Dated 29th day of September, 1997





                        Innovative Technologies Limited

                                    - and -

                          Derma Sciences Incorporated





                        SALES AND DISTRIBUTION AGREEMENT






                                 Ref: DERMS&D2


<PAGE>


THIS AGREEMENT is made the 29th day of September 1997 BETWEEN:

PARTIES:

INNOVATIVE TECHNOLOGIES LIMITED (a British Company, registration number 2666957)
whose principal  place of business is Road Three,  Winsford  Industrial  Estate,
Cheshire CW7 3PD, United Kingdom  ('IT'); and 

DERMA SCIENCES  INCORPORATED (an American  Corporation  whose principal place of
business is 214 Carnegie  Centre,  Suite 100,  Princeton,  New Jersey 08540, USA
("DERMA SCIENCES").

THE PARTIES AGREE as follows:

1.   APPOINTMENT, DURATION AND PRODUCT

1.1  The  appointment  shall  be with  effect  from  29  September,  1997,  (the
     "Effective Date") and subject to the provisions for earlier  termination in
     Clause 5 shall last until 28 September 2002 (the  "Expiry  Date") and shall
     continue  thereafter  unless and until terminated by either party giving to
     the other not less than six months notice in writing  expiring on or at any
     time after the expiry of the said 5 year term.

1.2  IT appoints DERMA SCIENCES as its  non-exclusive  distributor in The United
     States of America (the  "Territory")  for the products  listed in the first
     schedule to this  Agreement  ("Schedule 1") (the  "Products")  which may be
     amended by written agreement between IT and DERMA SCIENCES.

2    PRICES AND  PAYMENTS 

2.1  The prices to be paid by DERMA SCIENCES for Products shall be those set out
     in the second  schedule  ("Schedule  2"), (the  "Prices") or such prices as
     otherwise may be in effect at the time of IT's receipt of DERMA  SCIENCES's
     purchase  order.  DERMA  SCIENCES  shall be  invoiced  for the price of the
     Products on  despatch of the same and terms of payment  shall be forty five
     (45) days from the date of such invoice.

2.2  The Prices shall be reviewed and any necessary changes made to them on each
     successive anniversary of the Effective Date of this Agreement.  The prices
     for Product B only shall be reviewed and  renegotiated in December 1997 and
     thereafter on each successive  anniversary of the Effective Date. The price
     reviews  shall be  negotiated  in good  faith  and take into  account  IT's
     production costs and the market situation in the Territory.

2.3  All invoices sent and payment made shall be in American Dollars.

2.4  DERMA SCIENCES  acknowledges that IT incurs  considerable costs associated
     with  manufacturing  set-up  and agrees to share  equally  with IT any such
     manufacturing  set-up  costs in respect of each new (to IT) product size or
     format.

2.5  DERMA  SCIENCES  acknowledges  that IT will  incur  costs  associated  with
     printing set up utilising DERMA SCIENCES artwork.  DERMA SCIENCES agrees to
     pay for the full costs  associated  with printing set up or artwork changes
     for which DERMA  SCIENCES  shall be invoiced  immediately  IT incurs  them.
     Terms of payment shall be thirty (30) days from the date of such invoice.

<PAGE>

In the event of DERMA  SCIENCES  requesting  any changes to  printing  set up or
artwork DERMA  SCIENCES  agrees to either  purchase from IT any remaining  stock
bearing  the  previous  printing  or  artwork or to  compensate  IT for any loss
incurred in relation to such stock.

2.6  The Prices include the cost of packaging and labelling the Products and are
     FOB named Port of Shipment  excluding all shipping  costs,  import  duties,
     insurance tariffs and customs charges directly or indirectly  involved with
     so shipping the Products. FOB named Port of Shipment shall have the meaning
     and import the  respective  rights and  obligations  of buyer and seller as
     provided in Incoterms 1990 or any subsequent revision thereto.

2.7  IT shall be  entitled  to  withhold  delivery  of the  Products  under this
     Agreement at any time if payments are due from DERMA  SCIENCES and have not
     been paid in  accordance  with  Clause  2.1.  All sums due to IT under this
     Agreement  and unpaid shall bear  interest at the rate of two per cent (2%)
     over the base rate of Lloyds Bank Plc from time to time for the period from
     the due date for payment until the actual payment by DERMA SCIENCES.

