LICENSE AGREEMENT


     This  Agreement is made and entered into as of the 31 day of October,  1996
(the  "Effective  Date"),  by and among  DERMA  SCIENCES,  INC.  a  Pennsylvania
Corporation  with its  principal  offices at 121 West Grace  Street,  Old Forge,
Pennsylvania,  18518 ("Derma  Sciences"),  and  Gamida-MedEquip  Ltd.,  with its
principal office at 54, Harey Yehuda Street, Givat Savyon, Israel.

                                    RECITALS

     WHEREAS, Derma sciences is in the business of developing, manufacturing and
selling topical wound care products  including  without  limitation the Products
defined in, and meeting the specifications attached to, Exhibit A hereto;
     WHEREAS,  Gamida-MedEquip  Ltd.  is in  the  business  of  developing,  and
marketing medical products;
     WHEREAS,  Derma  Sciences has obtained U.S. FDA 510K approvals with respect
to the Products;
     WHEREAS, Derma Sciences owns or controls patents,  licensing rights, and/or
proprietary technology relating to the process of manufacturing the products;
     WHEREAS, Gamida-MedEquip Ltd. desires to distribute the Products;
     WHEREAS,  Derma  Sciences  is willing to license  Gamida-MedEquip  Ltd.  to
market  the  Products  and  in   connection   therewith   the   trademarks   and
Gamida-MedEquip  Ltd. is willing to license and purchase the Products from Derma
Sciences,  all on the  terms and  subject  to the  conditions  set forth in this
Agreement.
     NOW, THEREFORE, in consideration of the premises and the mutual benefits to
be derived hereunder,  Derma Sciences and  Gamida-MedEquip  Ltd. hereby agree as
follows:

I.  DEFINITIONS

     1.01  "Agreement"  shall  mean this  License,  Marketing  and  Distribution
Agreement.
     1.02  "Agreement  Field"  shall mean the field for which the  Products  are
approved in the treatment of wounds.
     1.03 "Confidential Information" shall mean all written and oral information
and data  provided  by the parties to each other  hereunder  and (in the case or
oral  information and data,  reduced to writing and) identified as confidential,
except any portion thereof which:

               (a)  is  known  to  the  receiving  party,  as  evidenced  by the
                    receiving  party's  written  record,  before receipt thereof
                    under this Agreement;
               (b)  is  disclosed to the  receiving  party by a third person who
                    has a right to make such disclosure;
               (c)  is or becomes part of the public domain  through no fault of
                    the receiving party; or
               (d)  is  independently   developed  by  the  receiving  party  as
                    evidenced by the receiving party's written record.

     1.04  "Developments"  shall  mean all  inventions,  ideas  and  improvement
developed during or arising out of the project  (hereinafter  defined) which are
made or conceived by Derma Sciences and its officer, employees and agents at any
time before or during the term of this Agreement.
     1.05 "Project"  shall mean the  development  of a particular  design of the
Products to include Product improvements,  new product ideas, and line extension
such as packaging changes.
     1.06 "Effective  Date" shall mean the date on which this Agreement is first
executed by both parties.
     1.07 "FDA" shall mean the United States Food and Drug Administration.
     1.08  "510K"  shall  mean a  concurrence  by  the  FDA  with  Manufacturer'
submissions under Section 510(K) of the Food, Drug and Cosmetics Act #895920.
     1.09 "Net Trade Sales" shall mean the aggregate billing revenue for Product
sold by Gamida-MedEquip  Ltd. or any of its affiliates to an unaffiliated entity
minus (i) discounts allowed on a uniform basis in a manner consistent with other
products sold by  Gamida-MedEquip  Ltd. or such  affiliate(s),  (ii) credits for
allowances  and  returns,  (iii)  prepaid  freight,  and (iv)  taxes  and  other
governmental charges added to the face of the invoices for such Product and paid
by Gamida-MedEquip Ltd. and/or any of its affiliates;  provided,  however,  that
the Net Trade  Sales  for  Product  sold by  Gamida-MedEquip  Ltd.  shall be the
billing  revenue  charges to the first  unaffiliated  entity to which Product is
sold.
     1.10 "Products"  shall mean the products and wound dressings  (described in
Exhibit A) and any product  improvements  and line  extensions  in such forms as
lotions,  sprays,  gels and creams for the treatment of chronic  wounds based on
the technology.
     1.11  "Product  Improvement"  shall mean (a) the use,  without  substantial
modification,  of Product to perform a function not initially intended for it or
(b) any improvement, redesign, or modification of any Product.
     1.12 "Technology"  shall mean the technology  related to the manufacture of
the products listed in Exhibit A.
     1.13 "Territory" shall mean a particular country,  state or other political
subdivision of the world (attached as Exhibit B).
     1.14 "Trademarks" shall mean the Trademarks listed in Exhibit C.
     1.15 "Unit" shall mean a single, separate Product.
     1.16 "Year" shall mean each 12 month period during the Term,  each of which
shall commence with the first day of the month,  the first of which shall be the
first full month following the Effective Date.

