Exhibit 10.3

IMMUNOMEDICS, INC. LETTERHEAD

 

Gerard G. Gorman      

Dear Mr. Gorman:

We are pleased to inform you that the Compensation Committee of the Company’s
Board of Directors has approved a special severance benefit program for you. The
purpose of this letter agreement is to set forth the terms and conditions of
your severance benefits and to explain certain limitations that may govern their
overall value or payment date.

Your severance package will become payable should your employment terminate
under certain circumstances following the Company’s execution of a definitive
agreement to effect a change in ownership or control of the Company. To
understand the full scope of your benefits, you should familiarize yourself with
the definitional provisions of Part One of this letter agreement. The benefits
comprising your severance package are detailed in Part Two, and the terms and
conditions of the special excise tax gross up to which you may become entitled
are set forth in Part Three. Part Four deals with ancillary matters affecting
your severance arrangement.

PART ONE — DEFINITIONS

For purposes of this letter agreement, the following definitions will be in
effect:

Agreement means this letter agreement between you and the Company, as it may be
amended from time to time in accordance with the applicable provisions of Part
Four.

Average Compensation means the average of your W-2 wages from the Company, or
from any predecessor or related entity, for the five (5) calendar years
completed immediately prior to the calendar year in which the Change in Control
is effected. Any W-2 wages for a partial year of employment will be annualized,
in accordance with the frequency which such wages are paid during such partial
year, before inclusion in your Average Compensation.

Base Salary means the annual rate of base salary in effect for you immediately
prior to the Change in Control or (if greater) the annual rate of base salary in
effect at the time of your Involuntary Termination.

Board means the Company’s Board of Directors.

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Change in Control means:

(i) A merger, consolidation or reorganization approved by the Company’s
stockholders, unless securities representing more than fifty percent (50%) of
the total and combined voting power of the outstanding voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly, by the persons who beneficially owned the Company’s outstanding
voting securities immediately prior to such transaction; or

(ii) The sale, transfer or other disposition of all or substantially all of the
Company’s assets as an entirety or substantially as an entirety, occurring
within a 12-month period, and representing, at a minimum, not less than 40
percent of the total gross fair market value of all assets of the Company, to
any person, entity, or group of persons acting in consort, other than a sale,
transfer or disposition to: (A) a shareholder of the Company in exchange for or
with respect to its stock; (B) an entity, 50 percent or more of the total value
or voting power of which is owned, directly or indirectly, by the Company; (C) a
person, or more than one person acting as a group, that owns, directly or
indirectly, 50 percent or more of the total value or voting power of the
outstanding stock of the Company; or (D) an entity, at least 50 percent of the
total value or voting power of which is owned by a person described in (C); or

(iii) Any transaction or series of related transactions pursuant to which any
person or any group of persons comprising a “group” within the meaning of Rule
13d-5(b)(1) under the Securities Exchange Act of 1934, as amended (other than
the Company or a person that, prior to such transaction or series of related
transactions, directly or indirectly controls, is controlled by or is under
common control with, the Company) becomes directly or indirectly the beneficial
owner (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended) of securities possessing (or convertible into or exercisable for
securities possessing) more than fifty percent (50%) of the total combined
voting power of the Company’s securities outstanding immediately after the
consummation of such transaction or series of related transactions, whether such
transaction involves a direct issuance from the Company or the acquisition of
outstanding securities held by one or more of the Company’s stockholders; or

(iv) A change in the composition of the Board over a period of twelve
(12) consecutive months or less such that a majority of the Board members ceases
by reason of one or more contested elections for Board membership to be
comprised of individuals whose election is endorsed by a majority of the members
of the Board immediately before the date of election.

A transaction shall not constitute a Change of Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in the same proportions by the persons who held the Company’s
securities immediately before such transaction

 

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Change in Control Severance Benefits means the various payments and benefits to
which you may become entitled under Part Two of this Agreement upon your
Involuntary Termination in connection with a Change in Control or upon any
earlier termination of your employment by the Company during the Pre-Closing
Period other than a Termination for Cause. Such Change in Control Severance
Benefits may include one or more of the following: the accelerated vesting of
your Options, a lump sum severance payment, a pro-rated bonus payment and
continued health care coverage provided for you and your spouse and eligible
dependents at the Company’s expense.

Code means the Internal Revenue Code of 1986, as amended.

Common Stock means the Company’s common stock.

Company means Immunomedics, Inc,. a Delaware corporation, and any successor
corporation, whether or not resulting from a Change in Control.

Independent Auditors means the accounting firm serving as the Company’s
independent certified public accountants immediately prior to the Change in
Control; provided, however, that in the event such accounting firm also serves
as the independent certified public accountants for the corporation or other
entity effecting the Change in Control transaction with the Company or such
accounting firm concludes that the services required of it hereunder would
adversely affect its independent status under applicable accounting standards or
the performance of such services would otherwise be in contravention of
applicable law, then the Independent Auditors shall mean a nationally-recognized
public accounting firm mutually acceptable to both you and the Company.

