Exhibit 11.01

                             SEVERANCE AGREEMENT
                             -------------------

      THIS AGREEMENT ("Agreement") is made by and between IGI, INC. ("IGI"),
a Delaware corporation, with its principal place of business at 105 Lincoln
Avenue, Buena, New Jersey 08310, and JOHN F. AMBROSE ("Ambrose") residing at
10 Bradlee Road, Marblehead, Massachusetts 01945.

                                  RECITALS

      WHEREAS, Ambrose was employed by IGI as its President and Chief
Operating Officer from September 2000 to May 2001, and as IGI's President and
Chief Executive Officer from May 2001 to August 15, 2003; and

      WHEREAS, the parties hereto mutually agreed to the termination of
Ambrose's employment with IGI as of August 15, 2003; and

      WHEREAS, Ambrose and IGI wish to resolve by this Agreement any and all
claims and/or disputes of any kind whatsoever that may exist between them
relating to Ambrose's employment with IGI, the termination of Ambrose's
employment with IGI and/or any other matter; and

      WHEREAS, the parties agree that any and all payments and/or other
benefits of any kind whatsoever, if any, that Ambrose is or may claim to be
entitled to receive from IGI in conjunction with his employment with IGI
and/or the termination thereof shall be exclusively and conclusively governed
by the terms of this Agreement, and Ambrose agrees that in accordance with
the terms hereof he shall be forever prohibited from seeking and/or claiming
any additional compensation, benefits, damages, remedies and/or any other
payments of any kind whatsoever from IGI,

      NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the parties hereto, IGI and Ambrose
agree as follows:

      1.    Incorporation of Recitals. The Recitals set forth above are
            hereby incorporated into and made a part of this Agreement.

      2.    Effective Date. Subject to the terms of Paragraph 15 of this
            Agreement and Ambrose' rights thereunder, the parties expressly
            acknowledge and agree that the effective date of this Agreement
            is August 15, 2003 (the "Effective Date"), irrespective of the
            date upon which it was formally executed by the parties.

      3.    Employment Termination Date. The parties expressly acknowledge
            and agree that Ambrose's employment with IGI is terminated as of
            August


<PAGE>  1


            15, 2003. As of August 15, 2003, Ambrose resigns from any and all
            officerships and directorships he holds with IGI, and thereby
            waives, relieves, relinquishes, renounces and surrenders as of
            August 15, 2003, any and all rights, powers, obligations,
            authorities and/or benefits of any kind whatsoever with respect
            thereto. Ambrose agrees to fully cooperate with IGI to accomplish
            such resignations, including without limitation, execution of any
            and all documents as may be necessary to effectuate such
            resignations. Ambrose further agrees, warrants and represents
            that as of August 15, 2003, and forever thereafter, he shall not
            represent and/or hold himself out as an employee, officer and/or
            director of IGI.

      4.    Payments to Ambrose.
            --------------------

            A. On the Effective Date, IGI shall pay Ambrose a lump sum gross
            amount of $173,250.00 (less any and all applicable taxes,
            withholdings, contributions and other deductions), which amount
            represents 90% of Ambrose's gross annual salary in effect
            immediately prior to the termination of his employment with IGI.

            B. The parties expressly acknowledge and agree that any and all
            payments to be made by IGI to Ambrose under Paragraphs 4(A) shall
            be paid, treated and reported by IGI and Ambrose as W-2 income,
            and that Ambrose shall be solely responsible for the payment of
            any and all federal, state and/or local income taxes, penalties
            and/or interest with respect to thereto.

      5.    Reimbursement of Business Expenses.
            -----------------------------------

            On or before September 30, 2003, Ambrose shall submit to IGI a
            final Business Expense Report ("Final Expense Report") to request
            reimbursement for any and all costs, expenses, and/or
            expenditures he had incurred as of August 15, 2003, in performing
            his employment with IGI. The Final Expense Report shall be
            submitted, reviewed, approved/declined and paid in accordance
            with the IGI's rules and procedures relative to such matters as
            currently in effect as of August 15, 2003.