3    TITLE, RISK AND INSURANCE 

3.1  Title to and property in a particular  order of the Products  (but not risk
     which shall pass on  delivery) in  accordance  with Clause 2.6 shall remain
     vested in IT until the price of such Products has been paid,  discharged or
     satisfied in full:

3.2  Until title to and  property in the  Products  pass to DERMA  SCIENCES  the
     following provisions shall apply:

    3.2.1 IT may at any time  without  prior  notice to DERMA  SCIENCES  require
          DERMA  SCIENCES to deliver up to IT the Products and may repossess and
          resell such  Products  if any sum due from DERMA  SCIENCES to IT under
          this  Agreement  for  such  Products  is not  paid on the due date for
          payment; and

    3.2.2 DERMA SCIENCES shall store  separately the Products  without charge to
          IT and shall not tamper with any IT identification  upon such Products
          or their  packaging but shall ensure that they are clearly  identified
          as belonging to IT.

3.3  DERMA  SCIENCES  and IT undertake to maintain  adequate  product  liability
     insurance  for the Products  which is or is  equivalent  to or exceeds five
     million  (5,000,000)  Pounds  Sterling  and  shall  give  details  of  such
     insurance to the other party upon written request.


4    OBLIGATIONS OF DERMA SCIENCES 

     DERMA SCIENCES hereby undertakes during the term of this Agreement:

4.1  to submit its  artwork or changes to artwork in respect of the  Products to
     IT at least  ninety  (90) days  prior to the first date on which it desires
     delivery of Products bearing such artwork.

4.2  to  submit to IT  quarterly  on or  before  the first day of each  calendar
     quarter  (ie  January  1, April 1, July 1 and  October  1) its non  binding
     twelve (12) month rolling  forecasts  for Products.  

4.3  to submit  its  purchase  orders not less than sixty (60) days prior to its
     requested delivery date. In the event that DERMA SCIENCES's purchase orders
     or IT's order  acceptances  contain terms that  contradict any contained in
     this Agreement, the terms of this Agreement shall prevail.

<PAGE>

4.4  that any purchase order made for the Products for any one  particular  size
     or format will be for a quantity in excess of five thousand  (5,000) units.

4.5  not to amend or in any way relabel,  repackage  or  overlabel  the Products
     without IT's prior written consent and approval,  such consent and approval
     not to be unreasonably  withheld.  

4.6  not to cancel any  purchase  order (or any part of a purchase  order) which
     has been accepted by IT except upon prior written  agreement by IT and upon
     such terms as will  indemnify IT for all IT's actual  out-of-pocket  costs,
     charges,  expenses,  damage or loss including  pre-paid  freight,  costs of
     tooling for  Products  and purchase of raw  materials  for  Products  which
     cannot be  cancelled or used for other IT  customers,  but  excluding  lost
     profits. IT is not bound to agree to any such cancellation and may complete
     the  contract   notwithstanding  any  purported   cancellation  from  DERMA
     SCIENCES.

4.7  In the  event of a non  delivery  or  alleged  shortage  of  Products  in a
     particular order,  DERMA SCIENCES shall submit a written claim to IT within
     thirty (30) days  following the expected date of receipt or the actual date
     of receipt of the shipment.  IT will adjust the invoice for the  incomplete
     shipment  and promptly  issue a revised  invoice to DERMA  SCIENCES.  DERMA
     SCIENCES shall not be entitled to refuse to accept  delivery by reason only
     of short delivery.  In the absence of notice as required above, the correct
     quantities  of the  products  shall be  deemed to have  been  delivered  in
     accordance  with this  Agreement.  

