RAIL FreightCar America Inc

PROXY STATEMENT

The board of directors (the “Board”) of FreightCar America, Inc. (“FreightCar America” or the “Company”) is asking for your proxy for use at the special meeting of stockholders to be held in virtual format at 10:00 a.m. (Central time) on November 24, 2020 at www.meetingcenter.io/232416354 (the “Special Meeting”). In light of the COVID-19 (Coronavirus) pandemic, to support the health and well-being of our stockholders, employees and directors, and taking into account recent federal, state and local guidance, the Special Meeting will be held in virtual format only, via live webcast on the Internet, with no physical, in-person meeting. We are initially mailing this proxy statement (the “Proxy Statement”) and the enclosed proxy card (the “Proxy Card”) to our stockholders on or about November 2, 2020.

ABOUT THE MEETING

What is the purpose of the special meeting?

The purpose of the Special Meeting is to consider and vote upon a proposal to approve the issuance of 23% of our outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance) issuable upon exercise of the Warrant, as required by and in accordance with Nasdaq Listing Rules 5635(b) and 5635(d) for certain private issuances of more than 20% of our outstanding common stock. In addition, stockholders will consider and vote upon a proposal to transact such other business as may properly come before the meeting. The Warrant issuance is an integral part of the Company’s strategic plan, as more fully described below.

As a part of the Company’s plan to enhance its financial flexibility, simplify its existing corporate structure and facilitate a more seamless shift of its operations at its Alabama facility to Mexico, the Company has entered into agreements with various parties including third party financing providers, which is described below. By shifting operations to its new facility in Castaños, Mexico (the “Mexico Facility”), the Company will be able to more effectively and efficiently execute its business plans and will be better suited to enhance profitability for the Company and its stockholders.

As previously disclosed, on October 8, 2020, the Company and its wholly owned subsidiary, FreightCar Alabama, LLC (“FreightCar Alabama”), entered into the Third Amendment to Industrial Facility Lease (the “Lease Amendment”) with Teachers’ Retirement System of Alabama and the Employees’ Retirement System of Alabama, as landlord (collectively, the “Landlord”), in connection with the Industrial Facility Lease, dated as of September 29, 2011, which was assigned to FreightCar Alabama on February 28, 2018 and amended by that certain Second Amendment to Industrial Facility Lease by and among FreightCar Alabama, the Landlord and the Company, as Guarantor, dated as of February 26, 2019 (as previously amended and assigned, the “Original Lease”), relating to the Company’s facility in Cherokee, Alabama (the “Alabama Facility”).

Early Termination of Alabama Facility Lease

The Lease Amendment was entered into in connection with the upcoming closure of the Alabama Facility, which was previously disclosed in the Company’s Form 8-K filed on September 10, 2020. The Lease Amendment amends the Original Lease to shorten its term by amending the expiration date from December 31, 2026 to February 28, 2021, with a single one-month extension of the new February 28, 2021 expiration date at the option of FreightCar Alabama, and provides FreightCar Alabama with the option to store railcars and other rolling stock from the end of the term through June 30, 2021 at no additional rent or other costs. In addition, the Landlord has agreed in the Lease Amendment to waive the base rent payable under the Original Lease for the months of October 2020 through February 2021. As consideration for the Landlord’s entry into the Lease Amendment and the aforementioned rent waiver, the Company and FreightCar Alabama agreed to sell and transfer Facility-related assets to the Landlord. The Lease Amendment was filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 13, 2020.

New Asset-Backed Loan Facility

Also, on October 8, 2020, the Company entered into a Loan and Security Agreement (the “Siena Loan Agreement”) by and among the Company, as guarantor, and certain of its subsidiaries, as borrowers (together with the Company, the “Loan Parties”), and Siena Lending Group LLC, as lender (“Siena”). Pursuant to the Siena Loan Agreement, Siena provided an asset backed credit facility, in the maximum aggregate principal amount of up to $20.0 million, consisting of revolving loans. The Siena Loan Agreement replaced the Company’s prior revolving credit facility under the Credit and Security Agreement dated as of April 12, 2019, among the Company and certain of its subsidiaries, as borrowers and guarantors, and BMO Harris Bank N.A., as lender, as amended from time to time, which was terminated effective October 8, 2020 and otherwise would have matured on April 12, 2024. The Siena Loan Agreement has a term ending on October 8, 2023. Revolving loans outstanding thereunder bear interest, subject to the provisions of the Siena Loan Agreement, at the Base Rate (as defined in the Siena Loan Agreement) plus 3.00% per annum.

