MASTER DISTRIBUTORSHIP AGREEMENT


     THIS MASTER  DISTRIBUTORSHIP  AGREEMENT  (hereinafter  called  "Agreement")
dated this 23rd day of January, 1996, between DERMA SCIENCES, INC. a corporation
organized  under  the laws of the  state of  Colorado  (hereinafter  "DSI")  and
InnerQuest  Sales,  a  corporation  organized  under  the  laws of the  state of
________________ (hereinafter "IS").
     WHEREAS,  DSI is  engaged  in the  manufacture,  sale and  distribution  of
various proprietary and non-proprietary pharmaceutical products,
     WHEREAS, DSI desires to retain the services of D.M. as a distributor of its
pharmaceutical products,
     WHEREAS,  IS is skilled in the distribution of pharmaceutical  products and
desires to perform distribution services for the account of DSI,
     NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants herein contained,  and intending to be legally bound, hereby agree
as follows:

                                    Article 1
                          Appointment and General Terms

     1.01  Appointment.  DSI hereby appoints IS as a "Master  Distributor"  with
respect to its pharmaceutical  products, and IS hereby accepts such appointment,
upon the terms and conditions hereinafter set forth.

     1.02 Term.  The term on this  Agreement  shall begin on the date hereof and
end on December 31, 1998.

     1.03 Products.  Pursuant to this Agreement,  IS shall assume responsibility
for the  sale  and  marketing,  within  the  Territory  below  defined,  of such
pharmaceutical  and related products  marketed by DSI as the parties shall, from
time to time, mutually determine (hereinafter "Products").  Without limiting the
generality of the  foregoing,  IS shall engage in the sale and  distribution  of
those  pharmaceutical  and other  products  marketed by DSI as are enumerated in
Exhibit A attached hereto.
    
     1.04  Territory.  This  Appointment  shall be effective with respect to the
territory described in Exhibit B attached hereto (hereinafter "Territory").  The
Territory is exclusive  and DSI warrants  that it shall not sell any products to
any third party in the Territory.

     1.05  Distributor's  Rights and Duties. IS shall have the right and duty to
market,  sell and distribute the Products in accordance with sound marketing and
sales  practices  and in  accordance  with  the  terms  and  conditions  of this
Agreement.  IS shall  sell and  deliver  the  Products  exclusively  to  dealers
(resellers)  who DSI and IS shall  determine to satisfy the following  standards
(hereinafter "Authorized Dealer" or "Dealer"):

               (a)  The Dealer stocks and actively markets reasonable quantities
                    of the Products;
               (b)  The Dealer  employs  sales  personnel  knowledgeable  in the
                    marketing, sale and use of the Products;
               (c)  The  Dealer  possesses   technical   expertise  relative  to
                    applications of the Products;
               (d)  The  Dealer  provides,  on a  regular  basis,  pre-sale  and
                    post-sale support to end users of the Products;
               (e)  All of the end users to whom the  Dealer  markets  and sells
                    the Products are located within the Territory;

[Those  firms  listed  on  Exhibit  C hereto  are  Authorized  Dealers.]  - [Not
Applicable] IS may, from time to time,  approve  additional  firms as Authorized
Dealers.  Upon  determination  that such firms  satisfy the  criteria  set forth
above,  such  firms  shall  become  Authorized  Dealers  for  purposes  of  this
Agreement.  Likewise,  DSI and IS may  "deauthorize"  any Authorized  Dealer for
failure to maintain the foregoing  standards.  Deauthorization  of an Authorized
Dealer is effective immediately upon notification thereof by either DSI or IS.

