<PAGE>
 
                                                                   EXHIBIT 10.87

                        MANUFACTURING SUPPLY AGREEMENT


     This MANUFACTURING SUPPLY AGREEMENT (the "Agreement") is entered into as of
March 24, 1998, by and between Hydro Med Sciences ("Hydro Med"), a division of
GP Strategies Corp., a Delaware corporation,  and Roberts Laboratories Inc., a
New Jersey corporation ("Roberts").


                                 RECITALS

     WHEREAS, Hydro Med has developed a sealed, hollow cartridge containing the
luteinizing hormone releasing hormone (LHRH), histrelin, for the subcutaneous
release of said hormone, which may be useful in the treatment of human prostatic
carcinoma and other indications (the "Product") and Roberts has agreed to
license from Hydro Med certain rights of Hydro Med to the Product and to pursue
development and commercialization of the Product pursuant to the terms of a
License Agreement, dated as of the date hereof (the "License Agreement"),
between Hydro Med and Roberts; and

     WHEREAS, subject to the terms and conditions set forth in this Agreement,
Roberts wishes to have Hydro Med manufacture the Product at its manufacturing
facility in Cranbury, New Jersey and Hydro Med has agreed to manufacture such
Product for Roberts at such facility.

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:

                                   SECTION 1
                                  DEFINITIONS

     For purposes of this Agreement, the following terms shall have the meanings
set forth below:

     "AFFILIATES" shall mean, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with, such other
Person.  For purposes hereof, the term "controlled" (including the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the direct or indirect ability or power to direct or cause
the direction of management policies of such Person, whether through the
ownership of voting securities or otherwise.

     "AGREEMENT" shall mean this Manufacturing Supply Agreement, as the same may
hereafter be amended, modified or restated, including all of the exhibits
annexed hereto.

     "ANNUAL FORECAST" shall have the meaning ascribed to such term in Section
2.2 hereof.
<PAGE>
 
     "APPLICABLE LAWS" shall mean all applicable United States federal, state
and local laws, ordinances, rules and regulations of any kind whatsoever,
including, without limitation, the United States Federal Food, Drug and Cosmetic
Act.

     "BUSINESS DAY" shall mean a day on which banks are open for the transaction
of business required for this Agreement in the State of New Jersey.

     "CAPITAL IMPROVEMENTS" shall mean items of any nature incorporated into the
Plant which are not expensed but rather are capitalized in accordance with Hydro
Med's policies.

     "DEFECT" shall mean one or more defects or characteristics in any Product
which causes the Product to fail to conform to the Specifications.

     "DEFECTIVE PRODUCT" shall  mean a Product containing one or more Defects
which causes the Product to fail to conform to the labeled indications for its
use which have been established by the FDA.

     "DISPUTED PRODUCT" shall have the meaning ascribed to such term in Section
4.3(b) hereof.

     "DISPUTED ROBERTS MATERIALS" shall have the meaning ascribed to such term
in Section 5.4 hereof.

     "FDA" shall mean the United States Food and Drug Administration.

     "FORCE MAJEURE CONDITIONS" shall have the meaning ascribed to such term in
Section 9.13 hereof.

     "HYDRO MED GROUP" shall have the meaning ascribed to such term in Section
5.5 hereof.

     "HYDRO MED PRODUCT DEFECT" shall mean any Defect in any Product which is
attributable to Hydro Med, rather than to Roberts, including, without
limitation, in the design, workmanship, in the manufacture of, in the Materials
(other than in the Roberts Materials) comprising, or in the packaging of, any
Product, and which causes the Product to be a Defective Product.

     "LICENSING AGREEMENT" shall have the meaning ascribed to such term in the
Recitals set forth above.

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     "MATERIALS" shall mean all materials, goods and ingredients ( including,
without limitation, the Roberts Materials) necessary for the manufacture,
production, labeling, packaging and storage of the Product.

     "MINIMUM ANNUAL UNIT AMOUNTS" shall have the meaning ascribed to such term
in Section 2.3 hereof.

     "PERSON" shall mean a natural person, a corporation, a partnership, a
trust, a joint venture, a limited liability company, any governmental authority
or any other entity or organization.

     "PLANT" shall mean Hydro Med's manufacturing facility at 8 Cedar Brook
Drive, Cranbury, New Jersey 08512 or any other manufacturing premises where
Hydro Med moves its operations in accordance with the terms of this Agreement.

     "PRODUCT" shall have the meaning ascribed to such term in the Recitals set
forth above.

     "PURCHASE ORDER" shall mean a purchase order from Roberts to Hydro Med for
the Products which is issued in accordance with the provisions of Section 2.2 of
this Agreement.

     "ROBERTS GROUP" shall have the meaning ascribed to such term in Section 5.6
hereof.

     "ROBERTS MATERIALS" shall mean the luteinizing hormone releasing hormone
(LHRH) histrelin and all other materials, goods and ingredients supplied by
Roberts to Hydro Med in connection with the manufacturing, production and
processing of the Product at the Plant pursuant to the terms hereof.

     "ROBERTS PRODUCT DEFECT" shall mean any  Defect in any Product which is
attributable to Roberts, rather than to Hydro Med, including, without
limitation, in the design, workmanship, in the manufacture of, in the Roberts
Materials comprising, or in the labeling or packaging of, any Product, and which
causes the Product to be a Defective Product.

     "SPECIFICATIONS" shall mean the specifications for the Product which are
established by Hydro Med and are approved by the FDA.

     "TECHNICAL AGREEMENT" shall mean the Technical Agreement, substantially in
the form attached hereto as Exhibit A, to be entered into between Roberts and
Hydro Med on the date hereof, as the same may hereafter be amended, modified or
restated.

     "TOTAL COST PER UNIT" shall mean the  aggregate amount of all direct and
indirect costs, fees and expenses incurred by Hydro Med in order to manufacture
and produce each unit of the Product at the Plant.

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                                   SECTION 2
                      MANUFACTURING, PRICING, AND PAYMENT


     2.1.  MANUFACTURING.   (a)  During the term of this Agreement, Hydro Med
will manufacture, package, produce and provide to Roberts, Roberts' total
requirements of Product on an exclusive basis. Subject to the provisions of
Section 2.2(e) hereof, Roberts shall not permit any party other than Hydro Med
to manufacture and produce the Product.  Such manufacturing shall be performed
to the best of Hydro Med's ability in accordance with the terms hereof and in
accordance in all material respects with the terms and conditions described in
the Technical Agreement attached hereto as Exhibit A.

          (b) All Roberts Materials required in connection with the production
and manufacture of the Product shall be supplied to Hydro Med by Roberts at
Roberts' sole cost and expense and shall comply with the Specifications. Once
the parties hereto have obtained all necessary approvals from the FDA to market
and sell the Product in the United States, Roberts shall, during the term
hereof,  deliver to Hydro Med, on a semi-annual basis, a sufficient volume of
Roberts Materials to enable Hydro Med following each such delivery to produce
the Product at the Plant in an amount necessary to satisfy Roberts' then current
volume requirements for the Product for at least a six (6) month period  in
accordance with the most recent Purchase Order furnished by Roberts  to Hydro
Med pursuant to Section 2.2 (c) hereof .  Title to all Roberts Materials
furnished by Roberts to Hydro Med shall remain in Roberts and the materials
shall be segregated in Hydro Med's Plant and clearly and conspicuously labeled
as Roberts' property until such time as such Roberts Materials are used in the
production of the Product.

          (c) Product produced hereunder shall be manufactured by Hydro Med in
accordance with Applicable Laws (including current Good Manufacturing Practices
(cGMP)) and Hydro Med's current production standards and practices at the Plant.
Either party hereto may, from time to time, during the term of this Agreement,
request the approval of the other party to a change in such standards or
practices, which approval shall not be unreasonably withheld; provided that if
any such requested change is not agreed to, the standards and practices in
effect immediately prior to the time of such request shall remain valid and in
effect.  Any and all changes to such practices and standards shall be made only
pursuant to the written agreement of the parties hereto, or, if required in
order for Hydro Med to remain in compliance with Applicable Laws following the
date hereof, upon written notice from Hydro Med to Roberts, such notice to
specify in reasonable detail the basis for such changes; provided that Hydro Med
shall be entitled to increase its standards costs of production to the extent of
any increase in production costs resulting from any change in production
standards or practices pursuant to this Section 2.1(c) from those in effect on
the date hereof.  In the event that the production standards or practices of
Hydro Med are changed pursuant 

                                     - 4 -
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to the provisions of this Section 2.1(c), Hydro Med shall thereafter manufacture
the Product hereunder in compliance with such changed production practices and
standards.

          (d) Nothing contained herein shall limit, restrict or prohibit Hydro
Med during the term of this Agreement from soliciting for manufacture or
manufacturing other products, goods and items in addition to the Products so
long as Hydro Med is able to satisfy all of its manufacturing obligations to
Roberts hereunder.  In such case, Hydro Med agrees not to favor such other
products, goods or items by manufacturing such products, goods or items at the
Plant in a manner which has a material adverse effect on Hydro Med's ability to
manufacture the Product at the Plant.

     2.2.  PRODUCTION REQUIREMENTS; PURCHASE ORDERS. (a)   Once the parties
hereto have obtained all necessary approvals from the FDA to market and sell the
Product in the United States, Roberts shall, by  September 1 of each year during
the term hereof, provide Hydro Med with an annual written forecast (the "Annual
Forecast") for the following calendar year describing in specific detail and on
a quarterly basis its volume requirements for the Product during such year,
which Annual Forecast shall be updated quarterly and shall include written
notice of any significant changes in Roberts' volume requirements. It is
understood and agreed, however, that within thirty (30) days of the date on
which the parties hereto have obtained all necessary approvals from the FDA to
market and sell the Product in the United States, Roberts shall provide Hydro
Med with an Annual Forecast for the relevant calendar year in which all such
approvals have been obtained, such Annual Forecast to describe in specific
detail Roberts' volume requirements for the Product for the remainder of such
calendar  year.  Any such Annual Forecast (and any quarterly update thereto)
shall constitute the best estimate of Roberts as of the date of such Annual
Forecast (or as of the date of any such quarterly update) of Roberts' then
current volume requirements for the Products, but nothing contained in any such
Annual Forecast (or in any quarterly update thereto) shall constitute a Purchase
Order or an undertaking or obligation on the part of Roberts to purchase the
quantities of Products set forth therein during the periods specified therein.

          (b) On a regular and frequent basis, which may be quarterly, Hydro Med
and Roberts (i) shall review the inventory of Product and anticipated sales of
the Product; and (ii) agree upon a production schedule which will provide
Roberts with sufficient amounts of Product to maintain appropriate customer
service levels.

