SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

IGI, INC.
- ---------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.

(1) Title of each class of securities to which transaction
applies:

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(2) Aggregate number of securities to which transaction
applies:

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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.

(1) Amount previously paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing party:

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(4) Date Filed:

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IGI, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2002

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
IGI, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 15, 2002 at 10:00 a.m. at the Renaissance Philadelphia
Airport Hotel, 500 Stevens Drive, Philadelphia, PA 17113 (the "Meeting"),
for the purpose of considering and voting upon the following matters:

1. To elect seven (7) directors to serve until the next Annual
Meeting of Stockholders.

2. To ratify the appointment of KPMG LLP as independent auditors
of the Company for the current fiscal year.

3. To approve the adoption of and the increase in the number of
shares authorized under the Company's 1999 Stock Incentive
Plan.

To transact such other business as may properly come before the
Meeting or any adjournment thereof.

The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.

The Board of Directors has fixed the close of business on Monday,
April 1, 2002 as the record date for the determination of stockholders
entitled to notice of and to vote at the Meeting and at any adjournments
thereof.

A copy of the Company's Annual Report to Stockholders for the year
ended December 31, 2001, which contains financial statements and other
information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.

By Order of the Board of Directors,

/s/ John F. Ambrose

John F. Ambrose,
President & CEO

April 16, 2002

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. NO POSTAGE NEEDS TO BE AFFIXED IF THE PROXY IS MAILED IN THE
UNITED STATES.

IGI, INC.

105 Lincoln Avenue
Buena, New Jersey 08310
_______________________________

PROXY STATEMENT

For Annual Meeting of Stockholders

To Be Held May 15, 2002
_______________________________

This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of IGI, Inc. (the "Company") for use
at the Annual Meeting of Stockholders to be held on Wednesday, May 15, 2002
at 10:00 a.m. at the Renaissance Philadelphia Airport Hotel, 500 Stevens
Drive, Philadelphia, PA 17113, and at any adjournments thereof (the
"Meeting").

All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor
of the proposals set forth in the accompanying Notice of Meeting. Any
proxy may be revoked by a stockholder at any time before its exercise by
delivery of a written revocation to the Secretary of the Company at 105
Lincoln Avenue, Buena, New Jersey 08310. Attendance at the Meeting will not
itself be deemed to revoke a Proxy unless the stockholder gives affirmative
notice at the Meeting that the stockholder intends to revoke the Proxy and
vote in person.

Only the record holders of shares of common stock, $.01 par value per
share, of the Company (the "Common Stock") at the close of business on
April 1, 2002 may vote at the Meeting. Each share entitles the record
holder to one vote on each of the matters to be voted upon at the Meeting.
On April 1, 2002, there were 11,293,028 shares of Common Stock outstanding.

The Notice of Meeting, Proxy Statement, the enclosed Proxy and the
Company's Annual Report for the year ended December 31, 2001 are being
mailed to stockholders on or about April 16, 2002.

Beneficial Ownership of Common Stock

The following table sets forth information as of April 1, 2002 with
respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) the directors of

the Company, (iii) the Chief Executive Officer and the executive officers
of the Company listed in the "Summary Compensation Table" below
(collectively, the "Named Executive Officers"), and (iv) the directors and
executive officers of the Company as a group. Unless otherwise noted, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.

Name of Beneficial Owner Number of Shares Percent of Class (1)
- ------------------------ ---------------- --------------------

<s> <c> <c>
5% Stockholders

Stephen J. Morris 2,584,682 (2) 22.7%
66 Navesink Avenue
Rumson, New Jersey 07760

Frank Gerardi 901,000 (3) 7.9%
c/o Univest. Mgt. Inc. EPSP
149 West Village Way
Jupiter, Florida 33458

American Capital Strategies, Ltd. 1,914,680 (4) 14.5%
One Tower Bride - Suite 250
100 Front Street
West Conshohocken, PA 19428

Edward B. Hager, M.D. 1,596,632 (5) 13.7%
Pinnacle Mountain Farms
Lyndeboro, NH 03082

Jane E. Hager 1,330,829 (6) 11.6%
Pinnacle Mountain Farms
Lyndeboro, NH 03082

Other Directors and Executive Officers

Constantine L. Hampers, M.D. 220,596 (7) 1.9%
Terrence O'Donnell 244,162 (8) 2.1%
John F. Ambrose 100,000 (9) *
Domenic N. Golato 100,000 (10) *
Donald W. Joseph 53,318 (11) *
Earl R. Lewis 92,005 (12) *

All executive officers and directors,
as a group (9 Persons) 6,640,272 (13) 47.3%

<FN>
- ---------------------
* Less than 1% of the Common Stock outstanding.
<F1> Percentage of beneficial ownership for each person listed is based on
11,293,028 shares of Common Stock outstanding as of April 1, 2002,
and includes the shares of Common Stock underlying options, or other
rights, held by such persons that are exercisable within 60 days
after April 1, 2002.
<F2> Includes 816,300 shares which Mr. Morris owns jointly with his wife
and 200 shares owned directly by his wife. Also includes 154,460
shares, which are held in an account on behalf of Mr. Morris'
children, over which Mr. Morris has voting and investment control,
and 42,000 shares held in a building fund on behalf of St. George
Greek Orthodox Church of Asbury Park, New Jersey, over which Mr.
Morris has voting and investment control. Includes 80,000 shares
which Mr. Morris may acquire pursuant to stock options exercisable
within 60 days after April 1, 2002.
<F3> Includes 50,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002.
<F4> On February 14, 2001, American Capital Strategies, Ltd. ("ACS") filed
a Schedule 13G with the Securities and Exchange Commission reporting
beneficial ownership of a total of 1,907,543 shares, all of which are
issuable upon the exercise of warrants held by ACS. ACS reported that
it has sole voting and dispositive power over all 1,907,543 shares.
<F5> Includes 350,000 shares which Dr. Hager may acquire pursuant to stock
options exercisable within 60 days after April 1, 2002, and 639,815
shares beneficially owned by Dr. and Mrs. Hager as co-trustees of the
Hager Family Trust, who share voting and investment power.
<F6> Includes 639,815 shares beneficially owned by Dr. and Mrs. Hager, as
co-trustees of the Hager Family Trust, who share voting and
investment power. Includes 150,000 shares which Mrs. Hager may
acquire pursuant to stock options exercisable within 60 days after
April 1, 2002.
<F7> Includes 170,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002.
<F8> Includes 190,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002.
<F9> Includes 100,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002.
<F10> Includes 100,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002.

<F11> Includes 30,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002.
<F12> Includes 30,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002.
<F13> Includes 850,000 shares which may be acquired pursuant to stock
options exercisable within 60 days after April 1, 2002 included in
Notes (2) and (6) - (12) above, and 1,907,543 shares which may be
acquired pursuant to warrants held by American Capital Strategies,
Ltd. included in Note (4) above.
</FN>

Unrelated Beneficial Ownership Under Stockholder Voting Agreements

On February 6, 2002, the Company entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement") with Vetoquinol U.S.A, Inc.
("Vetoquinol") providing for the purchase by Vetoquinol of substantially
all of the assets of the Company's companion pet products division. The
Asset Purchase Agreement transaction requires approval by the Company's
stockholders in accordance with Section 271 of the Delaware General
Corporation Law. On February 7, 2002, the Company filed with the
Securities and Exchange Commission ("SEC") a Schedule 14A Statement of
Soliciting Materials pursuant to Rule 14a-12 of the Securities Exchange Act
of 1934, relating to the proposed Asset Purchase Agreement transaction.
Upon completion of the SEC's review of the Asset Purchase Agreement
transaction (assuming SEC approval is granted), the Company plans to file
with the SEC and mail to its stockholders a Proxy Statement in connection
with the Asset Purchase Agreement transaction.