II.      LICENSE AND TERRITORY

     2.01  Grant of  License.  Subject  to the  terms of this  Agreement,  Derma
Sciences  hereby  grants to  Gamida-MedEquip  Ltd.  an  exclusive  license  (the
"License") to distribute, market and sell the Products in the agreement field in
the  territory  for a term of five (5)  years  from the  Effective  Date of this
Agreement (the "Initial  Term").  Subject to  satisfaction of the minimum annual
purchase  requirement  in  Section  4.09,  each  party  shall have the option to
continue the term of this  Agreement  after the Initial  Term for an  additional
term of five (5) years (the  RENEWAL  Term),  which  option may be  exercised by
giving written notice to each other not later than two-hundred and seventy (270)
days prior to the expiration of the Initial Term. Subject as aforesaid, the same
shall apply after each  successive  period of five (5) years of this  Agreement.
The Term of the License, as it may be shortened or lengthened pursuant hereto is
referred as the "License Term".
     2.02 Territory.  The territory is defined in Exhibit B. If  Gamida-MedEquip
Ltd.  fails to  introduce  or sub license the  Products  into any country in the
territory within 24 months of the signing of the Agreement, the rights to market
the products in such country will revert to Derma Sciences.
     2.03 Sub License. Subject to approval of Derma Sciences which approval will
not be unreasonably  withheld,  Gamida-MedEquip Ltd. may be granted the right to
sub license the Product in countries in the Territory.

III.     TRADEMARKS AND REGISTRATIONS

     3.01 Rights to Trademarks. Gamida-MedEquip Ltd. during the License Term, is
authorized  to use the  TRADEMARKS  in the  Territory  listed in  Exhibit C (the
initial  Trademarks).  Gamida-MedEquip  Ltd. may only market the Products  under
Derma Sciences'  Trademarks.  Gamida-MedEquip Ltd. may add additional Trademarks
at its discretion.  Gamida-MedEquip  Ltd. rights in and to the Trademarks  shall
revert  to  Derma  Sciences  upon  expiration  of the  License  Term or  earlier
termination thereof.