      6.    Continuation of Health/Medical Insurance Coverage For Ambrose and
            Dependents. For a period of twelve (12) months commencing August
            31, 2003 and ending August 31, 2004, IGI shall continue to
            provide Ambrose and his dependents with health, medical and
            dental Insurance coverage benefits under the IGI,


<PAGE>  2


            Inc. Aetna, Inc. Group Health Insurance Plan and/or any other
            employer (IGI) provided plan or policy, if any. As of August 31,
            2004, Ambrose and his dependents shall no longer be entitled to
            nor be permitted to participate in any and all insurance coverage
            and/or other benefits provided under the IGI, Inc. Aetna, Inc.
            Group Health Insurance Plan and/or any under other employer (IGI)
            provided plan or policy, if any. Any and all coverage and/or
            benefits previously afforded to Ambrose and/or his dependents
            thereunder shall terminate on August 31, 2004, subject to any and
            all rights by Ambrose and/or his dependents to elect to continue
            participation therein under COBRA and/or any other applicable
            laws, and Ambrose and/or his dependents shall be solely
            responsible for the payment of any and all costs and expenses
            relating thereto, including, without limitation, premium costs
            and expenses for continued coverage under COBRA and/or any other
            applicable law.

      7.    Termination of 401K Plan Benefits. In accordance with the terms
            and conditions of the IGI, Inc. 401K Retirement Savings Plan
            ("401K Plan"), Ambrose's eligibility to participate therein
            terminated on August 15, 2003, and from that date onward Ambrose
            shall not be permitted to make any further contributions to the
            401K Plan nor is he entitled to any employer matching
            contributions made by IGI after such date. Any and all account
            balances in the 401K Plan for the benefit of Ambrose shall be
            held in such account and/or distributed to Ambrose in accordance
            with the terms of the 401K Plan and notice to IGI of Ambrose's
            compliance with any and all requirements contained therein.
            Ambrose shall be solely responsible for any and all federal,
            state and/or local taxes, penalties and/or interest that may be
            assessed in relation to any and all distributions to Ambrose from
            and under the 401K Plan. Ambrose agrees and acknowledges that he
            is in possession of a complete and current copy of the 401K Plan
            and is fully familiar with and has been fully advised as to his
            rights there under.

      8.    Termination of Life Insurance Benefits. As of August 31, 2003,
            Ambrose shall no longer be entitled to nor be permitted to
            participate in any and all life insurance coverage and/or other
            benefits provided by IGI under its life insurance plan and/or
            under any other employer (IGI) provided plan or policy, if any.
            Any and all coverage and/or benefits previously afforded to
            Ambrose thereunder shall terminate on August 31, 2003, without
            any further notice by IGI to Ambrose, unless otherwise required
            by law.

      9.    Termination of Unexercised Stock Options. Ambrose hereby agrees
            as of the Effective Date to release, relinquish and forever
            discharge any and all rights, title, interest and claims in and
            to any and all 400,000 stock options granted to him under the
            IGI, Inc. 1999 Stock Option Plan, the IGI, Inc. 1998 Stock Option
            Plan and/or otherwise. As such, irrespective of the exercise date
            stated in and/or on any stock option grant or other document
            relating thereto, all of Ambrose's 400,000 stock options shall
            automatically terminate on the Effective


<PAGE>  3


            Date without further notice and/or action by IGI unless as
            otherwise required by law.

      10.   Return of IGI Property. Ambrose represents and warrants that as
            of the Effective Date, he has returned to IGI any and all
            equipment, property, manuals, materials and/or any other
            documents belonging to IGI and/or that were provided to or came
            into Ambrose's possession as the result of his employment with
            IGI, including, without limitation, any and all documents that
            contain trade secrets of IGI and/or proprietary and/or
            confidential information relating to IGI and/or its business.
            Ambrose further represents and warrants that he has not copied,
            duplicated and/or otherwise reproduced any such manuals,
            materials, documents and/or information. Ambrose expressly agrees
            that he shall not use for and/or in conjunction with any future
            business and/or employment purposes and/or disclose to any other
            individual, corporation, person, partnership (general or
            limited), limited liability company and/or other business entity,
            IGI's trade secrets and/or confidential/proprietary information
            of IGI that Ambrose may have acquired at any time during his
            employment with IGI, including, without limitation, client lists,
            price lists, manufacturing processes, manufacturing costs and
            business plans.

