CREDIT INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of the 30th day of March, 1998, between
Harnischfeger Industries, Inc., a Delaware corporation ("HII"), and Morris
Material Handling, Inc., a Delaware corporation ("Morris"). Capitalized terms
used but not defined herein shall have the respective meanings set forth in the
Recapitalization Agreement entered into as of January 28, 1998, as amended, by
and among MHE Investments, Inc., a Delaware corporation, Harnischfeger
Corporation, a Delaware corporation ("HarnCo"), and certain other parties named
therein (the "Recapitalization Agreement").
WHEREAS, pursuant to the Recapitalization Agreement, HarnCo and
Investor will participate in a recapitalization of MMH Holdings, Inc., a
Delaware corporation ("MMH"), which is the parent company of Morris;
WHEREAS, MMH and its Subsidiaries owe financial and performance
obligations to third persons, the payment and performance of which are
guaranteed by HII and its Affiliates or for which HII and its Affiliates stand
as surety or are otherwise liable or contingently liable, or are secured by
letters of credit, surety bonds, indemnities or other arrangements with third
parties whereby HII and its Affiliates are obligated to repay amounts paid on
such arrangements by third parties; and
WHEREAS, HII and its Affiliates will agree to continue such third
party letters of credit, surety bonds and other arrangements existing on the
Closing Date, but subject to the obligation of Morris and its Subsidiaries to
repay any amounts paid by HII and its Affiliates under such arrangements.
NOW THEREFORE, for the purpose of evidencing the obligations of
Morris and its Subsidiaries in respect of the foregoing, and for establishing
the rights of the parties in respect thereof, the parties do hereby enter into
this Agreement.
Section 1. Definitions. As used in this Agreement:
"Annual Fees" shall have the meaning set forth in Section 4(a)
below.
"Credit" shall mean each letter of credit, performance bond, payment
bond, surety bond or other bond or instrument by, on behalf of or for the
benefit of the MHE Business, whereby HII or an Affiliate thereof is obligated to
pay, reimburse, or indemnify any non-Affiliated Person, including those
arrangements set forth on Schedule 4(p) of the Disclosure Schedule, and any
renewal, replacement, substitution or extension thereof; provided that Credits
shall not include any of the foregoing if and to the extent they cover (i)
Excluded Liabilities or (ii) businesses or operations other than the MHE
Business.
"Credit Provider" means every obligor on a Credit (which may include
HII or Affiliates thereof) and every successor and assign thereof.
"Credit Provider Agreement" means any agreement, contract,
promissory note or other instrument, arrangement or understanding whereby HII or
one of its Affiliates is obligated to pay, reimburse, or indemnify any Credit
Provider for any payments made on any Credit.
"Demand" shall mean any draft, authenticated electronic or
telegraphic transmission or written demand drawn or made.
"Event of Default" shall have the meaning set forth in Section 10
below.
"Face Amount of Credits" shall mean the sum of the original face
amount of the Credits (and any extensions or renewals thereof). For the purposes
of this Agreement, the face amount of all bonds opened with respect to a single
contract, including performance bonds, payment bonds and all other bonds
relating thereto, shall be deemed to be the sum of such bonds.
"HII" shall have the meaning set forth in the preface above.
"HII Credit Payment" shall mean any payment whatsoever made by HII
or an Affiliate thereof on or after the date of this Agreement under or in
connection with a Credit Provider Agreement.
"MMH" shall have the meaning set forth in the preface above.
"Morris" shall have the meaning set forth in the preface above.
"Obligation" shall mean (i) each Credit and (ii) each guaranty,
indemnity, direct obligation, contingent obligation or other arrangement
(including, without limitation, foreign exchange contracts), maintained by, on
behalf of or for the benefit of the MHE Business, whereby HII or an Affiliate
thereof is obligated to pay, reimburse, or indemnify any non-Affiliated Person,
and any renewal, replacement, substitution or extension thereof; provided that
Obligations shall not include any of the foregoing if and to the extent they
cover (x) Excluded Liabilities or (y) businesses or operations other than the
MHE Business.
"Outstanding Amount of Credits" shall mean: (a) the Face Amount of
Credits; minus (b) the sum of (i) the Face Amount of Credits with respect to
which all liability, potential or actual, has been released or otherwise
terminated by the Credit Provider and the obligee of such Credits; and (ii) that
portion of the Face Amount of Credits with respect to which all liability,
potential or actual, has been released or otherwise terminated by the Credit
Provider and the obligee of such Credits; and (iii) any amount by which the Face
Amount of any Credits has been automatically reduced in accordance with the
terms of such Credits; and (iv) any portion of the Face Amount of Credits which
Morris (or MMH) and HII have mutually agreed upon, which agreement is evidenced
by a writing executed by HII and Morris (or MMH) and which makes
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reference to this Section.