Involuntary Termination means the termination of your employment with the
Company which occurs by reason of:

(i) your involuntary dismissal or discharge by the Company other than a
Termination For Cause, or

(ii) your voluntary resignation within ninety (90) days following the occurrence
of any one of the following events, provided that you have given the Company
written notice of such event within fifteen (15) days of its occurrence and the
Company does not, within thirty (30) days following such notice, correct the
action or failure to act constituting or giving rise to such event: (A) a change
in your position with the Company which reduces your duties and responsibilities
or the level of management to which you report, (B) a reduction in the aggregate
dollar amount of your base salary and Target Bonus by more than ten percent
(10%), (C) a relocation of your principal place of employment by more than forty
(40) miles, (D) the failure by the Company to obtain the assumption of this
Agreement by any successor entity or (E) a material breach by the Company of any
of its obligations under this Agreement.

 

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Option means any option granted you to purchase shares of Common Stock under any
Plan or other arrangement which is outstanding at the time of the Change in
Control (or, if earlier, upon the Company’s termination of your employment
during the Pre-Closing Period ) or upon your Involuntary Termination following
such Change in Control. Your Options will be divided into two (2) separate
categories as follows:

Acquisition-Accelerated Options: any outstanding Option (or installment thereof)
which automatically accelerates, pursuant to the acceleration provisions of the
agreement evidencing that Option, upon a Change in Control.

Severance-Accelerated Options: any outstanding Option (or installment thereof)
which, pursuant to Part Two of this Agreement, accelerates upon the termination
of your employment by the Company during the Pre-Closing Period for any reason
other than a Termination for Cause or upon your Involuntary Termination
following the Change in Control.

Option Parachute Payment means, with respect to any Acquisition-Accelerated
Option or any Severance-Accelerated Option, the portion of that Option deemed to
be a parachute payment under Code Section 280G and the Treasury Regulations
issued thereunder. The portion of such Option which is categorized as an Option
Parachute Payment will be calculated in accordance with the valuation provisions
established under Code Section 280G and the applicable Treasury Regulations.

Other Parachute Payment means any payments in the nature of compensation (other
than your Option Parachute Payment and any other Change in Control Severance
Benefits to which you become entitled under Part Two of this Agreement) which
are made to you in connection with the Change in Control and which accordingly
qualify as parachute payments within the meaning of Code Section 280G(b)(2) and
the Treasury Regulations issued thereunder.

Parachute Payment means (i) any Change in Control Severance Benefits provided
you under Part Two of this Agreement which is deemed to constitute a parachute
payment within the meaning of Code Section 280G(b)(2) and the Treasury
Regulations issued thereunder and (ii) any Option Parachute Payment attributable
to your Acquisition-Accelerated Options.

Permissible Parachute Amount means a dollar amount equal to the 2.99 times your
Average Compensation.

 

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Plan means (i) the Company’s 2002 Stock Option Plan, as amended or restated from
time to time, (ii) the Company’s 1992 Stock Option Plan, as amended or restated
from time to time and (iii) any other stock incentive plan implemented or
established by the Company.

Pre-Closing Period means the period commencing with the Company’s execution of
the definitive agreement for a Change in Control transaction and ending upon the
earliest to occur of (i) the closing of the Change in Control contemplated by
such definitive agreement, (ii) the termination of such definitive agreement
without the consummation of the contemplated Change in Control or (iii) the
Termination Date.

Present Value means the value, determined as of the date of the Change in
Control, of any payment in the nature of compensation to which you become
entitled in connection with the Change in Control or your subsequent Involuntary
Termination, including (without limitation) the Option Parachute Payment
attributable to your Severance-Acceleration Options and the additional Change in
Control Severance Benefits to which you become entitled under Part Two of this
Agreement. The Present Value of each such payment will be determined in
accordance with the provisions of Code Section 280G(d)(4), utilizing a discount
rate equal to one hundred twenty percent (120%) of the applicable Federal rate
in effect at the time of such determination, compounded semi-annually to the
effective date of the Change in Control.

Target Bonus means the annual incentive bonus to which you may become entitled
for one or more fiscal years upon the Company’s attainment of the performance
milestones designated for the applicable year and your attainment of any
personal objectives specified for you for that year.

Termination Date means December 31, 2007; provided, however, that the
Termination Date shall automatically be extended to one or more successive
one-year anniversaries of such date, unless the Company provides you with
written notice of its decision not to extend the Termination Date at least sixty
(60) days prior to the next scheduled Termination Date. In the event of such
notice, this Agreement and the Pre-Closing Period shall terminate on the next
scheduled Termination Date, unless a Change in Control is in fact consummated on
or before that date.

Termination for Cause means the termination of your employment for any of the
following reasons: (i) your conviction of a felony or your commission of any act
of personal dishonesty involving the property or assets of the Company intended
to result in your financial enrichment, (ii) your material breach of one or more
of your obligations under your Proprietary Information and Inventions Agreement
with the Company or your unauthorized use or disclosure of any material trade
secrets or other material confidential information of the Company or any
affiliate, (iii) any intentional misconduct on your part which has a materially
adverse effect upon the Company’s business or reputation, (iv) your failure to
perform the major duties, functions and responsibilities of your executive
position with the Company, (v) your material breach of any of your fiduciary
obligations as an officer of the Company or (vi) your intentional and knowing

 

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participation in the preparation or release of false or materially misleading
financial statements relating to the Company’s operations and financial
condition or your intentional and knowing submission of any false or erroneous
certification required of you under the Sarbanes-Oxley Act of 2002 or any
securities exchange on which shares of the Common Stock are at the time listed
for trading. However, prior to any termination of your employment for any of the
reasons specified in clauses (ii) through (iv), the Company shall give you
written notice of the actions or omissions deemed to constitute the grounds for
a Termination for Cause, and you shall have a period of not less than thirty
(30) days in which to cure the specified default in performance and thereby
remedy the actions or omissions which would otherwise constitute grounds for a
Termination for Cause.