4.8  DERMA  SCIENCES shall inform IT without delay in the event of any complaint
     in respect of any of the Products, and DERMA SCIENCES shall provide IT with
     complete information, including names and addresses of complainants and all
     facts concerning the complaint (including whether the complaint concerns an
     alleged reaction to the Product or an alleged defect in the Product). DERMA
     SCIENCES  shall  be  responsible  for   acknowledging,   dealing  with  and
     investigating  any complaint  made to it in respect of the Products.  DERMA
     SCIENCES  investigation  thereof and DERMA  SCIENCES  shall  without  delay
     inform IT of any material  developments  in respect of either the complaint
     or DERMA SCIENCES  investigation.  DERMA SCIENCES shall be responsible  for
     making any  necessary  reports on such  complaints  to the US Food and Drug
     Administration  ("FDA") and DERMA  SCIENCES  shall attempt to consult IT on
     the content of such reports before  submitting them to the FDA. Each of the
     parties hereto shall give the other all reasonable  assistance if requested
     by the other in  investigating  the complaint or in locating and recovering
     any Products  alleged to be unsaleable or defective and in preventing their
     sale to third parties.  Any request by IT as aforesaid  shall not of itself
     be an admission of liability to DERMA SCIENCES or any other party as to the
     condition of the Products


5    OBLIGATIONS OF IT

5.1  IT hereby undertakes during the term of this Agreement:

    5.1.1 to manufacture and package  quantities of Products in conformance with
          DERMA SCIENCES's purchase orders subject to the following provisions:-

       5.1.1.1 only  to  the  extent that the  purchase  order is for a quantity
               in  excess of five  thousand  (5,000)  units for each  individual
               product size and format.

       5.1.1.2 only  to  the  extent that they comply with DERMA SCIENCES's most
               recent   non-binding   quarterly  forecast  provided  that  DERMA
               SCIENCES  shall accept such  quantities  being 5% (five per cent)
               above or below the quantity specified in the purchase order;

<PAGE>

    5.1.2 to use  reasonable  efforts to manufacture  Products  ordered by DERMA
          SCIENCES  that are in quantities  in excess of DERMA  SCIENCES's  most
          recent  non-binding  quarterly  forecast  provided  by DERMA  SCIENCES
          pursuant to Clause 4.2;

    5.1.3 to accept all DERMA  SCIENCES  purchase  orders that  conform with the
          most  recent  non-binding  quarterly  forecast.  

    5.1.4 to keep in stock such packaging  materials,  bearing artwork submitted
          by DERMA  SCIENCES  pursuant  to Clause  4.1, as needed to package the
          quantities  of  Products  specified  in DERMA  SCIENCES's  most recent
          non-binding  quarterly  forecast  provided  that, in the event of such
          materials not being used,  DERMA SCIENCES  shall  reimburse IT for all
          direct  costs   reasonably   incurred  in  the  procurement  of  such.


6    WARRANTIES  AND  INDEMNITIES  

6.1  IT  warrants  and  represents  to  DERMA  SCIENCES  that to the best of its
     knowledge IT owns the intellectual  property rights in the Products free of
     any restrictions from third parties,  and that to the best of its knowledge
     IT may enter into this Agreement without  infringing third party rights and
     without  requiring  consents,  approvals or similar  actions from any third
     parties in respect of the Products.

6.2  IT shall indemnify and hold DERMA SCIENCES harmless from all losses,  costs
     or damages, except financial loss such as consequential loss, loss of time,
     loss of profit or similar types of indirect  losses,  which DERMA  SCIENCES
     may be held liable to pay as a result of claims or suits arising out of any
     injuries to persons and/or damage to property caused by any breach by IT of
     any provision of this Agreement or by the fact that the Products were other
     than in accordance with the Product  Specifications  if the claims or suits
     incurred  are  not  due  to  DERMA   SCIENCE's   own  or  DERMA   SCIENCE's
     sub-distributors warranties or negligence.

6.3  DERMA  SCIENCES  shall  in turn  indemnify  and hold IT  harmless  from all
     losses, costs or damages, except financial loss such as consequential loss,
     loss of time, loss of profit or similar types of indirect losses,  which IT
     may be held liable to pay as a result of claims or suits arising out of any
     injuries  to  persons  and/or  damage to  property  by any  breach by DERMA
     SCIENCES of any provision of this Agreement or arising from DERMA SCIENCE's
     own  warranties or negligence or if DERMA SCIENCES fails to comply with any
     storage,  handling or other such  instructions  in respect of the  Products
     issued by IT.

6.4  The indemnification which either party may receive under Clause 6.2 and 6.3
     shall never  exceed the  aggregate  maximum of the coverage of each party's
     product liability insurance for the Product's in accordance with sub-clause
     3.3.

