,267.
“B” shall mean, as of any time of determination, the sum of 0.23 plus the number (expressed as a decimal value) set forth immediately following clause (a) in the first paragraph of each other CSDO Warrant (including, when issued, that certain CSDO Warrant which the parties anticipate to be issued in March 2022 pursuant to the terms of the Credit Agreement); provided that, for the avoidance of doubt, as of the date hereof “B” equals 0.28.
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Execution Version
Upon receipt by the Company of this Warrant and payment of the Exercise Price in cash (by wire transfer to the account designated in writing by the Company) or by check, or pursuant to Section 2.2, shares of Common Stock in certificated or book entry form representing the Exercise Shares so purchased, registered in the name of the Holder or Persons affiliated with the Holder, if the Holder so designates, shall be issued and delivered to the Holder at the Company’s expense within three (3) Business Days after the Company’s receipt of such Notice of Exercise and/or Exercise Price.
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Execution Version
The Person in whose name any certificate or book entry representing the Exercise Shares that are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such shares.
X = Y * (A-B)
A
Where X = the number of Exercise Shares to be issued to the Holder
Y = the number of Exercise Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such exercise)
A = the Fair Market Value of one Exercise Share purchasable under the Warrant (at the date of such exercise)
B = Exercise Price (as adjusted to the date of such exercise)
The Company acknowledges that the provisions of this Section 2.2 are intended, in part, to ensure that a full or partial exchange of this Warrant pursuant to this Section 2.2 will qualify as a conversion, within the meaning of paragraph (d)(3)(iii) of Rule 144 under the Securities Act. At the request of the Holder, the Company will accept reasonable modifications to the exchange procedures provided for in this Section in order to accomplish such intent. For the avoidance of doubt, the Holder shall not be required to pay any cash upon any exercise of this Warrant pursuant to this Section 2.2. For all purposes of this Warrant (other than this Section 2), any reference herein to the exercise of this Warrant shall be deemed to include a reference to the exchange of this Warrant for Exercise Shares in accordance with the terms of this Section 2.2.
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THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT.
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[SIGNATURE PAGE FOLLOWS]
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Execution Version
IN WITNESS WHEREOF, the Company and the Holder have each caused this Warrant to be executed by its duly authorized officer as of the date first above written.
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FREIGHTCAR AMERICA, INC. By: /s/ Terence R. Rogers Name: Terence R. Rogers Title: Chief Financial Officer
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OC III LVS XII LP By: /s/ Adam L. Gubner Title: Authorized Person |
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Execution Version
NOTICE OF EXERCISE
1.a. ☐ The undersigned hereby elects to purchase a number of shares of Common Stock, par value $0.01 per share (the “Common Stock”), of FreightCar America, Inc. (the “Company”), equal to ___% of the Common Stock Deemed Outstanding pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full.
1.b ☐ The undersigned hereby elects to purchase a number of shares of Common Stock equal to ___% of the Common Stock Deemed Outstanding pursuant to the terms of the net exercise provisions set forth in Section 2.2 of the attached Warrant.
2. Please issue said shares of Common Stock in the name of the undersigned or in such other name as is specified below:
(Name)
(Address)
(Date) (Signature)
(Print name)
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Execution Version
ASSIGNMENT FORM
(To assign the foregoing Warrant or a portion thereof, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant (or portion thereof) and all rights evidenced thereby are hereby assigned to
Name: (“Assignee”)
(Please Print)
Address: ______________________________________________________________
(Please Print)
Assignee agrees to take and hold the Warrant and any shares of stock to be issued upon exercise of the rights thereunder subject to, and to be bound by, the terms and conditions set forth in the Warrant to the same extent as if Assignee were the original holder thereof.
Dated: , 20__
Holder’s
Signature: __________________________
Holder’s
Address: __________________________
Assignee’s
Signature: __________________________
Assignee’s
Address: ___________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant (or portion thereof).
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Execution Version
Exhibit 10.5
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT.
AMENDED AND RESTATED
WARRANT TO PURCHASE COMMON STOCK
OF
FREIGHTCAR AMERICA, INC.
NO. W-003 March 1, 2022
THIS AMENDED AND RESTATED WARRANT CERTIFIES THAT, for value received, OC III LVS XXVIII LP, a Delaware limited partnership, or its assigns (the “Holder”), is entitled to subscribe for and purchase from FreightCar America, Inc., a Delaware corporation (the “Company”), a number of shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), equal to (a) 5.0% of the Common Stock Deemed Outstanding on the date of any exercise of this Warrant less (b) the aggregate number of shares of Common Stock previously issued from time to time as a result of any partial exercise of this Warrant in accordance with the terms set forth herein (collectively, the “Exercise Shares”), at a purchase price per share of $0.01 (the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Amended and Restated Warrant (this “Warrant”).