PART TWO — CHANGE IN CONTROL SEVERANCE BENEFITS

Should your employment with the Company terminate by reason of an Involuntary
Termination within twelve (12) months after a Change in Control, or should your
employment be terminated by the Company during the Pre-Closing Period for any
reason other than a Termination for Cause, then you will become entitled to
receive the applicable Change in Control Severance Benefits provided under this
Part Two, provided you execute and deliver to the Company a general release
(substantially in the form of attached Exhibit A) which becomes effective under
applicable law and pursuant to which you release the Company and its officers,
directors, stockholders, employees and agents from any and all claims you may
otherwise have with respect to the terms and conditions of your employment with
the Company and the termination of that employment. In no event, however, shall
such release cover any claims, causes of action, suits, demands or other
obligations or liabilities relating to:

(a) any payments, benefits or indemnification to which you are or become
entitled pursuant to the provisions of this Agreement (including, without
limitation, the severance benefits provided under this Part Two, the special tax
gross up payment to which you may become entitled under Part Three and the
continued indemnification coverage to which you are entitled under Paragraph 2
of Part Four of this Agreement); and

(b) any claims for workers’ compensation benefits under any of the Company’s
workers’ compensation insurance policy or fund.

The Change in Control Severance Benefits provided under this Part Two shall be
in lieu of any other severance benefits to which you might otherwise become
entitled under any other severance plan, program or arrangement of the Company
upon a termination of your employment either during the Pre-Closing Period or
within twelve (12) months following a Change in Control.

 

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1. Accelerated Vesting.

Each outstanding Option which you hold at the time of your Involuntary
Termination or at any earlier termination of your employment by the Company
during the Pre-Closing Period other than a Termination for Cause, to the extent
that Option is not otherwise exercisable for all the shares of Common Stock or
other securities at the time subject to that Option, will immediately vest and
become exercisable for all those option shares and may be exercised for any or
all of those shares as fully vested shares. Each such accelerated Option will
remain so exercisable until the earlier of (i) the expiration of the option term
or (ii) the post-service exercise period specified in the agreement evidencing
your Option. Any Options not exercised prior to the expiration of the applicable
post-service exercise period will terminate and cease to remain exercisable for
any of the option shares.

2. Severance Payment.

(a) In the event your employment terminates pursuant to an Involuntary
Termination within twelve (12) months following a Change in Control, the Company
will make a lump-sum cash severance payment to you, not more that sixty
(60) days following the date of your Involuntary Termination, in an amount equal
to two (2) times the sum of your annual rate of Base Salary and Target Bonus
(the “Severance Payment”).

The Severance Payment shall be subject to the Company’s collection of all
applicable withholding taxes, and you will only be paid the amount remaining
after such withholding taxes have been collected.

(b) In the event your employment is terminated by the Company during the
Pre-Closing Period for any reason other than a Termination for Cause, you will
subsequently become entitled to the Severance Payment upon the closing of the
Change in Control, provided and only if that Change in Control is in fact
consummated prior to the expiration of the Pre-Closing Period. The Company will
make such lump-sum cash Severance Payment not more than sixty (60) days
following the effective date of the Change in Control. The Severance Payment
shall be subject to the Company’s collection of all applicable withholding
taxes, and you will only be paid the amount remaining after such withholding
taxes have been collected. In no event, however, will you become entitled to all
or any portion of the Severance Payment if the Change in Control is not
consummated prior to the expiration of the Pre-Closing Period.

 

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3. Pro-Rated Target Bonus

(a) In the event your employment terminates pursuant to an Involuntary
Termination within twelve (12) months following a Change in Control, the Company
will make an additional lump-sum cash severance payment (the “Pro-Rated Bonus”)
to you equal to the dollar amount obtained by multiplying one-twelfth
(1/12th) of the annual Target Bonus in effect for you for the year of your
Involuntary Termination by the number of full or partial months of employment
which you complete with the Company in that year. The payment of your Pro-Rated
Bonus shall be made not more than sixty (60) days following the date of your
Involuntary Termination. The payment shall be subject to the Company’s
collection of all applicable withholding taxes, and you will only be paid the
amount remaining after such withholding taxes have been collected.

(b) In the event your employment is terminated by the Company during the
Pre-Closing Period for any reason other than a Termination for Cause, you will
subsequently become entitled to the Pro-Rated Bonus upon the closing of the
Change in Control, provided and only if that Change in Control is in fact
consummated prior to the expiration of the Pre-Closing Period. The Company will
pay the Pro-Rated Bonus to you in a lump-sum not more than sixty (60) days
following the effective date of the Change in Control. The payment shall be
subject to the Company’s collection of all applicable withholding taxes, and you
will only be paid the amount remaining after such withholding taxes have been
collected. In no event, however, will you become entitled to all or any portion
of the Pro-Rated Bonus if the Change in Control is not consummated prior to the
expiration of the Pre-Closing Period.