7    TERMINATION  FOR CAUSE  

7.1  Notwithstanding  any provision herein to the contrary this Agreement may be
     terminated  by sixty (60) days notice in writing to the other (and  without
     compensation  becoming due to the other by reason only of such termination)
     if the other  party  fails to perform  or observe  any of the terms of this
     Agreement or any term of a contract and in the case of a breach  capable of
     remedy has not  remedied the breach  within  thirty (30) days of receipt of
     written notification requiring it to do so.

7.2  If DERMA  SCIENCES  makes  default in the  payment of any money which shall
     have become due hereunder for more than thirty (30) days after
    

<PAGE>


     the due date for  payment  IT may give  DERMA  SCIENCES  thirty  (30)  days
     written notice of termination notwithstanding any other remedy which may be
     available to IT.

7.3  If IT is unable to supply Products as requested by DERMA SCIENCES, provided
     that  the  requests  are  within  the  parameters  of the  current  rolling
     forecasts  supplied by DERMA SCIENCES pursuant to Clause 4.2 DERMA SCIENCES
     may give IT thirty (30) days  written  notice of  termination,  and IT will
     within thirty (30) days of notification  compensate  DERMA SCIENCES for any
     loss directly  arising from such inability to supply.  Alternatively  DERMA
     SCIENCES may waive its right to termination  and agree to delayed  delivery
     of the Products  without  prejudice to its right to  compensation  for loss
     arising directly from the delay of supply of the Products.  Nothing in this
     Clause 7.3 shall,  however,  make IT liable for any  indirect  economic  or
     consequential loss (including loss of profit or legal fees) or damage.

7.4  Termination  of this  Agreement,  howsoever  caused,  shall not  affect the
     accrued rights, or liabilities of either party to it nor shall it eliminate
     obligations arising prior to termination.

7.5  Without  prejudice  to any  rights  or  remedies  available  to IT,  IT may
     terminate  this  agreement,  upon one months prior written  notice to DERMA
     SCIENCES if DERMA SCIENCES  undergoes a Change of Control,  whereby Control
     passes to a direct competitor of IT in the field of healthcare.

7.6  For the purposes of Clause 7.5 "Control"  means ownership of more than half
     of the  capital,  business  or  assets of DERMA  SCIENCES,  or the power to
     exercise or acquire more than half of the voting  rights of or the power to
     appoint more than half the members of the Board of Directors (or equivalent
     officers) of DERMA  SCIENCES,  and a "Change of Control" shall be deemed to
     take place where any person  other than the  person(s)  in Control of DERMA
     SCIENCES at the date of execution of this Agreement  subsequently  acquires
     Control of DERMA SCIENCES (either acting alone or in concert with others.)

7.7  On termination of this Agreement  howsoever  caused,  IT shall complete all
     orders for the Products  which it has accepted from DERMA SCIENCES prior to
     the  date  of  termination,  provided  that  such  orders  are  within  the
     parameters of the rolling forecasts  supplied by DERMA SCIENCES pursuant to
     Clause 4.2.

7.8  On termination of this Agreement howsoever caused DERMA SCIENCES shall:-

    7.8.1 complete  all orders  from  customers  for the  Products  which it has
          accepted up to date of termination;

    7.8.2 on the expiry of six (6) months  following the date of  termination of
          this Agreement have disposed of all stocks of the Products; and

    7.8.3 return to IT or otherwise  dispose of as IT may in writing  direct and
          at DERMA  SCIENCES's  expense all  documents  and  records  including,
          without limitation, all promotional literature,  catalogues, and other
          documents  relating to the  Products or to the business of IT, and all
          copies  thereof,  in the  possession  or under  the  control  of DERMA
          SCIENCES, providing that DERMA SCIENCES shall have the right to retain
          copies of any  documentation  which may be required by any  regulatory
          authority in the Territory.

7.9  On and following  termination  of this  Agreement  howsoever  caused,  both
     parties shall continue to be bound by the obligations  imposed under Clause
     8.