This Warrant was originally issued pursuant to the terms of the Warrant Acquisition Agreement, dated as of December 30, 2021 (the “Warrant Agreement”), by and between the Company and CO Finance LVS VI LLC, a Delaware limited liability company and Affiliate of the Holder (“COF LVS”), and then assigned to Holder on January 5, 2022. Certain capitalized terms used herein are defined in Section 1 hereof. Capitalized terms not otherwise defined herein shall have the meaning given to such terms in the Warrant Agreement. The Exercise Shares are subject to adjustment as provided herein.
This Warrant represents a complete amendment and restatement of that certain warrant assigned to the Holder on January 5, 2022 (the “Original Warrant”).
This Warrant is subject to the following terms and conditions:
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Common Stock Deemed Outstanding = A ÷ (1 – B)
Provided that, for the avoidance of doubt, as of January 31, 2022, “Common Stock Deemed Outstanding” shall mean 25,522,593.
For purposes of the foregoing formula, the following definitions shall apply:
“A” shall mean, as of any time of determination, the sum of, without duplication, (i) the number of shares of Common Stock actually outstanding at such time, plus (ii) the number of shares of Common Stock reserved for issuance at such time under any equity incentive plans approved by the Board of Directors of the Company, regardless of whether the shares of Common Stock are
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actually subject to outstanding options or other rights to acquire shares, plus (iii) the number of shares of Common Stock issuable upon exercise of any other options, warrants or rights to acquire shares of Common Stock actually outstanding at such time (excluding the shares of Common Stock issuable upon exercise of this Warrant and each other warrant (such other warrants, together with this Warrant, the “CSDO Warrants”) that has a definition of “Common Stock Deemed Outstanding” substantially similar to this definition), plus (iv) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities (excluding all CSDO Warrants) actually outstanding at such time, in each case, regardless of whether the options, warrants, or Convertible Securities are actually exercisable at such time; plus (v) 774,407 shares of Common Stock, which represents 5.0% of the total number of shares of Common Stock outstanding as of July 30, 2021, to the extent such shares of Common Stock have not already been issued as an equity fee and are not currently outstanding; provided that, for the avoidance of doubt, as of January 31, 2022, “A” equals 18,376,267.
“B” shall mean, as of any time of determination, the sum of 0.05 plus the number (expressed as a decimal value) set forth immediately following clause (a) in the first paragraph of each other CSDO Warrant (including, when issued, that certain CSDO Warrant which the parties anticipate to be issued in March 2022 pursuant to the terms of the Credit Agreement); provided that, for the avoidance of doubt, as of the date hereof “B” equals 0.28.
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Upon receipt by the Company of this Warrant and payment of the Exercise Price in cash (by wire transfer to the account designated in writing by the Company) or by check, or pursuant to Section 2.2, shares of Common Stock in certificated or book entry form representing the Exercise Shares so purchased, registered in the name of the Holder or Persons affiliated with the Holder, if the Holder so designates, shall be issued and delivered to the Holder at the Company’s expense within three (3) Business Days after the Company’s receipt of such Notice of Exercise and/or Exercise Price.
The Person in whose name any certificate or book entry representing the Exercise Shares that are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such shares.
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X = Y * (A-B)
A
Where X = the number of Exercise Shares to be issued to the Holder
Y = the number of Exercise Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such exercise)
A = the Fair Market Value of one Exercise Share purchasable under the Warrant (at the date of such exercise)
B = Exercise Price (as adjusted to the date of such exercise)
The Company acknowledges that the provisions of this Section 2.2 are intended, in part, to ensure that a full or partial exchange of this Warrant pursuant to this Section 2.2 will qualify as a conversion, within the meaning of paragraph (d)(3)(iii) of Rule 144 under the Securities Act. At the request of the Holder, the Company will accept reasonable modifications to the exchange procedures provided for in this Section in order to accomplish such intent. For the avoidance of doubt, the Holder shall not be required to pay any cash upon any exercise of this Warrant pursuant to this Section 2.2. For all purposes of this Warrant (other than this Section 2), any reference herein to the exercise of this Warrant shall be deemed to include a reference to the exchange of this Warrant for Exercise Shares in accordance with the terms of this Section 2.2.