     1.06 Product  Purchases.  IS shall purchase  Products from DSI at the rate,
and in the amounts, set forth in Exhibit D hereto (the "Annual Purchase Quota").
Not later than the first day of October prior to the term of this Agreement, DSI
and IS shall review the Annual Purchase Quota and endeavor  mutually to agree on
the Annual Purchase Quota for the following year. Upon failure of the parties to
so agree,  this Agreement,  at the option of either party,  shall terminate at a
point to be negotiated.
<PAGE>

     1.07  Product  Prices.  DSI's  prices to IS relative to the  Products are
subject to change at any time subject to DSI's sole discretion.  Price increases
shall be effective with respect to Products shipped not earlier than thirty (30)
days prior to  notification  to IS of such price  increase(s).  Price  decreases
shall be  effective  with  respect to Products  shipped on and after the date of
such  prices  decrease(s).  In no event  shall  the  price  charged  by DSI to a
national  account located within the Territory be less than the published Dealer
cost at the time of sale.

     1.08 Distributor's Marketing and Sales. IS shall maintain a program for the
effective  marketing,  sale and delivery of the Products.  Without  limiting the
generality of the foregoing, IS shall undertake the following:

         (a)  Sales Activities:

               (1)  Maintain  an  effective  and  aggressive  sales and  service
                    organization  skilled  in  the  marketing  and  sale  of the
                    Products  and in  the  provision  of  advisory  and  support
                    services relative to the Products to Authorized Dealers;
               (2)  Cooperate with DSI in the training of IS sales personnel;
               (3)  Cooperate  with  DSI  in  the  conduct  of  seminars  for IS
                    Dealers;
               (4)  Actively solicit Dealers for the Products;
               (5)  Cooperate  with DSI  relative to all matters  pertaining  to
                    sales of the Products and post-sale support services;
               (6)  Conduct such other and further support  activities as may be
                    necessary to effectuate the purposes of this Agreement.
               (7)  IS shall  not  market  any  products  which DSI  regards  as
                    competitive  to any DSI  products. 

         (b)  Authorized  Dealers Support:

                    (1)  Where  applicable,   conduct  in  store   merchandising
                         activities;
                    (2)  Where  applicable,  advise  on  display  placement  and
                         arrangement;
                    (3)  Provide sales support;
                    (4)  Encourage   enrollment  by  Authorized  Dealers  in  IS
                         conducted seminars and programs;
                    (5)  Distribute  DSI's  literature  and technical  data on a
                         regular basis;
                    (6)  Provide technical support;
                    (7)  Stock such  quantities  of the  Products as  reasonably
                         required to meet  delivery  requirements  of Authorized
                         Dealers and end users;
                    (8)  Conduct such other and further  support  activities  as
                         may be  necessary  to  effectuate  the purposes of this
                         Agreement.

     1.09 Packaging and Shipping.  DSI will determine,  in its sole  discretion,
the packaging and routing of the Products purchased by IS.

     1.10 Risk of Loss and Title.  Risk of loss and title to all Products  shall
pass  to  IS  F.O.B.   DSI's  designated   shipping  facility  unless  otherwise
specifically agreed in writing by DSI.
                                                         
     1.11 Distributor's  Literature.  IS shall deliver to DSI for its review and
approval all printed materials to be used by IS in connection with the marketing
or  sale of the  Products,  including  therein,  without  limitation,  catalogs,
advertising, brochures and price lists.
         
     1.12 DSI Support. DSI, in support of the activities of IS in furtherance of
this  Agreement,  shall  provide  to IS, in such form and  amounts  as DSI shall
determine,  sales  assistance,  technical  support,  product  seminars,  product
literature and samples.
<PAGE>
                                               
                                    Article 2
                                National Accounts

     2.01  Establishment.  DSI may at anytime,  in its  discretion,  designate a
given Authorized Dealer, a potential dealer,  reseller,  former Dealer,  managed
care account,  cooperative,  buying group, wholesaler,  institution,  government
agency,  end user or other entity, as a "National  Account",  providing that DSI
has  determined  that any of the  above  accounts  ships  Products  across  IS's
territorial  boundaries.  Prior  to the  above  mentioned  designation  DSI will
consult  with each  affected  Master  Distributor  as to various  aspects of the
designation.

