[LOGO]

                                                Filed Pursuant to Rule 424(b)(3)
                                                   Commission File No. 333-70750

                                                                October 26, 2001

Dear Endorex Corporation Stockholders:

    We are writing to you today about the proposed merger of Corporate
Technology Development, Inc., or CTD, and Roadrunner Acquisition, Inc., or
Roadrunner, a wholly owned subsidiary of Endorex Corporation, or Endorex.

    Endorex, CTD and Roadrunner entered into an agreement and plan of merger and
reorganization on July 31, 2001, that provides for the proposed merger. Pursuant
to the proposed merger, CTD will become a wholly owned subsidiary of Endorex,
and (a) each share of CTD common stock will be exchanged for 0.271443 of a share
of Endorex common stock, par value $0.001 per share and (b) each share of CTD
Series A preferred stock will be exchanged for 1.008466 shares of Endorex common
stock. Endorex common stock is traded on the American Stock Exchange under the
symbol "DOR." In connection with the merger, Endorex expects to issue
approximately 9.4 million shares of its common stock and options and warrants
exercisable for approximately 0.6 million shares of its common stock in
substitution for CTD options and warrants. The merger is described more fully in
the accompanying joint proxy statement/prospectus.

    At the annual meeting of Endorex stockholders to be held on November 29,
2001 at 10:00 a.m., central standard time, at 28101 Ballard Drive, Suite F, Lake
Forest, Illinois, you will be asked to vote upon the issuance of shares of
Endorex common stock, options and warrants pursuant to the merger agreement. For
the merger to go forward, the holders of a majority of the shares of Endorex
common stock, voting together with the holders of Endorex Series B preferred
stock on an as converted basis, entitled to vote and that are present or
represented by proxy at the Endorex annual meeting must approve the issuance of
the shares of Endorex common stock, options and warrants. Only stockholders at
the close of business on October 23, 2001 will be entitled to vote at the annual
meeting.

    At the annual meeting, you will also be asked to consider and vote upon some
additional proposals which are described in the attached Notice of Annual
Meeting of Stockholders.

    AFTER CAREFUL CONSIDERATION, ENDOREX'S BOARD OF DIRECTORS HAS DETERMINED
THAT THE MERGER AND THE ISSUANCE OF ENDOREX COMMON STOCK, OPTIONS AND WARRANTS
IN CONNECTION WITH THE PROPOSED MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF
ENDOREX AND ITS STOCKHOLDERS, AND RECOMMENDS THAT YOU APPROVE SUCH ISSUANCE OF
THE SHARES OF ENDOREX COMMON STOCK, OPTIONS AND WARRANTS IN CONNECTION WITH THE
MERGER.

    The accompanying joint proxy statement/prospectus provides detailed
information about Endorex, CTD and the merger. Please give all of this
information your careful attention. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER
THE DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 16 OF
THE JOINT PROXY STATEMENT/PROSPECTUS.

    We invite you to attend the meeting. Whether or not you plan to attend,
please complete, sign and date the enclosed proxy card and return it to Endorex
in the enclosed envelope. If you attend the meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. It is important
that your shares be represented and voted at the meeting. To approve the
issuance of shares of Endorex common stock, options and warrants pursuant to the
merger agreement, you MUST vote "FOR" that proposal by following the
instructions stated on the enclosed proxy card. We urge you to vote "FOR" this
proposal, a necessary step in consummating the proposed merger. In addition, to
approve the other proposals submitted for your approval, you must vote "FOR"
those proposals by following the instructions stated on the enclosed proxy card,
and we encourage you to do so.

                                          Sincerely,
                                          [SIG]

                                          Kenneth Tempero
                                          Chairman of the Board of Directors
                                          [SIG]

                                          Michael S. Rosen
                                          President, Chief Executive Officer and
                                          Director

    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR THE SECURITIES OF
ENDOREX TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

    THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED OCTOBER 23, 2001, AND WAS
FIRST MAILED TO ENDOREX STOCKHOLDERS ON OR ABOUT OCTOBER 26, 2001.

                                     [LOGO]

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                        TO BE HELD ON NOVEMBER 29, 2001

To Our Stockholders:

    Endorex Corporation, or Endorex, will hold its annual meeting of
stockholders on November 29, 2001, at 10:00 a.m., central standard time, at
28101 Ballard Drive, Suite F, Lake Forest, Illinois to consider and vote on the
following proposals:

        1.  to issue shares of Endorex common stock, options and warrants
    pursuant to the Agreement and Plan of Merger and Reorganization, or the
    merger agreement, dated as of July 31, 2001 by and among Endorex, Corporate
    Technology Development, Inc., or CTD, and Roadrunner Acquisition, Inc., a
    wholly owned subsidiary of Endorex, under which CTD will become a wholly
    owned subsidiary of Endorex;

        2.  to amend Endorex's Amended and Restated Certificate of Incorporation
    changing Endorex's name to DOR BioPharma, Inc.;

        3.  to elect six directors to serve until the next annual meeting of the
    stockholders of Endorex or until their successors are duly elected and
    qualified;

        4.  to approve an amendment of Endorex's Amended and Restated 1995
    Omnibus Incentive Plan, or the 1995 plan, to (i) increase the number of
    shares of Endorex common stock reserved for issuance by an additional
    2,165,664 shares, (ii) implement a maximum annual limit of 500,000 shares of
    common stock by which the share reserve may increase annually over the term
    of the 1995 Plan under the automatic share increase provision and
    (iii) modify the automatic option grant program to (a) increase the initial
    option grants to newly-elected board members to 50,000 shares vesting
    immediately and (b) provide for annual option grants to continuing board
    members for 10,000 shares vesting over one year;

        5.  to approve February 21, 2001 option grants to each non-employee
    member of the Endorex board of directors to purchase 50,000 shares of
    Endorex common stock;

        6.  to ratify the appointment of Ernst & Young LLP as Endorex's
    independent auditors for the fiscal year ending December 31, 2001; and

        7.  to transact such other business as may properly come before the
    annual meeting or any adjournment or postponement thereof.

    Endorex's board of directors has determined that the proposed merger and the
issuance of shares of Endorex common stock, options and warrants are fair to and
in the best interests of Endorex and Endorex's stockholders, and recommends that
you vote to approve such issuance of Endorex common stock, options and warrants
in connection with the proposed merger. Endorex's board of directors has also
determined that the other proposals are in the best interests of Endorex and
Endorex's stockholders and recommends that you vote in favor of such proposals.

    For more information about the merger, the merger agreement and related
matters, please review carefully the accompanying joint proxy
statement/prospectus.

    Only Endorex stockholders of record at the close of business on October 23,
2001 are entitled to notice of and to vote at the annual meeting or any
adjournment or postponement thereof.

    Your vote is important. To assure that your shares are represented at the
annual meeting, you are urged to complete, date and sign the enclosed proxy card
and mail it promptly in the postage-paid envelope provided, whether or not you
plan to attend the annual meeting in person. You may revoke your proxy in the
manner described in the accompanying joint proxy statement/prospectus at any
time before it has been voted at the annual meeting. You may vote in person at
the annual meeting even if you have returned a proxy card.

                                          By Order of the Board of Directors
                                          [SIG]

                                          Kenneth Tempero
                                          Chairman of the Board of Directors
                                          [SIG]

                                          Michael S. Rosen
                                          President, Chief Executive Officer and
                                          Director

Lake Forest, Illinois
October 26, 2001

                     CORPORATE TECHNOLOGY DEVELOPMENT, INC.

                                                                October 26, 2001

Dear Corporate Technology Development, Inc. Stockholders:

    We are writing to you today about our proposed merger of Roadrunner
Acquisition, Inc., or Roadrunner, a wholly owned subsidiary of Endorex
Corporation, or Endorex, with and into Corporate Technology Development, Inc.,
or CTD. As a result of the proposed merger, CTD will become a wholly owned
subsidiary of Endorex.

    Pursuant to the proposed merger, (a) each share of CTD common stock that you
own will be exchanged for 0.271443 of a share of Endorex common stock and
(b) each share of CTD Series A preferred stock that you own will be exchanged
for 1.008466 shares of Endorex common stock. In connection with the proposed
merger, Endorex expects to issue approximately 9.4 million shares of its common
stock and options and warrants exercisable for approximately 0.6 million shares
of Endorex common stock in substitution for CTD options and warrants. Endorex
common stock is traded on the American Stock Exchange under the trading symbol
"DOR," and closed at $.90 per share on October 15, 2001. The merger is described
more fully in the accompanying joint proxy statement/ prospectus.

    You will be asked to vote upon the merger at a special meeting of CTD
stockholders to be held on November 29, 2001 at 10:00 a.m., local time, at CTD's
offices at 1680 Michigan Avenue, Suite 700, Miami, Florida 33139. For the merger
to go forward, the holders of a majority of the outstanding shares of CTD common
stock and the holders of a majority of the outstanding shares of CTD Series A
preferred stock, voting together on an as converted basis, must approve the
merger and the merger agreement. Only stockholders who hold shares of CTD stock
at the close of business on November 19, 2001 will be entitled to vote at the
special meeting.

    CTD'S BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS AND CONDITIONS OF THE
MERGER ARE IN THE BEST INTERESTS OF CTD AND ITS STOCKHOLDERS, AND RECOMMENDS
THAT YOU APPROVE MERGER AND THE MERGER AGREEMENT.

    The accompanying joint proxy statement/prospectus provides detailed
information about Endorex, CTD and the merger. Please give all of this
information your careful attention. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER
THE DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS" ON PAGE 16 OF THE JOINT
PROXY STATEMENT/PROSPECTUS.

    We invite you to attend the meeting. Whether or not you plan to attend,
please complete, sign and date the enclosed proxy card and return it to CTD in
the enclosed envelope. If you attend the meeting, you may vote in person if you
wish, even if you have previously returned your proxy card. It is important that
your shares be represented and voted at the meeting. To approve the merger and
merger agreement, you MUST vote "FOR" that proposal. We urge you to vote "FOR"
this proposal, a necessary step in consummating the proposed merger.

                                          Sincerely,

                                          [LOGO]

                                          Colin Bier
                                          Chairman of the Board of Directors

                                          [SIG]

                                          Steve H. Kanzer
                                          President and Chief Executive Officer

    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR THE SECURITIES OF
ENDOREX TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

    THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED OCTOBER 23, 2001, AND WAS
FIRST MAILED TO CTD STOCKHOLDERS ON OR ABOUT OCTOBER 26, 2001.

  1680 Michigan Avenue, Suite 700, Miami, Florida 33139 Ph: 305-777-2258 Fax:
                                  305-777-2249

                              www.corpdevelop.com

                     CORPORATE TECHNOLOGY DEVELOPMENT, INC.

                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                        TO BE HELD ON NOVEMBER 29, 2001

To Our Stockholders:

    Corporate Technology Development, Inc., or CTD, will hold a special meeting
of stockholders at 10:00 a.m., local time, on November 29, 2001 at CTD's offices
at 1680 Michigan Avenue, Suite 700, Miami, Florida 33139 to consider the
following proposals:

        1.  to approve the merger and the Agreement and Plan of Merger and
    Reorganization dated as of July 31, 2001 by and among Endorex Corporation,
    CTD and Roadrunner Acquisition, Inc., a wholly owned subsidiary of Endorex;
    and

        2.  to transact such other business as may properly come before the
    special meeting or any adjournment or postponement thereof.

    CTD's board of directors has determined that the merger is in the best
interests of CTD and its stockholders, and recommends that you vote to approve
the merger and the merger agreement.

    The merger is described more fully in the accompanying joint proxy
statement/prospectus, which we urge you to read carefully.

    Only CTD stockholders of record at the close of business on November 19,
2001 are entitled to notice of and to vote at the special meeting or any
adjournment or postponement thereof.

    Your vote is important. To assure that your shares are represented at the
special meeting, we urge you to complete, date and sign the enclosed proxy card
and mail it promptly in the postage-paid envelope provided, whether or not you
plan to attend the special meeting in person. You may revoke your proxy in the
manner described in the accompanying joint proxy statement/prospectus at any
time before it has been voted at the special meeting. You may vote in person at
the special meeting even if you have returned a proxy card.

                                          By Order of the Board of Directors

                                          [LOGO]

                                          Colin Bier
                                          Chairman of the Board of Directors

                                          [SIG]

                                          Steve H. Kanzer
                                          President and Chief Executive Officer

Miami, Florida
October 26, 2001

  1680 Michigan Avenue, Suite 700, Miami, Florida 33139 Ph: 305-777-2258 Fax:
                                  305-777-2249

                              www.corpdevelop.com

                               TABLE OF CONTENTS



                                                                PAGE
                                                              --------
                                                           
QUESTIONS AND ANSWERS ABOUT THE MERGER......................         1
SUMMARY.....................................................         6
ENDOREX SUMMARY HISTORICAL FINANCIAL DATA...................        13
CTD SUMMARY HISTORICAL FINANCIAL DATA.......................        14
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION...........        15
RISK FACTORS................................................        16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS IN THIS
  JOINT PROXY STATEMENT/PROSPECTUS..........................        39
ENDOREX ANNUAL MEETING......................................        40
CTD SPECIAL MEETING.........................................        43
THE MERGER..................................................        45
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION AND RELATED
  AGREEMENTS................................................        68
MARKET PRICE INFORMATION....................................        82
DESCRIPTION OF ENDOREX......................................        83
ENDOREX MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS.......................        92
ENDOREX'S MANAGEMENT AND EXECUTIVE COMPENSATION.............        95
PRINCIPAL STOCKHOLDERS OF ENDOREX...........................       105
DESCRIPTION OF ENDOREX CAPITAL STOCK........................       107
COMPARISON OF RIGHTS OF STOCKHOLDERS OF CTD AND ENDOREX.....       111
DESCRIPTION OF CTD..........................................       118
CTD MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS.......................       129
PRINCIPAL STOCKHOLDERS OF CTD...............................       133
PROPOSALS TO BE VOTED UPON BY ENDOREX STOCKHOLDERS AT THE
  ENDOREX ANNUAL MEETING....................................       136
PROPOSAL ONE: APPROVAL OF ISSUANCE OF ENDOREX COMMON STOCK,
  OPTIONS AND WARRANTS PURSUANT TO THE AGREEMENT AND PLAN OF
  MERGER AND REORGANIZATION.................................       137
PROPOSAL TWO: APPROVAL OF AMENDMENT TO AMENDED AND RESTATED
  CERTIFICATE OF INCORPORATION..............................       138
PROPOSAL THREE: ELECTION OF DIRECTORS.......................       139
PROPOSAL FOUR: APPROVAL OF AMENDMENT TO ENDOREX AMENDED AND
  RESTATED 1995 OMNIBUS INCENTIVE PLAN......................       143
PROPOSAL FIVE: APPROVAL OF FEBRUARY 21, 2001 OPTION GRANTS
  TO NON-EMPLOYEE MEMBERS OF THE BOARD OF DIRECTORS.........       154
PROPOSAL SIX: RATIFICATION OF INDEPENDENT PUBLIC
  ACCOUNTANTS...............................................       157
STOCKHOLDER PROPOSALS.......................................       159
OTHER MATTERS...............................................       159
PROPOSAL TO BE VOTED UPON BY CTD STOCKHOLDERS AT THE CTD
  SPECIAL MEETING...........................................       160
EXPERTS.....................................................       161
LEGAL MATTERS...............................................       161
WHERE YOU CAN FIND MORE INFORMATION.........................       161
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
  INFORMATION...............................................       P-1
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS..................       F-1
INDEX TO APPENDICES.........................................      IA-1


                                       i

                     QUESTIONS AND ANSWERS ABOUT THE MERGER
                             INTRODUCTORY QUESTIONS

Q: WHY ARE ENDOREX AND CTD PROPOSING A MERGER?

A: Endorex and CTD are proposing a merger for the reasons described in this
   joint proxy statement/prospectus, including their belief:

    - that the merged companies may provide enhanced opportunities for new drug
      product discoveries, and commercial alliances;

    - that the merger would likely benefit Endorex and CTD in their negotiations
      with potential collaborators, corporate partners, licensors and licensees;

    - that CTD's and Endorex's operations and strategic focus complement each
      other, in that they both focus on pre-approved drug compounds;

    - that the merger would result in operational and administrative cost
      savings; and

    - that CTD's and Endorex's management may be compatible.

Q: HOW IS ENDOREX PROPOSING TO ACQUIRE CTD?

A: Endorex proposes to acquire CTD by merging Roadrunner, a recently formed,
   wholly owned subsidiary of Endorex, with and into CTD. CTD will survive the
   merger as a wholly owned subsidiary of Endorex. Pursuant to the merger, all
   outstanding shares of capital stock of CTD (other than those shares as to
   which appraisal rights have been properly exercised) will be exchanged as
   follows: (a) each share of CTD common stock will be exchanged for 0.271443 of
   a share of Endorex common stock and (b) each share of CTD Series A preferred
   stock will be exchanged for 1.008466 shares of Endorex common stock. Pursuant
   to the terms of the merger agreement, Endorex expects to issue approximately
   9.4 million shares of its common stock and options and warrants exercisable
   for approximately 0.6 million shares of its common stock in substitution for
   CTD options and warrants.

Q: ARE THERE RISKS CTD AND ENDOREX STOCKHOLDERS SHOULD CONSIDER IN DETERMINING
   WHETHER TO VOTE FOR PROPOSALS IN CONNECTION WITH THE MERGER?

A: Yes. We have set out in the section entitled "Risk Factors" beginning on
   page 16 a number of risk factors that you should consider carefully in
   connection with the merger and the related exchange of CTD capital stock for
   Endorex common stock.

                       QUESTIONS FOR ENDOREX STOCKHOLDERS

Q: WHAT IS CTD?

A: CTD is a holding company that does business and carries out its operations
   primarily through its subsidiaries, four of which are majority owned and one
   of which is wholly owned by CTD. Discussions or statements contained in this
   joint proxy statement/prospectus that refer to the business of CTD refer to
   the combined business of CTD and its subsidiaries.

    CTD is a development stage pharmaceutical company focused on developing new
    oral or mucosal formulations of approved chemical entities, or ACEs, (drugs
    that have been previously approved by the Food and Drug Administration, or
    FDA) and products based upon ACEs that treat new indications. CTD currently
    has one drug in the phase III clinical trials and one drug in phase I
    clinical trials.

                                       1

Q: WHY DOES THE ENDOREX BOARD OF DIRECTORS RECOMMEND THAT ENDOREX'S STOCKHOLDERS
   VOTE "FOR" THE ISSUANCE OF SHARES OF ENDOREX COMMON STOCK PURSUANT TO THE
   MERGER AGREEMENT?

A: Based on its consultations with Endorex's management, as well as Endorex's
   legal and financial advisors, and its careful consideration of the terms of
   the merger agreement and the transactions contemplated by the merger
   agreement, and for the reasons described in this joint proxy
   statement/prospectus, Endorex's board of directors believes that the terms of
   the merger are fair to and in the best interests of Endorex and its
   stockholders.

Q: WHY DOES ENDOREX NEED THE APPROVAL OF ITS STOCKHOLDERS?

A: Pursuant to the rules of the American Stock Exchange, or AMEX, Endorex is
   required to obtain stockholder approval for issuances of its common stock in
   connection with the acquisition of CTD because (a) certain affiliates of
   Endorex (such as directors, officers or principal stockholders) are also
   affiliates of CTD and (b) the Endorex common stock to be issued in connection
   with the merger exceeds 20% of Endorex's outstanding common stock.

Q: WHAT ELSE WILL I BE VOTING ON AT THE ANNUAL MEETING?

A: In addition to voting on the proposed issuance of shares of Endorex common
   stock, options and warrants pursuant to the merger agreement, Endorex's
   stockholders will also be asked to vote on:

    - the amendment of Endorex's Amended and Restated Certificate of
      Incorporation to change Endorex's name to DOR BioPharma, Inc.;

    - the election of six directors to serve until the next annual meeting of
      the stockholders of Endorex or until their successors are duly elected and
      qualified;

    - the amendment of Endorex's Amended and Restated 1995 Omnibus Incentive
      Plan to (i) increase the number of shares of Endorex common stock reserved
      for issuance by an additional 2,165,664 shares, (ii) implement a maximum
      annual limit of 500,000 shares of common stock by which the share reserve
      may increase annually over the term of the 1995 Plan under the automatic
      share increase provision and (iii) modify the automatic option grant
      program to (a) increase the initial option grants to newly-elected board
      members to 50,000 shares vesting immediately and (b) provide for annual
      option grants to continuing board members to 10,000 shares vesting over
      one year;

    - the February 21, 2001 option grants to each non-employee member of the
      Endorex board of directors to purchase 50,000 shares of Endorex common
      stock;

    - the ratification of the appointment of Ernst & Young LLP as Endorex's
      independent auditors for the fiscal year ending December 31, 2001; and

    - such other business as may properly come before the annual meeting or any
      adjournment or postponement thereof.

Q: HOW MANY VOTES DO I HAVE?

A: You are entitled to one vote for each share of Endorex common stock and
   approximately 13.55 votes for each share of Endorex Series B preferred stock
   (representing the number of shares of common stock into which each share of
   Series B preferred is convertible) that you owned at the close of business on
   October 23, 2001, the Endorex record date.

                                       2

Q: SHOULD ENDOREX STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES?

A: No. Endorex stockholders will continue to own their shares of Endorex stock
   after the merger and should continue to hold their stock certificates.

                         QUESTIONS FOR CTD STOCKHOLDERS

Q: WHAT IS ENDOREX?

A: Endorex is a development stage drug delivery company focused on developing
   oral and mucosal formulations of macromolecular and small molecule drugs that
   are currently administered by injections. Endorex's core drug delivery
   technology is based on lipid systems, which can be used to encapsulate
   fragile drugs in a protective layer of polymerized lipids or liposomes. This
   process allows fragile drugs to survive the stress of the gastrointestinal
   tract and improve the bioavailability of water insoluble drugs.

Q: DO CTD'S STOCKHOLDERS HAVE TO APPROVE THE MERGER?

A: Yes. Delaware General Corporation Law requires that the holders of a majority
   of the outstanding shares of CTD common stock and the holders of a majority
   of the outstanding shares of CTD Series A preferred stock, voting together on
   an as converted basis, must approve the merger and the merger agreement.

Q: HOW MANY VOTES DO I HAVE?

A: You are entitled to one vote for each share of CTD common stock and one vote
   for each share of CTD Series A preferred stock (representing the number of
   shares of common stock into which each share of CTD Series A preferred stock
   is convertible) that you owned at the close of business on November 19, 2001,
   the CTD record date.

Q: WHAT RIGHTS DO I HAVE TO DISSENT FROM THE MERGER?

A: Those CTD stockholders who do not wish to accept Endorex common stock issued
   in connection with the merger have the right under Delaware law to have the
   fair value of their CTD shares determined by the Delaware Chancery Court.
   This right to appraisal is subject to a number of restrictions and technical
   requirements as described under "The Merger--Appraisal Rights of CTD
   Stockholders."

Q: WILL CTD STOCKHOLDERS BE ABLE TO SELL THE ENDOREX COMMON STOCK THAT THEY
   RECEIVE IN THE MERGER?