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THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT.
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[signature page follows]
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IN WITNESS WHEREOF, the Company and the Holder have each caused this Warrant to be executed by its duly authorized officer as of the date first above written.
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FREIGHTCAR AMERICA, INC. By: /s/ Terence R. Rogers |
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OC III LVS XXVIII LP By: /s/ Adam L. Gubner |
NOTICE OF EXERCISE
1.a. ❑ The undersigned hereby elects to purchase a number of shares of Common Stock, par value $0.01 per share (“Common Stock”), of FreightCar America, Inc. (the “Company”) equal to ___% of the Common Stock Deemed Outstanding pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full.
1.b ❑ The undersigned hereby elects to purchase a number of shares of Common Stock equal to ___% of the Common Stock Deemed Outstanding pursuant to the terms of the net exercise provisions set forth in Section 2.2 of the attached Warrant.
2. Please issue said shares of Common Stock in the name of the undersigned or in such other name as is specified below:
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(Print name) |
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ASSIGNMENT FORM
(To assign the foregoing Warrant or a portion thereof, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant (or portion thereof) and all rights evidenced thereby are hereby assigned to
Name: (“Assignee”)
(Please Print)
Address: _____________________________________________________________
(Please Print)
Assignee agrees to take and hold the Warrant and any shares of stock to be issued upon exercise of the rights thereunder subject to, and to be bound by, the terms and conditions set forth in the Warrant to the same extent as if Assignee were the original holder thereof.
Dated: , 20__
Holder’s
Signature: _________________________________
Holder’s
Address: __________________________________
Assignee’s
Signature: _________________________________
Assignee’s
Address: __________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant (or portion thereof).
Exhibit 10.6
AMENDMENT NO. 5 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 5 TO CREDIT AGREEMENT (this “Amendment”), dated as of March 1, 2022, is made by and among FREIGHTCAR NORTH AMERICA, LLC, a Delaware limited liability company (the “Borrower”), FREIGHTCAR AMERICA, INC., a Delaware corporation (“Holdings”), the other Loan Parties party hereto, the Lenders party hereto, and the LC Provider party hereto.
R E C I T A L S:
WHEREAS, the Borrower, Holdings, the Lenders party hereto, the LC Provider party hereto, and certain other entities are parties to that certain Credit Agreement, dated as of October 13, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”);
WHEREAS, the parties (i) desire to revise the definition of Common Stock Deemed Outstanding (as used in the Credit Agreement and any Loan Documents related thereto) and (ii) subject to the terms and conditions set forth herein, hereby agree to amend the Credit Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:
“Common Stock Deemed Outstanding” shall mean the number of shares of Common Stock deemed to be outstanding determined in accordance with the following formula:
Common Stock Deemed Outstanding = A ÷ (1 – B)
Provided, that, for the avoidance of doubt, as of January 31, 2022, “Common Stock Deemed Outstanding” shall mean 25,522,593.
For purposes of the foregoing formula, the following definitions shall apply:
“A” shall mean, as of any time of determination, the sum of, without duplication, (i) the number of shares of Common Stock actually outstanding at such time, plus (ii) the number of shares of Common Stock reserved for issuance at such time under any equity incentive
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plans approved by the board of directors of the Company, regardless of whether the shares of Common Stock are actually subject to outstanding options or other rights to acquire shares, plus (iii) the number of shares of Common Stock issuable upon exercise of any other options, warrants or rights to acquire shares of Common Stock actually outstanding at such time (excluding the shares of Common Stock issuable upon exercise of the Warrant to be exercised and each other warrant (such other warrants, together with the Warrant to be exercised, the “CSDO Warrants”) that has a definition of “Common Stock Deemed Outstanding” substantially similar to this definition), plus (iv) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities (excluding all CSDO Warrants) actually outstanding at such time, in each case, regardless of whether the options, warrants, or Convertible Securities are actually exercisable at such time; plus (v) 774,407 shares of Common Stock, which represents 5.0% of the total number of shares of Common Stock outstanding as of July 30, 2021, to the extent such shares of Common Stock have not already been issued as an equity fee and are not currently outstanding; provided that, for the avoidance of doubt, as of January 31, 2022, “A” equals 18,376,267.
