FreightCar America, Inc. (Form: 10-Q, Received: 05/10/2013 15:23:33)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2013

¨	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.)

Two North Riverside Plaza, Suite 1300 Chicago, Illinois		60606
(Address of principal executive offices)		(Zip Code)

(800) 458-2235

(Registrant’s telephone number, including area code)

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 x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

As of April 26, 2013, there were 12,024,823 shares of the registrant’s common stock outstanding.

FREIGHTCAR AMERICA, INC.

INDEX TO FORM 10-Q


Item Number		Page Number
	PART I – FINANCIAL INFORMATION

1.	Financial Statements:

	Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2013 and December 31, 2012		3

	Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2013 and 2012		4

	Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) for the Three Months Ended March 31, 2013 and 2012		5

	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended March 31, 2013 and 2012		6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2013 and 2012		7

	Notes to Condensed Consolidated Financial Statements (Unaudited)		8

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

3.	Quantitative and Qualitative Disclosures About Market Risk		22

4.	Controls and Procedures		23

	PART II – OTHER INFORMATION

1.	Legal Proceedings		23

1A.	Risk Factors		23

2.	Unregistered Sales of Equity Securities and Use of Proceeds		23

3.	Defaults Upon Senior Securities		23

4.	Mine Safety Disclosures		23

5.	Other Information		24

6.	Exhibits		24

	Signatures		25

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

FreightCar America, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	March 31, 2013			December 31, 2012
	*(In thousands, except share and per share data)*
Assets
Current assets
Cash and cash equivalents	$	73,077		$	98,509
Restricted cash		2,969			14,700
Marketable securities		41,988			41,978
Accounts receivable, net of allowance for doubtful accounts of $274 and $299, respectively		10,783			12,987
Inventories, net		75,824			73,842
Other current assets		7,308			7,130
Deferred income taxes, net		12,079			12,079

Total current assets		224,028			261,225
Property, plant and equipment, net		50,790			39,343
Railcars available for lease, net		43,132			43,435
Goodwill		22,128			22,128
Deferred income taxes, net		15,930			18,940
Other long-term assets		3,318			3,494

Total assets	$	359,326		$	388,565

Liabilities and Stockholders’ Equity
Current liabilities
Accounts and contractual payables	$	18,277		$	33,453
Accrued payroll and employee benefits		3,440			6,548
Accrued postretirement benefits		4,978			4,978
Accrued warranty		7,468			7,625
Customer deposits		27,383			36,087
Other current liabilities		9,249			7,885

Total current liabilities		70,795			96,576
Accrued pension costs		11,938			12,193
Accrued postretirement benefits, less current portion		63,805			64,322
Accrued taxes and other long-term liabilities		4,156			4,143

Total liabilities		150,694			177,234

Stockholders’ equity
Preferred stock, $0.01 par value, 2,500,000 shares authorized (100,000 shares each designated as Series A voting and Series B non-voting, 0 shares issued and outstanding at March 31, 2013 and December 31, 2012)		—			—
Common stock, $0.01 par value, 50,000,000 shares authorized, 12,731,678 shares issued at March 31, 2013 and December 31, 2012		127			127
Additional paid in capital		98,667			100,402
Treasury stock, at cost, 706,855 and 752,167 shares at March 31, 2013 and December 31, 2012, respectively		(32,309	)		(34,488	)
Accumulated other comprehensive loss		(25,916	)		(26,139	)
Retained earnings		168,063			171,429

Total stockholders’ equity		208,632			211,331

Total liabilities and stockholders’ equity	$	359,326		$	388,565

See Notes to Condensed Consolidated Financial Statements.

FreightCar America, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
	2013			2012
	*(In thousands, except share and per share data)*
Revenues	$	87,615		$	219,066
Cost of sales		82,646			195,335

Gross profit		4,969			23,731
Selling, general and administrative expenses		4,431			8,693
Gain on sale of railcars available for lease		(14	)		(948	)

Operating income		552			15,986
Interest income		14			2
Interest expense		(98	)		(92	)

Income before income taxes		468			15,896
Income tax provision		3,112			6,162

Net (loss) income	$	(2,644	)	$	9,734

Net (loss) income per common share – basic	$	(0.22	)	$	0.82

Net (loss) income per common share – diluted	$	(0.22	)	$	0.81

Weighted average common shares outstanding – basic		11,943,423			11,924,418

Weighted average common shares outstanding – diluted		11,943,423			11,979,727

Dividends declared per common share	$	0.06		$	0.06

See Notes to Condensed Consolidated Financial Statements.

FreightCar America, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)


	Three Months Ended March 31,
	2013			2012
	*(In thousands)*
Net (loss) income	$	(2,644	)	$	9,734

Other comprehensive income, net of tax:
Pension liability reclassified to net income (net of taxes of $46 and $48 )		85			78
Postretirement liability reclassified to net income (net of taxes of $76 and $59)		138			95

Other comprehensive income		223			173

Comprehensive (loss) income	$	(2,421	)	$	9,907

See Notes to Condensed Consolidated Financial Statements.

FreightCar America, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands, except for share data)


	FreightCar America Stockholders
					Additional									Accumulated Other						Total
	Common Stock				Paid In			Treasury Stock						Comprehensive			Retained			Stockholders’
	Shares		Amount		Capital			Shares			Amount			Loss			Earnings			Equity
Balance, December 31, 2011		12,731,678	$	127	$	100,204			(780,320	)	$	(35,904	)	$	(22,302	)	$	155,209		$	197,334

Net income		—		—		—			—			—			—			9,734			9,734
Other comprehensive income		—		—		—			—			—			173			—			173
Restricted stock awards		—		—		(651	)		14,150			651			—			—			—
Employee restricted stock settlement		—		—		—			(763	)		(17	)		—			—			(17	)
Stock-based compensation recognized		—		—		458			—			—			—			—			458
Cash dividends		—		—		—			—			—			—			(718	)		(718	)

Balance, March 31, 2012		12,731,678	$	127	$	100,011			(766,933	)	$	(35,270	)	$	(22,129	)	$	164,225		$	206,964

Balance, December 31, 2012		12,731,678	$	127	$	100,402			(752,167	)	$	(34,488	)	$	(26,139	)	$	171,429		$	211,331

Net loss		—		—		—			—			—			—			(2,644	)		(2,644	)
Other comprehensive income		—		—		—			—			—			223			—			223
Restricted stock awards		—		—		(2,281	)		49,740			2,281			—			—			—
Employee restricted stock settlement		—		—		—			(2,212	)		(54	)		—			—			(54	)
Forfeiture of restricted stock awards		—		—		48			(2,216	)		(48	)		—			—			—
Stock-based compensation recognized		—		—		498			—			—			—			—			498
Cash dividends		—		—		—			—			—			—			(722	)		(722	)

Balance, March 31, 2013		12,731,678	$	127	$	98,667			(706,855	)	$	(32,309	)	$	(25,916	)	$	168,063		$	208,632

See Notes to Condensed Consolidated Financial Statements.

FreightCar America, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
	2013			2012
	*(In thousands)*
Cash flows from operating activities
Net (loss) income	$	(2,644	)	$	9,734
Adjustments to reconcile net (loss) income to net cash flows (used in) provided by operating activities
Depreciation and amortization		2,223			2,097
Gain on sale of railcars available for lease		(14	)		(948	)
Other non-cash items, net		(242	)		209
Deferred income taxes		2,888			6,468
Stock-based compensation recognized		498			458
Changes in operating assets and liabilities:
Accounts receivable		2,204			(2,201	)
Inventories		(1,745	)		(4,491	)
Other assets		(173	)		(4,283	)
Accounts and contractual payables		(15,004	)		23,686
Accrued payroll and employee benefits		(3,108	)		1,560
Income taxes receivable/payable		345			(237	)
Accrued warranty		(157	)		(38	)
Customer deposits and other current liabilities		(7,545	)		2,079
Deferred revenue, non-current		(15	)		(124	)
Accrued pension costs and accrued postretirement benefits		(549	)		(1,549	)

Net cash flows (used in) provided by operating activities		(23,038	)		32,420

Cash flows from investing activities
Restricted cash deposits		(2,039	)		(14,475	)
Restricted cash withdrawals		13,770			96
Purchase of securities held to maturity		(8,995	)		—
Proceeds from securities held to maturity		9,000			—
Proceeds from sale of property, plant and equipment and railcars available for lease		—			10,377
Purchases of property, plant and equipment		(13,354	)		(1,164	)

Net cash flows used in investing activities		(1,618	)		(5,166	)

Cash flows from financing activities
Employee restricted stock settlement		(54	)		(17	)
Cash dividends paid to stockholders		(722	)		(718	)

Net cash flows used in financing activities		(776	)		(735	)

Net (decrease) increase in cash and cash equivalents		(25,432	)		26,519
Cash and cash equivalents at beginning of period		98,509			101,870

Cash and cash equivalents at end of period	$	73,077		$	128,389

Supplemental cash flow information:
Interest paid	$	56		$	31

Income taxes paid	$	—		$	—

Income tax refunds received	$	—		$	—

See Notes to Condensed Consolidated Financial Statements.

FreightCar America, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share data)

Note 1 – Description of the Business

FreightCar America, Inc. (“FreightCar”) operates primarily in North America through its direct and indirect subsidiaries, JAC Operations, Inc. (“Operations”), Johnstown America, LLC (“JA LLC”), Freight Car Services, Inc. (“FCS”), JAIX Leasing Company (“JAIX”), FreightCar Roanoke, LLC (“FCR”), FreightCar Mauritius Ltd. (“Mauritius”), FreightCar Rail Services, LLC (“FCRS”), FreightCar Rail Management Services, LLC (“FCRMS”), FreightCar Short Line, Inc. (“Short Line”) and FreightCar Alabama, LLC (“FCAL”) (herein collectively referred to as the “Company”), and manufactures railroad freight cars, supplies railcar parts, leases freight cars and provides railcar maintenance, repairs and management. The Company designs and builds coal cars, bulk commodity cars, flat cars, mill gondola cars, intermodal cars, coil steel cars and motor vehicle carriers. The Company is headquartered in Chicago, Illinois and has facilities in the following locations: Clinton, Indiana; Cherokee, Alabama; Danville, Illinois; Lakewood, Colorado; Grand Island, Nebraska; Hastings, Nebraska; Johnstown, Pennsylvania; and Roanoke, Virginia.

The Company’s operations comprise two reportable segments, Manufacturing and Services. The Company and its direct and indirect subsidiaries are all Delaware corporations or Delaware limited liability companies except Mauritius, which is incorporated in Mauritius. The Company’s direct and indirect subsidiaries are all wholly owned.

Note 2 – Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of FreightCar America, Inc. and 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 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, 2013 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 2012 year-end balance sheet data was derived from the audited financial statements as of December 31, 2012. 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, 2012.

Note 3 – Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income; (“ASU 2013-02”). ASU 2013-02 requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount is required to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures that provide additional detail on these amounts. This standard is effective prospectively for reporting periods beginning after December 31, 2012. The adoption of these changes had no impact on the consolidated financial position, results of operations or cash flows of the Company.

Note 4 – Segment Information

The Company’s operations comprise two reportable segments, Manufacturing and Services. The Company’s Manufacturing segment includes new railcar manufacturing, used railcar sales, railcar leasing and major railcar rebuilds. The Company’s Services segment includes general railcar repair and maintenance, inspections, parts sales and railcar fleet management services. Corporate includes selling, general and administrative expenses not related to production of goods and services, retiree pension and other postretirement benefit costs, and all other non-operating activity.

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 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 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.


	Three Months Ended March 31,
	2013			2012
Revenues:
Manufacturing	$	77,722		$	210,449
Services		9,893			8,617

Consolidated revenues	$	87,615		$	219,066

Operating income:
Manufacturing	$	2,092		$	22,690
Services		1,289			653
Corporate		(2,829	)		(7,357	)

Consolidated operating income		552			15,986
Consolidated interest income		14			2
Consolidated interest expense and deferred financing costs		(98	)		(92	)

Consolidated income before income taxes	$	468		$	15,896

Depreciation and amortization:
Manufacturing	$	1,365		$	1,277
Services		520			494
Corporate		338			326

Consolidated depreciation and amortization	$	2,223		$	2,097

Capital expenditures:
Manufacturing	$	12,709		$	426
Services		526			519
Corporate		119			219

Consolidated capital expenditures	$	13,354		$	1,164


	March 31, 2013			December 31, 2012
Assets:
Manufacturing	$	174,422		$	165,090
Services		26,238			24,230
Corporate		129,673			167,266

Total operating assets		330,333			356,586
Consolidated income taxes receivable		984			960
Consolidated deferred income taxes, current		12,079			12,079
Consolidated deferred income taxes, long-term		15,930			18,940

Consolidated assets	$	359,326		$	388,565

Note 5 – Fair Value Measurements

The Company’s current investment policy is to invest in cash, U.S. Treasury securities, U.S. government agency obligations and money market funds invested in U.S. government securities. Investments as of March 31, 2013 have remaining maturities of up to nine months.

The following table sets forth by level within the ASC 820 fair value hierarchy the Company’s financial assets and liabilities that were recorded at fair value on a recurring basis.


Recurring Fair Value Measurements	As of March 31, 2013
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash equivalents	$	8,938	$	—	$	—	$	8,938
U.S. Treasury securities held to maturity	$	41,988	$	—	$	—	$	41,988

Recurring Fair Value Measurements	As of December 31, 2012
	Level 1		Level 2		Level 3		Total
ASSETS:
Cash equivalents	$	11,933	$	—	$	—	$	11,933
U.S. Treasury securities held to maturity	$	41,978	$	—	$	—	$	41,978

Note 6 – Inventories

Inventories are stated at the lower of first-in, first-out cost or market and include material, labor and manufacturing overhead. Inventories, net of reserve for excess and obsolete items, consist of the following:


	March 31, 2013		December 31, 2012
Work in progress	$	67,047	$	68,171
Finished new railcars		2,450		—
Used railcars acquired upon trade-in		105		105
Parts and service inventory		6,222		5,566

Total inventories	$	75,824	$	73,842

Inventory on the Company’s condensed consolidated balance sheets includes reserves of $1,330 and $1,565 relating to excess or slow-moving inventory for parts and work in progress at March 31, 2013 and December 31, 2012, respectively.

Note 7 – Leased Railcars

Railcars available for lease at March 31, 2013 was $43,132 (cost of $48,234 and accumulated depreciation of $5,102) and at December 31, 2012 was $43,435 (cost of $48,234 and accumulated depreciation of $4,799). The Company’s lease utilization rate for railcars in its lease fleet was 100% at each of March 31, 2013 and December 31, 2012.

Leased railcars at March 31, 2013 are subject to lease agreements with external customers with terms of up to nine years and are accounted for as operating leases.

