His cage sits atop a rotating purple island, so he's easy to see. After being freed, Herman presents Mickey with an offer. If the mouse gives the Gremlin 100 E-Tickets, the latter will turn off the Thinner whirlpool, relieving the mouse of traveling through the whirring blades to do the job himself. Herman will do this via a crank in the wall that Mickey can't activate himself.
However, if Mickey takes Herman up on his offer, the mouse will not be able to collect the Bronze Pin that's accessible through the secret "back way" of the blade path. Unlike Gremlins Jumbo and Stuffus, after Herman is free, Mickey only has one shot to take the offer. If Mickey refuses, the Gremlin teleports away. However, Mickey can disable the whirlpool himself, grab the Pin, then free Herman. Even though he can't do anything and will simply teleport away, Mickey can still get the Bronze Pin and the Gremlin Guardian Pin this way.