IV.      MANUFACTURE AND SUPPLY

     4.01  Exclusive  Supplier.  During the license term,  Gamida-MedEquip  Ltd.
agrees that it shall  purchase  the  Products  exclusively  from Derma  Sciences
pursuant to the  provisions  of this  Agreement and that during the license term
Derma  Sciences  will  sell  the  products  in  the  Territory   exclusively  to
Gamida-MedEquip Ltd., its Sub Licensees or assigns pursuant to the provisions of
this Agreement.
     4.02 Pricing.  Gamida-MedEquip  Ltd.  agrees to pay Derma  Sciences for the
Products  ordered by and delivered to it in accordance  with the price  schedule
attached as Exhibit D, provided, however, all Products ordered for delivery in a
particular  contract year in accordance  with the provisions of this  Agreement,
shall be priced and paid for at the 3. Transfer  Price for such Product,  as set
forth on Exhibit D, applicable at the time of shipment.  The transfer prices are
subject to adjustment as provided on Exhibit D.
     4.03 Purchase  Forecasts.  Not later than ten (10) days following execution
of this  Agreement,  Gamida-MedEquip  Ltd.  shall deliver to Derma  Sciences its
purchase  forecast  for the first four (4) quarters of the License Term for each
Product,  the first  quarter to begin  December 31, 1997.  Thereafter,  at least
fourteen (14) days prior to the end of each quarter,  Gamida-MedEquip Ltd. shall
furnish Derma  Sciences with a further  forecast for an additional  quarter,  so
that the  estimate at all times  reflects  estimated  requirements  for four (4)
quarters.  The purchase  forecast provided by  Gamida-MedEquip  Ltd. pursuant to
this  Sub-Section  are solely for the  convenience  of Derma  Sciences and shall
under no circumstances be binding upon either party.
     4.04  Orders.  As  soon  as is  practicable  after  the  execution  of this
Agreement,  and ninety (90) days prior to the beginning of each  calendar  month
thereafter,  Gamida-MedEquip  Ltd.  shall  deliver  to Derma  Sciences  its firm
purchase  order for the  Products to be  delivered  during  such  month.  If the
quantity of any Product  ordered on the  purchase  order for  delivery  during a
month is more than its forecasted  quantity,  then Derma Sciences may reschedule
the delivery of such excess in accordance with its production  requirements  and
schedule.  Derma Sciences  agrees to ship  forecasted  monthly  purchase  orders
accepted for entry within ninety (90) days of the receipt of the order.
     4.05  Freight,  Insurance & Title.  All  shipments of the Products  will be
F.O.B.  from such Derma  Sciences  facility  to  Gamida-MedEquip  Ltd.  or other
destinations  designated by Gamida-MedEquip Ltd.  Gamida-MedEquip Ltd. agrees to
bear all costs for transporting  and insuring the Products to such  destination.
Gamida-MedEquip   Ltd.   shall  have  the  right  to   determine   the  mode  of
transportation  or  carrier  utilized  for  shipments  of  the  Products  in its
discretion.
     4.06 Labeling.  Derma Sciences agrees to supply all products with packaging
having the labeling presently used at Derma Sciences' expense and further agrees
to otherwise  meet,  at Derma  Sciences'  expense,  all  packaging  and labeling
requirements of then existing governmental  requirements or approvals,  with the
exception of all expenses related to converting  approved packaging and labeling
into non-English format,  which shall include but not be limited to the costs of
translation,  art work,  mechanical and printing plates, which shall be borne by
Gamida-MedEquip Ltd. This cost will be included in pricing. Gamida-MedEquip Ltd.
agrees that all advertising and promotional  materials for the Products will not
be in conflict with or violation of then existing governmental  requirements and
approvals and will refer to Derma Sciences as the  manufacturer  of the Products
and the owner of the  Trademarks.  All labeling  changes shall be subject to the
written  approval of Derma Sciences given in advance of the use of such changes,
which approval shall not be unreasonably withheld.
     4.07 Quality  Assurance.  Derma  Sciences  agrees that each lot of Products
shipped to  Gamida-MedEquip  Ltd. will have passed all  in-process  and finished
product  Quality  Assurance  testing  and will meet the  specifications  for the
Products set forth in the applicable government  regulations as the case may be,
as this may be amended and supplemented from time to time. Derma Sciences agrees
that the Products will be manufactured according to Good Manufacturing Practices
(GMPs)  promulgated by U.S. FDA and in a facility  registered  with and approved
for such purposes by the U.S. FDA.  Gamida-MedEquip  Ltd.  shall have the right,
from time to time,  but  subject to  reasonable  notice  and other  requirements
imposed by Derma Sciences,  to have its quality control  personnel inspect Derma
Sciences' manufacturing processes and its quality control procedures. While such
personnel  shall be subject to the provisions of Section 7.0, Derma Sciences may
require such personnel to sign individual confidentiality agreements.
     4.08  Expiration  Date.  Subject to the  provisions  of Section  4.06,  all
Products sold to  Gamida-MedEquip  Ltd. shall have (i) not less than twenty-four
(24) months  remaining shelf life or (ii) not less than six (6) months less than
the maximum shelf life approved by the applicable  government authority for such
Product, at the time of delivery to Gamida-MedEquip Ltd., whichever shall be the
lesser.  Product  having a shorter  shelf life,  provided  such shelf life is at
least nine (9) months,  may be shipped to  Gamida-MedEquip  Ltd.  with its prior
consent, which consent shall not be unreasonably withheld.
     4.09 Minimum  Purchase  Requirement.  During each year of the License Term,
Gamida-MedEquip Ltd. agrees that if the revenue as defined in Exhibit E to Derma
Sciences from Gamida-MedEquip Ltd. purchases of Products for delivery during any
such year  shall be less  than 70% of the  purchase  forecast  for such year set
forth in Exhibit E attached hereto, then Gamida-MedEquip Ltd. shall be deemed in
default of this contract.  At Derma Sciences'  option,  the exclusive  agreement
will  convert to a  non-exclusive  agreement  as cure for  Gamida-MedEquip  Ltd.
breach  of the  Agreement  for  failure  to meet  the  annual  minimum  purchase
requirement.  If Derma  Sciences  fails to  fulfill a purchase  order  placed by
Gamida-MedEquip  Ltd. in accordance  with the provisions of Section 4.04 hereof,
then the amount of such purchase order shall be deemed to have been purchased by
Gamida-MedEquip  Ltd.  for  delivery in such year for  purposes  of  determining
Gamida-MedEquip  Ltd.  satisfaction  of  its  then-applicable  Minimum  Purchase
Requirement.  Minimum purchase requirements will be set up on yearly basis and a
business plan will be submitted by Gamida-MedEquip Ltd. annually at which time a
minimum purchase will be set for the forthcoming year. This will be submitted by
December 31 of each year, starting December 31, 1997.


V.       PAYMENT TERMS; PRICING FREEDOM


     5.01  Payment  Terms.  Product  monies  due  and  payable  will  be paid by
Gamida-MedEquip  Ltd. to Derma  Sciences  within  ninety (90) days from shipping
date. All payments  required by this Agreement shall be made by wire transfer to
the bank account  designated  by Derma  Sciences  from time to time,  payable in
United States currency at a U.S. Bank, subject to collection.
     5.02 Pricing Freedom. Derma Sciences acknowledges that Gamida-MedEquip Ltd.
may sell the  Products  at such  price as  Gamida-MedEquip  Ltd.  determines  at
Gamida-MedEquip Ltd.'s sole discretion.