          (c) During the term of this Agreement, Roberts shall on a quarterly
basis provide Hydro Med with Purchase Orders for the Product with each such
Purchase Order to specify  Roberts' volume requirements for the Product for at
least a six (6) month period and to be provided to Hydro Med at least one
hundred eighty (180) days in advance of the date that any such Products must
first be delivered by Hydro Med to Roberts.  Each Purchase Order shall be
governed by the terms of this Agreement and none of the terms or conditions of
Roberts's Purchase Orders, Hydro Med's acknowledgment forms or any other forms
shall be applicable, except those specifying quantity ordered, delivery
locations and delivery schedule and invoice information.  Each Purchase Order

                                     - 5 -
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shall constitute a valid, binding and irrevocable obligation upon Roberts to
accept the quantities of Products ordered therein if, and to the extent that,
such Products do not contain any  Hydro Med Product Defects.  Roberts shall make
reasonable efforts to order reasonable quantities of the Products per Purchase
Order and to spread out the deliveries of the Products over the course of the
year to the extent practicable. Hydro Med hereby covenants that it shall use
reasonable efforts to ensure that all of the shipments of Products ordered by
Roberts pursuant to a Purchase Order are shipped timely in accordance with the
directions contained in such Purchase Order; provided, however, that nothing
contained herein shall require Hydro Med, during any six (6) month period, to
supply  to Roberts more than 150% of the quantity of Products which Roberts
anticipated ordering from Hydro Med during such six (6) month period pursuant to
the most recent Annual Forecast which Roberts previously furnished to Hydro Med.

          (d) In the event Hydro Med, within ninety (90)  Business Days after
its receipt of a Purchase Order, notifies Roberts of its inability to meet the
requirements of such Purchase Order, including the specified delivery dates, the
parties shall attempt to arrange a substitute delivery schedule by mutual
agreement. Such notice shall include a statement of the reasons for Hydro Med's
inability to produce such volume of the Product and the amount of Product
affected.

          (e) Except in the case of a force majeure condition (in which case the
provisions of Section 9.13 hereof shall apply), in the event the parties are
unable to agree on a substitute delivery schedule, Roberts shall have the right
to have the Product manufactured by parties other than Hydro Med or to undertake
such manufacture itself, but only if Product can be obtained more expeditiously
from an alternative source and only in such amounts and for such periods
necessary to make up the difference between the amounts required by Roberts
hereunder and the amounts Hydro Med is capable of manufacturing at the Plant
during such periods and only for such periods in which Hydro Med is unable to
supply the Product to Roberts on a timely basis.  In that event, Hydro Med
agrees to provide Roberts or its designee with all technical assistance
reasonably necessary for the manufacture of Product, so long as any such
designee signs a confidentiality agreement in form and substance reasonably
satisfactory to Hydro Med, whereby such designee agrees to be bound by all of
the confidentiality obligations to which Roberts is subject in accordance with
the provisions of Section 8.1 hereof.

     2.3.  MINIMUM UNITS. (a)  Roberts and Hydro Med hereby agree that once the
parties hereto have obtained all necessary approvals from the FDA to market and
sell the Product in the United States, Roberts will be required to make minimum
annual purchases of the Product in the following amounts (such amounts are the
"Minimum Annual Unit Amounts"):

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<TABLE>
<CAPTION>
                        Period of Time                                    Minimum Annual Unit
                                                                             Amount During
                                                                           Applicable Period
<S>                                                                       <C> 
The first one-year period following the date of receipt by
 the parties hereto of all necessary FDA approvals                                       10,000
 
The second one-year period following the date of receipt by
 the parties hereto of all necessary FDA approvals                                       20,000
 
The third one-year period following the receipt by the
 parties hereto of all necessary FDA approvals                                           40,000
 
The fourth one-year period following the receipt by the
 parties hereto of all necessary FDA approvals and each                                  60,000
 one-year period thereafter during the term of this Agreement
</TABLE>

          (b) In the event of the failure of Roberts, other than for causes
solely attributable to a Force Majeure Condition (as defined pursuant to Section
9.13 hereof),  during any applicable one-year period described above, to order
the applicable Minimum Annual Unit Amounts of the Products set forth above,
Roberts and Hydro Med agree that Hydro Med will have the option, in its sole
discretion, to either (i) immediately terminate this Agreement and the License
Agreement or (ii) demand and receive liquidated damages from Roberts in an
amount equal to the product of the  Total Cost Per Unit times the aggregate
number of units of the Product which Roberts failed to order from Hydro Med in
accordance with the applicable Minimum Annual Unit Amount requirements set forth
above.


     2.4.  REIMBURSEMENT OF EXPENSES.

          (a) The parties hereto hereby agree that Hydro Med shall not receive
any fees or other compensation or consideration from Roberts for the performance
of the manufacturing services it is providing for Roberts pursuant to the terms
of this Agreement. The parties hereto hereby acknowledge and agree, however,
that Hydro Med will incur substantial ongoing operating costs, fees and expenses
in order to manufacture the Product at the Plant.  In order to reimburse Hydro
Med for such costs, fees and expenses which have previously been or will be
incurred  by Hydro Med in connection with the commercial operation of  the Plant
and the manufacture of the Product at the Plant (including, without limitation,
any costs and expenses related to product development, production scale-up,
Capital Improvements,  labor, overhead and regulatory compliance),  Roberts
hereby agrees to provide the following reimbursement payments to Hydro Med in
the following manner:

          (i)  On the date of the signing of this Agreement        []  $250,000

          (ii) On the date which is six (6) months from the
               date of the signing of this Agreement               []  $250,000

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         (iii) On the date which is twelve (12) months from the
               date of the signing of this Agreement               []  $250,000

          (iv) On the date which is eighteen (18) months from
               the date of  the signing of this Agreement          []  $250,000
 
          (b) Roberts has also agreed during the term of this Agreement to,
subject to the terms and conditions of this Section 2, reimburse Hydro Med for
all direct and indirect costs, fees and expenses incurred by Hydro Med in
connection with the production and manufacture of the Product at the Plant
pursuant to the terms hereof. In connection therewith, the parties hereto hereby
agree that for the purposes of this Agreement  the Total Cost Per Unit shall be
fixed at thirty-five dollars ($35.00) during the entire term of this Agreement .

     2.5.   INVOICES.  Within thirty (30) days after the shipment of Product to
Roberts pursuant to a Purchase Order, Hydro Med shall provide Roberts with an
invoice for the total number of units of the Product manufactured at the Plant
and shipped to Roberts in accordance with such Purchase Order. Each such invoice
shall include a computation of the Total Cost Per Unit multiplied by the total
number of units of the Product covered by such invoice.   All payments due and
payable to Hydro Med by Roberts in accordance with any such invoice shall be
provided by Roberts to Hydro Med within thirty (30) days of Roberts' receipt of
such invoice.

     2.6.  TERMS OF PAYMENT.  All payments to be made to Hydro Med in accordance
with Sections 2.4 and 2.5 hereof shall be made by check or bank draft to the
following address and shall indicate to which invoice(s) payment applies:

          Hydro Med Sciences
          8 Cedar Brook Drive
          Cranbury, New Jersey  08512
          Attention: Mr. Robert Feinberg
                     President and Chief Executive Officer


                                   SECTION 3
                            OBLIGATIONS OF HYDRO MED

     3.1.  MANUFACTURING REQUIREMENTS  (a)  Hydro Med shall manufacture,
package, label, test, prepare for shipment and ship Products to Roberts, or to
locations designated in writing by Roberts, at and from Hydro Med's Plant at the
times and in the quantities set forth by Roberts in the Purchase Orders.

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<PAGE>
 
     3.2.  QUALITY CONTROL AND ASSURANCE.  (a)  Hydro Med shall manufacture the
Products in accordance with all Applicable Laws (including, without limitation,
current Good Manufacturing Practices (cGMP)), its customary standards and
practices at the Plant and in accordance with the Specifications for the
Product.

          (b) Personnel from Roberts shall, upon reasonable advance written
notice to Hydro Med, have access to the Plant no more than once a month (except
in the event that any Force Majeure Condition has occurred at the Plant, in
which case Roberts and its representatives shall be entitled to have access to
the Plant upon reasonable advance notice to Hydro Med) during normal business
hours in order to observe and inspect the manufacturing, quality control and
testing processes for, and the records of all production and quality assurance
data related to, the Products.

     3.3.  RECORDS AND ACCOUNTING.  Hydro Med shall, with respect to each lot of
the Products produced by it hereunder, keep accurate records during the term of
this Agreement of the manufacture and testing of the Products produced by it
hereunder, including, without limitation, all such records which are required
under Applicable Laws.  Access to such records shall be made available by Hydro
Med to representatives of Roberts up to four (4) times during any calendar year
during normal business hours at the Plant upon Roberts's prior written request.

     3.4.  TECHNICAL AGREEMENT.  The parties hereto shall on the date hereof
enter into a Technical Agreement, substantially in the form attached hereto as
Exhibit A and made a part hereof.


                                   SECTION 4
                         LABELING AND TESTING PRODUCTS

     4.1.  LABELING AND PACKING.  The Products shall be labeled, prepared and
packed for shipment in full compliance with all Applicable Laws, the
Specifications and Hydro Med's customary practice.

     4.2.  LOT NUMBERING.  Lot numbers shall be affixed on the containers for
the Products and on each shipping carton in accordance with Applicable Laws, the
Specifications and Hydro Med's customary practice.

     4.3.  TESTING AND REJECTION OF DELIVERED PRODUCTS.  (a)  Roberts shall be
entitled, at its sole cost and expense, to test any and all Products delivered
to it hereunder to determine whether any such Products are Defective Products.
Such testing of the Products shall be conducted in accordance with procedures
and requirements to be mutually agreed upon by Roberts and Hydro Med.  Roberts
shall notify Hydro Med in writing promptly, and in any event not later than
thirty (30) days after its receipt thereof, if it rejects any Products delivered
to it because Roberts believes that such Products are Defective Products.
Products not rejected within such thirty (30) day period by Roberts shall be
deemed accepted by Roberts.  Hydro Med shall use reasonable efforts to 

                                     - 9 -
<PAGE>
 
replace any Defective Products with Products which are not Defective Products
within the shortest possible time and shall deliver such replacement Products to
Roberts. In addition, Hydro Med shall arrange for all such Defective Products to
be picked up promptly in accordance with all Applicable Laws.

          (b) Notwithstanding subsection 4.3(a) above, if Roberts and Hydro Med
disagree on whether any Products are Defective Products or on the methods for or
results of testing of any of the Products, an independent laboratory which is
acceptable to both parties shall be asked to test the Products in dispute
("Disputed Products").  To the extent such laboratory finds that the Disputed
Products  are not Defective Products or  that the Disputed Products are
Defective Products due to any Roberts Product Defects, Roberts shall promptly
pay all of the fees, costs and expenses of such laboratory related to such
testing and shall promptly pay for all of the Disputed Products.  To the extent
that such laboratory finds that the Disputed Products are Defective Products due
to any Hydro Med Product Defects, Hydro Med shall promptly pay all of the costs,
expenses and fees of such laboratory related to such testing and shall replace
the Disputed Products in accordance with the preceding subsection 4.3(a).  Both
parties hereby agree to accept and be bound by the findings of such independent
laboratory.


