This Agreement is made the 11th of November, 1997

BETWEEN

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

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

WHEREAS:

A.   DERMA is engaged in the  marketing,  distribution  and sale of products for
     the treatment of chronic  non-healing skin ulcerations such as pressure and
     venous ulcers, surgical incisions and burns ("chronic wounds").

B.   IT is  engaged in the  development  and  manufacture  of  products  for the
     treatment of chronic wounds.

C.   DERMA  desires to retain IT,  and IT  desires  to be  retained  by DERMA to
     develop and manufacture  certain zinc products for the treatment of chronic
     wounds.

IT IS AGREED as follows: -

1        RETENTION

1.1      DERMA hereby retains IT and IT hereby agrees to be retained to develop,
         manufacture and obtain United States Food and Drug Administration (FDA)
         clearance for the three woundcare products ("The Products") which IT is
         currently developing and shall continue to develop:-

         1.1.1    A zinc-containing alginate;

         1.1.2    A zinc-containing intelligent hydrocolloid dressing; and

         1.1.3    A zinc-containing flat sheet hydrogel

         as specified in Enclosure l.

2        PRODUCT OWNERSHIP

2.1      DERMA shall have title and  ownership  of the  Products  together  with
         associated Intellectual Property Rights.

2.2      Nothing in the Agreement  shall  constitute IT as owner,  part owner or
         licensee.

2.3      Notwithstanding  this, IT shall have the right to manufacture,  use and
         sell the Products, subject to the terms herein.

3        DEVELOPMENT TIMETABLE

3.1      Development  and dispatch of the zinc  hydrocolloid  and zinc  alginate
         Products shall be completed before April 30th, 1998.


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3.2      Development  and  dispatch  of the flat  sheet zinc  hydrogel  shall be
         completed before 31st December, 1998.

4        DEVELOPMENT COSTS

4.1      IT has carried out and continues to carry out work in  connection  with
         the  development  of the Products,  in  consideration  of which,  DERMA
         agrees to reimburse  IT for the  development  costs of each  individual
         Product.

4.2      Commencing  on the last  day of the  month of  dispatch  of the  launch
         stock, of each of the Products, DERMA shall make to IT:-

         4.2.1    the initial  payments  as  specified  in  Enclosure 2 for each
                  individual Product; and

         4.2.2    monthly,  on the  last  day of each  month  thereafter,  for a
                  period  of  seventeen   (17)  months,   seventeen  (17)  equal
                  payments,  as  specified  in  Enclosure 2 for each  individual
                  Product.

5        RIGHT OF MANUFACTURE

5.1      DERMA grants to IT during the term of this Agreement:-

         5.1.1    the exclusive right to manufacture the Products; and

         5.1.2    the exclusive  right to sell and license the Products  outside
                  the United States of America and its possessions.

5.2      In consideration of such grant, IT shall pay to DERMA:-

         5.2.1    A proportion  of profit in respect of each Product  calculated
                  at fifty per cent (50%) of the gross margin;

         5.2.2    Fifty per cent (50%) of any  license  fees  obtained  by IT in
                  consideration  of  granting  a  license  to  sell  any  of the
                  Products;

         5.2.3    "Gross  margin"  shall be computed as net sales  revenue  less
                  fully allocated standard costs of Products.

6        TRANSFER PRICE, MINIMUM ORDERS AND STANDARD COSTS

6.1      Product  transfer  prices and minimum  order  requirements  shall be as
         specified in Enclosure 3, and are fixed until December 31st 1998.

6.2      Prior to 1st December 1998, and on a yearly basis thereafter, DERMA and
         IT shall  exchange  information  relative to their  respective  average
         gross sales  margins and average  manufacturing  costs for the Products
         and, if necessary,  shall  re-negotiate  the current transfer prices in
         good faith.

6.3      Any suggested review of current transfer prices, which reflects up to a
         5%  increase  or  reduction,  shall  be  deemed  to be  reasonable  and
         acceptable.


<PAGE>

7        TERM AND TERMINATION

7.1      The Agreement  shall  commence on the date as written on the first page
         and shall continue in force until December 31st 2002.

7.2      Either party may  terminate  this  Agreement,  at any time,  by written
         notice to the other party if:-

         7.2.1    the other party  commits a material  breach of this  Agreement
                  and in the  case  of a  breach  capable  of  remedy,  has  not
                  remedied  the  breach  within  thirty  (30) days of receipt of
                  written notice requiring it to do so: or

         7.2.2    the other party becomes insolvent, has a receiver appointed of
                  the  whole or any part of its  assets or  business,  makes any
                  composition  or  arrangement  with  its  creditors,  takes  or
                  suffers any similar action in consequence of debt, or an order
                  or resolution is made for its dissolution or liquidation.

7.3      IT may give  DERMA  sixty  (60)  days  written  notice  of  termination
         notwithstanding  any other remedy which maybe  available to IT if DERMA
         makes  default in the  payment of any money which shall have become due
         hereunder  for  more  than  thirty  (30)  days  after  the due date for
         payment.

