EMPLOYMENT AGREEMENT

Exhibit 10.2

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “ Agreement ”), is made on this 18 ^th  day of May 2009, by and between IGI Laboratories, Inc., having an address at 105 Lincoln Avenue, Buena, New Jersey 08310 (the “ Company ”) and Phillip S. Forte, having an address at 151 North Congress Street, Newtown, PA 18940 (the “ Executive ”).  The Company and the Executive are collectively referred to hereinafter as the “ Parties ”.

R E C I T A L S :

WHEREAS, the Company desires to employ the Executive on the terms and subject to the conditions set forth herein, and Executive is willing to accept such employment on such terms and conditions; and

WHEREAS, by virtue of such employment, Executive will have access to Proprietary Information of the Company and its subsidiaries (the “IGI Companies”); and

WHEREAS, Executive acknowledges and agrees that the Company (on behalf of itself and the IGI Companies) has a reasonable, necessary and legitimate business interest in protecting its own and the IGI Companies’ Proprietary Information, client accounts, relationships with prospective clients, Goodwill and ongoing business, and that the terms and conditions set forth below are reasonable and, necessary in order to protect these legitimate business interests.

NOW THEREFORE, in consideration of the representations, warranties, covenants, and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are conclusively acknowledged, the Parties, intending to become legally bound, agree as follows:

A G R E E M E N T :

1.

DEFINITIONS

1.1.

Specific Definitions .  Capitalized terms not defined elsewhere herein shall have the following meanings ascribed to them:

“Change in Control” shall mean the occurrence of any of the following events:

(a)

any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other (i) than an individual or entity holding securities of the Company as of the date hereof which represent 3% or more of the outstanding voting power of the all securities on matters to be generally voted upon by the Company’s stockholders, (ii) Jane Hager, Edward Hager, Steve Morris, Frank Gerardi or any of their respective affiliates, any entity of which any of the foregoing are trustees, or trusts established for their benefit, (iii) the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, (iv) Signet Healthcare Partners, its affiliates or any of its affiliated funds, or (v) any corporation owned directly or indirectly by the

stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the owner, directly or indirectly, of outstanding securities of the Company representing 60% or more of the combined voting power of the Company’s then outstanding securities;

(b)

the consummation of a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 40% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a re-capitalization of the Company (or similar transaction) or a reincorporation of the Company into another jurisdiction; or

(c)

a sale of all or substantially all of the assets of the Company;

“Goodwill” means the expectation of continued patronage from client accounts and new patronage from prospective clients.

“Person” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a limited liability company, or a governmental entity (or any department, agency, or political subdivision thereof).

“IGI Business” means the businesses provided by any of the IGI Companies.

“IGI Companies” or “IGI Company” means the Company, its subsidiaries (including the Company), and any entity under the control (as defined in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended, without regard to whether any party is a “registrant” under such Act) of IGI, and any of their successors or assigns.

2.

POSITION, RESPONSIBILITIES AND TERM

2.1.

Executive’s Position .  On the terms and subject to the conditions set forth in this Agreement, the Company shall employ Executive to serve as an officer of the Company and as the Controller of the Company.  The Executive shall report directly to the President of the Company.  Executive shall perform such services in the Company’s offices in Buena, New Jersey or such other location or locations as the Executive and the President shall agree; provided, however , that Executive will be required to travel from time to time for business purposes.

2.2.

Executive’s Responsibilities .  The Executive shall perform all duties customarily attendant to the position and shall perform such services and duties commensurate with such position as may from time to time be reasonably prescribed by the President or the Board of Directors of the Company (the “ Board ”).

2.3.

No Conflicts of Interest .  Executive further agrees that throughout the period of his employment hereunder, he will not perform any activities or services, or accept such other

-2-

employment which would be inconsistent with this Agreement, the employment relationship between the Parties, or would interfere with or present a conflict of interest concerning Executive’s employment with the Company; provided , that Executive shall be permitted to serve on the boards of directors of such other companies as the Board shall approve, and that Executive may make personal investments and may act as a director and engage in other activities for any charitable, educational, or other nonprofit institution, as long as such investments and activities do not materially interfere with the performance of Executive’s duties hereunder.  Executive agrees to adhere to and comply with any and all business practices and requirements of ethical conduct set forth in writing from time to time by the Company in its employee manual or similar publication.

2.4.

Term .  This Agreement shall become effective on May 26, 2009 (the “ Effective Date ”) and will govern Executive’s employment by the Company until that employment ceases (such period of Executive’s employment is herein referred to as the “ Term ”).

3.

ACCEPTANCE

Executive hereby accepts such employment and agrees that throughout the Term,  Executive will devote his full business time, attention, knowledge and skills faithfully, diligently and to the best of his ability, in the furtherance of the business of the IGI Companies.

4.

COMPENSATION

4.1.

Base Salary .  The Executive shall receive an initial annual salary of One Hundred and Fifty-Five Thousand ($155,000) Dollars (the “ Base Salary ”) paid in accordance with the Company’s payroll practices, as in effect from time to time.  The Base Salary shall be reviewed on an annual basis by the Company and may be adjusted from time to time by the Company.

4.2.

Benefits .  In addition to such compensation, Executive shall be entitled to the benefits which are afforded generally, from time to time to similarly situated executive employees of the IGI Companies.  Notwithstanding the foregoing, nothing contained in this Agreement shall require the IGI Companies to establish, maintain or continue any of the group benefits plans already in existence or hereafter adopted for the employees of the IGI Companies, or restrict the right of the IGI Companies to amend, modify or terminate such group benefit plans in a manner which does not discriminate against Executive as compared to other executive employees of IGI Companies.