                                                       
VI.      OTHER TERMS AND CONDITIONS

     6.01  Marketing and Sales  Efforts.  Gamida-MedEquip  Ltd.  shall  exercise
reasonable  efforts to lawfully  promote  and market  Products so as to maximize
sales of Products within the Territory, and shall do no thing or act to derogate
from,   diminish,   or  injure  the  market  for  Products  in  the   Territory.
Gamida-MedEquip Ltd. marketing efforts may include, but not limited to;

               (i)  use of sales  techniques and sales aids, as  Gamida-MedEquip
                    Ltd. may in its judgment  determine to be appropriate,  such
                    as the  following:  literature,  print  advertising,  sample
                    kits,  direct sales calls,  telemarketing  and telemarketing
                    follow-up,  direct mail, video presentations and preparation
                    and distribution of surgical procedure manuals;
               (ii) exhibiting   at   appropriate   professional   meetings  and
                    providing speaker support as required;
               (iii)providing  sufficient  time at  national  sales  meetings to
                    adequately  train  and  motivate  sales  force as well as to
                    provide for the  introduction  and training  with respect to
                    new product lines.

As soon as practicable  after the execution of this  Agreement,  Gamida-MedEquip
Ltd. will prepare a marketing  plan and submit a copy to Derma  Sciences for its
review and comments. The marketing plan shall be reviewed with Derma Sciences on
a yearly basis.  Gamida-MedEquip Ltd. will provide Derma Sciences with quarterly
report of its unit sales within  thirty (30) days after the end of each calendar
quarter during the term of this Agreement.  Gamida-MedEquip Ltd. agrees that the
Products sold hereunder  shall be marketed in the Territory  under the Trademark
licensed  hereunder and in connection  with  packaging,  labeling and literature
prepared by or otherwise approved in advance by Derma Sciences.

     6.02  Marketing  Participation.  Derma  Sciences will render  assistance to
Gamida-MedEquip  Ltd.  in sales  training  and  promotional  effort;  trade  and
professional  shows;  in preparing  annual  sales and  marketing  plans;  and in
offering  technical  and customer  support for  products.  Derma  Sciences  upon
receipt of marketing plans from  Gamida-MedEquip  Ltd., will promptly review and
provide its input.  Derma  Sciences may also  participate,  as may be reasonably
requested  and  required  by   Gamida-MedEquip   Ltd.,   in  product   training,
professional  meetings,  and strategic planning  meetings.  Derma Sciences shall
also provide  technical  sales support as may  reasonably  be  requested.  Derma
Sciences reasonable  out-of-pocket  expenses for such participation and support,
if it requires  travel out of the United States or it is required on occasion in
excess  of  what  would   reasonably   be  expected,   shall  be  reimbursed  by
Gamida-MedEquip Ltd., provided that Derma Sciences has received  Gamida-MedEquip
Ltd.'s prior approval for such expenditures.
       6.03  Product   Improvements  and  Line  Extensions. In  the  event  that
Gamida-MedEquip  Ltd.  requests that Derma Sciences  develop line  extensions or
product  improvements  beyond the  specifications  for the Products  outlined in
Exhibit A, Derma  Sciences  agrees to provide a development  plan with estimated
funding  requirements.  Upon  negotiated  agreement to fund the  Project,  Derma
Sciences  agrees  to  provide  its  reasonable  efforts  to effect  the  product
improvements  or line  extension.  Gamida-MedEquip  Ltd.  will have an exclusive
right to market  such  products  in the  defined  Agreement  Field.  These  line
extensions and/or  improvements shall be granted to  Gamida-MedEquip  Ltd. under
substantially the same term and conditions contained in this Agreement.
     6.04 Right of First Refusal.  In the event that Derma Sciences develops new
powder,  gel or cream  wound  care  products  utilizing  its  technology,  Derma
Sciences agrees that it shall first offer Gamida-MedEquip Ltd. the right to fund
development  and market such new products in the Defined  Agreement Field before
offering such right to market to third parties. The offer to market will be made
in accordance with the following:

               (a)  Derma  Sciences  shall  give  Gamida-MedEquip  Ltd.  written
                    notice of such New Product,  which notice shall describe the
                    New Product  and its use in  reasonable  detail.  The notice
                    shall  also,  if then  determined,  set  forth the terms and
                    conditions  under which the marketing  rights are offered to
                    Gamida-MedEquip  Ltd.  In  addition,  Derma  Sciences  shall
                    provide  Gamida-MedEquip  Ltd.  with such other  information
                    which Gamida-MedEquip Ltd. might reasonably request in order
                    for it to make its Initial Decision as described below.
               (b)  Within  sixty (60) days after  receipt of such  notification
                    from Derma Sciences, Gamida-MedEquip Ltd. shall advise Derma
                    Sciences as to whether or not it is  interested in obtaining
                    such marketing rights ("Initial Decision").
               (c)  If  Gamida-MedEquip  Ltd.'s Initial Decision is that it does
                    not wish to market  the New  Product,  then  Derma  Sciences
                    shall be free to market such New Product as it determines in
                    its discretion.  If Gamida-MedEquip  Ltd.'s Initial Decision
                    is that it  wishes  to  market  such  New  Product,  Gamida-
                    MedEquip  Ltd.  shall have,  without  payment,  an option to
                    acquire  marketing  rights to such New  Product on the terms
                    and conditions offered for a period of ninety (90) days from
                    Gamida-MedEquip   Ltd.'s   Initial   Decision  (the  "Option
                    Period").  During the Option  Period,  Derma  Sciences shall
                    provide  such  samples  of the New  Product,  if it has been
                    developed and is available,  to Gamida-  MedEquip Ltd. as it
                    may reasonably  request without charge for use as samples in
                    its market research. In addition, during such Option Period,
                    the parties shall  negotiate  the terms and  conditions of a
                    development   agreement,   if  required,   and  a  marketing
                    agreement,  the  provisions of which may include the payment
                    of a non-refundable  license fee for the marketing rights to
                    the New Product.  In the event such  Marketing  Agreement is
                    not executed  prior to the  expiration of the Option Period,
                    Gamida-  MedEquip  Ltd.'s  option  shall  expire  and  Derma
                    Sciences  shall be free to offer  such  marketing  rights to
                    others.

