EMPLOYMENT AGREEMENT FOR JOHN E. CARROLL, JR

Exhibit 10.1

EMPLOYMENT AGREEMENT FOR JOHN E. CARROLL, JR.

THIS AGREEMENT (the “Agreement”) is made effective as of December 17, 2004 (the “Effective Date”), between FreightCar America, Inc. (formerly known as JAC Holdings International, Inc.), a Delaware corporation (the “Company”), and John E. Carroll, Jr. (the “Executive”).

WHEREAS, the Company and its subsidiaries are engaged in the business of designing, manufacturing and selling railroad freight cars (such business hereinafter referred to as the “Business”); and

WHEREAS, the Executive, as a result of training, expertise and personal application over the years, has acquired and will continue to acquire considerable and unique expertise and knowledge which are of substantial value to the Company in the conduct, management and operation of its Business; and

WHEREAS, the Board of Directors of the Company (the “Board”) considers it desirable to prepare for and make an initial public offering of the common stock of the Company (an “IPO”); and

WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to the successful completion of an IPO and to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; and

WHEREAS, the parties hereto desire to substitute and replace this Agreement for the Employment Agreement between the parties hereto dated June 2, 2002 (the “Prior Employment Agreement”);

NOW THEREFORE, in consideration of the continued employment of the Executive by the Company and the benefits to be derived by the Executive hereunder, and of the Executive’s agreement to continued employment by the Company as provided herein, the parties mutually agree as follows:

1. Employment; Prior Employment Agreement. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue to serve the Company, on the terms and conditions set forth herein. On the Effective Date, this Agreement shall replace the Prior Employment Agreement.

2. Employment, Position and Duties. The Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company as its President and Chief Executive Officer and as an officer of such of the Company’s subsidiaries (if any) as shall be reasonably requested by the Company, and the Executive shall have such responsibilities, duties and authority as are customarily associated with such offices. The Executive shall report to the Company’s Board of Directors. The terms of Executive’s employment shall be as set forth herein. The Executive shall devote substantially all of his time to the performance of his duties

hereunder. The Executive shall devote his best efforts to the successful completion of the IPO, including participation in the “road show” leading up to the IPO.

3. Term. The employment of the Executive by the Company pursuant to this Agreement will commence as of December 17, 2004 (the “Effective Date”) and shall terminate on December 31, 2006; provided, however, that this Agreement, shall remain in effect from year to year thereafter unless, not less than ninety (90) days prior to the then termination of the term of this Agreement, either the Executive or the Company shall deliver to the other written notice of his or its intention not to continue in effect this Agreement, in which case this Agreement shall terminate as of December 31 of the year in which such notice is given (the “Term”).

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

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

(a) Salary. Commencing on the execution of this Agreement, the Company shall pay to the Executive an annual base salary at the rate of $550,000 per year, such salary to be paid in substantially equal installments no less frequently than monthly. Such annual base salary may be increased from time to time at the discretion of the Boards of Directors of the Company.

(b) Bonus. For the period from the Effective Date through the date of the termination of this Agreement, the Executive shall receive a bonus (the “Bonus”) equal to one percent (1%) of the Company’s operating earnings before taxes, interest, depreciation and amortization (“EBITDA”) for each calendar year ending in such period. The Bonus shall be payable within ninety (90) days following the end of each calendar year during the Term or the date of termination of this Agreement, as applicable, each such payment to be made with respect to the period (each a “Measuring Period”) (i) from the beginning of the applicable calendar year, to (ii) the earlier of (A) the end of such calendar year during the Term or (B) the date of termination of this Agreement. The calculation of any portion of the Bonus payable by the Company hereunder shall be based upon the EBITDA of Holdings earned during the applicable Measuring Period.

(c) Retention Bonus. The Company shall pay the Executive a lump sum cash bonus of (i) $250,000 if the Executive remains continuously employed with the Company until April 1, 2005, and if the Company is listed on the NASDAQ National Market System on that date, and (ii) $250,000 if the Executive satisfies the terms of clause (i) and remains continuously employed with the Company until the earlier of October 1, 2005 or completion of a follow-on offering of the Company’s common stock; provided, however, that if a Change in Control (as defined below) occurs before the earlier of October 1, 2005 or completion of a follow-on offering of the Company’s common stock, the

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Company will pay the Executive the $250,000 lump sum cash bonus under this clause (ii) upon the Change in Control.

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

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

(f) Vacations. During his employment hereunder, the Executive shall be entitled to paid vacation in each calendar year, determined in accordance with the Company’s vacation policy. The Executive shall also be entitled to all paid holidays and personal days given by the Company to its executive employees.

(g) Car. During his employment hereunder, the Company shall provide for the Executive a car for his use in Johnstown, PA consistent with the type of car provided to other executives of the Company.

(h) Country Club. During his employment hereunder, the Company shall pay membership and basic dues for the Executive at the Sunnehanna Country Club.

Any payments or benefits payable to the Executive under this Section 5 in respect of any year during which the Executive is employed by the Company for less than the entire such year shall, unless otherwise provided herein (including without limitation the Bonus payable to the Executive hereunder) or in the applicable plan or arrangement, be prorated in accordance with the number of days in such year during which he is so employed.

6. Termination. The Company may terminate the Executive’s employment hereunder under the following circumstances:

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

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(b) Disability. If, in the written opinion of a qualified physician selected by the Company, the Executive shall become unable to perform his duties hereunder with reasonable accommodation due to physical or mental illness that continues for three months, the Company may terminate the Executive’s employment hereunder.

(c) Cause. The Company may terminate the Executive’s employment hereunder for Cause. For purposes of this Agreement, the Company shall have “Cause” to terminate the Executive’s employment hereunder upon (x) the willful and continuous neglect or refusal to perform the Executive’s duties or responsibilities, or the willful taking of actions (or willful failures to take actions) which materially harm the Company in any manner or impair the Executive’s ability to perform his duties or responsibilities which in each case continues after being brought to the attention of the Executive (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness); (y) any act by the Executive which constitutes gross negligence or willful misconduct in the performance of his duties hereunder, or the arrest, indictment and/or conviction of the Executive for any felony or a misdemeanor involving property of the Company or (z) a material breach by the Executive of his obligations hereunder.

7. Compensation Upon Termination, Death or During Disability.

(a) Death. If the Executive’s employment is terminated by his death, the Company shall within ninety days following the date of the Executive’s death, (i) pay any salary due to the Executive through the date of his death and any unreimbursed expenses and (ii) pay to the Executive’s legal representative any death benefits provided under any Benefit Plan in accordance with their terms, and the Company shall, thereafter, have no further obligations to the Executive under this Agreement.

(b) Disability. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, the Executive shall continue to receive his full base salary and other benefits at the rate then in effect for such period (offset by any payments to the Executive received pursuant to disability benefit plans maintained by the Company) until his employment is terminated, and upon such termination, and the Company shall, thereafter, have no further obligations to the Executive under this Agreement.

(c) Cause or By Executive Other than for Good Reason. If the Executive’s employment is terminated by the Company for Cause or by the Executive for other than Good Reason, the Company shall pay the Executive his salary through the date of termination and any unreimbursed expenses, and the Company shall, thereafter, have