<PAGE>

8    CONFIDENTIAL INFORMATION

8.1  On 15th November,  1996 IT and DERMA SCIENCES signed a Secrecy Agreement, a
     copy of which is  attached  as the third  schedule  hereto  ("Schedule  3 -
     Secrecy Agreement"). IT and DERMA SCIENCES agree to observe and continue to
     be bound  by the  terms  of that  Secrecy  Agreement,  both in  respect  of
     information  disclosed  independently  of, and in  respect  of  information
     disclosed  pursuant or in  relation  to, the terms of this  Agreement.  The
     parties agree: 

    8.1.1 that any Proprietary Information (as defined in the Secrecy Agreement)
          disclosed  by either  hereto to the other  under or  pursuant  to this
          Agreement  may  only  be  used by the  recipient  of such  Proprietary
          Information for the performance of the recipient's  obligations  under
          this  Agreement;  and 

    8.1.2 that such  disclosure  is made  under and on the terms of the  Secrecy
          Agreement.

8.2  Such obligations  shall last during the terms of the Secrecy  Agreement and
     this  Agreement and for a period of 5 years from the expiry or  termination
     of the Secrecy Agreement or this Agreement  whichever is the later.  

8.3  Except as provided in Clause 8.5 below DERMA SCIENCES agrees and undertakes
     that during the term of this  Agreement and  thereafter it will keep secret
     and will not  without  the prior  written  consent  of IT  disclose  either
     directly or indirectly to any third party the  Proprietary  Information nor
     disclose  to any  third  party  any of the  financial  or other  terms  and
     conditions of this Agreement other than as required by regulatory  agencies
     or law  but  such  information  shall  be  transmitted  only  under  agreed
     conditions as to confidentiality,  ie directly to such authorities.  

8.4  Except as provided in Clause 8.5 below IT agrees and undertakes that during
     the term of this  Agreement and thereafter it will keep secret and will not
     without  the  prior  written  consent  of DERMA  SCIENCES  disclose  either
     directly  or  indirectly  to any third  party any  Proprietary  Information
     provided to it by DERMA SCIENCES nor disclose to any third party any of the
     financial or other terms and conditions of this Agreement.  

8.5  The  obligations  contained  in Clauses 8.1, 8.2 and 8.3 shall not apply to
     any Proprietary  Information  which: 

    8.5.1 is at the date of this Agreement or at any time after the date of this
          Agreement  comes into the public  domain other than through  breach of
          this Agreement by DERMA SCIENCES or its employees or contractors or by
          IT or its employees or contractors;  or 

    8.5.2 can be shown by DERMA  SCIENCES to the reasonable  satisfaction  of IT
          to have been known by DERMA SCIENCES before  disclosure to IT by DERMA
          SCIENCES  and vice versa;  or  

    8.5.3 subsequently  comes  lawfully into the possession of DERMA SCIENCES or
          IT from a third party.

<PAGE>


9    FORCE MAJEURE

9.1  If the  performance by either party of any of its  obligations  (other than
     the obligation to make payments  hereunder)  shall be in any way prevented,
     interrupted or hindered in consequence of circumstances  beyond the control
     of such party,  including  without  limitation  an act of God,  war,  civil
     disturbance, strike, lock-out, cessation of work, combination of workmen or
     employees,   legislation  or  restriction  of  any  governmental  or  other
     authority,  breakdown or  interruption  of raw material supply or transport
     the  obligations  of the  party  concerned  shall be  wholly  or  partially
     suspended  during the  continuance  and to the  extent of such  prevention,
     interruption or hindrance.  If a force majeure  situation has continued for
     more  than one  hundred  and  eighty  days  (180)  days,  either  party may
     terminate this Agreement by notice to the other party, provided that in the
     event the parties  agree  (notwithstanding  the  provisions of this clause)
     that IT shall  recommence  manufacture  and  supply  of the  Products  this
     agreement shall be deemed to have continued  despite the  interruption  and
     the term of the Agreement unexpired before the start of the interruption in
     supply  shall be the  residual  term.  Any party  seeking  to rely upon the
     provisions  of this Clause 9.1 shall notify the other party  promptly  upon
     the event of force majeure or other circumstances  arising and a failure to
     do so shall  prevent  the party  experiencing  the force  majeure  or other
     circumstances from being able to involve the provisions of this clause.

10   GRANT OF SUB LICENCES AND ASSIGNMENT 

10.1 DERMA SCIENCES shall have no right to assign or delegate the performance of
     its duties hereunder nor to grant sub-licences.