A: All shares of Endorex common stock that CTD stockholders receive in
   connection with the merger will be listed on AMEX and will be freely
   transferable unless the holder is considered an affiliate of CTD, at the time
   the merger is submitted to the vote of CTD stockholders, or an affiliate of
   Endorex for purposes of the Securities Act of 1933, as amended, or the
   Securities Act (such as directors, officers or principal stockholders).
   Shares of Endorex common stock and warrants held by these affiliates may be
   sold only in compliance with Rule 145 under the Securities Act or pursuant to
   an effective registration statement or an exemption under the Securities Act.
   Certain affiliates of CTD have additionally agreed not to sell or transfer
   their Endorex common stock, options and warrants until the date upon which
   Endorex has filed two reports on either Form 10-QSB or 10-KSB with the
   Securities and Exchange Commission, or SEC, for any two reporting periods
   subsequent to the effective date of the merger and thereafter only pursuant
   to an effective registration statement or an exemption under the Securities
   Act.

                                       3

Q: WILL ANY PORTION OF THE ENDOREX COMMON STOCK ISSUED IN THE MERGER BE HELD IN
   ESCROW?

A: Yes. The merger agreement provides that 1,350,000 shares of the Endorex
   common stock to be issued in connection with the merger will be placed in
   escrow to indemnify Endorex for any damages or losses resulting from breaches
   of the merger agreement by CTD and for other specified matters. The escrow
   and indemnification provisions of the merger agreement, and the related
   escrow agreement, are described under "Agreement and Plan of Merger and
   Reorganization and Related Agreements--Indemnification" and "Agreement and
   Plan of Merger and Reorganization and Related Agreements--Related
   Agreements--Escrow Agreement."

Q: SHOULD CTD STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?

A: No. After the merger is completed, Endorex will send instructions to CTD
   stockholders explaining the procedure for exchanging their shares of common
   stock and Series A preferred stock of CTD for the appropriate number of
   shares of Endorex common stock.

Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?

A: In general, CTD stockholders will recognize no gain or loss for federal
   income tax purposes on the exchange of their CTD stock in the merger, except
   with respect to any cash they receive in lieu of a fractional share of
   Endorex stock, as described under "The Merger--Material Federal Income Tax
   Consequences.

                   QUESTIONS FOR ENDOREX AND CTD STOCKHOLDERS

Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?

A: Endorex and CTD are working to complete the merger in the fourth quarter of
   2001. Because the merger is subject to various conditions, however, we cannot
   predict the exact timing or assure you that those conditions will be fully
   satisfied by the fourth quarter of 2001, if at all.

Q: HOW MANY SHARES OF ENDOREX COMMON STOCK WILL ENDOREX ISSUE IN THE MERGER?

A: In connection with the merger, Endorex expects to issue approximately
   9.4 million shares of Endorex common stock and options and warrants
   exercisable for approximately 0.6 million shares of Endorex common stock in
   substitution for CTD options and warrants.

Q: WHAT PERCENTAGE OF ENDOREX WILL BE OWNED BY FORMER CTD STOCKHOLDERS
   IMMEDIATELY FOLLOWING THE MERGER?

A: Upon consummation of the proposed merger, CTD stockholders will own
   approximately 44% of the outstanding Endorex common stock, assuming the
   exercise of all outstanding Endorex options and warrants to be issued in
   substitution for CTD options and warrants. CTD stock options will be
   exchanged for options to purchase shares of Endorex common stock based on the
   CTD common stock exchange ratio and CTD warrants to acquire CTD Series A
   preferred stock will be exchanged for warrants to acquire Endorex common
   stock based on the CTD common stock exchange ratio.

Q: WHAT DO I NEED TO DO NOW?

A: After carefully reviewing this joint proxy statement/prospectus, Endorex and
   CTD stockholders should fill out the applicable proxy card, sign and date it,
   and promptly return it in the enclosed return envelope as soon as possible.
   If you abstain from voting your shares, it will have the same effect as a
   vote against the matters to be voted upon at the stockholder meeting other
   than the election of the Endorex board of directors.

                                       4

Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?

A: Yes. You can change your vote at any time before your proxy is voted at the
   annual or special meeting, as applicable. You can do this by:

    - sending a written notice to the corporate secretary of Endorex or CTD, as
      appropriate, stating that you would like to revoke your proxy;

    - completing and submitting a new proxy card with a later date; or

    - attending the annual or special meeting, as applicable, and voting in
      person.

Q: IF MY BROKER HOLDS MY SHARES IN STREET NAME, WILL MY BROKER VOTE MY SHARES
   FOR ME?

A: No. Your broker will not be able to vote your shares without instructions
   from you. If you have instructed your broker to vote your shares, you must
   follow directions received from your broker to change those instructions.

Q: WHO CAN I CALL WITH QUESTIONS?

A: If you are a Endorex stockholder with questions about the merger, please call
   Steve J. Koulogeorge, Controller and Assistant Secretary of Endorex, at
   (847) 573-8990.

    If you are a CTD stockholder with questions about the merger, please call
    Nicholas Stergiopoulos, Director of Corporate Development of CTD, at
    (305) 777-2258.

                                       5

                                    SUMMARY

    FOR YOUR CONVENIENCE, WE HAVE SUMMARIZED HERE INFORMATION THAT IS CONTAINED
ELSEWHERE IN THIS DOCUMENT. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION
THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE TRANSACTIONS MORE FULLY AND FOR A
MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THESE TRANSACTIONS, YOU SHOULD
CAREFULLY READ THIS DOCUMENT AND THE DOCUMENTS TO WHICH WE HAVE REFERRED. SEE
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 161. WE HAVE INCLUDED PAGE
REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE DESCRIPTION OF THE
TOPICS IN THIS SUMMARY.

THE COMPANIES

ENDOREX CORPORATION
28101 Ballard Drive, Suite F
Lake Forest, Illinois 60045
(847) 573-8990

    Endorex Corporation is a development stage drug delivery company focused on
developing oral and mucosal formulations of macromolecular and small molecule
drugs that are currently administered by injections. Endorex's core drug
delivery technology is based on lipid systems which can be used to encapsulate
fragile drugs in a protective layer of polymerized lipids and liposomes. Endorex
believes this process may allow fragile drugs to survive the stress of the
gastrointestinal tract and improve the bioavailability of water insoluble drugs.
Endorex also believes this will result in better patient compliance.
Applications of Endorex's technology could result in oral versions of peptide
hormones, such as insulin and human growth hormone, other sensitive peptide
drugs and proteins, and nucleic acids such as DNA and RNA. Virtually all of
these compounds are currently given to patients via injection.

CORPORATE TECHNOLOGY DEVELOPMENT, INC.
1680 Michigan Avenue, Suite 700
Miami, Florida 33139
(305) 777-2258

    CTD is a development stage pharmaceutical company. Its primary strategy is
to develop, through its subsidiaries, innovative oral and mucosal formulations
and new, therapeutic indications of drugs that previously have been approved by
the FDA for marketing in the United States. Such compounds are known as approved
chemical entities, or ACEs. CTD currently has two ACE drug products in clinical
development, orBec-TM- and Oraprine-TM-; orBec-TM- is in phase III clinical
trials and Oraprine-TM- is in phase I clinical trials. CTD also has a drug
product in preclinical development, Metropt-TM-, for which an Investigational
New Drug, or IND, application has been filed with and approved by the FDA.

THE MERGER (SEE PAGE 45)

    Endorex and CTD have entered into a merger agreement that provides for the
merger of a newly formed, wholly owned subsidiary of Endorex into CTD. As a
result, CTD will become a wholly owned subsidiary of Endorex. Stockholders of
CTD will become stockholders of Endorex following the merger, and (a) each share
of CTD common stock will be exchanged for 0.271443 of a share of Endorex common
stock and (b) each share of CTD Series A preferred stock will be exchanged for
1.008466 shares of Endorex common stock. In connection with the merger, Endorex
expects to issue a total of approximately 9.4 million shares of Endorex common
stock and options and warrants exercisable for approximately 0.6 million shares
of Endorex common stock in substitution for CTD options and warrants. We urge
you to carefully read in its entirety the merger agreement, a copy of which is
attached as Appendix I hereto.

                                       6

VOTING OF PROXIES (SEE PAGE 41 & 43)

    To have your shares represented and voted at the applicable stockholder
meeting, you must either attend and vote at the meeting in person or complete,
date and sign the accompanying proxy card and promptly return it in the enclosed
postage-paid envelope. All properly executed proxy cards that Endorex or CTD, as
applicable, receive prior to the vote at the applicable stockholder meeting and
that are not revoked, will be voted in accordance with the instructions
indicated on the proxies or, if no instructions are given, to approve the
proposals to be voted upon. A stockholder may revoke a proxy at any time before
it is used by delivering to Endorex or CTD, as applicable, a signed notice of
revocation or a later dated signed proxy card, or by attending the applicable
stockholder meeting and voting in person.

STOCKHOLDER APPROVALS (SEE PAGE 41 & 44)

ENDOREX STOCKHOLDERS

    At the annual meeting, the affirmative vote of the holders of a majority of
the shares of Endorex common stock, voting together with the holders of Endorex
Series B preferred stock on an as converted basis, that are entitled to vote and
are present or represented by proxy at the Endorex meeting is required to
approve the proposals submitted to the Endorex stockholders for their approval,
except (a) the election of directors which requires a plurality of the votes
cast and (b) the amendment to the Amended and Restated Certificate of
Incorporation which requires the approval of the holders of a majority of the
outstanding shares of Endorex common stock, voting together with the holders of
Endorex Series B preferred stock on an as converted basis. Endorex stockholders
are entitled to one vote per share of Endorex common stock and approximately
13.55 votes per share of Endorex Series B preferred stock owned on October 23,
2001, the record date.

    As of October 15, 2001, directors and executive officers of Endorex and
their affiliates beneficially owned an aggregate of 1,707,686 shares of Endorex
common stock and 100,410 shares of Endorex Series B preferred stock (exclusive
of any shares issuable upon the exercise of options) representing approximately
13.4% of the outstanding Endorex common stock and 100% of the outstanding
Endorex Series B preferred stock on such date.

CTD STOCKHOLDERS

    At the special meeting, the affirmative vote of the holders of a majority of
the outstanding shares of CTD common stock voting together with the holders of
the outstanding shares of CTD Series A preferred stock, on an as converted
basis, is required to approve the merger and the merger agreement. CTD
stockholders are entitled to one vote per share of CTD common stock and one vote
per share of CTD Series A preferred stock owned at the close of business on
November 19, 2001, the record date. Pursuant to a voting agreement in the form
attached as Appendix II hereto, certain CTD stockholders, including CTD's
directors, executive officers and their affiliates, owning beneficially
approximately 63% and 61% of CTD's common stock and Series A preferred stock,
respectively, outstanding as of October 15, 2001 have agreed to vote all of
their shares of CTD capital stock for approval of the merger, the merger
agreement and the transactions contemplated thereby.

    As of October 15, 2001, directors and executive officers of CTD and their
affiliates beneficially owned an aggregate of 2,872,453 shares of CTD common
stock (exclusive of any shares issuable upon the exercise of options) and
1,000,000 shares of CTD Series A preferred stock, representing approximately
39.7% of the shares of CTD common stock and approximately 13.1% of the shares of
CTD Series A preferred stock outstanding on such date.

                                       7

TREATMENT OF CTD STOCK OPTIONS AND WARRANTS (SEE PAGE 66)

STOCK OPTIONS

    At the effective time of the merger and without any action on the part of
the holders of CTD options, each option to acquire CTD common stock that is
issued and outstanding immediately prior to the merger, and all rights in
respect thereof, will be exchanged for an Endorex option to acquire Endorex
common stock. Each Endorex option will be evidenced by a new stock option
agreement issued by Endorex to each of the holders of a CTD option. Each such
Endorex option will have, and be subject to, the same terms and conditions set
forth in the applicable option holder's stock option agreements for the CTD
options, as in effect on the date of the merger agreement, except that the
number of shares and the exercise price of the CTD options will be changed to
reflect the exchange ratio of 0.271443 of a share of Endorex common stock for
each share of CTD common stock.

WARRANTS

    The holders of CTD warrants exercisable for CTD Series A preferred stock
have agreed to amend such warrants prior to the effective time of the merger
such that at the effective time of the merger and without any action on the part
of the holders of CTD warrants issued and outstanding immediately prior to the
merger, such warrants and all rights in respect thereof will be exchanged for
Endorex warrants to acquire Endorex common stock. Each Endorex warrant will be
evidenced by a new warrant agreement issued by Endorex to each of the holders of
a CTD warrant. Each such Endorex warrant will have, and be subject to, the same
terms and conditions set forth in the applicable warrant holder's warrant
agreement (as such warrant agreement will be amended pursuant to the terms of
the merger agreement) for the CTD warrants, as in effect on the date of the
merger agreement, except that the number of shares and the exercise price of the
CTD warrants will be changed to reflect the exchange ratio of 0.271443 of a
share of Endorex common stock for each share of CTD preferred stock and will be
exercisable for Endorex common stock instead of CTD Series A preferred stock.

COMPARISON OF STOCKHOLDER RIGHTS (SEE PAGE 111)

    As a result of the merger, CTD stockholders will become holders of shares of
Endorex common stock. The rights of CTD stockholders are currently governed by
the CTD charter, the CTD bylaws and the laws of the State of Delaware. Following
the merger, the rights of all former holders of shares of CTD common stock and
Series A preferred stock will be governed by the Endorex charter and the Endorex
bylaws and will continue to be governed by the laws of the State of Delaware. In
connection with the merger, CTD Series A preferred stock will be exchanged for
common stock of Endorex. As a result of this exchange, holders of CTD's
Series A preferred stock will lose certain important rights.

RECOMMENDATIONS OF THE BOARDS OF DIRECTORS (SEE PAGE 42 & 44)

    The CTD and Endorex boards of directors have determined that the terms and
conditions of the merger are in the best interests of their respective
stockholders. The CTD board recommends that CTD stockholders vote "FOR" approval
of the merger and the merger agreement, and the Endorex board recommends that
Endorex stockholders vote "FOR" the issuance of the shares of Endorex common
stock, options and warrants in connection with the merger.

OPINION OF ENDOREX FINANCIAL ADVISOR (SEE PAGE 52)

    In deciding to approve the merger, the board of directors of Endorex
considered, among various factors described below in "The Merger--Endorex's
Reasons for the Merger and Recommendation of the Endorex Board of Directors,"
the opinion of its independent financial advisor, Wells Fargo Van Kasper, or
WFVK.

                                       8

    On July 13, 2001, WFVK delivered its oral opinion to the Endorex board of
directors that, as of that date, the consideration to be received from CTD
stockholders (the exchange ratio) was fair from a financial point of view to the
stockholders of Endorex. WFVK subsequently confirmed its oral opinion by
delivering a written opinion dated July 13, 2001. The full text of the written
opinion sets forth the assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion and is attached as
Appendix III hereto. You should read this opinion in its entirety. WFVK'S
OPINION IS DIRECTED TO ENDOREX'S BOARD OF DIRECTORS AND ADDRESSES ONLY THE
FAIRNESS OF THE EXCHANGE RATIO PURSUANT TO THE MERGER AGREEMENT FROM A FINANCIAL
POINT OF VIEW TO THE STOCKHOLDERS OF ENDOREX AS OF THE DATE OF THE OPINION, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW STOCKHOLDERS
SHOULD VOTE ON ANY MATTER RELATING TO THE MERGER.

INTERESTS OF CERTAIN PERSONS IN THE MERGER AND POTENTIAL CONFLICTS OF INTEREST
  (SEE PAGE 59)

    When considering the recommendations of the boards of directors of Endorex
and CTD regarding the merger, you should be aware that some directors and
officers may have interests in the merger that are different from, or in
addition to, yours. As a result, these directors and officers may be more likely
to recommend approval of the merger, the merger agreement and the transactions
contemplated thereby than CTD and Endorex stockholders generally. See "The
Merger--Interests of Certain Persons in the Merger and Potential Conflicts of
Interest."

CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 69)

    Whether Endorex and CTD complete the merger depends on a number of
conditions being satisfied in addition to Endorex stockholders' approval of the
issuance of Endorex common stock, options and warrants and CTD stockholders'
approval of the merger and the merger agreement. However, either Endorex or CTD
may choose to complete the merger even though one or more of these conditions
has not been satisfied, as long as the applicable law allows them to do so.
Neither Endorex nor CTD can be certain when, or if, the conditions to the merger
will be satisfied or waived, or that the merger will be completed.

TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 75)

    At any time prior to the effective time of the merger, the merger agreement
may be terminated by the mutual agreement of Endorex and CTD. Also, CTD or
Endorex can decide, without the other's consent, to terminate the merger
agreement:

    - if the merger has not been completed on or before December 31, 2001;

    - if the other party has breached the merger agreement; or

    - for certain other reasons.

TERMINATION FEE AND EXPENSES (SEE PAGE 76)

    CTD and Endorex have each agreed to pay the other party, under certain
circumstances, reasonable costs and expenses incurred in connection with the
merger agreement and a termination fee of $1,000,000.

NO SOLICITATION OF TRANSACTIONS (SEE PAGE 74)

    The merger agreement prohibits Endorex from directly or indirectly taking
certain actions relating to the solicitation of alternative proposals or offers
for Endorex to acquire other entities, except in limited circumstances, and CTD
is prohibited from directly or indirectly taking certain actions relating to the
solicitation of competing proposals or offers to acquire all or any part of
CTD's stock or assets.

                                       9

MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 61)

    The merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, or Internal
Revenue Code. If the merger qualifies as a reorganization, CTD stockholders
generally will recognize no gain or loss for United States federal income tax
purposes on the exchange of CTD stock for shares of Endorex common stock
pursuant to the merger, except for cash received in lieu of fractional shares of
Endorex common stock. Consummation of the merger is conditioned upon each of CTD
and Endorex receiving a legal opinion from outside counsel that the merger
constitutes a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code.

    Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult with your
own tax advisor for a full understanding of all tax consequences of the merger
to you.

ANTICIPATED ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 61)

    Endorex intends to treat the merger as a purchase for accounting and
financial reporting purposes, which means that CTD will be treated as a separate
entity for periods prior to the closing, and thereafter as a wholly-owned
subsidiary of Endorex.

MARKET PRICE INFORMATION (SEE PAGE 82)

    Endorex common stock is traded on AMEX under the symbol "DOR." On July 31,
2001, the last trading day before announcement of the proposed merger, the
closing price per share of Endorex common stock on AMEX was $1.13. On
October 15, 2001, the latest practicable trading day before this joint proxy
statement/prospectus was printed, the closing price per share of Endorex common
stock was $.90. CTD is unable to provide information with respect to the market
price of CTD stock because there is no established trading market for CTD stock.

RESTRICTIONS ON THE ABILITY TO SELL ENDOREX STOCK (SEE PAGE 67)

    All shares of Endorex common stock that CTD stockholders receive in
connection with the merger will be freely transferable unless the holder is
considered an affiliate of CTD, at the time the merger is submitted to the vote
of CTD stockholders, or an affiliate of Endorex for purposes of the Securities
Act (such as officers, directors and principal stockholders). Shares of Endorex
common stock and warrants held by these affiliates may be sold or transferred
only pursuant to an effective registration statement or an exemption under the
Securities Act. Certain affiliates of CTD have additionally agreed not to sell
or transfer their Endorex common stock, options and warrants until the date upon
which Endorex shall have filed two reports on either Form 10-QSB or 10-KSB with
the SEC for any two reporting periods subsequent to the effective date of the
merger and thereafter only pursuant to an effective registration statement or an
exemption under the Securities Act.

APPRAISAL RIGHTS (SEE PAGE 63)

    Under the Delaware General Corporation Law, any holder of shares of CTD
stock who does not wish to accept the merger consideration in respect of its
shares has the right to dissent from the merger and to seek an appraisal of, and
to be paid the fair cash value (exclusive of any element of value arising from
the accomplishment or expectation of the merger) for, its shares of stock, as
determined by a court, together with a fair rate of interest, if any, provided
that the stockholder fully complies with the provisions of Section 262 of the
Delaware General Corporation Law. A copy of Section 262 is attached as
Appendix IV hereto. If you properly request appraisal, the fair value of your
shares will be determined by the Delaware Court of Chancery and may be less than
or greater than the value of the consideration to be paid to CTD stockholders
who do not seek appraisal. This right to appraisal is

                                       10

subject to a number of restrictions and technical requirements. If you fail to
strictly comply with all of the restrictions and requirements, you will lose
your appraisal rights. Generally, in order to exercise your appraisal rights you
must:

    - send a written demand to CTD for appraisal in compliance with the Delaware
      General Corporation Law BEFORE the proposal to approve the merger is voted
      on;

    - not vote in favor of approving the merger and merger agreement; and

    - continuously hold your CTD common stock from the date you make the demand
      for appraisal through the completion of the merger.

    MERELY VOTING AGAINST THE APPROVAL OF THE MERGER AND THE MERGER AGREEMENT
WILL NOT PROTECT YOUR RIGHTS TO AN APPRAISAL. THE REQUIREMENTS UNDER DELAWARE
LAW FOR EXERCISING APPRAISAL RIGHTS ARE DESCRIBED IN FURTHER DETAIL IN THE
SECTION OF THIS JOINT PROXY STATEMENT/PROSPECTUS ENTITLED "APPRAISAL RIGHTS OF
CTD STOCKHOLDERS" BEGINNING ON PAGE 63. THE COMPLETE TEXT OF SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW IS ATTACHED AS APPENDIX IV HERETO.

    If you vote in favor of approving the merger and the merger agreement, you
will waive your rights to seek appraisal of your shares of CTD common stock
under Delaware law.

    Endorex will not be obligated to complete the merger if CTD stockholders
entitled to receive more than 250,000 shares of Endorex common stock to be
issued in connection with the merger properly exercise their appraisal rights
under Delaware law. However, Endorex may nevertheless waive its right not to
complete the merger if the 250,000 share threshold is exceeded.

ESCROW AGREEMENT (SEE PAGE 78)

    1,350,000 shares of Endorex common stock to be issued in the merger will be
deposited into an escrow fund to indemnify Endorex for any losses or damages
resulting from breaches of the merger agreement by CTD and for other specified
matters. Except in limited circumstances, the escrow shares are Endorex's
exclusive remedy for claims for indemnification and Endorex will receive
compensation only if its aggregate damages exceed $100,000. On each of
March 31, 2002, September 30, 2002 and March 31, 2003, 674,975, 337,502 and
337,523 shares of Endorex common stock, respectively, less any shares subject to
an indemnification claim or which have been distributed to Endorex pursuant to
indemnification claims, shall be distributed to the CTD stockholders from the
escrow.

    The form of the escrow agreement is attached as Appendix V hereto. CTD
stockholders will be required to execute the escrow agreement in connection with
the closing of the merger. You are encouraged to read the escrow agreement in
its entirety.

TRADEMARKS

    This document contains trademarks of Endorex, CTD and others.