      11.   Non-Disclosure of Confidential Information.
            -------------------------------------------

            A. For the purposes of and as used in Paragraph 11(B) or
            otherwise in this Agreement, the term "Confidential Information"
            shall be defined as and mean as follows: IGI's trade secrets and
            proprietary information, as well as any and all information of a
            business and/or technical nature disclosed to, revealed,
            discovered, learned and/or developed by Ambrose at any time
            during and/or in the course of his employment with IGI, which
            information relates in any way whatsoever to the business of IGI,
            to the business of any customer of IGI, and/or to the business of
            any other person and/or entity which consults with IGI in any way
            whatsoever in conjunction with IGI's business, which such
            information is generally unknown in the industry. Confidential
            Information shall include, but not limited to, information and
            knowledge relating to IGI's computer and/or IT systems, programs,
            software, passwords and/or other specifications relating thereto,
            Novasome(R) technologies, formulations, manufacturing processes,
            procedures, packaging, developments, improvements, methods or
            operation, sales, pricing and profit margins, customers, clients
            credit and other financial information about IGI and/or IGI's
            customers and/or relationships between IGI and its customers,
            clients and other who have dealings with the Company.

            B. Except as expressly required by law, Ambrose hereby agrees
            that


<PAGE>  4


            he will not at any time whatsoever from the Effective Date of
            this Agreement and forever thereafter, without the express prior
            written consent of IGI: (1) disclosure directly and/or indirectly
            any Confidential Information to any person, entity and/or other
            third-party not a signatory to this Agreement; and/or (2) use
            directly and/or indirectly any Confidential Information for the
            benefit of himself and/or any other person, entity and/or other
            third-party not a signatory to this Agreement.

            C. Ambrose represents and warrants that as of the Effective Date
            he has not without the prior written consent of IGI: (1)
            disclosed directly and/or indirectly any Confidential Information
            to any person, entity and/or other third-party not a signatory to
            this Agreement; and/or (2) use directly and/or indirectly any
            Confidential Information for the benefit of himself and/or any
            other person, entity and/or other third-party not a signatory to
            this Agreement.

            D. Ambrose further acknowledges and agrees that any violation of
            the terms of this Paragraph 11 shall be deemed a breach of this
            Agreement entitling IGI to any and all rights and remedies under
            this Agreement, as well as any and all rights and remedies
            available at law and/or equity.

      12.   No Admission of Liability. Ambrose expressly agrees and
            acknowledges that IGI has voluntarily agreed as a business
            decision to enter into this Agreement with Ambrose, and that IGI
            is neither required nor obligated, by law, contract or otherwise,
            to enter into this Agreement with Ambrose and/or to pay Ambrose
            any of the amounts and/or benefits provided for herein. IGI
            disputes any claim by Ambrose that IGI is obligated and/or
            otherwise liable to him for any monetary amounts, benefits and/or
            other damages arising from the termination of his employment with
            IGI and/or with respect to any other matter. Neither the
            execution of this Agreement nor any of the terms contained herein
            shall be construed and/or interpreted as an admission of
            liability by IGI with respect to any claims by Ambrose relating
            to his employment with IGI and/or the termination of his
            employment with IGI. Neither this Agreement nor any term hereof
            shall be admissible in any judicial, administrative and/or
            arbitration proceeding to which IGI now or hereafter may be a
            party, except any judicial, administrative and/or arbitration
            proceeding relating to this Agreement.