11   ENTIRE AGREEMENT, VARIATION AND CONFLICT

11.1 This Agreement  contains the entire agreement between the parties as at the
     Effective  Date and  supersedes  all prior  agreements  and  understandings
     between the parties  whether  oral or in writing in relation to the subject
     matter herein  contained  except that both parties  hereto agree to observe
     and continue to be bound by the terms of the Secrecy  Agreement between the
     parties bearing an effective date of 15th November, 1996 and annexed hereto
     as Schedule 3.

     Any amendments to or modifications to this Agreement shall only be valid if
     made in writing and signed by both parties hereto.

11.2 In the event of any conflict between this Agreement and any other contract,
     the terms of this Agreement shall prevail.

12   GOVERNING Law AND DISPUTES 

12.1 The  formation,   construction,   performance,  validity  and  all  aspects
     whatsoever of this Agreement and any  individual  contract for the purchase
     of the Products by DERMA SCIENCES made  hereunder  shall be governed by and
     construed in accordance  with the laws of the state in which the defendant,
     in any proceedings,  is domiciled. Any proceedings for the determination of
     any question or dispute  arising in connection with this Agreement shall be
     held in New Jersey if  initiated  by IT and in London if initiated by DERMA
     SCIENCES.

<PAGE>


13   NOTICES

13.1 Any notice  authorised or required to be given  pursuant to this  Agreement
     shall be in writing and given as follows:-

13.2  Attn:  Edward Quilty        IT:    Attn:  D Keith Gilding
      Chairman                           Managing Director
      Derma Sciences Incorporated        Innovative Technologies Limited
      214 Carnegie Centre                Road Three
      Suite 100, Princeton               Industrial Estate, Winsford
      New Jersey 08540  USA              Cheshire CW7 3PD  UK
      Facsimile: 001 609 452 0880        Facsimile:  44 1606 86 3600

     Any such notice may be given by post or  facsimile  transmission.  To prove
     service  in the case of a notice  given by post it shall be  sufficient  to
     show that the notice was despatched by airmail recorded delivery service in
     a correctly  addressed and adequately stamped envelope and to prove service
     in the  case of a  notice  given  by  facsimile  transmission  it  shall be
     sufficient to show that it was dispatched to the correct  telephone  number
     with a transmission  'OK' printed  message.  Service by facsimile  shall be
     deemed to have been  effected  24  (twenty-four)  hours  after  dispatch by
     facsimile  transmission  and  service  by post shall be deemed to have been
     effected seven (7) days after the date of postmark.

14   COUNTERPARTS  

     This Agreement may be executed in any number of counterparts  each of which
     when executed and delivered  shall be an original but all the  counterparts
     together shall constitute one and the same instrument.

AS  WITNESS  the hands of the duly  authorised  representatives  of IT and DERMA
SCIENCES the day and year first above written.

Signed by Roy Smith                               )  /s/ Roy Smith

for and on behalf of INNOVATIVE TECHNOLOGIES LTD  )  25/09/97



Signed by Edward J. Quilty                        )  /s/ Edward J. Quilty

for and on behalf of DERMA SCIENCES INCORPORATED  )  9/29/97

<PAGE>


                             SCHEDULE 1 - PRODUCTS

Product A
Alginate wound dressing known as SAD 2C

Product B
Hydrocolloid dressing with intelligent film known as SHD 40

Product C
Intelligent Film known as SFD C44-2 SH40 MB

Product D
Standard Film known as SFD C34 PAD LB

Product E
Sheet Hydrogel (more detailed specification to follow).