OTHER ENDOREX PROPOSALS (SEE PAGE 40)

    At the Endorex annual meeting, Endorex is also presenting to its
stockholders the following proposals:

    - amendment of Endorex's Amended and Restated Certificate of Incorporation
      changing Endorex's name to DOR BioPharma, Inc.;

    - election of six directors to serve until the next annual meeting of the
      stockholders of Endorex or until their successors are duly elected and
      qualified;

                                       11

    - approval of an amendment of Endorex's Amended and Restated 1995 Omnibus
      Incentive Plan to (i) increase the number of shares of Endorex common
      stock reserved for issuance by an additional 2,165,664 shares,
      (ii) implement a maximum annual limit of 500,000 shares of common stock by
      which the share reserve may increase annually over the term of the 1995
      Plan under the automatic share increase provision and (iii) modify the
      automatic option grant program to (a) increase the initial option grants
      to newly-elected board members to 50,000 shares vesting immediately and
      (b) provide for annual option grants to continuing board members for
      10,000 shares vesting over one year;

    - approval of the February 21, 2001 option grants to each non-employee
      member of the Endorex board of directors to purchase 50,000 shares of
      Endorex common stock;

    - ratification of the appointment of Ernst & Young LLP as Endorex's
      independent auditors for the fiscal year ending December 31, 2001; and

    - transaction of such other business as may properly come before the annual
      meeting or any adjournment or postponement thereof.

                                       12

                   ENDOREX SUMMARY HISTORICAL FINANCIAL DATA

    The summary financial data presented below as of December 31, 2000 and for
the five years ended December 31, 2000 is derived from the audited consolidated
financial statements of Endorex. The summary financial data presented below as
of and for the six months ended June 30, 2000 and June 30, 2001 and the
cumulative period since inception of Endorex to June 30, 2001 is derived from
the unaudited consolidated financial statements of Endorex. The data set forth
below should be read in conjunction with Endorex's consolidated financial
statements and accompanying notes and "Endorex Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this joint proxy statement/prospectus.


                             PERIOD FROM
                          FEBRUARY 1, 1996                                                                  SIX MONTHS ENDED
                           TO DECEMBER 31,                   YEAR ENDED DECEMBER 31,                            JUNE 30,
                          -----------------   ------------------------------------------------------   --------------------------
                                1996             1997           1998          1999          2000           2000          2001
                          -----------------   -----------   ------------   -----------   -----------   ------------   -----------
                                                                                                       (UNAUDITED)    (UNAUDITED)
                                                                                                 
STATEMENT OF OPERATIONS
  DATA:
SBIR contract revenue...     $        --      $        --   $         --   $        --   $        --   $        --    $       --
Operating expenses:
  SBIR contract research
    and development.....              --               --             --            --            --            --            --
  Proprietary research
    and development.....       1,141,926        1,826,066      1,977,994     2,028,945       956,742       468,193     1,171,494
  General and
    administrative......         865,831        1,450,828      3,500,682     3,046,684     2,101,767       981,521       908,269
                             -----------      -----------   ------------   -----------   -----------   -----------    -----------
    Total operating
      expenses..........       2,007,757        3,276,894      5,478,676     5,075,629     3,058,509     1,449,714     2,079,763
                             -----------      -----------   ------------   -----------   -----------   -----------    -----------
Loss from operations....      (2,007,757)      (3,276,894)    (5,478,676)   (5,075,629)   (3,058,509)   (1,449,714)   (2,079,763)
Equity in losses from
  joint ventures........                                     (17,097,975)   (2,865,908)   (2,682,368)   (1,578,856)     (577,661)
Other income............                                                         3,790       250,000            --        (1,577)
Interest income.........          44,880          185,642        799,335       488,582       747,073       320,965       294,686
Interest expense........                         (153,074)       (15,854)      (51,854)      (51,889)      (23,019)      (27,320)
                             -----------      -----------   ------------   -----------   -----------   -----------    -----------
Net loss................      (1,962,877)      (3,244,326)   (21,793,170)   (7,501,019)   (4,795,693)   (2,730,624)   (2,391,635)
Preferred stock
  dividends.............              --               --       (713,187)   (1,285,413)   (1,382,200)     (687,378)     (737,142)
                             -----------      -----------   ------------   -----------   -----------   -----------    -----------
Net loss applicable to
  common stockholders...     $(1,962,877)     $(3,244,326)  $(22,506,357)  $(8,786,432)  $(6,177,893)  $(3,418,002)   $(3,128,777)
                             ===========      ===========   ============   ===========   ===========   ===========    ===========



                          CUMULATIVE PERIOD
                            FEBRUARY 15,
                          1985 (INCEPTION)
                          TO JUNE 30, 2001
                          -----------------
                             (UNAUDITED)
                       
STATEMENT OF OPERATIONS
  DATA:
SBIR contract revenue...    $    100,000
Operating expenses:
  SBIR contract research
    and development.....          86,168
  Proprietary research
    and development.....      16,004,499
  General and
    administrative......      13,980,313
                            ------------
    Total operating
      expenses..........      30,070,980
                            ------------
Loss from operations....     (29,970,980)
Equity in losses from
  joint ventures........     (23,223,912)
Other income............         253,725
Interest income.........       3,336,274
Interest expense........        (340,630)
                            ------------
Net loss................     (49,945,523)
Preferred stock
  dividends.............      (4,117,942)
                            ------------
Net loss applicable to
  common stockholders...    $(54,063,465)
                            ============




                                                              DECEMBER 31,     JUNE 30,         JUNE 30,
                                                                  2000           2000             2001
                                                              -------------   -----------   -----------------
                                                                              (UNAUDITED)      (UNAUDITED)
                                                                                   
BALANCE SHEET DATA:
Cash and cash equivalents...................................   $10,831,266    $10,170,382     $  9,808,676
Working capital.............................................    10,112,440    12,267,644         6,626,974
Total assets................................................    13,669,458    15,012,487        11,582,177
Total stockholders' equity (deficit)........................       880,633     3,285,321        (1,846,269)


                                       13

                     CTD SUMMARY HISTORICAL FINANCIAL DATA

    The summary financial data presented below for the fiscal years ended
December 31, 2000, December 31, 1999 and December 31, 1998 and as of
December 31, 2000 are derived from the audited consolidated financial statements
of CTD. The summary financial data presented below for the six months ended
June 30, 2001 and June 30, 2000 and the period from January 1, 1998
(commencement of operations) through June 30, 2001 and as of June 30, 2001 is
derived from the unaudited financial statements of CTD. The data set forth below
should be read in conjunction with CTD's consolidated financial statements and
accompanying notes and "CTD Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this joint proxy
statement/ prospectus.



                                                                                                                   PERIOD FROM
                                                                                                                 JANUARY 1, 1998
                                                                                                                  (COMMENCEMENT
                                             YEAR ENDED DECEMBER 31,                  SIX MONTHS ENDED            OF OPERATIONS)
                                     ---------------------------------------   -------------------------------   THROUGH JUNE 30,
                                        1998          1999          2000       JUNE 30, 2000    JUNE 30, 2001          2001
                                     -----------   -----------   -----------   --------------   --------------   ----------------
                                                                                (UNAUDITED)      (UNAUDITED)       (UNAUDITED)
                                                                                               
STATEMENT OF OPERATIONS DATA:
Interest income....................  $   214,000   $   167,000   $   428,000     $ 230,000       $   173,000       $   982,000
                                     -----------   -----------   -----------     ---------       -----------       -----------

General and administrative
  expenses.........................      991,000     1,528,000     1,354,000       607,000           724,000         4,597,000

Research and development
  expenses.........................       96,000       955,000     1,324,000       558,000           880,000         3,255,000

Write-off of licenses..............           --     1,822,000            --            --                --         1,822,000
                                     -----------   -----------   -----------     ---------       -----------       -----------

                                       1,087,000     4,305,000     2,678,000     1,165,000         1,604,000         9,674,000

                                        (873,000)   (4,138,000)   (2,250,000)     (935,000)       (1,431,000)       (8,692,000)

Gain on sale of license............           --     3,052,000            --            --                --         3,052,000
                                     -----------   -----------   -----------     ---------       -----------       -----------

Loss before minority interest and
  discontinued operations..........     (873,000)   (1,086,000)   (2,250,000)     (935,000)       (1,431,000)       (5,640,000)

Minority interest in net income of
  subsidiary.......................           --      (298,000)           --            --                --          (298,000)
                                     -----------   -----------   -----------     ---------       -----------       -----------

Loss from continuing operations....     (873,000)   (1,384,000)   (2,250,000)     (935,000)       (1,431,000)       (5,938,000)

Loss from operations of
  discontinued subsidiary..........   (3,121,000)   (4,852,000)           --            --                --        (7,973,000)

Gain on sale of discontinued
  subsidiary.......................           --     4,956,000            --            --                --         4,956,000
                                     -----------   -----------   -----------     ---------       -----------       -----------

Net loss...........................  $(3,994,000)  $(1,280,000)  $(2,250,000)    $(935,000)      $(1,431,000)      $(8,955,000)
                                     ===========   ===========   ===========     =========       ===========       ===========




                                                              DECEMBER 31, 2000   JUNE 30, 2001
                                                              -----------------   --------------
                                                                                   (UNAUDITED)
                                                                            
BALANCE SHEET DATA:
Cash and cash equivalents...................................      $6,508,000        $5,072,000

Liabilities.................................................      $  279,000        $  242,000

Working Capital.............................................      $6,249,000        $4,831,000

Total assets................................................      $6,645,000        $5,205,000

Stockholders' Equity........................................      $6,366,000        $4,963,000


                                       14

                          SUMMARY UNAUDITED PRO FORMA
                             FINANCIAL INFORMATION

    The following table presents summary pro forma financial information related
to Endorex's proposed acquisition of CTD and should be read in conjunction with
the introduction to the unaudited pro forma financial information and related
notes included elsewhere in this joint proxy statement/ prospectus. This
information has been derived from each company's respective financial statements
and notes, which are included elsewhere in this joint proxy
statement/prospectus. The unaudited summary pro forma financial information
below presents Endorex's statement of operations data on a pro forma basis to
reflect the proposed acquisition of CTD as though the transaction had occurred
on January 1, 2000 and presents balance sheet data on a pro forma basis as
though the transaction occurred on June 30, 2001. You should not rely on the
unaudited summary pro forma financial information as an indication of the
results of operations or financial position that would have been achieved if the
acquisition had taken place earlier or as an indication of the results of
operations or financial position of Endorex after completion of the acquisition.



                                                                  YEAR       SIX MONTHS
                                                                 ENDED          ENDED
                                                              DECEMBER 31,    JUNE 30,
                                                                  2000          2001
                                                              ------------   -----------
                                                                       
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA:
Revenue.....................................................  $        --    $        --
Operating expenses..........................................    6,818,066      4,221,014
Loss from operations........................................   (6,818,066)    (4,221,014)
Net loss....................................................   (8,127,250)    (4,359,886)
Net loss applicable to common stockholders..................   (9,509,450)    (5,097,028)
Basic and diluted net loss per share applicable to common
  stockholders..............................................  $     (0.44)   $     (0.23)
Basic and diluted weighted average common shares
  outstanding...............................................   21,628,144     22,175,742




                                                                             JUNE 30,
                                                                               2001
                                                                            -----------
                                                                      
UNAUDITED PRO FORMA BALANCE SHEET DATA:
Cash and cash equivalents...................................                $14,880,676
Working capital.............................................                 11,457,974
Total assets................................................                 21,155,082
Long-term liabilities, net of current portion...............                    162,754
Total stockholders' equity..................................                  7,484,636


                                       15

                                  RISK FACTORS

    BY VOTING IN FAVOR OF THE MERGER, CTD STOCKHOLDERS WILL BE CHOOSING TO
INVEST IN ENDOREX COMMON STOCK. AN INVESTMENT IN ENDOREX COMMON STOCK INVOLVES A
HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/
PROSPECTUS IN DECIDING WHETHER TO VOTE FOR THE MERGER (OR, IN THE CASE OF
ENDOREX STOCKHOLDERS, IN EVALUATING WHETHER TO VOTE IN FAVOR OF THE ISSUANCE OF
SHARES OF ENDOREX COMMON STOCK, OPTIONS AND WARRANTS IN CONNECTION WITH THE
MERGER). IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THE BUSINESS AND
PROSPECTS OF CTD OR ENDOREX MAY BE SERIOUSLY HARMED AND YOU MAY LOSE ALL OR PART
OF YOUR INVESTMENT.

                          RISKS RELATED TO THE MERGER

CTD STOCKHOLDERS WILL RECEIVE A FIXED NUMBER OF SHARES OF ENDOREX COMMON STOCK
DESPITE CHANGES IN MARKET VALUE OF ENDOREX COMMON STOCK OR CHANGES IN THE VALUE
OF CTD. THE DOLLAR VALUE OF ENDOREX COMMON STOCK RECEIVED IN THE MERGER MAY
INCREASE OR DECREASE AFTER CTD STOCKHOLDERS SUBMIT THEIR PROXIES.

    Endorex expects to issue approximately 9.4 million shares of Endorex common
stock in exchange for all outstanding shares of CTD capital stock and to make
certain payments to CTD employees in connection with the merger. In addition,
Endorex expects to issue options and warrants exercisable for approximately
0.6 million shares of Endorex common stock in substitution for CTD options and
warrants in connection with the merger. There will be no adjustment for changes
in the market price of Endorex common stock. In addition, neither CTD nor
Endorex may terminate the merger agreement or "walk away" from the merger or
resolicit the vote of its stockholders solely because of changes in the market
price of Endorex common stock.

    Accordingly, the specific dollar value of Endorex common stock that CTD
stockholders will receive upon the merger's completion will depend upon the
market value of Endorex common stock when the merger is completed, which could
be lower than it was on the date you submit your proxy. The market price of
Endorex common stock is by nature subject to the general price fluctuations in
the market for publicly traded equity securities as well as substantial price
fluctuations associated with development stage drug delivery companies. The
market price of Endorex common stock has experienced significant volatility in
the past. We urge you to obtain current market quotations for Endorex common
stock. Endorex cannot predict or give any assurances regarding the market price
of Endorex common stock at any time before or after the completion of the
merger.

THE MERGER WILL RESULT IN AN IMMEDIATE AND SUBSTANTIAL INCREASE IN ENDOREX'S NET
LOSS.

    The merger would, on a pro forma basis, increase Endorex's net loss (before
preferred dividends) from a loss of $4.8 million to a loss of $8.1 million for
the year ended December 31, 2000. This increase in Endorex's loss from
operations could have a negative impact on the market price of Endorex's common
stock. Analysts and investors carefully review a company's earnings per share
and often base investment decisions on a company's operating profits and losses
and per share earnings.

ENDOREX'S STOCKHOLDERS WILL BE SUBSTANTIALLY DILUTED AS A RESULT OF THE MERGER.

    Endorex will issue approximately 9.4 million shares of Endorex common stock
and options and warrants exercisable for approximately 0.6 million shares of
Endorex common stock in substitution for CTD options and warrants in connection
with the merger. As of October 15, 2001, there were 12,741,858 shares of Endorex
common stock outstanding. Upon completion of the merger, CTD stockholders will
collectively own approximately 44% of Endorex's outstanding common stock
assuming exercise of all Endorex options and warrants issued in substitution for
CTD options and warrants. Therefore, after the merger, current Endorex
stockholders will face immediate and substantial dilution and the CTD
stockholders could exert significant influence over the matters of Endorex.

                                       16

THE EXERCISE PRICE OF CERTAIN ENDOREX WARRANTS AND THE CONVERSION PRICE OF THE
SERIES B AND SERIES C PREFERRED STOCK OF ENDOREX MAY BE SUBJECT TO ADJUSTMENT AS
A RESULT OF THE MERGER, THEREBY DILUTING ENDOREX STOCKHOLDERS.

    Certain warrants issued by Endorex and the Series B and Series C preferred
stock of Endorex are subject to anti-dilution provisions that adjust the
exercise price of the warrants and the conversion price of the Series B and
Series C preferred stock. Depending upon the price per share of Endorex common
stock as quoted on AMEX or any other national exchange at the effective time of
the merger, the exercise price of the warrants and the conversion price of the
Series B and C preferred stock may be adjusted, resulting in the issuance of a
greater number of shares of Endorex common stock upon the exercise of the
warrants and the conversion of the Series B and Series C preferred stock and
diluting Endorex stockholders.

ENDOREX AND CTD MAY NOT SUCCESSFULLY MEET THE CHALLENGES NECESSARY TO REALIZE
THE POTENTIAL BENEFITS OF THE MERGER.

    Endorex and CTD will need to overcome significant issues in order to realize
any benefits or synergies from the merger, including, but not limited to, the
following challenges:

    - developing and commercializing existing product candidates of both
      companies;

    - integrating the operations, business models and research and development
      of both companies;

    - integrating CTD product candidates and technology with Endorex drug
      delivery technology;

    - developing or acquiring new product candidates or technology;

    - successfully commercializing future product candidates or technology;

    - obtaining FDA approval for the product candidates of both companies;

    - developing and commercializing products that can successfully compete with
      similar products; and

    - raising sufficient funds to develop and commercialize product candidates.

    The successful completion of these post-merger events will involve
considerable difficulty and there can be no assurance that Endorex will be able
to overcome these obstacles, or that there will be a market for existing product
candidates or new products developed by Endorex after the merger. Endorex's
failure to do so could have a material adverse effect on the combined company's
business, financial condition and operating results or could result in the loss
of key personnel. In addition, the attention and effort devoted to the
integration of the two companies may divert management's attention from other
important issues, and could seriously harm the combined company.

THE MARKET PRICE OF ENDOREX COMMON STOCK MAY DECLINE AS A RESULT OF THE MERGER.

    The market price of Endorex common stock may decline as a result of the
merger if:

    - investors or analysts do not view the merger favorably;

    - the integration of Endorex and CTD is unsuccessful;

    - Endorex does not achieve the perceived benefits of the merger as rapidly
      or to the extent anticipated by the two companies, financial or industry
      analysts or investors;

    - the effect of the merger on Endorex's financial results is not consistent
      with the expectations of both companies, financial or industry analysts or
      investors;

                                       17

    - the combined company fails to successfully develop or market the product
      candidates of Endorex and CTD; or

    - the demand for CTD and Endorex products fails to develop or diminishes.

ENDOREX'S AND CTD'S OFFICERS AND DIRECTORS MAY HAVE INTERESTS IN THE MERGER
DIFFERENT FROM THOSE OF THE STOCKHOLDERS OF ENDOREX AND CTD THAT MAY INFLUENCE
THEM TO SUPPORT OR APPROVE THE MERGER.

    Endorex's and CTD's current directors and officers may have interests in the
merger that are in addition to, or different from, the interests of other
Endorex and CTD stockholders. These interests include:

    - Pursuant to the terms of the merger agreement, CTD's current directors and
      officers will, after the merger, be indemnified by CTD and, for a period
      of six years thereafter, benefit from insurance coverage for liabilities
      that arise from their service as directors and officers of CTD prior to
      the merger.

    - Pursuant to the terms of the merger agreement, after the closing of the
      merger, Dr. Colin Bier, Guy Rico and Peter Kliem, currently directors of
      CTD, will become directors of Endorex. Mr. Rico and Mr. Kliem, as
      non-employee directors, will upon appointment and subject to the approval
      of Proposal Four by the Endorex stockholders at the Endorex annual
      meeting, receive an option exercisable for 50,000 shares of Endorex common
      stock and will thereafter each receive options exercisable for an
      additional 10,000 shares of Endorex common stock at each annual meeting of
      the Endorex stockholders vesting one year from the date of grant. If
      Proposal Four is not approved, then each will receive an option
      exercisable for 42,000 shares of Endorex common stock upon their
      appointment to the Endorex board of directors and will thereafter each
      receive an option exercisable for 12,000 shares of Endorex common stock
      for every two years they serve as a non-employee director of Endorex.

    - Concurrently with the closing of the merger, Dr. Bier, the Chairman of the
      board of directors of CTD, will enter into an agreement with Endorex to
      become the Chairman of the board of directors and the Chief Executive
      Officer of Endorex. Pursuant to this agreement, Dr. Bier will receive an
      initial annual base salary of $275,000 and options exercisable for 700,000
      shares of Endorex common stock.

    - Pursuant to the terms of the merger agreement, Steve H. Kanzer, the
      President and a director of CTD, will receive a payment of 250,000 shares
      of Endorex common stock upon the closing of the merger.

    - Concurrently with the closing of the merger, Mr. Kanzer will enter into a
      noncompetition and nonsolicitation agreement with Endorex whereby he will
      be paid approximately $250 per hour for any time incurred while assisting
      Endorex in obtaining and enforcing patents, copyrights or trademarks for
      any intellectual property acquired or discovered by Mr. Kanzer during the
      course of performing services for or acting as an employee or officer of
      CTD.

    - Pursuant to the terms of the merger agreement, Nicholas Stergiopoulos, the
      Director of Corporate Development of CTD, will receive a payment of
      133,334 shares of Endorex common stock upon the closing of the merger.

    - Concurrently with the closing of the merger, Mr. Stergiopoulos will enter
      into a consulting agreement with Endorex whereby he will be paid
      approximately $8,200 per calendar month for a period of six months. In
      addition, Mr. Stergiopoulos will receive 1% of the proceeds of any
      licensing or asset sale transaction between RxEyes, Inc., a majority owned
      subsidiary of CTD, and a certain third party or its affiliates, if that
      license agreement or asset sale was consummated due to the efforts of
      Mr. Stergiopoulos.

                                       18

    - Pursuant to a voting agreement in the form attached as Appendix II hereto
      among Endorex, CTD, Roadrunner and the other parties thereto, certain CTD
      stockholders, including CTD's directors, executive officers and their
      affiliates, owning beneficially approximately 63% and 61% of CTD's common
      stock and Series A preferred stock, respectively, outstanding as of
      October 15, 2001 have agreed to vote all of their shares of CTD common
      stock and Series A preferred stock for approval of the merger, the merger
      agreement and the transactions contemplated thereby.

    - As of October 15, 2001, the officers and directors of CTD owned in the
      aggregate options exercisable for 1,322,725 shares of CTD common stock at
      an exercise price of $.20 per share which will be assumed by Endorex and
      exchanged for Endorex options exercisable for 359,042 shares of Endorex
      common stock at an exercise price of $.74 per share.

    Mr. Kanzer is a director of Endorex and the President and Chief Executive
Officer and a director of CTD. As of October 15, 2001, Mr. Kanzer beneficially
owned 1.92% of Endorex's common stock and 21.0% of CTD's common stock.
Mr. Kanzer serves on the board of directors of Endorex as a nominee of the Aries
Master Fund II and the Aries Domestic Fund, who subsequently transferred their
right to nominate a member to the board of directors of Endorex to Aries
Select, Ltd., or Aries, and Aries Select I LLC, or Aries I, each of which is a
principal stockholder of Endorex. Aries Select II LLC, or Aries II, is also a
stockholder of Endorex.