Future minimum rental revenues on leased railcars at March 31, 2013 are as follows:


Nine months ending December 31, 2013	$	3,272
Year ending December 31, 2014		3,758
Year ending December 31, 2015		2,051
Year ending December 31, 2016		1,687
Year ending December 31, 2017		1,256
Thereafter		2,045

	$	14,069

Note 8 – Property, Plant and Equipment

Property, plant and equipment consists of the following:


	March 31, 2013			December 31, 2012
Buildings and improvements	$	25,267		$	25,192
Machinery and equipment		37,993			36,672
Software		8,383			8,383
Leasehold improvements		5,350			5,350

Cost of buildings and improvements, leasehold improvements, machinery, equipment and software		76,993			75,597
Less: Accumulated depreciation and amortization		(41,003	)		(39,269	)

Buildings and improvements, leasehold improvements, machinery, equipment and software, net of accumulated depreciation and amortization		35,990			36,328
Land (including easements)		2,203			2,203
Construction in process		12,597			812

Total property, plant and equipment, net	$	50,790		$	39,343

Note 9 – Intangible Assets and Goodwill

Intangible assets consist of the following:


	March 31, 2013			December 31, 2012
Patents	$	13,097		$	13,097
Accumulated amortization		(11,114	)		(10,966	)

Patents, net of accumulated amortization		1,983			2,131

Customer-related intangibles		1,300			1,300
Accumulated amortization		(250	)		(213	)

Customer-related intangibles, net of accumulated amortization		1,050			1,087

Total amortizing intangibles	$	3,033		$	3,218

Manufacturing segment goodwill	$	21,521		$	21,521
Services segment goodwill		607			607

Total goodwill	$	22,128		$	22,128

Patents are being amortized on a straight-line method over their remaining legal life from the date of acquisition. The weighted average remaining life of the Company’s patents is 4 years. Amortization expense related to patents, which is included in cost of sales, was $148 for each of the three months ended March 31, 2013 and 2012. Customer-related intangibles are being amortized from the date of acquisition and have a remaining life of 18 years. Amortization expense related to customer intangibles, which is included in selling, general and administrative expenses, was $37 for each of the three months ended March 31, 2013 and 2012.

The estimated future intangible amortization at March 31, 2013 is as follows:


Nine months ending December 31, 2013	$	554
Year ending December 31, 2014		744
Year ending December 31, 2015		720
Year ending December 31, 2016		476
Year ending December 31, 2017		108
Thereafter		431

	$	3,033

Note 10 – Product Warranties

Warranty terms are based on the negotiated railcar sales contracts. The Company typically warrants that new railcars produced by it will be free from defects in material and workmanship under normal use and service identified for a period of up to five years from the time of sale. The changes in the warranty reserve for the three months ended March 31, 2013 and 2012, are as follows:


	Three Months Ended March 31,
	2013			2012
Balance at the beginning of the period	$	7,625		$	7,795
Provision for warranties issued during the period		161			990
Reductions for payments, cost of repairs and other		(310	)		(87	)
Adjustments to prior warranties		(8	)		(941	)

Balance at the end of the period	$	7,468		$	7,757

Adjustments to prior warranties includes changes in the warranty reserve for warranties issued in prior periods due to expiration of the warranty period, revised warranty cost estimates and other factors.

Note 11 – Revolving Credit Facility

On July 29, 2010, the Company entered into a $30,000 senior secured revolving credit facility pursuant to a Loan and Security Agreement dated as of July 29, 2010 (the “Revolving Loan Agreement”) among FreightCar, JA LLC, FCS, Operations and FCR, as borrowers (collectively, the “Borrowers”), and Fifth Third Bank, as lender. The proceeds of the revolving credit facility can be used for general corporate purposes, including working capital. As of March 31, 2013 and December 31, 2012, the Company had no borrowings and therefore had $30,000 available under the revolving credit facility. The Revolving Loan Agreement also contains a sub-facility for letters of credit not to exceed $20,000. The Company had no outstanding letters of credit under the revolving credit facility as of March 31, 2013 and December 31, 2012.

The Revolving Loan Agreement has a term ending on July 29, 2013 and revolving loans outstanding thereunder will bear interest at a rate of LIBOR plus an applicable margin of 2.50% or at prime, as selected by the Company. The Company is required to pay a non-utilization fee of 0.35% on the unused portion of the revolving loan commitment, which is included in interest expense and deferred financing fees in the consolidated statement of operations. Borrowings under the Revolving Loan Agreement are secured by the Company’s accounts receivable, inventory and certain other assets of the Company, and borrowing availability is tied to a borrowing base of eligible accounts receivable and inventory. The Revolving Loan Agreement has both affirmative and negative covenants, including, without limitation, a minimum tangible net worth covenant and limitations on indebtedness, liens and investments. The minimum tangible net worth covenant in the Revolving Loan Agreement effectively limits potential dividends to $64,920 as of March 31, 2013. The Revolving Loan Agreement also provides for customary events of default. As of March 31, 2013, the Company was in compliance with all of the financial covenants contained in the agreement.

Note 12 – Stock-Based Compensation

The Company recognizes stock-based compensation expense for stock option awards based on the fair value of the award on the grant date using the Black-Scholes option valuation model. Expected life in years for all stock options awards was determined using the simplified method. The Company believes that it is appropriate to use the simplified method in determining the expected life for options because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for stock options and due to the limited number of stock option grants to date. Expected volatility was based on the historical volatility of the Company’s stock. The risk-free interest rate was based on the U.S. Treasury bond rate for the expected life of the option. The expected dividend yield was based on the latest annualized dividend rate and the current market price of the underlying common stock on the date of the grant. The Company recognizes stock-based compensation for restricted stock awards over the vesting period based on the fair market value of the stock on the date of the award, calculated as the average of the high and low trading prices for the Company’s common stock on the award date.

On January 14, 2013, the Company awarded 3,250 non-qualified stock options to an executive of the Company pursuant to its 2005 Long Term Incentive Plan. The stock options will vest in three equal annual installments beginning on January 14, 2014 and have a contractual term of 10 years. The exercise price of each option is $24.27, which was the fair market value of the Company’s stock on the date of the grant. The estimated fair value of $10.70 per option will be recognized over the period during which the employee is required to provide service in exchange for the award, which is the vesting period. The following assumptions were used to value the January 14, 2013 stock options: expected lives of the options of 6 years; expected volatility of 51.36%; risk-free interest rate of 0.78%; and expected dividend yield of 0.98%.

On January 18, 2013, the Company awarded 96,800 non-qualified stock options to certain employees of the Company pursuant to its 2005 Long Term Incentive Plan. The stock options will vest in three equal annual installments beginning on January 18, 2014 and have a contractual term of 10 years. The exercise price of each option is $24.56, which was the fair market value of the Company’s stock on the date of the grant. The estimated fair value of $10.82 per option will be recognized over the period during which the employee is required to provide service in exchange for the award, which is the vesting period. The following assumptions were used to value the January 18, 2013 stock options: expected lives of the options of 6 years; expected volatility of 51.38%; risk-free interest rate of 0.77%; and expected dividend yield of 0.99%.

During the three months ended March 31, 2013, the Company awarded 49,740 shares of restricted stock to certain employees of the Company pursuant to its 2005 Long Term Incentive Plan. Each restricted stock award will vest in three equal annual installments beginning on the first anniversary of the award, with continued vesting of the award subject to the recipient’s continued employment with the Company. Stock compensation expense will be recognized over the vesting period based on the fair market value of the stock on the date of the award, calculated as the average of the high and low trading prices for the Company’s common stock on the award date.

As of March 31, 2013, there was $3,514 of unearned compensation expense related to stock options and restricted stock awards, which will be recognized over the remaining requisite service period of 34 months.

Note 13 – Employee Benefit Plans

The Company has qualified, defined benefit pension plans that were established to provide benefits to certain employees. These plans are frozen and participants are no longer accruing benefits. The Company also provides certain postretirement health care benefits for certain of its salaried and hourly retired employees. Generally, employees may become eligible for health care benefits if they retire after attaining specified age and service requirements. These benefits are subject to deductibles, co-payment provisions and other limitations.

A substantial portion of the Company’s postretirement benefit plan obligation relates to a settlement with the union representing employees at the Company’s and its predecessors’ Johnstown manufacturing facilities. The terms of that settlement agreement required the Company to pay until November 30, 2012 certain monthly amounts toward the cost of retiree health care coverage. The Company is currently engaged in negotiations related to the expired settlement agreement but no agreements have been reached. Therefore, the outcome of those negotiations and the impact on the Company’s postretirement benefit plan obligation cannot be determined at this time. The Company’s recorded postretirement benefit plan obligation assumes for accounting purposes a continuation of those monthly payments after November 30, 2012 (as permitted under the settlement). However, the Company’s postretirement benefit plan obligation could significantly increase or decrease if payments were to cease, if litigation should ensue or if the parties should agree on a modified settlement.

Generally, contributions to the plans are not less than the minimum amounts required under the Employee Retirement Income Security Act of 1974 (“ERISA”) and not more than the maximum amount that can be deducted for federal income tax purposes. The plans’ assets are held by independent trustees and consist primarily of equity and fixed income securities.

The components of net periodic benefit cost (benefit) for the three months ended March 31, 2013 and 2012, are as follows:


	Three Months Ended March 31,
Pension Benefits	2013			2012
Interest cost	$	632		$	725
Expected return on plan assets		(887	)		(862	)
Amortization of unrecognized net loss		131			126

	$	(124	)	$	(11	)


	Three Months Ended March 31,
Postretirement Benefit Plan	2013		2012
Service cost	$	18	$	16
Interest cost		657		755
Amortization of prior service cost		60		60
Amortization of unrecognized net loss		154		94

	$	889	$	925

Amortization of unrecognized net loss for the Company’s defined benefit pension plans was reclassified to income, from accumulated other comprehensive income, of which $118 and $13 was recognized in cost of sales and selling, general and administrative expenses, respectively for the three months ended March 31, 2013 and $77 and $49 was recognized in cost of sales and selling, general and administrative expenses, respectively for the three months ended March 31, 2012. The Company made contributions of $0 and $1,044 to the Company’s defined benefit pension plans for the three months ended March 31, 2013 and 2012, respectively. The Company expects to make $759 in contributions to its pension plans in 2013 to meet its minimum funding requirements.

Amortization of prior service cost for the Company’s postretirement benefit plan was reclassified to income, from accumulated other comprehensive income, of which $57 and $3 was recognized in cost of sales and selling, general and administrative expenses, respectively for the three months ended March 31, 2013 and $56 and $4 was recognized in cost of sales and selling, general and administrative expenses, respectively for the three months ended March 31, 2012. Amortization of unrecognized net loss for the Company’s postretirement benefit plan was reclassified to income, from accumulated other comprehensive income, of which $146 and $8 was recognized in cost of sales and selling, general and administrative expenses, respectively for the three months ended March 31, 2013 and $88 and $6 was recognized in cost of sales and selling, general and administrative expenses, respectively for the three months ended March 31, 2012. The Company made payments to the Company’s postretirement benefit plan of $1,192 and $1,313 for the three months ended March 31, 2013 and 2012, respectively. If the Company continued to fund its postretirement benefit plan based on the expired settlement agreement the Company would make approximately $4,946 in payments to the plan in 2013.

The Company also maintains qualified defined contribution plans, which provide benefits to employees based on employee contributions, employee earnings or certain subsidiary earnings, with discretionary contributions allowed. Expenses related to these plans were $548 and $441 for the three months ended March 31, 2013 and 2012, respectively.

Note 14 – Contingencies

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.

On September 29, 2008, Bral Corporation, a supplier of certain railcar parts to the Company, filed a complaint against the Company in the U.S. District Court for the Western District of Pennsylvania (the “Pennsylvania Lawsuit”). The complaint alleges that the Company breached an exclusive supply agreement with Bral by purchasing parts from CMN Components, Inc. (“CMN”) and seeks damages in an unspecified amount, attorneys’ fees and other legal costs. On December 14, 2007, Bral sued CMN in the U.S. District Court for the Northern District of Illinois, alleging among other things that CMN interfered in the business relationship between Bral and the Company (the “Illinois Lawsuit”) and seeking damages in an unspecified amount, attorneys’ fees and other legal costs. On October 22, 2008, the Company entered into an Assignment of Claims Agreement with CMN under which CMN assigned to the Company its counterclaims against Bral in the Illinois Lawsuit and the Company agreed to defend and indemnify CMN against Bral’s claims in that lawsuit. On March 4, 2013, Bral Corporation and the Company agreed to settle the Illinois Lawsuit and the Pennsylvania Lawsuit. The settlement resulted in a $3,884 reduction in litigation reserves, which favorably impacted the Company’s results of operations for the three months ended March 31, 2013.

On a quarterly basis, the Company evaluates the potential outcome of all significant contingencies and estimates the likelihood that a future event or events will confirm the loss of an asset or incurrence of a liability. When information available prior to issuance of the Company’s financial statements indicates that in management’s judgment, it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and the amount of loss can be reasonably estimated, the contingency is accrued by a charge to income.

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. While the ultimate outcome of these other legal proceedings cannot be determined at this time, it is the opinion of management that the resolution of these other actions will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Note 15 – Other Commitments

The Company leases certain property and equipment under long-term operating leases expiring at various dates through 2024. On February 19, 2013, the Company subleased space at a production facility located in the Shoals region of Alabama. The Company will operate approximately 543,399 square feet of a 2,150,000-square foot facility located on approximately 700 acres of land. The subleased premises will include production lines, an assembly area, storage and fabrication areas and office space. The initial term of the sublease expires on December 31, 2021 and, at the Company’s option, subject to satisfaction of certain conditions, may be extended for an additional 120 months.

Future minimum lease payments at March 31, 2013 are as follows:


Nine months ending December 31, 2013	$	6,276
Year ending December 31, 2014		8,865
Year ending December 31, 2015		9,285
Year ending December 31, 2016		9,046
Year ending December 31, 2017		8,748
Thereafter		44,511

	$	86,731

The Company is liable for maintenance, insurance and similar costs under most of its leases and such costs are not included in the future minimum lease payments. Total rental expense for the three months ended March 31, 2013 and 2012, was approximately $782 and $1,822, respectively.

In addition, the Company has other non-cancelable agreements with its suppliers to purchase certain materials used in the manufacturing process. The commitments may vary based on the actual quantities ordered and be subject to the actual price when ordered. At March 31, 2013, the Company had purchase commitments under these agreements of $18,060 for the nine months ending December 31, 2013 and $17,300 for the year ending December 31, 2014.

Note 16 – Earnings Per Share

Shares used in the computation of the Company’s basic and diluted earnings per common share are reconciled as follows:


	Three Months Ended March 31,
	2013		2012
Weighted average common shares outstanding		11,943,423		11,924,418
Dilutive effect of employee stock options and nonvested share awards		—		55,309

Weighted average diluted common shares outstanding		11,943,423		11,979,727

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. Because the Company had a net loss for the three months ended March 31, 2013, all stock options and shares of nonvested share awards were anti-dilutive and not included in the above calculation for that period. For the three months ended March 31, 2012, 172,059 shares were not included in the weighted average common shares outstanding calculation as they were anti-dilutive.

Note 17 – Income Taxes

The income tax provision was $3,112 for the three months ended March 31, 2013, compared to $6,162 for the three months ended March 31, 2012. The addition of the Company’s Shoals facility will change the mix of income from states in which it operates, resulting in changes in the Company’s estimated state tax apportionment and effective state tax rates. The income tax provision for the three months ended March 31, 2013 included a provision of $1,354 resulting from applying these changes in effective state tax rates on the Company’s deferred tax balances. Additionally, projected taxable income in certain states in which the Company operates may not be sufficient to realize the full value of net operating loss carryforwards. As a result, the income tax provision also includes the recognition of a valuation allowance of $2,503 against deferred tax assets related to net operating loss carryforwards in certain states in which the Company operates. These discrete tax provisions during the first quarter of 2013 were partially offset by $891 of discrete tax benefits recorded during the quarter associated with tax deductible goodwill. Excluding these discrete items, the Company’s forecasted full-year effective tax rate applied against pre-tax income for the three months ended March 31, 2013 was 25.9%. The effective tax rate for the three months ended March 31, 2012 was 38.8% and was higher than the statutory U.S. federal income tax rate of 35% primarily due to a 4.9% blended state tax rate offset by 2.0% for the impact of tax deductible goodwill.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 believe we are the leading manufacturer of aluminum-bodied railcars and coal cars in North America, based on the number of railcars delivered. Our railcar manufacturing facilities are located in Danville, Illinois; Roanoke, Virginia; and Cherokee, Alabama. Additionally, we refurbish and rebuild railcars and sell forged, cast and fabricated parts for all of the railcars we produce, as well as those manufactured by others. We provide railcar repair and maintenance, inspections and railcar fleet management services for all types of freight railcars through our FCRS and FCRMS subsidiaries. FCRS has repair and maintenance and inspection facilities in Clinton, Indiana, Grand Island, Nebraska and Hastings, Nebraska and services freight cars and unit coal trains utilizing key rail corridors in the Midwest and Western regions of the United States. We also lease freight cars through our JAIX Leasing Company subsidiary. Our primary customers are financial institutions, shippers and railroads.

