The Company’s incentive compensation plans, titled “The 2005 Long Term Incentive Plan” (as restated to incorporate all amendments, the “2005 Plan”) and “The FreightCar America, Inc. 2018 Long Term Incentive Plan (the “2018 Plan” and, collectively, the “Prior LTIPs”), were terminated and replaced by the Company's new incentive compensation plan, titled “The FreightCar America, Inc. 2022 Long Term Incentive Plan” (the “2022 Plan” or “Incentive Plan”). The 2022 Plan was approved by the Company’s Board of Directors and ratified by the stockholders on May 12, 2022. Awards previously granted under the Prior LTIPs were unaffected by the adoption of the 2022 Plan, and they remain outstanding under the terms pursuant to which they were previously granted. The Incentive Plan provides for the grant to eligible persons of stock options, share appreciation rights (“SAR”), restricted shares, restricted share units (“RSU”), performance shares, performance units, dividend equivalents and other share-based awards, referred to collectively as the awards. Time-vested stock option awards generally vest based on one to three years of service and have 10‑year contractual terms. Share awards generally vest over one to three years. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the Incentive Plans). The Company accounts for forfeitures of stock‑based awards as incurred. The 2022 Plan will terminate as to future awards on May 12, 2032. Upon approval of the 2022 Plan, 880,000 shares of common stock were registered and made available for issuance, together with 494,977 shares of common stock that were available under the Prior LTIPs on May 12, 2022. Under the 2022 Plan, 1,374,977 shares of common stock have been reserved for issuance (from either authorized but unissued shares or treasury shares), of which 1,285,806 were available for issuance at December 31, 2022.

The Company recognizes stock-based compensation expense for time-vested 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 time-vested stock option 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 time-vested stock options because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for time-vested stock options. 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.

Grant date fair values of time-vested stock option awards were estimated using the Black-Scholes option valuation model with the following assumptions:


				Expected	Risk Free	Grant Date
			Expected	Dividend	Interest	Fair Value
Grant Year	Grant Date	Expected Life	Volatility	Yield	Rate	Per Award

2022	1/17/2022	6 years	74.32%	0.00%	1.60%	$	2.63
2022	2/4/2022	6 years	74.27%	0.00%	1.81%	$	2.30
2022	3/21/2022	6 years	74.45%	0.00%	2.33%	$	2.90
2022	4/19/2022	6 years	75.31%	0.00%	2.91%	$	3.87
2022	7/11/2022	6 years	77.95%	0.00%	3.04%	$	2.41
2022	7/18/2022	6 years	77.92%	0.00%	3.04%	$	2.51
2022	8/29/2022	6 years	78.17%	0.00%	3.24%	$	3.10
2022	9/6/2022	6 years	78.19%	0.00%	3.41%	$	2.81
2022	12/1/2022	6 years	78.20%	0.00%	3.65%	$	2.60

A summary of the Company’s time-vested stock options activity and related information at December 31, 2022 and 2021, and changes during the years then ended, is presented below:


				December 31,
	2022					2021
				Weighted-					Weighted-
				Average					Average
				Exercise					Exercise
	Options			Price		Options			Price
	Outstanding			(per share)		Outstanding			(per share)
Outstanding at the beginning of the year		733,967		$	5.66		211,361		$	11.68
Granted		513,518			3.95		608,485			4.04
Exercised		(102,850	)		3.98		-			-
Forfeited or expired		(255,821	)		4.76		(85,879	)		9.02
Outstanding at the end of the year		888,814		$	5.12		733,967		$	5.66

Exercisable at the end of the year		227,056		$	8.39		111,516		$	13.86

A summary of the Company’s time vested stock options outstanding as of December 31, 2022 is presented below:


			Weighted-
			Average		Weighted-
			Remaining		Average
			Contractual		Exercise		Aggregate
	Options		Term		Price		Intrinsic
	Outstanding		(in years)		(per share)		Value
Options outstanding		888,814		8.3	$	5.12	$	-
Vested or expected to vest		888,814		8.3	$	5.12	$	-
Options exercisable		227,056		6.5	$	8.39	$	-

The Company issued 5,292 shares of common stock as a result of cashless exercise of 102,850 time-vested stock options during the year ended December 31, 2022. There were no time-vested stock options exercised during 2021. As of December 31, 2022, there was

$1,178 of total unrecognized compensation expense related to time-vested stock options, which will be recognized over the average remaining requisite service period of 23 months.

During 2020, the Company granted 1,164,464 cash settled stock appreciation rights to certain employees. Each stock appreciation right represents the right to receive a payment measured by the increase in the fair market value of one share of the Company’s stock from the date of grant of the stock appreciation right to the date of exercise of the stock appreciation right. The cash settled stock appreciation rights vest ratably over three years and have a contractual life of 10 years. Cash settled stock appreciation rights are classified as liabilities. The Company measures the fair value of unvested cash settled stock appreciation rights using the Black-Scholes option valuation model and remeasures the fair value of the award each reporting period until the award is vested. Once vested the Company immediately recognizes compensation cost for any changes in fair value of cash settled stock appreciation rights until settlement. Fair value of vested cash settled stock appreciation rights represents the fair market value of one share of the Company’s stock on the measurement date less the exercise price per share. Compensation cost for cash settled stock appreciation rights is trued up each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.