    Paramount Capital Asset Management, Inc., or PCAM, is the investment manager
of Aries and the managing member of each of Aries I and Aries II. Lindsay A.
Rosenwald, M.D. is the Chairman and sole stockholder of PCAM and Paramount
Capital, Inc., or Paramount. As of October 15, 2001, Dr. Rosenwald beneficially
owned 34.0% of Endorex's common stock. Paramount has acted as a placement agent
in connection with certain private placements of Endorex's common stock, as a
finder in connection with a private placement of Endorex's common stock and
warrants, and as a financial advisor to Endorex. In addition, certain officers,
employees and associates of Paramount and its affiliates own securities of
Endorex and a subsidiary of Endorex.

    Dr. Rosenwald is also the Chairman and sole stockholder of Huntington Street
Company, or Huntington Street, and June Street Company, or June Street, and is
the sole member of Paramount Capital Drug Development Holdings LLC, or Paramount
Holdings. Paramount Holdings and Dr. Rosenwald's wife are principal stockholders
of CTD. Dr. Rosenwald, Huntington Street and June Street are also stockholders
of CTD. In addition, certain officers, employees and associates of Paramount and
its affiliates own securities of CTD and subsidiaries of CTD. Paramount has also
acted as a placement agent in connection with certain private placements of
CTD's Series A preferred stock. As of October 15, 2001, Dr. Rosenwald
beneficially owned 56.5% of CTD's common stock and 6.0% of CTD's Series A
preferred stock. Additionally, as of October 15, 2001, Dr. Rosenwald's wife
beneficially owned 8.9% of CTD's common stock.

    Mr. Peter Kash, an employee of Paramount who beneficially owns 5.0% of CTD's
common stock and is a security holder of Endorex, and Mr. Martin Kratchman, an
employee of Paramount who is a security holder of both Endorex and CTD, will, at
the closing of the merger, receive options to acquire an aggregate of 100,000
shares of common stock of Endorex. Mr. Kash and Mr. Kratchman are receiving the
options as compensation for their financial advisory services to Endorex in
connection with the merger.

    For the above reasons, the directors and officers of Endorex and CTD who are
entitled to vote at Endorex's annual meeting of stockholders and CTD's special
meeting of stockholders could be more likely to vote to approve the merger, the
merger agreement and the transactions contemplated thereby than if they did not
have these interests. Endorex and CTD stockholders should consider whether these
interests may have influenced these directors and officers to support or
recommend the merger.

                                       19

FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT ENDOREX'S STOCK PRICE AND
ENDOREX'S AND CTD'S FUTURE BUSINESS AND OPERATIONS.

    If the merger is not completed for any reason, Endorex and CTD may be
subject to a number of material risks, including the following:

    - depending on the reasons for termination of the merger agreement, Endorex
      may be required to pay CTD, or CTD may be required to pay Endorex, a
      termination fee of $1,000,000 plus costs and expenses incurred in
      connection with the merger agreement;

    - the market value of Endorex common stock may decline if the market views
      the proposed merger positively and the current market price reflects a
      market assumption that the merger will be completed; and

    - costs incurred by Endorex and CTD related to the merger, such as legal and
      accounting fees, must be paid even if the merger is not completed.

    In addition, Endorex or CTD corporate partners, existing and potential
investors and suppliers, in response to the announcement of the merger, may
delay or defer decisions concerning the two companies. Any delay or deferral in
those decisions could have a material adverse effect on the business of either
company, regardless of whether the merger is ultimately completed. Similarly,
current and prospective employees may experience uncertainty about their future
roles until strategies with regard to the two companies are announced or
executed. This may adversely affect the ability of either company to attract and
retain key management, sales, marketing and technical personnel.

    Further, if the merger is not completed and the board of directors of either
company determines to seek another merger or business combination, there can be
no assurance that either company will be able to find an acceptable candidate or
negotiate a transaction on acceptable terms. Pursuant to the merger agreement,
CTD is prohibited from soliciting, initiating or encouraging or entering into
certain extraordinary transactions, such as a merger, sale of assets or other
business combination, with any party other than Endorex. Furthermore, pursuant
to the merger agreement, Endorex is prohibited from soliciting, initiating or
encouraging or entering into any agreement or arrangement to acquire all or
substantially all of the outstanding securities or assets of another entity if
such acquisition would materially adversely effect Endorex's ability to
consummate the merger.

THE COMBINED COMPANY WILL CONTINUE TO HAVE THE RISKS THAT EACH OF ENDOREX AND
CTD WERE SUBJECT TO BEFORE THE MERGER.

    CTD will represent a substantial portion of the operations, businesses and
results of the combined company. As a result, the combined company will be
susceptible to the risks to which both Endorex and CTD are subject. These risks
are more fully described in this "Risk Factor" section.

                            RISKS RELATED TO ENDOREX

IF ENDOREX CANNOT OBTAIN ADDITIONAL FUNDING, ENDOREX MAY REDUCE OR DISCONTINUE
ITS PRODUCT DEVELOPMENT AND COMMERCIALIZATION EFFORTS.

    Until it is able to generate sufficient revenue from the sale and/or
licensing of its products, Endorex will require additional funding to sustain
its research and development efforts, provide for future clinical trials, and
continue its operations. Endorex cannot be certain whether it will be able to
obtain additional required funding on terms satisfactory to it, if at all. In
addition, Endorex has expended, and will continue to expend, substantial funds
developing its product candidates and for clinical trials. Endorex currently has
commitments to spend additional funds in connection with development of its oral
delivery systems, licenses, severance arrangements, employment agreements and
consulting agreements. If Endorex is unable to raise additional funds when
necessary, Endorex may

                                       20

have to reduce or discontinue development, commercialization or clinical testing
of some or all of its product candidates or enter into financing arrangements on
terms that Endorex would not otherwise accept.

ENDOREX HAS HAD SIGNIFICANT LOSSES AND ANTICIPATES FUTURE LOSSES.

    Endorex is a development stage company that has experienced significant
losses since inception and has a significant accumulated deficit. Endorex
expects to incur significant additional operating losses in the future and
expects cumulative losses to substantially increase due to expanded research and
development efforts, preclinical studies and clinical trials. All of Endorex's
products are currently in development, preclinical studies or clinical trials
and Endorex has not generated significant revenues from product sales or
licensing. There can be no guarantee that Endorex will ever generate product
revenues sufficient to become profitable or to sustain profitability.

ENDOREX IS DEPENDENT ON ITS JOINT VENTURES, CORPORATE PARTNERS AND FUTURE JOINT
VENTURES OR CORPORATE PARTNERSHIPS.

    Endorex's strategy for research, development and commercialization of
certain of its technologies is to rely on arrangements with corporate partners.
As a result, Endorex's ability to commercialize future products is dependent
upon the success of third parties in performing preclinical studies and clinical
trials, obtaining regulatory approvals, and manufacturing and successfully
marketing Endorex's products. In connection with Endorex's two joint ventures
with Elan, InnoVaccines Corporation, or InnoVaccines, and Endorex Newco, Ltd.,
or Newco, Endorex is obligated to fund research and development activities in
proportion to Endorex's ownership interest in each joint venture, currently
80.1% of each joint venture. If Endorex does not have sufficient resources to
meet its funding obligations under each of the two Elan joint ventures, Endorex
may have to terminate the joint ventures prior to commercialization of its
technologies or renegotiate the terms of the joint ventures, and Endorex's
interest in the joint ventures may be diluted.

    Endorex cannot assure you that its joint ventures, corporate collaborations
or corporate partnerships will be successful or that the development efforts
carried out by them will continue. Endorex is currently in discussions with Elan
regarding terminating InnoVaccines and Newco, although no definitive agreements
have been reached by Endorex and Elan with respect to such terminations. Endorex
cannot assure you that the results of these discussions will be favorable or
that the joint ventures with Elan will continue. If Elan chooses to discontinue
its collaborations with Endorex, Endorex may not be able to continue to license
certain proprietary technology from Elan and obtain Elan's expertise and
research and development services on reasonable terms, if at all.

    Newco is Endorex's joint venture with Elan that has focused on developing a
product to deliver iron chelation compounds using Elan's
MEDIPAD-Registered Trademark- delivery device. Newco licensed Elan's
MEDIPAD-Registered Trademark- device on a worldwide basis to Schein
Pharmaceutical, Inc., or Schein, which has been acquired by Watson
Pharmaceuticals, Inc., or Watson, for use with Schein's iron chelation compound.
Schein agreed to develop and market the MEDIPAD-Registered Trademark- iron
chelation product in the United States, and Newco and Schein agreed to jointly
seek partners for marketing the product outside the United States. In May 2001,
Watson indicated to Endorex that it will not continue to meet the obligations
originally agreed to by Schein in connection with the license, although no
definitive agreements have been reached by Newco and Watson. Subsequently,
Watson discontinued its collaboration efforts. Endorex cannot assure you that
Watson and Newco will continue their efforts to develop, market, commercialize
or obtain the necessary regulatory approvals for the
MEDIPAD-Registered Trademark- delivery device in the United States or
internationally or that the agreement with Watson will continue. Thus, Endorex
cannot assure you that Newco's MEDIPAD-Registered Trademark- iron chelator
product will be marketed and sold in the near future or at all. If the
collaboration with Watson does not continue, Endorex cannot assure you that
Newco will be able

                                       21

to find another corporate partner to develop and market an iron chelation
product or that Endorex will continue with its MEDIPAD-Registered Trademark-
iron chelator joint venture with Elan. In the event that Endorex and Elan
terminate their Newco joint venture, Endorex may lose its rights to use Elan's
MEDIPAD-Registered Trademark- technology and its supply of
MEDIPAD-Registered Trademark- devices.

    Endorex intends to pursue additional corporate partnerships and
collaborations in the future; however, the terms available may not be acceptable
to Endorex and the corporate partnerships or collaborations may not be
successful. In addition, the amount and timing of resources that Endorex's
collaborators devote to these activities are not within Endorex's control. If
any of Endorex's current corporate partnerships, such as those discussed above,
are discontinued, Endorex cannot assure you that it will be able to find others
to develop and commercialize its current product candidates. If any of Endorex's
corporate partnerships and collaborations for its current product candidates are
discontinued, Endorex may not be able to continue the development of such
product candidates due to the loss of technology, intellectual property or
expertise or due to contractual restrictions. Furthermore, the successful
development and commercialization of Endorex's drug delivery technology depends
upon entering into corporate partnerships, collaborations or license agreements
that provide rights to drug candidates that are compatible with Endorex's drug
delivery technology and that are safe and proven effective for medical
conditions. Endorex cannot assure you that it will be able to enter into such
new corporate partnerships, collaborations or license agreements to develop and
commercialize any future product candidates using its drug delivery technology.

PROBLEMS IN PRODUCT DEVELOPMENT MAY INCREASE AND VARY THE RATE AT WHICH ENDOREX
SPENDS ITS FUNDS.

    Endorex has limited experience with preclinical development, clinical trials
and regulatory affairs and if it encounters unexpected difficulties with its
operations or clinical trials, Endorex may have to spend additional funds, which
would increase its cash depletion rate. Endorex's cash depletion rate will vary
substantially from quarter to quarter as Endorex funds non-recurring items
associated with clinical trials, product development, patent expenses, legal
fees and consulting fees.

ENDOREX'S PRODUCT DEVELOPMENT AND COMMERCIALIZATION EFFORTS MAY NOT BE
SUCCESSFUL.

    Endorex's product candidates, which have not received regulatory approval,
are in the early stages of development. If the initial results from any of the
evaluations for these product candidates are poor, those results could seriously
harm Endorex's business and its ability to raise additional capital which may be
necessary to continue research and development for its oral delivery technology.
In addition, product candidates resulting from Endorex's research and
development efforts, if any, are not expected to be available commercially for
several years, if at all.

    Although Endorex is involved in developing oral versions of injectable drugs
and vaccines that have already been approved by the FDA, the products Endorex is
currently developing will require significant additional laboratory and clinical
testing and investment for the foreseeable future. Endorex's product candidates
may not show sufficient efficacy in animal models to justify continuing research
into clinical testing stages or may not prove to be effective in clinical trials
or may cause serious harmful side effects. In addition, Endorex's product
candidates, if approved, may prove impracticable to manufacture in commercial
quantities at a reasonable cost and/or with acceptable quality. Any of these
results could seriously harm Endorex's business.

    Endorex's products, if approved, may not be immediately used by doctors
unfamiliar with Endorex's product applications. Endorex or its commercialization
partner may be required to implement an aggressive education and promotion plan
with doctors in order to gain market recognition, understanding and acceptance
of Endorex's products. Any such effort may be time consuming and costly and
might not be successful.

                                       22

ENDOREX'S PRODUCT DEVELOPMENT AND COMMERCIALIZATION EFFORTS MAY BE REDUCED OR
DISCONTINUED DUE TO DIFFICULTIES OR DELAYS IN CLINICAL TRIALS.

    Endorex may encounter unanticipated problems, including development,
manufacturing, distribution, financing and marketing difficulties, during the
product development, approval and commercialization process. Endorex's product
candidates may take longer than anticipated to reach and progress through
clinical trials. In addition, patient enrollment in the clinical trials may be
delayed or prolonged significantly, thus delaying the clinical trials and
causing increased costs. If Endorex experiences any such difficulties or delays,
Endorex may have to reduce or discontinue development, commercialization or
clinical testing of some or all of Endorex's product candidates.

ENDOREX DEPENDS ON A LIMITED NUMBER OF SUPPLIERS AND MANUFACTURERS.

    Prior to commercial distribution of any of its products, if approved,
Endorex will need to enter into contracts with commercial suppliers or
manufacturers for production of commercial volumes of its products. Endorex
cannot guarantee that such suppliers or manufacturers will be able to qualify
their facilities under regulations imposed by the FDA or that they will be able
to label and supply Endorex in a timely manner, if at all, with drugs that meet
regulatory and commercial requirements. Accordingly, any failure to enter into
supply or manufacturing agreements, any failure of such suppliers and
manufacturers to perform, and any change in Endorex's existing or future
contractual relationships with, or an interruption in supply from, any
third-party service provider or supplier could seriously harm Endorex's ability
to develop and commercialize its products.

ENDOREX DOES NOT HAVE AGREEMENTS WITH THIRD PARTIES OR A SALES FORCE TO MARKET
ITS PRODUCTS.

    If Endorex receives approval from the FDA for Endorex's initial product
candidates, the commercialization of these products will depend upon Endorex's
ability to enter into marketing agreements with companies that have sales and
marketing capabilities or to recruit, develop, train and deploy its own sales
force. Endorex currently intends to sell its products in the United States and
internationally in collaboration with one or more marketing partners. Endorex
cannot assure you that it will be able to enter into any such collaborations to
commercialize products in a timely manner or on commercially reasonable terms,
if at all. Additionally, Endorex does not currently have a sales force, or
possess the resources or experience necessary to market any of its product
candidates, if they are approved. Development of an effective sales force
requires significant financial resources, time and expertise. Endorex cannot
assure you that it will be able to obtain the financing necessary to establish
such a sales force in a timely or cost effective manner, if at all, or that such
a sales force will be capable of generating demand for Endorex's product
candidates, if they are approved.

ENDOREX MAINTAINS LIMITED PRODUCT LIABILITY INSURANCE AND MAY BE EXPOSED TO
CLAIMS IF ITS INSURANCE COVERAGE IS INSUFFICIENT.

    The clinical testing, manufacture and sale of Endorex's products involves an
inherent risk that human subjects in clinical testing or consumers of Endorex's
products may suffer serious bodily injury or death due to side effects, allergic
reactions or other unintended negative reactions to Endorex's products. Endorex
currently has clinical trial and product liability insurance with limits of
liability of $10 million. Because liability insurance is expensive and difficult
to obtain, Endorex cannot assure you that it will be able to maintain existing
insurance or obtain additional liability insurance on acceptable terms or with
adequate coverage against potential liabilities. Endorex's inability to obtain
sufficient insurance coverage on acceptable terms or to otherwise protect
against potential liability claims in excess of Endorex's insurance coverage
could seriously harm Endorex's business.

                                       23

ENDOREX USES HAZARDOUS MATERIALS IN ITS BUSINESS. ANY CLAIMS RELATING TO
IMPROPER HANDLING, STORAGE, OR DISPOSAL OF THESE MATERIALS COULD BE COSTLY.

    Endorex's research and development processes involve the controlled use of
hazardous materials, including hazardous chemicals and radioactive and
biological materials. Endorex's operations also produce hazardous waste
products. Endorex cannot fully eliminate the risk of accidental contamination or
discharge of such materials and any resulting injury. Endorex could be subject
to civil damages in the event of improper or unauthorized release of, or
exposure of individuals to, hazardous materials. In addition, Endorex could be
sued for injury or contamination that results from its use of hazardous
materials or their use by third parties or Endorex's collaborators, and
Endorex's liability may exceed its assets. Federal, state, and local laws and
regulations govern the use, manufacture, storage, handling, and disposal of
these materials. Endorex believes that its current operations comply in all
material respects with these laws and regulations. Compliance with environmental
laws and regulations may be expensive, and current or future environmental
regulations may impair Endorex's research, development, or commercialization
efforts.

ENDOREX MAY NOT BE ABLE TO COMPETE WITH ITS COMPETITORS IN THE BIOTECHNOLOGY
INDUSTRY.

    The biotechnology industry is intensely competitive, subject to rapid change
and sensitive to new product introductions or enhancements. Virtually all of
Endorex's existing competitors have greater financial resources, larger
technical staffs, and larger research budgets than Endorex has, as well as
greater experience in developing products and conducting clinical trials.
Endorex's competitors in the field of oral and nasal delivery of protein and
peptide-based drugs include Emisphere Technologies, which has started phase III
trials for oral heparin and phase I trials for oral calcitonin (through its
collaborator Novartis) and oral insulin; Unigene Laboratories, which has an oral
calcitonin product in phase I/II trials; Nobex Corp. (formerly known as Protein
Delivery), which has an oral insulin in phase II trials, and Generex, which has
an oral insulin spray in phase I trials. Endorex's competitors in the vaccine
delivery field include Aviron, which is developing a nasal flu vaccine that is
in phase III clinical trials, I.D. Biomedical, which is in phase I/II trials
with an intranasal flu vaccine and another major vaccine, specialized
biotechnology firms, universities, and governmental agencies. Endorex's
competitors in the liposomal formulation field include The Liposome Company
(owned by Elan Corporation), NexStar (owned by Gilead Sciences, Inc.) and Sequus
(owned by ALZA Corporation). In addition, there may be other companies which are
currently developing competitive technologies and products or which may in the
future develop technologies and products that are comparable or superior to
Endorex's technologies and products. Accordingly, Endorex cannot assure you that
it will be able to compete successfully with its existing and future competitors
or that competition will not negatively affect Endorex's financial position or
results of operations in the future.

ENDOREX MAY NOT BE SUCCESSFUL IF IT IS UNABLE TO OBTAIN AND MAINTAIN PROPRIETARY
POSITIONS IN ITS PRODUCTS AND TECHNOLOGY.

    Endorex's success depends, in large part, on its ability to obtain and
maintain a proprietary position in Endorex's products through patents, trade
secrets and orphan drug designations. Endorex has been granted several United
States patents and has submitted several United States patent applications and
numerous corresponding foreign patent applications, and has also obtained
licenses to patents and patent applications owned by other entities. However,
Endorex cannot assure you that any of these patent applications will be granted
or that Endorex's patent licensors will not terminate any of its patent
licenses. Endorex also cannot guarantee that any issued patents will provide
competitive advantages for its products or that any issued patents will not be
successfully challenged or circumvented by Endorex's competitors. Further, the
laws of certain countries may not protect Endorex's proprietary rights to the
same extent as United States law and Endorex cannot assure you it will obtain
patent protection outside the United States. To the extent that Endorex relies
on trade

                                       24

secret protection and confidentiality agreements to protect Endorex's
technology, others may independently develop similar or superior technology, or
otherwise obtain access to Endorex's findings or research materials embodying
those findings, thus diminishing the value of such trade secrets and
confidentiality obligations.

    The application of patent law to the field of biotechnology is relatively
new and has resulted in considerable litigation. In addition, since patent
applications in the United States are maintained in secrecy until patents issue,
and since publication of discoveries in the scientific or patent literature
often lags behind actual discoveries, Endorex cannot be certain that it and its
licensors are the first creators of inventions covered by any licensed patent
applications or patents or that they are the first to file. Moreover, the United
States Patent and Trademark Office, or PTO, may commence interference
proceedings involving Endorex's patents or patent applications, in which the
question of first inventorship is contested. There is a substantial risk in the
rapidly developing biotechnology industry that patents and other intellectual
property rights held by Endorex could be infringed by others or that products
developed by Endorex or its method of manufacture could be covered by patents
owned by other companies. Although Endorex believes that its products and
services do not infringe on any third party's patents or other intellectual
property rights, Endorex cannot be certain that it can avoid litigation
involving such proprietary rights. Intellectual property litigation entails
substantial legal and other costs and may take years to resolve, and Endorex may
not have the necessary financial resources to defend or prosecute Endorex's
rights in connection with any litigation. Responding to, defending or bringing
claims related to patents and other intellectual property rights may require
Endorex's management to redirect its human and monetary resources to address
these claims and may take years to resolve.

ENDOREX DEPENDS ON LICENSES FROM THIRD PARTIES.

    Endorex's business depends on its license of polymerized liposome technology
from the Massachusetts Institute of Technology, or MIT, licenses from Elan in
connection with Endorex's two joint ventures with Elan, and the technology
licensed by InnoVaccines from Southern Research Institute. Endorex's license
agreement with MIT provides that Endorex will commence phase I clinical trials
with the MIT liposome technology prior to January 1, 2002. Endorex cannot assure
you that it will be able to meet this commitment. If Endorex fails to meet this
commitment and fails to obtain a waiver or extension from MIT, then MIT will
have a right to terminate Endorex's license to the MIT liposome technology and
have a claim against Endorex for breach of contract. In addition, Endorex cannot
assure you that the technology underlying these licenses will be profitable, or
that Endorex will be able to retain licenses for these technologies. If Endorex
is unable to retain these licenses and rights to third party technology, or if
Endorex is unable to obtain rights to substitute technology on reasonable terms,
Endorex's development efforts and business will be seriously harmed.

ENDOREX MAY BE FORCED TO REDUCE OR DISCONTINUE PRODUCT DEVELOPMENT AND
COMMERCIALIZATION EFFORTS DUE TO DELAYS OR FAILURE IN OBTAINING REGULATORY
APPROVALS.

    Endorex will need to do substantial additional development and clinical
testing prior to seeking any regulatory approval for commercialization of
Endorex's product candidates. Testing, manufacturing, commercialization,
advertising, promotion, exporting and marketing, among other things, of
Endorex's proposed products are subject to extensive regulation by governmental
authorities in the United States and other countries. The testing and approval
process requires substantial time, effort and financial resources and Endorex
cannot guarantee that any approval will be granted on a timely basis, if at all.
At least initially, Endorex intends, to the extent possible, to rely on
licensees to obtain regulatory approval for marketing Endorex's products.
Failure by Endorex or its licensees to adequately demonstrate the safety and
efficacy of any of its product candidates under development could delay, limit
or prevent regulatory approval of the product, which may require Endorex to
reduce or discontinue development, commercialization or clinical testing of some
or all of its product candidates.