     6.05 Loss of Exclusivity.  In the event that  Gamida-MedEquip Ltd. fails to
exercise its option for the Renewal Term,  pursuant to Section 2.01,  then Derma
Sciences, as its option, upon thirty (30) days written notice to Gamida-MedEquip
Ltd.,  may  convert  Gamida-MedEquip  Ltd.  exclusive  right to the License to a
non-exclusive  right,  effective during the last three (3) months of the Initial
Term during which period, any other provision of this Agreement notwithstanding,
Derma Sciences may market the Products in the Territory or license third parties
to do so,  provided,  however,  if Derma Sciences DOES EXERCISE SUCH RIGHT,  the
Minimum Purchase Requirements for the last year shall be proportionally  reduced
to reflect the reduction in period of exclusivity.
     6.06  Repurchase of Inventory.  Upon the  expiration of the License Term or
earlier termination  thereof,  Derma Sciences will have the option,  exercisable
upon six (6) months prior written  notice,  or purchasing  from  Gamida-MedEquip
Ltd.  all of its salable  inventory  of  Products.  The  purchase  price for the
inventory  shall be equal to the last landed cost paid by  Gamida-MedEquip  Ltd.
prior to Derma Sciences' offer to repurchase the inventory;  provided,  however,
if Derma  Sciences  does not  exercise  such  option,  Gamida-MedEquip  Ltd. may
continue  to sell its  inventory  after the  expiration  or  termination  of the
License Term.
     6.07 Transfer of Business.  Promptly after the execution of this Agreement,
and for the  period  of the  License  Term  during  which  the  License  granted
Gamida-MedEquip Ltd. hereunder remains exclusive, Derma Sciences shall refer all
orders and inquiries for orders for the Territory to Gamida-MedEquip Ltd.
     6.08 Regulatory  Notification  and Reports.  Gamida-MedEquip  Ltd. shall be
responsible  to maintain  files and  documentation  on all  complaints  or other
adverse information received concerning the Products and their use and agrees to
immediately  notify  Derma  Sciences  in  writing,  of  any  such  complaint  or
information   received  and  provide  copies  of  all  documentation   received.
Gamida-MedEquip  Ltd. shall retain such responsibility under the applicable laws
of Countries in the territory.
     6.09  Foreign  Government  Approval.  Prior to selling the  Products in any
country,   nation,   territory   or  other   political   subdivision   in  which
Gamida-MedEquip Ltd. is permitted to make sales hereunder,  Gamida-MedEquip Ltd.
shall,  if required,  apply for at its own expense and in Derma  Sciences'  name
(wherever  not  prohibited)  and,  at   Gamida-MedEquip   Ltd.'s  election,   in
Gamida-MedEquip  Ltd.'s name, and shall have received, all governmental or other
licenses,  consents or  approvals  necessary  for the sale or use of Products in
such country,  nation,  territory or other political subdivision.  Copies of all
applications and related documents for such approvals shall be provided to Derma
Sciences.

VII.     CONFIDENTIAL DISCLOSURE

     7.01 Definition.  The term "Confidential  Information" as used herein shall
include,  but not be limited  to,  inventions,  processes,  formulas,  products,
equipment,   know-how,  technology,  data  and  information  except  where  said
information  (i) presently is or hereinafter  becomes part of the public domain,
(ii) is  already in the  non-disclosing  party's  possession  at the time of the
disclosure,  (iii) comes into the non-disclosure party's possession from a third
party without breach of this Agreement,  or (iv) is  independently  developed by
the non-disclosing  party or a third party without recourse to or utilization of
any portion of the Confidential Information imparted or transmitted hereunder.
     7.02 Mutual Covenants. In consideration of the willingness of each party to
disclose  confidential  information to the other, each party agrees for the term
of this  Agreement  and a period  of five (5)  years  thereafter  (i) to use the
Confidential  Information  only  for the  purpose  of  conducting  the  business
arrangement  in-tended by the terms of this Agreement,  (ii) to take precautions
to keep Confidential  Information  secret and to prevent its disclosure to third
parties  except  with the written  consent of the  disclosing  party,  with such
precautions being at least equivalent to those taken by the non-disclosing party
with  respect  to its own  Confidential  Information,  and (iii) to  return  all
documents  containing  Confidential  Information  upon request of the disclosing
party.

