EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") by and between Morris Material
Handling, Inc., a Delaware corporation (the "Company"), and Michael S. Erwin
("Executive").
W I T N E S S E T H:
WHEREAS, the Executive is a valued and important employee of the Company,
and possesses significant information about its strategic plans and other trade
secrets; and
WHEREAS, the Executive has been offered the opportunity to purchase units
of Niles, LLC, in connection with the recapitalization contemplated by that
certain Recapitalization Agreement, among Harnischfeger Corporation, the Sellers
named therein and MHE Investments, Inc., dated January 28, 1998 (the
"Recapitalization Agreement"), and to acquire options to purchase additional
units of MMH Holdings, Inc., ("MMH") the owner of all of the stock of the
Company; and
WHEREAS, the Executive desires to purchase such units and to acquire such
options, and understands that the offer to purchase units and acquire options is
contingent upon the execution of this Agreement; and
WHEREAS, the Company wishes to secure the services of Executive after the
Recapitalization, and Executive wishes to furnish such services to the Company,
pursuant to the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, the Company and Executive agree as follows:
ARTICLE I: EMPLOYMENT, TERM AND DUTIES
Section 1.1. Condition Precedent. This Agreement shall take effect
immediately upon Harnischfeger Corporation or one of its Affiliates (as that
term is defined in the Recapitalization Agreement) selling 50 percent or more of
the outstanding shares of MMH to any party which is an affiliate of Chartwell
Investments Inc., (the "Effective Date"). Should Harnischfeger Corporation or
one of its Affiliates not sell 50 percent or more of the outstanding shares of
the Company to a party which is an affiliate of Chartwell Investments Inc. prior
to July 31, 1998, then this Agreement becomes void ab initio.
Section 1.2. Term. Unless terminated sooner pursuant to the occurrence of
an "Employment Related Event" or a "Termination Event" (both terms as defined in
Article III) and subject to the other terms and provisions of this Agreement,
the Company agrees to employ Executive and Executive agrees to be employed by
the Company, for the period beginning as of the Effective Date and continuing
until the third anniversary of the Effective Date. The Agreement will be
extended for one year on the third anniversary of the Effective Date and on each
anniversary thereafter unless either party gives 60 days' written notice of
failure to renew or termination prior to any such anniversary date; provided,
however, that any such non-renewal by the Company shall void the Executive's
postemployment obligations contained in the Non-Competition Agreement referred
to in Article V of this Agreement. The Executive may voluntarily resign
employment at any time upon providing 60 days' written notice to the Company's
Board of Directors; provided, however, that the obligations of the Executive
under Article IV (Confidential Information) hereof, and the post-employment
obligations of Executive
contained in the separate Non-Competition Agreement referred to in Article V
hereof shall survive such resignation. The Executive's entitlement to any
severance benefits or payments following termination of employment shall be
governed solely by Article III of this Agreement, and the Executive shall have
no entitlement to any such benefits or payments other than as set forth in
Article III of this Agreement, or as required to be provided to the Executive by
operation of law.
Section 1.3 Title. From and after the Effective Date, the Company shall
employ Executive in the position of President and Chief Executive Officer, or
such other title as mutually agreed upon by the Company and the Executive.
Section 1.4 Duties. Executive agrees to serve in the position referred to
in Section 1.3 and to perform diligently and to the best of his abilities the
duties and services pertaining to such office, as well as such additional duties
and services appropriate to such office as the Board of Directors of the Company
("Board of Directors") may reasonably assign to Executive from time to time.
Section 1.5 Business Time and Efforts. Executive agrees, during the period
of employment by the Company, to devote all of his business time, energy and
best efforts to the business and affairs of the Company and its affiliates and
not to engage, directly or indirectly, in any other business or businesses,
whether or not similar to that of the Company, except with the prior written
consent of the Board of Directors.