In February 2013, we subleased approximately 25% of a state-of-the-art production facility located in the Shoals region of Alabama. Our Shoals production facility was designed to efficiently build a wide variety of railcar types and is an important part of our long-term growth strategy as we continue to expand our railcar product and service offerings outside of our traditional coal car market. While our Danville, Illinois and Roanoke, Virginia facilities will continue to support our coal car products, our Shoals facility will allow us to produce a broader variety of railcars in a cost-effective and efficient manner. In addition, the facility layout, automated production equipment, proximity to key suppliers and new supply agreements will increase our flexibility and make us more competitive in the marketplace. Production preparation has begun and we have installed a management team to operate the Shoals facility and are in the process of staffing and training the production work force. We have also procured our first order for the facility and are on track to begin production in the third quarter of 2013.

We have two reportable segments, Manufacturing and Services. Our Manufacturing segment includes new railcar manufacturing, used railcar sales, railcar leasing and major railcar rebuilds. Our Services segment includes general railcar repair and maintenance, inspections, parts sales and railcar fleet management services. Corporate includes administrative activities and all other non-operating costs.

Total orders for railcars in the first quarter of 2013 were 274 units, compared to 1,244 units, consisting of 1,164 new railcars and 80 used railcars, ordered in the first quarter of 2012. Our order activity for the first quarter of 2013 reflects continued uncertainty in the railcar market. Railcar deliveries totaled 1,073 units, consisting of 448 new railcars and 625 rebuilt railcars, in the first quarter of 2013, compared to 2,613 units, consisting of 2,146 new railcars, 80 used railcars sold and 387 leased railcars delivered, in the first quarter of 2012. Total backlog of unfilled orders was 2,082 units, consisting of 707 new railcars and 1,375 rebuilt railcars, at March 31, 2013, compared to 2,881 units, consisting of 981 new railcars and 1,900 rebuilt railcars, at December 31, 2012.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2013 compared to Three Months Ended March 31, 2012

Revenues

Our consolidated revenues for the three months ended March 31, 2013 were $87.6 million compared to $219.1 million for the three months ended March 31, 2012. Manufacturing segment revenues for the first quarter of 2013 were $77.7 million compared to $210.4 million for the first quarter of 2012. The decrease in Manufacturing segment revenues for the 2013 period compared to the 2012 period reflects the decrease in the number of railcars delivered and an unfavorable product mix. Our Manufacturing segment delivered 1,073 units, consisting of 448 new railcars and 625 rebuilt railcars, in the first quarter of 2013, compared to 2,613 units, consisting of 2,146 new railcars, 80 used railcars sold and 387 leased railcars, in the first quarter of 2012. Services segment revenues for the three months ended March 31, 2013 were $9.9 million compared to $8.6 million for the three months ended March 31, 2012. The increase in Services segment revenues for 2013 compared to 2012 reflects higher parts sales revenue that was partially offset by lower repair volumes.

Gross Profit

Our consolidated gross profit for the three months ended March 31, 2013 was $5.0 million compared to $23.7 million for the three months ended March 31, 2012, representing a decrease of $18.7 million. The decrease in our consolidated gross profit for the first quarter of 2013 compared to the first quarter of 2012 reflects a decrease in gross profit from our Manufacturing segment of $19.4 million, which was partially offset by an increase in gross profit from our Services segment of $0.6 million. The decrease in gross profit for our Manufacturing segment for the first quarter of 2013 compared to the first quarter of 2012 reflects the decrease in deliveries, the negative impact of lower volumes on our operating efficiency, as well as product mix changes. The increase in gross profit for our Services segment for the first quarter of 2013 compared to 2012 reflects higher parts sales and an increase in higher margin program repairs. Our consolidated gross margin rate was 5.7% for the three months ended March 31, 2013 compared to 10.8% for the three months ended March 31, 2012.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses for the three months ended March 31, 2013 were $4.4 million compared to $8.7 million for the three months ended March 31, 2012, representing a decrease of $4.3 million. During the first quarter of 2013 we settled the Bral litigation (see note 14 to our condensed consolidated financial statements), which resulted in a $3.9 million reduction in litigation reserves, which was partially offset by $0.5 million of related legal expenses incurred during the quarter. Selling, general and administrative expenses for the three months ended March 31, 2013 also included decreases in compensation of $0.3 million and external services of $0.4 million. Manufacturing segment selling, general and administrative expenses for the three months ended March 31, 2013 were $1.7 million compared to $1.5 million for the three months ended March 31, 2012. Services segment selling, general and administrative expenses for the three months ended March 31, 2013 were $1.0 million compared to $0.9 million for the three months ended March 31, 2012. Corporate selling, general and administrative expenses for the three months ended March 31, 2013 were $1.8 million compared to $6.3 million for the three months ended March 31, 2012, reflecting the reduction in the litigation reserve (partially offset by related legal expenses) and decreases in compensation and external services.

Gain on Sale of Railcars Available for Lease

Gain on sale of railcars available for lease for the three months ended March 31, 2012 was $0.9 million and represented the gain on sale of 128 leased railcars (with a net book value of $10.4 million). Gain on sale of railcars available for lease for the three months ended March 31, 2013 was immaterial.

Operating Income

Our consolidated operating income for the three months ended March 31, 2013 was $0.6 million, compared to $16.0 million for the three months ended March 31, 2012. Operating income for the Manufacturing segment was $2.1 million for the three months ended March 31, 2013 compared to $22.7 million for the three months ended March 31, 2012. The reduction in operating income for the Manufacturing segment reflects the decrease in deliveries, the negative impact of lower volumes on our operating efficiency, as well as product mix changes. Services segment operating income was $1.3 million for the three months ended March 31, 2013 compared to $0.7 million for the three months ended March 31, 2012. The increase in Services segment operating income was primarily due to higher parts sales volume and higher volume of program repairs for the 2013 period compared to the 2012 period. Corporate costs were $2.8 million for the three months ended March 31, 2013 compared to $7.4 million for the three months ended March 31, 2012. The decrease in Corporate costs was primarily due to a reduction in the litigation reserve (partially offset by related legal expenses) and decreases in compensation and external services.

Interest Expense/Income

Interest expense (consisting of commitment fees on our revolving credit facility and letter of credit fees) was $0.1 million for each of the three months ended March 31, 2013 and 2012.

Income Taxes

The income tax provision was $3.1 million for the three months ended March 31, 2013, compared to $6.2 million for the three months ended March 31, 2012. The addition of our Shoals facility will change the mix of income from states in which we operate, resulting in changes in our estimated state tax apportionment and effective state tax rates. The income tax provision for the three months ended March 31, 2013 included a provision of $1.4 million resulting from applying these changes in effective state tax rates to our deferred tax balances. Additionally, projected taxable income in certain states in

which we operate may not be sufficient to realize the full value of net operating loss carryforwards. As a result, the income tax provision also includes the recognition of a valuation allowance of $2.5 million against deferred tax assets related to net operating loss carryforwards in certain states in which we operate. These discrete tax provisions during the first quarter of 2013 were partially offset by $0.9 million of discrete tax benefits recorded during the quarter associated with tax deductible goodwill. Excluding these discrete items, our forecasted full-year effective tax rate applied against pre-tax income for the three months ended March 31, 2013 was 25.9%. The effective tax rate for the three months ended March 31, 2012 was 38.8% and was higher than the statutory U.S. federal income tax rate of 35% primarily due to a 4.9% blended state tax rate offset by 2.0% for the impact of tax deductible goodwill.

Net (Loss) Income

As a result of the foregoing, net loss was $2.6 million for the three months ended March 31, 2013, reflecting a decrease of $12.4 million from net income of $9.7 million for the three months ended March 31, 2012. For the three months ended March 31, 2013, our basic and diluted net loss per share was $0.22 on basic and diluted shares outstanding of 11,943,423.

For the three months ended March 31, 2012, our basic and diluted net income per share were $0.82 and $0.81, respectively, on basic and diluted shares outstanding of 11,924,418 and 11,979,727.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity for the three months ended March 31, 2013 and 2012, were our cash and cash equivalent balances on hand, our securities held to maturity, our lease fleet and our revolving credit facility. On July 29, 2010, we entered into a $30.0 million senior secured revolving credit facility pursuant to a Loan and Security Agreement dated as of July 29, 2010 (the “Revolving Loan Agreement”) among the Company and certain of its subsidiaries, as borrowers (collectively, the “Borrowers”), and Fifth Third Bank, as lender. The proceeds of the revolving credit facility can be used for general corporate purposes, including working capital. The Revolving Loan Agreement also contains a sub-facility for letters of credit not to exceed $20.0 million. As of each of March 31, 2013 and December 31, 2012, we had no borrowings or outstanding letters of credit under the revolving credit facility.

Revolving loans outstanding under the Revolving Loan Agreement will bear interest at a rate of LIBOR plus an applicable margin of 2.50% or at prime, as selected by the Borrowers. We have no expectations to draw upon the revolving credit facility. We are required to pay a non-utilization fee of 0.35% on the unused portion of the revolving loan commitment. Borrowings under the Revolving Loan Agreement are secured by our accounts receivable, inventory and certain other assets, and borrowing availability is tied to a borrowing base of eligible accounts receivable and inventory. The Revolving Loan Agreement has both affirmative and negative covenants, including, without limitation, a minimum tangible net worth covenant and limitations on indebtedness, liens and investments. The minimum tangible net worth covenant effectively limits potential dividends to $64.9 million as of March 31, 2013. The Revolving Loan Agreement also provides for customary events of default. As of March 31, 2013, we had borrowing capacity of $30.0 million under the Revolving Loan Agreement and we were in compliance with all of the covenants contained in the agreement. The Revolving Loan Agreement has a term ending on July 29, 2013. We are currently evaluating renewal or refinancing alternatives for our current Revolving Loan Agreement and expect to have a new agreement in place by July 29, 2013.

Our restricted cash balance was $3.0 million as of March 31, 2013 and $14.7 million as of December 31, 2012, and consisted of cash used to collateralize standby letters of credit with respect to performance guarantees and to support our worker’s compensation insurance claims. The standby letters of credit outstanding as of March 31, 2013 are scheduled to expire at various dates through December 2013. We expect to establish restricted cash balances in future periods to minimize bank fees related to standby letters of credit while maximizing our ability to borrow under the revolving credit facility.

As of March 31, 2013, the value of railcars available for lease was $43.1 million. We may continue to offer railcars for lease to certain customers and pursue opportunities to sell leased railcars in our portfolio. Additional railcars available for lease may be funded by cash flows from operations or we may pursue a new credit facility or both, as we evaluate our liquidity and capital resources.

Based on our current level of operations and known changes in planned volume based on our backlog, we believe that our cash balances and our marketable securities, together with amounts available under our revolving credit facility, will be sufficient to meet our expected liquidity needs. Our long-term liquidity is contingent upon future operating performance and our ability to continue to meet financial covenants under our revolving credit facility and any other indebtedness. We may also require additional capital in the future to fund working capital as demand for railcars increases, 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.

Our long-term liquidity needs also depend to a significant extent on our obligations related to our pension and welfare benefit plans. We provide pension and retiree welfare benefits to certain salaried and hourly employees upon their retirement. Benefits under our pension plans are now frozen and will not be impacted by increases due to future service. The most significant assumptions used in determining our net periodic benefit costs are the discount rate used on our pension and postretirement welfare obligations and expected return on pension plan assets. As of December 31, 2012, our benefit obligation under our defined benefit pension plans and our postretirement benefit plan was $65.0 million and $69.3 million, respectively, which exceeded the fair value of plan assets by $12.2 million and $69.3 million, respectively.

We made no contributions to our defined benefit pension plans during the first three months of 2013 and expect to make approximately $0.8 million in total contributions to our defined benefit pension plans during 2013. The Pension Protection Act of 2006 provides for changes to the method of valuing pension plan assets and liabilities for funding purposes as well as minimum funding levels. Our defined benefit pension plans are in compliance with the minimum funding levels established in the Pension Protection Act. Funding levels will be affected by future contributions, investment returns on plan assets, growth in plan liabilities and interest rates. Assuming that the plans are fully funded as that term is defined in the Pension Protection Act, we will be required to fund the ongoing growth in plan liabilities on an annual basis.

We made payments to our postretirement benefit plan of $1.2 million during the three months ended March 31, 2013. A substantial portion of our postretirement benefit plan obligation relates to a settlement with the union representing employees at the Company’s and its predecessors’ Johnstown manufacturing facilities. The terms of that settlement required us to pay until November 30, 2012 certain monthly amounts toward the cost of retiree health care coverage. We are currently engaged in negotiations related to the expired settlement agreement but no agreements have been reached. Therefore, the outcome of those negotiations and the impact on our postretirement benefit plan obligation cannot be determined at this time. If we continued to fund our postretirement benefit plan based on the expired settlement agreement we would make approximately $5.0 million in payments to the plan in 2013. However, the Company’s postretirement benefit plan obligation could significantly increase or decrease if payments were to cease, if litigation should ensue or if the parties should agree on a modified settlement. We anticipate funding pension plan contributions and postretirement benefit plan payments with cash from operations and available cash.

Based upon our operating performance, capital requirements and obligations under our pension and welfare benefit plans, we may, from time to time, be required to raise additional funds through additional offerings of our common stock and through long-term borrowings. 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.

Contractual Obligations

The following table summarizes our contractual obligations as of March 31, 2013 and the effect that these obligations and commitments would be expected to have on our liquidity and cash flow in future periods:


	Payments Due by Period
Contractual Obligations	Total		1 Year		2-3 Years		4-5 Years		After 5 Years
	*(In thousands)*
Operating leases	$	86,731	$	8,496	$	18,233	$	17,694	$	42,308
Material and component purchases		35,657		22,682		12,975		—		—

Total	$	122,388	$	31,178	$	31,208	$	17,694	$	42,308

Material and component purchases consist of non-cancelable agreements with suppliers to purchase materials used in the manufacturing process. Purchase commitments for aluminum are made at a fixed price and are typically entered into after a customer places an order for railcars. The estimated amounts above may vary based on the actual quantities and price.

The above table excludes $3.5 million related to a reserve for unrecognized tax benefits and accrued interest and penalties at March 31, 2013 because the timing of the payout of these amounts cannot be determined.

We are also required to make minimum contributions to our pension plans and postretirement welfare plans as discussed above.

Cash Flows

The following table summarizes our net cash (used in) provided by operating activities, investing activities and financing activities for the three months ended March 31, 2013 and 2012:


	Three Months Ended March 31,
	2013			2012
	(In thousands)
Net cash (used in) provided by:
Operating activities	$	(23,038	)	$	32,420
Investing activities		(1,618	)		(5,166	)
Financing activities		(776	)		(735	)

Total	$	(25,432	)	$	26,519

Operating Activities. Our net cash provided by or used in operating activities reflects net income or 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, and payments to our suppliers. As some of our customers accept delivery of new railcars in train-set quantities, consisting on average of 120 to 135 railcars, 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 used in operating activities for the three months ended March 31, 2013 was $23.0 million compared to net cash provided by operating activities of $32.4 million for the three months ended March 31, 2012. Net cash used in operating activities for the three months ended March 31, 2013 included decreases in accounts and contractual payables of $15.0 million and customer deposits of $8.7 million. Net cash provided by operating activities for the three months ended March 31, 2012 includes our income from operations and increases in accounts and contractual payables of $23.7 million. The increase in account and contractual payables for the three months ended March 31, 2012 primarily represents purchases of materials to support increased production levels and the timing of payment on those purchases.

