Exhibit 10.4

SEPARATION OF EMPLOYMENT AGREEMENT

AND GENERAL RELEASE

THIS SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE (the “Agreement”) is
made as of the date set forth below immediately above the signatures hereto, by
and between IGI Laboratories, Inc., having an address at 105 Lincoln Avenue,
Buena, New Jersey 08310 (the “Company”) and Rajiv Mathur, having an address at
35 Milestone Drive, Ringoes, New Jersey 08551 (“Mathur”).

WHEREAS, Mathur’s employment with the Company will terminate as of the date
hereof; and

WHEREAS, the Company has agreed to provide Mathur with a separation package,
subject to the execution and non-revocation of this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED by and between Mathur and the Company as
follows:

1.

Resignation.  Mathur hereby resigns all employment, Board of Director and other
positions with the Company, effective as of May 28, 2009 (“Termination Date”).

2.

Separation Payments.

a.

The Company shall pay to Mathur his accrued but unpaid cash compensation which
shall consist of:  (i) Mathur’s base salary through the date his employment with
the Company terminated that has not yet been paid, (ii) any accrued but unpaid
vacation pay, and (iii) any unreimbursed employee business expenses incurred
prior to the date hereof to the extent Mathur has submitted a valid claim for
such expenses.

(1)

In consideration for Mathur’s obligations as set forth herein (including,
without limitation, the execution and non-revocation of this Agreement and
agreeing to be bound by the terms of Paragraph 3 below), subject to the Mathur
conducting himself in accordance with and not violating the terms of this
Agreement and in full satisfaction of any and all obligations of the Company
including, without limitation, under any severance policy or program maintained
by the Company or the terms of the Employment Agreement, the Company hereby
agrees to pay Mathur Three Hundred Twelve Thousand Seven Hundred Ninety Eight
Dollars ($312,798), less any applicable withholding taxes, such amount to be
paid ratably over a twelve month period with equal portions, less applicable
withholding taxes, to be paid to Mr. Mathur on each regular payroll payment date
during such period.  The first installment of such amount will be made on the
first regular payroll date that occurs after the Termination Date.

3.

Benefits.

a.

Continuation of Health/Group Life Insurance Benefits.  Following the Termination
Date, in addition to the severance pay described above, subject to the
non-revocation of this Agreement, Mathur is entitled to receive the group health
benefits coverage in effect on the Termination Date (or generally comparable
coverage) for himself and, where

applicable, his spouse and eligible dependents (to the extent they were
receiving such coverage as of the Termination Date), at the same premium rates
as may be charged from time to time for employees of IGI generally, which
coverage will be provided until the earlier of (i) twelve months from the date
hereof and (ii) the date Mathur is or becomes eligible for coverage under group
health plan(s) of any other employer.  Such continued coverage will run
concurrently with COBRA.

b.

401(k) Plan.  If available, Mathur will be entitled to receive benefits under
the IGI Laboratories, Inc. 401(k) Plan in accordance with the terms and
conditions of the plan.

4.

Mutual Release.

a.

Mathur Release.

(1)

Mathur, for and in consideration of the commitments of the Company as set forth
in this Agreement, and intending to be legally bound, does hereby REMISE,
RELEASE AND FOREVER DISCHARGE the Company, its affiliates, subsidiaries and
parents, and its officers, directors, employees, and agents, and its and their
respective successors and assigns, heirs, executors, and administrators (each, a
“Company Releasee” and collectively, “Company Releasees”) from all causes of
action, suits, debts, claims and demands whatsoever in law or in equity, which
Mathur ever had, now has, or hereafter may have, whether known or unknown, or
which Mathur’s heirs, executors, or administrators may have, by reason of any
matter, cause or thing whatsoever, from the beginning of Mathur’s employment to
the date of this Agreement, and particularly, but without limitation of the
foregoing general terms, any claims arising from or relating in any way to
Mathur’s employment relationship with the Company and/or its predecessors,
subsidiaries or affiliates, the terms and conditions of that employment
relationship, and the termination of that employment relationship, including,
but not limited to, any claims arising under the Age Discrimination in
Employment Act, the Older Workers Benefit Protection Act (“OWBPA”), Title VII of
The Civil Rights Act of 1964, the Americans with Disabilities Act, the Family
and Medical Leave Act of 1993, the Employee Retirement Income Security Act of
1974, and any other claims under any federal, state or local common law,
statutory, or regulatory provision, now or hereafter recognized, and any claims
for attorneys’ fees and costs.  This Agreement is effective without regard to
the legal nature of the claims raised and without regard to whether any such
claims are based upon tort, equity, implied or express contract or
discrimination of any sort.