VIII.  INDEMNIFICATION

     8.01 Indemnification of Derma Sciences - Product Liability.  Derma Sciences
agrees,  at  its  own  expense,   to  defend,   indemnify,   and  hold  harmless
Gamida-MedEquip  Ltd., its officers,  agents, and employees from and against any
and all claims, losses,  damages, causes of action, suits and liability of every
kind,  including all expenses of litigation,  court costs,  and attorney's fees,
for injury to or death of any  person,  or for damage to any  property,  arising
from the negligence of Derma  Sciences with respect to the design,  manufacture,
implantation or use of any product supplied under this Agreement.
     8.02 Indemnification by Gamida-MedEquip Ltd. Gamida-MedEquip Ltd. agrees to
hold harmless,  protect and indemnify Derma Sciences from any and all claims for
property  damage or personal  injury arising out of the negligent  activities of
Gamida-MedEquip Ltd., its employees, agents and representatives in the marketing
and sale of the  Products  on or  after  the  date of this  Agreement  provided,
however, such indemnification shall not cover claims with respect to which Derma
Sciences has agreed to indemnify  Gamida-MedEquip  Ltd. pursuant to Section 8.01
above. Such indemnification shall include, but not be limited to, the cost of an
attorney's fees and other fees,  damages,  liabilities,  and customary  expenses
related to such litigation or claims.
     8.03 General Indemnification  Provisions. The right to each party hereto to
claim indemnification  pursuant to the provisions set forth above is conditioned
upon (i) such party (the  "Indemnified  Party")  notifying  the other party (the
"Indemnitor")  of such  claim or suit  within  adequate  time to  avoid  default
judgment  being  taken and (ii)  notice of the claim or suit being  received  by
Indemnitor  prior to the  expiration of the applicable  statute of  limitations.
Indemnitor shall have the right to select defense counsel and direct the defense
or settlement of such claim or suit as it shall deem appropriate and Indemnified
Party agrees to cooperate, at its expense, in the defense of such claim or suit.
In no event  shall an  Indemnitor  be liable  where the claim  arises out of the
negligence or willful misconduct of the Indemnitee or of any employee, agent, or
representative  of the  Indemnified  Party or any  party  claiming  through  the
Indemnified Party. The provisions of Article 8 will survive  termination of this
Agreement for any reason.
     8.04  Insurance.  Derma  Sciences will maintain  general  liability/product
liability  insurance,  written  on an  events  basis,  during  the  term of this
Agreement in the minimum amount of two million  dollars  ($2,000,000) so long as
such  insurance  is  available  and the  cost is not  prohibitive.  The  product
liability/general  liability  insurance  so  maintained  will be  written  by an
insurance carrier acceptable to Gamida-MedEquip  Ltd. with  Gamida-MedEquip Ltd.
named as an additional insured.
<PAGE>


IX.  FORCE MAJEURE

     9.01  Definition.  "Force Majeure" shall mean any act of God,  governmental
act or regulation, judicial decree or order, outbreak of hostilities (whether or
not  war  is  declared),   insurrection,   riot,  civil  disturbance,   climatic
conditions,  fire, flood,  explosion,  accident,  theft,  shortage of materials,
energy  shortages,  delay or failure of carriers,  subcontractors  or suppliers,
strike or other labor  difficulty,  lockout or trade dispute (whether  involving
Gamida-MedEquip  Ltd. or Derma  Sciences'  employees or other  parties),  or any
other  events or  circumstances  (whether or not of the same or similar  kind to
those enumerated) beyond  Gamida-MedEquip  Ltd. or Derma Sciences',  as the case
may be, reasonable control.
     9.02  Failure to  Perform.  Notwithstanding  any other  provisions  of this
Agreement  to the  contrary,  if  either  party to this  Agreement  is unable to
perform any of its obligations hereunder by reason of the occurrence of an event
of Force  Majeure,  despite  such  party's best efforts to correct the cause and
resume  performance,  the  period for  performance  of such  obligation  will be
suspended  during the continuance of such event of Force Majeure,  provided such
party  continues  to use its best  efforts  to  correct  the  cause  and  resume
performance of such obligations,  provided, however, the party whose performance
is affected  promptly  notifies the other party,  and further  provided  that no
event of Force  Majeure  shall be deemed to prevent or excuse the payment of any
amounts  due under this  Agreement,  whether  for  Product  delivered,  services
provided or otherwise.