Investing Activities. Net cash used in investing activities for the three months ended March 31, 2013 was $1.6 million compared to $5.2 million for the three months ended March 31, 2012. Net cash used in investing activities for the three months ended March 31, 2013 included purchases of property, plant and equipment of $13.4 million, which were partially offset by restricted cash withdrawals (net of deposits) of $11.7 million. Net cash used in investing activities for the three months ended March 31, 2012 included restricted cash deposits for collateralization of letters of credit of $14.5 million and purchases of property, plant and equipment of $1.2 million, which were partially offset by proceeds from the sale of railcars on operating leases of $10.4 million.

Financing Activities. Net cash used in financing activities for the three months ended March 31, 2013 was $0.8 million compared to net cash used in financing activities of $0.7 million for the three months ended March 31, 2012. Net cash used in financing activities primarily included cash dividends paid to our stockholders.

Capital Expenditures

Our capital expenditures were $13.4 million in the three months ended March 31, 2013 compared to $1.2 million in the three months ended March 31, 2012. Capital expenditures for the three months ended March 31, 2013 were primarily purchases of equipment for our Shoals facility. Capital expenditures for the three months ended March 31, 2012 were primarily cash outlays to maintain our existing facilities. Excluding unforeseen expenditures, management expects that total capital expenditures will be approximately $20.0 million for 2013, including capital expenditures for our Shoals facility.

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,” “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. Our actual results could differ materially from those projected in the forward-looking statements.

Our forward-looking statements are subject to risks and uncertainties, including:

•

the cyclical nature of our business;

•

adverse economic and market conditions;

•

the highly 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;

•

our reliance on the sales of our coal cars;

•

the risk of lack of acceptance of our new railcar offerings by our customers;

•

our reported backlog may not indicate what our future sales will be;

•

potential significant warranty claims;

•

shortages of skilled labor;

•

our ability to manage our health care and pension costs;

•

risks relating to our relationship with our unionized employees and their unions;

•

our ability to maintain relationships with our suppliers of railcar components;

•

the cost of complying with environmental laws and regulations; and

•

various covenants in the agreement governing our indebtedness that limit our management’s discretion in the operation of our businesses.

Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections and may be better or worse than anticipated. Given these uncertainties, you should not rely on forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. 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. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under Item 1A, “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We have a $30.0 million senior secured revolving credit facility, the proceeds of which can be used for general corporate purposes, including working capital. On an annual basis, a 1% change in the interest rate in our revolving credit facility will increase or decrease our interest expense by $10,000 for every $1.0 million of outstanding borrowings. As of March 31, 2013, there were no borrowings or outstanding letters of credit under the revolving credit facility.

The production of railcars and our operations require substantial amounts of aluminum and steel. The cost of aluminum, steel and all other materials (including scrap metal) used in the production of our railcars represents a significant majority of our direct manufacturing costs. Our business is subject to the risk of price increases and periodic delays in the delivery of aluminum, steel and other materials, all of which are beyond our control. Any fluctuations in the price or availability of aluminum or steel, or any other material used in the production of our railcars, may have a material adverse effect on our business, results of operations or financial condition. In addition, if any of our suppliers were unable to continue its business or were to seek bankruptcy relief, the availability or price of the materials we use could be adversely affected. When market conditions permit us to do so, we negotiate contracts with our customers that allow for variable pricing to protect us against future changes in the cost of raw materials. When raw material prices increase rapidly or to levels significantly higher than normal, we may not be able to pass price increases through to our customers, which could adversely affect our operating margins and cash flows.

We are not exposed to any significant foreign currency exchange risks as our general policy is to denominate foreign sales and purchases in U.S. dollars.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

On September 29, 2008, Bral Corporation, a supplier of certain railcar parts to us, filed a complaint against us in the U.S. District Court for the Western District of Pennsylvania (the “Pennsylvania Lawsuit”). The complaint alleges that we breached an exclusive supply agreement with Bral by purchasing parts from CMN Components, Inc. (“CMN”) and seeks damages in an unspecified amount, attorneys’ fees and other legal costs. On December 14, 2007, Bral sued CMN in the U.S. District Court for the Northern District of Illinois, alleging among other things that CMN interfered in the business relationship between Bral and us (the “Illinois Lawsuit”) and seeking damages in an unspecified amount, attorneys’ fees and other legal costs. On October 22, 2008, we entered into an Assignment of Claims Agreement with CMN under which CMN assigned to us its counterclaims against Bral in the Illinois Lawsuit and we agreed to defend and indemnify CMN against Bral’s claims in that lawsuit. On March 4, 2013, Bral Corporation and the Company agreed to settle the Illinois Lawsuit and the Pennsylvania Lawsuit. The settlement resulted in a $3.9 million reduction in litigation reserves, which favorably impacted our results of operations for the three months ended March 31, 2013.

In addition to the foregoing, we are involved in certain other pending and threatened legal proceedings, including commercial disputes and workers’ compensation and employee matters arising out of the conduct of our business. While the ultimate outcome of these other legal proceedings cannot be determined at this time, it is the opinion of management that the resolution of these other actions will not have a material adverse effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in Item 1A of our 2012 annual report on Form 10-K.

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.

(a)

Exhibits filed as part of this Form 10-Q:


10.1		Sublease, dated as of February 19, 2013, by and between Navistar, Inc. and FreightCar Alabama, LLC.*

10.2		Amendment to Sublease, dated as of March 11, 2013, by and among Teachers’ Retirement Systems of Alabama, Employees’ Retirement System of Alabama, Navistar, Inc. and FreightCar Alabama, LLC.*

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document **

101.SCH		XBRL Taxonomy Extension Schema Document **

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document **

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document **

101.LAB		XBRL Taxonomy Extension Label Linkbase Document **

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document **

*	Confidential treatment has been requested for the redacted portions of this exhibit. A complete copy of the exhibit, including the redacted portions, has been filed separately with the Securities and Exchange Commission.

Pursuant to Rule 406T of Regulation S-T, these Interactive Data Files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	FREIGHTCAR AMERICA, INC.

Date: May 10, 2013	By:	/s/ E DWARD J. W HALEN
		Edward J. Whalen, Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ J OSEPH E. M C N EELY
		Joseph E. McNeely, President and
		Chief Operating Officer (Principal Financial Officer)

	By:	/s/ J OSEPH J. M ALIEKEL
		Joseph J. Maliekel, Vice President, Corporate
		Controller and Principal Accounting Officer

EXHIBIT INDEX


Exhibit Number		Description

10.1		Sublease, dated as of February 19, 2013, by and between Navistar, Inc. and FreightCar Alabama, LLC.*

10.2		Amendment to Sublease, dated as of March 11, 2013, by and among Teachers’ Retirement Systems of Alabama, Employees’ Retirement System of Alabama, Navistar, Inc. and FreightCar Alabama, LLC.*

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document **

101.SCH		XBRL Taxonomy Extension Schema Document **

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document **

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document **

101.LAB		XBRL Taxonomy Extension Label Linkbase Document **

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document **

*	Confidential treatment has been requested for the redacted portions of this exhibit. A complete copy of the exhibit, including the redacted portions, has been filed separately with the Securities and Exchange Commission.

Exhibit 10.1

SUBLEASE

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS OF THIS AGREEMENT, WHICH ARE DENOTED BY ***. A COMPLETE COPY OF THIS AGREEMENT, INCLUDING THE REDACTED PORTIONS, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

THIS SUBLEASE (this “ Sublease ”) is entered into this 19 ^th day of February, 2013 by and between Navistar, Inc., a Delaware corporation (“ Sublandlord ”) and FreightCar Alabama, LLC, a Delaware limited liability company (“ Subtenant ”).

Background

A. Sublandlord, as tenant, and Teachers’ Retirement Systems of Alabama, an instrumentality of the State of Alabama, and Employees’ Retirement System of Alabama, an instrumentality of the State of Alabama, collectively as landlord (the “ Master Landlord ”) entered into that certain Industrial Facility Lease dated as of September 29, 2011, as amended by that certain Amendment to Industrial Facility Lease and Consent To Sublease, dated as of February 19, 2013, among Master Landlord, Sublandlord and Subtenant (collectively, the “ Master Lease ”), a copy of which has been provided to Subtenant and is attached hereto as Exhibit A .

B. Pursuant to the Master Lease, Sublandlord leases from Master Landlord that certain parcel of land constituting approximately seven hundred (700) acres in Cherokee, Alabama (the “ Land ”) and all of the improvements situated on the Land, including that certain building consisting of approximately 2,150,000 square feet (the “ Facility ”, and collectively with the other improvements upon the Land, the “ Improvements ”). The Land and Improvements are more particularly described in the Master Lease and are referred to herein collectively as the “ Premises ”.

C. Sublandlord desires to (i) sublease to Subtenant a portion of the Facility consisting of approximately 543,399 square feet of space to be occupied by Subtenant (the “ FCA Controlled Subleased Space ”) and *** square feet of space to be occupied by Sublandlord (the “ Navistar Controlled Subleased Space ”) for a total of approximately *** square feet in the Facility (the FCA Controlled Subleased Space and the Navistar Controlled Subleased Space shall be collectively referred to herein as the “ Subleased Premises ”), all as more particularly set forth on the floor plan attached hereto as Exhibit B , and (ii) grant to Subtenant the exclusive use of those areas of the Premises identified as being for the exclusive use of Subtenant (the “ Exclusive Use Areas ”), as more particularly set forth on the site plan attached hereto as Exhibit C .

D. Subtenant and International Truck and Engine Investments Corporation, an affiliate of Sublandlord, concurrently with the execution of this Sublease, are entering into a Parts and Production Services Supply Agreement (the “ Services Agreement ”) in connection with certain assets and activities of the parties at the Premises, as more particularly set forth therein.

NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Terms

1. Sublease .

1.1 Subleased Premises, Exclusive Use Areas and Exclusive Use Assets . Sublandlord hereby subleases the Subleased Premises to Subtenant, and Subtenant hereby subleases the Subleased Premises from Sublandlord, for the term, at the rental, and upon all of the conditions set forth herein. Subject to the applicable terms of this Sublease, in addition to the Subleased Premises Sublandlord shall make available for the exclusive use of Subtenant during the Term (as hereinafter defined) (i) the Exclusive Use Areas, and (ii) the Exclusive Use Assets (as hereinafter defined). As used in this Sublease, “ Exclusive Use Assets ” shall have the meaning set forth on Exhibit D hereto.

1.2 Demising Work .

(a) Subtenant and Sublandlord agree that the FCA Controlled Subleased Space is not separately demised from the balance of the Facility (the “ Remaining Space ”) as of the date hereof. In addition, the parties acknowledge that certain electrical and mechanical systems may not be separated in such a manner to permit Subtenant and Sublandlord to separately control the utilities and mechanical systems serving their respective premises. Prior to the Rent Commencement Date Sublandlord shall cause the FCA Controlled Subleased Space and the Remaining Space to be separately demised (the “ Demising Work ”). In addition, the Demising Work shall include sub-metering of the electrical service and compressed air to be consumed by Subtenant in the FCA Controlled Subleased Space. The Demising Work shall be performed at Sublandlord’s sole cost. Sublandlord shall determine the method, means and material for completing the Demising Work, subject to Subtenant’s prior approval, which shall not be unreasonably withheld, delayed or conditioned. The foregoing notwithstanding, the portion of the Demising Work involving the separation of the FCA Controlled Subleased Space from the Remaining Space may initially consist of marking with paint or other material on the Facility floor the perimeter outline of the FCA Controlled Subleased Space. Sublandlord shall instruct and train its personnel that the FCA Controlled Subleased Space, the Exclusive Use Areas and the Exclusive Use Assets are for the sole and exclusive use of Subtenant and its employees, other personnel and invitees. Subtenant shall instruct and train its personnel that the Remaining Space including, pursuant to Section 5.4(b) below, the Navistar Controlled Subleased Space (other than the Common Areas and the Exclusive Use Areas) is for the sole and exclusive use of Sublandlord and its employees, other personnel and invitees.

(b) If during the Term either Subtenant or Sublandlord reasonably determines that installation of a wall or other means of physically separating the FCA Controlled Subleased Space from the Remaining Space (the “ Additional Demising Work ”) is necessary or desirable, it shall so notify the other party thereof. The Additional Demising Work shall be promptly performed by Sublandlord and the cost of such

Additional Demising Work shall be shared equally between Sublandlord and Subtenant. Subtenant shall reimburse Sublandlord for one-half of the costs associated with the Additional Demising Work within thirty (30) days after Sublandlord’s demand therefor. Sublandlord shall determine the method, means and material for completing the Additional Demising Work, subject to Subtenant’s prior approval, which shall not be unreasonably withheld, delayed or conditioned.

(c) Subtenant shall permit Sublandlord’s employees, agents or contractors reasonable access to the Subleased Premises in connection with the performance of the Demising Work and, if applicable, the Additional Demising Work. Sublandlord shall complete the Demising Work and, if applicable, the Additional Demising Work promptly and in a good and workmanlike manner. Subtenant acknowledges that (i) the Demising Work and, if applicable, the Additional Demising Work may at times be performed while Subtenant is conducting business operations at the Subleased Premises and the Demising Work and, if applicable, the Additional Demising Work may interfere with such business operations, (ii) Sublandlord’s performance of the Demising Work and, if applicable, the Additional Demising Work as provided herein shall not constitute a constructive eviction of Subtenant or entitle Subtenant to any reduction or abatement of Rent, and (iii) the covenants and conditions of the Sublease, including Subtenant’s obligation to pay Rent, shall be in full force and effect during Sublandlord’s performance of the Demising Work and, if applicable, the Additional Demising Work, as provided herein. The foregoing notwithstanding, Sublandlord shall use its commercially reasonable efforts not to materially interfere with the conduct of Subtenant’s business operations during the performance of the Demising Work and, if applicable, the Additional Demising Work.

(d) Notwithstanding the foregoing, if and to the extent Sublandlord is actually delayed in completing the Demising Work or the Additional Demising Work as a result of a Subtenant Delay, then the Demising Work or the Additional Demising Work, if applicable, shall be deemed to have been completed on the date that it would have been completed if such Subtenant Delay had not occurred. Sublandlord will give Subtenant notice (in writing and with reasonable specificity) of any claim of Subtenant Delay promptly upon Sublandlord’s becoming aware of the existence of any such delay. As used herein the term “ Subtenant Delay ” shall mean the occurrence of any one or more of the following: (i) Subtenant is Delinquent (as hereafter defined) in approving any plans for the Demising Work or the Additional Demising Work, if applicable, including, without limitation, architectural drawings; (ii) any postponements or delays requested by Subtenant and agreed to by Sublandlord regarding the completion of the Demising Work or the Additional Demising Work, if applicable; provided, however, notwithstanding anything to the contrary herein, no such requested postponement or delay shall be a basis for a “Subtenant Delay” unless and until such request is set forth in writing signed by Subtenant and Sublandlord and specifying the duration of such postponement or delay; or (iii) any delays in completing the Demising Work or the Additional Demising Work, if applicable; as a result of any other act or omission of the Subtenant, its employees or agents. For purposes of this Section 1.2, all actions required, or information/decisions requested of Subtenant shall be deemed “ Delinquent ” if not taken and communicated to Sublandlord within ten (10) business days following Subtenant’s receipt of written request from Sublandlord for such action or decision.