In order to facilitate consummation of the transactions contemplated
under the Asset Purchase Agreement, Vetoquinol simultaneous with the
execution of the Asset Purchase Agreement on February 6, 2002, entered into
Stockholder Voting Agreements (each a "Stockholder Voting Agreement") and
Irrevocable Proxies (each an "Irrevocable Proxy") with the following
stockholders of the Company: Constantine L. Hampers, M.D., Donald W.
Joseph, Earl R. Lewis, Stephen J. Morris, Terrence O'Donnell, Kenneth E.
Jones (American Capital Strategies, Ltd.), Jane E. Hager and Edward B.
Hager, M.D. (each a "Voting Agreement Stockholder"). Each Voting Agreement
Stockholder is the record or beneficial owner of such number of shares of
the Company's Common Stock as reflected above in the Table of Beneficial
Ownership (the "Subject Shares").

Pursuant to the Irrevocable Proxies, the Voting Agreement
Stockholders have irrevocably empowered Vetoquinol, at any time prior to
the termination of the Stockholder Voting Agreements in accordance with
their terms (the "Proxy Expiration Date"), to exercise all voting rights
(including, without limitation, the power to execute and deliver written
consents with respect to the Subject Shares) of each Voting Agreement
Stockholder, solely to the extent set forth as follows: at every annual,
special or adjourned or postponed meeting of stockholders of the Company,
and in every written consent in lieu of such a meeting, or otherwise, in
favor of the sale of assets contemplated by the Asset Purchase Agreement,
and any matter that could

reasonably be expected to facilitate the transactions contemplated by the
Asset Purchase Agreement.

None of the matters to be considered and voted on at the Meeting
concern the approval or ratification of the sale contemplated by the Asset
Purchase Agreement and/or could reasonably be expected in any way to
facilitate the transaction contemplated by the Asset Purchase Agreement.
As such, the Irrevocable Proxies do not empower Vetoquinol to exercise any
and/or all of the voting rights of each Voting Agreement Stockholder with
respect to any matter and/or proposal to be considered and voted on at the
Meeting.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock ("Reporting
Persons") to file with the Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of the Company. Based solely on its review of copies of reports filed by
Reporting Persons furnished to the Company, the Company believes that,
except as set forth below, during 2001 its officers, directors and holders
of more than 10% of the Company's Common Stock complied with all Section
16(a) filing requirements.

Number of
Transactions Not
Name Number of Late Reports Timely Reported
- ----------------------------------------------------------------------------

<s> <c> <c>
Donald W. Joseph 2 3
Earl R. Lewis 2 3
Stephen J. Morris 2 3
Terrence O'Donnell 2 3
Constantine L. Hampers, M.D. 2 3
American Capital Strategies, Ltd. 1 2
Jane E. Hager 2 3

Votes Required

The holders of a majority of the shares of Common Stock outstanding
shall constitute a quorum for the transaction of business at the Meeting.
Shares of Common Stock present in person or represented by proxy (including
shares which abstain or do not vote with respect to one or more of the
matters presented for stockholder approval) will be counted for purposes of
determining whether a quorum exists at the Meeting.

The affirmative vote of the holders of a plurality of the shares of
Common Stock voted at the Meeting is required for the election of directors
(Proposal 1). The affirmative vote of the holders of a majority of the
shares of Common Stock voted at the Meeting is required to ratify

the appointment of KPMG LLP as independent auditors of the Company
(Proposal 2). The affirmative vote of the holders of a majority of the
shares of Common Stock voted at the Meeting is required to approve the
adoption of and increase in the number of authorized shares under the
Company's 1999 Stock Incentive Plan (Proposal 3).

Shares which abstain from voting as to a particular matter, and
shares held in "street name" by brokers or nominees who indicate on their
proxies that they do not have discretionary authority to vote such shares
as to a particular matter, will not be counted as votes cast in favor of
such matter, and also will not be counted as shares voting on such matter.
Accordingly, abstentions and "broker non-votes" will have no effect on the
voting on a matter that requires the affirmative vote of the holders of a
certain percentage of the shares of Common Stock voting on a matter.

PROPOSAL 1 - ELECTION OF DIRECTORS

Nominees for Election as Directors

The persons named as proxies in the accompanying Proxy intend (unless
authority to vote therefore is specifically withheld) to vote for the
election of the persons named below as directors to hold office until the
next Annual Meeting of Stockholders and until their respective successors
are elected and qualified. Each nominee has consented to being named in
this Proxy Statement and to serve if elected. If any of the nominees
becomes unavailable to serve as a director, the persons named as proxies in
the accompanying Proxy may vote the Proxy for substitute nominees. The
Board of Directors has no reason to believe that any of the nominees will
be unable to serve if elected. The table below sets forth certain
information with respect to the nominees.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES LISTED BELOW.

Principal Occupation,
Other Business
Experience During
Director Past Five Years and
Name Age Since Other Directorships
- ------------------------------------------------------------------------------------------------------------------

<s> <c> <c> <c>
Terrence O'Donnell 58 1993 Executive Vice President and General Counsel,
Textron Inc., a producer of aircraft, automotive
products and industrial products, since March 2000;
Member of the Law Firm of Williams & Connolly,
Washington, D.C. since April 1992 and from March 1977
to October 1989; General Counsel of Department of
Defense from October 1989 to March 1992; Special
Assistant to President Ford

from August 1974 to January 1977; Deputy Special
Assistant to President Nixon from May 1972 to August
1974; Director of ePlus, Inc. (formerly MLC Holdings).

Constantine L.
Hampers, M.D. 69 1994 Chief Executive Officer of MDL Consulting
Associates, LLC, a medical consulting firm,
since 1996; Chairman of the Board of Directors
and Chief Executive Officer of National Medical
Care, Inc., a provider of in-center and home
kidney dialysis services and products, from 1968
to 1996; Executive Vice President and Director
of W.R. Grace & Co., a supplier of specialty
chemical, construction and container products,
from 1986 to 1996; Director of Artificial Kidney
Services at Peter Bent Brigham Hospital and
Assistant Professor of Medicine at Harvard
University School of Medicine prior to 1968 and
for several years thereafter.

Donald W. Joseph 64 2000 Group Vice President of Baxter International Inc.,
a medical products and services company, from
November 1993 to July 2000; President, Renal
Business of Baxter International Inc. from October
1981 to November 1993; Director of Sales and
Marketing for the renal division of Baxter
International Inc. from December 1972 to October
1981; Joined Baxter International Inc. as Sales
Representative in July 1966, where Mr. Joseph held
various sales management positions from July 1966
to December 1972.

Stephen J. Morris 69 1999 Co-founder and General Manager of John Morris &
Sons, Inc., a hotel and restaurant enterprise,
which Mr. Morris owned and managed from July
1958 to December 1998; Co-founder and Advisor of
International Scientific Communications, a
scientific publishing company.