                                   SECTION 5
                      DEFECTIVE PRODUCTS; INDEMNIFICATION

     5.1.  Roberts shall be solely responsible for the quality of all Roberts
Materials provided to Hydro Med hereunder. Hydro Med shall be responsible for
any loss or damage to the Roberts Materials which is solely attributable to the
gross negligence or willful misconduct of Hydro Med.

     5.2.  In the event that any  Roberts Materials provided by Roberts to Hydro
Med pursuant hereto are deemed by Hydro Med to contain a Roberts Product Defect
within forty-five (45) days of the date of delivery of such Roberts Materials to
Hydro Med's Plant,  after routine testing of such Roberts Materials by Hydro
Med, Roberts shall, at its sole cost and expense, replace such Roberts Materials
as soon as possible.

     5.3.  Any nondefective Roberts Materials used by Hydro Med in the
manufacture, packaging and production of a Product which is deemed to be a
Defective Product in accordance with Section 4.3 hereof  due to a Hydro Med
Product Defect shall be replaced by Roberts as soon as possible at the sole cost
and expense of Hydro Med.

     5.4.  Notwithstanding anything herein to the contrary, if Roberts and Hydro
Med disagree on whether any Roberts Materials contain any Roberts Product
Defects or on the methods for or results of testing of any of the Roberts
Materials, an independent laboratory which is acceptable to both parties shall
be asked to test the Roberts Materials in dispute ("Disputed Roberts
Materials").  To the extent such laboratory finds that the Disputed Roberts
Materials do not contain any Roberts Products Defects, Hydro Med shall promptly
pay all of the fees, costs and expenses of such 

                                     - 10 -
<PAGE>
 
laboratory related to such testing. To the extent such laboratory finds that the
Disputed Roberts Materials contain any Roberts Product Defects, Roberts shall
promptly pay all of the fees, costs and expenses of such laboratory related to
such testing and shall, at its sole cost and expense, promptly replace the
Disputed Roberts Materials in accordance with this Agreement. Both parties
hereby agree to accept and be bound by the findings of such independent
laboratory.

     5.5.  Roberts agrees to indemnify and hold harmless Hydro Med and its
employees, officers, directors, shareholders, representatives, agents and
Affiliates (collectively, the "Hydro Med Group") from and against and in respect
of any liabilities, fees, costs, obligations, damages, judgments, penalties,
losses or expenses (including, without limitation, reasonable attorneys' fees
and expenses)  incurred by any or all of  the Hydro Med Group as a result of any
demand, suit, action, proceeding or claim asserted or brought against the
Roberts Group or  the Hydro Med Group by any Person for any death, actual bodily
injury or physical property damage arising out of or  attributable to (i) any
Roberts Product Defect (including, without limitation, any misleading or
inaccurate label or instruction form or information affixed to or included with
any Product), or (ii)  any inaccurate, misleading, or false claim or
representation relating to the Product made by Roberts or any of its employees,
officers, directors, representatives or agents.

     5.6.  Hydro Med agrees to indemnify and hold harmless Roberts and its
employees, officers, directors, shareholders, representatives, agents and
Affiliates (collectively, the "Roberts Group") harmless from and against and in
respect of any liabilities, fees, costs, losses, expenses (including, without
limitation, reasonable attorneys' fees and expenses), obligations, damages,
judgments and penalties incurred by any or all of the Roberts Group as a result
of  any demand, suit, action, proceeding  or claim asserted or brought against
the Hydro Med Group or the  Roberts Group by any Person for any death, actual
bodily injury or physical property damage  arising out of or attributable to (i)
any Hydro Med Product Defect or (ii) any inaccurate, misleading, or false claim
or representation relating to the Product  made by Hydro Med or any of its
employees, officers, directors, representatives or agents.

     5.7.  The Hydro Med Group on the one hand, and the Roberts Group, on the
other, shall each give prompt written notice to the other of any claim against
the party giving notice which might give rise to a claim by it against the other
party based upon any indemnity contained herein.  The notice shall set forth in
reasonable detail the nature and basis of the claim and the actual or estimated
amount thereof.  In the event any action, suit or proceeding is brought against
the Hydro Med Group or the Roberts Group, or the Hydro Med Group or the Roberts
Group  is a party thereto, with respect to which the other party hereto may have
liability under any indemnity contained herein, the indemnifying party shall
have the right, at its sole cost and expense, to defend such action in the name
and on behalf of the indemnified party and in connection with any such action,
suit or proceeding the parties hereto agree to render to each other such
assistance as may reasonably be required in order to ensure the proper and
adequate defense of any such action, suit or proceeding.  The indemnified party
shall have the right to participate, at its own expense and with counsel of its
choosing, in the defense of any claim against which it is indemnified hereunder
and it shall be kept fully informed with respect thereto.  The party seeking
indemnification hereunder shall not make any 

                                     - 11 -
<PAGE>
 
settlement of any claim which might give rise to liability of the other party
under any indemnity contained herein without the prior written consent of the
other party, which consent shall not be unreasonably withheld.


                                   SECTION 6
                         TERM OF AGREEMENT; TERMINATION

     6.1  TERM OF AGREEMENT.  Unless sooner terminated in accordance with this
Section 6, this Agreement shall take effect and commence on the date hereof and
shall continue in full force and effect until the  date of termination of the
License Agreement, at which time this Agreement shall terminate in accordance
with the provisions of this Section 6.

     6.2  TERMINATION FOR INSOLVENCY.  If either Roberts or Hydro Med (or any
Affiliate of Hydro Med to which this Agreement has been assigned in accordance
with Section 9.1 hereof) (i) makes a general assignment for the benefit of its
creditors or becomes insolvent; (ii) files an insolvency petition in bankruptcy;
(iii) petitions for or acquiesces in the appointment of any receiver, trustee or
similar official to liquidate or conserve its business or any substantial part
of its assets; (iv) commences under the laws of any jurisdiction any proceeding
involving its insolvency, bankruptcy, reorganization, adjustment of debt,
dissolution, liquidation or any other similar proceeding for the release of
financially distressed debtors; or (v) becomes a party to any proceeding or
action of the type described in clauses (iii) or (iv) of this Section 6.2 and
such proceeding or action remains undismissed or unstayed for a period of more
than sixty (60) consecutive days, then the other party hereto may by written
notice terminate this Agreement in its entirety with immediate effect.

     6.3  TERMINATION FOR DEFAULT.   Roberts and Hydro Med shall each have the
right to terminate this Agreement if the other party hereto fails to comply in
any material respect with any of the material terms and conditions of this
Agreement.  At least thirty (30) days prior to any such termination for default,
the party seeking to so terminate shall give the other party hereto written
notice of its intention to terminate this Agreement in accordance with the
provisions of this Section 6.3, which notice shall set forth the default(s)
which forms the basis for such termination in reasonable detail.  If the
defaulting party fails to correct such default(s) within thirty (30) days after
the receipt of such notification, or if the same reasonably cannot be corrected
or remedied within thirty (30) days, then the other party hereto may terminate
this Agreement upon the expiration of any such thirty (30) day period.  In
addition, any default by a party under the Licensing Agreement shall be deemed
to be a default by such party hereunder. Notwithstanding any provision to the
contrary contained herein, in the event of a default by Roberts of its
obligations set forth in Section 2.3 hereof, Hydro Med shall be entitled to
immediately terminate this Agreement without providing thirty (30) days prior
notice of such termination to Roberts.

     6.4  CONTINUING OBLIGATIONS.  Termination of this Agreement for any reason
shall not relieve the parties of any obligation accruing prior thereto with
respect to the Product and shall 

                                     - 12 -
<PAGE>
 
be without prejudice to the rights and remedies of either party with respect to
any antecedent breach of the provisions of this Agreement. Without limiting the
generality of the foregoing, no termination of this Agreement, whether by lapse
of time or otherwise, shall serve to terminate the obligations of the parties
hereto under Sections 2.3, 2.4, 2.5, 5, 8, 9.14, 9.15 or 9.17 hereof, and such
obligations shall survive any such termination.

                                   SECTION 7
                        COMPLIANCE WITH APPLICABLE LAWS

     7.1  COMPLIANCE WITH APPLICABLE LAWS. (a)  Hydro Med shall manufacture,
store and load for shipment Product, maintain the Plant and dispose of waste and
other by-products of manufacture at the Plant, and package the Product in
conformity in all material respects with all Applicable Laws and the
Specifications; provided, however, that Roberts shall be solely responsible for
designing and maintaining labels that comply with all Applicable Laws.

          (b) Hydro Med shall, within seventy-two (72) hours, notify Roberts of
any inspection of the Plant by the FDA or any other federal, state or local
governmental agency or authority and shall furnish Roberts with copies of all
reports and analyses relating to such inspections where the inspections involve
Product, its ingredients or the Plant used to manufacture Product; provided that
any failure to so notify or furnish shall not constitute a breach or default of
this Agreement.  If such inspections are scheduled or conducted with advance
notice, Hydro Med shall advise Roberts and Roberts shall have the option to be
present at the Plant at the time of such inspection.  Duplicate samples of
Product given to government agents will be provided to Roberts, as will
duplicates of photographs, if any, taken during the inspection.

                                     - 13 -
<PAGE>
 
                                   SECTION 8
                                CONFIDENTIALITY

     8.1  CONFIDENTIALITY.  The parties hereto hereby acknowledge and agree that
each party hereto possesses certain confidential and proprietary information,
patent rights and trade secrets relating to, among other things, the Roberts
Materials and the Product, in the case of Roberts, and the Product and Hydro
Med's manufacturing processes, systems and techniques, in the case of Hydro Med,
which the other party hereto will have access to by virtue of this Agreement.
The parties hereto hereby agree to maintain said confidential and proprietary
information, patent rights and trade secrets in the strictest confidence and not
to disclose any such information to anyone, except to their respective
consultants, representatives, directors, officers and employees on a "need to
know" basis, and only after they have made them aware of all of the restrictions
contained herein regarding the limitations imposed by this Section 8.1 and not
to use any such confidential or proprietary information, patent rights or trade
secrets for any purposes other than the discharge of their respective duties and
obligations under this Agreement.  This prohibition includes, but is not limited
to, press releases, educational and scientific conferences, promotional
materials, governmental filings, and discussions with lenders, investment
bankers, potential investors, shareholders, public officials, and the media.
The parties hereto also agree to cause their respective consultants,
representatives, directors, officers and employees to execute, from time to
time, such confidentiality agreements that the other party hereto shall
reasonably require in respect of such confidential or proprietary information,
patent rights and trade secrets.  Notwithstanding any provision to the contrary
contained herein, Hydro Med may provide a copy of this Agreement, and any
information and records concerning any payments provided to it by Roberts
pursuant to Section 2 hereof, to The Population Council, Inc. as may be required
by Hydro Med's agreement with The Population Council, Inc.