“B” shall mean, as of any time of determination, the sum of (i) the number (expressed as a decimal value) set forth immediately following clause (a) in the first paragraph of the Warrant to be exercised plus (ii) the number (expressed as a decimal value) set forth immediately following clause (a) in the first paragraph of each other CSDO Warrant (including, when issued, that certain CSDO Warrant which the parties anticipate to be issued in March 2022 pursuant to the terms of the Credit Agreement); provided that, for the avoidance of doubt, as of January 31, 2022, “B” equals 0.28.
“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for the Common Stock, but excluding any warrants or other rights or options to subscribe for, acquire, purchase or otherwise be issued Common Stock or convertible securities.
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[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized officers, all as of the day and year first written above.
BORROWER:
FREIGHTCAR NORTH AMERICA, LLC
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
HOLDINGS:
FREIGHTCAR AMERICA, INC.
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
OTHER LOAN PARTIES:
JAC OPERATIONS, INC.
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
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Signature Page to Amendment No. 5 |
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FREIGHT CAR SERVICES, INC.
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
JAIX LEASING COMPANY
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
FREIGHTCAR SHORT LINE, INC.
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
JOHNSTOWN AMERICA, LLC
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
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Signature Page to Amendment No. 5 |
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FREIGHTCAR ALABAMA, LLC
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
FREIGHTCAR RAIL SERVICES, LLC
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
FREIGHTCAR RAIL MANAGEMENT SERVICES, LLC
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
FCA-FASEMEX, LLC
By: /s/ Terence R. Rogers
Name: Terence R. Rogers
Title: Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
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Signature Page to Amendment No. 5 |
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FCA-FASEMEX, S. DE R.L., DE C.V.
By: /s/ James R. Meyer
Name: James R. Meyer
Title: President
FCA-FASEMEX ENTERPRISE, S. DE R.L., DE C.V.
By: /s/ James R. Meyer
Name: James R. Meyer
Title: President
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Signature Page to Amendment No. 5 |
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LENDER:
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CO FINANCE LVS VI LLC, as a Lender and LC Provider
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/s/ Christopher Neumeyer |
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Christopher Neumeyer |
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OC III LVS XII LP, as a Lender
By: OC III GP LLC, its general partner
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Adam L. Gubner |
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Authorized Person |
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OC III LVS XXVIII LP, as a Lender
By: OC III GP LLC, its general partner
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/s/ Adam L. Gubner |
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Adam L. Gubner |
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Authorized Person |
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Signature Page to Amendment No. 5 |
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Exhibit 10.7
March 18, 2022
Mr. Michael A. Riordan 2123 N. Point Street Chicago, IL 60647
Re: Offer Letter Dear Mike:
We are extremely pleased to offer you the position of Vice President, Finance, Chief Financial Officer and Treasurer at FreightCar America, Inc. The role will be based at our Corporate Headquarters in Chicago and will include duties and responsibilities customarily performed and held by persons holding equivalent positions in public companies that are of similar industries and size. In this position you will be reporting directly to me and be a part of the Senior Management Team.
This letter ("letter") sets forth the terms of your promotion. If accepted, your date of promotion will be effective on Monday, March 21, 2022.
This letter and your employment are for no specific term. Your employment may be terminated at any time for any reason (or no reason), subject to the terms of this letter below, by the Company or you upon notice to the Company.
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will be eligible to participate in all of the Company’s equity-based and cash-based long-term incentive and other executive compensation plans on a basis no less favorable than the other similarly situated executives. Your target LTI is 75% of your base salary of which 50% are Restricted Shares and 50% are Stock Options. The restricted shares have a three (3) year cliff vest and the stock options vest 1/3 per year for three consecutive years. The term of stock options is ten (10) years as per the 2018 Long Term Incentive Plan. Any award under this plan is approved at the sole discretion of the Compensation Committee of the Board or the Board and subject to change. You will be eligible to participate in this plan with the next annual grant, scheduled for January 2023.
granted: (a) 40,000 restricted shares of Company stock under the Company’s 2018 Long Term Incentive Plan, which shares will vest on the third anniversary date of the Grant Date as defined in the Restricted Share Award Agreement; and (b) 100,000 stock options under the Company’s 2018 Long Term Incentive Plan which vest over a 1/3 per year for three (3) consecutive years and are available to exercise over a ten (10) year period as defined in the Stock Option Agreement. You acknowledge and agree that these Awards are being offered as additional consideration in return for your agreement to the covenants set forth in the Section 7
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competition with any business of the Company on the date of your employment termination for which you worked or had responsibility during your employment.
