The opinion of the court was delivered by: SHADUR
MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE
IPC was a pork slaughtering and processing business in Monmouth, Illinois formed as the result of a joint effort by Shareholders, the City of Monmouth and the State of Illinois to reopen the former Wilson Foods Plant that had been vacant for almost one year -- thus bringing some 500 jobs to economically-depressed Monmouth. IPC's shares were evenly divided among Ahlemeyer, Spencer and Merrick, and Merrick served as IPC's President and chief executive officer.
IPC began slaughtering operations in March 1987 and was operating profitably by 1988. At that time Ahlemeyer expressed an interest in selling his IPC shares, and Merrick and Spencer, although not wanting to terminate their investment in IPC, considered selling a portion of their shares as well. Ahlemeyer spoke with Bernard Conway ("Mr. Conway"), the principal in Conway (a Chicago business broker), about helping Shareholders in the sale of some or all of their shares. Mr. Conway told Merrick that Mariah Purina Company ("Purina") might be interested in purchasing IPC shares.
In September 1988 Mr. Conway drafted a proposed letter agreement covering his retainer as Shareholders' business broker. After Shareholders had provided their own input via proposed revisions,
Mr. Conway put the document in final form and Shareholders signed it in early November. These provisions of the Agreement are relevant to the present controversy:
The purpose of this letter is to set forth the terms and conditions under which Conway Corporation agrees to serve all of the shareholders of Illinois Pork Corp. in the effort to sell all or some of their Illinois Pork Corp. shares to Mariah Purina Company. For purposes of this Agreement any other type of transaction between the shareholders and/or Illinois Pork Corp. and Mariah Purina Company, as for example a joint venture, sale of assets, merger, or co-investment with Mariah Purina Company in other projects, are specifically included. Excluded however are product sales by Illinois Pork Corp. to Mariah Purina Company in the normal course of business. It is agreed that Conway Corporation shall be the sole and exclusive independent contractor serving the Illinois Pork Corp. shareholders and/or Illinois Pork Corp. for effecting a transaction (as defined above) with Mariah Purina Company.
Fee based upon the total consideration (including, but not limited to, such considerations as payments in cash, stock, or kind; options; fees; debentures or convertible debentures; notes or other evidence of indebtedness; leases; as well as the total amount of earn out or covenants not to compete) received by Illinois Pork Corporation, its shareholders and affiliates, directly or indirectly arising from or connected to the transaction equal to: five percent (5%) of the first million dollars, four percent (4%) of the second million dollars, three percent (3%) of the third million dollars, two percent (2%) of the fourth million and one percent (1%) of the remaining consideration.
9. RIGHT OF REFUSAL. Each shareholder shall have the sole and exclusive right to refuse any offer for his individual shares.
10. ENTIRE AGREEMENT. This is the entire agreement between the parties pertaining to its subject matter and supersedes all prior agreements, representations and understandings of the parties. No modification of this Agreement shall be binding unless agreed to in writing by the parties.
In January 1989
the fresh pork industry experienced a sudden downturn, with the price of hogs increasing and the price of fresh pork decreasing. IPC's financial condition began to deteriorate. Although negotiations with Purina for its purchase of IPC's shares ceased in March, in May Purina expressed its interest in buying IPC's assets. At the end of June IPC's primary bank refused to renew its working capital loan. After the negotiations with a potential buyer of the shares (other than Purina) had fallen through, Purina issued a letter of intent to purchase IPC's assets. Merrick then issued a press release announcing Purina's offer and stating that IPC would cease operations in order to close the transaction and prepare for the transition.
In July Shareholders consented to an assignment of IPC to Development Specialists, Inc. ("DSI") for the benefit of the creditors. William Brandt, Jr. ("Brandt"), in turn the assignee from DSI, apparently agreed -- with no objection from the secured creditors -- that Conway's commission would be treated as an administrative expense. Then on September 11 an involuntary petition for bankruptcy was filed against IPC. Purina told Brandt that it would not close on the asset-sale transaction if IPC did not consent to the bankruptcy filing. On September 18 IPC consented to the filing. Richard Barber was appointed its trustee in bankruptcy ("Trustee").
Trustee promptly entered into an agreement with Purina for the sale of IPC's assets to Purina. On September 28 Conway filed an objection to the sale
in the bankruptcy court but that court overruled the objection, and the sale of IPC's assets to Purina closed on October 3, with the proceeds of sale being paid to the estate of IPC. All the proceeds have been distributed to secured creditors by order of the bankruptcy court, except for that court's retention in escrow of an amount sufficient to cover Conway's claim for commission due from the sale.
Conway then filed its Complaint here, praying for a judgment:
a) declaring the rights and obligations of the parties to the contract and, specifically, that defendants, Ahlemeyer, Spencer and Merrick are individually and personally obligated to pay plaintiff ...