Earl R. Lewis 58 2000 Chairman of the Board, President and Chief
Executive Officer of FLIR Systems, an infrared
imaging technology company, from November 1,
2000 to the present; Chief Executive Officer of
Thermo Instrument Systems, Inc., which produces
tools for measurement and analysis, from January

1998 to July 2000; Chief Operating Officer of
Thermo Instrument Systems, Inc. from January
1996 to January 1998; President of Thermo
Instrument Systems, Inc. from March 1997 to July
2000; Director of FLIR Systems; Director of
Spectra-Physics Laser Inc., a commercial laser
company; Director of SpectRx, Inc., which
produces optical systems for medical applications;
Director of Harvard Bioscience, Inc., a medical
instrument and supply company.

John F. Ambrose 62 Nominee President and Chief Executive Officer of IGI, Inc.,
April 2001 to present; President and Chief
Operating Officer of IGI, Inc. September 2000 to
April 2001; Vice President of Sales and Marketing
at Digitrace Care Services of Boston from
November 1997 to September 2000; Vice President
of Field Operations at NMC Homecare from July
1990 to November 1996.

Kenneth E. Jones 49 Jan. 2002 Principal of American Capital Strategies,
Ltd. since November 2000; Prior to November
2000, General Partner at Meridian Venture Partners
and Director at Berwind Financial, a Philadelphia,
Pennsylvania based middle market investment bank.

For information relating to shares of the Company owned by each of
the directors, see "Beneficial Ownership of Common Stock."

Board and Committee Meetings

The Board of Directors met six (6) times during 2001. Each of the
current directors attended at least 75% of the meetings of the Board of
Directors and the committees on which he or she served. The Board of
Directors has an Executive Committee, an Audit Committee, an Independent
Committee of Outside Directors, and a Compensation and Stock Option
Committee. The present composition of the committees of the Board of
Directors are set forth below. Membership of the committees may change at
the time of the Meeting due to the election of new directors.

The Executive Committee, whose members are Mr. Lewis (Chairman) and
Dr. Hampers, has the authority to exercise the powers of the Board of
Directors between Board meetings. The

Audit Committee, whose members are Mrs. Hager and Messrs. O'Donnell
(Chairman), Morris and Lewis, reviews the audit of the Company's accounts,
monitors the effectiveness of the audit and evaluates the scope of the
audit. The Independent Committee of Outside Directors, whose members are
Dr. Hampers (Chairman) and Mr. O'Donnell reviews and approves transactions
between management and the Company. The Compensation and Stock Option
Committee, whose members are Dr. Hampers (Chairman) and Messrs. Lewis,
Joseph and Morris, reviews and recommends salaries and other compensatory
benefits for the principal officers of the Company and grants stock options
to key employees of the Company and its subsidiaries.

During 2001, the Audit Committee met three (3) times and the
Compensation and Stock Option Committee met once. The Executive Committee
and the Independent Committee of Outside Directors did not meet during
2001.

Director Compensation and Stock Options

Director Options. In September 1999, the Board of Directors adopted
the 1999 Director Stock Option Plan (the "1999 Plan"). Under the 1999
Plan, on January 2 of each year, beginning with January 2000 (i) each non-
employee director is granted a stock option for 15,000 shares, and (ii)
each of the Chairmen of the Audit Committee and the Stock Option and
Compensation Committee is granted additional stock options for 15,000 and
10,000 shares, respectively. Additionally, under the 1999 Plan, each newly
elected director will receive a stock option grant of 15,000 shares at the
time of his/her election. All of such options will be granted at an
exercise price equal to the closing price of the Common Stock on the
American Stock Exchange on the date of grant. All options granted under the
1999 Plan become 100% vested twelve months after the date of grant.

During 2001, the following number of options were granted under the
1999 Plan on the dated indicated to each of the following directors listed
below:

Name of Director Option Grant Date Number of Options Granted
- ---------------------------------------------------------------------------------------

<s> <c> <c>
American Capital Strategies, Ltd. 5/16/01 15,000
Terrence D. Daniels (resigned 07/05/01) 1/2/01 15,000
Jane E. Hager 1/2/01 15,000
Constantine L. Hampers, M.D. 1/2/01 25,000
Donald W. Joseph 1/2/01 15,000
Earl R. Lewis 1/2/01 15,000
Earl R. Lewis 5/16/01 200,000
Stephen J. Morris 1/2/01 15,000
Terrence O'Donnell 1/2/01 30,000

Director Fees. The Board of Directors adopted the 1998 Directors
Stock Plan (the "1998 Plan") in October 1998 to provide each outside
director with the right to receive shares of the Company's Common Stock as
director compensation in lieu of cash payments of director fees, thereby
encouraging ownership in the Company by the directors. Each non-employee
director receives $2,000 in value of Common Stock for each meeting of the
Board he or she

attends in person, $1,000 in value of Common Stock for each telephonic
meeting of the Board attended, $500 in value of Common Stock for each
Committee meeting attended which is held on the same day as a Board
meeting, $1,000 in value of Common Stock for each Committee meeting
attended which is not held on the same day as the Board meeting, and up to
$5,000 in value of Common Stock annually for the Chairman of certain of the
Board Committees. The fees are payable quarterly and the number of shares
of Common Stock issued to each director is determined by dividing the fees
payable for the quarter by the closing price of the Company's Common Stock
on the American Stock Exchange on the last business day of the applicable
quarter.

From the Fourth Quarter 2000 through the Third Quarter 2001, the
following number of shares of the Company's Common Stock were received by
each of the directors listed below under the 1998 Plan:

Name of Director Number of Shares Received
- ---------------------------------------------------------------------------

<s> <c>
American Capital Strategies, Ltd. 5,470
Terrence D. Daniels (resigned 07/05/01) 5,886
Jane E. Hager 20,671
Constantine L. Hampers, M.D. 17,833
Donald W. Joseph 17,910
Earl R. Lewis 20,748
Robert E. McDaniel (resigned 4/29/01) 1,961
Stephen J. Morris 22,348
Terrence O'Donnell 17,162

These shares represented a total value at the time of issuance of $79,000.

Legal Proceedings

While no judgment or findings have been entered, Dr. Hampers is
currently a party in an SEC administrative cease and desist proceeding
styled, In the Matter of Jean-Paul Bolduc, et al, File No. 3-9793 (December
22, 1998). The complaint arises out of accounting practices followed at
W.R. Grace & Company ("Grace") from 1991 to 1996 in connection with the
booking of reserves at National Medical Care, Inc. ("NMC"), then a wholly-
owned subsidiary of Grace. The case is currently stayed by order of the
SEC. Dr. Hampers has denied any wrongdoing because the accounting
treatment of the reserves at issue was separately approved by the financial
staffs of Grace and NMC and by the Audit Committee of the Grace's Board of
Directors. In addition, Grace's independent auditors, Price Waterhouse
LLP, annually reviewed the practices, and in each of the subject fiscal
years approved Grace's financial statements with an unqualified opinion.

Certain Relationships and Related Transactions

American Capital Strategies, Ltd. ("ACS") owns warrants (the
"Warrants") to purchase 1,907,543 shares of the Company's Common Stock,
representing 16.9% of the outstanding

capital stock of the Company. The Warrants were issued on October 29, 1999,
in connection with a financing arrangement, pursuant to which the Company
entered into a $7 million subordinated debt agreement ("Subordinated Debt
Agreement") with ACS. Borrowings under the Subordinated Debt Agreement bear
interest at the rate of 12.5% per annum plus an additional interest
component at the rate of 2.25%, which is payable at the Company's election
in cash or Company Common Stock. The Subordinated Debt Agreement matures in
October 2006.