The Siena Loan Agreement provides for a revolving credit facility with maximum availability of $20.0 million, subject to borrowing base requirements set forth in the Siena Loan Agreement, which generally limit availability under the revolving credit facility to (a) 85% of the value of eligible accounts and (b) up to the lesser of (i) 50% of the lower of cost or market value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory, and as reduced by reserves established by Siena from time to time in accordance with the Siena Loan Agreement. The Siena Loan Agreement contains affirmative and negative covenants, including, without limitation, limitations on future indebtedness, liens and investments. The Siena Loan Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Siena Loan Agreement, each of the Loan Parties granted Siena a continuing lien upon certain assets of the Loan Parties to secure the obligations of the Loan Parties under the Siena Loan Agreement. The Siena Loan Agreement was filed as Exhibit 10.2 to the Company’s Form 8-K filed on October 13, 2020.

Joint Venture for Mexico-Based Railcar Production

In September 2019, the Company formed a 50-50 joint venture with Fabricaciones y Servicios de México, S.A. de C.V. (“Fasemex Mexico”), to manufacture new railcars and convert existing railcars at the Mexico Facility. In early October, the Mexico Facility completed its Association of American Railroads (“AAR”) certification audits and is currently awaiting issuance of the certifications applied for in order to be able to start shipping railcars. The Mexico Facility produced its first railcar in September 2020. The Mexico Facility is expected to be fully operational in early 2021. As the Mexico Facility moves closer to being able to start shipping railcars, the Company, through its wholly owned subsidiary, FreightCar North America, LLC (f/k/a FCAI Holdings, LLC) (“FreightCar North America”) entered into an equity purchase agreement dated October 16, 2020 (the “Equity Purchase Agreement”) with Fasemex, Inc. (the “US Seller”), Fasemex Mexico and Agben de Mexico, S.A. de C.V. (“Agben” and, together with Fasemex Mexico, the “MX Sellers”, and the MX Sellers, together with the US Seller, the “Sellers”).

Pursuant to the Equity Purchase Agreement, FreightCar North America acquired from Sellers 50% of the outstanding equity interests (the “Seller Interests”) of FCA-Fasemex, LLC, a Delaware limited liability company (the “US JV”), FCA-Fasemex, S. de R.L. de C.V., an entity organized under the laws of Mexico (“Production JV”), and FCA-Fasemex Enterprise, S. de R.L. de C.V., an entity organized under the laws of Mexico (“ Services JV,” and, collectively, with the Production JV and the US JV, the “ JV Companies”). The JV Companies collectively represented the Company’s joint venture with the Sellers to manufacture railcars in Castaños, Mexico, which was formed in September 2019. Prior to the execution of the Equity Purchase Agreement, FreightCar North America owned a 50% interest in each of the JV Companies and, as a result of the acquisition of the Seller Interests, the JV Companies are now wholly-owned by FreightCar North America. The consideration for the Seller Interests included $172,500 in cash and the issuance of an aggregate of 2,257,234 shares of the Company’s common stock, par value $0.01 per share (the “EPA Shares”), to the Sellers. In addition, the Company and certain of its subsidiaries entered into several ancillary agreements as discussed in the Company’s Form 8-K filed on October 19, 2020. The Equity Purchase Agreement contains certain customary representations, warranties, indemnities and covenants, including a non-competition covenant from the Sellers and their affiliates until the later of three years after closing and such time that the Sellers cease to beneficially own, in the aggregate, common stock of the Company equal to at least 5% of the issued and outstanding shares of the Company’s common stock.