     2.02 Sales  Administration.  Sales administration  relative to all National
Accounts shall be effected exclusively by DSI and shall include:
            
                  (a)  Acceptance and processing of orders;
                  (b)  Tracking;
                  (c)  Warehousing;
                  (d)  Billing;
                  (e)  Commission payment;
        
     DSI  shall  require  that all  National  Accounts  provide  it with  timely
information  concerning  the identity and location of the ultimate  purchaser or
end user of Products sold to such  Accounts for use in computing the  commission
due to Master  Distributor as provided in paragraph  2.03. All Sales by National
Accounts  to any  Account  within the  Territory  shall be  credited  toward the
satisfaction  by IS of its Annual  Purchase  Quota  described  in Exhibit D. The
amount of such credit(s) shall be the number of cases of subject Products.

     2.03  Distributor's  Commission.  DSI shall pay to IS a  commission  on all
sales made by DSI to D.M. at the rate of 10% of the sales  price,  exclusive  of
insurance costs, upon receipt of paid invoices from IS to DSI. In the event that
DSI  designates  any  account  as a  National  Account,  DSI  shall  pay to IS a
commission  on sales made by DSI to National  Accounts  of  Products  ultimately
utilized in Master Distributor's  Territory. The amount of this Commission shall
be the difference between the sale price of the Products, exclusive of insurance
costs, and the price thereof currently in effect for IS.

     2.04 Duties of Distributor. IS shall have those duties relative to National
Accounts,  and their  distributees,  as enumerated in paragraph 1.05,  excepting
therefrom the duties of DSI enumerated in paragraph  2.02.

     2.05 Distributor's Responsibilities Relative to National Accounts: IS shall
be  responsible to identify all National  Accounts  within the Territory as they
are brought to IS attention,  at which time IS must notify DSI of the situation.
At that time, DSI will determine the Account's status.
<PAGE>
 
                                    Article 3
                       Territorial Rights and Obligations

     3.01  Sales Out of  Territory.  IS shall  not,  without  the prior  written
consent of DSI, (1) effect sales of the Products to dealers  located outside the
Territory,  or (2) effect  sales of the  Products  to dealers  for resale to end
users located outside the Territory.
        
     3.02 Distributor's  Enforcement Obligations.  In the event IS becomes aware
of resales  of the  Products  to end users  located  outside  the  Territory  in
violation of paragraph  3.01,  IS shall utilize its best efforts to prevent such
resales; provided,  however, nothing contained herein shall be deemed to require
IS to bring legal action against any dealer, reseller or other entity.
     
     3.03 Sales Into  Territory.  DSI shall  utilize its best efforts to prevent
sales  by  other  distributors  or  dealers  to end  users  located  within  the
Territory;  provided,  however,  nothing  contained  herein  shall be  deemed to
require DSI to bring legal action against any dealer, reseller or other entity.

<PAGE>
                                                          
                                    Article 4
                                Events of Default

     4.01 Enumeration. Any one of the following acts or omissions on the part of
IS  shall  constitute  an Event of  Default  and  shall  justify  the  immediate
termination of this Agreement by DSI "for cause":

          (a)  Failure of IS to perform any of its  obligations  hereunder which
               failure  shall  continue  for a period of thirty  (30) days after
               notice thereof, and demand for cure, to IS from DSI;
          (b)  Failure of IS to pay any  invoice of DSI in  accordance  with its
               terms which failure  shall  continue for a period of fifteen (15)
               days after notice  thereof,  and demand for  payment,  to IS from
               DSI;
          (c)  Filing by IS for protection under the Federal  Bankruptcy Code or
               similar statute of any jurisdiction;
          (d)  Admission by IS of its  inability to pay its debts as they mature
               or  the  making  by DSI  of an  assignment  for  the  benefit  of
               creditors;
          (e)  Sale by DSI of substantially all of its assets outside the normal
               course of its business;
          (f)  Change, or agreement to change,  the ownership or control of DSI,
               to the  extend  of over 50%  thereof,  whether  by sale of stock,
               merger, consolidation, liquidation or other means;
          (g)  Sale by IS of any of the  Products  to a person or entity who has
               not been  designated  an  Authorized  Dealer in  accordance  with
               paragraph 1.05.
          (h)  Publication or distribution by IS, regardless of means or extent,
               of proprietary  information,  trade secrets,  confidential  data,
               internal memoranda or like documents or information of DSI;
          (i)  Publication or distribution by IS, regardless of means or extent,
               of  information  defamatory  or  harmful  to  the  reputation  or
               business interests of DSI;
          (j)  Failure  of  IS to  purchase  that  "Annual  Purchase  Quota"  of
               Products specified in Exhibit D, as from time to time amended.
          (k)  Failure  of IS to  notify  DSI of any  account  that is  shipping
               products outside of the Territory.