                                   SECTION 9
                            MISCELLANEOUS PROVISIONS

     9.1  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that Roberts may not assign any of its rights,
duties or obligations hereunder to any party other than any Affiliate thereof,
without the prior written consent of Hydro Med, which consent shall not be
unreasonably withheld.  In the event of any such assignment by Roberts to an
Affiliate thereof, Roberts agrees to guarantee the due payment and performance
of all of such Affiliate's obligations hereunder.  Hydro Med may freely assign
its rights, duties and obligations hereunder to any other Person; provided,
however, that if Hydro Med assigns its rights, duties and obligations hereunder
to an Affiliate thereof, it will guarantee the due payment and performance of
all of such Affiliate's obligations hereunder.

     9.2  NOTICES.  All notices, claims or other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered by 

                                     - 14 -
<PAGE>
 
hand, sent by facsimile transmission or mailed postage prepaid, by registered or
certified mail, return receipt requested, or by reputable overnight delivery
service as follows:

     If to Hydro Med:

     Hydro Med Sciences, a Division of GP Strategies Corp.
     8 Cedar Brook Drive
     Cranbury, NJ  08512
     Telecopier No.: (609) 409-1650
     Attention:  Mr. Robert Feinberg
                 President and Chief Executive Officer


     With a copy to:

     GP Strategies Corp.
     9 West 57th Street, 41st Floor
     New York, NY  10019
     Telecopier No.:  (212) 230-9545
     Attention:  General Counsel

If to Roberts:

     Roberts Pharmaceutical Corporation
     4 Industrial Way West
     Eatontown, New Jersey  07724
     Telecopier No.: (732) 389-1014
     Attention:  Anthony A. Rascio
                 Vice President and General Counsel


Any party named in this Section 9.2 may change its address or telecopier number
for the receipt of notices by sending a notice provided in accordance with this
Section 9.2 to the other parties named in this Section 9.2.  All notices and
other communications hereunder shall be deemed to have been duly given when
transmitted by telecopier, in each case addressed as aforesaid or personally
delivered or, in the case of a mailed notice, when actually received by the
intended recipient.

     9.3  WAIVER; REMEDIES.  No delay on the part of Hydro Med or Roberts in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either Hydro Med or Roberts of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.

                                     - 15 -
<PAGE>
 
     9.4  ENTIRE AGREEMENT.  This Agreement, together with the Licensing
Agreement, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements or
understandings between the parties relating thereto.

     9.5  AMENDMENT.  This Agreement may be modified or amended only by written
agreement of the parties hereto.

     9.6  COUNTERPARTS.  This Agreement may be executed in any number of
separate counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute a single instrument.

     9.7  GOVERNING LAW; SUBMISSION TO JURISDICTION.  This Agreement shall be
governed and construed in accordance with the laws of the State of New York
excluding any choice of law rules which may direct the application of the law of
another state. The parties hereto hereby agree that any action, suit or
proceeding initiated by either party hereto arising directly or indirectly out
of the transactions contemplated hereby shall be heard or litigated in the
Supreme Court of the State of New York, New York County or in the United States
District Court for the Southern District of New York. The parties hereto hereby
agree that final judgment in such suit, action or proceeding shall be conclusive
and may be enforced in any other jurisdiction by suit on the judgment or in any
other manner provided by Applicable Laws.

     9.8  CAPTIONS.  All section titles or captions contained in this Agreement
are for convenience only, shall not be deemed a part of this Agreement and shall
not affect the meaning or interpretation of this Agreement.

     9.9  NO THIRD PARTY RIGHTS.  No provision of this Agreement shall be deemed
or construed in any way to result in the creation of any rights or obligation in
any Person not a party to this Agreement.

     9.10  CONSTRUCTION.  This Agreement shall be deemed to have been drafted by
both Hydro Med and Roberts and shall not be construed against either party as
the draftsperson hereof.

     9.11  NO JOINT VENTURE.  Nothing contained herein shall be deemed to create
any joint venture or partnership between the parties hereto, and, except as is
expressly set forth herein, neither party shall have any right by virtue of this
Agreement to bind the other party in any manner whatsoever.

     9.12  SEVERABILITY.  If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective while
this Agreement remains in effect, the legality, validity and enforceability of
the remaining provisions shall not be affected thereby.

     9.13  FORCE MAJEURE.  If either party is prevented from complying, either
totally or in part, with any of the terms or provisions set forth herein with
respect to the Product by reason of a 

                                     - 16 -
<PAGE>
 
force majeure condition, including, by way of example and not of limitation,
fire, flood, explosion, storm, strike, lockout or other labor dispute, riot,
war, rebellion, accidents, acts of God, acts of governmental agencies or
instrumentalities, failure of suppliers or any other cause or externally induced
casualty beyond its reasonable control (any such event is a "Force Majeure
Condition"), whether similar to the foregoing contingencies or not, said party
shall provide written notice of same to the other party. Said notice shall
describe any such Force Majeure Condition in reasonable detail and shall be
provided within five (5) days of the occurrence of such event and shall identify
the requirements of this Agreement or such of its obligations hereunder as may
be adversely affected by such Force Majeure Condition, and to the extent so
affected, said obligations shall be suspended during the period of such
disability. The party prevented from performing hereunder as a result of any
such Force Majeure Condition, shall use reasonable efforts to remove such
condition, and shall continue performance whenever such Force Majeure Conditions
are removed. The party so affected shall give to the other party a good faith
estimate of the continuing effect of the Force Majeure Condition and
nonperformance. If the period of any previous actual nonperformance by Hydro Med
because of Hydro Med Force Majeure Conditions plus the anticipated future period
of Hydro Med nonperformance because of any Force Majeure Conditions will exceed
an aggregate of one hundred fifty (150) days within any twenty-four (24) month
period, Roberts may terminate this Agreement by written notice to Hydro Med. If
the period of any previous actual nonperformance of Roberts because of Roberts
Force Majeure Conditions plus the anticipated future period of Roberts
nonperformance because of any Force Majeure Conditions will exceed an aggregate
of one hundred fifty (150) days within any twenty-four (24) month period, Hydro
Med may terminate this Agreement by written notice to Roberts. When such
circumstances as those contemplated herein arise, the parties shall discuss in
good faith, what, if any, modification of the terms set forth herein may be
required in order to arrive at an equitable solution.

     9.14  REPRESENTATIONS. Each of the parties hereto hereby represents and
warrants that it has the full corporate power and authority to execute, deliver
and perform all of its obligations under this Agreement and that it is not a
party to any other agreement, understanding or arrangement which conflicts with,
violates or constitutes a breach of any of its duties and obligations under this
Agreement. Roberts hereby represents and warrants that it is the sole owner of
or is duly licensed to provide all of the Roberts Materials to Hydro Med in
accordance with the terms hereof for use in the production and manufacture of
the Product.  Nothing contained in this Agreement is intended to limit,
restrict, modify or otherwise affect any representation, warranty, obligation or
covenant of Hydro Med or Roberts which is set forth in the Licensing Agreement
and all of such representations, warranties, obligations and covenants are
hereby incorporated herein by reference as if such representations, warranties,
obligations and covenants had been expressly stated herein.

     9.15  INSURANCE.  Hydro Med shall, at its sole cost and expense,  procure
and maintain insurance coverage in the amount of at least  $1,000,000 for fire,
theft, fidelity and such other insurance which is reasonably necessary so as to
protect the Product and perform its obligations hereunder.  At its sole cost and
expense, Hydro Med shall also obtain and maintain in full force and effect
during the term of this Agreement insurance to cover its property and
operations, and worker's compensation insurance in the amount required by law.
Roberts shall, at its sole cost and expense, procure and maintain product
liability insurance coverage in the amount of $5,000,000 in relation to the
Product and shall name Hydro Med as an additional loss payee  on any such
insurance policies.

                                     - 17 -
<PAGE>
 
     9.16  CHANGE OF PLANT.   Hydro Med hereby agrees that it must provide at
least forty-five (45) days prior written notice to Roberts of any relocation of
its Plant but in no event, however, shall Hydro Med relocate its Plant without
the prior consent of any and all necessary governmental authorities.

     9.17  GUARANTY.  By its execution of this Agreement in the space provided
for its signature below,  Roberts Pharmaceutical Corporation, a New Jersey
corporation, which owns all of the issued and outstanding shares of capital
stock of Roberts, hereby guarantees Roberts' full and prompt payment and the
performance of all of Roberts' obligations and liabilities under this Agreement
and all of the agreements, instruments and documents executed by Roberts in
connection herewith and hereby agrees to pay or perform all of such liabilities
and obligations to the extent that Roberts fails to do so.

     IN WITNESS WHEREOF, the parties hereto have executed this Manufacturing
Supply Agreement as of the date first above written.

                              GP STRATEGIES CORP.


                              By: __________________________________
                                  Name:
                                  Title:


                              ROBERTS LABORATORIES INC.


                              By: __________________________________
                                  Name:
                                  Title:



ACCEPTED AND AGREED WITH
RESPECT TO SECTION 9.17 HEREOF ONLY:

ROBERTS PHARMACEUTICAL CORPORATION


By:____________________________________________
   Name:
   Title:
<PAGE>
 
               FIRST AMENDMENT TO MANUFACTURING SUPPLY AGREEMENT
               -------------------------------------------------

     FIRST AMENDMENT (the "Amendment"), dated as of September 25, 1998, to the
Manufacturing Supply Agreement (the "Agreement"), dated as of March 24, 1998, by
and among HYDRO MED SCIENCES ("Hydro Med"), a division of GP STRATEGIES CORP., a
Delaware corporation, and ROBERTS LABORATORIES INC., a New Jersey corporation
("Roberts").

                                 W I T N E S S E T H:
                                 ------------------- 

     WHEREAS, Hydro Med has developed a sealed, hollow cartridge containing the
luteinizing hormone releasing hormone (LHRH), histrelin, for the subcutaneous
release of said hormone, which may be useful in the treatment of human prostatic
carcinoma and other indications (the "Product") and Roberts has agreed to
license from Hydro Med certain rights of Hydro Med to the Product and to pursue
development and commercialization of the Product pursuant to the terms of a
License Agreement, dated as of March 24, 1998 (the "License Agreement"), between
Hydro Med and Roberts;

     WHEREAS, pursuant to the terms and conditions of the Agreement, Roberts and
Hydro Med have agreed that Hydro Med shall manufacture the Product at its
manufacturing facility in Cranbury, New Jersey (the "Plant") and that Roberts
shall reimburse Hydro Med for all of the costs, fees and expenses incurred by
Hydro Med in connection with the commercial operation of the Plant and the
production of the Product at the Plant;

     WHEREAS, in order to reimburse Hydro Med for such costs, fees and expenses,
Roberts provided Hydro Med with a $250,000 payment following the execution and
delivery of the Agreement and agreed to provide Hydro Med with three additional
$250,000 payments to reimburse Hydro Med for all of the costs, fees and expenses
it may incur during the eighteen (18) month period following the date of
execution of the License Agreement in connection with the performance of its
obligations under the License Agreement; and

     WHEREAS, Hydro Med and Roberts have mutually agreed to extend by four (4)
months the date on which these three separate $250,000 payments shall be
provided by Roberts to Hydro Med.