Section 1.6 Board Seat. By its execution of this Agreement, MHE
Investments, Inc. agrees to take all necessary actions to cause Michael Erwin to
be elected and maintained as a member of the Board of Directors of the Company
and the board of directors of MMH for so long as the Executive is employed
pursuant to this Agreement. In addition, it is agreed that Michael Erwin shall
be entitled from time to time to recommend one other member of management to
serve as a director of the Company and as a director of MMH, subject to the
approval of their respective boards.
ARTICLE II: COMPENSATION AND BENEFITS
Section 2.1 Base Salary. During the term of this Agreement, Executive
shall receive an annual base salary of $180,000, subject to annual review by the
Board of Directors.
Section 2.2 Bonus. The Company and Executive shall annually establish an
objective, performance-based bonus plan for Executive. The percentages, targets,
and other terms of the plan will be as mutually agreed upon between the
Compensation Committee of the Board of Directors of the Company and the Chief
Executive Officer of the Company. It is anticipated that, for fiscal year 1998,
the bonus plan will be based on Economic Value Added, while for fiscal 1999 and
after the plan will be based on EBITDA. Bonuses will be earned over the
Company's fiscal year ending October 31, and shall be paid by the Company to the
Executive as soon as practicable in accordance with the Company's bonus payment
procedures.
Section 2.3 Equity.
(a) Equity Purchase. Executive shall be eligible to purchase
an initial amount of Equity in Niles LLC for payment as agreed upon
between Niles LLC and the Executive.
(b) Equity Options. Executive shall be eligible to receive an
initial option
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grant of 620 A Options, 620 B Options and 750 C Options pursuant to the
terms of Schedule A, attached hereto.
Section 2.4 Other Perquisites. During his employment hereunder, Executive
shall be afforded the following incidental benefits:
(a) Expenses. Executive shall be entitled to be reimbursed for
all customary and reasonable expenses incurred by Executive in the
performance of his duties and responsibilities, subject to such reasonable
substantiation and documentation as may be required by the Company in
accordance with its normal policies.
(b) Other Company Benefits. Subject to the terms of each plan,
program or arrangement as the case may be, Executive and, to the extent
applicable, Executive's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be, available to similarly situated employees of the Company generally.
The Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to employees of the Company generally.
Section 2.5 Withholding of Taxes. The Company may withhold from any
benefits or compensation payable under this Agreement all federal, state, city
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
ARTICLE III: TERMINATION OF EMPLOYMENT
Section 3.1 Employment-Related Event. An "Employment-Related Event" means
any of the following: (a) Executive's resignation for Good Reason (as defined
below), (b) Executive's termination by the Company without Cause (as defined
below) or (c) Executive's death or permanent disability (as defined below).
Should an Employment Related Event occur, the Executive shall only be entitled
to the benefits and payments set forth below, and Executive specifically agrees
to sign a Release as drafted by the Company under which the Executive shall
agree to waive and release all other rights and entitlement, whether legal,
contractual or equitable (including waiving and releasing any claims alleging
discrimination and/or harassment to the maximum extent allowed by law) in order
to be entitled to such benefits and payments.