In connection with the Subordinated Debt Agreement, the Company
issued to ACS the Warrants to purchase 1,907,543 shares of Common Stock at
an exercise price of $.01 per share. The Warrants are fully vested and can
be exercised by ACS at any time up to October 29, 2009. On April 12, 2000,
the Subordinated Debt Agreement was amended whereby a "put" provision, in
which ACS had the right to require the Company to repurchase the Warrants
under certain circumstances, was replaced with a "make-whole" feature. This
feature requires the Company to compensate ACS, in either Common Stock or
cash, at the option of the Company, in the event that ACS ultimately
realizes proceeds from the sale of its Common Stock obtained upon exercise
of the Warrants that are less than the fair value, as defined, of the
Common Stock multiplied by the number of shares obtained upon exercise.
ACS must exercise reasonable effort to sell or place its shares in the
marketplace over a 180-day period before it can invoke the make-whole
provision.

The Subordinated Debt Agreement also contains financial and other
covenants and restrictions, which, if breached by the Company, would allow
ACS to demand prompt repayment of all outstanding indebtedness. In
addition, to secure all of its obligations under the Subordinated Debt
Agreement, the Company has granted ACS a subordinate security interest in
all of the assets and properties of the Company and its subsidiaries.
Pursuant to the Subordinated Debt Agreement, ACS has the right to designate
for election to the Company's Board of Directors that number of directors
that bears the same ratio to the total number of directors as the number of
shares of Common Stock owned by ACS plus the number of shares issuable upon
exercise of the Warrants bear to the total number of outstanding shares of
Common Stock on a fully-diluted basis; provided that so long as all or any
of the loan principal amount and/or interest thereon remains outstanding or
for as long as ACS holds Common Stock and Underlying Common Stock (the
shares which may be acquired pursuant to the Warrant) that in the aggregate
constitute at least 5% of the outstanding shares of the common stock of the
Company, ACS shall have the right to designate for election at least one
director. In May 2001, ACS exercised its director designation rights under
the Subordinated Debt Agreement appointing ACS Vice President John Freal to
the ACS director seat. In January 2002, Mr. Freal resigned from his
position with ACS, and ACS Principal Kenneth E. Jones was appointed to fill
the ACS director seat. As reflected above under the heading "Nominees for
Election as Directors", ACS has re-appointed Kenneth E. Jones as its
representative nominee for election to the ACS director seat.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief
Executive Officer of the Company, the most highly compensated executive
officers of the Company who received compensation in excess of $100,000
during 2001 and who were serving as executive officers at the end of 2001
and the only one other existing highly compensated officer of the Company
who received compensation in excess of $100,000 during 2001 but who were
not serving as executive officers at the end of 2001.

Summary Compensation Table

Long-Term
Compensation
Annual Compensation Awards
------------------------------- ------------
Securities
Name/Principal Other Annual Underlying
Compensation Salary Bonus Compensation Options All Other
Position (1) Year ($) ($) ($)(2) (#)(3) ($)(4)
- --------------------------------------------------------------------------------------------------------

<s> <c> <c> <c> <c> <c> <c>
Edward B. Hager, M.D. (5) 2000 $ 80,183 (6) $ 0 $ 0 0 $11,035
Chief Executive Officer 1999 460,000 0 0 100,000 8,046

Paul Woitach (7) 2000 191,752 40,000 7,704 0 12,209
Chief Executive Officer 1999 200,000 40,000 7,200 200,000 9,269

Robert E. McDaniel (8) 2001 157,418 0 2,400 0 9,634
Chief Executive Officer 2000 185,000 0 7,200 100,000 9,949
1999 185,000 0 7,200 140,000 8,002

John Ambrose 2001 185,769 0 8,250 250,000 13,265
Chief Executive Officer
& President/
Chief Operating Officer 2000 53,856 0 2,400 100,000 3,130
& President (9)

Domenic Golato 2001 178,975 0 8,250 200,000 15,459
Chief Financial Officer 2000 82,973 0 3,600 100,000 5,073
& Sr. Vice President

Richard J. Claxton 2001 107,013 0 0 5,000 11,249
EVSCO Area Sales Manager

<FN>
- ---------------------
<F1> Lists the principal position with the Company as of December 31,
2001, with the exception of Edward B. Hager, M.D., whose term as
Chief Executive Officer ended on February 1, 2000,

Paul Woitach, whose term as Chief Executive Officer ended on
September 1, 2000, and Robert McDaniel, whose term as Chief Executive
Officer ended on April 29, 2001.
<F2> The amounts shown in this column represent automobile allowances.
<F3> The Company has never granted any stock appreciation rights.
<F4> The amounts shown in this column represent premiums for group life
insurance and medical insurance paid by the Company and the Company's
contributions under its 401(k) Plan. In 2000, the Company paid (i)
$604, $736, $560, $378 and $252 in group life insurance premiums for
Dr. Hager and Messrs. Woitach, McDaniel, Golato and Ambrose,
respectively; (ii) $9,389, $9389, $9389, $4,696 and $3,130 in medical
insurance premiums for each of Dr. Hager and Messrs. Woitach,
McDaniel, Golato and Ambrose, respectively; and (iii) $1,042 and
$2,084 in 401(k) plan contributions for Dr. Hager and Mr. Woitach,
respectively. In 2001, the Company paid (i) $252, $756, $756 and
$647, in group life insurance premiums for Messrs. McDaniel, Ambrose,
Golato and Claxton, respectively; (ii) $9,382, $12,509, $12,509 and
$9,278 in medical insurance premiums for each of Messrs. McDaniel,
Ambrose, Golato and Claxton, respectively; and (iii) $2,194 and
$1,324 in 401(k) Plan contributions for Messrs. Golato and Claxton,
respectively.
<F5> Dr. Hager served as Chief Executive Officer from January 1, 2000 to
February 1, 2000.
<F6> In 2000, Dr. Hager, the Company's former Chief Executive Officer,
chose to defer payment of 2000 and 1999 travel reimbursement expenses
amounting to $129,000 until the Company's cash flow stabilized. On
February 14, 2001, the Company agreed to pay the Company's obligation
to Dr. Hager using shares of Company Common Stock. Total payments
through December 31, 2001 resulted in the issuance to Dr. Hager of
125,625 shares of common stock valued at $129,000.
<F7> Mr. Woitach served as the Company's Chief Executive Officer from
February 1, 2000 to September 1, 2000. Following his resignation,
the Company and Mr. Woitach entered into a Separation Agreement dated
September 1, 2000, under which he was to receive certain payments and
benefits from the Company over a twelve month period. In 2001, Mr.
Woitach received the following compensation from the Company under
the terms of the Separation Agreement: (i) salary in the amount of
$97,534; (ii) auto allowance in the amount of $6,048; and (iii)
medical insurance premiums in the amount of $9,382.
<F8> Mr. McDaniel served as Chief Executive Officer from September 15,
2000 to April 29, 2001.
<F9> John F. Ambrose was appointed by the Board of Directors as the
Company's Chief Executive Officer as of April 30, 2001. Prior to his
appointment, Mr. Ambrose had been the Company's President and Chief
Operating Officer since September 2000. All compensation paid to Mr.
Ambrose by the Company during 2000 was for his employment as the
Company's President and Chief Operating Officer.
</FN>

Stock Options

The following tables set forth certain information concerning option
grants during the fiscal year ended December 31, 2001 to the Named
Executive Officers and the number and the value of the options held by such
persons on December 31, 2001. No options were exercised by Named Executive
Officers during 2001.

