## Facts

- Jensen-Sundquist Agency, Inc. was a closely held holding company whose principal asset was a majority interest in First Bank of Grantsburg.
- In 1975, Dennis Frandsen bought 8% of Jensen-Sundquist stock; a family “majority bloc” held 52%.
- The shareholders executed a stockholder agreement requiring the majority bloc, before selling its Jensen-Sundquist stock, to (1) first offer its shares to specified minority shareholders on the same terms (right of first refusal) and (2) simultaneously offer to buy all minority shares at the same price per share if the majority sold to a third party (tag-along protection).
- In 1984, First Wisconsin Corporation negotiated to acquire the bank at $88 per share of bank stock; an initial structure contemplated First Wisconsin purchasing Jensen-Sundquist (a stock acquisition).
- The majority sought waivers of the stockholder agreement; Frandsen refused.
- The transaction was restructured: Jensen-Sundquist sold the bank (a corporate asset sale) to First Wisconsin, then distributed the proceeds to Jensen-Sundquist shareholders through liquidation at $62 per Jensen-Sundquist share.
- Frandsen claimed the restructuring was designed to avoid triggering his contractual rights and that he would have exercised his rights had a stock sale occurred.

## Issues

1. Whether a shareholder agreement triggered by an “offer to sell” the majority’s Jensen-Sundquist stock applies to a sale of the corporation’s principal asset followed by liquidation, when the majority does not sell its shares.
2. Whether the acquirer can be liable for tortious interference with the shareholder agreement when the transaction is structured to avoid triggering the agreement but no contractual breach occurs.

## Decision

- The Seventh Circuit affirmed summary judgment for Jensen-Sundquist and First Wisconsin.
- The court held there was no breach because the agreement applied only to sales of the majority bloc’s Jensen-Sundquist shares, and no such sale occurred.
- The court held the tortious interference claim failed because it depended on a breach of the agreement and there was no independent wrongful conduct shown.

## Legal Principles

- Rights of first refusal and tag-along protections tied by contract to a sale of stock are construed according to their express terms.
- A stock-sale right of first refusal does not, without explicit language, restrict corporate decisions to sell assets or liquidate, even if the economic effect resembles a stock sale.
- Parties may structure transactions in legally distinct forms that do not trigger contractual transfer restrictions, so long as they do not violate the contract’s text.
- A tortious interference claim premised on inducing breach fails absent an actual breach of contract (and absent other independently actionable wrongful conduct).

## Conclusion

The court enforced the shareholder agreement as written, holding that an asset sale and liquidation did not trigger contractual protections limited to sales of the majority’s shares, and therefore the acquirer could not be liable for interference based on a non-breached contract.


Frandsen v. Jensen-Sundquist Agency, Inc., 802 F.2d 941 (7th Cir. 1986)