(a) Good Reason. The Executive may terminate his employment
under this Agreement for Good Reason, after having given the Company
written notice specifying the reason the Executive is terminating his
employment and having given the Company thirty days after such notice
within which to cure the condition specified. "Good Reason" means any of
the following: (i) a material reduction of the Executive's duties or
authority as provided in the Agreement or as later increased by the Board
of Directors; (ii) a substantial change in work conditions; (iii) a
material decrease in compensation or benefits; (iv) relocation of his
principal workplace over 50 miles from his initial workplace without
Executive's consent; (v) the breach of this Agreement by the Company or an
affiliate of the Company; (vi) a change in control of the Company (as
defined in Schedule D hereto); or (vii) the failure by the Company to
obtain the assumption of this Agreement by any successor to or assignee of
the Company or any purported termination of this Agreement which does not
satisfy the requirements of this Agreement. If at the end of such notice
period, the Company has not cured such condition, the written notice shall
take effect, and the Executive will be entitled to the
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following: (A) continuation of his then current Base Salary (prior to any
reduction that constitutes Good Reason) for twelve months from the date of
termination payable in accordance with Company payroll practice; (B)
continuation of health and life insurance benefits for twenty-four months
at the Company's expense subject to applicable cost-sharing arrangements,
co-payments, and deductibles in place immediately prior the Executive's
termination (provided, however, that such health benefits shall not be
counted toward the Executive's entitlement for COBRA, and that such health
and life insurance benefits shall terminate immediately upon Executive
obtaining employment with a third party which provides health and life
insurance benefits); (C) a "pro-rated bonus" for the fiscal year in which
the termination occurs which shall be payable at the time the Company
customarily pays bonuses; (D) the continuation of all other perquisites
for six months; (E) reasonable outplacement assistance for six months
(including out of pocket expenses of the Executive to search for a job not
to exceed $5000); and (F) payment, if requested by the Executive, for all
equity in MMH or the Company owned by the Executive or his family
(including but not limited to Equity Units), payable in equal quarterly
installments over the thirty-six month period following termination,
provided, however, that if this option is requested, the equity shall be
valued as of the date of termination at its fair market value by the
Compensation Committee of the Board of Directors and shall be repurchased
so long as permitted under the terms of any financing documents, including
but not limited to indentures or loan agreements applicable to the Company
or any direct or indirect parent entity of the Company at such time. For
purposes of this Agreement, a "pro-rated bonus" means the portion of the
bonus that is arrived at by using the number of days the Executive was
employed by the Company in the year of termination as the numerator of a
fraction of which 365 is the denominator and then multiplying the bonus
the Executive was otherwise eligible to receive by such fraction.
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(b) Termination by the Company without Cause. If the Company
terminates the Executive's employment under this Agreement without Cause,
the Executive shall be entitled to the following: (i) a lump sum payment
equal to his then current annual Base Salary plus a lump sum payment equal
to the Base Salary which would have otherwise been payable for the balance
of the fiscal year in which termination occurs, and (ii) the same benefits
and compensation and payable at the same time as provided in clauses (B)
through (F) of Section 3.1(a). "Cause" means any of the following acts by
the Executive which, if curable, have not been cured by Executive within
30 days' written notice thereof: (i) willful failure to substantially and
materially perform his duties as assigned to him by Board of Directors
(other than any such failure resulting from the Executive's reasonable
business judgment or incapacity due to physical or mental illness); (ii)
commission of a fraud on the Company; (iii) breach of fiduciary duty
involving material personal gain; or (iv) willful misconduct materially
and demonstrably injurious or detrimental to the Company or its
affiliates.
(c) Death or Permanent Disability. This Agreement shall
terminate immediately upon the Executive's Death or Permanent Disability.
Permanent Disability shall have the same meaning as set forth in the
Company's long term disability policy. Upon termination for Death or
Permanent Disability, the Executive, or his estate, shall receive the
following: (i) all accrued Base Salary and other accrued entitlements
earned through the date of termination, (ii) the continuation of Base
Salary for 90 days after such termination, and (iii) the compensation and
benefits set forth in clauses (B), (C), (D) and (F) of Section 3.1(a).
Section 3.2 Termination Event. "Termination Event" means the Executive's
resignation without Good Reason or termination by the Company for Cause. In the
event of a termination due to a Termination Event, the Executive shall receive
his accrued Base Salary and accrued entitlements through the date of
termination. In the event the Executive resigns from the Company without Good
Reason, such resignation only becomes effective upon 60 days' written notice to
the Company.
Section 3.3 Resignation from the Board of Directors and Offices. In the
event of Executive's termination of employment for any reason (including the
failure of the Company to renew the Agreement), such termination or non-renewal
shall also be considered a resignation as a member of the Board of Directors, a
resignation from the board of directors of any affiliates or subsidiaries of the
Company and a resignation from any offices held by the Executive with the
Company or with any of its affiliates or subsidiaries.