OPTION GRANTS IN LAST FISCAL YEAR

Potential Realizable

Individual Grants Value At Assumed
---------------------------- Annual Rates
Number of Percent of of Stock Price
Securities Total Options Appreciation
Underlying Granted to Exercis for Option Term (1)
Options Employees in Base Price Per Expiration --------------------
Name Granted (#) Fiscal Year Share ($/sh) Date 5% 10%
- - -------------------------------------------------------------------------------------------------------

<s> <c> <c> <c> <c> <c> <c>
John F. Ambrose 100,000 (2) 16.4% $.80 May 16, 2111 $50,000 $127,000
CEO/Pres. 150,000 (3) 24.6% $.52 Dec. 27, 2111 $49,000 $124,000

Domenic Golato 100,000 (2) 16.4% $.80 May 16, 2111 $50,000 $127,000
CFO/Sr. V.P. 100,000 (3) 16.4% $.52 Dec. 27, 2111 $33,000 $ 83,000

<FN>
- ---------------------
<F1> Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock price appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date. Actual gains, if any, on stock
option exercises will depend on the future performance of the Common
Stock and the date on which the options are exercised. No gain to the
optionees is possible without an appreciation in stock price, which
will benefit all stockholders commensurately.
<F2> 50% of the shares covered by the options vest one year after the date
of grant and the remaining 50% of the shares vest two years after the
date of grant.
<F3> 33.3% of the shares covered by the options vest one year after the
date of grant, 33.3% of the shares covered by the options vest two
years after the date of grant and the remaining 33.3% of the shares
covered by the options vest three years after the date of grant.
</FN>

AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2001 AND YEAR END
2001 OPTION VALUE

No. of Shares Underlying Value of Unexercised
Unexercised Options In-The-Money Options
Shares Acquired Value at Year End 2001 At Year End 2001
On Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name (2) (2)(3)
- ----------------------------------------------------------------------------------------------------------

<s> <c> <c> <c> <c>
John F. Ambrose
CEO & President $ -- (1) $ -- (1) 100,000/250,000 $ 0

Domenic Golato $ -- (1) $ -- (1) 100,000/200,000 $ 0
CFO & Sr. V.P.

<FN>
- ---------------------
<F1> No options exercised during fiscal year 2001.
<F2> Exercisable shares represent number of shares under fully vested
options as of December 31, 2001. Unexercisable shares represent
number of shares under unvested options as of December 31, 2001.
<F3> Value based on market value of the Company's Common Stock at the end
of fiscal 2001 ($0.60 per share) minus the exercise price.
</FN>

Employment Agreements

Effective September 1, 1999, the Company entered into an employment
agreement with Robert E. McDaniel, former Chief Executive, Executive Vice
President and General Counsel of the Company. The initial term of the
agreement was one year, commencing September 1, 1999 and ending on August
31, 2000. The agreement provided for an automatic extension of the term of
the agreement until April 30, 2001, unless either party gave notice to the
other on or before August 31, 2000 that the term will not be extended. No
such notice was given. Under the terms of the agreement, Mr. McDaniel
received a base salary of $185,000, subject to annual merit increase
review. All equity-based awards received by Mr. McDaniel were to vest fully
upon a change of control. Mr. McDaniel's employment agreement stated that
his position with the Company was that of Vice President and General
Counsel. Mr. McDaniel became Chief Executive Officer of the Company in
September 2000, at which time he ceased to hold the position of Vice
President and General Counsel of the Company, but no amendment was made to
his employment agreement to reflect the change in his position.

Mr. McDaniel served as the Company's Chief Executive Officer from
September 2000 until his resignation from the Company on April 29, 2001.
On May 16, 2001, the Board of Director's Compensation and Stock Option
Committee approved a severance package for Mr. McDaniel in the total
amount of $93,317, paid in bi-weekly installments of $7,178.23 for the

period of May 1 to October 31, 2001. In addition, Mr. McDaniel continued
to receive Company paid heath benefits until September 30, 2001.

Immediately following Mr. McDaniel's resignation, John F. Ambrose was
appointed by the Board of Directors as the Company's new Chief Executive
Officer. Prior thereto, Mr. Ambrose had been the Company's President and
Chief Operating Officer since September 2000. The Company does not have a
employment agreement with Mr. Ambrose.

On July 1, 2000, the Company entered into an employment agreement
with Domenic Golato, Senior Vice President and Chief Financial Officer of
the Company. The agreement provides for employment through June 30, 2001.
Each year beginning June 30, 2001, the term of the agreement shall
automatically be extended for an additional year unless either party gives
written notice to the other party by April 30 of that year that it does not
wish to extend the term of the agreement. No such notice was given by April
30, 2001, and Mr. Golato's term was therefore automatically extended to
June 30, 2002. Under the terms of the agreement, Mr. Golato's base salary
for the first year of the term thereof was $168,000, subject to annual
merit increase reviews. In April 2001, Mr. Golato's base salary was
increased to $185,000. All equity-based awards received by Mr. Golato will
vest fully upon a change of control of the Company or a change in more than
half of the members of the Board of Directors over a two-year period.

In the event that Mr. Golato's employment is terminated by the
Company with cause or Mr. Golato resigns, Mr. Golato will receive his base
salary, bonus and all other benefits which have accrued as of the date of
termination. In the event that Mr. Golato's employment is terminated by the
Company without cause, Mr. Golato is entitled to continuation of his annual
salary and benefits for twelve months, and all of his unvested options will
fully vest and become exercisable for a period of at least two years after
the date of his termination.

REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE

Overview and Philosophy

The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") is comprised of at least three non-employee directors and
is responsible for the development and administration of the Company's
executive compensation policies and programs, subject to the review and
approval by the full Board. The Committee reviews and recommends to the
Board for its approval the salaries and incentive compensation for the
executive officers of the Company and grants stock options to executives
and other key employees of the Company and its subsidiaries.

The objectives of the Company's executive compensation program are
to:

* Support the achievement of strategic goals and objectives of
the Company.
* Attract and retain key executives critical to the long-term
success of the Company.
* Align the executive officers' interests with the success of the
Company.

Compensation Program

The Company's executive compensation program consists of three
principal elements -- base salary, annual cash incentive compensation and
long-term incentive compensation in the form of stock options.

The base salaries received in 2001 by Messrs. Golato and McDaniel
(until his resignation on April 29, 2001) were established pursuant to the
terms of their respective employment agreements with the Company. See
discussion set forth above under heading "Employment Agreements." Base
salary levels for the Company's executive officers are generally based on a
review of compensation for competitive positions in the market, the
executives' job skills and experience and judgments as to past and future
contributions of the executives to the Company's success. The Committee
seeks to set the annual base salaries of its executives at levels
competitive with those paid to executives in those businesses in which the
Company is engaged; namely, consumer products and petcare products. It
seeks, however, to provide its executives with opportunities for
substantially higher compensation through annual incentive awards and stock
options.