4.3.

Paid Time Off .  Executive shall be entitled to 20 business days of paid time off (consisting of vacation and personal days) and sick days and holidays as are provided in general to similarly situated employees of the IGI Companies, in accordance with usual practices and procedures.  Without limiting the foregoing, unless otherwise required by law, Executive shall not be entitled to any additional compensation for any unused paid time off.  Paid time off shall stop accruing once Executive has accumulated and not used the number of days to which he is entitled to in a year.

4.4.

Annual Performance Bonus .  The Executive shall be eligible to receive an annual performance bonus (the “ Annual Bonus ”) for each calendar year during the Term (each a “ Fiscal Year ”), which may be payable, in the discretion of the Board or the Compensation

-3-

Committee of the Board (the “ Committee ”), in the form of cash, stock options and/or restricted equity not later than 75 days after the end of such Fiscal Year; provided, however , that the Executive must be employed by the Company on December 31 of a Fiscal Year in order to be eligible for an Annual Bonus under this Section 4.4 for such Fiscal Year.

The Executive’s target Annual Bonus will be $22,605 ¹ with respect to the remainder of the 2009 calendar year and will be 25% of Executive’s Base Salary then in effect for each subsequent Fiscal Year.  The actual amount of the Annual Bonus with respect to the 2009 calendar year, and any subsequent Fiscal Years, will be determined by the Board or the Committee, in their discretion, with reference to the Executive’s and the Employer’s fulfillment of performance goals established by the Committee with respect to the applicable Fiscal Year .  The Committee shall establish such performance goals within one (1) month of the Effective Date of this Agreement with respect to the remainder of the 2009 calendar year (the “ 2009 Performance Goals ”).  The 2009 Performance Goals shall be mutually agreed upon by the Executive and the Chairwoman of the Board.

4.5.

Grant of Equity Awards .

(a)

Equity Awards .  As soon as practicable following the Effective Date of this agreement and subject to the approval of the Board, Executive will receive a grant of: (i) 80,000 shares of restricted stock, as memorialized in (and subject to the terms of) a restricted stock award agreement, attached hereto as Exhibit A (the “ Restricted Stock Agreement ”) and (ii) an option to purchase 110,000 shares of the Company’s Common Stock, as memorialized in (and subject to the terms of) an option award agreement, attached hereto as Exhibit B (the “ Option Agreement ”) (collectively the “ Equity Award Agreements ”).

(b)

Vesting .  Except as otherwise set forth in Section 8 hereof, the shares subject to the Equity Award Agreements shall become fully vested over a period of three years as follows: (i) one-twelfth of the shares subject to the Equity Award Agreements shall vest as of the Effective Date; (ii) one-twelfth of the shares subject to the Equity Award Agreements shall vest on each of the following dates: (A) September 30, 2009, (B) December 31, 2009 and (C) March 31, 2010; (iii) one-third of the shares subject to the Equity Award Agreements shall vest on the second anniversary of the Effective Date and (iv) one-third of the shares subject to the Equity Award Agreements shall vest on the third anniversary of the Effective Date.

(c)

Accelerated Vesting .  Immediately prior to a Change in Control (as defined in Section 1.1 above), any shares that then remain unvested will become vested, provided the Executive remains in continuous service with the Company through the consummation of that Change in Control.

5.

EXPENSES

The Company shall reimburse Executive, in accordance with Company policy, for all expenses reasonably and properly incurred by Executive in connection with the performance

_________________

¹  Pro-rata portion of $38,750 (i.e. 25% of $155k), with pro-ration based on start/effective date.

-4-

of Executive’s duties hereunder and the conduct of the business of the Company, upon the submission to the Company (or its designee) of appropriate vouchers therefor.

6.

CONFIDENTIAL INFORMATION AND PROPERTY

6.1.

Confidentiality .  The Executive recognizes and acknowledges that the Proprietary Information (as defined below) is a valuable, special and unique asset of the business of the Company and its affiliates.  As a result, both during the Term and thereafter, the Executive will not, without the prior written consent of the Company, for any reason divulge to any third-party or use for his own benefit, or for any purpose other than the exclusive benefit of the Company and its affiliates, any Proprietary Information.  Notwithstanding the foregoing, if the Executive is compelled to disclose Proprietary Information by court order or other legal or regulatory process, to the extent permitted by applicable law, he shall promptly so notify the Company so that it may seek a protective order or other assurance that confidential treatment of such Proprietary Information shall be afforded, and the Executive shall reasonably cooperate with the Company and its affiliates in connection therewith.  If the Executive is so obligated by court order or other legal process to disclose Proprietary Information it will disclose only the minimum amount of such Proprietary Information as is necessary for the Executive to comply with such court order or other legal process.

6.2.

Property of the Company .

(a)

Proprietary Information . All right, title and interest in and to Proprietary Information will be and remain the sole and exclusive property of the Company and its affiliates.  The Executive will not remove from the Company’s or its affiliates’ offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Proprietary Information, or other materials or property of any kind belonging to the Company or its affiliates unless necessary or appropriate in the performance of his duties to the Company and its affiliates.  If the Executive removes such materials or property in the performance of his duties, he will return such materials or property promptly after the removal has served its purpose.  The Executive will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property, except to the extent necessary to satisfy contractual obligations of the Company or its affiliates or to perform his duties on behalf of the Company and its affiliates.  Upon termination of the Executive’s employment with the Company, he will leave with the Company and its affiliates or promptly return to the Company and its affiliates all originals and copies of such materials or property then in his possession.

(b)

Intellectual Property .  The Executive agrees that all the Intellectual Property (as defined below) will be considered “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property will be the sole