4. Continued Health Care Coverage.

Should you elect under Code Section 4980B to continue health care coverage under
the Company’s group health plan for yourself, your spouse and your eligible
dependents following your Involuntary Termination or any earlier termination of
your employment by the Company during the Pre-Closing Period other than a
Termination for Cause, then the Company shall reimburse you for the cost of such
continued health care coverage for you and your spouse and other eligible
dependents at its sole cost and expense. Such reimbursement shall continue until
the earliest of (i) the expiration of the twelve (12)-month period measured from
the date of your Involuntary Termination or any earlier termination of your
employment by the Company during the Pre-Closing Period, (ii) the first date you
are covered under another employer’s heath benefit program which provides
substantially the same level of benefits without exclusion for pre-existing
medical conditions or (iii) the date the definitive agreement for the Change in
Control is terminated without consummation of that Change in Control during the
Pre-Closing Period. Should the Company’s reimbursement of the cost of such
continued health care coverage result in the recognition of taxable income
(whether for federal, state or local income tax purposes) by you or your spouse
or other eligible dependent, then each of you will be responsible for the
payment of the income and employment tax liability resulting from such coverage,
and the Company will not provide any tax gross-up payments to you (or any other
person) with respect to such income and employment tax liability. To the extent
you are subject to the delayed

 

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benefit commencement provisions of Paragraph 1 of Part Four, the Company shall,
at the end of the delayed commencement period, promptly reimburse you with a
lump sum cash payment equal to the cost you incurred for such health care
coverage for that period.

PART THREE – SPECIAL TAX PAYMENT

1. Special Tax Gross-Up. In the event that (i) one or more of the
Acquisition-Accelerated Options or any of the Change in Control Severance
Payments to which you become entitled under Part Two of this Agreement or any
Other Parachute Payments are deemed, in the opinion of the Independent Auditors
or by the Internal Revenue Service, to constitute an excess parachute payment
under Code Section 280(G) and (ii) it is determined that the aggregate Present
Value (measured as of the Change in Control) of the Parachute Payment
attributable to those Change in Control Severance Payments, the Option Parachute
Payment attributable to your Acquisition-Accelerated Options and any Other
Parachute Payments to which you are entitled exceeds one hundred ten percent
(110%) of the Permitted Parachute Amount, then you shall be entitled to receive
from the Company one or more additional payments (collectively, the “Gross-Up
Payment”) in an aggregate dollar amount determined pursuant to the following
formula, provided and only if the general release required of you pursuant to
the provisions of Part Two has become effective:

X = Y ÷ [1 - (A + B + C)], where

X is the aggregate dollar payment of the Gross-up Payment.

Y is the total excise tax, together with all applicable interest and penalties
(collectively, the “Excise Tax”), imposed on you pursuant to Code Section 4999
(or any successor provision) with respect to the excess parachute payment
attributable to (i) one or more of the Change in Control Severance Payments
provided you under Part Two of this Agreement, (ii) your
Acquisition-Acceleration Options and (iii) any Other Parachute Payments.

A is the Excise Tax rate in effect under Code Section 4999 for such excess
parachute payment,

B is the highest combined marginal federal income and applicable state income
tax rate in effect for you for the applicable calendar year in which the
Gross-Up Payment is made, determined after taking into account the deductibility
of state income taxes against federal income taxes to the extent actually
allowable for that calendar year, and

 

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C is the applicable Hospital Insurance (Medicare) Tax Rate in effect for you for
the applicable calendar year in which the Gross-Up Payment is made.

Should the aggregate Present Value (measured as of the Change in Control) of the
Parachute Payment attributable to the Change in Control Severance Payments, the
Option Parachute Payment attributable to the Acquisition-Accelerated Options and
any Other Parachute Payments to which you become entitled not exceed one hundred
ten percent (110%) of the Permitted Parachute Amount, then no Gross-Up Payment
shall be made under this Part Three, and the Change in Control Severance
Payments shall instead be subject to reduction in accordance with the benefit
limitation provisions of Appendix I to this Agreement.

2. Determination Procedures. All determinations required to be made under this
Part Three shall be made by the Independent Auditors in accordance with the
following procedures:

(a) If your employment is terminated by the Company during the Pre-Closing
Period for any reason other than a Termination for Cause, then within ten
(10) business days after the closing of the Change in Control, the Independent
Auditors shall provide both you and the Company with a written determination of
the Parachute Payments attributable to your Acquisition-Accelerated Options (if
any), your Change in Control Severance Payments under Part Two and any Other
Parachute Payment to which you are entitled, together with detailed supporting
calculations with respect to the Gross-Up Payment due you by reason of those
various Parachute Payments. Except to the extent the deferred payment provisions
set forth in Paragraph 1 of Part Four are applicable to your Gross-Up Payment,
the Company shall pay the resulting Gross-Up Payment to you within three
(3) business days after receipt of such determination.