"Recapitalization Agreement" shall have the meaning set forth in the
preface above.
"Reduction Amount" shall have the meaning set forth in Section 4(b)
below.
"Reduction Dates" shall have the meaning set forth in Section 4(b)
below.
Section 2. Continuance of Obligations. On the terms and subject to
the provisions of this Agreement, HII and its Affiliates shall maintain in place
the Obligations in existence on the date hereof. HII and its Affiliates shall
have no obligation to extend, renew or increase any Obligation or create or
enter into any new or additional Obligation; provided that HII and its
Affiliates shall be required to renew Credits as and to the extent required by
customer contracts in effect on the date hereof (but in no event shall HII or
its Affiliates be required to increase the amount of any such Credit). Morris
and its Affiliates shall join HII and its Affiliates in taking all commercially
reasonable efforts to effect the release of all liability of HII and its
Affiliates in respect of the Obligations; provided that Morris shall not be
required to post or arrange substitute or back-up Credits, furnish collateral or
other credit support or make any payments (other than payments owed to third
parties in respect of such Obligations and payments owed to HII and its
Affiliates under this Agreement) in order to obtain such release.
Section 3. Reimbursement for HII Payments.
(a) Morris agrees that HII and its Affiliates may make any HII
Credit Payment demanded of it, as long as HII or an Affiliate thereof, as
applicable, believes that such demand complies with the terms of a Credit
Provider Agreement. HII or an Affiliate thereof, as applicable, shall give
Morris or MMH prompt written notice after any such HII Credit Payment.
Notwithstanding the foregoing, with respect to HII Credit Payments that are not
due on demand, HII or an Affiliate thereof (i) shall give notice to Morris or
MMH of such demand, (ii) shall give MMH or a Subsidiary thereof a reasonable
opportunity defend or contest such demand, and (iii) shall not make such HII
Credit Payment until it receives written notice from MMH or a Subsidiary thereof
authorizing it to do so; provided, however, that if such delay in making an HII
Credit Payment would cause a default under a Credit Provider Agreement, HII or
an Affiliate thereof may make such HII Credit Payment prior to such failure
becoming a default. Morris and its Subsidiaries shall reimburse HII on Demand
for the full amount of HII Credit Payments. Such reimbursement shall be made by
Morris or a Subsidiary thereof in immediately available funds on Demand in the
full amount of any such HII Credit Payment, plus interest accrued thereon from
the date of such HII Credit Payment to the date of reimbursement. Such
reimbursement shall be made within 10 days after Demand by HII or an Affiliate
thereof.
(b) In the event that HII or an Affiliate receives a demand
for payment on any Obligation (other than HII Credit Payments), HII or such
Affiliate (i) shall give notice to
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Morris or MMH of such demand, (ii) shall give MMH or an Affiliate a reasonable
opportunity to defend or contest such demand, and (iii) shall not make such
payment until either (x) it receives written notice from MMH or an Affiliate
thereof authorizing it to do so, or (y) MMH or an Affiliate fails to defend HII
against such demand (or fails to conduct such defense in good faith), or (z) a
judgment in entered against HII or an Affiliate in respect of such demand (and
MMH or an Affiliate thereof does not promptly obtain a stay of such judgment
pending appeal). Morris and its Subsidiaries shall reimburse HII on demand for
the full amount of any payment made by HII or an Affiliate in accordance with
this Section 3(b). Such reimbursement shall be made by Morris or a Subsidiary
thereof in immediately available funds in the full amount of any such HII
payment, plus interest accrued thereon from the date of such HII payment to the
date of reimbursement. Such reimbursement shall be made within 10 days after
Demand by HII or an Affiliate thereof.
Section 4. Continuation Fees and Expenses.
(a) On the Closing Date, Morris and its Subsidiaries shall pay
to HII an annual fee equal to 1% of the Outstanding Amount of Credits on the
Closing Date (pro rated for the period from the Closing Date through the end of
the 1998 calendar year). On or before January 15 of each calendar year
thereafter, Morris and its Subsidiaries shall pay to HII an annual fee equal to
1% of the Outstanding Amount of Credits on January 1 of such calendar year. The
annual fees payable pursuant to this Section 4(a) are referred to herein as
"Annual Fees".