     4.02 Performance Excused.  During the pendency of any act or omission of IS
as enumerated  above,  DSI shall be relieved of any obligations  imposed upon it
under this Agreement.
<PAGE>

                                    Article 5
                              Remedies and Damages

     5.01  Exclusive  Remedy.  In  the  event  either  DSI or IS  breaches  this
Agreement,  regardless of whether such breach is willful,  and including therein
the  abrogation  or  cancellation  of this  Agreement  prior  to the  expiration
thereof,  the  breaching  party shall  immediately  forfeit all rights to future
benefits under this Agreement saving and excepting  therefrom  benefits to which
the breaching party has theretofore become entitled. In the event of breach, the
sole and exclusive remedy of the non-breaching party against the breaching party
shall  be to  withhold  further  performance  hereunder.  Without  limiting  the
foregoing, neither party shall be liable to the other party for monetary damages
based upon any claim arising from the  performance  or  non-performance  of this
Agreement  or the  breach  of  any  warranty,  express  or  implied,  associated
therewith,  including  therein damages for loss of opportunity or profits or any
other special or consequential damages of whatsoever nature. Furthermore, in the
event of  breach,  no  equitable  action  shall lie by the  non-breaching  party
against  the  breaching   party   including   therein  an  action  for  specific
performance.

     5.02  Independent  Causes of Action Not Barred.  Nothing  contained in this
Article  shall  preclude  either party from  bringing suit against the other for
damages  arising  independently  of the rights and  obligations  created by this
Agreement.
 


<PAGE>

                                    Article 6
                        Warranties, Defense and Indemnity

     6.01 Limited  Nature of  Warranties.  DSI warrants that the Products,  when
properly  utilized  and  applied in  accordance  with the  directives  furnished
therewith,  are safe and will not cause or  contribute  to sickness or injury to
the users of the Product or associated  medical  personnel.  DSI shall  promptly
replace any Product or Products which, in the opinion of DSI, are defective. The
foregoing  represents the sole  warranties of DSI relative to the Products.  DSI
makes  no  other  warranties  with  respect  to the  Products,  or any of  them,
INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

     6.02 Duty to  Indemnify  and Defend.  IS shall  indemnify  DSI and hold DSI
harmless from and against,  and shall defend DSI against, any and all claims and
damages  of every  kind for  injury or death to any  person or  persons  and for
damages  to or  loss of  property  arising  out of or  attributed,  directly  or
indirectly,  to the conduct,  operations  or  performance  of IS relative to the
Products.

     6.03 DSI's Duty to Indemnify and Defend. DSI shall indemnify IS and hold IS
harmless from and against,  and shall defend IS against,  any and all claims and
damages of every kind arising out of any defects,  failures or  malfunctions  of
any of the  Products,  saving  and  excepting  those  caused by IS or  otherwise
arising out of or attributed, directly or indirectly, to the conduct, operations
or performance of IS.


<PAGE>

                                    Article 7
                                  Miscellaneous

     7.01 Independent Contractor Relationship.  The relationship between DSI and
IS created and contemplated hereby is that of independent  contractors.  Nothing
contained herein shall be construed to create any other relationship,  including
therein employer-employee, agency, joint venture or partnership. Neither DSI nor
IS shall  have  authority  to act for or bind the other to any  extent or in any
manner whatsoever.

     7.02 No Waiver.  Failure of DSI to insist  upon strict  performance  of any
term of this Agreement,  or the waiver by DSI of any breach of this Agreement by
IS, shall not constitute a waiver by DSI of the subsequent strict enforcement by
DSI on any such term or terms.

