WARRANT AGREEMENT

         WARRANT AGREEMENT dated July __, 2000 between Derma Sciences, Inc. (the
"Company") and StockTrans, Inc. (the "Warrant Agent").

         The Company proposes to issue common stock purchase warrants to be
known as series E warrants (the "Warrant(s)"). Each Warrant entitles the holder
thereof to purchase one share of Common Stock, par value $.01 per share (the
"Common Stock"), at a purchase price of $0.85 per whole share. The Warrant
Agent, at the request of the Company, has agreed to act as the agent of the
Company in connection with the issuance, registration, transfer, exchange, and
exercise of Warrants. Each Warrant shall be exchangeable at the holder's request
pursuant to the terms of Section 6 hereof.

         NOW, THEREFORE, in consideration of the mutual agreements herein set
forth:

         1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment. The Company may from time to time appoint such
Co-Warrant Agents as it may deem necessary or desirable. The Company shall
promptly notify the Warrant Agent from time to time in writing of the number of
Warrants to be issued and furnish written instructions in connection therewith.

         2. FORM OF WARRANT CERTIFICATES. The Warrant Certificates (and the
forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially of the tenor and purport recited in
Exhibit A hereto and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Warrant Agreement, or as
may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Warrants may from time to time be listed, or to conform to usage. The
Warrant Certificates shall be dated as of the date of issuance thereof by the
Warrant Agent, either upon initial issuance or upon transfer or exchange, and
initially shall entitle the holders thereof to purchase one share of Common
Stock, but the number of such shares and the purchase price per share of Common
Stock shall be subject to adjustments as provided herein.

         3. COUNTERSIGNATURE AND REGISTRATION. The Warrant Certificates shall be
executed on behalf of the Company by the President or Chief Executive Officer
and shall be attested by a Vice President or the Secretary of the Company. The
Warrant Certificates shall be countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. In case any of the Company's
officers who shall have signed any of the Warrant Certificates shall cease to be
such before countersignature by the Warrant Agent and issuance and delivery by
the Company, such Warrant Certificates, nevertheless, may be countersigned by
the Warrant Agent, issued and delivered with the same force and effect as though
the person who signed such Warrant Certificates had not ceased to be such
officer of the Company; and any Warrant Certificates may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Warrant Certificates, shall be a proper officer of the Company to sign such



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Warrant Certificates, although at the date of the execution of this Warrant
Agreement any such person was not such an officer.

         The Warrant Agent will keep or cause to be kept, at one of its offices
in the City of Ardmore, Commonwealth of Pennsylvania books for registration and
transfer of the Warrant Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Warrant Certificates, the
number of Warrants evidenced on its face by each of the Warrant Certificates,
and the date of each of the Warrant Certificates.

         The Warrant Agent shall countersign a Warrant Certificate only (a) upon
initial issuance of the Warrants in accordance with the written order signed by
the President and Chief Executive Officer or the Vice President and Chief
Financial Officer, or (b) upon exchange, transfer or substitution for one or
more previously countersigned Warrant Certificates as hereinafter provided.

         4. TRANSFER AND EXCHANGE. Subject to Section 6 hereof, the Warrant
Agent shall, from time to time, register the transfer of any outstanding Warrant
Certificate upon the books to be maintained by the Warrant Agent for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instruments of transfer and written instructions for transfer. Upon
any such registration of transfer, a new Warrant Certificate shall be issued to
the transferee and the surrendered Warrant Certificate shall be canceled by the
Warrant Agent. Any Warrant Certificate may be exchanged at the option of the
holder thereof, upon surrender at the office of the Warrant Agent specified in
Section 21 hereof, for another Warrant Certificate, or other Warrant
Certificates of different denominations, representing in the aggregate the right
to purchase a like number of shares of Common Stock.

         5. COMMON STOCK AND WARRANT COMMON STOCK. As hereinafter used in this
Agreement, Common Stock shall mean stock of the Company of any class, whether
now or hereafter authorized, which has the right to participate in the
distribution of either earnings or assets of the Company without limit as to
amount or percentage, and Warrant Common Stock shall mean only Common Stock, and
stock of any other class into which such presently authorized Common Stock may
hereafter be changed, issuable upon exercise or exchange of the Warrant. In
case, by reason of the operation of Section 7, the Warrants shall entitle the
registered holders thereof to purchase any other shares of stock or other
securities or property of the Company or of any other corporation, any reference
in this Agreement to the exercise of Warrants shall be deemed to refer to and
include the purchase of such other shares of stock or other securities or
property upon such exercise.