                                       25

    Companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in conducting advanced human clinical trials, even after
obtaining promising results in earlier trials. Furthermore, the FDA may suspend
clinical trials at any time on various grounds, including a finding that the
subjects or patients are being exposed to an unacceptable health risk. Also,
even if regulatory approval of a product is granted, such approval may entail
limitations on the indicated uses for which the product may be marketed.
Accordingly, Endorex may be unable to, or experience difficulties and delays in
obtaining, necessary governmental clearances and approvals to market a product.

ENDOREX'S PRODUCTS, IF APPROVED, MAY NOT BE COMMERCIALLY VIABLE DUE TO HEALTH
CARE CHANGES AND THIRD-PARTY REIMBURSEMENT LIMITATIONS.

    Recent initiatives to reduce the federal deficit and to change health care
delivery are increasing cost-containment efforts. Endorex anticipates that
Congress, state legislatures and the private sector will continue to review and
assess alternative benefits, controls on health care spending through
limitations on the growth of private health insurance premiums and Medicare and
Medicaid spending, price controls on pharmaceuticals, and other fundamental
changes to the health care delivery system. Any such changes could negatively
impact the commercial viability of Endorex's products, if approved. Endorex's
ability to successfully commercialize its product candidates, if they are
approved, will depend in part on the extent to which appropriate reimbursement
codes and authorized cost reimbursement levels of such products and related
treatment are obtained from governmental authorities, private health insurers
and other organizations, such as health maintenance organizations. In the
absence of national Medicare coverage determination, local contractors that
administer the Medicare program, within certain guidelines, can make their own
coverage decisions. Accordingly, there can be no assurance that any of Endorex's
product candidates, if approved and when commercially available, will be
included within the then current Medicare coverage determination or the coverage
determination of state Medicaid programs, private insurance companies and other
health care providers. In addition, third-party payers are increasingly
challenging the necessity and prices charged for medical products, treatments
and services. Also, the trend toward managed health care and the growth of
health maintenance organizations in the United States may result in lower prices
for Endorex's products, if approved and when commercially available, than
Endorex currently expects. The cost containment measures that health care payers
and providers are instituting and the effect of any health care changes could
negatively affect Endorex's financial performance, if one or more of Endorex's
products are approved and available for commercial use.

ENDOREX'S BUSINESS COULD BE SERIOUSLY HARMED IF ENDOREX CANNOT ATTRACT AND
RETAIN KEY PERSONNEL.

    Endorex's success is dependent, in part, upon Michael S. Rosen, Endorex's
President and Chief Executive Officer, Panayiotis Constantinides, Ph.D.,
Endorex's Vice President of Research and Development, John McCracken, Endorex's
Vice President of Business Development, and Steve Koulogeorge, Endorex's
Controller, Assistant Secretary and Assistant Treasurer. Endorex also believes
that its future success will depend largely upon its ability to attract and
retain highly skilled research and development and technical personnel. Although
Endorex maintains and is the beneficiary of key man life insurance for
Mr. Rosen, Endorex does not believe the proceeds would be adequate to compensate
it for his loss. Endorex faces intense competition in its recruiting activities,
including competition from larger companies with greater resources. Endorex
cannot assure you that it will be successful in attracting or retaining skilled
personnel. The loss of certain key employees or Endorex's inability to attract
and retain other qualified employees could seriously harm its business.

                                       26

ENDOREX'S STOCK PRICE IS HIGHLY VOLATILE AND ITS STOCK IS THINLY TRADED.

    The market price of Endorex's common stock, like that of many other
development stage public pharmaceutical and biotechnology companies, has been
highly volatile and may continue to be so in the future due to many factors,
including, but not limited to:

    - actual or anticipated fluctuations in its results of operations;

    - announcements of innovations by Endorex or its competitors;

    - introduction of new products by Endorex or its competitors;

    - additions or departures of key personnel;

    - commencement of litigation;

    - developments with respect to intellectual property rights;

    - conditions and trends in the pharmaceutical and drug delivery industries;

    - changes in estimates of the development, future size and growth rate of
      Endorex's markets;

    - general market conditions; and

    - future sales of Endorex's common stock.

    In addition, the stock market has experienced significant price and volume
fluctuations that affect the market price for the common stock of Endorex and
many other biotechnology companies. These market fluctuations were sometimes
unrelated or disproportionate to the operating performance of these companies.
Any significant stock market fluctuations in the future, whether due to
Endorex's actual performance or prospects or not, could result in a significant
decline in the market price of Endorex's common stock.

    Since it commenced trading on the American Stock Exchange on August 6, 1998,
Endorex's common stock has been thinly traded. Endorex cannot assure you that a
more active trading market for its common stock will develop.

ENDOREX CANNOT ASSURE YOU THAT IT WILL CONTINUE TO BE LISTED ON THE AMERICAN
STOCK EXCHANGE.

    Endorex cannot assure you that it will satisfy the requirements necessary to
remain listed on the American Stock Exchange or that the American Stock Exchange
will not take actions to delist Endorex's common stock. If such events were to
occur, Endorex cannot assure you that it will be able to list its common stock
on another national exchange. If Endorex's common stock is not listed on an
exchange, Endorex cannot assure you that an active trading market will exist for
its common stock.

INVESTORS MAY SUFFER SUBSTANTIAL DILUTION.

    Endorex has a number of agreements or obligations that may result in
dilution to investors. These include:

    - warrants to purchase 2,014,001 shares of common stock at $2.54375 per
      share, subject to adjustment, issued in connection with the October 1997
      private placement of Endorex's common stock;

    - warrants to purchase 230,770 shares of common stock at $10.00 per share,
      subject to adjustment, held by Elan;

    - warrants to purchase 43,334 shares of common stock at $2.3125 per share,
      subject to adjustment, held by Aries Select Ltd. and warrants to purchase
      23,334 shares of common stock at $2.3125

                                       27

      per share, subject to adjustment, held by Aries Select I LLC, both issued
      on May 19, 1997 pursuant to a senior line of credit that has been
      subsequently retired;

    - warrants to purchase 452,383 shares of common stock at $5.91, subject to
      adjustment, held by certain investors pursuant to the April 2000 private
      placement of Endorex's common stock;

    - warrants to purchase 226,190 shares of common stock at $5.25, subject to
      adjustment, issued to Paramount Capital, Inc., as the finder in connection
      with the April 2000 private placement of Endorex's common stock;

    - conversion rights and dividend rights of preferred stock held by Elan,
      consisting of 100,410 shares of Series B preferred stock ($8.0 million
      original liquidation value) bearing an 8% cumulative payment-in-kind
      dividend and convertible at the liquidation value into common stock at
      $7.38 per share and 97,603 shares of Series C preferred stock
      ($8.4 million original liquidation value) bearing a 7% cumulative
      payment-in-kind dividend and exchangeable for part of Endorex's interest
      in the Newco joint ventures with Elan or convertible at liquidation value
      into common stock at $8.86 per share;

    - options to purchase approximately 2.2 million shares of common stock
      issued to participants in Endorex's stock option plan with a weighted
      average exercise price of approximately $2.01; and

    - anti-dilution rights under the above warrants and preferred stock, which
      can permit purchase of additional shares and/or lower exercise/conversion
      prices under certain circumstances.

To the extent that anti-dilution rights are triggered, or warrants, options or
conversion rights are exercised, Endorex's stockholders will experience
substantial dilution and Endorex's stock price may decrease.

FUTURE SALES OF COMMON STOCK BY ITS EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT
ENDOREX'S STOCK PRICE.

    The market price of Endorex's common stock could decline as a result of
sales by Endorex's existing stockholders of shares of common stock in the
market, or the perception that these sales could occur. These sales also might
make it more difficult for Endorex to sell equity securities in the future at a
time and at a price that Endorex deems appropriate.

ENDOREX HAS NOT PAID CASH DIVIDENDS.

    Endorex has never paid cash dividends on its common stock and it does not
anticipate paying any dividends in the foreseeable future. Endorex currently
intends to retain earnings, if any, to develop its business.

ENDOREX HAS CERTAIN RELATIONSHIPS THAT MAY PRESENT POTENTIAL CONFLICTS OF
INTEREST.

    Lindsay A. Rosenwald, M.D. is the Chairman and sole stockholder of Paramount
Capital Asset Management, Inc., or PCAM, Paramount Capital, Inc., or Paramount,
and Paramount Capital Investment LLC, or PCI, a merchant banking and venture
capital firm specializing in biotechnology companies. PCAM is the investment
manager of Aries Select, Ltd., and the managing member of Aries Select I LLC and
Aries Select II LLC, each of which is an affiliate of PCI, PCAM, Paramount and
Lindsay Rosenwald. Aries Select I LLC and Aries Select, Ltd. are principal
stockholders, and Aries Select II LLC is also a stockholder, of Endorex.
Paramount has also acted as a placement agent in connection with private
placements of Endorex's common stock, as a finder in connection with a private
placement of Endorex's common stock and warrants and as a financial advisor to
Endorex. In addition, certain officers, employees and associates of Paramount
and its affiliates own securities of a subsidiary of Endorex. In the regular
course of its business, PCI identifies, evaluates and pursues investment
opportunities in biomedical and pharmaceutical products, technologies and
companies.

                                       28

However, PCI is under no obligation to make any additional products or
technologies available to Endorex, and Endorex does not expect, and you should
not expect, that any biomedical or pharmaceutical product or technology
identified by such affiliates or PCI in the future will be made available to it.
In addition, certain of Endorex's officers and directors and officers or
directors appointed in the future may from time to time serve as officers,
directors or consultants of other biopharmaceutical or biotechnology companies
and those companies may have interests that conflict with Endorex's interests.

CERTAIN DIRECTORS, OFFICERS AND STOCKHOLDERS HAVE SIGNIFICANT INFLUENCE.

    Endorex's directors, executive officers and principal stockholders and
certain of their affiliates have the ability to influence the election of
directors and most other stockholder actions. This may discourage or prevent any
proposed takeover of Endorex, including transactions in which stockholders might
otherwise receive a premium for their shares over the then current market
prices. Such stockholders may also influence corporate actions, including
influencing elections of directors and significant corporate events.

                              RISKS RELATED TO CTD

CTD HAS NO OPERATING HISTORY, HAS AN ACCUMULATED DEFICIT, HAS NEVER BEEN
PROFITABLE AND MAY NOT BE ABLE TO GENERATE REVENUES SUFFICIENT TO ACHIEVE
PROFITABILITY.

    CTD, to date, has had no operations and has not been profitable since
inception in 1997. As of June 30, 2001, CTD had an accumulated deficit of
approximately $9.0 million. CTD expects to continue to incur significant
operating losses for the foreseeable future, as it expects to continue to incur
costs related to research, development, testing, regulatory compliance
activities, and initiation and continuation of clinical trials. CTD has never
received any significant milestone revenue or license fees. CTD expects that it
will take a number of years before it generates revenue from commercial sales of
products based upon any drug target or drug lead that it identifies, and may
never do so. CTD cannot assure you that it will achieve significant revenues or
that it will ever achieve profitability. CTD's ability to generate revenue will
depend on its ability, alone or with others, to successfully research, develop,
obtain regulatory clearance for, manufacture, and market its products under
development. In addition, if collaborative development arrangements are
terminated or commercialization efforts under those agreements are delayed or
are unsuccessful, then successful commercialization of CTD's products under
development may be delayed or terminated, which could have a material adverse
effect on its business.

CTD IS AN EARLY DEVELOPMENT STAGE COMPANY AND MAY NOT SUCCEED IN DEVELOPING
COMMERCIALLY VIABLE PRODUCTS.

    To be profitable, CTD must, alone or with corporate partners and
collaborators, successfully research, develop and commercialize its technologies
or product candidates. Current technologies and product candidates are in
various stages of clinical and pre-clinical development and will require
significant further funding, research, development, preclinical and/or clinical
testing, regulatory approval and commercialization testing, and are subject to
the risks of failure inherent in the development of products based on innovative
or novel technologies. They are also rigorously regulated by the federal
government, particularly the FDA, and by comparable agencies in state and local
jurisdictions and in foreign countries. Each of the following is possible with
respect to any one of CTD's technologies or product candidates:

    - that CTD will not be able to maintain its current research and development
      schedules;

    - that CTD will not be able to enter into human clinical trials because of
      scientific, governmental or financial reasons, or that CTD will encounter
      problems in clinical trials that will cause it to delay or suspend
      development of one of the technologies;

                                       29

    - that its products will be found to be ineffective or unsafe;

    - that government regulations will delay or prevent its products' marketing
      for a considerable period of time and impose costly procedures upon CTD's
      activities;

    - that the FDA or other regulatory agencies will not approve a given product
      or will not do so on a timely basis;

    - that the FDA or other regulatory agencies may not approve the process or
      facilities by which a given product is manufactured;

    - that CTD's dependence on others to manufacture its products may adversely
      affect CTD's ability to develop and deliver the products on a timely and
      competitive basis;

    - that, if CTD is required to manufacture its own products, CTD will be
      subject to similar risks regarding delays or difficulties encountered in
      manufacturing the products, will require substantial additional capital,
      and may be unable to manufacture the products in a manner that meets
      regulatory requirements or in a cost-effective manner;

    - that the FDA's policies may change and additional government regulations
      and policies may be instituted, both of which could prevent or delay
      regulatory approval of CTD's potential products; or

    - that CTD will be unable to obtain, or will be delayed in obtaining,
      approval of a product in other countries because the approval process
      varies from country to country and the time needed to secure approval may
      be longer or shorter than that required for FDA approval.

    If any of the risks set forth above occurs, CTD may not be able to
successfully develop its technologies and product candidates and CTD's business
will be seriously harmed.

    Similarly, it is possible that, for reasons including, but not limited to
those set forth below, CTD may be unable to commercialize, or receive royalties
from the sale of, any given technology, even if it is shown to be effective, if:

    - it is uneconomical or if the market for CTD's products does not develop or
      diminishes;

    - CTD is not able to enter into arrangements or collaborations to
      commercialize its products;

    - in the case of one of CTD's pharmaceutical technologies, it is not
      eligible for third-party reimbursement from government or private
      insurers;

    - others hold proprietary rights that preclude CTD from commercializing any
      of its products;

    - others have brought to market similar or superior products;

    - others have superior resources to market similar products or technologies;

    - government regulation imposes limitations on the indicated uses of a
      product, or later discovery of previously unknown problems with a product
      results in added restrictions on the product or results in the product
      being withdrawn from the market; or

    - the product has undesirable or unintended side effects that prevent or
      limit its commercial use.

CTD'S CURRENT AND FUTURE PRODUCT CANDIDATES MAY NOT BE DEVELOPED SUCCESSFULLY
AND MAY NOT TREAT MEDICAL CONDITIONS OTHER THAN THOSE ALREADY BEING TREATED BY
THE ACES.

    CTD is focused on the development of new therapeutic uses and new oral and
mucosal formulations of ACEs. CTD cannot assure you that its product candidates
will effectively treat medical conditions other than those for which the ACE was
designed, have new therapeutic uses or utilize new formulations.

                                       30

EVEN IF ORBEC-TM- IS APPROVED, ITS PROFITABILITY MAY BE LIMITED.

    CTD's business may not become profitable if and when orBec-TM-, CTD's lead
product candidate, is approved for commercialization by the FDA or similar
foreign regulatory agencies because the market for the use of orBec-TM- for the
treatment of intestinal GVHD is relatively small. CTD has initiated clinical
studies to examine whether or not orBec-TM- is effective and safe when used to
treat disorders other than intestinal GVHD, but CTD does not know whether these
studies will in fact demonstrate safety and efficacy, or if they do, whether CTD
will succeed in receiving regulatory clearance to market orBec-TM- for
additional indications. If the results of these studies are negative, or if
adverse experiences are reported in these clinical studies or otherwise in
connection with the use of orBec-TM- by patients, this could undermine physician
and patient comfort with the product, limit the commercial success of the
product, and even impact the acceptance of orBec-TM- in the intestinal GVHD
market. Furthermore, new technology is being developed for bone marrow
transplants that could reduce or eliminate instances of intestinal GVHD
resulting from bone marrow transplants, and therapeutic alternatives to bone
marrow transplants may become available. Any such developments could
significantly decrease the market for orBec-TM-.

IF SUFFICIENT FUNDS TO FINANCE CTD'S BUSINESS ARE NOT AVAILABLE TO CTD WHEN
NEEDED OR ON ACCEPTABLE TERMS, CTD MAY BE REQUIRED TO DELAY, SCALE BACK,
ELIMINATE OR ALTER ITS STRATEGY FOR ITS PROGRAMS.

    CTD will require additional funds for its research and product development
programs, operating expenses, the pursuit of regulatory approvals, license or
acquisition opportunities and the expansion of its production, sales and
marketing capabilities. Historically, CTD has satisfied its funding needs
through equity financings. These funding sources may not be available to CTD
when needed in the future, and, if available, they may not be on terms
acceptable to CTD. Insufficient funds could delay, scale back or eliminate
research and development programs or cause CTD to discontinue its business.
CTD's cash requirements may vary materially from those now planned because of
factors including:

    - increased research and development expenses;

    - patent or other intellectual property developments and disputes;

    - licensing or acquisition opportunities;

    - relationships with collaboration partners;

    - litigation;

    - the FDA regulatory process;

    - capital expenditures not needed in the ordinary course of business; and

    - selling, marketing and manufacturing expenses in connection with
      commercialization of products.

CTD MAINTAINS LIMITED PRODUCT LIABILITY INSURANCE AND MAY BE EXPOSED TO CLAIMS
IF ITS INSURANCE COVERAGE IS INSUFFICIENT.

    The clinical testing, manufacture and sale of CTD's products involves an
inherent risk that human subjects in clinical trials or consumers of CTD's
products will suffer serious bodily injury or death due to side effects,
allergic reactions, drug interactions or other unintentional negative reactions
to CTD's products. Furthermore, CTD's clinical trial and product liability
insurance has a $4 million limit. Because such liability insurance is expensive
and difficult to obtain, CTD cannot assure you that it will be able to maintain
existing insurance or obtain additional liability insurance on acceptable terms
or with adequate coverage against potential liabilities. CTD's inability to
obtain sufficient insurance coverage on acceptable terms or to otherwise protect
against potential liability claims in excess of CTD's insurance coverage, if
any, could seriously harm CTD's business.

                                       31

IF CTD FAILS TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY RIGHTS OR FACES A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, THEN CTD COULD
LOSE VALUABLE INTELLECTUAL PROPERTY RIGHTS, BE LIABLE FOR SIGNIFICANT DAMAGES OR
BE PREVENTED FROM COMMERCIALIZING ITS PRODUCTS.

    CTD's success depends in part on its ability to obtain and maintain patents,
protect trade secrets and operate without infringing upon the proprietary rights
of others. In the absence of patent and trade secret protection, competitors may
adversely affect CTD's business by independently developing and marketing
substantially equivalent or superior products and technology, possibly at lower
prices. It is also possible that CTD could incur substantial costs in litigation
if CTD is required to defend itself in intellectual property infringement suits
brought by third parties, or if CTD is required to initiate litigation against
others to protect or assert its intellectual property rights.

    CTD has filed various patent applications covering certain uses of its
product candidates. However, CTD may not be issued patents from the patent
applications already filed or from applications CTD may file in the future.
Moreover, the patent position of companies in the pharmaceutical industry
generally involves complex legal and factual questions, and recently has been
the subject of much litigation. Any patents CTD has obtained, or may obtain in
the future, may be challenged, invalidated or circumvented. To date, no
consistent policy has been developed in the PTO regarding the breadth of claims
allowed in biotechnology patents.

    In addition, since patent applications in the United States are maintained
in secrecy until patents issue, and since publication of discoveries in the
scientific or patent literature often lags behind actual discoveries, CTD cannot
be certain that it and its licensors are the first creators of inventions
covered by any licensed patent applications or patents or that they are the
first to file. Moreover, the PTO may commence interference proceedings involving
its patents or patent applications, in which the question of first inventorship
is contested. Accordingly, there can be no assurance that patents owned by CTD
or patents licensed to CTD in the future will be valid or will afford it
protection against competitors with similar technology or that patent
applications licensed to CTD will result in the issuance of patents. Any
challenge to, or invalidation or circumvention of, CTD's patents or patent
applications could have a material adverse effect on its business.

    No assurance can be given that any issued patents will provide competitive
advantages for the proposed products or will not be successfully challenged or
circumvented by competitors, or that the patents of others will not be infringed
by CTD's proposed products. In addition, others may independently develop
similar products or duplicate any of CTD's products. It is also possible that
CTD's patented technologies may infringe on patents or other rights owned by
others, licenses to which may not be available to CTD. CTD may have to alter its
products or processes, pay licensing fees or cease activities altogether because
of patent rights of third parties, thereby causing additional unexpected costs
and delays to CTD.

    CTD relies upon unpatented proprietary technology. CTD may not be able to
meaningfully protect its rights with regard to such unpatented proprietary
technology and competitors may duplicate or independently develop substantially
equivalent technology. A failure by CTD to protect its rights could seriously
harm CTD's business. To the extent that consultants, key employees or other
third parties apply technological information independently developed by them or
by others to any of the proposed projects of CTD, disputes may arise as to the
proprietary rights to such information which may not be resolved in favor of
CTD. Third parties, typically drug companies, hold patents or patent
applications covering the composition-of-matter for most of the ACEs for which
CTD has use patents or patent applications. In each of these cases, unless CTD
has or obtains a license agreement, CTD generally may not commercialize the ACE
until these third-party patents expire. Because pharmaceutical patents typically
provide valuable rights that take many years to develop, the United States has
laws that allow the term of such patents to be extended. This has led to complex
and costly litigation between large pharmaceutical companies and others seeking
to sell products based on compositions of matter covered

                                       32

by expiring patents. Licenses may not be available to CTD for these patents on
acceptable terms, if at all. In addition, CTD would incur substantial cost,
expense and delay as well as expand considerable management and operational
resources if it needed to contest the validity of a third-party patent or defend
itself against claims that it infringed a third-party patent. Moreover,
litigation involving third-party patents may not be resolved in CTD's favor.

CTD DEPENDS ON LICENSES FROM THIRD PARTIES.

    CTD relies on license agreements from several third parties for the rights
to commercialize its product candidates. Such agreements require that CTD meet
certain milestones; the failure to meet those milestones allows licensors to
terminate the licenses, whereas meeting those milestones triggers payment
obligations on the part of CTD. CTD may not be able to retain the rights granted
under such agreements or negotiate additional agreements on reasonable terms, or
at all. CTD is currently involved in a dispute with the licensors of its
Metropt-TM- product candidate, and has received communications from the
licensors that they intend to terminate that license agreement. CTD may not be
able to resolve that dispute on terms that are favorable to CTD, or at all. In
the event that CTD is not able to settle that dispute and retain its rights
under the Metropt-TM- license agreement, it would not be able to commercialize
the Metropt-TM- product without the risk of a lawsuit from the licensors for
infringement of their patent rights and misappropriation of their trade secrets,
which lawsuit could be costly and distracting to management and could result in
a costly damage award against CTD, including the potential for a treble damage
award for willful infringement, and injunctions that could prevent CTD from
pursuing its Metropt-TM- business.