     NOW, THEREFORE, the parties hereto hereby agree as follows:

     1.  Definitions.  All capitalized terms used herein, unless otherwise
         -----------                                                      
defined herein, shall have the meanings ascribed to such terms in the Agreement.

     2.  Amendment to Agreement.  The Agreement is hereby amended as follows as
         ----------------------                                                
of the date hereof:
<PAGE>
 
          Clauses (ii), (iii) and (iv) of Section 2.4(a) of the Agreement are
hereby deleted in their entirety and the following provisions are hereby
inserted in place thereof:

<TABLE>
        <S>         <C>                                         <C>
 
 
        "(ii)       In order to reimburse Hydro Med for the     $250,000 to be provided
                    costs, fees and expenses it incurs during   by Roberts to Hydro Med
                    the period commencing March 24, 1998 and    no later than January
                    ending September 30, 1998                   24, 1999
 
        (iii)       In order to reimburse Hydro Med for the     $250,000 to be provided
                    costs, fees and expenses it incurs during    by Roberts to Hydro Med
                    the period commencing October 1, 1998 and    no later than July 24,
                    ending March 31, 1999                       1999

         (iv)       In order to reimburse Hydro Med for the     $250,000 to be provided
                    costs, fees and expenses it incurs during   by Roberts to Hydro Med
                    the period commencing April 1, 1999 and     no later than January
                    ending September 30, 1999                   24, 2000"
</TABLE>



     3.  Miscellaneous.
         ------------- 

          (a) Each of Roberts and Hydro Med hereby acknowledges and agrees that
it continues to be bound by and subject to all of its covenants, undertakings,
agreements, liabilities and obligations under the Agreement and the License
Agreement and hereby repeats and reaffirms all of its covenants, undertakings,
agreements, liabilities and obligations under the Agreement and the License
Agreement.

          (b) Except as expressly amended hereby, the Agreement shall remain in
full force and effect following the execution and delivery of this Amendment by
the parties hereto.

          (c) This Amendment may be executed in any number of separate
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Amendment by signing
any such counterpart.

          (d) This Amendment shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed in and
to be wholly performed therein.
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
the Manufacturing Supply Agreement to be duly executed as of the day and year
first above written.


                              GP STRATEGIES CORP.


                              By:
                                 ------------------------------------
                                    Name:
                                    Title:


                              ROBERTS LABORATORIES INC.


                              By:
                                 ------------------------------------
                                    Name:
                                    Title:



ACCEPTED AND AGREED TO IN ALL RESPECTS:

ROBERTS PHARMACEUTICAL CORPORATION


By:
   ------------------------------------
     Name:
     Title:

                               LICENSE AGREEMENT


     This License Agreement ("Agreement") is made as of the 24th day of March,
1998, by and between Hydro Med Sciences, a division of GP Strategies Corp., a
Delaware corporation ("Hydro Med") and Roberts Laboratories Inc., a New Jersey
corporation ("Roberts").

                                   RECITALS
                                   --------

     1.  Hydro Med is in the business of discovering, developing and marketing
drug delivery technologies. Roberts is in the business of developing and
marketing pharmaceutical products.

                                     - 21 -
<PAGE>
 
     2.  Hydro Med has developed a sealed, hollow cartridge containing the
luteinizing hormone releasing hormone (LHRH), histrelin, for the subcutaneous
release of said hormone, which may be useful in the treatment of human prostatic
carcinoma and other indications (as defined in Section 1.02, the "Licensed
Product").  Hydro Med has previously engaged in certain research and development
efforts, including limited clinical trials, with respect to the Licensed
Product, but has concluded that future development efforts could best be
conducted in conjunction with Roberts.

     3.  Roberts desires to license from Hydro Med certain rights of Hydro Med
to the Licensed Product and to pursue development and commercialization of the
Licensed Product within the Territory (as defined below), and Hydro Med is
willing to grant such license, all upon the terms and conditions set forth in
this Agreement.


                                   AGREEMENT
                                   ---------

     In consideration of the Recitals and the mutual covenants and agreements
set forth below, the parties agree as follows:

                                   ARTICLE 1
                                   ---------

                                  DEFINITIONS
                                  -----------

     When used in this Agreement, each of the following terms shall have the
meanings set forth below.

     Section 1.01.  "Affiliate" of a party hereto means, with respect to any
     ------------                                                           
Person, any Person directly or indirectly controlling, controlled by, or under
common control with, such other 

                                     - 22 -
<PAGE>
 
Person. For purposes hereof, the term, "controlled" (including the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the direct or indirect ability or power to direct or cause
the direction or management policies of such Person, whether through the
ownership of voting securities or otherwise.

     Section 1.02.  "Licensed Product" means a sealed, hollow cartridge
     ------------                                                      
containing the luteinizing hormone releasing hormone (LHRH), histrelin, a
synthetic nonapeptide agonist of naturally occurring luteinizing hormone
releasing hormone, which cartridge is constructed from biocompatible hydrogel
copolymers, consisting of hydrophilic monomers such as 2-
hydroxyethylmethacrylate (HEMA) and hydroxypropylmethacrylate (HPMA).  Any
product for use as a therapeutic or diagnostic product that incorporates a
Licensed Product (as defined above) shall also be deemed a Licensed Product.

     Section 1.03.  "End User" means a wholesaler, distributor, pharmacy,
     ------------                                                        
hospital, health care organization, physician or patient.

     Section 1.04.  "Know-How" means the items described in the attached
     ------------                                                       
Appendix A (i) which are now owned by or licensed to Hydro Med or (ii) which may
subsequently be owned by or licensed to Hydro Med with a right to sublicense to
Roberts.

     Section 1.05.  "Hydro Med Intellectual Property Rights" means all patent
     ------------                                                            
rights, trade secret rights, and Know-How rights which are now owned by or
licensed to Hydro Med or which may subsequently be owned by or licensed to Hydro
Med with a right to sublicense to Roberts and which encompass the Licensed
Product and are effective in the Territory, including all patent divisions,
continuations, continuations-in-part, reissuances, reexaminations, extensions,
Supplementary Protection Certificates, and any similar intellectual property
rights, and all 

                                     - 23 -
<PAGE>
 
counterparts thereof in the Territory. A list of all such patent rights owned or
licensed to Hydro Med as of the date hereof and which are licensed hereunder is
attached as Appendix B.

     Section 1.06.  "Net Sales" means with respect to a Licensed Product, the
     ------------                                                            
gross amounts invoiced by Roberts, any Affiliate of Roberts and/or any
sublicensee hereunder, less only the following deductions:

     (a)  Customary trade, quantity and cash discounts actually given or
          allowed;

     (b)  Amounts repaid or credited for returned goods or rejections of
          Licensed Product which is unsalable;

     (c)  Reasonable chargebacks, allowances and rebates, Medicaid and Medicare
          reimbursements, and similar deductions; and

     (d)  Any taxes, customs duties, and the like levied on the on the sale,
          delivery, importation or use of the Licensed Product (other than taxes
          on income or similar taxes) and paid by or on behalf of Roberts.

     Section 1.07.  "Territory" means the United States of America, its
     ------------                                                      
territories and possessions, Canada and the following countries:  Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden, United Kingdom, Switzerland, Norway,
Andorra, Cyprus, Malta, San Marino, Liechtenstein, Australia, South Africa, New
Zealand, Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic,
Estonia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Poland, Romania,
Serbia, Slovakia, Slovenia, Turkey, Russia, Armenia, Azerbaijan, Belarus,
Georgia, Kazakstan, Kyrgystan, Mongolia, Tajikistan, Turkmenistan, Ukraine,
Uzbekistan, Bahrain, Egypt, Iran, Iraq, Israel, 

                                     - 24 -
<PAGE>
 
Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, Turkey,
United Arab Emirates, and Yemen.

     Section 1.08.  "Person" means a natural person, a corporation, a
     -------------                                                   
partnership, a trust, a joint venture, a limited liability company, any
governmental authority or any other entity or organization.

                                  ARTICLE II
                                  ----------

                                    LICENSE
                                    -------

     Section 2.01.  License Grant.  Hydro Med grants to Roberts an exclusive
     ----------------------------                                           
license to use and sell the Licensed Product to End Users within the Territory
under the Hydro Med Intellectual Property Rights solely and only for the
treatment of human prostatic carcinoma (the "Field of Use").  With respect to
any patent rights licensed hereunder, such license shall be limited solely to
those patent claims necessary to provide Roberts with the ability to use and
sell the Licensed Product to End Users for the Field of Use within the Territory
and shall, further, be limited solely to the right to use and sell the Licensed
Product to End Users for the Field of Use within the Territory.  Such license
shall include the right of Roberts to sublicense consistent with the terms of
this Agreement; provided, however, that Roberts shall not grant any such
sublicense without first obtaining the written approval of Hydro Med therefor,
which approval shall not be unreasonably withheld.  All terms and provisions of
this Agreement shall apply to each sublicense to the same extent as they apply
to Roberts, and Roberts shall, and hereby does, guarantee the performance by any
sublicensee of any and all obligations imposed by the terms and provisions of
this Agreement, including, without limitation,  the payment of royalties.  The
foregoing license shall be subject to the Supply Agreement between the parties
being entered into 

                                     - 25 -
<PAGE>
 
by Hydro Med and Roberts contemporaneously with the signing of this Agreement
(the "Supply Agreement").

     Section 2.02.  Exclusivity.  Except as is necessary for Hydro Med to
     --------------------------                                          
fulfill its obligations under the Supply Agreement, during the Term of this
Agreement (as defined below), Hydro Med will not sell the Licensed Product for
the Field of Use within the Territory nor will it license any Person other than
Roberts to do so.