         6. WARRANT PRICE; CONVERSION DATE OF WARRANTS; EXCHANGE OF WARRANTS.
The registered holder of any Warrant Certificate may exercise or exchange the
Warrants evidenced thereby in whole or in part at any time on or after the date
hereof upon surrender of the Warrant Certificate with the form of election to
purchase or exchange on the reverse side thereof duly executed, to the Warrant
Agent at the principal office of the Warrant Agent in the City of Ardmore,
Commonwealth of Pennsylvania, together with payment of the purchase price for
each one share of Common Stock as to which the Warrants are exercised, at or
prior to 3:30 p.m. Eastern Standard Time on July 18, 2005 (the "Exercise Date").

         The purchase price for each share of Common Stock pursuant to the
exercise of a Warrant (the "Warrant Price") shall be as specified in the first


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paragraph of this Warrant Certificate, as adjusted pursuant to Section 7 hereof,
and shall be payable in lawful money of the United States of America.

         The Warrants may be exchanged, in whole or in part, at the holder's
option, for that number of shares of Common Stock obtained by dividing the value
of the Warrant (determined by subtracting the aggregate exercise price of the
Warrant from the aggregate fair market value of the number of shares of Common
Stock issuable upon exercise of the Warrant), by the fair market value of one
share of Common Stock prior to the exchange.

         7. WARRANT ADJUSTMENTS. The Warrant Price and the number of shares
purchasable upon exercise of a Warrant shall be subject to adjustment as
follows:

                (a) STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS AND
RECLASSIFICATIONS. In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), the Warrant Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and/or the number and kind of
shares of capital stock issuable upon exercise of the Warrants on such date
shall be proportionately adjusted so that the holder of any Warrant exercised
after such time shall be entitled to receive the aggregate number and kind of
shares of capital stock which, if such Warrant had been exercised immediately
prior to such date and at a time when the Common Stock transfer books of the
Company were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.

                (b) SUBSCRIPTIONS. If at any time after the date hereof the
Company shall fix a record date for the issuance of rights or warrants to all
holders of its Common Stock entitling them to subscribe for or to purchase
shares of Common Stock (or securities convertible into shares of Common Stock)
or having a conversion price per share of Common Stock (if a security is
convertible into Common Stock) at a price per share less than the Current Market
Price per share of Common Stock on such record date (as determined in the manner
prescribed in Section 8 hereof) the Warrant Price shall be decreased to an
amount determined by multiplying such Warrant Price in effect immediately prior
to such record date by a fraction, the numerator of which is the sum of the
total number of shares of Common Stock outstanding immediately prior to such
record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be offered
(or the aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such Current Market Price and the denominator of
which shall be the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined by the Board of Directors of
the Company, whose determination shall be conclusive, and described in a
statement filed with the Warrant Agent. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event that such


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rights or warrants are not so issued, the Warrant Price shall again be adjusted
to be the price which would then be in effect if such record date had not been
fixed.

                (c) DISTRIBUTIONS. If at any time after the date hereof the
Company shall fix a record date for the making of a distribution to all holders
of its Common Stock of evidences of its indebtedness or assets (excluding cash
distributions made as a dividend payable out of earnings or out of surplus
legally available for dividends under the laws of the jurisdiction of the
Company) or rights to subscribe (excluding those referred to in subsection (b)
above), then in each case the Warrant Price in effect immediately prior to such
record date shall be decreased to an amount determined by multiplying such
Warrant Price by a fraction, the numerator of which is the Current Market Price
on such record date less the then fair market value (as determined by the Board
of Directors of the Company, whose determination shall be conclusive, and
described in a statement filed with the Warrant Agent) of the assets or
evidences of indebtedness so distributed or of such subscription rights and the
denominator of which is the Current Market Price at such date. The number of
shares purchasable on such record date shall be increased to a number of shares
equal to (i) the number of shares purchasable at the date of such distribution
multiplied by the Warrant Price in effect immediately prior to the adjustment
required by the preceding sentence, divided by (ii) the adjusted Warrant Price
computed pursuant to the preceding sentence. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Warrant Price shall again be adjusted to the
Warrant Price which would then be in effect if such record date had not been
fixed.