(2)

To the fullest extent permitted by law, Mathur represents and affirms that (i)
Mathur has not filed or caused to be filed on Mathur’s behalf any claim for
relief against the Company or any Company Releasee and, to the best of Mathur’s
knowledge and belief, no outstanding claims for relief have been filed or
asserted against the Company or any Company Releasee on Mathur’s behalf; (ii)
Mathur has not reported any improper, unethical or illegal conduct or activities
to any supervisor, manager, department head, human resources representative,
agent or other representative of the Company, to any member of the Company’s
legal or compliance departments, or to the ethics hotline, and has no knowledge
of any such improper, unethical or illegal conduct or activities; and (iii)
Mathur will not file, commence, prosecute or participate in any judicial or
arbitral action or proceeding against the Company or

any Company Releasee based upon or arising out of any act, omission,
transaction, occurrence, contract, claim or event existing or occurring on or
before the date of this Agreement.

b.

Company Release.  The Company, for and in consideration of the commitments of
Mathur set forth in this Agreement, and intending to be legally bound, does
hereby REMISE, RELEASE AND FOREVER DISCHARGE Mathur, its his dependents, heirs,
executors, and administrators (each, a “Mathur Releasee” and collectively,
“Mathur Releasees”) from all causes of action, suits, debts, claims and demands
whatsoever in law or in equity, which the Company ever had, now has, or
hereafter may have, whether known or unknown, by reason of any matter, cause or
thing whatsoever, from the beginning of Mathur’s employment to the date of this
Agreement, and particularly, but without limitation of the foregoing general
terms, any claims arising from or relating in any way to Mathur’s employment
relationship with the Company and/or its predecessors, subsidiaries or
affiliates, the terms and conditions of that employment relationship, and the
termination of that employment relationship, including, but not limited to, any
claims arising under any federal, state or local common law, statutory, or
regulatory provision, now or hereafter recognized, and any claims for attorneys’
fees and costs.  This Agreement is effective without regard to the legal nature
of the claims raised and without regard to whether any such claims are based
upon tort, equity, implied or express contract or discrimination of any sort.

5.

Confirmation of Non-Compete and Non-Solicitation Provisions.   In consideration
of the commitments of the Company set forth herein, Mathur acknowledges and
reconfirms his agreement to be subject to and to abide by the terms of Sections
6 and 7 of that certain employment agreement by and between the Company and
Mathur dated as of January 1, 2007 (the “Employment Agreement”).  Failure to
abide by such terms shall void any obligation of the Company to pay any sums or
further consideration due or which may become due under this Agreement in
addition to all other legal remedies available to the Company.

6.

Cooperation.   Mathur agrees to cooperate, in good faith, with the Company at
such times and in such manner as it may reasonably request with respect to
matters that were within Mathur 's area of responsibility, or in which Mathur
was otherwise engaged, in the course of Mathur 's employment by the Company.
 With respect to litigation affecting the Company that arises out of events with
respect to which Mathur has or may have knowledge, Mathur 's cooperation shall
include, without limitation, interviews and conferences with the Company's
attorneys and testifying at trials.  The Company shall pay any expenses
reasonably incurred by Mathur in connection with cooperating with the Company as
provided above.  In the event that Mathur is named personally in any legal
proceeding relating to his activities on behalf of the Company, he will be
eligible for indemnification to the extent permitted by the Company’s by-laws
and other governance documents, as well as any applicable liability insurance
policies, as in effect at the time he makes a claim for indemnification.

7.