(b) In the event your employment terminates pursuant to an Involuntary
Termination within twelve (12) months following a Change in Control, then the
following determination procedures shall be in effect:

 

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Within ten (10) business days after the closing of the Change in Control, the
Independent Auditors shall provide both you and the Company with a written
determination of the Parachute Payment attributable to your
Acquisition-Accelerated Options (if any), together with detailed supporting
calculations with respect to the Gross-Up Payment due you by reason of that
Parachute Payment. The Company shall pay the resulting Gross-Up Payment to you
within three (3) business days after receipt of such determination.

 

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  •  

Within ten (10) business days after the date of your Involuntary Termination,
the Independent Auditors shall provide both you and the Company with a written
determination of the Parachute Payments attributable to any Change in Control
Severance Payments or Other Parachute Payment to which you are entitled,
together with detailed supporting calculations with respect to the Gross-Up
Payment due you by reason of those Parachute Payments. Except to the extent the
deferred payment provisions set forth in Paragraph 1 of Part Four are applicable
to your Gross-Up Payment, the Company shall pay the resulting Gross-Up Payment
to you within three (3) business days after receipt of such determination or (if
later) contemporaneously with the Change in Control Severance Payment or Other
Parachute Payment triggering such Gross-Up Payment.

(c) In the event the Treasury Regulations under Code Section 280G (or applicable
judicial decisions) specifically address the status of any Change in Control
Severance Payment or Other Parachute Payment or the method of valuation
therefor, the characterization afforded to such payment by the Regulations (or
such decisions) shall, together with the applicable valuation methodology, be
controlling. All other determinations by the Independent Auditors shall be made
on the basis of “substantial authority” (within the meaning of Section 6662 of
the Code).

(d) Both you and the Company shall provide the Independent Auditors with access
to and copies of any books, records and documents in your or its possession
which may be reasonably requested by the Independent Auditors and shall
otherwise cooperate with the Independent Auditors in connection with the
preparation and issuance of the determinations contemplated by this Part Three.

(e) All fees and expenses of the Independent Auditors and the appraisers shall
be borne solely by the Company, and to the extent those fees or expenses are
treated as a Parachute Payment, they shall be taken into account in the
calculation of the Gross-Up Payment to which you are entitled under this Part
Three.

3. Additional Claims. You shall provide written notification to the Company of
any claim made by the Internal Revenue Service which would, if successful,
require the payment by the Company of an additional Gross-Up Payment. Such
notification shall be given as soon as practicable after you are informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. You shall not pay such
claim prior to the expiration of the thirty (30)-day period following the date
on which such notice is given to the Company (or such shorter period ending on
the date that any payment of taxes, interest and/or penalties with respect to
such claim is due). Prior to the expiration of such thirty (30)-day or shorter
period, the Company shall ether (i) pay you the

 

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additional Gross-Up Payment attributable to the Internal Revenue Service claim
or (ii) provide written notice to you that the Company shall contest the claim
on your behalf. In the event, the Company provides you with such written notice,
you shall:

(A) provide the Company with any information reasonably requested by the Company
relating to such claim;

(B) take such action in connection with contesting such claim as the Company may
reasonably request in writing from time to time, including (without limitation)
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company and reasonably satisfactory to you, with the
fees and expenses of such attorney to be the sole responsibility of the Company
without any tax implications to you in accordance with the same tax
indemnity/gross-up arrangement as in effect under subparagraph (D) below;

(C) cooperate with the Company in good faith in order to effectively contest
such claim; and

(D) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all additional
Excise Taxes imposed upon you and all costs, legal fees and other expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify you for and hold him harmless from, on an after-tax
basis, any additional Excise Tax (including interest and penalties) imposed upon
you and any Excise Tax or income or employment tax (including interest and
penalties) attributable to the Company’s payment of that additional Excise Tax
on your behalf or imposed as a result of such representation and payment of all
related costs, legal fees and expenses. The amounts owed to you by reason of the
foregoing shall be paid to you or on your behalf as they become due and payable.
Without limiting the foregoing provisions of this subparagraph (D), the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at the Company’s sole option, either direct you to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and you shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that should
the Company direct you to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to you, on an interest-free basis, and shall
indemnify you for and hold him harmless from, on an after-tax basis, any Excise
Tax or income or employment tax (including interest or penalties) imposed with
respect to such advance or with respect to any imputed income with respect to

 

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such advance or any income resulting from the Company’s forgiveness of such
advance; provided, further, that the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder, and you shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.

PART FOUR — MISCELLANEOUS

1. Section 409A of the Code. This Agreement is intended to comply with
Section 409A of the Code and its corresponding regulations, to the extent
applicable. Notwithstanding anything in this Agreement to the contrary, payments
may only be made under this Agreement upon an event and in a manner permitted by
Section 409A of the Code, to the extent applicable. For purposes of Section 409A
of the Code, each payment under this Agreement shall be treated as a separate
payment and the right to a series of installment payments shall be treated as
the right to a series of separate payments. All reimbursements provided under
this Agreement shall be made or provided in accordance with Section 409A of the
Code, including the requirement that (i) the amount of expenses eligible for
reimbursement during a calendar year may not affect the expenses eligible for
reimbursement in any other calendar year, (ii) the reimbursement of an eligible
expense will be made on or before the last day of the taxable year following the
year in which the expense is incurred, and (iii) the right to reimbursement is
not subject to liquidation or exchange for another benefit.

