EXHIBIT 10.39

                                    AGREEMENT


     THIS  AGREEMENT,  made this ___ day of December,  2001 by and between Derma
Sciences,  Inc.,  a  business  corporation  organized  under  the  laws  of  the
Commonwealth of Pennsylvania ("Employer") and John T. Borthwick ("Employee").

     WHEREAS,  Employee is currently  employed by Employer as its Vice President
for Sales  pursuant to that certain  agreement  dated  January ___,  2001 ("2001
Agreement");

     WHEREAS, the parties desire to amend and restate the 2001 Agreement;

     NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants herein contained, hereby agree as follows:

     1.  Amendment  and  Restatement.  Saving and  excepting  the  amendment and
cancellation of prior employment  agreements  pursuant to paragraph 2, the grant
of stock options pursuant to paragraph 3 and the note  cancellation  pursuant to
paragraph 8 of the 2001  Agreement,  the 2001  Agreement  is hereby  amended and
restated in its entirety.

     2. Employment.  Employer hereby employs Employee, and Employee agrees to be
employed by Employer,  as Employer's Vice President for Sales upon the terms and
conditions  hereinbelow set forth. Employee shall perform such duties and assume
such  responsibilities as may be determined by the President and Chief Executive
Officer of Employer.

     3. Time and Efforts. Employee will devote substantially all of his business
time and efforts to his duties hereunder.

     4. Compensation.  During the Term hereof Employer shall pay compensation to
Employee as follows:

          (a) Base  compensation at the rate of One Hundred Ten Thousand Dollars
     ($110,000) per year; and


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          (b) Bonus,  stock options and/or such other incentive  compensation as
     may be determined by Employer's President and Chief Executive Officer.

     Reviews by the President  and Chief  Executive  Officer of Employee's  base
compensation and incentive  compensation shall be undertaken not less often than
annually.  The principal  criteria utilized in the conduct of such reviews shall
be the extent to which  Employer  attains  its  performance  objectives  and the
extent of Employee's contributions thereto, together with such other criteria as
the President and Chief Executive Officer may establish.

     5.  Vacation.  During the term hereof,  Employee  shall be entitled to paid
vacation of three (3) weeks per year.

     6. Term.  This Agreement shall be effective as of January 1, 2001 and shall
continue  indefinitely  until  terminated  as  provided  herein.  Subject to the
requirements of paragraph 7 herein below, either party hereto may terminate this
Agreement upon thirty (30) days written notice of such  termination to the other
party.

     7.  Severance.  Upon  termination  of this  Agreement by Employer  "without
cause," Employer shall pay to Employee  severance  compensation in the amount of
six months' base  compensation  at the rate most recently in effect  pursuant to
paragraph 4(a) hereof.

     8. Change in Control.  Within six months of the  occurrence of a "change in
control" of Employer  (defined  below),  Employee  may, in the event his duties,
responsibilities  or status have been  diminished  subsequent  to such change in
control, tender his resignation from Employer and receive severance compensation
as  provided in  paragraph 7 above to the same extent as if Employer  terminated
this Agreement  "without  cause." For purposes of this  paragraph,  a "change in
control" shall mean a change in

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ownership  of stock  possessing  greater than fifty  percent  (50%) of the total
combined voting power of all classes of stock entitled to vote of Employer.

     9. Confidential  Information.  Employee recognizes and acknowledges that he
has had, and will have, access to certain  confidential  information of Employer
and that such information  constitutes valuable,  special and unique property of
Employer.  Employee  will  not,  during  or after  the  term of his  employment,
disclose any of such confidential  information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever unless ordered
to do so by a court or other  tribunal or  government  agency with  jurisdiction
over the subject  matter and  Employee.  In the event of a breach or  threatened
breach by  Employee  of the  provisions  of this  paragraph,  Employer  shall be
entitled to an  injunction  restraining  Employee from  disclosing  confidential
information  of Employer or from  rendering  any  services to any person,  firm,
corporation,  association or other entity to whom such confidential  information
has been disclosed or is threatened to be disclosed.

     10. Option Exercise Extension. In the event either that Employer terminates
this  Agreement  "without  cause" or  Employee  tenders his  resignation  upon a
"change in  control,"  then the period to exercise  any option to  purchase  the
securities of Employer of which  Employee may be possessed  shall be extended to
the expiration thereof as set forth in the option instrument.

     11.  Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania  (without reference
to its rules as to conflicts of law) and the federal law of the United States of
America.

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     12. Entire Agreement.  This agreement contains the entire  understanding of
the parties  relative to the subject matter hereof and may be modified only by a
writing  signed by the party  against whom  enforcement  of any waiver,  change,
extension or modification is sought to be enforced.

     IN WITNESS  WHEREOF,  this  Agreement  has been  executed by  Employee  and
Employer on the date first hereinabove written.

                                  EMPLOYER:

                                  DERMA SCIENCES, INC.



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


                                  EMPLOYEE:



                                  -----------------------------------
                                  John T. Borthwick



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