(e) Until such time that the Demising Work has been completed, Sublandlord shall have sole control over the controls for any utilities, services or mechanical systems serving the Remaining Space (regardless if such systems also serve the Subleased Premises), including, without limitation, the controls for the electricity, heating, cooling, life and safety and security systems; provided that, so long as no Sublease Event of Default (as hereinafter defined) has occurred and is continuing, Sublandlord shall not intentionally take any action with respect to such controls which would have a material adverse effect on Subtenant’s use of the Subleased Premises.

1.3 Common Areas and Common Use Assets . Subtenant shall have the right to access and use the Common Areas (as such term is hereinafter defined) and the Common Use Assets (as such term is hereinafter defined) jointly with Sublandlord and other subtenants or tenants of the Premises in accordance with the terms and provisions of the Master Lease and this Sublease. All of such use of any of the Common Areas and Common Use Assets shall be such as will not unreasonably obstruct or interfere with the joint use thereof, and shall be in compliance with all applicable laws and the Master Lease. As used in this Sublease, (i) “ Common Areas ” shall mean the common areas within the Facility and portions of the Land as set forth on Exhibit C , and (ii) “ Common Use Assets ” shall have the meaning set forth on Exhibit D hereto.

2. Term .

2.1 Sublease Initial Term . This Sublease shall be for an initial term (the “ Sublease Initial Term ”) of approximately nine (9) years, commencing on the date first set forth above (the “ Sublease Commencement Date ”), and ending on December 31, 2021 (the “ Sublease Expiration Date ”), unless sooner terminated or extended as provided herein. On the Sublease Commencement Date, Sublandlord shall deliver the FCA Controlled Subleased Space and the Exclusive Use Areas to Subtenant in broom clean condition and free of all occupants.

2.2 Sublease Extension Terms . Subject to the provisions of Section 2.3 hereof, Subtenant shall have the right and option to extend the term of this Sublease for one (1) additional term of one hundred twenty (120) months (“ Sublease Extension Term ”), upon all of the terms, conditions and covenants contained in this Sublease. The Sublease Extension Term shall commence (if at all) immediately following the Sublease Expiration Date. Subtenant shall exercise its right and option to extend the term of this Sublease for the Sublease Extension Term (if at all) by giving Sublandlord notice (a “ Sublease Extension Notice ”) of same on or before May 31, 2020 (the “ Notice Date ”). Anything herein to the contrary notwithstanding, Subtenant may not exercise any right and option provided for in this Section 2.2: (i) if a Sublease Event of Default shall have occurred and be continuing as of the date of the Sublease Extension Notice, (ii) if following a Sublease Event of Default Sublandlord shall have terminated Subtenant’s right to possession of the Subleased Premises and the Exclusive Use Areas in accordance with this Sublease, or (iii) after this Sublease shall have otherwise been terminated. The Sublease Base Rent (as defined below) for the Sublease Extension Term shall be as set forth in Section 3.1 hereof. Any and all references contained herein to the “ Term ” shall be deemed to include the Sublease Initial Term, as extended by the Sublease Extension Term, if applicable.

2.3 Extension of the Master Lease .

(a) Subject to the provisions hereof, Sublandlord shall have no obligation whatsoever to extend the Master Lease for the “Extension Term” (as defined in Section 1.3 of the Master Lease), provided that not later than December 31, 2019, Sublandlord shall give Subtenant written notice (the “ Master Lease Extension Election Notice ”) of Sublandlord’s election to extend or not extend the term of the Master Lease. If Sublandlord fails to timely deliver to Subtenant the Master Lease Extension Election Notice, then Sublandlord shall be deemed to have elected to extend the term of the Master Lease.

(b) If (i) Sublandlord elects in the Master Lease Extension Election Notice, or is deemed to have elected , to extend the Master Lease for the “Extension Term” in accordance with Section 1.3 of the Master Lease, and (ii) Subtenant delivers to Sublandlord the Sublease Extension Notice in accordance with Section 2.2 hereof, then Sublandlord agrees to deliver to Master Landlord no later than June 15, 2020, notice of its election to extend the Master Lease for the “Extension Term” in accordance with Section 1.3 of the Master Lease. Simultaneously with such delivery Sublandlord shall deliver to Subtenant a true copy of such notice together with a certificate executed by an authorized representative of Sublandlord that the notice extending the Master Lease for the “Extension Term” was delivered to Master Landlord in accordance with Section 1.3 of the Master Lease. If as provided in this Section 2.3(b) Sublandlord elects in the Master Lease Extension Election Notice, or is deemed to have elected , to extend the Master Lease for the “Extension Term” in accordance with Section 1.3 of the Master Lease, then, upon the extension of the Master Lease for the “Extension Term” and the extension of this Sublease for the Sublease Extension Term, this Sublease shall be extended on the terms and conditions set forth in Section 2.2 hereof.

(d) ***

(e) The parties acknowledge and agree that the provisions of this Section 2.3 *** are limited to the Extension Term as set forth in Section 1.3 of the Master Lease, and Subtenant shall have no further right to extend the term of *** this Sublease. In no event shall this Sublease or Sublandlord’s liability to Subtenant hereunder extend beyond such Extension Term, except for such liability which expressly survives the expiration or earlier termination of this Sublease.

(f) ***

3. Rent .

3.1 Sublease Base Rent . Subtenant shall pay to Sublandlord base rent for the Subleased Premises (“ Sublease Base Rent ”), in the amount of $*** per year (calculated by multiplying $*** per square foot per year by *** square feet of the Subleased Premises), payable in equal monthly installments of $*** each. If Subtenant timely exercises any option to extend the Term of this Sublease for any Sublease Extension Term in accordance with Section 2.2 hereof, Subtenant shall pay to Sublandlord Sublease Base Rent for the Subleased Premises during any such Sublease Extension Term in the amount of $*** per year (calculated by multiplying $*** per square foot per year by *** square feet of the Subleased Premises), payable in equal monthly installments of $*** each.

3.2 Payment of Rent . No Sublease Base Rent shall be due until the sixtieth (60th) day following the Sublease Commencement Date (the “ Rent Commencement Date ”). Beginning on the Rent Commencement Date Subtenant shall pay to Sublandlord, on or before the first business day of each calendar month during the remainder of the Term, the monthly Sublease Base Rent. Sublease Base Rent, and all other amounts and charges payable by Subtenant to Sublandlord pursuant to the terms of this Sublease (the “ Additional Sublease Rent ”; and, all Sublease Base Rent and Additional Sublease Rent shall be collectively referred to herein as “ Rent ”) shall be paid in the lawful money of the United States to Sublandlord at 2701 Navistar Drive, Lisle, IL 60532, Attention: Mark Luginbill , or to such other persons or at such other places as Sublandlord may designate by giving not less than thirty (30) days prior written notice thereof to Subtenant. If the Rent Commencement Date falls on a date other than the first day of a calendar month, or the Sublease Expiration Date falls on any day other than the last day of a calendar month, the Rent due for such fractional month shall be prorated on a per diem basis. Except as expressly set forth in this Sublease, all Rent shall be paid without set off, abatement or deduction.

3.3 Operating Costs.

(a) Subtenant shall pay monthly as Additional Sublease Rent, along with monthly installments of Sublease Base Rent, one twelfth (1/12th) of Subtenant’s Proportionate Share (as hereinafter defined) of certain annual costs incurred by Sublandlord during any calendar year falling entirely or partly within the Term in connection with maintaining and operating the Facility and providing the Facility services pursuant to Section 5.5 below (the “ Operating Costs ”). Subject to adjustments, if any, in accordance with Section 3.3(e) hereof, the term “Operating Costs” will include only the costs and expenses (which shall in all cases be net of any discounts, credits, reimbursements and rebates received by Sublandlord) for the maintenance and operation of the Premises and providing those services provided by Sublandlord as described in Section 5.5(a) hereof. The term “Operating Costs” will not include the following costs and expenses:

(A)

electricity and compressed air to the Subleased Premises which is separately metered;

(B)

capital improvements to the Facility;

(C)

interest, fines or penalties for late payment or violations of applicable laws, rules or regulations by Sublandlord, if any;

(D)

legal, auditing, consulting and professional fees and other costs paid or incurred in connection with financings, refinancings or sales of any interest in Sublandlord or of Sublandlord’s interest in the Premises, or in connection with the Master Lease (except as expressly set forth in this Sublease);

(E)

the cost of any items to the extent to which such cost is reimbursed to Sublandlord by tenants or other occupants of the Premises (other than pursuant to this Section), other third parties, or is covered by a warranty to the extent of reimbursement for such coverage;

(F)

the cost of repairs or replacements incurred by reason of fire or other casualty, or condemnation;

(G)

damage and repairs necessitated by the negligence or willful misconduct of Sublandlord or its employees, contractors, licensees or agents; and

(H)

the cost of remediation and removal of “Hazardous Materials” (as defined in Section 19.1(a) of the Master Lease) in the Facility or on the Land (it being understood and agreed that Subtenant shall nonetheless be responsible under Article XIX of the Master Lease for all costs of remediation and removal of Hazardous Materials to the extent caused by Subtenant or its employees, contractors, licensees or agents).

(b) Commencing on or about the Sublease Commencement Date and prior to the first day of each calendar year thereafter during the Term, Sublandlord shall submit to Subtenant a statement (“ Annual Operating Costs Statement ”) setting forth Sublandlord’s reasonable estimate of (i) the Operating Costs that are expected to be incurred during such calendar year, together with supporting documentation relating to such costs and expenses, and (ii) Subtenant’s Proportionate Share thereof. Sublandlord may revise such Annual Operating Costs Statement from time to time during the Term; provided that Sublandlord shall not do so more than once in any calendar year and then only if there would be an aggregate increase of more than twenty-five percent (25%) in the estimated Operating Costs. Notwithstanding anything to the contrary, Sublandlord’s failure to timely deliver the Annual Operating Costs Statement shall not be a default hereunder and shall not waive any obligation on the part of Subtenant to pay Subtenant’s Proportionate Share of Operating Costs and Subtenant shall continue to pay Subtenant’s Proportionate Share of Operating Costs as set forth in the most recently delivered Annual Operating Costs Statement until a revised Annual Operating Costs Statements is delivered to Subtenant.

(c) In the event the Term begins or expires on a day other than the first and last day of a calendar year, respectively, then Subtenant’s obligation for Operating Costs for such partial calendar year shall be an amount equal to the product of (i) Subtenant’s Proportionate Share of the Operating Costs for the full calendar year, multiplied by (ii) a fraction, the numerator of which is the number of days during such calendar year falling within the Term, and the denominator of which is three hundred sixty-five (365).

(d) “ Subtenant’s Proportionate Share ” shall mean 25.27%, which has been determined by dividing the number of square feet in the FCA Controlled Subleased Space (543,399 square feet) by the number of square feet in the Facility (2,150,000 square feet).

(e) Notwithstanding the foregoing, in the event that Sublandlord or Subtenant reasonably determines that Subtenant’s Proportionate Share of Operating Costs (or any item thereof) does not with reasonable accuracy reflect an equitable distribution of liability for the Operating Costs (or any item thereof), then either Sublandlord or Subtenant shall propose, by written notice which must be delivered no later than ninety (90) days after Subtenant’s receipt of the Annual Operating Costs Statement, to the other party an alternate method (the “ Alternative Allocation ”) of allocating Operating Costs (or any item thereof), which shall be subject to such other party’s prior written approval which approval shall not be unreasonably withheld, delayed or conditioned. Subtenant shall continue to pay Subtenant’s Proportionate Share of Operating Costs unless and until an Alternative Allocation is mutually agreed upon by the parties and such Alternative Allocation shall not, in any event, be applicable to any portion of the Operating Costs for which a Reconciliation Statement has been delivered, it being understood that the Alternative Allocation shall, if applicable, be used only for the allocation of Operating Costs incurred during the calendar year to which such Alternative Allocation relates.

(f) Within ninety (90) days following the conclusion of each calendar year during the Term, Sublandlord shall submit to Subtenant a statement (the “ Reconciliation Statement ”) setting forth the actual Operating Costs incurred during the previous calendar year and Subtenant’s Proportionate Share thereof. If the sum of any installment or estimated payments made by Subtenant on account of any or all of the Operating Costs exceed Subtenant’s Proportionate Share of Operating Costs for any year, Sublandlord shall refund the excess to Subtenant within thirty (30) days after delivery of the Reconciliation Statement. If the sum of any installment or estimated payments made by Subtenant on account of any or all of the Operating Costs are less than Subtenant’s Proportionate Share of Operating Costs for any year, Subtenant shall pay the amount of such deficiency to Sublandlord within thirty (30) days after delivery of the Reconciliation Statement.

(g) Subject to this Section 3.3(g) and provided that (x) Subtenant has paid in full all Rent when due including all Additional Sublease Rent due (if and to the extent Subtenant has been billed therefor) pursuant to the Annual Operating Costs Statement, (y) Subtenant does not engage any auditor or accountant on a “contingent fee” basis to conduct or participate in such inspection, and (z) Subtenant shall keep the results of any such inspection strictly confidential and shall not disclose the results of same to any third party (except as may be required by law or court order), Subtenant may examine Sublandlord’s books and records relative to Operating Costs. Any request for examination must be made by written notice from Subtenant to Sublandlord no later than ninety (90) days following Subtenant’s receipt of the Reconciliation Statement. Sublandlord’s books and records pertaining to the calendar year included in the Reconciliation Statement shall be made available to Subtenant within ten (10) business days after Sublandlord timely receives Subtenant’s written notice. Said books and records shall be made available to Subtenant for inspection and copying at the Facility or at another location in the general vicinity of Chicago, IL as identified by Sublandlord in a written notice delivered to

Subtenant within such ten (10) day period. If Subtenant fails to take written exception to an item of Operating Costs within one hundred fifty (150) days following Subtenant’s receipt of the Reconciliation Statement in which such item appeared (to be extended one (1) day for each day Sublandlord delays in making available to Subtenant Sublandlord’s books and records pertaining to the calendar year included in the Reconciliation Statement), Subtenant shall be deemed to have accepted such Reconciliation Statement and waived its audit right with respect thereto. If Subtenant takes written exception to an item of Operating Costs within the applicable period and such exception is not resolved by Sublandlord and Subtenant within forty-five (45) days after Subtenant’s notice taking exception, either Sublandlord or Subtenant may, within a sixty (60) day period following the expiration of such forty-five (45) day period, submit the dispute to an independent certified public accounting firm selected by Sublandlord and Subtenant. If Sublandlord and Subtenant are unable to agree on an independent certified public accounting firm, Sublandlord may select one of the five (5) largest national certified public accounting firms. Within sixty (60) days following its selection, the selected accounting firm shall prepare and submit to Sublandlord and Subtenant a certificate as to whether the exception is proper and the amount owed by or to Subtenant, which determination shall be final and conclusive. Sublandlord shall in any event apply any amount overpaid by Subtenant against Sublease Base Rent and Additional Sublease Rent next coming due under this Sublease or, if the Term has already expired and provided there is no Sublease Event of Default which remains uncured, refund such excess to Subtenant within thirty (30) days after completion of such certification, in either case without interest to Subtenant. Subtenant shall in any event pay to Sublandlord any amount that Subtenant owes Sublandlord within thirty (30) days after completion of such certification. If it is determined that Sublandlord’s original determination of Operating Costs for any calendar year as set forth in the Reconciliation Statement exceeded the amount which Subtenant was obligated to pay (i) by three percent (3%) or less, Subtenant shall bear all costs of Subtenant’s accountant or other reviewing entity and of such certification, (ii) by more than three percent (3%), then Sublandlord shall bear the reasonable costs of Subtenant’s accountant and all costs of such certification.