Non-Disparagment.  Mathur further agrees that Mathur will not disparage or
subvert the Company, or make any statement reflecting negatively on the Company,
its affiliated corporations or entities, or any of their officers, directors,
employees, agents, stockholders or representatives, including, but not limited
to, any matters relating to the operation or management of the Company, Mathur’s
employment and the termination of Mathur’s employment, irrespective of the
truthfulness or falsity of such statement.  Mathur will

continue to conduct his activities in a professional manner and to cooperate
with the Company in all reasonable ways to achieve a smooth transition and
resolution to any open items on which he was working and not intentionally
injure the Company in any way relating to Company property or personnel.

8.

Satisfaction of Other Obligations.  Mathur acknowledges and agrees that the
Company previously has satisfied or pursuant to this Agreement hereby does
satisfy any and all obligations owed to Mathur under any severance policy or
program maintained by the Company, any bonus or compensation related arrangement
or understanding with the Company and any employment-related agreement or offer
letter Mathur has with the Company (including, without limitation, the
Employment Agreement), and further, that, except as set forth expressly herein,
no promises or representations have been made to Mathur in connection with the
termination of Mathur’s employment, or the terms of this Agreement.  Mathur
understands and agrees that the payments, benefits and agreements provided in
this Agreement are being provided to Mathur in consideration for Mathur’s
acceptance and execution of, and in reliance upon Mathur’s representations in,
this Agreement.  Mathur further acknowledges that, in the absence of his
execution of this Agreement, the payments specified herein would not otherwise
be due to him.  The severance payments, rights and benefits described in this
Agreement will be the only such payments, rights and benefits Mathur is to
receive as a result of his termination of employment and Mathur agrees he is not
entitled to any additional payments, rights or benefits not otherwise described
in this Agreement.  Mathur hereby acknowledges and agrees that he is not
eligible to be a participant in any severance or retention plan of the Company.

9.

Non-Disclosure.  Mathur agrees not to disclose the terms of this Agreement to
anyone, except Mathur’s spouse, attorney and, as necessary, tax/financial
advisor.  It is expressly understood that any violation of the confidentiality
obligation imposed hereunder constitutes a material breach of this Agreement.

10.

Return of Company Property.  Mathur represents that Mathur does not presently
have in Mathur’s possession any records and business documents, whether on
computer or hard copy, and other materials (including but not limited to
computer disks and tapes, computer programs and software, office keys,
correspondence, files, customer lists, technical information, customer
information, pricing information, business strategies and plans, sales records
and all copies thereof) (collectively, the “Corporate Records”) provided by the
Company and/or its predecessors, subsidiaries or affiliates or obtained as a
result of Mathur’s prior employment with the Company and/or its predecessors,
subsidiaries or affiliates, or created by Mathur while employed by or rendering
services to the Company and/or its predecessors, subsidiaries or affiliates.
 Mathur acknowledges that all such Corporate Records are the property of the
Company.  In addition, Mathur shall promptly return in good condition any and
all beepers, credit cards, cellular telephone equipment, business cards and
computers.

11.

Limitation of Claims.

a.

This Agreement will not prevent Mathur from filing a charge with the Equal
Employment Opportunity Commission (or similar state agency) or participating in
any investigation conducted by the Equal Employment Opportunity Commission (or
similar state agency); provided, however, that any claims by Mathur for personal
relief in connection with such a charge or investigation (such as reinstatement
or monetary damages) would be barred.

b.

The parties agree and acknowledge that the agreement by the parties described
herein, and the settlement and termination of any asserted or unasserted claims
against the Company Releasees or the Mathur Releasees, are not and shall not be
construed to be an admission of any violation of any federal, state or local
statute or regulation, or of any duty owed by any of the Company Releasees or
the Mathur Releasees.

12.

Consequences of Breach.  Mathur agrees and recognizes that should Mathur breach
or otherwise fail to comply with any of the obligations or covenants set forth
in this Agreement, the Company will have no further obligation to provide Mathur
with the consideration set forth herein, and will have the right to seek
repayment of all consideration paid up to the time of any such breach.  Further,
the parties acknowledge that in the event of a breach of or other failure to
comply with this Agreement by either party, the non-breaching party (and in the
case of the Company, the Company Releasees) may seek any and all appropriate
relief for any such breach, including equitable relief and/or money damages,
attorney’s fees and costs.

13.

