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SHEPHERD v. GENERAL TELEPHONE & ELECTRONICS CORPORATION. (04/26/63)

April 26, 1963

SHEPHERD, APPELLANT,
v.
GENERAL TELEPHONE & ELECTRONICS CORPORATION.



Appeal, No. 235, March T., 1962, from judgment of Court of Common Pleas of Erie County, Sept. T., 1961, No. 134, in case of Lewis F. Shepherd v. General Telephone & Electronics Corporation and General Telephone Company of Pennsylvania. Judgment affirmed; reargument refused May 29, 1963.

COUNSEL

William F. Illig, with him Gifford, Graham, MacDonald & Illig, for appellant.

Theodore F. Brophy, of the New York Bar, with him John W. English, John A. Bowler, and English, Gilson, Bowler, Shamp and Levin, for appellee.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Keim, JJ.

Author: O'brien

[ 411 Pa. Page 50]

OPINION BY MR. JUSTICE O'BRIEN

Appellant, Lewis F. Shepherd, appeals from entry of judgment on the pleadings for appellee, General Telephone & Electronics Corporation. The pleadings consist of complaint, answer and new matter, plaintiff's reply to new matter, amendment to complaint and amendment to answer.

Appellant instituted this action of assumpsit by foreign attachment against appellee, General Telephone & Electronics Corporation, and named General Telephone Company of Pennsylvania, a wholly owned subsidiary of appellee, as garnishee. By stipulation, the foreign attachment proceedings were discontinued and the action proceeded in assumpsit against appellee. Appellant seeks to recover damages from appellee by reason of its refusal to permit appellant to exercise certain stock option rights.

Appellant, on May 3, 1960, announced, at an employees' service banquet, his intention to retire at the end of 1960. He was at the time, and had been for many years prior, the president of General Telephone Company of Pennsylvania. This announcement precipitated a series of events which resulted in the appellant submitting his resignation as president and director

[ 411 Pa. Page 51]

    of General Telephone Company effective as of July 1, 1960. He also requested his pension to begin as of that date. Appellant's employment was continued until August 1, 1960, although the effective date of resignation as president and director remained as July 1, 1960. The extension of employment enabled the appellant to take advantage of a more favorable retirement plan and to exercise certain stock options under a restricted stock option agreement with appellee. Within two months after termination of appellant's employment, he sought to exercise additional stock options under the restricted stock option agreement of July 8, 1958; the appellant's contention being that he was entitled to exercise the stock option by the terms of the agreement.

The pertinent provisions of the restricted stock option agreement between Shepherd and appellee, dated July 8, 1958, provide in part: "4. This option may be exercised as to 25% of the total number of shares subject hereto at the expiration of two years from the date hereof, and as to an additional 25% of such total number of shares at the expiration of each of the fourth, sixth and eighth years from the date hereof. If, however, the Employee retires at or after his normal retirement age pursuant to a retirement plan of General or a subsidiary subsequent to the expiration of two years from the date hereof and prior to the expiration of eight years from the date hereof this option may be exercised as to all of the shares subject thereto as to which it is then unexercised. ...

"6. Any unexercised portion of this option shall terminate upon Employee's ceasing to be employed by General or a subsidiary unless Employee's employment ceases by the action of General or a subsidiary or by reason of Employee's incapacity or death or retirement at or after his normal ...


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