     Section 2.03.  Reserved Rights.  Notwithstanding the foregoing, Hydro Med
     ------------------------------                                           
retains and reserves all rights respecting the Licensed Product and/or under the
Hydro Med Intellectual Property Rights for all human and veterinary indications
other than the treatment of human prostatic carcinoma; provided, however, that
Hydro Med hereby grants to Roberts an exclusive option a period of two (2) years
after the date first written (the "Option Period") to negotiate a license
agreement to use and sell the Licensed Product in the Territory for the
treatment, in humans, of endometriosis, benign prostatic hyperplasia and central
precocious puberty (the "Additional Indications").  The parties shall negotiate
in good faith during the Option Period with a view towards entering into such a
license agreement.  During the Option Period, Roberts may provide a written
offer to Hydro Med (the "Offer Notice") to enter into such a license agreement,
such Offer Notice to specify in reasonable detail all of the material terms and
conditions (including, without limitation, the royalty payments to be paid by
Roberts to Hydro Med in connection therewith and the territory to be covered by
such license agreement), upon which Roberts desires to enter into such a license
agreement.  Such Offer Notice shall constitute an irrevocable, binding offer on
the part of Roberts to enter into such a license agreement with 

                                     - 26 -
<PAGE>
 
Hydro Med on the terms and conditions contained in such Offer Notice. Hydro Med
may elect, in its sole discretion, to accept or reject the offer provided by
Roberts to Hydro Med pursuant to such Offer Notice. If, during the Option
Period, Hydro Med does not accept an offer provided to it by Roberts pursuant to
an Offer Notice to enter into such a license agreement, it may not accept an
offer from any other Person to enter into such a license agreement for a period
of three (3) months following the expiration of such Option Period, unless in
the reasonable estimation of Hydro Med, the terms of any such offer are more
favorable to Hydro Med than the terms contained in the Offer Notice furnished to
Hydro Med by Roberts, in which case Hydro Med may accept any such offer upon the
expiration of the Option Period. In the event that the parties are unable to
reach final agreement on such a license agreement, Hydro Med shall be free to
use and sell the Licensed Product for the Additional Indications and to
negotiate and enter into a license agreement therefor with any other Person.
Hydro Med further reserves and retains a non-exclusive right respecting the
Licensed Products and/or under the Hydro Med Intellectual Property Rights to
make, have made, use and sell the Licensed Products for the Field of Use and for
the Additional Indications for research purposes only. Nothing in this Agreement
shall be deemed to license or grant to or otherwise confer upon Roberts any
rights, under the Hydro-Med Intellectual Property Rights or otherwise, to make,
use or sell any cartridge described in Section 1.02 containing any hormone,
enzyme, drug, medicine, medication, compound, mixture or solution other than
histrelin, all of which rights are hereby expressly reserved and retained by
Hydro-Med.

     Section 2.04.  Transfer of IND.  Promptly after the signing of this
     ------------------------------                                     
Agreement, Hydro Med shall transfer to Roberts, and Roberts shall assume, all of
the responsibilities and expenses of the 

                                     - 27 -
<PAGE>
 
sponsor of the Investigational New Drug application ("IND") respecting the
Licensed Product; provided, however, that Hydro Med shall retain the right to
review, comment and approve (such approval not to be unreasonably withheld)
those actions of Roberts respecting such IND that directly or indirectly affect
Hydro Med or its rights or this Agreement. All of the data generated from
clinical trials of the Licensed Product in connection with such IND which are
sponsored and paid for solely by Roberts shall be the sole and exclusive
property of Roberts, and Hydro Med may not use or authorize any Person to use
such data without Roberts' prior consent, which consent may not be unreasonably
withheld, except that Hydro Med may use such data for or in connection with
internal research purposes and/or academic papers, presentations, conferences
and seminars. Furthermore, after the signing of this Agreement, Roberts shall be
responsible for all adverse event reporting, annual reporting and any other
reporting responsibilities to regulatory agencies in the Territory relating to
the Licensed Product.

     2.05.  Improvements.  In the event that Hydro Med shall make any
     -------------------                                             
improvements in the Licensed Products that have application in the Field of Use,
said improvements and any patent applications and patents therefor shall come
under this Agreement and be subject to all of the terms and provisions hereof.

                                  ARTICLE III
                                  -----------

                             DEVELOPMENT PAYMENTS
                             --------------------

                                     - 28 -
<PAGE>
 
     Section 3.01.  Costs of Clinical Development.  From and after the date
     --------------------------------------------                          
first written, Roberts shall assume the responsibility for obtaining, and shall
use its best efforts to obtain, approval to market and sell the Licensed Product
under the United States Federal Food, Drug and Cosmetic Act and under other
similar laws in Canada and elsewhere in the Territory as defined by the
Medicinal Product Directives of the European Economic Community (Council
Directive 93/39 EEC dated January 14, 1993), and Roberts shall also assume the
responsibility for all of the  costs of obtaining such approvals and the
clinical development of the Licensed Product, including, without limitation, all
of the costs of any clinical supplies of the Licensed Product necessary to
obtain such approvals.  Without limiting the foregoing, Roberts shall also
assume responsibility for, and the costs associated with, the New Drug
Application ("NDA") for the Licensed Product according to the provisions of 21
CFR (S)314. The parties agree that such approval process and development shall
be undertaken under the joint supervision and control of Hydro Med and Roberts.
The parties further agree that Hydro Med has engaged Precision Research, Inc. to
compile and review the data generated to date from the multi-center dose range
study for the Licensed Product that has heretofore been conducted by or for
Hydro Med and to assist in the preparation of a protocol as required by 21 CFR
(S)312.21. The parties further agree that Hydro Med or Roberts will engage one
or more contract research organizations to satisfy the protocol as required by
21 CFR (S)312.21. Accordingly, in addition to being responsible for the costs of
obtaining regulatory approvals and all clinical development of the Licensed
Product, Roberts shall pay Hydro Med by wire transfer to an account designated
by Hydro Med the following amounts at the following times:

        (i)    Upon submission of a New Drug             $250,000 (U.S.)

                                     - 29 -
<PAGE>
 
               Application to the United States
               Food and Drug Administration (the
               "FDA") to market and sell the 
               Licensed Product for the Field of 
               Use in the United States

        (ii)   Upon approval by the FDA of a             $500,000 (U.S.)
               NDA to market and sell the Licensed 
               Product for the Field of Use in the 
               United States

        (iii)  Upon approval by any authorized           $250,000 (U.S.)
               or competent regulatory authority
               equivalent to the FDA of the equivalent
               of a NDA to market and sell the Licensed
               Product for the Field of Use in (a) 
               the European Union market or (b) any 
               of the following countries:  (1) France, 
               (2) the United Kingdom, (3) Germany or 
               (4) Italy

     Section 3.02 Late  Payment.  All payments described above shall be made
     --------------------------                                             
within ten (10) days of the stated event, except for the payment described in
Section 3.01(i), which shall be made upon the signing of this Agreement.
Without limiting any of Hydro Med's rights or remedies hereunder or otherwise,
any payment not made when due as above shall bear interest at the United States
prime rate on the due date as published in the Wall Street Journal.

                                     - 30 -
<PAGE>
 
                                 ARTICLE IV
                                 ----------

                                 ROYALTIES
                                 ---------

     Section 4.01.  Royalty.  As consideration for the licenses granted
     ----------------------                                            
hereunder, Roberts shall pay to Hydro Med a royalty equal to twenty seven
percent (27%) of all Net Sales.  On sales for resale between Roberts and an
Affiliate of Roberts or a sublicensee hereunder, the royalty shall be calculated
on the resale price.

     Section 4.02.  Timing of Payments.  The payments due under Section 4.01
     ---------------------------------                                      
shall be paid and reported as set forth in Article VIII below.

     Section 4.03.  Certain Minimum Payments.  In the event that within three
     ---------------------------------------                                 
(3) years after the date first above written Roberts fails to submit to the FDA
a completed NDA for the Licensed Product, Roberts shall be obligated to pay to
Hydro Med, as non-refundable advances against the percentage royalties, the sum
of $41,666.66 (the AAdvance Amount@) on the first day of each calendar month
beginning after the expiration of such three (3) year period (such three (3)
year period as the same may be extended pursuant to this Section 4.03 is the
ANDA Submission Period@) and continuing until such NDA is submitted to the FDA,
after which submission this obligation shall cease.  All amounts paid to Hydro
Med under this Section 4.03 shall be credited against the amounts due under
Section 4.01 above.  If the FDA requires two or more phase III clinical studies,
or two or more treatment cycles of one or more phase III studies, with respect
to the Licensed Product the NDA Submission Period shall be extended from three
(3) years to four (4) years and Roberts shall not be obligated to pay any
Advance Amount to Hydro Med until the first day of each calendar month beginning
after the expiration of such four (4) year period.  Any payment to be made by
Roberts to Hydro Med pursuant to this Section 4.03 shall be conditioned 

                                     - 31 -
<PAGE>
 
upon Hydro Med having supplied Roberts with a completed Chemistry, Pharmacy and
Controls Section of the NDA which can be submitted to the FDA as part of the
aforesaid completed NDA. Notwithstanding any provision to the contrary contained
herein, if the FDA requires substantial additional studies to be conducted with
respect to the Licensed Product prior to authorizing the commencement of a phase
III clinical study for the Licensed Product, the NDA Submission Period shall not
be deemed to commence for the purposes of this Section 4.03 until the date on
which the FDA authorizes the commencement of such phase III clinical study.

                                 ARTICLE V
                                 ---------

         PROSECUTION AND INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
         ------------------------------------------------------------

     Section 5.01.  Patent Term Extensions and Supplementary Protection
     ------------------------------------------------------------------
Certificates.  Hydro Med, upon request of Roberts, shall apply for and grant
------------                                                                
Roberts a license under any patent term extensions, Supplementary Protection
Certificates or functional equivalents thereof, in any jurisdiction within the
Territory where such items are permissible, for and to the extent of any Hydro
Med Intellectual Property Rights licensed to Roberts hereunder.  Roberts will
provide Hydro Med with all material and information as may be necessary to
obtain any of the aforesaid rights.

     Section 5.02.  Prosecution and Maintenance of Licensed Patents.
     ---------------------------------------------------------------

     (a) Appendix B attached hereto identifies all pending patent applications
and patents in the Territory which are encompassed in the Hydro Med Intellectual
Property Rights.  In the event that Hydro Med applies for or maintains
additional patents relating to the Hydro Med Intellectual Property Rights
anywhere in the Territory or elsewhere, any costs, fees and expenses 

                                     - 32 -
<PAGE>
 
incurred by Hydro Med in connection therewith shall be shared equally by Hydro
Med and Roberts.

     (b) Hydro Med shall use reasonable efforts to prosecute any pending patent
applications of which it is the owner that are encompassed in the Hydro Med
Intellectual Property Rights in the Territory and maintain any patents that have
issued or will issue thereon in full force and effect for the term of such
patent.  Should, during the course of prosecution of any pending claims, an
official action rejecting the claims require that an amendment be made or action
be taken which would limit or substantially change the scope of any license
hereunder, Hydro Med will timely inform Roberts in writing.  Hydro Med shall
consult Roberts before responding to any such official action, and allow Roberts
to assist in the prosecution of such claims or, at Hydro Med's option, allow
Roberts the opportunity at its time and expense to prosecute such claims to
Roberts' satisfaction.