3.4 Taxes . At no time during the Term will Subtenant be required to pay any state or local real property (ad valorem) taxes pursuant to or in relation to this Sublease, the Land or the Improvements, including the Subleased Premises, so long as such taxes are not required to be paid by Sublandlord under the Master Lease. In the event that Sublandlord should become responsible for the payment of any such taxes (other than as a result of Sublandlord’s intentional action or omission), a portion of the amount of such taxes incurred by Sublandlord during any calendar year falling entirely or partly within the Term (net of the amount, if any, that Master Landlord may be required to reimburse Sublandlord in accordance with the terms of the Master Lease) shall be paid by Subtenant to Sublandlord as follows:

(i) the amount of such taxes shall be allocated so that only the portion thereof attributable to the Subleased Premises (including the portion of the Land upon which the Subleased Premises is located); and

(ii) in addition to the foregoing, Subtenant shall be responsible for the amount of any such taxes which are attributable to the Exclusive Use Areas (including the Land and any improvements thereon), it being understood that for this purpose the portion allocated to Subtenant of taxes attributable to the Land shall be equal to the percentage equivalent of a fraction, the numerator of which is the sum of the number of acres comprising the Exclusive Use Areas, and the denominator of which is the total number of acres comprising the Land portion of the Premises.

In the event the Term begins or expires on a day other than the first and last day of a calendar year, respectively, then Subtenant’s obligation for payment of a portion of such taxes for such partial calendar year shall be an amount equal to the product of (a) Subtenant’s share of such taxes for the full calendar year, multiplied by (b) a fraction, the numerator of which is the number of days during such calendar year falling within the Term, and the denominator of which is three hundred sixty-five (365).

4. Master Lease .

4.1 Subordinate to Master Lease . Subject to the provisions of this Section 4, this Sublease is and shall be at all times subject and subordinate to the Master Lease.

4.2 Incorporation of Master Lease . Except as otherwise expressly provided in, or otherwise inconsistent with, this Sublease, the provisions of the Master Lease (the “ Master Lease Incorporated Provisions ”) are hereby incorporated into this Sublease by reference with the same force and effect as if set forth at length herein, except that unless the context requires otherwise, (i) references in such provisions to “Landlord” shall be deemed to refer to Sublandlord, and (ii) references in such provisions to “Tenant” shall be deemed to refer to Subtenant. During the term of this Sublease, Subtenant does hereby expressly assume and agree to perform and comply with, for the benefit of Sublandlord and Master Landlord, the obligations of Sublandlord as “Tenant” under the Master Lease with respect to the FCA Controlled Subleased Space and the Exclusive Use Areas, except to the extent otherwise set forth in this Sublease.

Subtenant acknowledges and agrees that, except as expressly set forth in this Sublease, the Master Lease Incorporated Provisions shall not include the following rights, if any, set forth in the Master Lease: (a) any right which is contradicted or limited by this Sublease; (b) any right of extension or expansion; (c) any right of first refusal; (d) any right of self-help or set-off; and (e) any early termination right. Further, the Master Lease Incorporated Provisions shall specifically not include the following:

Article I (Grant; Term)

Section 1.4 (Early Commencement)

Section 2.2 (Landlord’s Representations; Assignment of Warranties)

Section 2.3 (Landlord Covenants)

Section 2.4 (Survival)

Section 4.1 (Base Rent)

Section 4.3 (Net Lease)

Section 4.4 (Additional Rent Reduction)

Section 6.2(a) (first paragraph only) (Property Insurance insuring the Facility and other Improvements)

Section 6.4 (Insurance Premiums) (except with respect to insurance required to be maintained by Subtenant hereunder)

Section 6.9 (Self-Insurance)

Article VII (Damage and Destruction)

Article VII I (Condemnation)

Article IX (Maintenance)

Section 10.2 (Machinery and Equipment)

Article XIII (Utilities)

Section 25.3 (Notices)

Section 25.22 (Tenant’s Self-Help Rights)

Section 25.23 (Landlord’s Breach)

Section 25.24 (Landlord’s Payment or Tenant’s Offset Right)

4.3 Purchase Option.

(a) Except as expressly set forth in this Section 4.3, Sublandlord shall have no obligation whatsoever to exercise the “Purchase Option” granted by Master Landlord to Sublandlord pursuant to Article XXI of the Master Lease, provided that Sublandlord shall give Subtenant written notice (the “ Purchase Option Election Notice ”) of Sublandlord’s election to exercise or not exercise the Purchase Option not later than (i) December 31, 2019, with respect to the Purchase Option exercisable during the Initial Term, which notice may be combined with the Master Lease Extension Election Notice or delivered separately, and (ii) December 31, 2029, with respect to the Purchase Option exercisable during the Extension Term, but only if the Master Lease has been extended for the Extension Term in accordance with Section 1.3 of the Master Lease. If Sublandlord fails to timely deliver to Subtenant the Purchase Option Election Notice with respect to the Purchase Option exercisable during the Initial Term, then Sublandlord shall be deemed to have elected not to exercise the Purchase Option exercisable during the Initial Term. If Sublandlord fails to timely deliver to Subtenant the Purchase Option Election Notice with respect to the Purchase Option exercisable during the Extension Term, then Sublandlord shall be deemed to have elected not to exercise the Purchase Option exercisable during the Extension Term.

(b) ***

4.4 Exit Event.

(a) If at any time during the Sublease Term, including the Sublease Extension Term, Sublandlord determines to discontinue all operations at, and to completely vacate, the Premises prior to the scheduled expiration of the term of the Master Lease (“ Exit Event ”), then Sublandlord shall deliver to Subtenant written notice thereof (“ Exit Event Notice ”). The Exit Event Notice shall set forth the date that Sublandlord intends to vacate the Premises (“ Exit Date ”), which shall not be less than one hundred fifty (150) days following Subtenant’s receipt of the Exit Event Notice. ***

(b) ***

(d) For the avoidance of doubt, the parties acknowledge and agree that the provisions of this Section 4.4 shall not apply to any agreement entered into by Sublandlord pursuant to the provisions of Section 10.2 below.

4.5 Sublandlord’s Performance of Master Lease; Subtenant’s Right to Cure.

(a) Sublandlord agrees to observe and perform its obligations as tenant under the Master Lease to the extent such obligations are not the responsibility of Subtenant hereunder. Sublandlord shall not voluntarily terminate or voluntarily consent to the termination or surrender of the Master Lease in whole or with respect to the Subleased Premises and the Exclusive Use Areas unless such termination is effected pursuant to a right of termination arising out of casualty or condemnation as set forth in the Master Lease (it being understood that Sublandlord shall have the right to exercise any such right of termination). Sublandlord shall not suffer or permit the Master Lease to be terminated by reason of an Event of Default (as defined in the Master Lease) not arising out of a Sublease Event of Default. If because of (i) a default under the Master Lease by Sublandlord not arising out of a default hereunder by Subtenant or (ii) a violation by Sublandlord of this Section 4.5(a), the Master Lease is terminated, then Sublandlord shall be liable to Subtenant for the direct damages incurred by Subtenant by reason of such termination; provided, however, that in no event shall Sublandlord be liable for any lost data, lost revenue, lost profit, business interruption or other consequential, punitive or exemplary damages arising out of such termination. Notwithstanding anything to the contrary contained herein, Sublandlord’s obligation to pay Subtenant for the direct damages incurred by Subtenant shall include (without limitation, except as provided in the previous sentence) reimbursement to Subtenant of

(i) the Excess Amount in accordance with Section 4.4 hereof, and

(ii) if during the Sublease Initial Term the Master Lease is terminated as a result of an Event of Default not arising out of a Sublease Event of Default, and pursuant to Section 11.6 of the Master Lease Subtenant and Master Landlord enter into a New Lease (as defined in Section 11.6 of the Master Lease), the excess amount of (y) base rent, additional rent and any other amounts paid by Subtenant in accordance with the terms of the New Lease during the same period

as what would have been the remaining portion of the Sublease Initial Term following such termination of the Master Lease had such termination of the Master Lease not occurred, over (z) the Sublease Base Rent and Additional Sublease Rent (including, without limitation, operating and maintenance costs) that Subtenant would have paid during what would have been the remaining portion of the Sublease Initial Term following such termination of the Master Lease had such termination of the Master Lease not occurred.

(b) It is agreed that, if Sublandlord is in default of the provisions of the Master Lease, Subtenant may, but need not, cure said default specifically on behalf of and for the account of Sublandlord, in which case all reasonable costs and expenses incurred by Subtenant in connection therewith shall be paid to Subtenant within thirty (30) days after written demand delivered to Sublandlord accompanied by supporting data in reasonable detail. Subtenant may not exercise its right to cure Sublandlord’s default under the Master Lease unless (i) Subtenant delivers prior written notice (“ Subtenant’s Cure Notice ”) to Sublandlord stating, in reasonable detail, the circumstances of such default and (ii) Sublandlord either (A) fails to deliver to Subtenant in a timely manner following receipt of Subtenant’s Cure Notice a written notice (“ Sublandlord’s Response ”) stating Sublandlord’s intent to timely and fully cure such default, or (B) if after delivering to Subtenant Sublandlord’s Response, Sublandlord fails to cure or commence to cure such default within the time period required to cure the same as set forth in Section 22.1 of the Master Lease, less two (2) days. In so curing Sublandlord’s default, Subtenant shall not be deemed to have waived any of its rights, nor to have released Sublandlord from any of its obligations under this Sublease. It is further agreed that Subtenant may cure Sublandlord’s default under the Master Lease on and for Subtenant’s own account to preserve its interest in this Sublease.

4.6 No Liability by Sublandlord . Notwithstanding anything contained in this Sublease to the contrary, Subtenant acknowledges and agrees that: (x) Sublandlord shall not be responsible for or deemed a guarantor with respect to any representations, warranties, covenants or other obligations or liabilities of Master Landlord under the Master Lease, and Subtenant agrees to look solely to Master Landlord for the performance of Master Landlord’s obligations, (y) Sublandlord’s sole obligation to Subtenant under the Master Lease shall be, at Subtenant’s request and on Subtenant’s behalf, to use commercially reasonable efforts to require Master Landlord to perform specific obligations of Master Landlord under the Master Lease if necessary, and (z) Sublandlord shall have no liability to Subtenant for any misrepresentation, warranty, default or other act or omission of Master Landlord under the Master Lease and Sublandlord shall not be obligated to provide any services to Subtenant or otherwise to perform any obligations in connection with this Sublease except as expressly set forth herein as the separate obligations of Sublandlord. Subtenant shall reimburse Sublandlord for any reasonable out-of-pocket costs incurred by Sublandlord in connection with Sublandlord’s commercially reasonable efforts to require Master Landlord to perform specific obligations of Master Landlord under the Master Lease (to the extent such efforts are intended primarily to benefit Subtenant or the Subleased Premises). Subtenant shall reimburse Sublandlord within thirty (30) days after Subtenant’s receipt of reasonable supporting documentation relating to such costs.

5. Subleased Premises .

5.1 “AS IS” Condition . Subtenant shall accept possession of the Subleased Premises and the Exclusive Use Areas on the Sublease Commencement Date, subject to restrictions of all applicable covenants of record, the Master Lease, the applicable zoning laws and other laws regulating the use of the Subleased Premises and the Exclusive Use Areas and the provisions of Section 5.4(b) hereof regarding the Navistar Controlled Subleased Space. Subtenant acknowledges and agrees that, subject to Sublandlord’s proper completion of the Demising Work and the provisions of Section 5.4(b) hereof regarding the Navistar Controlled Subleased Space, Subtenant shall take possession of the Subleased Premises and the Exclusive Use Areas on the Sublease Commencement Date in an “AS IS” condition. Subtenant agrees and acknowledges that, except as expressly set forth in this Sublease, neither Sublandlord nor any agent, attorney, employee or representative of Sublandlord has made any representation respecting or has made any warranty whatsoever, express or implied, regarding the Subleased Premises and the Exclusive Use Areas. The foregoing notwithstanding, Subtenant shall not be liable for any Environmental Condition (as defined in the Master Lease) at, on, under or emanating from the Premises or any part thereof existing or occurring prior to the Sublease Commencement Date nor shall Subtenant be responsible for the remediation thereof, except to the extent that Sublandlord has delivered written notice to Subtenant of an existing Environmental Condition and Subtenant exacerbates the same in a negligent or willful manner, except if Subtenant’s actions are in the normal course of Subtenant’s business operations at the Facility.

5.2 Alterations . Subtenant shall be permitted, at its sole cost and expense, subject to the provisions of Section 9.4 of the Master Lease, to make alterations to the Subleased Premises without obtaining Sublandlord’s prior written consent; provided that any such alteration shall be made pursuant to Article X of the Master Lease. Notwithstanding the foregoing, Subtenant shall not make any alterations, additions or improvements in or to the Subleased Premises or any other part of the Premises (including the Exclusive Use Areas), or attach any fixtures or equipment thereto to the extent such alterations, additions or improvements will affect the structural, exterior or roof elements of the Facility or the mechanical, electrical, plumbing or life safety systems of the Facility, without in each instance obtaining Sublandlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

5.3 Utilities .

(a) Electrical service for the Subleased Premises and compressed air to be used by Subtenant at the Subleased Premises will be separately metered by Sublandlord, at its sole cost and expense, as part of the Demising Work. Subtenant shall pay to Sublandlord or the applicable utility provider, prior to delinquency, the cost of such compressed air and electricity; provided that until such time as the compressed air and electricity are separately metered, Sublandlord shall determine, in its reasonable judgment, the equitable proportion of such services which are being used by Subtenant and the Subleased Premises and shall deliver a reasonably detailed invoice to Subtenant setting forth the cost of such services, which shall be due and payable, as Rent, within ten (10) business days after Sublandlord’s delivery of such invoice to Subtenant.

(b) Subtenant shall, at its sole cost and expense, be responsible for all other utilities and services which Subtenant deems necessary or desirable for its use of the Subleased Premises, other than those specifically to be provided by Sublandlord pursuant to this Sublease. Sublandlord shall cooperate reasonably with Subtenant to facilitate Subtenant’s access to and use of such utilities and services.

5.4 Use of Subleased Premises .

(a) Subtenant may use the Subleased Premises and the Exclusive Use Areas only for (i) the purpose of conducting Subtenant’s manufacturing, assembly and related business operations, and (ii) any other purposes permitted under the Master Lease, provided, however, Subtenant shall not use any part of the Subleased Premises or the Exclusive Use Areas for the manufacture, assembly, sale or repair of trucks, truck engines, or truck components (other than trucks used by Subtenant in its railcar operations at the Facility) or any other use that would compete with the business of Sublandlord, other than the business of the manufacturing, assembly, repair or service of railcars and/or railcar components. Subtenant shall not occupy or use the Subleased Premises or the Exclusive Use Areas (or permit the use or occupancy of the Subleased Premises or the Exclusive Use Areas) for any purpose or in any manner which: (a) is unlawful or in violation of any applicable legal, governmental or quasi-governmental requirement, ordinance or rule; (b) would be dangerous to persons or property; (c) would invalidate or increase the amount of premiums for any policy of insurance affecting the Facility; (d) creates a nuisance, disturbs Sublandlord or any other subtenants of the Facility or the occupants of neighboring property; or (e) is in violation of the Master Lease. Subtenant shall be solely responsible for procuring and maintaining in effect any licenses or permits required for the operation of the Subtenant’s business activities in the Subleased Premises or the Exclusive Use Areas during the Term.