ARTICLE IV: MISCONDUCT AND CONFIDENTIAL INFORMATION
Executive agrees to be bound by the provisions of the World Wide Business
Conduct Policy and the Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Schedule B. The provisions of such documents are incorporated
into this Agreement.
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ARTICLE V: NON-COMPETITION; NON-SOLICITATION; INJUNCTIVE RELIEF
Simultaneously with the execution of this Agreement, Executive shall
execute and deliver to the Company a non-competition agreement in the form
attached hereto as Schedule C (the "Non-Competition Agreement"), which shall
become effective if and when this Agreement becomes effective as provided in
Section 1.1 hereof.
ARTICLE VI: INDEMNIFICATION
The Company shall, to the fullest extent permitted by applicable law
indemnify and hold harmless Executive from all claims or expenses that may be
asserted against the Company and affiliates thereof due to his employment, or
that may otherwise derive from Executive's employment as contemplated under this
Agreement, in accordance with the Company's charter and bylaws. The Company
shall purchase and maintain for the benefit of Executive a director's and
officer's liability policy.
ARTICLE VII: MISCELLANEOUS
Section 7.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered, sent by facsimile or when mailed
by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to such address or sent to such facsimile number as each
party may furnish to the other in writing from time to time. Unless notified
otherwise by Executive, copies of notices or other communications sent to
Executive shall be sent to the address noted on the signature page attached
hereto.
Section 7.2 Applicable Law, Jurisdiction and Venue. This Agreement is
entered into under, and shall be governed for all purposes by, the laws of the
State of Wisconsin. In any such litigation, each party hereto waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified mail directed to such party at his or its
address for purposes of notice under Section 7.1 hereof.
Section 7.3 No Waiver. No failure by either party hereto at any time to
give notice of any breach by the other party of, or to require compliance with,
any condition or provision of this Agreement shall (i) be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time or (ii) preclude insistence upon strict compliance in the
future.
Section 7.4 Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision all not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
Section 7.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
Section 7.6 Headings. The paragraph headings have been inserted for
purposes of convenience and shall not be used for interpretive purposes.
Section 7.7 Gender and Plurals. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and
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conversely.
Section 7.8 Affiliate. As used in this Agreement, unless otherwise
indicated, "affiliate" shall have the same definition as set forth in the
Recapitalization Agreement.
Section 7.9 Assignment. This Agreement, and the rights and obligations of
the parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party except that
vested rights to payment shall be subject to devise, and shall descend in
accordance with applicable laws of inheritance.
Section 7.10 Effects of Termination of Employment. Except as otherwise
provided herein or under any benefit plan or other agreement between the Company
and the Executive, termination of Executive's employment under this Agreement
shall not affect any right or obligation of either party hereto which is accrued
or vested prior to or upon such termination or the rights and obligations set
forth herein.
Section 7.11 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, contains all
the covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Executive by the Company, and supersedes
all prior employment agreements between the Executive and the Company or any of
its predecessors. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Executive by the Company, which is not contained in this
Agreement, shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by the party to be charged.
Section 7.12 Attorney's Fees. Pursuant to the terms of a side letter (the
"Side Letter"), Executive shall be entitled to be reimbursed for reasonable
attorney's fees incurred in the negotiation of this Agreement to the limit
established in the Side Letter. In addition, Executive shall be entitled to
reimbursement of attorney's fees in any litigation between the Company and
Executive with respect to Executive's enforcement of this Agreement to the
extent Executive prevails in such litigation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MORRIS MATERIAL HANDLING, INC.
By: /s/ Martin L. Ditkof
---------------------------------------
Name: Martin L. Ditkof
Title: Secretary
/s/ Michael S. Erwin
-----------------------------------------
Executive
Acknowledged by
MHE INVESTMENTS, INC.
By: /s/ Michael S. Shein
---------------------------------------
Name: Michael S. Shein
Title: Vice President
/s/ Michael S. Erwin
-----------------------------------------
Executive
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