     Section 5.03.  Costs of Prosecution and Maintenance of Patents.  Hydro Med
     --------------------------------------------------------------            
shall bear all costs incurred in filing, prosecuting and maintaining all patents
and patent applications encompassed within the Hydro Med Intellectual Property
Rights.

     Section 5.04.  Infringement.  Each party shall give prompt notice to the
     ---------------------------                                             
other of any infringement, potential infringement or suspected infringement in
the Territory of the rights to Hydro Med Intellectual Property Rights
exclusively licensed to Roberts hereunder that may come to such party's
attention.  Promptly thereafter, the parties shall consult and cooperate fully
to determine a course of action, including, but not limited to, the commencement
of legal action by one or both parties, to cause such infringement, potential
infringement, or suspected infringement to be terminated.  Each party, at its
option, may elect to participate in or commence such a legal 

                                     - 33 -
<PAGE>
 
action. In the event of a joint action in which both parties agree to
participate, the parties will share in the costs and the recovery thereof and
therefrom in a manner to be agreed upon. Failing agreement on a course of action
to abate such infringement, potential infringement or suspected infringement
within sixty (60) days of the time such infringement, potential infringement or
suspected infringement becomes known to both parties, either party shall have
the right, at its own expense, to initiate and prosecute an action against the
infringer and shall retain whatever damages are recovered. Neither party will
enter into any settlement of any action referred to in this Section 5.04 without
the other party's prior consent, which consent shall not be unreasonably
withheld. In the event that a declaratory judgment action is commenced or a
defense is raised alleging the invalidity of any of the Hydro Med Intellectual
Property Rights licensed hereunder, Hydro Med, at its sole option, shall have
the right to take over and control the defense of such action and/or the
response to such defense.

     Section 5.05.  Reexamination and Reissue.  Hydro Med shall defend in a
     ----------------------------------------                              
reasonable manner any patent encompassed within the Hydro Med Intellectual
Property Rights in any reexamination or reissue proceeding in the United States
Patent and Trademark Office and the applicable foreign equivalent.  Before Hydro
Med initiates a reissue proceeding, or before either party initiates a
reexamination proceeding, the parties shall consult as to the desirability or
necessity of such a proceeding.  Such proceedings will not be abandoned prior to
a final decision of the Patent Office Board of Appeals or Patent Office Board of
Interferences and the applicable foreign equivalent without the consent of
Roberts, which consent will not be unreasonably withheld taking into
consideration, inter alia, the merits of the action of the Patent and Trademark
Office and the applicable foreign equivalent, priority dates provable by any

                                     - 34 -
<PAGE>
 
interference party (should an interference be involved), and the technological
and commercial importance of the subject matter of the claims of the application
or patent involved.  All expenses of any proceedings set described in this
Section 5.05 shall be shared equally by Roberts and Hydro Med.

                                  ARTICLE VI
                                  ----------

                            DISCLOSURE OF AGREEMENT
                            -----------------------

     Section 6.01.  Disclosure of Agreement.  Except as provided below, neither
     --------------------------------------                                    
Roberts nor Hydro Med shall release any information to any third party with
respect to the existence and terms of this Agreement or with respect to any
confidential information or trade secrets concerning the parties, the Licensed
Product or the Hydro Med Intellectual Property Rights, without the prior written
consent of the other party to this Agreement, which consent shall not be
unreasonably withheld, except that Hydro Med may provide a copy of this
Agreement and information and records concerning the royalties and other
payments received by Hydro Med hereunder and the Net Sales of the Licensed
Product hereunder to the Population Council ("PC") as may be required by Hydro
Med's agreement with PC.  This prohibition includes, but is not limited to,
press releases, educational and scientific conferences, promotional materials,
governmental filings, and discussions with lenders, investment bankers, public
officials, and the media.

     Section 6.02.  Releases Required by Law.  If either party determines a
     ---------------------------------------                               
release of information is required by law or governmental regulation, it shall
notify the other in writing at least ten (10) days (or such shorter period where
legally required) before the time of the proposed release.  The notice shall
include the exact text of the proposed release, the time and manner of 

                                     - 35 -
<PAGE>
 
the release, and the basis for such party's belief that disclosure is required.
At the other party's request and before the release, the party desiring to
release information shall consult with the other party on the necessity for the
disclosure and the text of the proposed release. In no event shall a release
include information regarding the existence or terms of this Agreement that is
not required by law or governmental regulation without the consent of the other
party. Notwithstanding any other terms of this Agreement, either party shall be
permitted and allowed to provide a copy of this Agreement or any terms hereof or
otherwise provide any information with respect to the existence and terms of
this Agreement to appropriate governmental taxing or regulatory authorities,
without advance written notice or approval of the other party.

                                  ARTICLE VII
                                  -----------

                             CERTAIN UNDERTAKINGS
                             --------------------

     Section 7.01.  Hydro Med Warranties.  Hydro Med hereby warrants that, to
     -----------------------------------                                     
the best of its knowledge, the patents listed in Appendix B hereto are valid and
that Hydro Med is the sole owner of or is duly licensed under the Hydro Med
Intellectual Property Rights licensed to Roberts hereunder and has the authority
to grant licenses under such Rights.

     Section 7.02.  Roberts Efforts.  Roberts hereby agrees to use its best
     ------------------------------                                        
efforts to develop and commercialize the Licensed Product for the Field of Use
and to make a determination as to the Additional Indications throughout the
Territory.

     Section 7.03.  Sublicensing.  All sublicenses granted by Roberts hereunder
     ---------------------------                                               
shall be in writing and shall include a requirement that the sublicensee use its
best efforts to commercialize the Licensed Product as quickly as is reasonably
possible and shall bind the sublicensee to meet all of Roberts= obligations to
Hydro Med under this Agreement, and a copy of this Agreement 

                                     - 36 -
<PAGE>
 
shall be attached to such sublicense agreement. In the event that Roberts is
unable or unreasonably refuses to consent to the granting of sublicenses, either
as suggested by Hydro Med or a potential sublicensee or otherwise, Hydro Med may
directly license such potential sublicensee unless Roberts reasonably satisfies
Hydro Med that such sublicense would not materially increase the Net Sales of
the Licensed Products.

     Section 7.04.  Hydro Med Name.  Roberts shall not use Hydro Med's name or
     -----------------------------                                            
any adaptation of it in any packaging, advertising, promotional, sales
literature or other material without the prior written consent of Hydro Med.

     Section 7.05.  Comply With Law.  Roberts agrees to comply with all
     ------------------------------                                    
applicable laws and regulations relating to the Licensed Product.  In
particular, it is understood and acknowledged that the transfer of certain
commodities and technical data is subject to United States laws and regulations
controlling the export of such commodities and technical data, including all
Export Administration Regulations of the United States Department of Commerce.
These laws and regulations among other things prohibit or require a license for
the export of certain types of technical data to certain specified countries.
Roberts hereby agrees and gives written assurance that it will comply with all
United States laws and regulations controlling the export of commodities and
technical data, that it will be solely responsible for any violation of such by
Roberts or its Affiliates or any sublicensees hereunder, and that it will defend
and hold Hydro Med harmless in the event of any legal action of any nature
occasioned by such violation.

                                 ARTICLE VIII
                                 ------------
 
                                  ACCOUNTING
                                  ----------


                                     - 37 -
<PAGE>
 
     Section 8.01. Sales and Royalty Reports.  Roberts shall deliver to Hydro
     ---------------------------------------                                 
Med within forty-five (45) days after the end of each calendar quarter a written
report setting forth an accounting of Roberts= Net Sales and the royalty payment
due to Hydro Med for such quarter.  Such quarterly reports shall be in English
and shall set forth for such calendar quarter (a) the number of Licensed
Products sold by Roberts, any Affiliates of Roberts and/or any sublicensees
hereunder, separately by each country in the Territory, (b) the total billings
or invoice prices for such Licensed Products, separately by each country in the
Territory, (c) a detailed specification of the deductions from such amounts to
determine Net Sales, (d) the amount of royalties due pursuant to Section 4.01,
and (e) such other information as Hydro Med may from time to time reasonably
request.  Such reports shall be certified as correct by an officer of Roberts.
If no royalties are due Hydro Med for such quarter, the report shall so state.
Annually, by October 1, Roberts shall deliver to Hydro Med a sales forecast, by
quarter, for the subsequent calendar year.  All sales and royalty reports shall
be directed to Robert Feinberg, President and CEO of Hydro Med Sciences, c/o GP
Strategies Corp., 9 West 57th Street, 41st Floor, New York, New York 10019.  In
the event Roberts makes sales of the Licensed Product to Persons other than End
Users, Roberts shall require such Persons to provide Roberts with such
information as Hydro Med may reasonably request to permit Hydro Med to calculate
and verify Net Sales and Royalties due.

     Section 8.02.  Delivery of Royalty.  When Roberts delivers the written
     ----------------------------------                                    
reports to Hydro Med under Section 8.01 or forty-five (45) days after the end of
each calendar quarter, whichever is earlier, Roberts shall pay by wire transfer
or other method acceptable to Hydro Med, the payments due to Hydro Med for the
preceding calendar quarter under Section 4.01 hereof.  Without limiting any of
Hydro Med's rights or remedies hereunder or otherwise, any payment 

                                     - 38 -
<PAGE>
 
not made when due shall bear interest at the United States prime rate on the due
date as published in the Wall Street Journal.

     Section 8.03.  Audits.  Roberts shall keep, and shall require its
     ---------------------                                            
Affiliates to keep, accurate records in sufficient form and detail to enable the
amounts due to Hydro Med hereunder to be determined.  During the term of this
Agreement and for two (2) years after its termination, Hydro Med shall, not more
than once each year and upon written notice, have the right, at its expense, to
audit (or have audited) the books and records of Roberts and its Affiliates only
for the purpose of determining the accuracy of payments made to Hydro Med
hereunder.  If Roberts has underpaid the amounts due Hydro Med under this
Agreement by more than five percent (5%) for any twelve (12) month period,
Roberts shall, in addition to paying any royalties due plus interest, also
reimburse Hydro Med for the cost of such audit.

     Section 8.04.  Exchange Rates and Currency Translation.  All payments to be
     ------------------------------------------------------                     
made by Roberts to Hydro Med under this Agreement shall be made and reported in
United States dollars.  Conversion of foreign currency to U.S. dollars shall be
made at the conversion rate existing in the United States (as reported in the
Wall Street Journal) on the last business day of the calendar quarter for which
the payments are due.  Such payments shall be made to Hydro Med in accordance
with this Agreement.