CTD MAY NOT BE ABLE TO QUALIFY ITS PRODUCT CANDIDATES FOR CERTAIN GOVERNMENTAL
PROGRAMS AND OBTAIN THE MARKET EXCLUSIVITY PROVIDED UNDER SUCH PROGRAMS.

    CTD's business strategy relies significantly on the product and use
exclusivity provided by various government programs, including programs under
the Orphan Drug Act of 1983 and Waxman-Hatch Amendment of 1984, as well as the
three year market exclusivity period for approved new drug applications and
supplemental new drug applications. Currently, the FDA has granted orphan drug
status to orBec-TM-, for treatment of intestinal GVHD and prevention of GVHD,
and to Oraprine-TM-, for the treatment of oral auto-immune diseases. However,
CTD may not be able to maintain the orphan drug designations or qualify its
future product candidates for such governmental programs and obtain the
exclusivity provided thereunder, or obtain the market exclusivity provided for
new drug applications and supplemental new drug applications. Without such
exclusivity, CTD may not be able to successfully commercialize its product
candidates.

CTD EXPECTS TO FACE INTENSE COMPETITION AND ITS COMPETITORS HAVE GREATER
RESOURCES AND CAPABILITIES THAN CTD.

    CTD encounters intense competition and the market for CTD's proposed
products is characterized by rapidly changing technology, evolving industry
standards, and the frequent introduction of new products. In order to compete
effectively, CTD will need to continually upgrade its scientific expertise and
technology, bring to market in a timely manner products that meet changing
market demands, identify and retain capable management, and pursue
scientifically feasible and commercially viable opportunities. Products or
technologies developed by others may render CTD's products or technologies
non-competitive or obsolete.

    Many companies, research institutes, hospitals and universities are working
to develop products and processes in CTD's fields of research and development.
Most of these entities have substantially greater financial, technical,
manufacturing, marketing, distribution and other resources than CTD. Many of
CTD's competitors have greater experience in undertaking testing and clinical
trials. Accordingly, other companies may succeed in developing products earlier
than CTD or products that

                                       33

are more effective than those proposed to be developed by CTD. Further, it is
expected that competition in CTD's field will intensify.

    Competition is particularly intense in the gastroenterology and transplant
areas being addressed by CTD. Numerous companies are attempting to develop
technologies to treat GVHD by suppressing, through various mechanisms, the
immune system. Some companies, including Sangstat, Abgenix, and Protein Design
Labs, Inc., are developing monoclonal antibodies to treat GVHD. Biotransplant,
Novartis, Medimmune, and Ariad are developing both gene therapy products or
small molecules to treat GVHD.

    Competition is also intense in the therapeutic area of inflammatory bowel
disease, or IBD, including Crohn's disease and ulcerative colitis. Several
companies, including Centocor, Immunex, and Celgene, have products that are
currently FDA approved. For example, Centocor, a subsidiary of Johnson &
Johnson, markets the drug product Remicade. Other drugs used to treat IBD
include another orally-active corticosteroid called budesonide, which is being
marketed by AstraZeneca in Europe and Canada under the tradename of Entocort. In
addition, Salix Pharmaceuticals, Inc. markets an FDA-approved therapy for
ulcerative colitis.

    Several companies have also established various colonic drug-delivery
systems to deliver therapeutic drugs to the colon for treatment of Crohn's
disease. These companies include Ivax Corporation, Inkine Pharmaceutical
Corporation, and Elan Pharmaceuticals, Inc. Isis Pharmaceuticals, Inc. is in the
process of developing an antisense therapy to treat Crohn's disease.

CTD MAY NOT RECEIVE GOVERNMENTAL PRODUCT APPROVAL AND MAY NOT BE ABLE TO
COMMERCIALIZE ITS PRODUCTS.

    The proposed products of CTD will be subject to very stringent United
States, federal, foreign, state and local government regulations, including,
without limitation, the Federal Food, Drug and Cosmetic Act, the Environmental
Protection Act, the Occupational Safety and Health Act, and state and local
counterparts to such acts. Similar regulatory frameworks exist in other
countries where CTD may seek to market its products. Prior to marketing any
proposed product CTD may develop, such product must undergo an extensive
regulatory approval process.

    The regulatory process includes pre-clinical and clinical testing of any
product to establish its safety and efficacy. This testing can take many years
and require the expenditure of substantial capital and other resources. Delays
or denials of marketing approval are regularly encountered due to the submission
of data deemed unacceptable or incomplete by the FDA or other similar regulatory
agency, or due to regulatory policy for product approvals. These delays may be
encountered both domestically and abroad. Other problems that may arise during
clinical trials include:

    - results of clinical trials may not be consistent with earlier clinical or
      pre-clinical study results; and

    - products may not be shown to be safe and efficacious.

    There is no assurance that even after clinical testing, regulatory approval
will ever be obtained. If obtained, regulatory approval entails limitations on
the indicated uses for which any products may be marketed. Following regulatory
approval, if any, a marketed product and its manufacturer are subject to
continual regulatory review. Later discovery of problems with a product or
manufacturer may result in restrictions on such product or manufacturer. These
restrictions may include withdrawal of the marketing approval for the product.
Moreover, if CTD fails to comply with applicable regulatory requirements, CTD
may be subject to fines, suspension or withdrawal of regulatory approvals,
product recalls, seizure of products, operating restrictions and criminal
prosecution.

                                       34

CTD'S RESEARCH AND DEVELOPMENT CONTRACTORS MAY NOT BE COMPLYING WITH UNITED
STATES GOOD LABORATORY PRACTICE.

    CTD has not and some third party contractors performing research and
development for CTD may not have Good Laboratory Practice, or GLP, designation
from the United States regulatory authorities, and they may fail to qualify for
GLP designation. Failure to qualify for GLP designation may impair CTD's ability
to use the results of such party's research which, may seriously harm CTD's
product development efforts.

CTD MUST COMPLY WITH GOVERNMENTAL REGULATION REGARDING ENVIRONMENTAL MATTERS AND
ANY PAST OR FUTURE FAILURE TO COMPLY COULD ADVERSELY AFFECT CTD'S FINANCIAL
CONDITION.

    CTD is subject to various foreign, federal, state and local environmental
laws and regulations, in particular those governing the use, storage, handling
and disposal of hazardous substances and hazardous wastes. CTD believes that it
is in material compliance with environmental laws. Nonetheless, there can be no
assurance that hazardous materials have not been released into the environment
as a result of CTD's prior or ongoing operations. In the event of such a release
of hazardous substances, CTD could be held liable for any damages that result
and such liability could have a material adverse effect on CTD's business,
financial conditions and results of operations. While CTD does not anticipate
material costs to comply with environmental laws, there can be no assurances
that in the future, CTD will not be required to make significant capital
expenditures to comply with these laws or that CTD's business, financial
condition, and results of operation will not be materially adversely affected by
current or future environmental laws or regulations.

CTD'S PRODUCTS, IF APPROVED, MAY NOT BE COMMERCIALLY VIABLE DUE TO HEALTH CARE
CHANGES AND THIRD-PARTY REIMBURSEMENT LIMITATIONS.

    Recent initiatives to reduce the federal deficit and to change health care
delivery are increasing health care cost-containment efforts. CTD anticipates
that Congress, state legislatures and the private sector will continue to review
and assess alternative benefits, controls on health care spending through
limitations on the growth of private health insurance premiums and Medicare and
Medicaid spending, price controls on pharmaceuticals, and other fundamental
changes to the health care delivery system. Any such changes could negatively
impact the commercial viability of CTD's products, if approved. CTD's ability to
successfully commercialize its product candidates, if they are approved, will
depend in part on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of such products and related treatment are
obtained from governmental authorities, private health insurers and other
organizations, such as health maintenance organizations. In the absence of
national Medicare coverage determination, local contractors that administer the
Medicare program, within certain guidelines, can make their own coverage
decisions. Accordingly, there can be no assurance that any of CTD's product
candidates, if approved and when commercially available, will be included within
the then current Medicare coverage determination or the coverage determination
of state Medicaid programs, private insurance companies and other health care
providers. In addition, third-party payers are increasingly challenging the
necessity and prices charged for medical products, treatments and services.
Also, the trend toward managed health care and the growth of health maintenance
organizations in the United States may all result in lower prices for CTD's
products, if approved and when commercially available, than CTD currently
expects. The cost containment measures that health care payers and providers are
instituting and the effect of any health care changes could negatively affect
CTD's financial performance, if one or more of CTD's products are approved and
available for commercial use.

                                       35

CTD DEPENDS UPON KEY PERSONNEL, CONSULTANTS AND EMPLOYEES FOR BOTH ITSELF AND
ITS SUBSIDIARIES.

    CTD is highly dependent upon its officers, as well as consultants and
collaborating scientists. The loss of certain of these individuals could have a
negative impact on CTD.

    Competition for qualified employees among pharmaceutical and biotechnology
companies is intense, and the loss of any of such persons, or an inability to
attract, retain and motivate any additional highly skilled employees required
for the expansion of CTD's activities, could have a material adverse effect on
CTD. There can be no assurance that CTD will be able to retain its existing
personnel or attract additional qualified employees and such failure would
seriously harm CTD's business.

CTD LACKS MANAGEMENT AND EMPLOYEE DEPTH.

    CTD has only two full time employees: a President and a Director of
Corporate Development. CTD may need to identify and attract potential candidates
for other positions. This process could take several months, or longer, and CTD
may not be successful in attracting suitable candidates on terms acceptable to
CTD, if at all.

CTD HAS CERTAIN INTERLOCKING RELATIONSHIPS THAT MAY PRESENT POTENTIAL CONFLICTS
OF INTEREST.

    Lindsay A. Rosenwald, M.D., is the Chairman and sole stockholder of
Paramount, PCI, Huntington Street Company and June Street Company, and is the
sole member of Paramount Capital Drug Development Holdings LLC, or Paramount
Holdings. Paramount Holdings and Mr. Rosenwald's wife are principal stockholders
of CTD. Mr. Rosenwald, Huntington Street Company and June Street Company are
also stockholders of CTD. In addition, certain officers, employees and
associates of Paramount and its affiliates own securities of CTD and
subsidiaries of CTD. Paramount has also acted as a placement agent in connection
with private placements of CTD's Series A preferred stock. In the regular course
of its business, PCI identifies, evaluates and pursues investment opportunities
in biomedical and pharmaceutical products, technologies and companies. However,
PCI is under no obligation to make any additional products or technologies
available to CTD, and CTD does not expect, and you should not expect, that any
biomedical or pharmaceutical product or technology identified by PCI or any
other affiliates of Dr. Rosenwald in the future will be made available to CTD.
In addition, certain of CTD's current officers and directors and officers or
directors of CTD appointed in the future may from time to time serve as
officers, directors or consultants of other biopharmaceutical or biotechnology
companies and those other companies may have interests that conflict with CTD's
interests.

CTD'S CLINICAL TRIALS AND PRE-CLINICAL RESULTS ARE UNCERTAIN.

    In order for CTD to be granted regulatory approvals to sell its proposed
products, CTD or its collaborators will need to successfully conduct extensive
pre-clinical and clinical testing to demonstrate safety and efficacy of those
products in humans. The results of pre-clinical and clinical testing may prove
to be inconclusive. The results of pre-clinical testing are subject to varying
interpretations and may not be indicative of results that will be obtained in
humans. In addition, the results of early clinical trials may not be indicative
of the results of later clinical trials. As results of particular pre-clinical
studies and clinical trials are received, CTD and/or its collaborators, if any,
may abandon projects that they had previously thought promising.

    Regulatory agencies may not accept CTD's interpretation of results from
pre-clinical and clinical trials. Even if the development of CTD's products
advances to the clinical stage, there can be no assurance that they will prove
to be safe and effective for human use. The products that are successfully
developed, if any, will be subject to requisite regulatory approval prior to
their commercial sale, and the approval, if obtainable, may take several years.
Generally, only a very small percentage of

                                       36

new pharmaceutical products are approved for sale. Even if a new pharmaceutical
product is approved for sale, it may not be commercially successful. CTD may
encounter unanticipated problems relating to development, manufacturing,
distribution and marketing, some of which may be beyond CTD's financial and
technical capacity to resolve. The failure to address such problems adequately
will seriously harm CTD's business.

CTD LACKS SALES AND MARKETING EXPERIENCE.

    CTD does not anticipate having the resources in the foreseeable future to
allocate to the sale and marketing of its proposed pharmaceutical and related
products. The future success of CTD may depend, in part, on its ability to enter
into and maintain contracts for such sales and marketing. CTD intends to pursue
such collaborative arrangements; however, there can be no assurances that CTD
will be able to establish or maintain such collaborative arrangements. If CTD
decides not to, or is unable to, enter into such collaborative arrangements, it
will need to devote significant capital funds, management resources and time to
build an in-house sales force that may or may not be effective to market its
products.

FUTURE INABILITY TO OBTAIN RAW MATERIALS OR PRODUCTS FROM CONTRACT MANUFACTURERS
COULD SERIOUSLY AFFECT CTD'S OPERATIONS.

    CTD currently obtains raw materials and other products from single domestic
or foreign suppliers. Although to date CTD has not experienced difficulty in
obtaining these products, CTD cannot assure you that the supply will not be
interrupted in the future or that it will not have to obtain substitute
materials and products. Changes in CTD's raw material suppliers could result in
delays in production, higher raw material costs, and loss of sales and customers
because regulatory authorities must generally approve raw material sources for
pharmaceutical products.

CTD LACKS MANUFACTURING EXPERIENCE AND WILL RELY ON THIRD-PARTY MANUFACTURERS.
THIS COULD ADVERSELY AFFECT CTD'S ABILITY TO MEET CUSTOMERS DEMANDS.

    CTD has no manufacturing capabilities. Accordingly, CTD will need to rely on
third-party manufacturers of its products. CTD may not be able to identify any
such manufacturers, and, even if it is able to do so, CTD may not be able to
enter into manufacturing agreements on terms that are favorable to CTD, if at
all. CTD will be required to rely on contract manufacturers for the foreseeable
future to produce quantities of products and substances necessary for research
and development, pre-clinical trials, human clinical trials and product
commercialization. There can be no assurances that such products can be
manufactured at a cost or in quantities necessary to make them commercially
viable. There can be no assurance that third-party manufacturers will be able to
meet CTD's needs with respect to timing, quantity and quality for the products.
If CTD is unable to contract for a sufficient supply of required products and
substances on acceptable terms, or if it should encounter delays or difficulties
in its relationships with manufacturers, CTD's research and development,
pre-clinical and clinical testing would be delayed, thereby delaying the
submission of products for regulatory approval or the market introduction and
subsequent sales of such products. Any such delays may have a material adverse
effect on CTD's business, financial condition and results of operations.
Moreover, contract manufacturers that CTD may use must adhere to current Good
Manufacturing Practices regulations enforced by the FDA through its facilities
inspection program. If the facilities of such manufacturers cannot pass a
pre-approval plant inspection, the FDA pre-market approval of CTD's products
will not be granted.

CTD DEPENDS ON OTHERS FOR CLINICAL DEVELOPMENT AND REGULATORY APPROVALS OF ITS
PRODUCT CANDIDATES.

    In order for CTD to successfully develop and commercialize its product
candidates, it may need to enter into collaboration agreements with partners to
help research and develop its product candidates

                                       37

and to fund all or part of the costs thereof. CTD may not be able to enter into
such collaboration agreements or the terms of the collaboration agreements may
not be favorable to CTD. CTD's inability to enter into collaboration agreements
could delay or preclude the development, manufacture and/or marketing of some of
its product candidates or could significantly increase the costs of doing so.

    In the future, CTD may grant to its collaborative partners, if any, rights
to license and commercialize pharmaceutical and related products developed under
these collaborative agreements and such rights would limit CTD's flexibility in
considering alternatives for the commercialization of such products. Under such
agreements, CTD may rely on its collaborative partners to conduct research
efforts and clinical trials on, obtain regulatory approvals for, and
manufacture, market and commercialize certain of its product candidates.
Although CTD believes that its collaborative partners will have an economic
motivation to commercialize the pharmaceutical and related products which they
may license, the amount and timing of resources devoted to these activities
generally will be controlled by each such individual partner.

                                       38

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
                    IN THIS JOINT PROXY STATEMENT/PROSPECTUS

    This joint proxy statement/prospectus contains forward-looking statements
within the meanings of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, that address activities,
events or developments that Endorex or CTD intends, expects, projects, believes
or anticipates will or may occur in the future are forward looking statements
within the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995, as amended. Such statements are characterized by terminology
including "believe," "hope," "may," "anticipate," "should," "intend," "plan,"
"will," "expect," "estimate," "project," "positioned," "strategy" and similar
expressions. These statements are based on assumptions and assessments made by
Endorex's or CTD's management in light of their experience and their perception
of historical trends, current conditions, expected future developments and other
factors they believe to be appropriate. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those expectations. These risks and uncertainties are beyond
Endorex's and CTD's control and, in many cases, neither can predict the risks
and uncertainties that could cause Endorex's and CTD's actual results to differ
materially from those indicated by the forward-looking statements. Endorex and
CTD disclaim any duty to update any forward-looking statements.

                                       39

                             ENDOREX ANNUAL MEETING

GENERAL

    Endorex is furnishing this joint proxy statement/prospectus to holders of
Endorex common stock and Series B preferred stock in connection with the
solicitation of proxies by the Endorex board of directors for use at the annual
meeting of stockholders of Endorex to be held on November 29, 2001, and any
adjournment or postponement thereof.

    This joint proxy statement/prospectus is first being furnished to Endorex
stockholders on or about October 26, 2001.

DATE, TIME AND PLACE

    The annual meeting will be held on November 29, 2001 at 10:00 a.m., central
standard time, at 28101 Ballard Drive, Suite F, Lake Forest, Illinois.

MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING

    At the annual meeting and any adjournment or postponement of the annual
meeting, Endorex stockholders will be asked to consider and vote upon the
following proposals:

    - to issue shares of Endorex common stock, options and warrants pursuant to
      the merger agreement, under which CTD will become a wholly owned
      subsidiary of Endorex;

    - to amend Endorex's Amended and Restated Certificate of Incorporation
      changing Endorex's name to DOR BioPharma, Inc.;

    - to elect six directors to serve until the next annual meeting of the
      stockholders of Endorex or until their successors are duly elected and
      qualified;

    - to approve an amendment of the 1995 Plan to (i) increase the number of
      shares of common stock issuable under the 1995 Plan by an additional
      2,165,664 shares, (ii) implement a maximum annual limit of 500,000 shares
      of common stock by which the share reserve may increase annually over the
      term of the 1995 Plan under the automatic share increase provision and
      (iii) modify the automatic option grant program to (a) increase the
      initial option grants to newly-elected board members to 50,000 shares
      vesting immediately and (b) provide for annual option grants to continuing
      board members for 10,000 shares vesting over one year;

    - to approve February 21, 2001 option grants to each non-employee member of
      the Endorex board of directors to purchase 50,000 shares of Endorex common
      stock;

    - to ratify the appointment of Ernst & Young LLP as Endorex's independent
      auditors for the fiscal year ending December 31, 2001; and

    - to transact such other business as may properly come before the annual
      meeting or any adjournment or postponement thereof.

OTHER MATTERS

    Endorex knows of no other matters that will be presented for consideration
at the annual meeting. If any other matters properly come before the annual
meeting, it is the intention of the persons named in the enclosed proxy card to
vote the shares they represent as the board of directors may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed proxy.

                                       40

RECORD DATE

    Endorex's board has fixed the close of business on October 23, 2001, as the
record date for determining the Endorex stockholders entitled to notice of and
to vote at the annual meeting.

VOTING OF PROXIES

    Endorex requests that its stockholders complete, date and sign the enclosed
proxy card and promptly mail it to Endorex in the postage-paid envelope
provided. Brokers holding shares in "street name" may vote the shares only if
the stockholder provides instructions on how to vote. Brokers will provide
directions on how to instruct the broker to vote the shares. All properly
executed proxies that Endorex receives prior to the vote at the annual meeting
and that are not revoked will be voted in accordance with the instructions
indicated on the proxy cards or, if no direction is indicated, to approve
proposals described above.

    Stockholders may in the following manner revoke their proxies at any time
prior to their use:

    - by delivering to the secretary of Endorex a signed notice of revocation or
      a later-dated signed proxy card; or

    - by attending the annual meeting and voting in person.

    Attendance at the annual meeting does not in itself serve to revoke a proxy.

VOTES REQUIRED

    As of the close of business on October 15, 2001, there were 12,741,858
shares of Endorex common stock and 100,410 shares of Series B preferred stock
outstanding and entitled to vote. The affirmative vote of the holders of a
majority of the shares of Endorex common stock, voting together with the holders
of Endorex Series B preferred stock on an as converted basis, that are entitled
to vote and are present or represented by proxy at the Endorex meeting is
required to approve the proposals described above, except (a) the election of
directors which requires a plurality of the votes cast and (b) the amendment to
the Amended and Restated Certificate of Incorporation which requires the
approval of the holders of a majority of the outstanding shares of Endorex
common stock, voting together with the holders of Endorex Series B preferred
stock on an as converted basis. Endorex stockholders are entitled to one vote
per share of Endorex common stock and approximately 13.55 votes per share of
Endorex Series B preferred stock owned on October 23, 2001, the record date.

    As of October 15, 2001, directors and executive officers of Endorex and
their affiliates beneficially owned an aggregate of 1,707,686 shares of Endorex
common stock and 100,410 shares of Endorex Series B preferred stock (exclusive
of any shares issuable upon the exercise of options) representing approximately
13.4% of the outstanding Endorex common stock and 100% of the outstanding
Endorex Series B preferred stock on such date. The directors and executive
officers of Endorex have indicated their intention to vote their shares of
Endorex common stock in favor of the issuance of shares of Endorex common stock,
options and warrants pursuant to the merger agreement.

QUORUM; ABSTENTIONS AND BROKER NON-VOTES

    The required quorum for the transaction of business at the annual meeting is
holders, present or by proxy, of a majority of the shares of Endorex common
stock and Series B preferred stock, on an as converted basis, issued and
outstanding on the record date. If you hold your shares of Endorex common stock
through a broker, bank or other nominee, generally the nominee may only vote
your Endorex common stock in accordance with your instructions. However, if your
broker or nominee has not timely received your instructions, the nominee may
vote on matters for which it has discretionary voting authority. Brokers
generally will not have discretionary authority to vote on the proposal to

                                       41

approve the issuance of Endorex common stock, options and warrants in connection
with the Merger. If a broker cannot vote certain shares for or against a given
proposal because it does not have discretionary voting authority, this is a
"broker non-vote" for that proposal. Brokers holding shares for beneficial
owners cannot vote on the actions proposed in this joint proxy
statement/prospectus without the owners' specific instructions. Abstentions and
broker non-votes will be included in determining the number of shares present at
the meeting for purposes of determining whether a quorum exists. Broker
non-votes will not be included in vote totals and will have no effect on the
outcome of the votes on the proposals. Abstentions, however, will have the same
effect as a vote against the proposals.