                (d) CONSOLIDATION, MERGER OR SALE OF ASSETS. If, prior to the
exercise of any Warrants, the Company shall at any time consolidate with or
merge into another corporation, the holder of any Warrants will thereafter
receive, upon the exercise thereof in accordance with the terms of this
Agreement, the securities or property to which the holder of the number of
shares of Common Stock then deliverable upon the exercise or conversion of such
Warrants would have been entitled upon such consolidation or merger, and the
Company shall take such steps in connection with such consolidation or merger as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to any securities or
property thereafter deliverable upon the exercise of the Warrants. The Company
or the successor corporation, as the case may be, shall execute and deliver to
the Warrant Agent a supplemental agreement so providing. A sale of all or
substantially all the assets of the Company for a consideration (apart from the
assumption of obligations) consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes. The provisions of this
subsection (d) shall similarly apply to successive mergers or consolidations or
sales or other transfers.

                (e) CALCULATIONS TO THE NEAREST CENT AND ONE-HUNDREDTH OF A
SHARE. No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 7(e) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 7 shall be made to
the nearest cent and to the nearest one-hundredth of a share as the case may be.
Notwithstanding the first sentence of this subsection (e), any adjustment
required by this Section 7 shall be made no later than the earlier of six months
from the date of the transaction which mandates such adjustment or the
expiration of the right to exercise any Warrant.



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                (f) NOTICE OF WARRANT ADJUSTMENT. Whenever the Warrant Price or
the number of shares purchasable upon exercise of a Warrant shall be adjusted as
provided in this Section 7, the Company shall forthwith file with the Warrant
Agent a certificate, signed by a firm of independent public accountants, showing
in detail the facts requiring such adjustment and the Warrant Price and number
of shares so purchasable that will be effective after such adjustment. The
Company shall also cause a notice setting forth any adjustments to be sent by
mailing first class, postage prepaid, to each registered holder of a Warrant or
Warrants at its address appearing on the Warrant register and, at its option,
may cause a copy of such notice to be published once in an English language
newspaper of general circulation in the City of Ardmore, Pennsylvania. The
Warrant Agent shall have no duty with respect to any certificate filed with, it
except to keep the same on file and available for inspection by registered
holders of Warrants during reasonable business hours. The Warrant Agent shall
not at any time be under any duty or responsibility to any holder of a Warrant
to determine whether any facts exist which may require any adjustment of the
Warrant Price, or with respect to the nature of any adjustment of the Warrant
Price when made, or with respect to the method employed in making such
adjustment.

                (g) OTHER NOTICES. In case the Company after the date hereof
shall propose to take any action of the type described in subsections (b), (c)
and (d) of this Section 7, the Company shall file with the Warrant Agent a
certificate, signed by the President or Chief Executive Officer of the Company
and by its Secretary or Assistant Secretary specifying, in the case of any
action of the type specified in subsection (d), the date on which such action
shall take place and shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such facts may be known on the date of such notice) on the Warrant Price
and the number, or kind, or class of shares or other securities or property
which shall be purchasable upon exercise of Warrants. Such notice shall be given
in the case of any action of the type specified in subsections (b) and (c), at
least 10 days prior to the record date with respect thereto and in the case of
any action of the type specified in subsection (d) at least 10 days prior to the
taking of such proposed action. The Company shall also cause a notice setting
forth any adjustments to be sent by mailing first class, postage prepaid, to
each registered holder of a Warrant Certificate or Warrant Certificates at its
address appearing on the Warrant register and, at its option, may cause a copy
of such notice to be published once in an English language newspaper of general
circulation in the City of Princeton, New Jersey. Failure to give such notice or
any defect therein shall not affect the legality or validity of such action.