X.       TERMINATION


     10.01  Termination.  Notwithstanding  the stated  five (5) year term or any
other provision of this Agreement, this Agreement may be terminated prior to the
expiration of its stated term as set forth below.
     10.02  Termination for Default.  If either party defaults in its observance
or performance  of any material term or provision on its  respective  part to be
observed  and  performed  under  this  Agreement   between  Derma  Sciences  and
Gamida-MedEquip  Ltd.,  the other  party  will have the right to give that party
sixty (60) days notice to cure such default or breach. If such default or breach
is cured within such 60-day  period,  then at the written  election of the party
giving  such  notice,   this  Agreement  will  terminate.   Notwithstanding  the
foregoing,  the cure  period  for  Gamida-MedEquip  Ltd.  failure  to pay  Derma
Sciences monies due shall be five (5) business days.
     10.03  Deliveries  After  Termination  Notice.  If Derma Sciences gives any
notice under  Section  10.02,  it will have no obligation to deliver any further
shipments of the Product to Gamida-MedEquip Ltd.  notwithstanding any previously
acknowledged and accepted purchase orders from Gamida-MedEquip  Ltd., unless and
until the breach is cured within the applicable period. If Gamida-MedEquip  Ltd.
gives any notice under Section  10.02,  it will have no obligation to accept any
further  deliveries of Products  unless and until the breach is cured within the
60-day period.
     10.04 Survival.  All  representatives  or warranties made in this Agreement
and all terms and provisions  hereof intended to be observed and performed after
the termination hereof, shall survive such termination and continue, thereafter,
in full force and effect.
     10.05  No  Damages  on  Termination.   Both  parties  have  considered  the
expenditures  necessary in preparing  for  performance  of and  performing  this
Agreement,  and the possible losses and damages incident to each in the event of
termination.   Each  party   understands  that  this  Agreement  will  terminate
automatically pursuant to Section 2.01, and neither party is obligated to extend
the Agreement.


XI.  MISCELLANEOUS PROVISION

     11.01  Assignment.  This Agreement shall be binding upon and shall inure to
the benefit of and be  enforceable  by the permitted  successors  and assigns of
each party.  This  Agreement  may not be assigned by any party without the prior
written  consent of the other party,  which  consent  shall not be  unreasonably
withheld.  The  foregoing  notwithstanding,  no consent  shall be required  with
respect to an assignment by either Gamida-MedEquip Ltd. or Derma Sciences of its
rights and obligations  hereunder to an affiliated company,  provided,  however,
any such assignee shall become obligated hereunder and such assignment shall not
relieve the assignor of its obligations  under this Agreement,  or to assign its
rights  of the  payments  due  hereunder  to a  financial  institution.  For the
purposes  of  this  Agreement  an  "affiliated  company"  shall  mean a  company
controlling or controlled by Gamida-MedEquip Ltd. or Derma Sciences, or at least
50% owned by Gamida-MedEquip  Ltd. or Derma Sciences as the case may be, neither
directly or indirectly or controlled by a company which controls Gamida-MedEquip
Ltd. or Derma Sciences, as the case may be, either directly or indirectly.
     11.02 Waiver.  Any term or provision of this Agreement may be waived at any
time by the party  entitled  to the  benefit  thereof  by a  written  instrument
executed by such party.
     11.03 Notices. Any notice, request,  demand, waiver,  consent,  approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed  given only if  delivered to the address set forth below (to
the  attention  of the  person  identified  below) or sent by  telegram,  telex,
telecopy or sent by Courier as follows:

         If to Gamida-MedEquip Ltd., to:

         Gamida-MedEquip Ltd.
         54, Harey Yehuda Street
         (P.O.B. 94 Savyon 56530)
         Givat Savyon, Israel
         Attention:  Jacob Niv, Managing Director

         With required copies to:

         _______________________________
         _______________________________

 
         If to Derma Sciences, to:

         Derma Sciences
         121 West Grace Street
         Old Forge, Pennsylvania 18518

         Attention:  John Borthwick, Chief Executive Officer

or to such other address as the  addressee  may have  specified in a notice duly
given to the sender and to counsel as provided  herein.  Such  notice,  request,
demand, waiver, consent,  approval or other communication will be deemed to have
been given, if delivered,  as of the date so delivered, if by telex, telecopy or
telegraph,  when received or, if via courier, three business days after the date
so sent.
     11.04  Governing Law. This Agreement  shall be governed by and  interpreted
and  enforced  in  accordance  with  the  substantive   laws  of  the  State  of
Pennsylvania, USA
     11.05 Remedies Not Exclusive.  Nothing in this Agreement shall be deemed to
limit or restrict in any manner other rights or remedies that any party may have
against any other party at law, in equity or otherwise.
     11.06 No Benefit to Others. The representations,  warranties, covenants and
agreements  contained in this  Agreement are for the sole benefit of the parties
hereto  and  their  successors  and  assigns,  and  shall  not be  construed  as
conferring, and are not intended to confer, any rights on any other persons.
     11.07 Contents of Agreement.  This  Agreement,  together with any documents
referred to herein,  sets forth the entire  agreement of the parties hereto with
respect to the  transactions  contemplated  hereby.  This  Agreement  may not be
amended except by an instrument in writing signed by the parties hereto,  and no
claimed amendment,  modification,  termination or waiver shall be binding unless
in  writing  and  signed by the  party  against  which  such  claimed  amendment
modification, termination or waiver is sought to be enforced.
     11.08 Section  Headings and Gender.  All section  headings and the use of a
particular  gender  are for  convenience  only  and  shall in no way  modify  or
restrict any of the terms or provisions  hereof. Any reference in this Agreement
to a  Section,  Exhibit  or  Schedule  shall be  deemed to be a  reference  to a
Section,  Exhibit or Schedule  of this  Agreement  unless the context  otherwise
expressly requires.
     11.09  Schedules  and  Exhibits.  All  attachments,  Exhibits and Schedules
referred to herein are intended to be and hereby are specifically made a part of
this Agreement.
     11.10  Cooperation.  Subject to the provisions  hereof,  the parties hereto
shall use their best  efforts to take,  or cause to be taken,  such  action,  to
execute and deliver,  or cause to be executed  and  delivered,  such  additional
documents and instruments and to do, or cause to be done, all things  necessary,
proper or advisable under the provisions of this Agreement and under  applicable
law to consummate  and make  effective  the  transactions  contemplated  by this
Agreement.
     11.11  Severability.  Any provision of this  Agreement  which is invalid or
unenforceable  in any  jurisdiction  shall be  ineffective to the extent of such
invalidity or unenforceability  without invalidating or rendering  unenforceable
the remaining  provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render  unenforceable such provision in
any other jurisdiction.
     11.12  Counterparts.  This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of which is an original and all of which  together  shall be
deemed to be one and the same  instrument.  This Agreement  shall become binding
when one or more  counterparts  taken  together  shall  have been  executed  and
delivered by each of the parties to the other.
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed by their authorized officers as of the date first above written.