The Company has implemented a variable compensation plan for its top
executives. The purpose of the plan is to directly link management
compensation to Company performance. Present plans include expanding the
application of the variable compensation plan to more upper level managers.
Long-term incentives for executive officers and key managers are provided
through stock options. The objectives of this program are to align
executive and stockholder long-term interests by creating a strong and
direct link between executive compensation and stockholder return, and to
enable executives to develop and maintain a significant, long-term stock
ownership position in the Company's Common Stock. Stock options are
granted at an option price equal to the fair market value of the Company's
Common Stock on the date of grant and will only have value if the Company's
stock price increases. In selecting executives eligible to receive option
grants and determining the amount of such grants, the Committee evaluates a
variety of factors including (i) the job level of the executive, (ii)
option grants awarded by competitors to executives at a comparable job
level, and (iii) past, current and prospective service to the Company
rendered, or to be rendered, by the executive. It has been the Company's
practice to fix the exercise price of option grants at 100% of the fair
market value per share on the date of grant.

Executive Officers' 2001 Compensation

Mr. McDaniel was the Chief Executive Officer of the Company from
January 1 to April 29, 2001. Mr. Ambrose became the Chief Executive
Officer of the Company as of April 30, 2001 and currently holds that
position. Mr. Golato became the Chief Financial Officer and Senior Vice
President of the Company in June 2000 and currently holds such positions
with the Company pursuant to the terms of his employment agreement with the
Company.

Until April, 29, 2001, the Company paid Mr. McDaniel annual
compensation pursuant to the terms of his employment agreement with the
Company. Pursuant to his employment agreement, Mr. McDaniel was entitled
to a base annual salary of $185,000, subject to annual

merit reviews. Mr. McDaniel was also awarded additional performance-based
compensation in the form of options. Mr. Ambrose does not have an
employment agreement with the Company, but receives a base salary
compensation of $192,500 in his position as the Company's Chief Executive
Officer to be reviewed annual for merit increases. In 2001, the Committee
awarded Mr. Ambrose options to purchase 250,000 shares of the Company's
Common Stock as additional merit-based compensation. In 2001, the Company
paid Mr. Golato's annual compensation pursuant to the terms of his
employment agreement with the Company under which he receives a base annual
salary of $185,000, subject to annual merit reviews. In 2001, the
Committee awarded Mr. Golato options to purchase 200,000 shares of the
Company's Common Stock as additional merit-based compensation.

Tax Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation in excess of one million dollars paid to its chief executive
officer and its other four highest compensated officers. Qualified
performance-based compensation will not be subject to the deduction limit
if certain requirements are met. While the Committee does not currently
intend to qualify its annual cash incentive compensation as qualified
performance-based compensation, it will continue to monitor the impact of
Section 162(m) on the Company. Based on the compensation received by
Messrs. McDaniel, Ambrose and Golato as summarized above, it does not
appear that the Section 162(m) limitation will have a significant impact on
the Company in the near term.

Compensation and Stock Option Committee

Constantine L. Hampers, M.D. (Chairman)
Earl R. Lewis
Donald W. Joseph
Stephen J. Morris

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors (the "Audit Committee")
consists of at least three non-employee directors and is responsible for
reviewing the audit of the Company's accounts, monitoring the effectiveness
of the audit and evaluating the scope of the audit. In accordance with the
Company's Audit Committee Charter, as well as the listing standards
(Section 121(A)) of the American Stock Exchange, the members of the
Company's Audit Committee are "independent".

The Audit Committee has reviewed the financial statements prepared by
the Company and audited by KPMG LLP for the fiscal year ended December 31,
2001 and has discussed these financial statements with the Company's
management. The Audit Committee has discussed with KPMG LLP the matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU [SECTION]380), as may be modified or supplemented. The Audit
Committee has

received the written disclosures and the letter from KPMG LLP required by
Independence Standards Board Standard No. 1 (Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees), as
modified or supplemented, and has discussed with KPMG LLP their
independence. Based on their review and discussions set forth above, the
Audit Committee recommended to the Board of Directors that the audited
financial statements for the fiscal year ended December 31, 2001 be
included in the Company's Annual Report on Form 10-K.

Audit Committee

Terrence O'Donnell (Chairman)
Stephen J. Morris
Earl R. Lewis
Jane E. Hager

Compensation Committee Interlocks and Insider Participation

No member of the Compensation and Stock Option Committee was, during
fiscal year 2001, an officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries. During fiscal year 2001, no executive officer of the Company
served as a director or member of the compensation committee (or other
board committee performing equivalent functions, or in the absence of such
committee, the entire board of directors) of another entity, one of whose
executive officers served as a member of the Compensation and Stock Option
Committee, or as a director of the Company.

Comparative Stock Performance

The graph below compares the cumulative total stockholder return on
the Common Stock of the Company for the last five fiscal years with the
cumulative total return on the AMEX Composite Index and a peer group over
the same period (assuming the investment of $100 in the Company's Common
Stock, the AMEX Composite Index and the peer group on December 31, 1996,
and reinvestment of all dividends). The peer group consists of the Company
and AP Pharma Inc. (formerly Advanced Polymer Systems, Inc.). The Company's
Common Stock was suspended from trading on the American Stock Exchange from
March 31, 1998 to September 7, 1998 due to delays in filing periodic
reports under the Securities Exchange Act of 1934, as amended, and resumed
trading on September 8, 1998.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN *
AMONG IGI, INC., THE AMEX MARKET VALUE INDEX
AND A PEER GROUP

Cumulative Total Return
--------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
--------------------------------------------------------

<s> <c> <c> <c> <c> <c> <c>
IGI, INC. 100.00 59.26 28.70 28.71 9.26 8.89
AMEX MARKET VALUE 100.00 125.06 134.24 171.49 176.21 167.92
PEER GROUP 100.00 78.27 57.61 39.88 24.43 28.17

<FN>
- -------------------
* $100 invested on 12/31/96 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
</FN>

PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF AUDITORS

The Board of Directors has selected KPMG LLP as auditors of the
Company for the fiscal year ending December 31, 2002, subject to
ratification by stockholders at the Meeting. If this proposal is not
approved at the Meeting, the Board of Directors will reconsider this
selection. A representative of KPMG LLP is expected to be present at the
Meeting to respond to appropriate questions, and to make a statement if he
or she so desires.

On and effective as of November 28, 2000, the Company terminated its
relationship with PricewaterhouseCoopers LLP, who were the Company's
independent accountants for the years ended December 31, 1997 through
December 31, 1999. PricewaterhouseCoopers LLP's reports on the Company's
1997 through 1999 financial statements contained no adverse opinion or
disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principle, with the exception of its
opinion on the Company's 1999 financial statements, which was modified to
add an explanatory paragraph expressing substantial doubt as to the
Company's ability to continue as a going concern. The decision to
terminate the client-auditor relationship between the Company and
PricewaterhouseCoopers LLP was made by the Company's Board of Directors.
For the fiscal years ended December 31, 1997 through December 31, 1999, the
Company is unaware of any disagreement with PricewaterhouseCoopers LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements would have
caused PricewaterhouseCoopers LLP to make reference thereto in their report
on the financial statements for such periods.

On November 29, 2000, the Company engaged KPMG LLP to act as its
independent accountants. The Company did not consult with KPMG LLP during
the fiscal years ended December 31, 1997 through December 31, 1999
regarding matters that were or should have been subject to Statement on
Auditing Standard No. 50 or any subject matter of a disagreement or
reportable event with its former accountant.

Audit Fees

The aggregate amount the Company was billed by KPMG LLP for
professional services rendered for the 2001 quarterly reviews and audit of
the Company's annual financial statements for 2001 was $170,000 plus
expenses.