                (h) NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective of
any of the adjustments in the Warrant Price or the number of shares of Warrant
Common Stock, Warrant Certificates theretofore or thereafter issued may continue
to express the same prices and number of shares as are stated in a similar
Warrant Certificate issuable initially, or at some subsequent time, pursuant to
this Agreement and such number of Shares specified therein shall be deemed to
have been so adjusted.

                (i)   TREASURY SHARES. Shares of Common Stock at any time owned
by the Company shall not be deemed to be outstanding for purposes of any
computation under this Section 7.

                (j) OPTIONAL REDUCTION IN WARRANT PRICE. Anything in this
Section 7 to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Warrant Price, in addition to those adjustments required
by this Section 7, as it in its sole discretion shall determine to be necessary
in order that any consolidation or subdivision of the Common Stock, issuance


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wholly for cash of any Common Stock at less than the Current Market Price,
issuance wholly for cash of Common Stock or securities which by their terms are
convertible into or exchangeable for Common Stock, stock dividend, issuance of
rights, options or warrants referred to hereinabove in this Section 7,
hereinafter made by the Company to its common stockholders, shall not be taxable
to them.

         The Company may, at its option, at any time during the term of the
Warrants, reduce the then current Exercise Price to any amount deemed
appropriate by the Board of Directors of the Company, for any length of time.

         8. CURRENT MARKET PRICE. For all purposes of this Agreement, the
Current Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices for the thirty consecutive business days
commencing before such date. The closing price for each day shall be (a) if the
Common Stock shall be listed or admitted to trading on the New York Stock
Exchange, the closing price on the NYSE-Consolidated Tape (or any successor
composite tape recording transactions on the New York Stock Exchange) or, if
such a composite tape shall not be in use or shall not report transactions in
the Common Stock, or if the Common Stock shall be listed on a stock exchange
other than the New York Stock Exchange, the last reported sales price regular
way on the principal national securities exchange on which the Common Stock
shall be listed or admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of the Common Stock has been
traded during such thirty consecutive business days), or, in either case, if
there is no transaction on any such day, the average of the bid and asked prices
regular way on such day, or (b) if the Common Stock shall not be listed or
admitted to trading on any national securities exchange, the closing price, if
reported, or, if the closing price is not reported, the average of the closing
bid and asked prices, as reported by the National Association of Securities
Dealers Automated Quotation (Nasdaq) National Market or a similar source
selected from time to time by the Company for the purpose. If on any such date
the shares of Common Stock are not quoted by any such source, the fair value of
such shares on such date, as determined by the Board of Directors of the
Company, shall be used.

         9. EXERCISE OF WARRANTS. Subject to the provisions of this Agreement,
each registered holder of Warrants shall have the right, which may be exercised
as in such Warrant Certificates expressed, to purchase from the Company (and the
Company shall issue and sell to such registered holders of Warrants) all or part
of the number of fully paid and nonassessable shares of Warrant Common Stock
specified in such Warrant Certificates (subject to the adjustments as herein
provided), upon surrender to the Company at the office of the Warrant Agent
specified in Section 21 hereof, of such Warrant Certificates with the exercise
form on the reverse thereof duly filled in and signed, and upon payment to the
Warrant Agent to the account of the Company of the Warrant Price for the number
of shares of Warrant Common Stock in respect of which such Warrants are then
exercised. The date of exercise of any Warrant shall be deemed to be the date of
its receipt by the Warrant Agent duly filled in and signed and accompanied by
proper funds as hereinafter provided. Payment of such Warrant Price may be made
in cash, or by certified or official bank check. No adjustment shall be made for
any cash dividends on shares of Warrant Common Stock issuable upon exercise of a
Warrant. Upon such surrender of Warrants, and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the registered holder of such Warrants
and in such name or names as such registered holder may designate, a certificate
or certificates for the number of full shares of Warrant Common Stock so


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purchased upon the exercise of such Warrants together with cash as provided in
Section 11 of this Agreement, in respect of any fraction of a share of such
stock issuable upon such surrender.

         Each person in whose name any certificate for shares of Common Stock is
issued upon the exercise of Warrants shall for all purposes be deemed to have
become the holder of record of the Common Stock represented thereby on, and such
certificate shall be dated, the date upon which the Warrant Certificate
evidencing such Warrants was duly surrendered and payment of the Warrant Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Common Stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding business day on which the Common Stock transfer books of the
Company are open.