      13.   Ambrose Release. Except as expressly provided in Paragraph 14 of
            this Agreement, Ambrose, on behalf of himself and his heirs,
            executors, administrators, and assigns, does hereby remise,
            release and forever discharge IGI and its affiliates,
            subsidiaries and/or its past and present agents, attorneys,
            representatives, officers, directors, employees, successors,
            administrators, shareholders and assigns, of


<PAGE>  5


            and from any and all claims, liabilities, complaints, rights,
            injuries, damages, judgments, torts, causes of action, demands,
            suits, debts, losses, costs, expenses, fees, penalties,
            assessments, fines and interest, of any kind whatsoever, whether
            direct or indirect, absolute, fixed or contingent, liquidated or
            unliquidated, past or present, known or unknown, that Ambrose
            had, now has or may have against IGI, its subsidiaries,
            affiliates and/or its past and present agents, attorneys,
            representatives, officers, directors, employees, successors,
            administrators, shareholders and assigns relating to or arising
            out of Ambrose' employment with and/or termination of employment
            with IGI and/or any other matter, including, without limitation,
            any and all rights or claims relating to or arising under (i)
            federal and/or state common law; (ii) the Rehabilitation Act of
            1973; (iii) the Federal Age Discrimination in Employment Act of
            1967, as amended; (iv) the American With Disabilities Act; (v)
            Title VII of the Civil Rights Act of 1964, as amended; (vi) the
            Family Leave and Medical Act, (vii) the Employment Retirement
            Income Security Act of 1974, as amended, (viii) any and all
            federal, state, and/or local laws, statutes, ordinances,
            regulations and/or executive orders protecting the rights against
            discrimination upon the basis of age, race, sex, national origin,
            religion, non-job related disability, sexual preference and other
            types of discrimination; (ix) New Jersey Conscientious Employee
            Protection Act; (x) any and all any federal, state, and/or local
            laws, statutes, ordinances, regulations and/or executive orders
            protecting employees against sexual harassment and/or hostile
            work place environment; (xi) the Warn Act and/or any other
            similar state or federal laws, statutes, ordinances, regulations
            and/or executive orders requiring, among other things, advance
            notice to employees of certain workforce reductions; and (xii)
            any and all legal restrictions of any type whatsoever on IGI's
            right to terminate its employees, including Ambrose. Ambrose also
            agrees not to initiate, commence and/or file a lawsuit and/or any
            other judicial, administrative and/or arbitration proceeding in
            any jurisdiction whatsoever against IGI, its subsidiaries,
            affiliates and/or its past and present agents, attorneys,
            representatives, officers, directors, employees, successors,
            administrators, shareholders and assigns, with respect to,
            relating to and/or otherwise seeking to assert any claim released
            by Ambrose under the terms of this Agreement.

      14.   Exception to Ambrose Release. Notwithstanding the terms of
            Paragraph 13 above, the parties acknowledge and agree that by
            this Agreement Ambrose does not waive, release and/or relinquish
            (i) any and all rights and claims he may have under the Federal
            Age Discrimination in Employment Act of 1967, as amended,
            relating to events that may occur and/or facts that made known to
            Ambrose after the Effective Date, or (ii) his right to file a
            charge with or cooperate in


<PAGE>  6


            an investigation with the Equal Employment Opportunity Commission
            after the Effective Date.

      15.   Rights and Remedies.
            --------------------

            A. In the event of a material breach of this Agreement by
            Ambrose, and in addition to any and all rights, remedies and
            damages available to IGI hereunder and/or otherwise by law or
            equity, IGI shall immediately and automatically be forever
            relieved from that date forward, without any further action by
            IGI, from any and all obligations to Ambrose under this
            Agreement.

            B. Ambrose acknowledges and agrees that his breach of any of the
            terms and/or covenants contained in Paragraphs 10, 11, and/or
            17(A) of this Agreement can cause irreparable damage to IGI for
            which the remedy at law would not be adequate. Accordingly, in
            addition to any other remedy available to IGI under this
            Agreement and/or as otherwise provided by law or equity, IGI
            shall be entitled to injunctive relief restraining Ambrose from
            any actual or threatened violation of any of the terms of
            Paragraphs 10, 11, and/or 17(A) or any other appropriate decree
            of specific performance (without any bond or other security being
            required).