(b) In order, among other things, to effectuate certain rights and obligations of the parties set forth in the Services Agreement, during the Term for so long as Navistar, Inc. (or any affiliate or successor thereof) remains the Sublandlord, Subtenant hereby grants Sublandlord, at no cost to Sublandlord, an irrevocable license to exclusively access, use and occupy, coupled with an interest in and to, the Navistar Controlled Subleased Space. Subtenant shall not be responsible for any default under this Sublease or the Master Lease as a result of Sublandlord’s use or occupancy of the Navistar Controlled Subleased Space as provided herein, and Sublandlord shall continue to perform its obligations, as tenant, under the Master Lease with respect to the Navistar Controlled Subleased Space.

5.5 Facility Services .

(a) During the Term Sublandlord shall furnish the following services (the cost of which services, except as otherwise provided herein, will be included in Operating Costs in accordance with and subject to the terms of Section 3.3 above):

(i) heating, ventilation and air conditioning to provide a temperature condition required, in Sublandlord’s reasonable judgment, for comfortable occupancy of the Subleased Premises under normal business operations and during normal business hours or as may be otherwise agreed upon by Subtenant and Sublandlord;

(ii) hot and cold running water;

(iii) periodic janitorial service in the Subleased Premises and Common Areas;

(iv) such security services as Sublandlord, in its sole judgment, may determine are necessary or desirable for the safety and protection of the Facility; provided that Sublandlord shall not be responsible for any damages incurred by Subtenant (including, without limitation as a result of the theft or the loss of use of or damage to Subtenant’s personal property) as a result of such security services failing to adequately protect the Subleased Premises, the Exclusive Use Areas or the Facility, except that Sublandlord shall not be released from liability for any injury, loss, damages or liability to the extent arising from any negligence or willful misconduct of Sublandlord or its employees, agents, contractors, or licensees;

(v) Sewer and waste water services; and

(vi) Maintenance, repair and upkeep of the Subleased Premises, the Exclusive Use Areas, the Remaining Area and, as set forth in Section 1.3(b) above, the Common Areas.

(b) Subtenant agrees that neither Sublandlord nor its agents, partners or employees shall be liable for damage or injury to persons, property or business or for loss or interruption of business, or for any other matter, in the event there is any failure, delay, interruption, diminution or discontinuance in furnishing any of the services set forth above or any other service provided to Subtenant pursuant to this Sublease. No such failure, delay, interruption, diminution or discontinuance shall be deemed or constitute an eviction or disturbance of Subtenant’s use or occupancy of the Subleased Premises or the Exclusive Use Areas, in whole or in part, actual or constructive, or, except as expressly set forth in this Sublease, entitle Subtenant to any claim for set-off, abatement or reduction of Rent, render Sublandlord liable for damages, or relieve Subtenant from the performance of or affect any of Subtenant’s obligations under this Sublease. Notwithstanding the foregoing, (i) Sublandlord shall use commercially reasonable efforts to minimize any such failure, delay, interruption, diminution or discontinuance of any such service provided by Sublandlord; and (ii) Sublandlord shall not be released from liability for any injury, loss, damages or liability to the extent arising from any negligence or willful misconduct of Sublandlord or its employees, agents, contractors, or licensees.

(c) Notwithstanding anything in this Sublease to the contrary, if there is an interruption in essential services to the Subleased Premises, and such interruption (i) is a result of the negligence or willful misconduct of Sublandlord (or its agents, contractors or employees), (ii) materially and adversely affects Subtenant’s ability to conduct its business in the Subleased Premises, (iii) causes Subtenant to cease doing business in the Subleased Premises, (iv) does not result from the negligence or willful misconduct of Subtenant or its

employees, invitees or agents, and (v) continues for more than five (5) consecutive business days, then Subtenant, shall be entitled to receive an abatement of Sublease Base Rent and Additional Sublease Rent payable hereunder during the period beginning on the sixty (6th) consecutive business day of such interruption or when Subtenant stops using the Subleased Premises because of such interruption, whichever is later, and ending on the day the service has been restored.

5.6 Surrender . Upon the expiration or earlier termination of this Sublease Subtenant shall surrender the Subleased Premises and the Exclusive Use Areas in accordance with Sections 17.1 and 17.2 of the Master Lease.

6. Insurance . Subtenant, at its sole expense, shall obtain and keep in force during the Term insurance comparable to the insurance Sublandlord as “Tenant” is required to procure and maintain under Article VI of the Master Lease, except that Subtenant shall not be required to procure and maintain property insurance for the Facility and other Improvements as required in the first paragraph of Section 6.2(a) of the Master Lease.

7. Waiver of Claims .

7.1 Subtenant’s Waiver of Claims To the extent not prohibited by law or caused by the gross negligence or willful misconduct of Sublandlord or any of Sublandlord’s Indemnitees (as defined herein), and except as provided below, Subtenant hereby expressly releases Sublandlord, its property manager and their respective officers, agents, directors, representatives, shareholders, members, subsidiaries, affiliates, related entities, partners, employees and lenders (collectively, “ Sublandlord’s Indemnitees ”) for any loss or damage to any property of Subtenant, which loss or damage is insured against, or required to be insured against, by Subtenant pursuant to Section 6 of this Sublease, whether or not such loss or damage is due to the act or omission (including negligence) of Sublandlord or Sublandlord’s Indemnitees (other than the gross negligence or willful misconduct of Sublandlord or any of Sublandlord’s Indemnitees), and regardless of the amount of insurance proceeds collected or collectible under any insurance policies in effect, and Subtenant further agrees that all such property of Subtenant shall be at the risk of Subtenant only and Sublandlord and Sublandlord’s Indemnitees shall not be liable for any loss or damage thereto and Subtenant completely releases and exculpates Sublandlord and Sublandlord’s Indemnitees therefrom (other than any loss or damage due to the gross negligence or willful misconduct of Sublandlord or any of Sublandlord’s Indemnitees).

7.2 Sublandlord’s Waiver of Claims To the extent not prohibited by law or caused by the gross negligence or willful misconduct of Subtenant or any of Subtenant’s Indemnitees (as defined herein), and except as provided below, Sublandlord hereby expressly releases Subtenant and its officers, agents, directors, representatives, shareholders, members, subsidiaries, affiliates, related entities, partners, employees and lenders (collectively, “ Subtenant’s Indemnitees ”) for any loss or damage to any property of Sublandlord, which loss or damage is insured against, or required to be insured against, by Sublandlord pursuant to the Master Lease or this Sublease, whether or not such loss or damage is due to the act or omission (including negligence) of Subtenant or Subtenant’s Indemnitees (other than the gross negligence or willful misconduct of Subtenant or any of Subtenant’s Indemnitees), and regardless of the amount of insurance proceeds collected or collectible under any insurance policies in effect, and

Sublandlord further agrees that all such property of Sublandlord shall be at the risk of Sublandlord only and Subtenant and Subtenant’s Indemnitees shall not be liable for any loss or damage thereto and Subtenant completely releases and exculpates Subtenant and Subtenant’s Indemnitees therefrom (other than any loss or damage due to the gross negligence or willful misconduct of Subtenant or any of Subtenant’s Indemnitees).

8. Holdover . Subtenant shall have no right to occupy the Subleased Premises, the Exclusive Use Areas or any portion thereof after the expiration of this Sublease or after termination of this Sublease or Subtenant’s right to possession. In the event Subtenant holds over, Subtenant shall pay Sublandlord monthly rent at a rate equal to one hundred fifty percent (150%) of the monthly Sublease Base Rent payable by Subtenant for the month immediately preceding said holding over (the “ Base Holdover Rent ”), computed on a per-month basis, for each month or part thereof (without reduction for any such partial month) that Subtenant remains in possession after the expiration of this Sublease or after termination of this Sublease or Subtenant’s right to possession. In addition to the Base Holdover Rent, Subtenant shall pay to Sublandlord an amount (the “ Additional Holdover Rent ”) calculated as follows:

8.1 If Subtenant’s holdover of the Subleased Space is a result solely of Sublandlord’s failure to vacate the Navistar Controlled Subleased Space and Subtenant has otherwise surrendered and vacated the FCA Controlled Subleased Space and the Exclusive Use Areas in compliance with this Sublease, Subtenant shall not be required to pay Base Holdover Rent or Additional Holdover Rent;

8.2 If Subtenant holds over in any portion of the Subleased Premises or the Exclusive Use Areas and Sublandlord is not otherwise in holdover of any portion of the Premises, Subtenant shall pay Additional Holdover Rent equal to (A) any amount Sublandlord is required to pay to Master Landlord under the Master Lease as a result of such holdover pursuant to Section 17.3 of the Master Lease, less (B) the amount of the Base Holdover Rent that Subtenant is required to pay Sublandlord in accordance with this Section; and

8.3 If Subtenant and Sublandlord are both holding over in the Subleased Premises, the Exclusive Use Areas or the Remaining Space, as applicable, Subtenant shall pay Additional Holdover Rent equal to (A) Subtenant’s Proportionate Share of the amount that Sublandlord is required to pay to Master Landlord under the Master Lease as a result of such holdover pursuant to Section 17.3 of the Master Lease, less (B) the amount of the Base Holdover Rent that Subtenant is required to pay Sublandlord in accordance with this Section. To the extent any portion of the Additional Holdover Rent payable under this Section 8.3 is incurred and allocable only to a portion of the holdover period of Sublandlord or Subtenant after the other party has otherwise fully surrendered and vacated the Premises, the Additional Holdover Rent shall be equitably adjusted.

9. Assignment and Subletting .

9.1 Subtenant Assignment . Subtenant will not assign its interest in this Sublease or sub-sublease all or part of the Subleased Premises or the Exclusive Use Areas without the prior written consent of Sublandlord, which consent will not be unreasonably withheld, delayed or conditioned. The foregoing notwithstanding, but subject to the approval of

the Master Landlord if required, an assignment of this Sublease or a subletting of all or part of the Subleased Premises or the Exclusive Use Areas to (i) an entity that controls, is controlled by or is under common control with Subtenant, (ii) a purchaser of all or substantially all of the assets of Subtenant in one transaction, or (iii) the surviving entity in the event of any merger or consolidation of Subtenant, will not be subject to Sublandlord’s consent. Notwithstanding the preceding sentence, the prior written consent of Sublandlord will be required if such subtenant or assignee, as applicable, is a Navistar Competitor. As used herein, the term “ Navistar Competitor ” shall mean any third party which is engaged in the manufacture, assembly, fabrication, sale, leasing or financing of commercial or military trucks, diesel engines, vehicle chassis, school or commercial buses, recreational vehicles, truck bodies or truck, trailer or diesel engine components or parts.

9.2 Sublandlord Assignment . Sublandlord will not assign its interest in this Sublease or the Master Lease or lease or sublease all or part of the Premises without the prior written consent of Subtenant, which consent will not be unreasonably withheld, delayed or conditioned. The foregoing notwithstanding, but subject to the approval of the Master Landlord if required, an assignment of its interest in this Sublease or in the Master Lease or the lease of all or part of the Premises to (i) an entity that controls, is controlled by or is under common control with Sublandlord, (ii) a purchaser of all or substantially all of the assets of Sublandlord in one transaction, or (iii) the surviving entity in the event of any merger or consolidation of Sublandlord, will not be subject to Subtenant’s consent. Notwithstanding the preceding sentence, the prior written consent of Subtenant will be required if such subtenant or assignee, as applicable, is a FreightCar Competitor. As used herein, the term “ FreightCar Competitor ” shall mean any third party which is engaged in the manufacture, assembly, rebuilding, sale, leasing, maintenance or repair of railcars.

9.3 Consent for Competitors . If consent to an assignment, lease, sublease or sub-sublease is required because the proposed assignment, lease, sublease or sub-sublease would be to a Navistar Competitor, where Sublandlord is the party whose consent is required, or to a FreightCar Competitor, where Subtenant is the party whose consent is required, then the parties will discuss the concerns which the proposed assignment, lease, sublease or sub-sublease raises for the party whose consent is required, in an effort to determine whether those concerns can be addressed by some mutually-agreeable arrangement or understanding between the parties. Notwithstanding such discussion, whether to grant or withhold consent will be within the sole discretion of the party whose consent is required.

10. Exclusive Use; First Opportunity Activity

10.1 Exclusive Use.

(a) During the Term, except as set forth herein, Sublandlord shall not, and shall not suffer or permit any other person or entity to, use any part of the Premises for the manufacture, rebuilding, assembly, sale or repair of railcars.

(b) ***

10.2 ***

11. Subtenant Default .

11.1 Sublease Event of Default . The occurrence of any of the following shall constitute a “ Sublease Event of Default ” by Subtenant under this Sublease:

(a) Any act or omission by Subtenant that would constitute an “Event of Default” (as defined in Section 22.1 of the Master Lease) under the Master Lease, subject to the same notice and cure provisions provided therein, less three (3) days (if more than a seven (7) day cure period is provided therein); or

(b) Except for any act or omission by Subtenant that would constitute a Sublease Event of Default pursuant to Section 11.1(a) hereof, Subtenant shall fail to perform any of the covenants, agreements, terms or provisions contained in this Sublease which on the part or behalf of Subtenant are to be kept or performed, and Subtenant shall fail to remedy the same within thirty (30) days after Sublandlord shall have given to Subtenant a written notice specifying the same, or if such default is not reasonably curable in thirty (30) days, Subtenant shall fail to commence cure within such thirty (30) day period and diligently proceed to remedy the same.

11.2 Sublandlord’s Right to Cure . Subtenant agrees to do nothing which will subject the Master Lease to termination by Master Landlord under the provisions of the Master Lease. It is also agreed that, if Subtenant is in default of the provisions of the Master Lease, Sublandlord may, but need not, cure said default specifically on behalf of and for the account of Subtenant, in which case all reasonable costs, damages and expenses incurred by Sublandlord in connection therewith shall be paid to Sublandlord as Additional Sublease Rent hereunder within thirty (30) days after written demand delivered to Subtenant accompanied by supporting data in reasonable detail. In so curing Subtenant’s default, Sublandlord shall not be deemed to have waived any of its rights, nor to have released Subtenant from any of its obligations under this Sublease. It is further agreed that Sublandlord may cure Subtenant’s default under the Master Lease or this Sublease on and for Sublandlord’s own account to preserve its interest in the Master Lease, and may terminate this Sublease by reason of said default pursuant to the terms hereof, if Subtenant does not pay as Additional Sublease Rent to Sublandlord all costs, damages and expenses incurred by it in connection with such cure within the applicable grace period provided for in the Master Lease.

11.3 Remedies. Upon the occurrence, and during the continuance, of any Sublease Event of Default, Sublandlord shall be entitled to all remedies and damages provided for Master Landlord in the Master Lease upon the occurrence of an “Event of Default” thereunder.

12. Covenant of Sublandlord .

12.1 Generally . Sublandlord shall use reasonable efforts to obtain for Subtenant the benefit of all rights granted to Sublandlord, as tenant under the Master Lease, with respect to the Subleased Premises and the Exclusive Use Areas in order to effectuate the intent of the parties and the purpose of this Sublease; provided that nothing contained in this Sublease shall be construed as requiring Sublandlord to perform any obligation or discharge any duty

which Master Landlord is required to perform or discharge under the Master Lease. Except as may otherwise be expressly provided in this Sublease, Subtenant shall not receive any abatement of rent under this Sublease because of the Sublandlord or Master Landlord’s failure to perform any of their obligations under the Master Lease.

12.2 Sublandlord’s Purchase Option . The parties acknowledge that pursuant to the Master Lease Sublandlord has been granted an option to purchase the Premises. So long as no Sublease Event of Default exists, Sublandlord’s exercise of such purchase option and acquisition of the Premises shall not cause a termination of this Sublease or otherwise adversely affect Subtenant’s right to use, occupy and enjoy the Subleased Premises in accordance with the terms of this Sublease.