In tandem with the Equity Purchase Agreement, the Company entered into an investor rights agreement (the “Investor Rights Agreement”) and a royalty agreement (the “Royalty Agreement”) with the Sellers, and Fasemex Mexico entered into an amended and restated lease agreement (the “Lease Agreement”) with Production JV. Each of the Equity Purchase Agreement, the Investor Rights Agreement, the Lease Agreement and the Royalty Agreement was filed as Exhibit 10.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.4, respectively, to the Company’s Form 8-K filed on October 19, 2020.

New Term Loan Credit Agreement

On October 13, 2020, the Company entered into a Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, as guarantor, FreightCar North America (together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”), CO Finance LVS VI LLC, as lender (the “Lender”), a corporate credit fund for which Pacific Investment Management Company serves as investment manager, and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”). Pursuant to the Term Loan Credit Agreement, the Lender extended a term loan credit facility in the principal amount of $40.0 million, consisting of a single term loan to be funded upon the satisfaction of certain conditions precedent set forth in the Term Loan Credit Agreement, including stockholder approval of the issuance of the common stock underlying the Warrant described below (the funding date of such term loan, the “Closing Date”). The Term Loan Credit Agreement has a term ending five years following the Closing Date. The commitment of the Lender to fund the term loan will terminate if the Closing Date has not occurred by December 31, 2020. The term loan outstanding under the Term Loan Credit Agreement will bear interest, at FreightCar North America’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin for each such interest rate set forth in the Term Loan Credit Agreement. The Term Loan Credit Agreement has both affirmative and negative covenants, including, without limitation, limitations on indebtedness, liens and investments. The Term Loan Credit Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Term Loan Credit Agreement and the related loan documents, each of the Loan Parties granted to Agent a continuing lien upon all of such Loan Parties’ assets to secure the obligations of the Loan Parties under the Term Loan Credit Agreement. The Term Loan Credit Agreement was filed as Exhibit 10.5 to the Company’s Form 8-K filed on October 19, 2020.

In connection with the Term Loan Credit Agreement, the Company entered into a warrant acquisition agreement dated as of October 13, 2020 (the “Warrant Agreement”) with the Lender. Pursuant to the Warrant Agreement, the Company agreed to issue a warrant (the “Warrant”) to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to an aggregate of 23% of the Company’s outstanding common stock on a fully-diluted basis at the time the Warrant is exercised, after giving effect to such issuance of common stock. The funding of the term loan under the Term Loan Credit Agreement and the issuance of the common stock issuable upon exercise of the Warrant are both conditioned upon stockholder approval of the issuance of the Warrant Shares at the Special Meeting. The Warrant will be exercisable for a term of ten years from the date of the issuance of the Warrant.

Pursuant to the Warrant Agreement, for so long as the holder of the Warrant (the “Warrantholder”) or any of its affiliates hold (a) at least 50% of the Warrant or (b) at least 50% of the common stock issuable pursuant to the exercise of the Warrant, the Warrantholder shall be entitled to designate for nomination to the Board a director to the Board and a non-voting observer. The director nominee initially designated by the Warrantholder (the “the Warrantholder Director”) will be provided in writing by the Warrantholder prior to the Closing Date, and if the issuance of the common stock issuable upon exercise of the Warrant is approved by our stockholders, the Board intends to appoint him or her to serve as a Class III director promptly following such approval and in connection with the issuance of the common stock issuable upon exercise of the Warrant.

In connection with the Warrant Agreement, the Company agreed to enter into a registration rights agreement (the “Registration Rights Agreement”) with the Warrantholder as of the Closing Date. Pursuant to the Registration Rights Agreement will provide that the Warrantholder may deliver to the Company a written notice (a “Demand”) requiring the Company as soon as reasonably practicable after receiving the Demand, but not more than sixty calendar days following the receipt of the Demand, to file a registration statement (the “Demand Registration Statement”) with respect to all or a portion of the Company’s common stock issuable upon exercise of the Warrant (referred herein as “Registrable Securities”) with the Securities and Exchange Commission (the “SEC”). The Company will use commercially reasonable efforts to keep the Demand Registration Statement continuously effective (including the preparation and filing of any amendments and supplements necessary for that purpose) until the date on which the Warrantholder consummates the sale of all of the Registrable Shares registered for resale under the Demand Registration Statement or such earlier date on which all Registrable Shares held by the Warrantholder (or any of its affiliates) are freely tradeable in a single transaction pursuant to Rule 144. In certain circumstances, and as described in the Registration Rights Agreement, the Warrantholder (or any of its affiliates) will have (i) piggyback registration rights with respect to the Registrable Securities and (ii) the right to request that the Company initiate an Underwritten Offering (as defined in the Registration Rights Agreement) of Registrable Securities.