2. Delayed Commencement of Benefits. Notwithstanding any provision to the
contrary in this Agreement, no Severance Payment, Pro-Rated Bonus and no
reimbursement for the cost of health care coverage to which you otherwise become
entitled under Part Two of this Agreement or any Gross-Up Payment to which you
may become entitled under Part Three shall be made or provided to you prior to
the earlier of (i) the expiration of the six (6)-month period measured from the
date of your “separation from service” with the Company (as such term is defined
in Treasury Regulations issued under Code Section 409A) or (ii) the date of your
death, if you are deemed at the time of such separation from service to be a
“key employee” within the meaning of that term under Code Section 416(i) and
such delayed commencement is otherwise required in order to avoid a prohibited
distribution under Code Section 409A(a)(2). Upon the expiration of the
applicable Code Section 409A(a)(2) deferral period, all payments and benefits
deferred pursuant to this Paragraph (whether they would have otherwise been
payable in a single sum or in installments in the absence of such deferral)
shall be paid or reimbursed to you in a lump sum, and any remaining payments and
benefits due under this Agreement shall be paid or provided in accordance with
the normal payment dates specified for them herein. You shall be entitled to
interest on the deferred benefits and payments for the period the commencement
of those benefits and payments is delayed by reason of Code Section 409A(a)(2),
with such interest to accrue at the prime rate in effect from time to time
during that period and to be paid in a lump sum upon the expiration of the
deferral period.

 

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3. Continued Indemnification. The indemnification provisions for Officers and
Directors under the Company’s bylaws, the Directors and Officers Liability
Insurance Policy (if any) and any Indemnification Agreement between you and the
Company shall (to the maximum extent permitted by law) be extended to you during
the period following your resignation or termination of employment for any
reason (other than a Termination for Cause), whether or not in connection with a
Change in Control, with respect to all matters, events or transactions occurring
or effected during your period of employment with the Company.

4. Deferred Compensation. To the extent you participate in any deferred
compensation arrangements with the Company which are subject to Code
Section 409A, the payment provisions in effect for that deferred compensation
shall continue in effect, and nothing in this Agreement shall be deemed to
modify, revise or otherwise alter those payment provisions.

5. No Mitigation Duty. The Company shall not be entitled to set off any of the
following amounts against the Change in Control Severance Benefits to which you
may become entitled under Part Two of this Agreement: (i) any amounts which you
may subsequently earn through other employment or service following your
termination of employment with the Company or (ii) any amounts which you might
have potentially earned in other employment or service had you sought such other
employment or service.

6. Death. Should you die before your receive the full amount of payments and
benefits to which you may become entitled under this Agreement, then the balance
of such payments shall be made, on the due dates hereunder had you survived, to
the executors or administrators of your estate. Should you die before you
exercise all your outstanding Options as accelerated hereunder, then such
Options may be exercised, within the applicable exercise period following your
death, by the executors or administrators of your estate or by the persons to
whom those Options are transferred pursuant to your will or in accordance wit
the laws of inheritance. In no event, however, may any such Option be exercised
after the specified expiration date of the option term.

7. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and shall be binding upon, (i) the Company and its successors and
assigns, including any successor entity by merger, consolidation or transfer of
all or substantially all of the Company’s assets (whether or not such
transaction constitutes a Change in Control), and (ii) you, the personal
representative of your estate and your heirs and legatees.

8. General Creditor Status. The benefits to which you may become entitled under
Part Two of this Agreement shall be paid, when due, from the Company’s general
assets. No trust fund, escrow arrangement or other segregated account shall be
established as a funding vehicle for such payments. Your right (or the right of
the executors or administrators of your estate) to receive such benefits shall
at all times be that of a general creditor of the Company and shall have no
priority over the claims of other general creditors.

 

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9. Amendment and Termination.

(a) This Agreement may only be amended by written instrument signed by you and
an authorized officer of the Company. This Agreement shall remain in effect
through December 31, 2007 and shall be subject to one or more successive
one-year automatic renewals in accordance with the provisions of the Termination
Date definition in Part One.

(b) Once a Change in Control has been effected, this Agreement may not be
terminated at any time prior to the expiration of the twelve (12)-month period
following the effective date of that Change of Control, and no subsequent
termination of this Agreement shall adversely affect your right to receive any
benefits to which you may have previously become entitled hereunder in
connection with your Involuntary Termination following that Change in Control.

(c) In the event your employment is terminated by the Company during the
Pre-Closing Period for any reason other than a Termination for Cause, then the
termination of this Agreement on any subsequent Termination Date shall not
adversely affect your right to receive any benefits which previously became due
and payable to you, in accordance with the applicable provisions of Part Two, at
the time of your termination.

10. Termination for Cause/Resignation. In the event of your Termination for
Cause or your resignation under circumstances which would otherwise constitute
grounds for a Termination for Cause, the Company will only be required to pay
you (i) any unpaid compensation earned for services previously rendered through
the date of such termination and (ii) any accrued but unpaid vacation benefits
or sick days, and no benefits will be payable to you under Part Two of this
Agreement.