SOLICITATION OF PROXIES; PROXY SOLICITATION EXPENSES

    Endorex has retained the services of D.F. King & Company to assist it in
soliciting of proxies from Endorex stockholders. Endorex does not expect to pay
more than $9,000, plus reasonable out-of-pocket expenses, for such services.
Endorex and CTD will each bear their own expenses in connection with soliciting
proxies for their respective meetings of stockholders, except that each will pay
one-half of all filing fees incurred in connection with the registration
statement and this joint proxy statement/prospectus.

    In addition to solicitation by mail, the directors, officers and employees
of Endorex may solicit proxies from Endorex stockholders by telephone, facsimile
or in person. Endorex will ask brokerage houses, nominees, fiduciaries and other
custodians to forward soliciting materials to beneficial owners and will
reimburse them for their reasonable expenses incurred in sending proxy materials
to beneficial owners.

BOARD RECOMMENDATIONS

    Endorex's board of directors has determined that the proposed merger and the
issuance of shares of Endorex common stock, options and warrants are fair to and
in the best interests of Endorex and Endorex's stockholders, and recommends that
you vote to approve such issuance of Endorex common stock, options and warrants
in connection with the proposed merger. Endorex's board of directors has also
determined that the other proposals are in the best interests of Endorex and
Endorex's stockholders and recommends that you vote in favor of such proposals.

    The matters to be considered at the annual meeting are of great importance
to Endorex stockholders. Accordingly, Endorex stockholders are urged to read and
carefully consider the information presented in this joint proxy
statement/prospectus, and to complete, date, sign and promptly return the
enclosed proxy card in the enclosed postage-paid envelope.

    Endorex stockholders should NOT send any stock certificates with their proxy
cards.

                                       42

                              CTD SPECIAL MEETING

GENERAL

    CTD is furnishing this joint proxy statement/prospectus to holders of CTD
common stock and Series A preferred stock in connection with the solicitation of
proxies by the CTD board of directors for use at the special meeting of
stockholders of CTD to be held on November 29, 2001, and any adjournment or
postponement thereof.

    This joint proxy statement/prospectus is first being furnished to
stockholders of CTD on or about October 26, 2001.

DATE, TIME AND PLACE

    The special meeting will be held on November 29, 2001 at 10:00 a.m., local
time, at CTD's offices at 1680 Michigan Avenue, Suite 700, Miami, Florida 33139.

MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING

    At the CTD special meeting and any adjournment or postponement of the
special meeting, CTD stockholders will be asked:

    - to approve the merger and the merger agreement; and

    - to transact such other business as may properly come before the special
      meeting.

OTHER MATTERS

    CTD knows of no other matters that will be presented for consideration at
the special meeting. If any other matters properly come before the special
meeting, the persons named in the enclosed form of proxy intend to vote the
shares they represent as the board of directors may recommend. By signing and
returning the enclosed proxy card, you are granting discretionary authority with
respect to such other matters.

RECORD DATE

    CTD's board has fixed the close of business on November 19, 2001, as the
record date for determining CTD stockholders entitled to notice of and to vote
at the special meeting.

VOTING OF PROXIES

    CTD requests that stockholders of CTD complete, date and sign the enclosed
proxy card and promptly mail it to CTD in the postage-paid envelope provided.
All properly executed proxies that CTD receives prior to the vote at the special
meeting, and that are not revoked will be voted in accordance with the
instructions indicated on the proxy cards or, if no direction is indicated, to
approve the merger and the merger agreement.

    Stockholders may in the following manner revoke their proxies at any time
prior to their use:

    - by delivering to the secretary of CTD a signed notice of revocation or a
      later-dated signed proxy card; or

    - by attending the annual meeting and voting in person.

    Attendance at the special meeting does not in itself serve to revoke a
proxy.

                                       43

VOTES REQUIRED

    As of the close of business on October 15, 2001, there were 5,000,000 shares
of CTD common stock and 7,628,750 shares of Series A preferred stock outstanding
and entitled to vote. The affirmative vote of the holders of a majority of the
outstanding shares of CTD common stock, voting together with the holders of
Series A preferred stock, on an as converted basis is required to approve the
merger and the merger agreement. CTD stockholders are entitled to one vote per
share of CTD common stock and one vote per share of CTD Series A preferred stock
owned on November 19, 2001.

    As of October 15, 2001, directors and executive officers of CTD and their
affiliates beneficially owned an aggregate of 2,872,453 shares of CTD common
stock (exclusive of any shares issuable upon the exercise of options) and
1,000,000 shares of CTD Series A preferred stock, representing approximately
39.7% of the shares of CTD common stock and approximately 13.1% of the shares of
CTD Series A preferred stock outstanding on such date. The directors and
executive officers of CTD have indicated their intention to vote their shares of
CTD common stock in favor of the merger and the merger agreement. Pursuant to a
voting agreement in the form attached as Appendix II hereto, certain CTD
stockholders, including CTD's directors, executive officers and their
affiliates, owning beneficially approximately 63% and 61% of CTD's common stock
and Series A preferred stock, respectively, outstanding as of October 15, 2001
have agreed to vote all of their shares of CTD capital stock for approval of the
merger and the merger agreement.

QUORUM

    The required quorum for the transaction of business at the special meeting
is holders, present or by proxy, of a majority of the issued and outstanding
shares of CTD common stock and Series A preferred stock, on an as converted
basis, issued and outstanding on the record date.

SOLICITATION OF PROXIES; PROXY SOLICITATION EXPENSES

    CTD will bear its own expenses in connection with the solicitation of
proxies for its special meeting of stockholders, except that Endorex and CTD
each will pay one-half of all filing fees incurred in connection with the
registration statement and this joint proxy statement/prospectus.

    In addition to solicitation by mail, the directors, officers and employees
of CTD may solicit proxies from stockholders by telephone, facsimile or in
person.

BOARD RECOMMENDATIONS

    The CTD board has determined that the merger and the merger agreement are in
the best interests of CTD and its stockholders. Accordingly, the board has
approved, and recommends that stockholders vote to approve the merger and the
merger agreement. In considering this recommendation, CTD stockholders should be
aware that some CTD directors and officers have interests in the merger that are
different from, or in addition to, those of CTD stockholders, and that Endorex
has agreed to provide certain indemnification arrangements to some directors and
officers of CTD. See "The Merger--Interests of Certain Persons in the Merger and
Potential Conflicts of Interest."

    The matters to be considered at the special meeting are of great importance
to CTD stockholders. Accordingly, CTD stockholders are urged to read and
carefully consider the information presented in this joint proxy
statement/prospectus, and to complete, date, sign and promptly return the
enclosed proxy card in the enclosed postage-paid envelope.

    CTD's stockholders should NOT send any stock certificates with their proxy
cards. A transmittal form with instructions for the surrender of CTD stock
certificates will be mailed to CTD stockholders promptly once the merger has
been completed.

                                       44

                                   THE MERGER

    THIS SECTION OF THE JOINT PROXY STATEMENT/PROSPECTUS DESCRIBES MATERIAL
ASPECTS OF THE PROPOSED MERGER, INCLUDING THE MERGER AGREEMENT, WHICH IS
ATTACHED AS APPENDIX I HERETO AND INCORPORATED BY REFERENCE HEREIN. WHILE WE
BELIEVE THAT THIS DESCRIPTION COVERS THE MATERIAL TERMS OF THE MERGER AND THE
RELATED TRANSACTIONS, THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT
IS IMPORTANT TO ENDOREX STOCKHOLDERS AND CTD STOCKHOLDERS. FOR A MORE COMPLETE
UNDERSTANDING OF THE MERGER, STOCKHOLDERS SHOULD READ CAREFULLY AND IN THEIR
ENTIRETY THE MERGER AGREEMENT AND THE OTHER DOCUMENTS WE REFER TO.

GENERAL

    Endorex's and CTD's respective boards of directors are using this joint
proxy statement/prospectus to solicit proxies from the holders of Endorex's and
CTD's respective capital stock for use at the Endorex annual meeting and the CTD
special meeting. At Endorex's annual meeting, holders of Endorex capital stock
will be asked to vote upon approval and adoption of the issuance of Endorex
common stock, options and warrants pursuant to the terms of the merger
agreement. At CTD's special meeting, holders of CTD capital stock will be asked
to vote upon approval of the merger and the merger agreement.

BACKGROUND OF THE MERGER

    At the end of 1999, Endorex began concentrating its efforts on developing
its drug delivery business. In a presentation to the Endorex board of directors
in February 2000, Michael Rosen, President and Chief Executive Officer of
Endorex, proposed that Endorex acquire technology or companies within the field
of drug delivery. Endorex's management and board believed Endorex should seek to
increase financial resources, product portfolio (particularly products in
clinical trials), and scientific resources. The board approved management's
recommendation that the Endorex management team identify potential acquisition
candidates. Dr. Kenneth Tempero, Chairman of the Endorex board of directors, and
Mr. Rosen contacted and visited drug delivery companies to explore both
potential interest in an acquisition and synergies with Endorex. In addition,
Steve H. Kanzer, a director of Endorex and an officer and director of CTD,
provided non-confidential information regarding CTD to Endorex for review.
Additionally, during the fourth quarter of 2000, Peter Kash and Martin
Kratchman, each a security holder of both Endorex and CTD and an employee of
Paramount Capital, Inc., an investment bank that is an affiliate of significant
stockholders of both Endorex and CTD, suggested that Mr. Rosen and Mr. Kanzer
explore a potential transaction between Endorex and CTD. CTD was interested in
exploring such a transaction as a means of providing it investors with
liquidity, while Endorex was interested in obtaining CTD's financial resources
and product portfolio.

    On October 18, 2000, Endorex and CTD executed a mutual confidentiality and
non-disclosure agreement and CTD provided Endorex with a package of confidential
information explaining CTD's product portfolio, capital structure and financial
situation. Mr. Kanzer and Mr. Rosen also spoke by telephone to arrange a meeting
at O'Hare Airport in Chicago, Illinois to explore further merger possibilities.

    On October 23, 2000, a meeting was held at O'Hare Airport with Mr. Rosen,
Mr. Frank Reid, former Vice President, Finance and Corporate Development of
Endorex, Dr. Colin Bier, Chairman of the board of directors of CTD, Mr. Kanzer
and Mr. Nicholas Stergiopoulos, Director of Corporate Development of CTD, in
attendance. The parties discussed various issues, including the potential
synergies of a business combination. At the end of the meeting, the parties
indicated that they were interested in pursuing further discussions and
initiating further due diligence.

    On October 30, 2000, Mr. Kanzer sent to Mr. Rosen a proposal that Endorex
acquire CTD. This proposal was accompanied by an initial term sheet and outline
of a proposed merger structure,

                                       45

including a proposed valuation of CTD. Mr. Rosen responded by telephone that he
would review the proposal with the Endorex board of directors.

    On November 9, 2000, at an Endorex board meeting, Mr. Rosen and Mr. Reid
presented the CTD proposal as well as details of discussions with other
potential acquisition candidates. The board established a Strategy and Mergers
and Acquisition Committee, or M&A Committee, consisting of Dr. Tempero,
Dr. Paul Rubin and Mr. Richard Dunning, to work with Mr. Rosen and Endorex
management on potential acquisition opportunities.

    On November 29, 2000, Dr. Bier and Mr. Stergiopoulos visited Endorex's
headquarters in Lake Forest, Illinois and met with Mr. Rosen, Dr. Tempero,
Mr. Robert Brey, former Vice President of Research and Development of Endorex,
and Mr. Reid. Both parties discussed development of their respective products
and technologies, and the status of collaborations with corporate partners and
scientific and commercial institutions. The parties also discussed the potential
synergies of combining the companies and reviewed the terms of CTD's merger
proposal. Both parties expressed interest in continuing their merger
discussions.

    During December 2000, a number of telephone conversations occurred among
Dr. Tempero, Mr. Rosen, Dr. Bier and Mr. Kanzer regarding the potential
synergies of combining Endorex and CTD, as well as how to structure any merger.

    On December 6, 2000, a telephone conference was held among Dr. Tempero,
Mr. Rosen, Mr. Kanzer, representatives of Brobeck Phleger & Harrison LLP, or
Brobeck, legal counsel for Endorex, and a representative of Kramer Levin
Naftalis & Frankel LLP, or Kramer Levin, legal counsel for CTD, regarding the
potential structure of a merger transaction between Endorex and CTD.

    On December 18, 2000, another telephone conference was held with
Dr. Tempero, Mr. Rosen, Mr. Kanzer, Dr. Bier, representatives of Brobeck and
representatives of Kramer Levin participating. The discussion again was
regarding the potential structure of a merger transaction between Endorex and
CTD and related AMEX and SEC requirements.

    On December 26, 2000, Mr. Rosen sent to Mr. Kanzer a counterproposal to
Mr. Kanzer's October 30, 2000 acquisition proposal.

    On December 29, 2000, a telephone conference was held among Dr. Bier,
Mr. Kanzer, Dr. Tempero and Mr. Rosen in which Mr. Rosen outlined the rationale
for his acquisition proposal. Although issues remained open regarding the terms
of an acquisition, both parties indicated interest in pursing discussions
regarding a business combination and a two-day meeting was scheduled for
January 8-9, 2001 in Miami, Florida, to negotiate a term sheet for the
transaction.

    On January 3, 2001, a telephonic meeting of Endorex's M&A Committee was
held. Mr. Rosen summarized conversations with CTD since the board meeting held
on November 9, 2000, including the discussions that occurred during the visit to
Endorex by CTD management and the telephone conference among the parties on
December 29, 2000.

    On January 8-9, 2001, Dr. Tempero, Mr. Rosen, Dr. Bier, Mr. Kanzer and
Mr. Stergiopoulos met in Miami, Florida, to negotiate a term sheet for the
transaction. At the meeting, the major terms of a potential transaction were
agreed upon. The parties also agreed that Mr. Rosen would have Brobeck draft a
letter of intent and term sheet for review by the parties.

    From January 9, 2001, until execution of the letter of intent regarding the
merger on February 27, 2001, numerous telephone conversations were held among
Dr. Tempero, Mr. Rosen, Dr. Bier, Mr. Stergiopoulos and representatives of each
of Brobeck and Kramer Levin to negotiate the letter of intent and term sheet,
request due diligence materials and discuss due diligence materials and issues
with respect to both Endorex and CTD.

                                       46

    On January 16, 2001, a telephonic meeting of the M&A Committee was held
during which Mr. Rosen summarized the interim discussions with CTD, including
the meeting in Miami, Florida and the potential terms of the transaction.

    On January 29, 2001, a telephonic meeting of the M&A Committee was held and
was attended by Mr. Dunning and Dr. Tempero. Also present by invitation were
Mr. Rosen and Mr. Darren Hensley of Brobeck. Mr. Rosen briefed the committee on
discussions that had occurred between Endorex and CTD since January 16, 2001.
The M&A Committee discussed a two-step process proposed by CTD to consummate the
merger as compared to a conventional merger structure. The M&A Committee
determined that while the two-step process had elements that could be considered
attractive, it also entailed several potential drawbacks for Endorex. The M&A
Committee also discussed certain due diligence issues regarding CTD.

    On February 13, 2001, the M&A Committee members met with Dr. Bier in a
conference room at Logan Airport in Boston, Massachusetts. The purpose of the
meeting was to allow the members of the M&A Committee to meet and interview
Dr. Bier, as the M&A Committee contemplated that it might be appropriate to
appoint Dr. Bier Chairman and Chief Executive Officer of Endorex subsequent to a
merger. After introductions and a brief discussion of Dr. Bier's background and
experience, a discussion ensued regarding management philosophy, vision for the
combined companies, strategies for attaining goals, the priorities for the
combined companies, investor relations, public relations, capital structure,
capital needs, and the like. Dr. Bier's compensation requirements were also
discussed.

    On February 21, 2001, at Endorex's quarterly board of directors meeting,
Mr. Rosen provided the board with a draft of the letter of intent and term sheet
for the merger transaction that had been negotiated with CTD. The board approved
the letter of intent and term sheet and authorized Endorex management to execute
the letter of intent with CTD. Subsequent to the meeting, Mr. Rosen telephoned
Dr. Bier to inform him of the board's approval of the letter of intent and term
sheet.

    On February 26, 2001, a telephonic meeting of CTD's board of directors was
held to discuss the letter of intent and term sheet. Present by invitation were
Mr. Stergiopoulos as well as Kenneth A. Adams of Kramer Levin. The board of
directors voted to approve the letter of intent and term sheet. Mr. Kanzer
abstained from voting.

    On February 27, 2001, Endorex and CTD executed a letter of intent with an
attached term sheet outlining the terms of the proposed acquisition of CTD by
Endorex pursuant to a merger transaction.

    From the execution of the letter of intent on February 27, 2001, until
execution of the agreement and plan of merger and reorganization on July 31,
2001, numerous telephone conversations were held among Dr. Tempero, Mr. Rosen,
Dr. Bier, Mr. Stergiopoulos and representatives of each of Brobeck and Kramer
Levin to negotiate the terms of the merger agreement and related agreements,
request due diligence materials and discuss due diligence materials and issues
with respect to both Endorex and CTD.

    On March 9, 2001, Dr. Brey received from Mr. Stergiopoulos a partial set of
FDA submissions related to clinical development programs for orBec-TM- and
Oraprine-TM-. Endorex also requested additional documents regarding
manufacturing and formulation data on the new formulations of orBec-TM-.

    On March 11, 2001, after contacting several investment banks, Endorex
executed an engagement letter with Wells Fargo Van Kasper, or WFVK, pursuant to
which WFVK would provide the Endorex board of directors with a fairness opinion
with respect to the fairness of the terms of the merger transaction to the
stockholders of Endorex from a financial point of view.

    On April 9, 2001, a telephonic M&A Committee meeting occurred during which
Mr. Rosen provided an update regarding the status of negotiations with CTD
regarding the transaction. A

                                       47

discussion ensued regarding the open issues and what positions Endorex should
take. Mr. Rosen reviewed with the M&A Committee target dates for moving the
transaction to completion.

    On April 17, 2001, Mr. Steve Nelson of WFVK visited Endorex's offices to
meet with Mr. Koulogeorge, Mr. Rosen and Dr. Brey for purposes of a due
diligence review of Endorex related to the WFVK fairness opinion.

    On April 20, 2001, a telephone conference occurred pursuant to which
Dr. Hal Gerber of WFVK conducted a due diligence review of CTD with Dr. Peter
Hoyle and Dr. Paul Waymack, CTD regulatory and clinical consultants, and
Dr. Bier and Mr. Stergiopoulos.

    On May 1, 2001, there took place a joint telephonic meeting of the Endorex
board of directors Executive Committee and M&A Committee. Mr. Hensley of Brobeck
was present by invitation for a portion of the meeting. Mr. Rosen recapped the
history of the negotiations, summarized the proposed changes from the letter of
intent, explained the rationale for each of the deviations and analyzed their
potential impact upon the transaction. He then proceeded to itemize the open
issues, explaining their background and solicited input and guidance from the
committees. Dr. Tempero summarized the feedback received from Dr. Bier regarding
one of the open issues, the terms of his employment agreement, and also
solicited input and guidance from the committees with respect thereto.

    On May 10, 2001, a telephonic M&A Committee meeting occurred. Mr. Rosen
summarized the status of CTD negotiations since the last M&A Committee meeting
and informed the committee of recent comments from CTD on the transaction
documents that raised a number of new issues. The M&A Committee discussed the
items in detail and provided guidance to Mr. Rosen with respect thereto.

    On May 28, 2001, CTD and Endorex executed an amendment to the letter of
intent extending the exclusivity period to June 25, 2001.

    On June 14, 2001, a telephonic meeting of the M&A Committee occurred. The
purpose of the meeting was for Mr. Rosen to provide a status report of the
negotiations with CTD, to summarize the status of scientific work underway
within both companies, and to summarize remaining open items with respect to the
transaction negotiations. The M&A Committee determined that the exclusivity
period should not be extended upon its current expiration and that Endorex would
then be free to explore other acquisition candidates.

    On June 15, 2001, Mr. Rosen sent a letter to Dr. Bier reminding CTD of the
impending expiration of the exclusivity period and indicating that Endorex would
not agree to extend the exclusivity period in the letter of intent and that it
would discontinue all merger negotiations with CTD at that time. Additionally,
Mr. Rosen placed a telephone call to Dr. Bier to advise him of the content of
the letter and the concern of the Endorex board that the transaction
negotiations were proceeding much too slowly.

    On July 2, 2001, a telephonic meeting of CTD's board of directors was held
to discuss the merger agreement. Present by invitation were Mr. Stergiopoulos as
well as Mr. Adams of Kramer Levin. The principal topic of discussion was
concerns expressed by certain CTD stockholders regarding treatment of the
outstanding warrants to purchase shares of CTD Series A preferred stock. Also
discussed were other aspects of the merger agreement as well as composition of
Endorex's board of directors post-merger. The board did not approve the merger
agreement, but instead agreed to hold another meeting after any uncertainties
regarding treatment of the warrants had been resolved.

    On July 2, 2001, a special telephonic meeting of the Endorex board of
directors was held to approve the merger, the merger agreement and the
transactions contemplated thereby. Present by invitation were Mr. Koulogeorge;
Dr. Gerber, Mr. Allan Auerbach and Mr. Nelson of WFVK; and Mr. Hensley and
Mr. John Kim of Brobeck. Mr. Rosen presented an overview of the transaction

                                       48

documents previously distributed to the board and the merger transaction.
Mr. Kanzer posed questions about CTD's warrants and the request of one CTD
stockholder that the terms upon which Endorex issues substitute warrants for
them be changed. Mr. Kanzer indicated that the CTD board of directors had not
approved the merger at a meeting earlier that day and had agreed to reschedule
the meeting after resolution of the stockholder request. Due to this new
information, the meeting was adjourned without approving the transaction.

    On July 6, 2001, a telephonic meeting of CTD's board of directors was held
to discuss the merger agreement, treatment of the warrants to purchase shares of
Series A preferred stock, and when Endorex would announce the proposed merger to
the public. Present by invitation were Mr. Stergiopoulos and Mr. Adams. The
board of directors voted to approve the merger agreement and to submit the
merger agreement to CTD's stockholders for their approval. Mr. Kanzer abstained
from voting.

    On July 13, 2001, a special telephonic meeting of the Endorex board of
directors was held. Present by invitation were Mr. Koulogeorge, Mr. Nelson,
Dr. Gerber, Mr. Auerbach, Mr. Kim and Mr. Hensley. Mr. Rosen discussed the
background of the proposed merger and changes in the terms of the transaction
that had occurred due to the concern raised by a CTD stockholder. Mr. Rosen
informed the board that the CTD board had previously approved the merger
agreement with the revisions requested by the stockholder. The representatives
of WFVK presented their analysis and the background for their fairness opinion,
as well as the assumptions, terms and limitations thereof. WFVK delivered its
oral opinion, subsequently confirmed in writing, that the merger was fair to the
stockholders of Endorex from a financial point of view. The board of directors
subsequently voted to approve the merger, the merger agreement and the
transactions contemplated thereby and to submit the transaction to Endorex's
stockholders for approval. Mr. Kanzer abstained from the vote. Mr. Rosen then
discussed the actions and items that need to be completed prior to or
concurrently with the execution of the merger agreement and the time frame for
completing these actions and items, as well as the execution of the merger
agreement. Mr. Rosen also discussed other actions that will need to be taken
subsequent to the execution of the merger agreement and the board discussed when
to announce publicly the proposed merger.