Each of the Warrant Agreement, the form of Warrant and the form of Registration Rights Agreement was filed as Exhibit 10.6, Exhibit 10.7 and Exhibit 10.8, respectively, to the Company’s Form 8-K filed on October 19, 2020.

As described in more detail below, in accordance with the applicable rules and regulations of the Nasdaq Global Market (“Nasdaq”), the Company is calling the Special Meeting to consider and vote upon the proposal below. The Special Meeting described in the Proxy Statement is scheduled to be held on November 24, 2020, and we are providing these proxy materials to you in connection with the Special Meeting.

What are our voting recommendations?

Our board of directors recommends that you vote your shares:

“FOR” the approval of the issuance of the Warrant Shares issuable upon exercise of the Warrant, and as discussed below under “Proposal 1 – Approval of the Issuance of the Warrant Shares Issuable Upon Exercise of the Warrant.”

Why did the Company Approve the Term Loan Agreement and the Warrant?

The Board unanimously approved the Term Loan Agreement and the issuance of the common stock issuable upon exercise of the Warrant pursuant to the Warrant Agreement in order to secure necessary capital (i) to purchase machinery and equipment for the Mexico Facility, (ii) to pay transaction costs and expenses incurred in the execution of the strategic plan to reposition its manufacturing and (iii) to increase its liquidity to support other general corporate purposes of the Company and its subsidiaries. The Term Loan Agreement and the issuance of the common stock issuable upon exercise of the Warrant are each integral to the Company’s ability to secure necessary financing and enact its overall repositioning plans. By moving forward with its repositioning plan and shifting operations to Mexico, the Company will be significantly better positioned to increase stockholder value.

Who is entitled to vote?

Only stockholders of record at the close of business on the record date, October 19, 2020 (the “Record Date”), are entitled to receive notice of the Special Meeting and to vote the shares of common stock that they held on the Record Date at the Special Meeting and any postponements or adjournments of the Special Meeting. Each outstanding share of common stock entitles its holder to cast one vote, without cumulation, on each matter to be voted on.

What constitutes a quorum?

For business to be conducted at the Special Meeting, a quorum must be present. If a majority of the shares outstanding on the record date are present at the Special Meeting, either in person or by proxy, we will have a quorum at the Special Meeting permitting the conduct of business at the Special Meeting. As of the Record Date, we had 15,534,829 shares of common stock outstanding and entitled to vote. Any shares represented by proxies that abstain from voting on a proposal will be counted as present for purposes of determining whether we have a quorum. If a broker, bank, custodian, nominee or other record holder of our common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular matter, the shares held by that record holder (referred to as “broker non-votes”) will also be counted as present in determining whether we have a quorum.

How do I vote?

If you are a stockholder of record, there are four ways to vote:

As permitted by Securities and Exchange Commission (“SEC”) rules, we provide our materials in connection with the Special Meeting pursuant to the full set delivery option. Under the full set delivery option, a company delivers all proxy materials to its stockholders. The approximate date on which the Proxy Statement and the Proxy Card are intended to be first sent or given to our stockholders is on or about November 2, 2020. This delivery can be by mail, or if a stockholder has previously agreed, by e-mail. In addition to delivering proxy materials to its stockholders, the Company must also post all proxy materials on a publicly accessible website and provide information to stockholders about how to access that website. Accordingly, you should have received proxy materials by mail or, if you previously agreed, by e-mail. These proxy materials include the Notice, this Proxy Statement and the Proxy Card. These materials are available free of charge on our website at www.railproxy.info.