7.4      Either  party  may give the  other  six (6)  months  written  notice of
         termination if either party undergoes a change of control and "control"
         for this  purpose  means  ownership  of more  than  half  the  capital,
         business  or  assets  of or the  power to  exercise  more than half the
         voting  rights of or the power to appoint more than half the members of
         the Board of Directors of or the right to manage the affairs of a party
         and a "change" shall take place where some person other than the person
         or persons  enjoying  such  control at the time of the  Effective  Date
         acquire either party whether alone or acting in concert with others.

7.5      Upon termination of this Agreement from any cause, IT will complete all
         orders for the  Products  which it has accepted  from DERMA,  and DERMA
         shall pay for all such Products subject to the terms of this Agreement.

8        PRODUCT ORDERING / SUPPLY AND DELIVERY

8.1      IT shall supply DERMA with the Products for  distribution in the United
         States of America and it  possessions  on IT's standard terms of supply
         and delivery as specified in Enclosure 4.

9        PAYMENT TERMS AND CONDITIONS

9.1      All invoices and payments made shall be in US dollars.

9.2      DERMA shall be invoiced for the price of the Products on dispatch.

9.3      Terms of  payment  shall  be  forty  five  (45)  days  from the date of
         invoice.

10       WARRANTIES AND INDEMNITIES

10.1     IT  warrants  that at the time of  delivery  of the  Products  to DERMA
         that:-

         10.1.1   the  Products  shall be of  satisfactory  quality,  free  from
                  defects and fit for their purpose; and


<PAGE>

         10.1.2   the  Products  shall meet the  specifications  referred  to in
                  Enclosure 1; and

10.2     DERMA warrants that:-

         10.2.1   its formulations,  packaging and label  specifications  comply
                  with all applicable  regulatory  requirements  relating to the
                  sale or use of the Products  established  by the United States
                  Food and Drug Administration (FDA) administration; and

         10.2.2   the Products shall not be adulterated or misbranded within the
                  meaning of the Food, Drug and Cosmetic Act, nor be goods which
                  may not under the provisions of Section404, 505 or 512 of such
                  Act be introduced into interstate commerce.

         10.2.3   it will  comply  with all  storage,  handling  and other  such
                  instructions in respect of the Products issued by IT.

10.3     IT shall  indemnify  and hold harmless  DERMA for all claims,  demands,
         actions,  liabilities,  losses, damages and reasonable attorneys' fees,
         arising from a defect in the design or manufacture by IT of any Product
         sold and delivered to DERMA under the terms of this Agreement.

10.4     DERMA shall indemnify and hold harmless IT from all claims arising from
         the  mishandling or misuse of the Products by DERMA,  or its customers,
         or arising  from  DERMA's  formulations,  packaging  or labeling of the
         Products.

10.5     Liability  for the  breach of  warranties  shall be  limited to Product
         Liability  Insurance cover, which shall be maintained by each party for
         an amount not less than two million US dollars ($2,000,000).

11       RIGHT OF FIRST REFUSAL

11.1     IT grants DERMA the right of first refusal,  for a period of sixty (60)
         days  from the  date of first  offer in  writing  by IT to  become  the
         distributor for each zinc containing product,  and that IT may develop,
         in the United States and its possessions. If DERMA declines to exercise
         its right of first refusal,  IT may offer the product for  distribution
         by or sale to a third party on terms not better  than those  offered to
         DERMA.

12       [INFORMATION  OMITTED  AND  FILED SEPARATELY  WITH THE COMMISSION UNDER
         EXCHANGE ACT RULE 24b-2.]

<PAGE>

 13      FORCE MAJEURE

 13.1    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 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
         transport,  force majeure or any other circumstances beyond the control
         of such party 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.

14       CONFIDENTIALITY AGREEMENT

14.1     All  information  received  by one  party  from  the  other  concerning
         materials,  volumes,  costs, prices,  market information and production
         techniques,  and the terms and conditions of this  Agreement,  shall be
         regarded as  confidential  and shall not be  disclosed  by either IT or
         DERMA to third parties, without the prior written consent of the other.
         On 15th  November  1996 IT and DERMA signed a secrecy  agreement.  They
         agree  to  observe  and  continue  to be  bound  by the  terms  of that
         agreement  in respect of  information  disclosed  independently  of, or
         pursuant to, or in relation to, the terms of that agreement.

15       ENTIRE AGREEMENT, VARIATION AND CONFLICT

15.1     This Agreement  contains the entire agreement between the parties as at
         the date as written on the first page hereof 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 dated 15th November 1996.

15.2     Valid amendments to or modifications to this Agreement shall be made in
         writing and signed by both parties hereto.

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

16       GOVERNING LAW AND JURISDICTION

16.1     The  formation,  construction,  performance,  validity  and all aspects
         whatsoever  of this  Agreement  and  any  individual  contract  for the
         purchase of the Products by DERMA 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.