Financial Information Systems Design and Implementation Fees

KPMG LLP did not render any professional services to the Company in
connection with financial information systems design and implementation
during 2001, therefore the Company was not billed for any services of that
type.

All Other Fees

In addition to the services described above under the caption "Audit
Fees", KPMG LLP rendered professional services to the Company during 2001
in conjunction with the Company's filing of a Form S-3 Registration
Statement for 500,000 shares of the Company's Common Stock with the
Securities and Exchange Commission on May 25, 2001, and the aggregate
amount the Company was billed by KMPG LLP for such professional services
was $3,000.

With the exception of the immediately foregoing described services
for the Company's SEC Form S-3 filing on May 25, 2001, and those services
described under the captions of "Audit Fees" above, the Company was not
billed for any services of any other type.

Audit Committee Consideration of These Fees

The Company's Audit Committee has considered whether the provision of
the services covered under the categories of "Financial Information Systems
Design and Implementation Fees" and "All Other Fees" is compatible with
maintaining the independence of KPMG LLP.

Board Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITOR OF THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2002.

PROPOSAL 3 - APPROVAL OF AND PROPOSED INCREASE IN THE NUMBER
OF SHARES AUTHORIZED UNDER THE 1999 STOCK INCENTIVE PLAN

On March 16, 1999, the Board of Directors of the Company adopted,
subject to stockholder approval, the 1999 Stock Incentive Plan (the "1999
Incentive Plan") and authorized 1,200,000 shares of Common Stock for
issuance under the 1999 Incentive Plan. The Board of Directors believes
that the 1999 Incentive Plan has been and will continue to advance the

interests of the Company's stockholders by enhancing the Company's ability
to attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with
equity ownership opportunities and performance-based incentives and thereby
better aligning the interests of such persons with those of the Company's
stockholders. As of April 1, 2002, 117,000 shares of Common Stock remain
available for future grants of awards under the 1999 Incentive Plan. The
Company wishes to increase the number of authorized options under the 1999
Incentive Plan from 1,200,000 to 2,000,000.

Summary of the 1999 Incentive Plan

The 1999 Incentive Plan provides for the grant of incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code
("the Code"), non-statutory stock options and restricted stock awards
(collectively "Awards"). The 1999 Incentive Plan authorizes the Board to
determine the number of shares of Common Stock to be covered by each
option, the exercise price of each option and the conditions and
limitations applicable to the exercise of each option grant, including
conditions relating to applicable federal or state securities laws, as it
considers necessary or advisable.

No option will be granted for a term in excess of ten years. The 1999
Incentive Plan permits the Board to determine the manner of payment of the
exercise price of options, including through payment by cash, check or in
connection with a "cashless exercise" through a broker, by surrender to the
Company of shares of Common Stock, by delivery to the Company of a
promissory note or by any other lawful means.

The Board may grant Awards entitling recipients to acquire shares of
Common Stock, subject to the right of the Company to repurchase all or part
of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient
in the event that conditions specified by the Board in the applicable Award
are not satisfied prior to the end of the applicable restriction period or
periods established by the Board for such Award.

If any Award expires or is terminated, surrendered or canceled
without having been fully exercised or is forfeited in whole or in part or
results in any Common Stock not being issued, the unused Common Stock
covered by such Award shall again be available for the grant of Awards
under the 1999 Incentive Plan, subject, however, in the case of incentive
stock options, to any limitation required under the Code. Shares issued
under the 1999 Incentive Plan may consist in whole or in part of authorized
but unissued shares or treasury shares.

All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment)
are eligible to be granted Awards under the 1999 Incentive Plan. Subject to
adjustment, the maximum number of shares of Common Stock with respect to
which Awards may be granted to any participant under the 1999 Incentive
Plan shall be 300,000 per calendar year. This per-participant limit
described shall be construed and applied consistently with Section 162(m)
of the Code. The granting of Awards under the 1999 Incentive Plan is
discretionary.

Administration

The 1999 Incentive Plan is administered by the Compensation and Stock
Option Committee, who then recommends Awards to the Board of Directors for
approval. The Board has authority to grant Awards and to adopt, amend and
repeal such administrative rules, guidelines and practices relating to the
1999 Incentive Plan as it shall deem advisable. Pursuant to the terms of
the 1999 Incentive Plan, the Board of Directors may delegate authority
under the 1999 Incentive Plan to one or more committees of the Board, and
subject to certain limitations, to one or more executive officers of the
Company. Subject to any applicable limitations contained in the 1999
Incentive Plan, the Board of Directors, or any committee or executive
officer to whom the Board delegates authority, as the case may be, selects
the recipients of Awards and determines (i) the number of shares of Common
Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of
options, and (iv) the number of shares of Common Stock subject to any
restricted stock or other stock-based Awards and the terms and conditions
of such Awards, including conditions for repurchase, issue price and
repurchase price. The Board of Directors may make appropriate adjustments
in connection with the 1999 Incentive Plan and any outstanding Awards to
reflect stock dividends, stock splits and other certain events that affect
the Company's capitalization.

In the event of a merger, liquidation or other Acquisition Event (as
defined in the 1999 Incentive Plan), the Board of Directors is authorized
to provide for outstanding options or other stock-based Awards to be
assumed or substituted for, to accelerate the Awards to make them fully
exercisable prior to consummation of the Acquisition Event, or to provide
for a cash-out of the value of any outstanding options. Upon the occurrence
of an Acquisition Event in the case of restricted stock, the rights of the
Company shall inure to the benefit of the Company's successor. If any Award
expires or is terminated, surrendered, canceled or forfeited, the unused
shares of Common Stock covered by such Award will again be available for
grant under the 1999 Incentive Plan.

Amendment or Termination

No Award may be made under the 1999 Incentive Plan after March 16,
2009, but Awards previously granted may extend beyond that date. The Board
may amend, modify or terminate any outstanding Award, including but not
limited to, substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and converting an
incentive stock option to a non-statutory stock option. The Board may also
amend, suspend or terminate the 1999 Incentive Plan or any portion thereof
at any time, provided that, to the extent required by Section 162(m) of the
Code, no Award granted to a participant designated as subject to Section
162(m) by the Board after the date of such amendment shall become
exercisable, realizable or vested, as applicable to such Award (to the
extent that such amendment to the 1999 Incentive Plan was required to grant
such Award to a particular participant), unless and until such amendment
shall have been approved by the Company's stockholders as required by
Section 162(m) (including the vote required under Section 162(m)).

Federal Income Tax Consequences

The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under
the 1999 Incentive Plan and with respect to the sale of Common Stock
acquired under the 1999 Incentive Plan.

Incentive Stock Options. In general, a participant will not
recognize taxable income upon the grant or exercise of an incentive stock
option. Instead, a participant will recognize taxable income with respect
to an incentive stock option only upon the sale of Common Stock acquired
through the exercise of the option ("ISO Stock"). The exercise of an
incentive stock option, however, may subject the participant to the
alternative minimum tax. Generally, the tax consequences of selling ISO
Stock will vary with the length of time that the participant has owned the
ISO Stock at the time it is sold. If the participant sells ISO Stock after
having owned it for at least two years from the date the option was granted
(the "Grant Date") and one year from the date the option was exercised (the
"Exercise Date"), then the participant will recognize long-term capital
gain in an amount equal to the excess of the sale price of the ISO Stock
over the exercise price. If the participant sells ISO Stock for more than
the exercise price prior to having owned it for at least two years from the
Grant Date and one year from the Exercise Date (a "Disqualifying
Disposition"), then all or a portion of the gain recognized by the
participant will be ordinary compensation income and the remaining gain, if
any, will be a capital gain. This capital gain will be long-term capital
gain if the participant has held the ISO Stock for more than one year prior
to the date of sale. If a participant sells ISO Stock for less than the
exercise price, then the participant will recognize capital loss in an
amount equal to the excess of the exercise price over the sale price of the
ISO Stock. This capital loss will be long-term capital loss if the
participant has held the ISO Stock for more than one year prior to the date
of sale.