                 GAMIDA-MEDEQUIP, LTD.

                 By: /s/ Jacob Niv
                         ---------
                         Jacob Niv
                 Title: Managing Director    


                 DERMA SCIENCES


                 By: /s/ John T. Borthwick
                         -----------------
                         John T. Borthwick
                 Title: President; CEO        


<PAGE>


                                    EXHIBIT A

                               (Amended 01/24/97)

                                  "THE PRODUCT"


                         Dermagran Ointment (all sizes)
                           Dermagran Spray (all sizes)
                          Dermagran Wet Saline Dressing
                         Dermagran Zinc-Saline Dressing
                Dermagran Hydrophilic Wound Dressing (all sizes)
                     Dermagran Hydrophilic-B Wound Dressing
                       Dermagran Wound Cleanser with Zinc
            Dermagran (Zinc-Saline) Hydrogel Wound Dressing (85 grm)


<PAGE>




                                    EXHIBIT B



                                    TERRITORY


                  Israel, Israeli-administered territories and
                         areas of Palestinian autonomy.



<PAGE>





                                    EXHIBIT C


                                   TRADEMARKS

 

 
             All products with the Dermagran Trademark on them.


<PAGE>


 


                                    EXHIBIT D

                                     PRICING


Name                                Unit Size       Item Code      Unit Price

Dermagran Ointment (Jar)             2 oz.            DG2              $4.00

Dermagran Ointment (Jar)             4 oz.            DG4              $4.00

Dermagran Ointment (Tube)            4 oz.            DT4              $4.00

Dermagran Spray                      4 oz.            DM4              $1.85

Dermagran Hydrophilic
Wound Dressing                       2 x 2           SPD20             $ .85
                                     4 x 4           SPD21               .85
                                     5 x 9           SPD22               .85
                                     8 x 4           SPD24               .85

Dermagran Hydrophilic B              3 oz.           SPD03             $5.00

Dermagran Zinc-Saline
Dressing                             8 x 4           ZSD10             $ .75

Dermagran Tri-Zinc
Incontinent Wash                     8 oz.           DIW8              $ .95

Dermagran Wound Cleanser             4 oz.           WC04              $ .95

Dermagran Moisturizing
Hydrogel                             1 oz.           DH01              $ .35





Following the first twelve (12) months after the execution date,  Derma Sciences
may increase  its price once every year,  upon at least ninety (90) days advance
written  notice  of such  increase.  Such  price  increase  may not  exceed  the
documented increase in manufacturing cost.


<PAGE>


                                    EXHIBIT E


                         "MINIMUM PURCHASE REQUIREMENT"


     The "Minimum Purchase  Requirement" for any year shall mean the purchase of
the Products by Gamida-MedEquip  Ltd. for delivery during such year, adjusted by
any subsequent cancellations, of such orders by Gamida-MedEquip Ltd., whether or
not permitted  under the Agreement,  in an aggregate  amount of no less than the
unit  amounts  set forth  below  opposite  such  year.  For the  purpose of this
Agreement,  a unit  equals  one gram of  existing  Product.  In the  event  that
additional  sizes are  added,  the  contribution  to the unit  Minimum  Purchase
Requirement would be prorated on the basis of the ratio of the dry weight of the
Product to such one gram unit.

Revenue to Gamida-MedEquip at First Year Transfer Price 

                  Year          Units          Exclusive of Royalties     


                  Year 1   _______Units              $__________
                  Year 2   _______Units              $__________
                  Year 3   _______Units              $__________
                  Year 4   _______Units              $__________
                  Year 5   _______Units              $__________



           TO BE MUTUALLY DETERMINED NO LATER THAN DECEMBER 31, 1997.