     7.03 Written  Notices.  All written  notices  required  hereunder  shall be
deemed  delivered if delivered by hand or if mailed by United  States  certified
mail, return receipt requested,  postage pre-paid and addressed as follows or to
such other  address as maybe  specified by notice by either  party  specifically
referring to this paragraph:  

                           To DSI: 
                           Derma Sciences, Inc.
                           121 West Grace Street
                           Old Forge, PA 18518

                           To IS:

                           InnerQuest Sales
                           818 State Street
                           Lemont, IL  60439


     7.04 Governing Law. This Agreement  shall be governed by, and construed and
enforced in accordance with, the laws of the  Commonwealth of Pennsylvania.  Any
and all actions to determine or enforce any rights or obligations  created under
this  Agreement  shall be initiated  in the court of Common Pleas of  Lackawanna
County,  Pennsylvania.  The parties hereby irrevocably  consent to the exclusive
jurisdiction  of the court of Common Pleas of Lackawanna  County,  Pennsylvania,
relative  to the  adjudication  of any  and  all  disputes  arising  under  this
Agreement or any alleged breach thereof.
        
     7.05  Assignment.  IS shall not  assign  any of its  rights or  obligations
hereunder without the prior written consent of DSI which consent may be withheld
in the sole and unfettered discretion of DSI.

     7.06 Entire  Agreement.  This Agreement sets forth the entire Agreement and
understanding  of the parties with respect to the subject  matter treated herein
and  supersedes  all  prior  and  contemporaneous  agreements,   understandings,
representations and warranties, whether oral or written, save that neither party
shall be relieved  hereby from making payment of any amounts due and owing under
any agreement  entered into prior to the date hereof.  This Agreement may not be
amended, modified or altered, nor may any of its provisions be waived, except by
writing  signed by the party  against  whom such  amendment or  modification  is
sought to be enforced.

     IN WITNESS  WHEREOF,  the parties have caused this Agreement to be executed
by their duly authorized Presidents the day and year first hereinabove written.

DERMA SCIENCES, INC.                        INNERQUEST SALES

BY /s/ Don McHale                           BY /s/ James Hutchinson
       ----------                                  ----------------   
       Don McHale                                  James Hutchinson
       Vice President,Sales & Marketing

 


<PAGE>
                                    EXHIBIT A




1.       Dermagran Ointment (all sizes)

2.       Dermagran Spray (all sizes)

3.       Dermagran Wet Saline Dressing

4.       Dermagran Zinc-Saline Dressing

5.       Dermagran Hydrophilic Wound Dressing (all sizes)

6.       Wound Care Kits Containing Any Of
         The Above Products

7.       Dermagran Wound Cleanser with Zinc





<PAGE>


                                    EXHIBIT B

 
                                    TERRITORY


States of:                 NEBRASKA

                           IOWA

                           MISSOURI

                           KANSAS

                           ILLINOIS

                           MICHIGAN

                           INDIANA

                           WISCONSIN

                           MINNESOTA
                              
                           NORTH DAKOTA

                           SOUTH DAKOTA


 



<PAGE>


                                    EXHIBIT C
                                [NOT APPLICABLE]



1.       ____________________                  16.      ____________________

2.       ____________________                  17.      ____________________

3.       ____________________                  18.      ____________________

4.       ____________________                  19.      ____________________

5.       ____________________                  20.      ____________________

6.       ____________________                  21.      ____________________

7.       ____________________                  22.      ____________________

8.       ____________________                  23.      ____________________

9.       ____________________                  24.      ____________________

10.      ____________________                  25.      ____________________

11.      ____________________                  26.      ____________________

12.      ____________________                  27.      ____________________

13.      ____________________                  28.      ____________________

14.      ____________________                  29.      ____________________

15.      ____________________                  30.      ____________________




<PAGE>


                                    EXHIBIT D


Total Cases

         1996 - 350 cases a month/4,200 cases annually

         1997 - 500 cases a month/6,000 cases annually

         1998 - 650 cases a month/7,800 cases annually