11. Governing Law/Other Agreements. This Agreement is to be construed and
interpreted under the laws of the State of Delaware. This Agreement supersedes
all prior agreements between you and the Company relating to the subject of
severance benefits payable upon a change in control or ownership of the Company,
and you will not be entitled to any other severance benefits upon such a
termination other than those that are provided in this Agreement.

12. At Will Employment. Nothing in this Agreement is intended to provide you
with any right to continue in the employ of the Company (or any subsidiary) for
any period of specific duration or interfere with or otherwise restrict in any
way your rights or the rights of the Company (or any subsidiary), which rights
are hereby expressly reserved by each, to terminate your employment at any time
and for any reason, with or without cause.

 

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13. Arbitration. Any controversy, claim or dispute arising out of or relating to
this Agreement shall be promptly submitted and settled by arbitration by one
arbitrator in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association (or such other rules as may be agreed upon by
both you and the Company). The arbitration shall be held in Morris County in the
State of New Jersey, and any court having jurisdiction thereof may enter
judgment upon the award rendered by the arbitrator. Such award shall be binding
and conclusive upon the parties. You expressly agree and understand that by so
agreeing you are waiving your right to a jury trial and irrevocably and
unconditionally consent to jurisdiction of such proceeding. Any arbitrator shall
be required to apply the contractual provisions hereof in deciding any matter
submitted to them and shall not have any authority, by reason of this Agreement
or otherwise, to render a decision that is contrary to the mutual intent of the
parties as set forth in this Agreement.

Please indicate your agreement with the foregoing terms and conditions of your
change in control severance package by signing the Acceptance section of the
enclosed copy of this letter and returning it to the Company.

 

Very truly yours,

IMMUNOMEDICS, INC.

By:   /s/ Cynthia L. Sullivan Title:    President and CEO  

ACCEPTANCE

I hereby agree to all the terms and provisions of the foregoing Agreement
governing the special benefits to which I may become entitled in the event my
employment should terminate under certain prescribed circumstances in connection
with a substantial change in control or ownership of the Company.

 

Signature:    /s/ Gerard G. Gorman Dated:   December 17, 2008 Address          

 

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APPENDIX I

BENEFIT LIMIT

1. Benefit Limit. Should it be determined that the aggregate Present Value
(measured as of the Change in Control) of the Parachute Payment attributable to
the Change in Control Severance Payments and the Option Parachute Payment
attributable to your Acquisition-Accelerated Options, when added to the Present
Value of any Other Parachute Payment to which you may be entitled, does not
exceed one hundred ten percent (110%) of the Permissible Parachute Amount, then
no Gross-Up Payment shall be made to you under Part Three of the Agreement.
Instead, the limitations set forth in this Appendix I to the Agreement shall
apply. Accordingly, the amount of the Change in Control Severance Payments
otherwise due you under Part Three of the Agreement shall be reduced to the
extent necessary to assure that the aggregate Present Value of the Parachute
Payment attributable to your Change in Control Severance Payments, the Option
Parachute Payment attributable to your Acquisition-Accelerated Options and any
Other Parachute Payments to which you may be entitled does not exceed the
greater of the following dollar amounts (the “Benefit Limit”)

(a) the Permissible Parachute Amount, or

(b) the amount which yields you the greatest after-tax amount of benefits under
Part Two of the Agreement after taking into account any excise tax imposed under
Code Section 4999 on the Parachute Payment attributable to the Change in Control
Severance Payments which are provided you under Part Two, the Option Parachute
Payment attributable to your Acquisition-Accelerated Options or any Other
Parachute Payments to which you are entitled.

2. Benefit Reduction.

(a) To the extent the aggregate Present Value, measured as of the Change in
Control, of (i) the Option Parachute Payment attributable to your
Acquisition-Accelerated and Severance-Accelerated Options (or installments
thereof) plus (ii) the Parachute Payment attributable to your other Change in
Control Severance Benefits under Part Two of the Agreement would, when added to
the Present Value of all of your Other Parachute Payments, exceed the Benefit
Limit, then the following reductions shall be made to the Change in Control
Severance Benefits to which you are otherwise entitled under Part Two of this
Agreement and your Acquisition-Accelerated Options, to the extent necessary to
assure that such Benefit Limit is not exceeded:

first, the dollar amount of the Severance Payment to which you would otherwise
be entitled shall be reduced,

next, the dollar amount of the Pro-Rated Bonus to which you would otherwise be
entitled shall be reduced, and

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then the number of shares which would otherwise be purchasable under your
Acquisition-Accelerated and Severance-Accelerated Options shall be reduced
(based on the amount of the Option Parachute Payment attributable to each such
Option) to the extent necessary to eliminate such excess, with the actual
Options to be so reduced to be determined by you.