<PAGE>


                              SCHEDULE 2 - PRICES

               PRODUCT       SIZE     UNIT PRICE US$
                  A        2" x 2"        0.62
                  A        4" x 4"        1.22
                  A        16" Rope       1.39

                  B        3" x 3"        0.78
                  B        5" x 5"        1.29
                  B        Sacral         2.04

                  C        2" x 3"        0.47
                  C        4" x 5"        0.93
                  C        6" x 7"        1.73

                  D        2" x 3"        0.15
                  D        4" x 5"        0.29
                  D        6" x 7"        0.7

                  E        To be determined


<PAGE>


                         SCHEDULE 3 - SECRECY AGREEMENT



<PAGE>

                               SECRECY AGREEMENT

DATE:     15th November 1996

PARTIES:

1.   'IT': INNOVATIVE TECHNOLOGIES LIMITED, a British Company (registered number
     2666957)  whose  principal  place  of  business  in  Road  Three,  Winsford
     Industrial Estate, Winsford, Cheshire, CW7 3PD UK

2.   'DERMASCI':  DERMA  SCIENCES  INCORPORATED  a United  States  COmpany whose
     principal place of business is 121, West Grace Street, Old Forge, PA 18518,
     USA.

BACKGROUND:

A.   IT has  developed  novel  products  and ideas for wound  dressing and wound
     management  products and has technology  relating to the same including but
     not  limited  to  polyurethane  film  technology  and  alginate  and  other
     polysaccharide   fibre   technology  and  is  the  owner  of   confidential
     information relating to the same.

B.   DERMASCI has developed  and/or acquired chronic wound dressing and/or wound
     management  product  technology  and has  technology  relating  to the same
     including but not limited to nutrient  supply to chronic wounds  technology
     and is involved in the manufacture  and/or  distribution of wound dressings
     and wound management products and is the owner of confidential  information
     relating to the same.

C.   The parties wish to make  disclosure  of the  confidential  information  in
     their  respective   possession   relating  to  wound  dressings  and  wound
     management including specifically technology relating to nutrient supply to
     chronic  wounds and  alginate  fibre  technology  for the purposes of their
     evaluation but subject to the terms of confidentiality appearing below.

OPERATIVE PROVISIONS

1.   DEFINITIONS AND INTERPRETATION

1.1  In this  Agreement  the  following  words and  expressions  shall  have the
     following meanings unless inconsistent with the context.

     "IT  Information" means any and all information of whatever nature relating
          to the  business  of IT or any  Subsidiary  or  Holding  Company of IT
          including  without  limitation data,  know-how,  formulae,  processes,
          designs, drawings, specifications,  software programmes and samples of
          any other  material or  commercial  information  generally  bearing or
          incorporating any information relating to the business of IT.

     "DERMASCI  Information"  means any and all  information of whatever  nature
          relating to the  business of  DERMASCI  or any  Subsidiary  or Holding
          Company of  DERMASCI  including  without  limitation  data,  know-how,
          formulae,  processes,  designs,  drawings,  specifications,   software
          programmes and samples of any other material or commercial information
          generally  bearing or  incorporating  any information  relating to the
          business of DERMASCI.

<PAGE> 


     "Proprietary  Information"  means  the  IT  Information  and  the  DERMASCI
          Information together or either of them.

     "Subsidiary" has the meaning  set out in section 736 of the  Companies  Act
          1985.

     "Holding Company"  has the meaning set out in section 736 of the  Companies
          Act 1985.

     "Recipient" means the recipient of any Proprietary Information disclosed in
          pursuance of this Agreement.

     "Owner" means in relation to the IT  Information,  IT or any  Subsidiary or
          Holding  Company of IT and in  relation to the  DERMASCI  Information,
          DERMASCI or any Subsidiary or Holding Company of DERMASCI.


1.2  In this  Agreement the masculine  shall include the feminine and neuter and
     the  singular  the  plural  and vice versa as the  context  shall  admit or
     require.

1.3  Reference in this Agreement to a Clause or Schedule shall be construed as a
     reference to a Clause or Schedule of this Agreement.

2.   UNDERTAKINGS OF THE RECIPIENT

2.1  In  consideration  of the  disclosure  of  Proprietary  Information  to the
     Recipient  by  the  Owner  under  this   Agreement  the  Recipient   hereby
     undertakes:

    2.1.1 to use all  Proprietary  Information so disclosed  exclusively for the
          purpose of  evaluation  the accuracy and  commercial  potential of the
          information so disclosed; and

    2.1.2 to  maintain  confidential  all  Proprietary  Information  that it may
          acquire  in any  manner;  and it  will  accordingly  not  directly  or
          indirectly use or disclose any of the Proprietary Information in whole
          or in part  save  for the  purposes  of and in  accordance  with  this
          Agreement.