         10. UNEXERCISED WARRANTS. To the extent that any Warrant Certificates
remain outstanding at the expiration of the period during which the Warrants are
exercisable, the unexercised Warrants represented thereby shall be deemed null
and void.

         11. ELIMINATION OF FRACTIONS. The Company shall not be required to
issue fractional shares of stock upon any exercise of Warrants. As to any final
fraction of a share which the same registered holder of one or more Warrants,
the rights under which are exercised in the same transaction or series of
related transactions, would otherwise be entitled to purchase upon such
exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price (as
determined in the manner prescribed in Section 8 hereof) on the business day
which next precedes the day of exercise.

         12. ISSUE TAXES. The Company will pay documentary stamp taxes, if any,
attributable to the initial issuance of shares of Warrant Common Stock upon the
exercise of any Warrant; provided, however, that neither the Company nor the
Warrant Agent shall be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue or delivery of any certificates
for shares of Warrant Common Stock in a name other than that of the registered
holder of Warrants, in respect of which such shares are initially issued.

         13. RESERVATION OF SHARES. The Company shall at all times reserve and
keep available out of its authorized but unissued stock, for the purpose of
effecting the issuance of stock upon exercise of Warrants, such number of shares
of its duly authorized Warrant Common Stock as shall from time to time be
sufficient to effect the issuance of shares of Warrant Common Stock upon
exercise of all Warrants at the time outstanding.

         14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. In the case of Warrants which have been countersigned
by the Warrant Agent, but not delivered at the time any such successor to the
Warrant Agent succeeds to the agency created by this Agreement, any such
successor may adopt the countersignature of the original Warrant Agent and
deliver such Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, any successor to the Warrant Agent


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may countersign such Warrants either in the name of the predecessor Warrant
Agent or in the name of the successor Warrant Agent; and in all such cases such
Warrants shall have the full force and effect provided in the Warrants and in
this Agreement.

         In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrant Certificates so countersigned, and in case at that time any
of the Warrant Certificates shall not have been countersigned, the Warrant Agent
may countersign such Warrant Certificates either in its prior name or in its
changed name; and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.

         15. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS, ETC. The Warrant
Agent shall account promptly to the Company with respect to Warrants exercised
and concurrently pay to the Company all moneys received by the Warrant Agent for
the purchase of shares of Common Stock through the exercise of such Warrants.

         The Warrant Agent shall keep copies of this Agreement available for
inspection by holders of Warrants during normal business hours at its office
specified in Section 21 hereof.

         16. SUPPLEMENTS AND AMENDMENTS. The parties hereto may from time to
time supplement or amend this Agreement without the approval of any holders of
Warrants to cure any ambiguity or to correct or supplement any provision
contained in this Agreement which may be defective or inconsistent with any
other provision contained herein, or to make such other provisions with respect
to any change or any supplemental agreement as the parties may deem necessary or
desirable and which shall not materially adversely affect the interests of the
registered holders of the Warrants.

         17. MUTILATED OR MISSING WARRANT CERTIFICATES. If any Warrant shall be
mutilated, lost, stolen or destroyed the Warrant Agent shall deliver a new
Warrant Certificate of like tenor and denomination in exchange and substitution
therefor upon surrender and cancellation of the mutilated Warrant Certificate
or, in the case of a lost, stolen or destroyed Warrant Certificate, upon receipt
of evidence satisfactory to the Company and the Warrant Agent of the loss, theft
or destruction of such Warrant Certificate and, in either case, upon receipt of
such indemnity as the Company and the Warrant Agent may reasonably require.
Applicants for substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Warrant
Agent or the Company may prescribe. Any such new Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be at
any time enforceable by anyone.