If you vote by proxy, the individuals named on the Proxy Card as proxy holders will vote your shares in the manner you indicate. If you do not indicate your instructions, your shares will be voted:

If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Okapi Partners LLC, toll-free at (877) 869-0171.

Can I revoke my proxy or change my vote after I return my proxy card?

Yes. Even after you have submitted your proxy, you may revoke your proxy or change your vote at any time before the proxy is voted at the Special Meeting by delivering to our Vice President, Chief Financial Officer, Treasurer and Corporate Secretary a written notice of revocation or a properly submitted proxy bearing a later date, or by attending the Special Meeting and voting at the meeting. Attendance at the Special Meeting will not cause your previously granted proxy to be revoked unless you specifically so request or you vote at the Special Meeting.

What vote is required to approve each matter that comes before the Special Meeting?

The approval of the issuance of 23% of our outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance), as required by and in accordance with Nasdaq Listing Rules 5635(b) and 5635(d) for certain private issuances of more than 20% of our outstanding common stock requires the affirmative vote of a majority of the votes represented at the meeting in person or by proxy. Broker non-votes will not be counted for purposes of determining whether an item has received the requisite number of votes for approval. Abstentions and broker non-votes will have the effect of a vote against the issuance of 23% of our outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance), as required by and in accordance with Nasdaq Listing Rules 5635(b) and 5635(d) for certain private issuances of more than 20% of our outstanding common stock.

What will be the consequences if the proposal is not approved?

If the proposal to authorize the issuance of the common stock issuable upon the Warrantholder’s exercise of the Warrant is not approved, then the Warrant cannot be issued to the Warrantholder. In addition, because the issuance of the Warrant is a condition to the funding of the Term Loan under the Term Loan Credit Agreement, if the proposal is not approved then the Lender will not fund the Term Loan, which is critical to the Company’s ongoing manufacturing repositioning. In such event, the Company will need to seek alternative sources of financing to replace the term loan. There can be no assurance that any alternative sources of financing will be available to the Company at favorable rates and duration or at all. In this regard, before pursuing the contemplated transactions with the Lender and its affiliates, the Company engaged in a months-long process with outside advisors to advise it with respect to strategic alternatives and financing options. Based in part on the advice received and recommendations generated from this process, the Company has determined that the successful consummation of the transactions with the Lender and its affiliates (including the Term Loan and the issuance of the Warrant) is critical to the Company’s ability to execute its manufacturing and operational strategy as currently planned and is superior to all available alternatives for the Company and its stockholders.

What is the impact on my holdings of Company common stock if the Warrantholder or any of its affiliates exercises the Warrant?

If the proposal is approved, the Warrant Shares will be issued pursuant to the terms of the Warrant Agreement and the Warrant as summarized in this Proxy Statement at the time the Warrantholder chooses to exercise the Warrant. The issuance of common stock issuable upon exercise of the Warrant would result in an increase in the number of shares of the Company’s common stock outstanding and dilution of current equity ownership of the Company held by our existing stockholders. Such stockholders would have reduced voting power of the Company and have less ability to influence corporate decisions requiring stockholder approval. Dilution of equity interests would reduce such stockholders’ interests in the Company’s future earnings and could also cause prevailing market prices for our common stock to decline.

Because the timing and price may vary at which shares of Company common stock may be issued under the Warrant and because the number of shares to be issued is dependent upon number of shares of Company common stock then outstanding, the exact magnitude of the dilutive effect of the issuance of the Warrant Shares cannot be determined. However, the dilutive effect may be material to current stockholders of the Company.

Who will bear the costs of soliciting votes for the meeting?

Certain directors, officers and employees, who will not receive any additional compensation for such activities, may solicit proxies by personal interview, mail, telephone or electronic communication. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to our stockholders. We will bear all costs of solicitation, including a base fee of $10,000 and reasonable out-of-pocket expenses to be paid to the proxy solicitation firm of Okapi Partners LLC.

PROPOSAL TO BE VOTED ON