<PAGE>


 17       NOTICES

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

           Attn: Edward J Quilty               Attn: Roy Smith
           Chairman                            Chief Executive Officer
           Derma Sciences Incorporated         Innovative Technologies Group Plc
           214 Carnegie Center, Suite 100      Road Three
           Princeton                           Industrial Estate
           NJ 08540 USA                        Cheshire CW7 3PD UK
           Facsimile: 001 609 514 0502         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  dispatched 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
         affected   24   (twenty-four)   hours  after   dispatch  by   facsimile
         transmission  and service by post shall be deemed to have been affected
         seven (7) days after the date of postmark

Signed by:  /s/  Roy Smith                              Date:  November 25, 1997
          -------------------------------                      -----------------
For and on behalf of Innovative Technologies Ltd.

Signed by:  /s/  Edward J. Quilty                        Date:  December 1, 1997
          -------------------------------                       ----------------
For and on behalf of Derma Sciences Incorporated



<PAGE>


                             ENCLOSURE 1 - PRODUCTS

Product 1 - Zinc Containing Alginate
Alginate dressings and rope containing the following:-
         zinc chloride, at a nominal value 0.06mg/g fibre vitamin B6( pyridoxine
         HCL), at a nominal value 0.833 mg/g fibre

Product 2 - Zinc Containing Intelligent Hydrocolloid
Intelligent hydrocolloid dressing containing the following: -
         zinc chloride, at a nominal value 0.9 mg/g
         pyridoxine HCL, at a nominal value 1.8mg/g
         vitamin A palmitate, at a nominal value 0.1242 mg/g

Product 3 - Zinc Containing Flat Sheet Hydrogel
Flat sheet hydrogel containing trace elements of zinc and nutrients.
(To be decided)


<PAGE>


                              ENCLOSURE 2 - PRICES

                                DEVELOPMENT COSTS
Initial Payment
---------------

Zinc Containing Alginate                                          $4,000

Zinc Containing Hydrocolloid                                      $7,000

Zinc Containing Flat Sheet Hydrogel                               $4,000


17 Equal Monthly Payments
-------------------------

Zinc Containing Alginate                                          $2,400

Zinc Containing Hydrocolloid                                      $2,600

Zinc Containing Flat Sheet Hydrogel                               $2,400


<PAGE>


                              ENCLOSURE 3 - PRICES

A zinc-containing alginate

           Size                           Price US$
           ----                           ---------
2" x 2"                                       *
4" x 4"                                       *
16" Rope                                      *


A zinc-containing intelligent hydrocolloid dressing

           Size                            Price US$
           ----                            ---------
3" x 3"                                       *
5" x 5"                                       *
Sacral                                        *


A zinc-containing flat sheet hydrogel

           Size                           Price US$
           ----                           ---------

(To be advised)


The Minimum  Order  Requirement  for each  individual  Product is five  thousand
(5,000) units. Prices FOB port of shipment
-------------------
*   [INFORMATION   OMITTED  AND  FILED  SEPARATELY  WITH  THE  COMMISSION  UNDER
    EXCHANGE ACT RULE 24b-2.]


<PAGE>


                    ENCLOSURE 4 - TERMS OF SUPPLY & DELIVERY

DERMA shall  submit its  artwork to IT, at least 90 days prior to the  requested
delivery date.

DERMA agrees to pay for the full costs associated with printing set up utilizing
their artwork and for any subsequent changes to artwork required by DERMA.

DERMA  shall  submit  to IT  it's  twelve  month  non-binding  rolling  forecast
quarterly to IT, on or before the first day of each calendar quarter.

DERMA  shall  submit  it's  purchase  orders  not less than 60 days prior to its
requested delivery date.

DERMA  undertakes  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.

IT shall  deliver the  Products  FOB port of  shipment,  excluding  all shipping
costs,  import  duties,   insurance  tariffs  and  custom  charges  directly  or
indirectly involved with so shipping the Products.

DERMA shall inform IT without  delay in the event of any complaint in respect of
any of the  Products,  and DERMA  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 shall be  responsible  for
acknowledging,  dealing  with  and  investigating  any  complaint  made to it in
respect of the  Products.  DERMA shall  without  delay inform IT of any material
developments  in respect of either the complaint or DERMA  investigation.  DERMA
shall be responsible for making any necessary  reports on such complaints to the
US Food and Drug Administration ("FDA") and DERMA 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 or any other party as to the  condition of the
Products

IT hereby undertakes during the term of this Agreement:-

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

               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;

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

               to use  reasonable  efforts to  manufacture  Products  ordered by
               DERMA that are in  quantities  in excess of DERMA's  most  recent
               non-binding  quarterly  forecast  provided by DERMA to accept all
               DERMA   purchase   orders  that  conform  with  the  most  recent
               non-binding quarterly forecast.

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


<PAGE>


                        ENCLOSURE 5 - A LIST OF PRODUCTS

Dermagran Ointment Tubes

Dermagran Ointment Jars

Dermagran Spray

Dermagran Hydrogel

Dermagran Hydrophilic Ointment

Barrier Cream

Perineal Cleanser

Derma Wound Cleanser