(b) In the event your employment is terminated by the Company during the
Pre-Closing Period for any reason other than a Termination for Cause, the
Benefit Limit shall be calculated in good faith first at the time of such
termination, with such calculation to be based upon the probability of the
consummation of the contemplated Change in Control within the Pre-Closing
Period, and any benefit reduction required by Paragraph 2 above on the basis of
such good-faith calculation shall be applied at that time. The Benefit Limit
shall be recalculated in accordance with this Appendix I as soon as
administratively practicable following the expiration of the Pre-Closing Period.
To the extent any Options are reduced and terminated in connection with the
initial calculation made at the time of your termination of employment, those
Options will not be subsequently restored in connection with the re-calculation
of the Benefit Limit following the expiration of the Pre-Closing Period, even if
those terminated Options could have otherwise fallen within the Benefit Limit as
so re-calculated.

3. Resolution Procedures.

In the event there is any disagreement between you and the Company as to whether
one or more payments to which you become entitled in connection with the Change
in Control or your subsequent Involuntary Termination constitute Parachute
Payments, Option Parachute Payments or Other Parachute Payments or as to the
determination of the Present Value thereof, such dispute will be resolved in
accordance with as follows:

(a) In the event the Treasury Regulations under Code Section 280G (or applicable
judicial decisions) specifically address the status of any such payment or the
method of valuation therefor, the characterization afforded to such payment by
the Regulations (or such decisions) will, together with the applicable valuation
methodology, be controlling.

(b) In the event Treasury Regulations (or applicable judicial decisions) do not
address the status of any payment in dispute, the matter will be submitted for
resolution to the Independent Auditors. The resolution reached by the
Independent Auditors will be final and controlling; provided, however, that if
in the judgment of the Independent Auditors, the status of the payment in
dispute can be resolved through the obtainment of a private letter ruling from
the Internal Revenue Service, a formal and proper request for such ruling will
be prepared and submitted by the Independent Auditors, and the determination
made by the Internal Revenue Service in the issued ruling will be controlling.

 

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(c) In the event Treasury Regulations (or applicable judicial decisions) do not
address the appropriate valuation methodology for any payment in dispute, the
Present Value thereof will, at the Independent Auditor’s election, be determined
through an independent third-party appraisal.

 

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EXHIBIT A

GENERAL RELEASE

RELEASE AND WAIVER OF CLAIMS

In consideration of the severance payments and other benefits to which I have
become entitled, pursuant to that certain Agreement between Immunomedics, Inc.,
a Delaware corporation (the “Company”), and myself dated                     ,
2008 (the “Severance Agreement), in connection with the termination of my
employment on this date, I, Gerard G. Gorman, hereby furnish the Company with
the following release and waiver (“Release and Waiver”).

I hereby release and forever discharge the Company, its officers, directors,
agents, employees, stockholders, successors, assigns and affiliates from any and
all claims, liabilities, demands, causes of action, costs, expenses, attorney
fees, damages, indemnities and obligations of every kind and nature, in law,
equity or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising from or relating to my employment with the Company and the
termination of that employment, including (without limitation) claims of
wrongful discharge, emotional distress, defamation, fraud, breach of contract,
breach of the covenant of good faith and fair dealing, discrimination claims
based on sex, age, race, national origin, disability or any other basis under
Title VII of the Civil Rights Act of 1964, as amended, the Federal Age
Discrimination in Employment Act of 1967, as amended (“ADEA”), the Americans
with Disability Act, contract claims, tort claims, and wage or benefit claims,
including (without limitation) claims for salary, bonuses, commissions, stock
grants, stock options, vacation pay, fringe benefits, severance pay or any other
form of compensation (other than the payments and benefits to which I am
entitled under the Severance Agreement, my vested rights under the Company’s
Section 401(k) Plan and any worker’s compensation benefits under any Company
workers’ compensation insurance policy or fund).

This Release and Waiver does not pertain to any claims that may subsequently
arise in connection with the Company’s default in any of its payment obligations
under the Severance Agreement or its indemnification obligations to me
thereunder. Nor does it pertain to any claims which may subsequently arise in
connection with the indemnification provisions for Officers and Directors under
the Company’s bylaws, the Directors and Officers Liability Insurance Policy (if
any) and any Indemnification Agreement between I and the Company shall (to the
maximum extent permitted by law) be extended to me during the period following
my resignation or termination of employment for any reason (other than a
Termination for Cause), whether or not in connection with a Change in Control,
with respect to all matters, events or transactions occurring or effected during
my period of employment with the Company

I acknowledge that, among other rights subject to his Release and Waiver, I am
hereby waiving and releasing any rights I may have under ADEA, that this release
and waiver is knowing and voluntary, and that the consideration given for this
release and waiver is in addition to anything of value to which I was already
entitled as an executive of the Company. I further acknowledge that I have been
advised, as required by the Older Workers Benefit Protection Act, that: (a) the
release and waiver granted herein does not relate to claims which may arise
after this release and waiver is executed; (b) I have the right to consult with
an attorney prior to executing this release and waiver (although I may choose
voluntarily not to do so); and if I am over 40

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years old upon execution of this (c) I have twenty-one (21) days from the date
of termination of my employment with the Company in which to consider this
release and waiver (although I may choose voluntarily to execute this release
and waiver earlier); (d) I have seven (7) days following the execution of this
release and waiver to revoke my consent to this release and waiver; and (e) this
release and waiver shall not be effective until the seven (7)-day revocation
period has expired.

 

Date:                                                                  GERARD G.
GORMAN

 

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