            C. In the event either party is required to incur legal fees
            and/or costs in seeking enforcement of this Agreement, the
            prevailing party shall be entitled to recover from the other
            party any and all such legal fees and/or costs so incurred.

      16.   Waiting Period and Revocation Rights. Ambrose represents and
            warrants that he has been advised by IGI to consult with an
            attorney prior to executing this Agreement. Ambrose further
            represents and warrants that he understands that he shall have
            twenty-one (21) days from the date this Agreement has been
            executed by IGI and delivered to Ambrose to decide whether to
            sign this Agreement and relinquish the legal claims as provided
            for herein. Ambrose further represents and warrants that he has
            been advised by IGI that he shall have a period of seven (7) days
            following his execution of this Agreement to revoke it so that it
            has no continuing or past legal effect. Ambrose represents and
            warrants that he understands that to revoke this Agreement during
            such seven (7) day period he must provide IGI with written notice
            revoking the same and deliver such notice to IGI in accordance
            with the terms hereof prior to the expiration of the seven (7)
            days revocation period.


<PAGE>  7


      17.   Non-Disparagement.
            ------------------

            A. Ambrose agrees that neither he nor any person or entity on his
            behalf shall, directly or indirectly, make, orally or in writing,
            any comments, statements, and/or remarks of any kind whatsoever
            disparaging to IGI, its business, and/or its affiliates,
            subsidiaries and/or its past and present agents, attorneys,
            representatives, officers, directors, employees, administrators,
            and/or shareholders. Ambrose further acknowledges and agrees that
            any violation of the terms of this Paragraph 17(A) shall be
            deemed a material breach of this Agreement, entitling IGI to any
            and all rights and remedies hereunder, as well as otherwise
            available at law or equity.

            B. IGI agrees that neither it nor any person or entity on its
            behalf shall, directly or indirectly, make, orally or in writing,
            any comments, statements, and/or remarks of any kind whatsoever
            disparaging to Ambrose. Unless otherwise mutually agreed in
            writing by IGI and Ambrose, in the event IGI is contacted by a
            third-party for a recommendation and/or any other information
            related to Ambrose' employment with IGI and/or the termination
            thereof, IGI shall not provide any information and/or make any
            statements in response thereto other than confirmation of the
            position held by Ambrose at IGI and the dates of employment.
            Irrespective of the foregoing, Ambrose acknowledges and aggress
            that nothing contained herein requires IGI to provide any
            information, statements and/or recommendations to any inquiring
            third-party other than that which is expressly set forth in this
            Paragraph 17(B).

      18.   New Jersey Law Governs. This Agreement shall be executed,
            governed, enforced, construed and interpreted in accordance with
            the laws of the State of New Jersey. The parties hereto consent
            to the exclusive jurisdiction of the state and federal courts of
            New Jersey for the judicial resolution of any and all disputes
            that may arise under this Agreement, including without limitation
            enforcement of this Agreement and damages relating to a breach
            thereof.

      19.   Entire Agreement. This Agreement incorporates the understandings
            and agreements of the parties hereto, and each party acknowledges
            that in executing this Agreement they are not relying upon prior
            written or oral discussions or statements made by either party.
            This Agreement contains the entire understanding of the parties
            hereto and there are no representations, warranties, covenants or
            undertakings other than those expressly set forth herein. Except
            as expressly provided for in this Agreement, Ambrose acknowledges
            and agrees that he shall not be entitled to receive from IGI, nor
            shall IGI be required to pay and/or provide Ambrose, with any
            benefits, monetary amounts, stock options, health, medical, life
            and/or disability insurance


<PAGE>  8


            coverage, auto allowance and/or compensation of any kind
            whatsoever, by virtue of, under, relating to and/or with respect
            to Ambrose's employment with IGI and/or the termination of
            Ambrose's employment with IGI.