During 2021, the Company granted 1,735,500 cash settled stock appreciation rights to certain employees. Each of the 2021 cash settled stock appreciation rights allows the holder to receive, upon exercise, and subject to the vesting restrictions, a distribution in cash equal to the excess of the fair market value of a share of the Company’s stock on the date of exercise over the exercise price. The 2021 cash settled stock appreciation rights vest ratably over three years and have a contractual life of 10 years. Vesting of the 2021 cash settled stock appreciation rights is contingent upon the achievement of a thirty-day trailing average fair market value of a share of the Company’s common stock of 133.3% ($3.17) or more of the exercise price per share ($2.38). When vesting of an award of stock-based compensation is dependent upon the attainment of a target stock price, the award is considered to be subject to a market condition.

The 2021 cash settled stock appreciation rights are classified as liabilities. Because vesting of the 2021 cash settled stock appreciation rights included a market condition, the grant date fair market value of the 2021 cash settled stock appreciation rights of $1.74 was calculated using a Monte Carlo simulation model. During 2021, the market condition for the 2021 cash settled stock appreciation rights was met. Thereafter the Company measures the fair value of the 2021 cash settled stock appreciation rights using the Black-Scholes option valuation model and remeasures the fair value of the award each reporting period until the award is vested. Once vested, the Company immediately recognizes compensation cost for any changes in fair value of the 2021 cash settled stock appreciation rights until settlement. Fair value of vested 2021 cash settled stock appreciation rights represents the fair market value of one share of the Company’s stock on the measurement date less the exercise price per share. Compensation cost for the 2021 cash settled stock appreciation rights is trued up each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.

The estimated fair value of the cash settled stock appreciation rights as of December 31, 2022 was $3,021. Stock-based compensation for cash settled stock appreciation rights was $632 and $2,145 for the year ended December 31, 2022 and 2021, respectively.

The fair value of cash settled stock appreciation rights as of December 31, 2022 was estimated using the Black-Scholes option valuation model with the following assumptions:


				Expected	Risk Free
			Expected	Dividend	Interest	Fair Value
Grant Year	Grant Date	Expected Life	Volatility	Yield	Rate	Per Award

2020	1/24/2020	3.6 years	94.35%	0.00%	4.19%	$	2.44
2020	9/14/2020	4.2 years	89.86%	0.00%	4.10%	$	2.38
2020	11/30/2020	4.4 years	87.88%	0.00%	4.07%	$	2.28
2021	1/5/2021	4.3 years	89.36%	0.00%	4.09%	$	2.31

A summary of the Company’s cash settled stock appreciation rights activity and related information at December 31, 2022 and 2021 and changes during the year is presented below:


				December 31,
	2022					2021
				Weighted-					Weighted-
				Average					Average
				Exercise					Exercise
	SARS			Price		SARS			Price
	Outstanding			(per share)		Outstanding			(per share)
Outstanding at the beginning of the year		2,163,339		$	2.20		853,967		$	1.69
Granted		-			-		1,735,500			2.38
Exercised		(11,592	)		2.16		(42,652	)		1.64
Forfeited or expired		(19,634	)		2.31		(383,476	)		1.92
Outstanding at the end of the year		2,132,113		$	2.20		2,163,339		$	2.20

Exercisable at the end of the year		909,313		$	2.10		192,387		$	1.71

A summary of the Company’s cash settled stock appreciation rights outstanding as of December 31, 2022 is presented below:


			Weighted-
			Average		Weighted-
			Remaining		Average
			Contractual		Exercise		Aggregate
	SARS		Term		Price		Intrinsic
	Outstanding		(in years)		(per share)		Value
SARS outstanding		2,132,113		7.8	$	2.20	$	2,124,866
Vested or expected to vest		2,132,113		7.8	$	2.20	$	2,124,866
SARS exercisable		909,313		7.7	$	2.10	$	997,916

A summary of the Company’s nonvested restricted shares as of December 31, 2022 and 2021, and changes during the years then ended is presented below:



				December 31,
	2022					2021

				Weighted-					Weighted-
				Average					Average
				Grant Date					Grant Date
				Fair Value					Fair Value
	Shares			(per share)		Shares			(per share)
Nonvested at the beginning of the year		491,239		$	3.50		849,723		$	2.86
Granted		386,908			3.93		213,465			4.23
Vested		(113,886	)		6.16		(311,128	)		2.26
Forfeited		(74,399	)		4.44		(260,821	)		3.49
Nonvested at the end of the year		689,862		$	3.20		491,239		$	3.50
Expected to vest		689,862		$	3.20		491,239		$	3.50

The fair value of stock awards vested during the years ended December 31, 2022 and 2021, was $427 and $1,942, respectively, based on the value at vesting date. As of December 31, 2022, there was $1,065 of unrecognized compensation expense related to nonvested restricted stock awards, which will be recognized over the average remaining requisite service period of 20 months.

Stock-based compensation expense of $2,106 and $2,977 is included within selling, general and administrative expense for the years ended December 31, 2022 and 2021, respectively.