Deduction; Withholding; Set-Off.  Notwithstanding any other provision of this
Agreement, any payments or benefits hereunder will be subject to the withholding
of such amounts, if any, relating to tax and other payroll deductions as the
Company reasonably determines it should withhold pursuant to any applicable law
or regulation.  The amounts due and payable under this Agreement will at all
times be subject to the right of set-off of the Company for any amounts or debts
incurred and owed by Mathur to the Company whether during his employment or
after the Termination Date.

14.

Equitable Remedies.  The parties acknowledge and agree that if either party
should breach any of the covenants, restrictions and agreements contained
herein, irreparable loss and injury would result to the non-breaching party, and
that damages arising out of such a breach may be difficult to ascertain.  The
parties therefore agree that in addition to all other remedies provided at law
or at equity, the non-breaching party may petition and obtain from a court of
law or equity all necessary temporary, preliminary and permanent injunctive
relief, without the necessity of proving actual damages, to prevent a breach by
the other party of any covenant contained in this Agreement.  The parties agree
further that if it is determined by a court that the breaching party has
breached the terms of this Agreement, the non-breaching party shall be entitled
to recover from the breaching party all costs, attorneys’ fees, and expenses
incurred as a result of its attempts to redress such a breach or to enforce its
rights and protect its legitimate interests.

15.

Waiver.  Mathur agrees that if the Company fails to take action to remedy any
breach by Mathur of this Agreement or any portion of the Agreement, conduct or
inaction by the Company shall not operate or be construed as a waiver of any
subsequent breach by Mathur of the same or any other provision, agreement or
covenant.

16.

 Severable Nature of the Agreement.  Mathur agrees that each covenant, paragraph
and division of this Agreement is intended to be severable and distinct, and
that if any paragraph, subparagraph, provision or term of this Agreement is
deemed to be unlawful or unenforceable, such a determination will not impair the
legitimacy or enforceability of any other aspect of the Agreement.

17.

Assignment.  Mathur agrees that the Company may assign this Agreement to any of
its successors by merger or otherwise; provided, that the Company will remain
obligated to satisfy its obligations under the terms of this Agreement in the
event that its successors or assigns fail to fulfill such obligations.

18.

Entire Agreement.  This Agreement shall supersede any prior agreement between
Mathur and the Company relating to the subject matter hereof.

19.

Amendments.  No amendments or modifications to the document shall be binding or
valid unless mutually agreed upon, reduced to writing and signed by the parties.

20.

Governing Law.  This Agreement and the obligations of the parties hereunder
shall be construed, interpreted and enforced in accordance with the laws of the
State of Delaware, without regard to principles of conflict of laws.

21.

Confirmation.  Mathur certifies and acknowledges as follows:

a.

 That Mathur has read the terms of this Agreement, and that Mathur understands
its terms and effects, including the fact that Mathur has agreed to RELEASE AND
FOREVER DISCHARGE the Company and each and everyone of its affiliated entities
from any legal action arising out of Mathur’s employment relationship with the
Company and the termination of that employment relationship;

b.

That Mathur has signed this Agreement voluntarily and knowingly in exchange for
the consideration described herein, which Mathur acknowledges is adequate and
satisfactory to Mathur;

c.

That Mathur has been and is hereby advised in writing to consult with an
attorney prior to signing this Agreement;

d.

That Mathur does not waive rights or claims that may arise after the date this
Agreement is executed;

e.

That the Company has provided Mathur with a period of twenty-one (21) days
within which to consider this Agreement, and that Mathur has signed on the date
indicated below after concluding that this Agreement is satisfactory to him; and

f.

Mathur acknowledges that this Agreement may be revoked by Mathur within seven
(7) days after execution, and it shall not become effective until the expiration
of such seven day revocation period.  In the event of a timely revocation by
Mathur, other than Paragraph 1 herein, this Agreement will be deemed null and
void and the Company will have no obligations hereunder.

Intending to be legally bound hereby, Mathur and the Company executed the
foregoing Separation of Employment Agreement and General Release this 28th day
of May, 2009.

/s/ Rajiv Mathur

Rajiv Mathur

 

 

 

IGI LABORATORIES, INC.

By:

_________________________________
Name:

_________________________________
Title:

_________________________________