      20.   Modification/Waiver. A modification or waiver of any of the
            provisions of this Agreement shall be effective only if made in
            writing and executed by the parties with the same formality as
            this Agreement. The failure of any party to insist upon strict
            performance of any of the provisions of this Agreement shall not
            be construed as a waiver, release and/or discharge of any
            subsequent default and/or breach of the same or similar nature.

      21.   Product of Negotiations. This Agreement is the product of
            negotiations between the parties and shall be construed
            neutrally, without regard to the identity of the party who drew
            it.

      22.   Headings. The parties expressly acknowledge and agree that
            paragraph headings contained in this Agreement are for
            convenience purposes only and shall not be considered part of the
            terms and conditions of the Agreement.

      23.   Interpretation Provisions. All references in this Agreement to
            the plural shall also mean the singular and to the singular shall
            also mean the plural unless the context otherwise requires. The
            words "hereof", "herein", "hereunder", "this Agreement", "the
            Agreement" and words of similar import when used in this
            Agreement shall refer to this Agreement as a whole and not any
            particular provision of this Agreement unless the context
            otherwise requires. The word "including" when used in this
            Agreement shall mean "including, without limitation". "And" and
            "or" as used in this Agreement shall be interpreted conjunctively
            and shall not be interpreted disjunctively to exclude any
            information otherwise within the scope thereof.

      24.   Invalid or Unenforceable Provisions. In the event any provision
            of this Agreement shall be determined to be invalid or
            unenforceable in any respect, the remaining provisions of this
            Agreement shall not be affected thereby and shall continue in
            full force and effect.

      25.   Parties Bound. This Agreement shall be binding upon the parties
            hereto and their respective heirs, successors and assigns.


<PAGE>  9


      26.   Legal Advice of Counsel. The parties have obtained legal advice
            concerning this Agreement from the attorneys of their own
            choosing and have not relied on anything the other party or the
            other party's attorneys have said in deciding to sign this
            Agreement.

      27.   Voluntary Agreement. Ambrose represents and warrants that he has
            read and fully understands the terms of this Agreement. Ambrose
            further represents and warrants that he has executed this
            Agreement voluntarily without coercion, undue influence or
            duress, with full knowledge of the nature, consequences and legal
            effect of this Agreement. Ambrose further acknowledges and agrees
            that the terms hereof are a fair and adequate resolution of any
            and all claims, if any, he may have against IGI relating to his
            employment with IGI and/or the termination of his employment with
            IGI.

      28.   Notices. Any and all notices required and/or permitted to be
            given under this Agreement to be effective must be sent via hand-
            delivery or via Federal Express or other reliable overnight
            delivery service to the addresses set forth below, unless
            otherwise advised in writing by the other party in accordance
            with the terms hereof of a change of address. Any and all notices
            under this Agreement shall be deemed made on the date upon which
            it is actually delivered to the party to whom it is directed.

                  (a) To Ambrose:

                  John F. Ambrose
                  10 Bradlee Road
                  Marblehead, MA 01945

                  (b) To IGI:

                  Frank Gerardi, Chairman
                  IGI, Inc.
                  105 Lincoln Ave.
                  Buena, NJ 08103

                  With Copy To:

                  Diane L. Mulligan, Esq.
                  Edell & Associates, P.C.
                  1776 On the Green - 8th Floor
                  Morristown, New Jersey 07960


<PAGE>  10


      IN WITNESS WHEREOF, the parties have signed this Agreement on August
18, 2003, effective as of August 15, 2003.


                                       EMPLOYER

                                       IGI, INC.

                                       By: /s/ Frank Gerardi
                                           -----------------
                                           Frank Gerardi
                                           Chairman


                                       EMPLOYEE

Witnessed:


/s/ Diane Mulligan                     /s/ John F. Ambrose
---------------------------           -------------------
An Attorney At Law                     John F. Ambrose
 of the State of New Jersey


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