(b) Promptly following the end of each quarter during each
calendar year, Morris (or MMH) and HII shall identify and mutually agree on the
amount of any reductions of the Outstanding Amount of Credits which occurred
during such quarter (the "Reduction Amount") and the dates on which such
reductions occurred (the "Reduction Dates"). Promptly following such
identification and agreement, HII shall refund to Morris a pro-rata portion of
the Annual Fee for each Reduction Amount (based on the period from the
applicable Reduction Date through the end of the year).
(c) In addition to the amounts payable under Sections 4(a) and
(b), Morris and its Subsidiaries shall pay to HII, from time to time, the full
amount paid by HII and its Affiliates to non-Affiliated Persons in respect of
fees, commissions, costs, premiums and expenses (including reasonable attorney's
fees) incurred by HII and its Affiliates after the Closing Date in connection
with maintaining the Obligations.
Section 5. Undertakings of Affiliates. Morris shall cause each
Subsidiary of Morris to perform the obligations of such Subsidiary pursuant to,
and to comply with all covenants and agreements contained in, this Agreement.
HII shall cause each Affiliate of HII to perform the obligations of such
Affiliate pursuant to, and to comply with all covenants and agreements contained
in, this Agreement.
Section 6. Unconditional Obligations of Morris and its Subsidiaries.
Morris and its Subsidiaries' obligations under this Agreement shall be absolute,
unconditional, and
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irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under all circumstances whatsoever, notwithstanding (a) any lack
of validity or enforceability of any Obligation or any agreement or document
relating to any Obligation, (b) any amendment or waiver of, or any consent to or
departure from, all or any of the documents and agreements in connection with
any Obligation, (c) the existence of any claim, set-off, defense or other right
to which MMH or a Subsidiary thereof may have at any time against the
beneficiary or transferee of any Obligation, (d) any breach of contract or other
dispute between MMH or a Subsidiary thereof, HII or an Affiliate thereof, any
Credit Provider, the beneficiary or transferee of any Obligation or any other
person or entity, whether or not related to this Agreement or any Obligation, or
(e) any delay, extension of time, renewal, compromise or other indulgence
granted or agreed to by HII or an Affiliate thereof with or without notice to or
approval by MMH or a Subsidiary thereof with respect to the obligations of MMH
or a Subsidiary thereof to HII or an Affiliate thereof under this Agreement.
Section 7. No Liability for Certain Acts. Neither HII nor any of its
Affiliates assume liability or responsibility for any of the following: (a) any
acts or omissions of any beneficiary or transferee of any Obligation or of any
Credit Provider, or any person purporting to act on behalf of the foregoing, (b)
the form, validity, sufficiency, correctness, genuineness or legal effect of any
demand, instrument, draft, document, certificate or other writing given to HII
or an Affiliate thereof in connection with any Obligation or Credit Provider
Agreement, or of any signatures or endorsements thereon, (c) any payment by HII
or its Affiliates that does not comply with any Obligation or any Credit
Provider Agreement, except where such HII Payment arises solely from the gross
negligence, wilful misconduct or breach of this Agreement by HII or an Affiliate
thereof, (d) the failure of any Credit Provider or of any beneficiary or
transferee of any Obligation to meet any obligations owed to MMH or its
Subsidiaries, (e) any act, omission, error, breach, negligence, gross negligence
or misconduct of any Credit Provider or any beneficiary or transferee of any
Obligation, (f) any errors, inaccuracies, omissions, interruptions or delays in
transmission or delivery of any messages, directions or correspondence by mail,
cable, telegraph, wireless or otherwise, whether or not in cipher. The
occurrence of one or more of the contingencies referred to in this Section shall
not affect, impair or prevent the vesting of any of HII or any of its
Affiliates' rights or powers under this Agreement or the obligations of Morris
and its Subsidiaries to reimburse HII Payments under this Agreement, except to
the extent such occurrence is due to HII or an Affiliate's failure to comply
with Section 3 hereof.