(iii) disclosure required in connection with any legal process (after giving the Company the opportunity to dispute such requirement)) to any person, firm, corporation, association or other entity, for any reason or purpose whatsoever, nor shall you make use of any such information for the benefit of any person, firm, corporation or other entity except the Company. Your obligation to keep all such information confidential shall be in effect during and for a period of twenty-four (24) months after the termination of your employment with the Company; provided, however, that you will keep confidential and will not disclose any trade secret or similar information protected under law as intangible property (subject to the same exceptions set forth in the parenthetical clause above) for so long as such protection under law is extended.
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will be entitled to an award of its costs of litigation, including reasonable attorneys’ fees, and you further agree to reimburse the Company for all such costs and attorneys’ fees.
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(a) Entire Agreement. Except as otherwise contemplated herein, this letter contains the entire agreement between you and the Company with respect to the subject matter hereof. No amendment, modification or termination of this letter may be made orally but must be made in writing and signed by you and the Company.
(b) Successors; Assignment. Neither party hereto may assign any rights or delegate any duties under this letter without the prior written consent of the other party; provided, however, that (a) this letter will inure to the benefit of and be binding upon the successors and assigns of the Company upon any sale of all or substantially all of the Company's stock and/or assets, or upon any merger, consolidation or reorganization of the Company with or into any other corporation, all as though such successors and assigns of the Company and their respective successors and assigns were the Company; and (b) this letter will inure to the benefit of and be binding upon your heirs, assigns or designees to the extent of any payments due to them hereunder.
(c) Governing Law and Jurisdiction. This letter will be governed by and construed in accordance with the law of the State of Illinois and not its choice of law rules, applicable to contracts made and to be performed entirely within that State. You agree that the jurisdiction and venue for any disputes arising under, or any action brought to enforce, or otherwise relating to, this Letter shall be exclusively in the courts in the State of Illinois, Cook County including the Federal Courts located therein (should Federal jurisdiction exist), and you hereby submit and consent to said jurisdiction and venue.
(d) No Set-off or Mitigation. Your rights to payments under this letter will not be affected by any set off, counterclaim, recoupment or other right the Company may have against you or anyone else. You do not need to seek other employment or take any other action to mitigate any amounts owed to you under this letter, and those amounts will not be reduced if you do obtain other employment.
(e) Notices. All notices, requests, demands and other communications under this letter must be in writing and will be deemed given (i) when hand delivered, (ii) on the first business day after the business day sent from within the United States, if delivered by
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a nationally recognized overnight courier or (iii) on the third business day after the business day sent if delivered by registered or certified mail, return receipt requested, in each case to the following address (or to such other address as may be specified by notice that conforms to this section:
The Company, to:
FreightCar America, Inc. 125 South Wacker Drive Suite 1500
Chicago, Illinois 60606 Attention: President / CEO
If to you, to your last address shown on the payroll records of the Company.
(f) Counterparts. This letter may be executed in counterparts, each of which will constitute an original and all of which, taken together, will constitute one and the same instrument.
Mike, on behalf of FreightCar America, we are very excited by the prospect of you joining our company. I look forward to answering any questions you may have.
Sincerely,
FreightCar America, Inc.
By: /s/ James R. Meyer 3/18/22
James R. Meyer Date
I have read, understand, and agree to the terms of this letter.
/s/ Michael A. Riordan |
3/18/22 |
Employee (signature) |
Date |
Michael A. Riordan |
Employee (printed name) |
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Exhibit 31.1
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, James R. Meyer, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of FreightCar America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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Date: May 10, 2022 |
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/s/ JAMES R. MEYER |
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James R. Meyer |
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President and Chief Executive Officer |
Exhibit 31.2
Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael A. Riordan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of FreightCar America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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Date: May 10, 2022 |
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By: |
/s/ MICHAEL A. RIORDAN |
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Michael A. Riordan |
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Vice President, Finance, Chief Financial Officer and Treasurer |
Exhibit 32
Certification pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of FreightCar America, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, James R. Meyer, President and Chief Executive Officer, and Michael A. Riordan, Vice President, Finance, Chief Financial Officer and Treasurer, respectively, of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
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Date: May 10, 2022 |
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By: |
/s/ JAMES R. MEYER |
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James R. Meyer |
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President and Chief Executive Officer (Principal Executive Officer) |
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Date: May 10, 2022 |
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By: |
/s/ MICHAEL A. RIORDAN |
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Michael A. Riordan |
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Vice President, Finance, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
A signed copy of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.