Non-statutory Stock Options. As in the case of an incentive stock
option, a participant will not recognize taxable income upon the grant of a
non-statutory stock option. Unlike the case of an incentive stock option,
however, a participant who exercises a non-statutory stock option generally
will recognize ordinary compensation income in an amount equal to the
excess of the fair market value of the Common Stock acquired through the
exercise of the option ("NSO Stock") on the exercise date over the exercise
price. With respect to any NSO Stock, a participant will have a tax basis
equal to the exercise price plus any income recognized upon the exercise of
the option. Upon selling NSO Stock, a participant generally will recognize
capital gain or loss in an amount equal to the difference between the sale
price of the NSO Stock and the participant's tax basis in the NSO Stock.
This capital gain or loss will be a long-term capital gain or loss if the
participant has held the NSO Stock for more than one year prior to the date
of the sale.

Restricted Stock Awards. A participant will not recognize taxable
income upon the grant of a restricted stock Award, unless the participant
makes an election under Section 83(b) of the Code (a "Section 83(b)
Election"). If the participant makes a Section 83(b) Election within 30
days of the date of the grant, then the participant will recognize ordinary
compensation income, for the year in which the Award is granted, in an
amount equal to the difference between the fair market value of the Common
Stock at the time the Award is granted and the purchase price paid for the
Common Stock. If a Section 83(b) Election is not made, the participant will
recognize

ordinary compensation income at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference
between the fair market value of the Common Stock at the time of such lapse
and the original purchase price paid for the Common Stock. The participant
will have a basis in the Common Stock acquired equal to the sum
of the price paid and the amount of ordinary compensation income
recognized. Upon the disposition of the Common Stock acquired pursuant to
a restricted stock Award, the participant will recognize a capital gain or
loss in an amount equal to the difference between the sale price of the
Common Stock and the participant's basis in the Common Stock. This capital
gain or loss will be a long-term capital gain or loss if the shares are
held for more than one year. For this purpose, the holding period shall
begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made or just after
the Award is granted if a Section 83(b) Election is made.

Tax Consequences to the Company

The grant of an Award under the 1999 Incentive Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of
an incentive stock option nor the sale of any Common Stock acquired under
the 1999 Incentive Plan will have any tax consequences to the Company. The
Company generally will be entitled to a business-expense deduction,
however, with respect to any ordinary compensation income recognized by a
participant under the 1999 Incentive Plan, including in connection with a
restricted stock Award or as a result of the exercise of a non-statutory
stock option or a Disqualifying Disposition. Any such deduction will be
subject to the limitations of Section 162(m) of the Code.

Board Recommendation

THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE ADPOTION OF AND
INCREASE IN THE NUMBER OF SHARES AUTHORIZED UNDER THE 1999 STOCK INCENTIVE
PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL OF AND INCREASE IN THE
NUMBER OF AUTHORIZED SHARES UNDER THE 1999 STOCK INCENTIVE PLAN.

STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING

Any proposal that a stockholder intends to present at the 2003 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company
at its offices, 105 Lincoln Avenue, Buena, New Jersey 08310, no later than
December 23, 2002, in order to be considered for inclusion in the Proxy
Statement relating to that meeting.

If a stockholder of the Company wishes to present a proposal before
the 2003 Annual Meeting and the Company has not received notice of such
matter prior to March 7, 2003, the Company shall have discretionary
authority to vote on such matter, if the Company includes a specific
statement in the proxy statement or form of proxy to the effect that it has
not received such notice in a timely fashion.

OTHER MATTERS

The Board of Directors knows of no other business which will be
presented for consideration at the Meeting other than that described above.
However, if any other business should come before the Meeting, it is the
intention of the persons named in the enclosed Proxy to vote, or otherwise
act, in accordance with their best judgment on such matters.

The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular
employees may, without additional remuneration, solicit proxies by
telephone, telegraph, facsimile and personal interviews. The Company will
also request brokerage houses, custodians, nominees and fiduciaries to
forward copies of the proxy material to those persons for whom they hold
shares and request instructions for voting the Proxies. The Company will
reimburse such brokerage houses and other persons for their reasonable
expenses in connection with this distribution.

THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND
YOUR COOPERATION IS APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY
VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.

By Order of the Board of Directors,

John F. Ambrose,
President & CEO

April 16, 2002

IGI, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2002

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned, having received notice of the meeting and
management's proxy statement therefor, and revoking all prior proxies,
hereby appoint(s) John F. Ambrose and Domenic N. Golato, and each of them,
attorneys or attorney of the undersigned (with full power of substitution
in them and each of them) for and in the name(s) of the undersigned to
attend the Annual Meeting of Stockholders of IGI, Inc. (the "Company") to
be held on Wednesday, May 15, 2002 at 10:00 a.m. at the Renaissance
Philadelphia Airport Hotel, 500 Stevens Drive, Philadelphia, PA 17113, and
at any adjourned sessions thereof, and there to vote and act upon the
following matters in respect of all shares of stock of the Company which
the undersigned will be entitled to vote or act upon, with all the powers
the undersigned would possess if personally present.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY PROPOSAL, THIS
PROXY WILL BE VOTED FOR SUCH PROPOSAL.

PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.

Please sign this proxy exactly as your name appears on the books of
the Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, the
signature must be that of an authorized officer who should state his or her
title.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

_____________________________ _______________________________
_____________________________ _______________________________
_____________________________ _______________________________
_____________________________ _______________________________

[X] PLEASE MARK VOTES AS IN THIS EXAMPLE

PROPOSAL 1 - ELECTION OF DIRECTORS

[ ] For All Nominees [ ] Withhold Authority

Terrence O'Donnell, Constantine L. Hampers, M.D., Stephen J. Morris, Donald
W. Joseph, Earl R. Lewis, John F. Ambrose and Kenneth E. Jones (American
Capital Strategies, Ltd. designee).

NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Nominees" box and strike a line through the name(s) of
the nominee(s) that you do not wish to vote for. Your shares will be voted
for the remaining nominee(s).

PROPOSAL 2 - TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2002.

For [ ] Against [ ] Abstain [ ]

PROPOSAL 3 - TO APPROVE THE ADOPTION OF AND INCREASE IN THE NUMBER OF
SHARES AUTHORIZED UNDER THE COMPANY'S 1999 STOCK INCENTIVE PLAN.

For [ ] Against [ ] Abstain [ ]

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED IN
PROPOSAL 1 AND A VOTE "FOR" PROPOSALS 2 AND 3.

PLEASE BE SURE TO SIGN AND DATE THIS PROXY BELOW

- --------------------------------
Date:

- -------------------------------- --------------------------------
Stockholder Sign Here Co-Owner Sign Here

- -------------------------------- --------------------------------
Stockholder Print Name Here Co-Owner Print Name Here

Mark box at right if an
address change or comment
has been noted on the
reverse side of this card. [ ]