Section 8. Reimbursement for Certain Expenses. Except in the case of
HII or any of its Affiliates' gross negligence, wilful misconduct or breach of
this Agreement, Morris and its Subsidiaries shall reimburse and indemnify HII
and its Affiliates on Demand for any damages, losses, liabilities, claims,
penalties, judgments, costs and expenses paid, suffered or incurred by HII or
any of its Affiliates on or after the date of this Agreement, however caused,
including but not limited to, attorneys' fees and legal expenses, arising out of
or in connection with (a) the Obligations, or any demands made by beneficiaries
or any transferees of a Obligation or any Credit Provider, (b) the collection of
any amounts owed to HII or its Affiliates by Morris or a Subsidiary thereof
under this Agreement, any Credit Provider Agreement or any Obligation, (c) the
protection, exercise or enforcement of any of HII or any of its Affiliates'
rights and
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remedies under this Agreement, any Credit Provider Agreement or any Obligation,
or (d) any court orders, injunctions, decrees or other procedures restraining or
seeking to restrain HII or an Affiliate thereof from paying any amount under a
Obligation or a Credit Provider Agreement.
Section 9. Limitation of Liability. Notwithstanding any other
provision of this Agreement, in no event shall HII or any of its Affiliates be
liable, regardless of whether any claim is based on contract or tort, for any
special, consequential, indirect or incidental damages, including, but not
limited to, lost profits, arising out of or in connection with any action taken
by HII or any of its Affiliates in connection with this Agreement, any Credit
Provider Agreement or any Obligation.
Section 10. Event of Default. Morris agrees that each of the
following shall constitute an "Event of Default" under this Agreement: (a) any
acceleration of amounts owing under any promissory note, credit agreement, or
other evidence of indebtedness owed by MMH or a Subsidiary thereof to any other
Person (excluding HII or its Affiliates) having a principal amount in excess of
$10,000,000; (b) MMH or a Subsidiary thereof suspends the transaction of its
usual business, or dissolves or liquidates, or is generally not paying its debts
as they become due or becomes insolvent or makes a general assignment for the
benefit of creditor; or (c) a petition is filed by or against MMH or any
Subsidiary thereof seeking the liquidation or reorganization of MMH or such
Subsidiary under the United States Bankruptcy Code or any similar provision of
state, federal or foreign law or a custodian or receiver is appointed for any of
the properties or assets of MMH or any Subsidiary thereof, or any governmental
authority or any court takes possession of any substantial part of the property
of MMH or any material Subsidiary thereof or assumes control over the affairs of
MMH or any material Subsidiary thereof. Upon the occurrence of any Event of
Default, Morris or a Subsidiary thereof shall, within thirty (30) days following
written notice from HII, post a bank letter of credit in favor of HII and its
Affiliates in an amount equal to the Outstanding Amount of Credits at such time.
Such letter of credit shall give HII the unconditional right to draw in order to
fulfill the reimbursement obligations of Morris and its Subsidiaries hereunder
(but only at the time and to the extent HII or its Affiliates make payment on
any Obligation). The posting of such letter of credit shall not relieve Morris
and its Subsidiaries of their obligations hereunder.
Section 11. Remedies. HII and its Affiliates shall be entitled to
pursue any and all remedies available at law or in equity in connection with any
failure by Morris or its Subsidiaries to make any payment when due under this
Agreement or any other breach of the terms of this Agreement (regardless of
whether or not the matter in question constitutes an Event of Default).
Section 12. Set-Off. In addition to any rights now or hereafter
granted under applicable law, and not by way of limitation of any such rights,
upon the occurrence of any Event of Default, HII and its Affiliates are hereby
authorized by Morris at any time or from time to time, without notice thereto,
or to any other person, any such notice being hereby waived by Morris, to
set-off and to appropriate and to apply any and all amounts at any time held or
owing by HII or its Affiliates to or for the credit of MMH or any Subsidiary
thereof against and on account of the
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obligations and liabilities of Morris and its Subsidiaries under this Agreement.
Section 13. Waiver. No delay, extension of time, renewal,
compromise, or other indulgence which may occur or be granted by HII or any of
its Affiliates under this Agreement from time to time shall impair HII or any of
its Affiliates' rights or powers under this Agreement. Neither HII nor any of
its Affiliates shall be deemed to have waived any of its rights under this
Agreement, unless HII shall have signed such a waiver in writing. No such
written waiver shall be effective as to any transactions or events of default
occurring subsequent to the date of such waiver, unless expressly so provided
therein.
Section 14. Modification of Credits and Credit Provider Agreements.
Neither MMH nor any Subsidiary thereof shall increase the amount of any Credit,
extend any expiration date of any Credit, extend the period of time for
presentation of documents or demands under any Credit, agree to any substitution
of any Credit, or agree to any creation, amendment, supplement, waiver or other
modification of any Credit Provider Agreement or any creation, amendment,
supplement, waiver or other modification of any Credit, without the prior
written agreement of HII.
