Note 11. Changes in Management and the Board of Directors

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

11.      Changes in Management and the Board of Directors

On July 30, 2012, the Company announced that Jason Grenfell-Gardner has been appointed the Company’s new President and Chief Executive Officer, effective July 30, 2012.  Charles E. Moore left his employment with the Company and resigned as a member of the Company’s board of directors (the “Board”), effective July 30, 2012.  The Board appointed Mr. Grenfell-Gardner to fill the vacant Board seat created by Mr. Moore’s resignation, effective July 30, 2012.

The Company entered into an employment agreement with Mr. Grenfell-Gardner, effective as of July 30, 2012.  Under the terms of such employment agreement, Mr. Grenfell-Gardner will receive an annual salary of $315,000.  Mr. Grenfell-Gardner has received an option to purchase 975,000 shares of the Company’s common stock (the “Primary Option”) and a supplemental option to purchase 25,000 shares of the Company’s common stock (the “Supplemental Option”), the vesting terms of which are explained below. In addition, Mr. Grenfell-Gardner will receive an award of 325,000 shares of restricted stock and an option to purchase 25,000 shares of the Company’s common stock, as soon as practicable.  In addition, Mr. Grenfell-Gardner will be entitled to participate in certain of the Company’s benefit programs on the same terms and conditions generally provided by the Company to its executive employees. Mr. Grenfell-Gardner will also be eligible to receive an annual performance bonus for each calendar year during the term of his employment, which may be payable in either, cash, stock options and/or restricted stock. Mr. Grenfell-Gardner’s target bonus will be equal to 70% of his base salary for the applicable fiscal year. All performance targets pursuant to such plan shall be determined by the Board’s Compensation Committee. Mr. Grenfell-Gardner is also subject to certain restrictive covenants as set forth in his employment agreement, including confidentiality, non-solicitation and non-competition covenants. Mr. Grenfell-Gardner’s employment agreement further provides for payments upon certain types of employment termination events as further set forth in his employment agreement.

The above referenced stock option grants had an exercise price equal to the closing price of the Company’s common stock on July 30, 2012, and the Primary Option will become fully vested over a period of three years as follows: (i) one-third shall vest on the first anniversary of the date of the grant; (ii) one-third shall vest on the second anniversary of the date of the grant and (iii) one-third shall vest on the third anniversary of the date of the grant. The Supplemental Option shall become fully vested immediately upon their grant     In addition, any options or restricted stock that remain unvested immediately prior to a change in control will become vested, provided that the executive remains in continuous service with the Company through the consummation of the change in control.

On August 15, 2012, the Company filed on Form 8-K that effective July 30, 2012 (the "Separation Date"), Mr. Moore, the President and Chief Executive Officer of IGI Laboratories, Inc., a Delaware corporation (the "Company"), resigned from employment with the Company and resigned as a member of the Company’s board of directors.

In connection with Mr. Moore's departure from the Company, the Company entered into a Separation of Employment Agreement and General Release (the "Separation Agreement") dated August 14, 2012 with Mr. Moore, consistent with the terms of Mr. Moore’s employment agreement. The Separation Agreement provides that the Company shall pay Mr. Moore $138,680 as a separation payment, with such amount to be paid ratably over a 6 month period on each regular payroll payment date during such period.

Also, in the Separation Agreement, Mr. Moore agreed to provide the Company with a general release, and Mr. Moore agreed to certain restrictive covenants, and reconfirmed his agreement to the confidentiality, non-competition and non-solicitation covenants set forth in his employment agreement with the Company, after the Separation Date.  Consistent with his employment agreement, Mr. Moore vested in all outstanding options through his vesting date.  The Company recorded stock based compensation in the amount of $100,950.