     Section 8.05.  Withholding Taxes.  Roberts shall have no liability for any
     --------------------------------                                          
income taxes levied against Hydro Med on account of royalties paid hereunder.
If any law regulations require that any such taxes be withheld by Roberts,
Roberts shall deduct such taxes from the payment due Hydro Med, pay the taxes so
withheld to the proper taxing authority, and send proof of payment to Hydro Med
annually within sixty (60) days after the first day of the year following 

                                     - 39 -
<PAGE>
 
such payment. If Hydro Med desires to obtain a refund of any taxes so withheld
and paid from a taxing authority, Roberts shall cooperate reasonably in the
pursuit of such refund.

                                  ARTICLE IX
                                  ----------

                             TERM AND TERMINATION
                             --------------------

     Section 9.01.  Term.  This Agreement shall become effective on the date
     -------------------                                                    
hereof, and shall remain in effect until the later of either:  (i) the life of
the last to expire of the patents encompassed in the Hydro Med Intellectual
Property, or (ii) fifteen (15) years from the date hereof.  Upon termination of
this Agreement as set forth in this Section 9.01, the licenses granted to
Roberts hereunder shall be deemed to be paid up in full.

     Section 9.02.  Termination by Default.  If either party is in default of
     -------------------------------------                                   
any of its material obligations under this Agreement, or fails to remedy such
default within sixty (60) days (thirty (30) days in the case of a default in
making a payment hereunder)  after the other party sends written notice
detailing the substance of the default to the defaulting party, the injured
party may terminate this Agreement by written notice. In the event of the
termination of this Agreement, the licenses granted hereunder shall terminate.
Without limiting the meaning of the term default hereunder, it is agreed that
Roberts' failure to pay to Hydro Med the amounts due under Articles III and IV
as and when due as set forth in this Agreement shall constitute a default of a
material obligation under this Agreement.  In the event that this Agreement is
terminated by reason of a default by Roberts or Roberts' failure to make the
minimum purchases as set forth in Section 9.03 below, Roberts shall forthwith
transfer to Hydro Med all rights to the NDA for the Licensed Product and shall
execute and deliver to Hydro Med any and all documents reasonably necessary to
effectuate or confirm such transfer.

                                     - 40 -
<PAGE>
 
     Section 9.03.  Minimum Purchases.  In the event that in any year after the
     --------------------------------                                          
NDA for the Licensed Product is approved by the FDA, Roberts fails to make the
minimum purchases of the Licensed Product required under Section 2.3 of the
Supply Agreement, Hydro Med shall have the right to immediately terminate this
Agreement upon written notice to Roberts.

     Section 9.04.  Sublicenses.  All sublicenses granted hereunder shall
     --------------------------                                          
provide that, upon termination of this Agreement, such sublicenses shall
immediately terminate or, at Hydro Med's option, Roberts' interest therein shall
immediately be assigned to Hydro Med.

     Section 9.05.  Insolvency.  In the event that any party (or an Affiliate of
     -------------------------                                                  
such party to which this Agreement or any material rights or obligations
hereunder has been assigned) (a) shall become insolvent, (b) shall make an
assignment for the benefit of creditors or shall file a petition in bankruptcy,
or (c) shall have a petition in bankruptcy filed against it, the other party
shall have the right to terminate this Agreement, immediately upon giving
written notice of such termination.

     Section 9.06.  Residual Obligation Upon Termination.  Termination of this
     ---------------------------------------------------                      
Agreement for any reason whatsoever will not release or discharge Hydro Med or
Roberts from the performance of any obligation or the payment of any amount or
debt which may have previously accrued and remains to be performed, paid or
discharged, as of the date of such termination.

     Section 9.07.  Survive Termination. Sections 6.01, 7.01, 7.04, 7.05, 8.03,
     ----------------------------------                                        
9.02, 9.05, 9.06 and 10.12 of this Agreement shall survive the termination of
this Agreement.

                                   ARTICLE X
                                   ---------

                           MISCELLANEOUS PROVISIONS
                           ------------------------

                                     - 41 -
<PAGE>
 
     Section 10.01.  Amendment.  This Agreement may not be amended, supplemented
     -------------------------                                                  
or otherwise modified except by an instrument in writing signed by an authorized
representative of both parties.

     Section 10.02.  Entire Agreement.  This Agreement and the Supply Agreement
     --------------------------------                                          
constitute the complete and definitive agreement of the parties on the subject
matter hereof and supersede, cancel and annul all prior or subsequent
agreements, understandings and undertakings relating to the subject matter
hereof including, but, without limiting the generality of the foregoing, any
documents used by the parties in making or accepting any offer.  There are no
verbal agreements, warranties, representations or understandings affecting this
Agreement, and all previous or  other negotiations, representations and
understandings between Hydro Med and Roberts are merged herein.

     Section 10.03.  Severability.  Each party agrees that, should any provision
     ----------------------------                                               
of this Agreement be determined by a court of competent jurisdiction to violate
or contravene any applicable law or policy, such provision will be severed or
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.  The parties specifically agree
that nothing in this Agreement is intended to require either party to take, or
not take, any action which would constitute a violation of any applicable law or
regulation.

     Section 10.04.  Notices.  Any notice required or permitted to be given
     -----------------------                                               
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes if mailed by first class certified or
registered mail, postage prepaid, or sent by national 

                                     - 42 -
<PAGE>
 
overnight delivery service, or by acknowledged facsimile. Unless otherwise
specified in writing, the mailing addresses of the parties shall be as follows:

     For Roberts:

     Roberts Laboratories Inc.
     4 Industrial Way West
     Eatontown, New Jersey  07724
     Attention:  Anthony A. Rascio, Vice President and General Counsel

     For Hydro Med:

     GP Strategies Corp.
     9 West 57th St., 41st Floor
     New York, New York  10019
     Attention:  Robert Feinberg, President and CEO of Hydro Med Sciences

     Section 10.05.  Governing Law.  This Agreement shall be governed by, and
     -----------------------------                                           
construed in accordance with, the Laws of the State of New York, excluding any
choice of law rules which may direct the application of the law of any other
jurisdiction.

     Section 10.06.  Assignment.  Except as expressly provided herein, neither
     --------------------------                                               
party may assign or sublicense this Agreement or its rights or obligations under
this Agreement (other than to an Affiliate) without the prior written consent of
the other party, except that either party may make such an assignment without
the consent of the other in connection with any merger or sale of all or
substantially all of such party=s assets.  In the event of any such assignment
to an Affiliate, the assignor shall guarantee the due payment and performance of
all the Affiliate=s obligations under this Agreement.  This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
permitted successors and permitted assignees.

     Section 10.7.  Consents Not To Be Unreasonably Withheld.  Whenever
     -------------------------------------------------------           
provision is made in this Agreement for either party to secure the consent or
approval of the other, that consent or 

                                     - 43 -
<PAGE>
 
approval shall not unreasonably be withheld, and whenever in this Agreement
provisions are made for one party to object to or disapprove a matter, such
objection or disapproval shall not unreasonably be exercised.

     Section 10.8.  No Strict Construction.  This Agreement has been prepared
     -------------------------------------                                   
jointly and shall not be strictly construed against either party.

     Section 10.9.  Captions.  The captions or headings of the Sections or other
     -----------------------                                                    
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

     Section 10.10.  Force Majeure.  Any delay or failure in the performance of
     -----------------------------                                             
any of the duties or obligations of any party hereto caused by an event outside
the affected party's reasonable control shall not be considered a breach of this
Agreement, and the time required for such party's performance shall be extended
for a period equal to the period of such delay.  Such events shall include,
without limitation, any labor strike or lockout, act of God, war, fire, flood,
embargo, act of any governmental authority, riot, or any other unforeseeable
cause or causes beyond the reasonable control and without the fault or
negligence of the party so affected.  The party so affected shall give prompt
notice to the other party of such cause, and shall take whatever reasonable
steps are appropriate in the party's discretion to relieve the effect of such
cause as rapidly as possible.

     Section 10.11.  Currency.  All references to "$" or "dollars" in this
     ------------------------                                             
Agreement shall refer to United States dollars.

     Section 10.12. Guaranty.  By its execution of this Agreement in the space
     -----------------------                                                  
provided for its signature below, Roberts Pharmaceutical Corporation, a New
Jersey corporation, which owns all 

                                     - 44 -
<PAGE>
 
of the issued and outstanding shares of capital stock of Roberts, hereby
guarantees Roberts' full and prompt payment and the performance of all of
Roberts' obligations and liabilities under this Agreement and all of the
agreements, instruments and documents executed by Roberts in connection herewith
and hereby agrees to pay or perform all of such liabilities and obligations to
the extent that Roberts fails to do so.

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement by
their respective officers thereunto duly authorized.

ROBERTS LABORATORIES, INC.       GP STRATEGIES CORP.

By:  ______________________________     By:  ______________________________
Name:______________________________     Name:______________________________
Title:  ___________________________     Title:  ___________________________



ACCEPTED AND AGREED WITH
RESPECT TO SECTION 10.12 HEREOF ONLY:


ROBERTS PHARMACEUTICAL CORPORATION



By:
   ___________________________________
     Name:
     Title:

                                     - 45 -
<PAGE>
 
                                  Appendix A
                                  ----------

                              Hydro Med Know-How
                              ------------------

Know-How shall mean all written information in the possession of Hydro Med
regarding the Licensed Product reasonably useful to Roberts in exploiting the
rights granted to Roberts hereunder.  Hydro Med shall use its reasonable efforts
to locate and furnish to Roberts all material documents representing Know-How.
Provided that Hydro Med has used its reasonable efforts to locate such
documents, Hydro Med shall have no further obligation to Roberts with respect to
such documents.

                                  Appendix B
                                  ----------

          Hydro Med Patents and Patent Applications in the Territory
          ----------------------------------------------------------


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
           Country                Patent No.       Issue Date                  Title
                  
--------------------------------------------------------------------------------------------------
<S>                               <C>               <C>          <C>
U.S.                              5,266,325         11/30/93     Preparation of Homogeneous
                                                                 Hydrogel Copolymers
                                                                 ("Preparation")
--------------------------------------------------------------------------------------------------
U.S.                              5,292,515         03/08/94     Manufacture of Water Soluble
                                                                 Hydrophilic Articles and Drug
                                                                 Delivery Devices ("Manufacture")
--------------------------------------------------------------------------------------------------
Canada                            2,059,377         08/27/96     Manufacture
      
==================================================================================================
</TABLE>

                                     - 46 -
<PAGE>
 
<TABLE>
<S>                               <C>               <C>          <C>
--------------------------------------------------------------------------------------------------
Canada                            2,059,406         05/28/96     Preparation
--------------------------------------------------------------------------------------------------
Europe (France, Germany,

Italy, Switzerland, UK)           0,551,699         07/10/96     Preparation
 
--------------------------------------------------------------------------------------------------
Europe (Austria, Belgium,         0,551,698         03/05/97     Manufacture

Denmark, France, Germany,        

Italy, Netherlands, Sweden,

Switzerland, UK)
 
--------------------------------------------------------------------------------------------------
</TABLE>

                                     - 47 -