Section 15. Information Requirements. MMH and each of its
Subsidiaries shall deliver to HII reasonably promptly after receipt, a copy of
each demand, or other communication of any nature from a Credit Provider or the
beneficiary or transferee of any Credit with respect to the Credit, or any
person acting or purporting to act on behalf of any such person.
Section 16. Severability. Any provision of this Agreement or any
Obligation which is prohibited or unenforceable in any jurisdiction, shall be,
only as to such jurisdiction, ineffective to the extent of such prohibition or
unenforceability, but all the remaining provisions of this Agreement or any
Obligation shall remain valid.
Section 17. Succession and Assignment. The obligations of Morris and
its Subsidiaries hereunder shall bind the successors and assigns of Morris and
its Subsidiaries, and all rights, benefits, and privileges conferred on HII and
its Affiliates by this Agreement shall be and hereby are extended to, conferred
upon, and may be enforced by, the successors and assigns of HII and its
Affiliates.
Section 18. Submission to Jurisdiction. Each of the parties consents to
the exclusive jurisdiction of the federal courts of the Eastern District of
Wisconsin for any legal action, suit, or proceeding arising out of or in
connection with this Agreement, and agree that any such action, suit, or
proceeding may be brought only in such courts. If such forum is not available,
each of the parties consents to the exclusive jurisdiction of the Milwaukee
County Circuit Court for any such action, suit or proceeding. Each of the
parties further waives any objection to the laying of venue for any such suit,
action, or proceeding in such courts. Each party agrees to accept and
acknowledge service of any and all process that may be served in any suit,
action, or proceeding. Each party agrees that any service of process upon it
mailed by registered or certified mail, return receipt requested to such party
at the address provided in Section 22 below shall be deemed in
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every respect effective service of process upon such party in any such suit,
action, or proceeding. Each party agrees to waive any right it might have to a
trial by jury in any such suit, action or proceeding.
Section 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 20. Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party. The word "including" shall mean including without limitation.
Section 21. Joint and Several Obligations. Morris agrees that this
Agreement constitutes the joint and several agreement and obligation of Morris
and its Subsidiaries, and that HII would not be willing to enter into this
Agreement absent such joint and several liability. Morris shall cause its
Affiliates to honor and comply with the terms and conditions of this Agreement.
Section 22. Notice. Any notice required or permitted hereunder shall
be given in writing and shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to HII: with a copy to:
Harnischfeger Industries, Inc. Kirkland & Ellis
3600 South Lake Drive 200 East Randolph Drive
St. Francis, WI 53235-3716 Chicago, IL 60601
Attention: James A. Chokey and Attention: Keith S. Crow
John Spies Telephone No.: (312) 861-2000
Telephone No.: (414) 486-6400 Facsimile No.: (312) 861-2200
Facsimile No.: (414) 486-6717
If to Morris: and with a copy to:
Morris Material Handling, Inc. Akin, Gump Strauss, Hauer & Feld, L.L.P.
315 West Forest Hill Avenue Suite 400
Oak Creek, WI 53154 1333 New Hampshire Avenue, N.W.
Attention: Martin L. Ditkof Washington, D.C. 20036
Telephone No.: (414) 764-8593 Attention: Russell W. Parks, Jr.
Facsimile No.: (414) 764-8594 Telephone No.: (202) 887-4000
Facsimile No.: (202) 887-4288
or at such other address as such party may designate by ten days advance written
notice to the
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other party.
Section 23. Entire Agreement. This Agreement, the Recapitalization
Agreement and the other Transaction Agreements constitute the entire agreement
of HII and its Subsidiaries, on the one hand, and Morris, MMH and their
Subsidiaries, on the other hand, with respect to the Obligations, and no oral
statements or prior written statements not contained in this Agreement shall
have any force and effect.
Section 24. No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties, Affiliates
of HII, Subsidiaries of Morris and their respective successors and permitted
assigns.
Section 25. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 26. Headings. The Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 27. Interest. Interest shall accrue and be payable on
overdue amounts under this Agreement at a rate per annum equal to the lesser of
20% per annum or the highest rate allowed by law.
Section 28. Termination. The obligations of Morris and its
Subsidiaries under this Agreement will terminate when HII and its Affiliates no
longer have any obligations or liability, contingent or otherwise, under any
Obligation.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
agreement as of the date first above written.
HARNISCHFEGER INDUSTRIES, INC.
By: /s/ Eric Fonstad
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Its: Assistant Secretary
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MORRIS MATERIAL HANDLING, INC.
By: /s/ David D. Smith
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Its: Vice President
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