3.   EXCEPTIONS

3.1  The  foregoing  restrictions  on  the  Recipient  shall  not  apply  to any
     Proprietary Information which:

    3.1.1 the Recipient can prove by documentary  evidence produced to the Owner
          within 28 days of disclosure  that such  Proprietary  Information  was
          already in the  possession  of the  Recipient and at its free disposal
          before the disclosure hereunder to the Recipient; or

    3.1.2 is hereafter  disclosed to the  Recipient  without any  obligation  of
          confidence  by a third party who has derived it directly or indirectly
          from the Owner; or

    3.1.3 is  or  becomes   generally   available   to  the  public  in  printed
          publications in general  circulation  through no act or default on the
          part of the Recipient or the Recipient's agents or employees.


<PAGE>

4    INCLUSIONS

4.1  Without  prejudice to the generality of clause 3.1.3  information shall not
     be deemed to be generally available to the public by reason only that it is
     known to only a few of  those  people  to whom it  might  be of  commercial
     interest,  and a  combination  of two or more  portions of the  Proprietary
     Information shall not be deemed to be generally  available to the public by
     reason only of each separate portion being so available.

5.   CONFIDENTIAL MEASURES

5.1  To secure the confidentiality attaching to the Proprietary Information, the
     Recipient shall:

    5.1.1 keep  separate  all   Proprietary   Information  and  all  information
          generated by the Recipient  based thereon from all documents and other
          records of the Recipient;

    5.1.2 keep all documents  and any other  material  bearing or  incorporating
          any of the  Proprietary  Information at the usual place of business of
          the Recipient;

    5.1.3 not  use,  reproduce,  transform,  or  store  any of  the  Proprietary
          Information in an externally  accessible computer system or electronic
          information retrieval system or transmit it in any for or by any means
          whatsoever outside of its usual place of business.

    5.1.4 allow  access  to the  Proprietary  Information  exclusively  to those
          employees of the Recipient who has  reasonable  need to see and use it
          for the purposes of its  evaluation  by the Recipient and shall inform
          each of said employees of the  confidential  nature of the Proprietary
          Information  and  of  the  obligations  on the  Recipient  in  respect
          thereof;

    5.1.5 wherever  reasonably  practicable obtain a written statement from each
          of  its  employees  having  access  to  the  Proprietary   Information
          undertaking  to maintain  the same  confidential,  and shall take such
          steps as may be reasonably desirable to enforce sub obligations;

    5.1.6 make  copies of the  Proprietary  Information  only to the extent that
          the same is strictly  required for the purposes of its  evaluation  by
          the Recipient;

    5.1.7 on request  of the Owner made at any time  deliver up to the Owner all
          documents and other material in the  possession  custody or control of
          the Recipient  that bear or  incorporate  any part of the  Proprietary
          Information.

6    TERM

6.1  This  Agreement  controls  only  Proprietary  Information  disclosed to the
     Recipient during a five (5) year period from the date of this Agreement.

6.3  The  Recipient's  obligations  under  Clauses 2 and 5 subsist for a further
     five (5) year period ending ten (10) years from the date of this Agreement.

7    ENTIRE AGREEMENT

7.1  This  Agreement  sets forth the entire  agreement  between the parties with
     respect to the subject  matter herein and supercedes and replaces all prior
     communications,  representations warranties, stipulations, undertakings and
     agreements whether oral or written between the parties.

8    HEADINGS

8.1  The  headings  to the  Clauses  of this  Agreement  shall  not  effect  the
     construction of this Agreement.

<PAGE>

9    COPIES

9.1  This Agreement may be executed in more than one copy which, taken together,
     shall constitute a single agreement.

10   ENGLISH LAW

10.1 The  formation,   construction,   performance,   validity  and  all  aspect
     whatsoever  of this  Agreement  shall be  governed  by English  Law and the
     parties hereby agree to submit to the exclusive jurisdiction of the English
     Courts.


Signed:

                                             /s/ Diane J. Mitchell
for and on behalf of
Innovative Technologies Ltd.                 Diane J. Mitchell

Date:                                        15/11/96


                                             /s/ Robert DiGiovine
for and on behalf of
Derma Sciences Inc.                          Robert DiGiovine - Director

Date:                                        15/11/96