         18. DUTIES OF THE WARRANT AGENT. The Warrant Agent undertakes the
duties and obligations imposed by this Warrant Agreement upon the following
terms and conditions, by all of which the Company and the holders of Warrants,
by their acceptance thereof, shall be bound:

         The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature thereof and except such as describes
the Warrant Agent or action taken or to be taken by it) or be required to verify
the same, but all such statements and recitals are and shall be deemed to have


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been made by the Company only. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof or in respect of the validity or execution of any Warrant
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant Certificate to be complied with by the Company; nor
shall it be responsible for the making of any adjustment in the Warrant Price or
the number of shares issuable upon the exercise of a Warrant required under the
provisions of Section 7 or responsible for the manner, method or amount of any
such change or the ascertaining of the existence of facts that would require any
such change; nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
to be issued pursuant to this Agreement or any Warrant or as to whether any
shares will, when issued, be validly issued and fully paid and non-assessable.

         The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees or for any loss to the Company resulting
from such neglect or misconduct, provided reasonable care had been exercised in
the selection and continued employment thereof.

         The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be legal counsel for the Company) and the advice of
such counsel shall provide complete authorization and protection to the Warrant
Agent as to any action taken or omitted by it in good faith and in accordance
with such advice.

         The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of a Warrant Certificate for any action taken in
reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.

         The Company agrees to pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this Warrant
Agreement, to reimburse the Warrant Agent for all expenses (including reasonable
counsel fees), taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the execution of this Warrant Agreement
and to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and reasonable counsel fees, for
anything done or omitted by the Warrant Agent in the execution of this Warrant
Agreement except as a result of the Warrant Agent's negligence, willful
misconduct or bad faith.

         The Warrant Agent and any stockholder, director, officer or employee of
the Warrant Agent may buy, sell, or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Warrant Agreement. Nothing herein shall preclude the Warrant Agent
from acting in any other capacity for the Company or for any other legal entity.

         The Warrant Agent shall act hereunder solely as agent for the Company
and in a ministerial capacity, and its duties shall be determined solely by the


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provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, willful misconduct or bad faith.

         20. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement upon 30 days' notice in writing
mailed to the Company by registered or certified mail, and to the holders of the
Warrant Certificates by first-class mail. The Company may remove the Warrant
Agent or any successor Warrant Agent upon 30 days' notice in writing, mailed to
the Warrant Agent or successor Warrant Agent, as the case may be, and to each
transfer agent of the Common Stock by registered or certified mail, and to the
holders of the Warrant Certificates by first-class mail. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in of such resignation by the resigning or
incapacitated Warrant Agent or by the holder of a Warrant Certificate (who
shall, with such notice, submit such holder's Warrant Certificate for inspection
by the Company), then the registered holder of any Warrant Certificate may apply
to any court of competent jurisdiction for the appointment of a new Warrant
Agent.

         21. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of any
subsequent Transfer Agent for shares of the Common Stock, the Company will file
with the Warrant Agent a statement setting forth the name and address of such
Transfer Agent.

         22. NOTICES. Any notice pursuant to this Agreement to be given by the
Warrant Agent or by the registered holder of any Warrant to the Company shall be
sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing by the Company with the Warrant
Agent) as follows:

                         Derma Sciences, Inc.
                         214 Carnegie Center, Suite 100
                         Princeton, New Jersey  08540
                         Attention:  Edward J. Quilty, President and CEO

         Any notice pursuant to this Agreement to be given by the Company or by
the registered holder of any Warrant to the Warrant Agreement shall be
sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) as follows:

                         StockTrans, Inc.
                         7 East Lancaster Avenue
                         Ardmore, Pennsylvania  19003

        23. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.

         24. GOVERNING LAW. This Agreement and each Warrant issued hereunder
shall be deemed to be a contract made under the laws of the Commonwealth of
Pennsylvania, and for all purposes shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania without regard to principles of
conflict of laws.



                                       10
<PAGE>

         25. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of the Warrant Certificates.

        26. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

         27. REGISTRATION OF SHARES OF COMMON STOCK. The Company will furnish to
the Warrant Agent, upon request, an opinion of counsel to the effect that (a) a
Registration Statement under the Securities Act of 1933, as amended, is then in
effect with respect to the shares of Warrant Common Stock issuable upon exercise
of the Warrants and the Prospectuses hereinafter referred to comply as to form
in all material respects with the requirements of said Act and the rules and
regulations of the Securities and Exchange Commission thereunder; or (b) a
Registration Statement under said Act with respect to said shares is not
required. In the event that said opinion states that such a Registration
Statement is in effect the Company will, from time to time, furnish the Warrant
Agent with current Prospectuses meeting the requirements of said Act and all
rules and regulations thereunder in sufficient quantity to permit the Warrant
Agent to deliver a Prospectus to each transferee of a Warrant Certificate and
each holder of a Warrant Certificate upon exercise or conversion thereof. The
Company further agrees to pay all fees, costs and expenses in connection with
the preparation and delivery to the Warrant Agent of the foregoing opinions and
Prospectuses.