13. Notice of Default . Promptly following Sublandlord’s or Subtenant’s receipt of any notice of default under the Master Lease, the party receiving such notice shall deliver a copy thereof to the non-receiving party. Promptly following Sublandlord’s delivery to Master Landlord of any notice of default under the Master Lease, Sublandlord shall deliver a copy there to Subtenant.

14. Damage or Destruction.

(a) Subject to subparagraph (b) below, if the Subleased Premises or the Facility or other Improvements are totally or partially damaged or destroyed from any cause, thereby rendering the Subleased Premises totally or partially inaccessible or untenantable, Sublandlord, if and only to the extent Sublandlord, as tenant under the Master Lease, is required to do so in accordance with Section 7.1 of the Master Lease, shall restore and repair the Subleased Premises and/or the Facility and other Improvements to substantially the same condition they were in prior to such damage or destruction.

(b) Upon the occurrence of any such damage or destruction, Sublandlord shall have the right to terminate this Sublease if and when it terminates the Master Lease in accordance with Section 7.2 thereof. Promptly following Sublandlord’s delivery to Master Landlord of any notice of termination in accordance with Section 7.2 of the Master Lease, Sublandlord shall deliver a copy there to Subtenant.

(c) If this Lease is terminated in accordance with this Section, all Rent payable hereunder shall be apportioned and paid to the date of the occurrence of such damage or destruction. If this Lease is not terminated pursuant to the terms of this Section, until the repair and restoration of the Subleased Premises is completed, Tenant shall be required to pay Sublease Base Rent and Additional Sublease Rent only for that portion of the Subleased Premises that Tenant has reasonable access to and is able to use for its business while repairs are being made, based on the ratio that the number of square feet of floor area in the usable portion of the Subleased Premises bears to the total number of square feet of floor area of the Subleased Premises.

15. Consent and Approval of Master Landlord . Neither Sublandlord nor Subtenant shall take or omit to take any action requiring the Master Landlord’s consent under the Master Lease without first obtaining such consent in accordance with the terms of the Master Lease. Whenever the consent of the Master Landlord is required under the Master Lease, Sublandlord and Subtenant shall use reasonable diligence to obtain such consent from the Master Landlord.

16. Indemnity .

16.1 Subtenant’s Indemnity. To the extent not resulting from any act, omission, negligence or willful misconduct of Sublandlord, any affiliate of Sublandlord, or Master Landlord, and each of their respective direct or indirect partners, officers, shareholders, directors, members, trustees, beneficiaries, servants, employees, principals, contractors, licensees, agents or representatives, Subtenant shall defend, indemnify and hold Sublandlord harmless from and against any and all claims, actions, liabilities, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) arising from or in connection with the use or occupancy by Subtenant of the Subleased Premises or the Premises or from any work or thing done or any condition created by or any other act or omission of Subtenant or its employees, agents, contractors, visitors or licensees, in or about the Subleased Premises or any other part of the Premises, or from any breach of its obligations under this Sublease.

16.2 Sublandlord’s Indemnity. To the extent not resulting from any act, omission, negligence or willful misconduct of Subtenant or any affiliate of Subtenant, and each of their respective direct or indirect partners, officers, shareholders, directors, members, trustees, beneficiaries, servants, employees, principals, contractors, licensees, agents or representatives, Sublandlord shall defend, indemnify and hold Subtenant harmless from and against any and all claims, actions, liabilities, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) arising from the negligence or willful misconduct, or breach of this Sublease, by Sublandlord or its employees, agents, contractors, visitors or licensees.

16.3 Survival. The provisions of this Section shall survive the expiration or earlier termination of this Sublease.

17. Notices . Whenever a provision is made under this Sublease for any demand, notice or declaration of any kind, or where it is deemed desirable or necessary by either party to give or serve any such notice, demand or declaration to the other party, it shall be in writing and served either personally or sent by United States mail, certified, postage prepaid, or by pre-paid nationally recognized overnight courier service, addressed at the addresses set forth below:


If to Sublandlord:		Navistar, Inc. 2701 Navistar Drive Lisle, IL 60532 Attention: Scott F. Renier

with a copy to:		Jones Day 77 West Wacker Drive Chicago, IL 60601 Attention: Brian L. Sedlak


If to Subtenant:		c/o FreightCar America, Inc. Two North Riverside Plaza Suite 1300 Chicago, IL 60606 Attention: Senior Vice President, Operations

with a copy to:		McDermott Will & Emery LLP 227 West Monroe Street Suite 4700 Chicago, IL 60606 Attention: Helen R. Friedli

or at such other address as Sublandlord or Subtenant may theretofore by written notice to the other have designated for the service of such notice. Notices given hereunder shall be deemed to have been given on the date of personal delivery (or the first business day thereafter if delivered on a non-business day) or three (3) days after the date of certified mailing or the next business day after being sent by overnight courier, provided that the sender can evidence proof of receipt of such notice. If the sender is unable to provide such proof, notices given hereunder shall be effective upon actual receipt only.

18. Sublandlord’s Representations and Warranties . Sublandlord represents and warrants to Subtenant that: (i) a true, correct and complete copy of the Master Lease is attached as Exhibit A hereto, (ii) the Master Lease constitutes and comprises the entire understanding and agreement between Master Landlord and Sublandlord with respect to the Premises, (iii) to Sublandlord’s actual knowledge, no Event of Default exists under the Master Lease, nor is Master Landlord in default under the Master Lease, and (iv) to Sublandlord’s actual knowledge, there exists no state of facts and no event has occurred that, with the passage of time or the giving of notice, or both, would constitute an Event of Default under the Master Lease. As used herein the term “Sublandlord’s actual knowledge” shall mean and refer to the actual knowledge of Ray Koopman or Chuck Stansell without any duty of investigation whatsoever; provided that neither Koopman nor Chuck Stansell shall have any personal liability hereunder.

19. Governing Law . This Sublease shall be governed and construed in accordance with the laws of the State in which the Subleased Premises is located, notwithstanding any conflicts-of-laws doctrines of such state or other jurisdiction to the contrary.

20. Binding Effect . The covenants and agreements herein contained shall bind and inure to the benefit of Sublandlord and Subtenant and their respective successors and assigns.

21. Counterparts . This Sublease may be executed in any number of counterparts, each of which shall be deemed an original and all of which, taken together, constitute one and the same instrument.

22. Signage . Throughout the Term, Subtenant shall be permitted to install, maintain, repair and replace, at its sole cost and expense and subject to the terms and conditions of this Sublease (including any provisions of the Master Lease incorporated herein), signage on the exterior of the Facility and or the Land and interior signage within the Subleased Premises; provided that any signage placed outside the Subleased Premises shall be subject to the prior written approval of Sublandlord, which approval shall not be unreasonably withheld, conditioned or delayed.

23. Brokers . Each party represents to the other that no brokers were involved in or procured this Sublease and each will indemnify and defend the other against brokerage commission claims by anyone or any entity caused by the indemnifying party.

24. Quiet Enjoyment . Provided no Sublease Event of Default has occurred and is continuing, Subtenant shall, subject to the terms and provisions of this Sublease, peaceably and quietly hold and enjoy the Subleased Premises for the Term hereby demised against (i) interference therewith by the affirmative acts of Sublandlord, its employees or agents, and (ii) interference therewith by any person who may claim by, through or under Sublandlord, but not otherwise. This covenant of quiet enjoyment is in lieu of any covenant of quiet enjoyment provided or implied by law, and Subtenant expressly waives any such other covenant of quiet enjoyment to the extent broader than the covenant contained in this Section. Nothing herein deprives Subtenant of its right under law to prevent interference with its operations by third parties not under the control of Sublandlord, but such actions are at Subtenant’s own cost and expense.

25. Subtenant’s Self-Help Rights . In the event Sublandlord fails to comply with any of the terms, conditions or provisions of this Sublease and such failure continues for more than thirty (30) days after notice thereof from Subtenant (or such shorter period as is reasonable in the case of an emergency or such longer period if Sublandlord commences to complete such obligations and proceeds diligently and with reasonable dispatch to complete such obligation), Subtenant shall have all available rights and remedies provided at law or in equity and, without limiting the foregoing, Subtenant may perform the obligation which Sublandlord has failed to perform and Sublandlord shall reimburse Subtenant for any costs and expenses incurred by Subtenant for such performance within thirty (30) days after Subtenant’s written demand therefore, which demand shall include reasonable documentation evidencing such amounts owed to Subtenant.

26. Sublandlord’s Breach . In the event Sublandlord breaches any of the representations, warranties or covenants hereunder and such breach results in any costs, losses, damages or liabilities to Subtenant (whether arising as a third party cost or otherwise, but excluding consequential damages) then Sublandlord shall reimburse Subtenant for any such costs, losses, damages or liabilities within thirty (30) days after Subtenant’s written demand therefore, which demand shall include reasonable documentation evidencing such amounts owed to Subtenant.

27. Sublandlord’s Payment or Subtenant’s Offset Right .

(a) If Sublandlord shall fail to pay any amounts due to Subtenant under this Sublease (including any indemnification thereunder) (either such failure, a “ Claim ”), in each case within thirty (30) days of when due, then Subtenant shall give Sublandlord written notice of such Claim and Sublandlord shall have fifteen (15) days to notify Subtenant in writing that it in good faith disputes such Claim and the reasons therefor. If Sublandlord shall fail to so notify

Subtenant of its objection to the Claim, Subtenant shall have the rights set forth in Section 27(b) below. If Sublandlord shall so notify Subtenant of its objection to such Claim, the parties shall negotiate in good faith in order to seek resolution to such Claim. If the parties are unable to resolve such Claim within thirty (30) days after Sublandlord’s notice of its objection, either party may request arbitration by giving notice to that effect to the other party, and both parties shall promptly thereafter jointly apply to the American Arbitration Association (or any organization successor thereto) in the City of Chicago, Cook County, Illinois for the appointment of a single arbitrator acceptable to both parties. The arbitration shall be conducted in accordance with the then prevailing rules of the American Arbitration Association (or any organization successor thereto) in the City of Chicago, Cook County, Illinois. In rendering such decision and award, the arbitrator shall not add to, subtract from otherwise modify the provisions of this Sublease. The decision of the arbitrator shall be binding upon all parties to the dispute and a judgment therefor may be entered by either party in a court having jurisdiction thereof. All the expenses of the arbitration shall be borne by the parties equally, provided that each party shall bear their own legal costs.

(b) In the event (i) Sublandlord fails to object to Subtenant’s notice of a Claim within the fifteen (15) day period described above or (ii) the arbitrator shall make an award to Subtenant based on such Claim, Sublandlord shall pay any amounts owed to Subtenant on such Claim within thirty (30) days after either of the foregoing events, and if Sublandlord shall fail to make such payment Subtenant shall have the right to offset such amount against any amounts due hereunder.

28. Non-Solicitation.

(a) During the Sublease Term Sublandlord shall not, directly or indirectly, hire, retain or attempt to hire or retain any employee or independent contractor of Subtenant or in any way interfere with the relationship between Subtenant and any of its employees or independent contractors.

(b) During the Sublease Term Subtenant shall not, directly or indirectly, hire, retain or attempt to hire or retain any employee or independent contractor of Sublandlord or in any way interfere with the relationship between Sublandlord and any of its employees or independent contractors.

29. ***

[balance of page intentionally blank]

IN WITNESS WHEREOF , the parties have executed this Sublease as of the day and year first above written.


SUBLANDLORD: NAVISTAR, INC.

By:
Name:
Title:
SUBTENANT: FREIGHTCAR ALABAMA, LLC

By:
Name:
Its:

CONFIDENTIAL TREATMENT

Exhibit 10.1

List of Exhibits

A	Master Lease

B	Subleased Premises Floor Plan

C	Exclusive Use Areas and Common Use Areas Site/Floor Plan

D	Definition of Exclusive Use Assets and Common Use Assets

E	Determination of Fair Market Value

CONFIDENTIAL TREATMENT

Exhibit 10.1

EXHIBIT A

Master Lease

***

CONFIDENTIAL TREATMENT

Exhibit 10.1

EXHIBIT B

Subleased Premises Floor Plan

***

CONFIDENTIAL TREATMENT

Exhibit 10.1

EXHIBIT C

Exclusive Use Areas and Common Use Areas

***

CONFIDENTIAL TREATMENT

Exhibit 10.1

EXHIBIT D

Definition of Exclusive Use Assets and Common Use Assets

***

CONFIDENTIAL TREATMENT

Exhibit 10.1

EXHIBIT E

Fair Market Value

***

Exhibit 10.2

AMENDMENT TO SUBLEASE ***

THIS AMENDMENT TO SUBLEASE *** (this “ Agreement ”) is made and entered into effective as of March 11, 2013, by and among TEACHERS’ RETIREMENT SYSTEMS OF ALABAMA, an instrumentality of the State of Alabama, and EMPLOYEES’ RETIREMENT SYSTEM OF ALABAMA, an instrumentality of the State of Alabama (collectively, the “ Landlord ”), NAVISTAR, INC., a Delaware corporation (“ Tenant ”), and FreightCar Alabama, LLC, a Delaware limited liability company (“ Subtenant ”). Landlord, Tenant, and Subtenant are sometimes referred to herein collectively as the “ Parties ” and individually as a “ Party .”

Recitals

A. Landlord entered into that certain Industrial Facility Lease (the “ Lease ”), dated as of September 29, 2011, with Tenant, whereby Landlord leased to Tenant the Leased Premises (as defined in the Lease). Capitalized terms used herein, but not defined herein, shall have the meanings ascribed to them in the Lease.

B. A short form or memorandum of the Lease has been recorded in the land records of Colbert County, Alabama on October 25, 2011 in Book 2011, Page 22555.

C. Pursuant to that certain Sublease (the “ Sublease ”), dated as of February 19, 2013, Tenant has subleased to Subtenant a portion of the Facility referred to as the “Subleased Premises,” and granted to Subtenant the exclusive use of certain areas of the Leased Premises referred to therein as the “Exclusive Use Areas,” all as more particularly described in the Sublease. A true and complete copy of the Sublease has been delivered to Landlord.

D. Subtenant requires the *** pursuant to Article XXI of the Lease.

Agreement

For and in consideration of the respective covenants and agreements of the Parties herein set forth, and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged by the Parties, the Parties do hereby agree as follows:

ARTICLE 1

AMENDMENT TO SUBLEASE

Section 1.1 Amendment . Tenant and Subtenant hereby agree that Sections 4.3(b) and 4.3(c) of the Sublease shall be deleted in their entirety from the Sublease and Landlord hereby consents to such amendment of the Sublease.

ARTICLE 2

***

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first stated above.


Landlord:		Teachers’ Retirement Systems Of Alabama

		By:
		Name:
		Title:

		Employees’ Retirement System Of Alabama

		By:
		Name:
		Title:

Tenant:		Navistar, Inc.

		By:
		Name:
		Title:

Subtenant:		FreightCar Alabama, LLC

		By:
		Name:
		Title:

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Edward J. Whalen, 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:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Joseph E. McNeely, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of FreightCar America, Inc.;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 10, 2013	By:	/s/ J OSEPH E. M C N EELY
		Joseph E. McNeely,
		President and Chief Operating Officer (Principal Financial Officer)

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, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Edward J. Whalen, Chief Executive Officer, and Joseph E. McNeely, President and Chief Operating Officer, 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:

(1)

the Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 10, 2013	By:	/s/ E DWARD J. W HALEN
		Edward J. Whalen,
		Chief Executive Officer (Principal Executive Officer)

Date: May 10, 2013	By:	/s/ J OSEPH E. M C N EELY
		Joseph E. McNeely,
		President and Chief Operating Officer (Principal Financial 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.

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