         If any shares of Warrant Common Stock issuable upon the exercise of the
Warrants or the issuance thereof requires registration or approval of any
governmental authority, including, without limitation, the filing of necessary
amendments, supplements or post-effective amendments to a Registration Statement
of the Company under the Securities Act of 1933, or the taking of any other
action under the laws of the United States of America or any political
subdivision hereof or under the laws of any state of the United States of
America before such shares may be validly and legally issued, then the Company
covenants that it will in good faith and as expeditiously as possible endeavor
to secure and keep effective such registration or approval or to take such other
action, as the case may be.

                            [Signatures on next page]





                                       11
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed and delivered as of the day and year first above
written.

                                       DERMA SCIENCES, INC.



                                       By:______________________________________
                                           Edward J. Quilty
                                           President and Chief Executive Officer


                                       STOCKTRANS, INC.



                                       By:______________________________________
                                           Jonathan A. Miller
                                           President




                                       12
<PAGE>


                                    EXHIBIT A

                               WARRANT CERTIFICATE
                              DERMA SCIENCES, INC.

                     EXERCISABLE AT ANY TIME AT OR PRIOR TO
                    3:30 P.M. NEW YORK EASTERN STANDARD TIME
                              ON JULY 18, 2005

===============================================================================
XXX THOUSAND (XXX) WARRANTS                                          No. WE-000
===============================================================================


         This certifies that _________________________________ or registered
assigns is the registered holder of the number of Warrants set forth above, and
is entitled, upon surrender of this Warrant Certificate at the office of
StockTrans, Inc., Warrant Agent (or any successor as such Warrant Agent), in the
city of Ardmore, Pennsylvania, at any time on or after the date of the Warrant
Agreement (as defined) and at or prior to 3:30 p.m. Eastern Standard Time July
18, 2005, to purchase one share of Common Stock, par value $.01, of Derma
Sciences, Inc., a Pennsylvania corporation (the "Company"), at the price of
$0.85 per whole share.

         The applicable per share purchase price shown above and the number of
shares issuable upon exercise of the Warrants represented by this Warrant
Certificate are subject to adjustment for the occurrence of certain events,
including stock dividends and split-ups, combinations, reorganizations,
reclassifications, consolidations, mergers or sales of properties and assets and
upon the issuance of certain rights or warrants to holders of Common Stock or
the distribution to such holders of assets or indebtedness, as set forth in the
Warrant Agreement hereinafter referred to. A complete statement with respect to
such adjustments and to other terms and conditions pertaining to the Warrants is
contained in the Warrant Agreement between the Company and StockTrans, Inc.,
Warrant Agent (the "Warrant Agreement"), a copy of which may be examined by the
registered holder hereof at the office of the Warrant Agent.

         The Warrants may be exchanged, in whole or in part, at the holder's
option, for that number of shares of Common Stock obtained by dividing (x) the
value of the Warrant (determined by subtracting, the aggregate exercise price of
the Warrant from the aggregate fair market value of the number of shares of
Common Stock issuable upon exercise of the Warrant), by (y) the fair market
value of one share of Common Stock prior to the exchange.

         To exercise the Warrants represented by this Warrant Certificate the
form of election to purchase on the reverse hereof must be duly executed and the
accompanying instructions for the registration and delivery of the stock must be
filled in.

         The Warrants represented by this Warrant Certificate are transferable
(subject to the conditions set forth in the preceding paragraphs) at the office
in the City of Ardmore, Pennsylvania of the Warrant Agent (or of its successor
as Warrant Agent) by registered holder thereof in person or by attorney duly
authorized in writing, upon surrender of this Warrant Certificate. Upon any such
transfer, a new Warrant Certificate, representing the right to purchase a like
number of shares of the Company's Common Stock, will be issued to the transferee
in exchange for this Warrant Certificate.

         This Warrant Certificate when surrendered at the office in the City of
Ardmore, Pennsylvania of the Warrant Agent (or of its successor as Warrant
Agent) by the registered holder hereof in person or by attorney duly authorized

<PAGE>

in writing may be exchanged for another Warrant Certificate or Warrant
Certificates, representing in the aggregate the right to purchase a like number
of shares of the Company's Common Stock.

         If the Warrants evidenced by this Warrant Certificate remain
outstanding at the expiration of the period during which Warrants are
exercisable, as set forth in the first paragraph of this Warrant Certificate,
such Warrants shall thereupon be deemed null and void.

         No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof, a cash payment
will be made, as provided in the Warrant Agreement.

         No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Stock or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Warrant Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or, except as provided in the Warrant Agreement, to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise, until the Warrant or Warrants evidenced by this Warrant Certificate
shall have been exercised as provided in the Warrant Agreement.

         IN WITNESS WHEREOF, THE Company has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this ___ day of July, 2000.

                                         DERMA SCIENCES, INC.



                                         _______________________________________
                                         Edward J. Quilty
                                         President and Chief Executive Officer

ATTEST


__________________________________________
Stephen T. Wills, CPA, MST
Vice President and Chief Financial Officer


         This Warrant Certificate is not valid until countersigned by the
Warrant Agent.

                                         COUNTERSIGNED:

                                         STOCKTRANS, INC.



                                         _______________________________________
                                         Jonathan A. Miller
                                         President


<PAGE>



                            NOTIFICATION OF EXERCISE

To StockTrans, Inc. or its successor as WARRANT AGENT:

         The undersigned, holder of the within Warrant Certificate, hereby (1)
irrevocably exercises the undersigned's right to purchase ________ shares of
Common Stock, par value $0.01 per share, as Derma Sciences, Inc. (the "Company")
which the undersigned is entitled to purchase under the terms of the within
Warrant Certificate, or such other securities as the undersigned shall be
entitled to purchase under the terms of the Warrant Agreement referred to in
such Warrant Certificate by reason of the occurrence of certain events specified
therein, and (2) elects to make payment in full for the number of shares of
Common Stock so purchased by payment of $____ in cash or by certified or
official bank check.

         Please issue the certificate of shares of Common Stock in the name of,
and pay any cash for any fractional share to:

--------------------------------------------------------------------------------
                               Print or type name


--------------------------------------------------------------------------------
                   Social Security or other Identifying Number


--------------------------------------------------------------------------------
                                 Street Address


--------------------------------------------------------------------------------
                   State                                       Zip Code

--------------------------------------------------------------------------------

If such number of shares shall not be all the shares purchasable upon the
exercise of the Warrants evidenced by this Warrant Certificate, a new Warrant
Certificate for the balance of such Warrants remaining unexercised shall be
registered in the name of and delivered to:

Please insert social security or other identifying number:


--------------------------------------------------------------------------------
                         (Please print name and address)


--------------------------------------------------------------------------------


Dated: ___________________          ____________________________________________
                                                     Signature
                                    (Signature must conform in all respects to
                                    name of holder as specified on the face if
                                    the Warrant Certificate)


(Signature Medallion Guaranteed): __________________   Date: ___________________


(If the Common Stock, cash in lieu of fractional shares, or Warrants for any
unexercised balance are to be issued or paid to a person other than the person
in whose name the within Warrant is registered, or if otherwise requested by the
Company or the Warrant Agent, a signature Medallion guarantee is required.)


<PAGE>



                                   ASSIGNMENT


         FOR VALUE RECEIVED, _____________________________________ hereby sells,
assigns, and transfer unto ______________________ this Warrant Certificate
together with all right, title or interest therein and does hereby irrevocably
appoint ______________________ attorney to transfer the within Warrant
Certificate on the books of the Warrant Agent with full power of substitution in
the premises.

Dated: ___________________          ____________________________________________
                                                     Signature
                                    (Signature must conform in all respects to
                                    name of holder as specified on the face if
                                    the Warrant Certificate)


(Signature Medallion Guaranteed):  _________________   Date: ___________________