    On July 19, 2001, a draft of a press release announcing the merger was
distributed to CTD for review. Also on July 19, 2001, Dr. Bier visited Endorex
to meet with Mr. Rosen and Endorex's management team. Discussions covered what
documents needed to be completed before the merger agreement could be signed,
the press release announcing the execution of the merger agreement, the
timetable for filing a Form S-4 registration statement with the SEC and the
ensuing process, timing for stockholder meetings of each company, company
integration activities, and presentations at financial meetings in the fall.

    Between July 19, 2001 and July 31, 2001, numerous telephone conferences
occurred between Mr. Rosen, Mr. Stergiopoulos, Dr. Bier and representatives of
each of Brobeck and Kramer Levin negotiating the language of the press release
and the Form 8-K to be filed with the SEC in connection with the issuance of the
press release.

    On July 31, 2001, Endorex, Roadrunner Acquisition, Inc., or Roadrunner, a
wholly owned subsidiary of Endorex, and CTD executed the merger agreement and
Endorex, Roadrunner, CTD and certain stockholders of CTD executed the voting
agreement.

    On August 1, 2001, Endorex and CTD issued a joint press release announcing
the execution of the merger agreement and Endorex filed a Form 8-K and Rule 425
filing with the SEC regarding the press release.

    On August 7, 2001, Endorex made a Rule 425 filing with the SEC regarding
question and answer materials distributed to Endorex employees.

                                       49

    On September 5, 2001, pursuant to Rule 425, Endorex filed with the SEC
slides used in connection with a presentation delivered by Mr. Rosen at the WFVK
"The Class of 2001" conference in San Francisco, California.

    On September 25, 2001, CTD filed with the SEC under Rule 425 a press release
announcing that the FDA had recently granted Enteron Pharmaceuticals, Inc., a
majority owned subsidiary of CTD, an "orphan drug" designation for the use of
orBec-TM- to prevent graft-versus-host disease.

    On October 9, 2001, Endorex filed with the SEC under Rule 425 a press
release announcing that Endorex filed with the SEC the registration statement of
which this joint proxy statement/prospectus is a part.

    On October 24, 2001, Endorex expects to file with the SEC under Rule 425
slides to be used in connection with a presentation to be delivered by
Mr. Rosen at the Chicago Biotech Network Association's "BioMarketplace 2001"
conference in Chicago, Illinois.

STRUCTURE OF THE MERGER

    Roadrunner, a wholly owned subsidiary of Endorex, will merge into CTD, and
CTD will survive the merger and become a wholly owned subsidiary of Endorex. CTD
stockholders will become stockholders of Endorex.

ENDOREX'S REASONS FOR THE MERGER AND RECOMMENDATION OF THE ENDOREX BOARD OF
  DIRECTORS

    The Endorex board of directors, after careful consideration, has approved
the merger, the merger agreement and the transactions contemplated thereby,
including the proposed issuance of Endorex common stock, options and warrants in
connection with the merger. The Endorex board believes that the merger is
advisable and in the best interests of its stockholders and recommends that its
stockholders vote "FOR" the proposed issuance of Endorex common stock and
options and warrants to acquire Endorex common stock in connection with the
merger.

    The Endorex board of directors also considered and reviewed with the
management of Endorex a wide variety of information, factors and reasons in
connection with its evaluation of the merger and the merger agreement. In
particular, Endorex's board of directors considered the following information,
reasons and factors:

    - that CTD had, as of June 30, 2001, no debt and approximately $5 million in
      cash, which CTD believes will be sufficient to fund development of
      orBec-TM- and Oraprine-TM- in the near term and to take orBec-TM-, its
      lead drug candidate in phase III clinical trials, through the FDA approval
      process;

    - that the addition of CTD's drug product candidates will increase and
      broaden Endorex's product pipeline;

    - that the merged companies may provide enhanced opportunities for new drug
      product discoveries and commercial alliances;

    - the likelihood the merger may benefit Endorex in its negotiations with
      potential collaborators, corporate partners, licensors and licensees;

    - information concerning CTD's and Endorex's respective businesses, plans
      and operations, technology, management, competitive position, future
      business prospects, and historical and projected financial performance;

    - the complementary nature of CTD's and Endorex's operations and strategy,
      in that they both focus on pre-approved compounds;

                                       50

    - the operational and administrative cost savings that would result from the
      merger with CTD;

    - the amount of Endorex common stock and options and warrants exercisable
      for Endorex common stock to be issued to CTD's stockholders;

    - the compatibility of CTD's and Endorex's management;

    - the effect of the merger on Endorex's potential corporate partners and
      collaborators; and

    - the terms of the merger agreement.

    In reaching its conclusions, the board also considered the following:

    - the results of management's analysis of the drug delivery and development
      industry generally;

    - the written opinion of WFVK, independent financial advisors to the board,
      dated July 13, 2001, that, as of July 13, 2001, and based on the
      considerations set forth in the opinion, the exchange of shares of
      Endorex's common stock and options and warrants to acquire Endorex common
      stock for all of CTD's outstanding common stock, preferred stock, options
      and warrants is fair from a financial point of view to Endorex's
      stockholders;

    - management's valuation of CTD at approximately 10 million shares of
      Endorex common stock (utilizing an Endorex common stock per share price of
      $1.50 as of January 9, 2001) after extensive arm's-length negotiations
      with CTD;

    - that Endorex would remain a public entity after the merger was complete;
      and

    - restrictions on Endorex's ability to acquire other entities prior to the
      closing of the merger and the provisions regarding the payment of a fee
      under certain circumstances upon termination of the merger agreement.

    Endorex's board of directors also considered a variety of potential risks
and detriments, including, but not limited to, the following:

    - CTD's limited operating history;

    - CTD's limited revenue and historical and projected losses from operations;

    - the difficulties associated with merging the operations of each company
      including the distance between operational locations;

    - the risk that the merger might not be consummated;

    - the effect that announcing the merger would have on the price of Endorex's
      common stock;

    - the time and costs incurred or associated with the merger; and

    - other applicable risks described in this joint proxy statement/prospectus
      under "Risk Factors" starting on page 16.

    The Endorex board of directors was made aware and discussed the interests of
Steve H. Kanzer in CTD and the merger. Steve H. Kanzer abstained in the board's
vote to approve the merger, the merger agreement and the transactions
contemplated thereby. See "The Merger--Interests of Certain Persons in the
Merger and Potential Conflicts of Interest."

    Due to the many different factors and risks and the information considered
in connection with its evaluation of the merger, Endorex's board did not find it
practicable to quantify or otherwise assign relative weight or value to the
specific factors that it considered in approving the merger, the merger
agreement and the transactions contemplated thereby. Furthermore, individual
Endorex board members may have viewed or valued factors considered by them
differently from the other Endorex board members.

                                       51

    The foregoing discussion of the information, factors and risks considered by
the Endorex board of directors is not meant to be exhaustive, but includes the
principal factors considered by the board.

OPINION OF ENDOREX'S FINANCIAL ADVISOR

SELECTION OF INDEPENDENT FINANCIAL ADVISOR FOR FAIRNESS OPINION

    Endorex's objectives in selecting an independent financial advisor to render
a fairness opinion in connection with the merger were to:

    - engage an independent financial advisor recognized as a leader in
      biotechnology transactions and with knowledge of the biotechnology
      industry;

    - obtain the fairness opinion at a reasonable cost in relationship to the
      size and valuation of the transaction; and

    - establish a relationship for future activities of Endorex.

    Endorex contacted several independent financial advisors, including Gruntal,
Adams Harkness & Hill, William Blair & Co., and WFVK, to discuss their interest
in working with Endorex on the merger and in continuing to work with Endorex in
the future for other investment banking activities. After discussion with
personnel from the healthcare or lifescience divisions of each of these entities
and receiving cost estimates for rendering of the fairness opinion, Endorex
selected WFVK as its independent financial advisor in connection with the
merger. Prior to this contact, Endorex had no banking or other relationship with
WFVK or any of its affiliates during the last two years. An affiliate of WFVK,
Wells Fargo Bank Minnesota, National Association, will serve as escrow agent
under the terms of the escrow agreement to be executed at the closing of the
merger.

OPINION OF WELLS FARGO VAN KASPER

    On March 11, 2001, Endorex engaged WFVK to provide financial advisory
services to Endorex regarding Endorex's proposed business combination with CTD.
On July 13, 2001, WFVK delivered its oral opinion to Endorex's board of
directors, subsequently confirming that opinion with a written opinion dated
July 13, 2001, as to the fairness to the stockholders of Endorex, from a
financial point of view, of the merger consideration to be paid by Endorex in
the merger.

    WFVK's opinion is limited to the fairness of the merger consideration, from
a financial point of view, to the stockholders of Endorex and does not address
Endorex's underlying business decision to proceed with the merger. No
limitations were imposed by the Endorex board on WFVK with respect to the
investigations made or procedures followed by it in furnishing its opinion. The
merger consideration was determined through negotiations between the respective
managements of Endorex and CTD. WFVK did not assist Endorex in those
negotiations and in the negotiations leading to an agreement on principal
structural and terms of the agreement. In furnishing its opinion, WFVK was not
engaged as an agent or fiduciary of Endorex's stockholders or any other third
party.

    THE FULL TEXT OF THE WRITTEN OPINION OF WFVK, WHICH SETS FORTH ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION
WITH THE OPINION, IS ATTACHED AS APPENDIX III HERETO. THE SUMMARY CONTAINED
HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION. WE URGE THE STOCKHOLDERS OF ENDOREX TO CAREFULLY READ THE OPINION IN
ITS ENTIRETY.

    The WFVK opinion does not address the following:

    - the relative merits of the merger and any other transactions;

    - business strategies discussed by the Endorex board as alternatives to the
      merger; or

    - the underlying business decision of the Endorex board to proceed with the
      merger process.

                                       52

    In connection with the preparation of its opinion, WFVK did, among other
things, the following:

    - reviewed the financial terms and conditions set forth in the form of the
      merger agreement provided to WFVK by Endorex, which was represented to
      WFVK to be the final version to be executed by both parties;

    - reviewed certain financial information relating to CTD, including
      historical financial and operating statements and financial and operating
      projections prepared by the management of CTD;

    - discussed with members of CTD's management CTD's historical and current
      business operations, financial conditions and prospects and other matters
      WFVK deemed relevant;

    - discussed with members of Endorex's management Endorex's historical and
      current business operations, financial conditions and prospects and other
      matters WFVK deemed relevant;

    - reviewed operating results, trading multiples, research reports and
      consensus revenues and earnings estimates reported by I/B/E/S
      International, Inc., a third party financial information service company
      that provided to WFVK such information for selected publicly traded
      companies that WFVK deemed comparable to CTD;

    - compared the financial terms of the merger with the financial terms, to
      the extent publicly available, of other business combinations that WFVK
      deemed relevant;

    - reviewed the stock price and trading history of Endorex common stock; and

    - made other studies, inquiries and analyses and reviewed other data as WFVK
      deemed relevant and appropriate, based on WFVK's judgement as investment
      bankers, for the purpose of the opinion.

    In the course of WFVK's review, the assumption was made, with Endorex's
permission, that the documents prepared to be used and signed by the parties to
formally effect the merger, including any disclosure material to be delivered to
the stockholders of Endorex to elicit the necessary consents to the merger, will
effect the merger on the terms set forth in the proposed form of the merger
agreement provided to WFVK by Endorex, without material alteration.

    WFVK did not negotiate the terms of the merger or provide any legal advice
with respect to the merger. WFVK did not make or provide an independent
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of CTD or Endorex nor did WFVK make a physical inspection of any of
the properties or assets of CTD or Endorex.

    In rendering its opinion, WFVK relied, without independent verification, on
the accuracy and completeness of all of the financial and other information that
was publicly available or furnished or otherwise communicated to WFVK by Endorex
and CTD and relied upon and assumed without independent verification that there
had been no material change in the assets, financial condition and business
prospects of CTD or Endorex since the date that the most recent financial
statements were made available to WFVK.

    With respect to financial projections provided to WFVK by CTD management,
WFVK reviewed the projections and was advised by certain members of Endorex and
CTD management, and has relied upon and assumed without independent
verification, that the projections:

    - were reasonably prepared;

    - are based upon assumptions reflecting the best currently available
      estimates and good faith judgments of CTD management as to the future
      performance of CTD as an independent company; and

                                       53

    - are believed to be realizable in the amounts and time periods contemplated
      thereby.

    Each of the management of Endorex and CTD has also advised WFVK that they do
not currently have any information or beliefs that would make the projections
incomplete or misleading. With respect to projections of companies deemed
comparable to CTD by WFVK, WFVK used only projections, published in recent
research analysts' reports, reviewed those projections, and in all instances
used a median of the projected numbers.

    The opinion is based upon analyses of the foregoing factors in light of
WFVK's assessment of general economic, financial and market conditions as they
exist and as they can be evaluated by WFVK as of the date of the opinion and on
information made available to WFVK as of the date of the opinion. Although
events occurring after the date of the opinion could materially affect the
assumptions relied upon in preparing the opinion, WFVK does not have any
obligation to update, revise or reaffirm its opinion unless requested by Endorex
upon payment of an additional fee.

    The opinion is for the benefit and use of the board of directors of Endorex
in its consideration of the merger and is not a recommendation to any
stockholder as to how such stockholder should vote with respect to the merger.
Further, the opinion addresses only the financial fairness of the merger
consideration to be paid by Endorex and does not address any other aspect of the
merger.

SUMMARY OF METHODS UTILIZED

    Set forth below is a summary of the material financial analyses performed by
WFVK in connection with the delivery of its written opinion stating that the
merger consideration, as of July 13, 2001, was fair to the stockholders of
Endorex, from a financial point of view. The summary of the financial analyses
is not a complete description of all of the analyses performed by WFVK. Some of
the summaries of financial analyses include information presented in tabular
format. In order to fully understand the financial analyses, the tables must be
read together with the text of each summary. The tables alone do not constitute
a complete description of the financial analyses. Considering the data in the
tables without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of the financial analyses. WFVK
performed several procedures, including each of the financial analyses described
below, and reviewed with CTD and Endorex management the assumptions on which its
analyses were based and other factors, including CTD's historical and projected
financial results. No limitations were imposed by Endorex with respect to the
investigations made or procedures followed by WFVK in rendering its opinion.

ANALYSIS OF ENDOREX STOCK TRADING HISTORY

    To provide contextual data and comparative market data, WFVK reviewed the
historical market prices of Endorex common stock for the 90 days preceding the
date of the WFVK opinion. WFVK noted that over the indicated period from
April 11, 2001 to July 12, 2001, Endorex's common stock sold for a high of $1.20
per share, a low of $.75 per share, and had an average sale price at the close
of market trading of $.96 per share. The implied merger consideration, based on
a maximum of ten million shares of Endorex common stock to be issued as defined
in the merger agreement multiplied by the average closing sale price as
indicated above, was calculated by WFVK to be approximately $9.6 million.

                                       54

DISCOUNTED CASH FLOWS ANALYSIS

    WFVK estimated ranges of equity values for CTD based upon the discounted
present value of CTD's projected after-tax cash flows and the discounted present
value of CTD's terminal value at December 31, 2009, calculated using a perpetual
growth rate methodology, based on:

    - CTD's forecasts, and

    - CTD's forecasts, assuming the generation of revenues solely through
      licensing of technology to a third party in exchange for royalty payments
      of 15% of the product revenues set forth in CTD's forecasts.

    The purpose of the discounted cash flow analysis is to compare the
consideration paid in the merger to the present value of after-tax cash flows
implied by CTD's forecasts. WFVK applied the discounted cash flow methodology to
CTD's forecasts because CTD is a development stage company and the majority of
its value is derived from the sale of its products in the future. After-tax cash
flow was calculated by taking projected earnings before interest and taxes and
subtracting from this amount projected taxes, changes in working capital and
changes in other assets and liabilities and adding back projected depreciation
and amortization. This analysis was based upon assumptions described by,
projections supplied by, and discussions held with CTD and Endorex management.
For each scenario, a range of equity values was generated utilizing discount
rates ranging from 25% to 35%. In calculating the terminal value, WFVK utilized
a perpetual growth rate of zero, which was arrived at through discussions with
CTD and Endorex management regarding the life cycles of CTD's products.

    Utilizing this methodology, the equity value ranged from (in $ millions):



                                                                LOW        HIGH
                                                              --------   --------
                                                                   
Based on CTD's forecasts....................................   $12.1      $15.5
Based on CTD's forecasts, as adjusted by estimated royalty
  payments as set forth above...............................   $15.2      $22.1


COMPARABLE COMPANIES ANALYSIS

    WFVK analyzed, among other things, certain trading multiples of the
following publicly traded companies in the specialty pharmaceutical industry, or
the Comparable Companies, that WFVK deemed comparable:

    - Questcor Pharmaceuticals, Inc.

    - Cellegy Pharmaceuticals, Inc.

    - Inkine Pharmaceuticals, Inc.

    - SangStat Medical Corporation

    WFVK analyzed the trading multiples of enterprise value-to-projected net
revenues of the Comparable Companies for calendar years 2001 and 2002. All
trading multiples were based on closing sale prices on July 12, 2001. WFVK
determined the median enterprise value-to-projected net revenue multiple of the
Comparable Companies, for the calendar year 2002, to be 2.64 and applied this
multiple to CTD's projected 2009 revenues, based on:

    - CTD's forecasts, and

    - CTD's forecasts, assuming the generation of revenues solely through
      licensing of technology to a third party in exchange for royalty payments
      of 15% of the product revenues set forth in CTD's forecasts.

                                       55

    For each scenario, a range of equity values were generated by discounting
the resulting values to 2002 utilizing discount rates ranging from 25% to 35%.
WFVK applied the discount rate to CTD's forecasts because CTD is a development
stage company and the majority of its value is derived from the sale of its
products in the future.

    Utilizing this methodology, the equity value ranged from (in $ millions):



                                                                LOW        HIGH
                                                              --------   --------
                                                                   
Based on CTD's forecasts....................................   $33.4      $42.3
Based on CTD's forecasts, as adjusted by estimated royalty
  payments as set forth above...............................   $11.2      $13.5


PRECEDENT TRANSACTIONS ANALYSIS

    WFVK analyzed the aggregate transaction values and implied transaction-value
multiples paid in selected merger or acquisition transactions in the specialty
pharmaceutical industry. WFVK compared, among other things, the aggregate
transaction value in each of these transactions as a multiple of the latest
twelve month's revenues and earnings before interest, taxes, depreciation and
amortization (EBITDA), prior to the transaction.

    Based on this analysis, WFVK applied the revenue multiple of 5.64, which
approximates the median revenue multiple, to CTD's projected 2009 revenues,
based on:

    - CTD's forecasts, and

    - CTD's forecasts, assuming the generation of revenues solely through
      licensing of technology to a third party in exchange for royalty payments
      of 15% of the product revenues set forth in CTD's forecasts.

    For each scenario, a range of equity values were generated by discounting
the resulting values utilizing discount rates ranging from 25% to 35%. WFVK
applied the discount rate to CTD's forecasts because CTD is a development stage
company and the majority of its value is derived from the sale of its products
in the future.

    Utilizing this methodology, the equity value ranged from (in $ millions):



                                                                LOW        HIGH
                                                              --------   --------
                                                                   
Based on CTD's forecasts....................................   $46.6      $62.2
Based on CTD's forecasts, as adjusted by estimated royalty
  payments as set forth above...............................   $14.8      $19.0


    WFVK performed this analysis to compare the consideration offered in this
merger to transactions in the public market. These transactions were selected
because they involve companies in a comparable industry, specialty
pharmaceuticals. No company used or transaction compared in the above comparable
company or precedent transaction analysis is identical to CTD or the combined
company. Accordingly, an analysis of the results of the foregoing is not purely
mathematical; rather it involves complex considerations and judgments as to the
financial and operating characteristics of the companies and other factors that
could affect the value of the companies to which CTD is being compared.

    While the foregoing summary describes certain analyses and factors that WFVK
deemed material in its presentation to the Endorex board, it is not a
comprehensive description of all analyses and factors considered by WFVK.

    The preparation of a fairness opinion is a complex process that involves
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of these

                                       56

methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. WFVK believes that its analyses must
be considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, would
create an incomplete view of the evaluation process underlying the WFVK opinion.
Several analytical methodologies were employed and no one method of analyses
should be regarded as critical to the overall conclusion reached by WFVK. Each
analytical technique has inherent strengths and weaknesses, and the nature of
the available information may further affect the value of particular techniques.
The conclusions reached by WFVK are based on all analyses and factors taken as a
whole and also on application of WFVK's own experience and judgment. Such
conclusions may involve significant elements of subjective judgment and
qualitative analyses. WFVK therefore gives no opinion as to the value or merit
standing alone of any one or more parts of the analyses it performed.

    In performing its analyses, WFVK considered, and made numerous assumptions
with respect to industry performance, general business and economic conditions,
market and financial conditions and other matters in addition to the assumptions
described above. The analyses performed by WFVK are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than those suggested by such analyses. Accordingly, analyses relating
to the value of a business do not purport to be appraisals or to reflect the
prices at which the business actually may be purchased. Furthermore, no opinion
is being expressed as to the prices at which shares of Endorex or CTD common
stock may be traded at any future time.

    WFVK is a nationally recognized investment banking firm. As part of its
investment banking business, WFVK is frequently engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and other purposes.

    WFVK has received a fee for the rendering of the fairness opinion. In
addition, Endorex has agreed to reimburse WFVK for its reasonable out of pocket
expenses incurred in connection with the transaction and to indemnify WFVK and
its affiliates against certain liabilities, including liabilities arising under
applicable securities laws and its legal expenses in connection with any
litigation relating to the transaction.

CTD'S REASONS FOR THE MERGER AND RECOMMENDATION OF THE CTD BOARD OF DIRECTORS

    After careful consideration, CTD's board of directors has determined that
the terms of the merger and the merger agreement are in the best interests of
CTD and its stockholders. As a result, CTD's board has approved the merger and
the merger agreement and recommends that CTD stockholders vote "FOR" approval of
the merger and the merger agreement.

    CTD's board of directors reviewed a wide variety of information and
considered a number of factors in connection with its evaluation of the merger
and the merger agreement, and determined that the proposed merger provides an
opportunity that serves the best interests of CTD and its stockholders. In
particular, CTD's board of directors considered, among other things:

    - the likelihood that by providing CTD with greater financial security and
      leverage, the merger may benefit CTD in its negotiations with potential
      collaborators or other licensees, enabling CTD to achieve improved
      financial terms;

    - the existence of a public market for the Endorex common stock to be
      received by CTD's stockholders in the merger in place of their CTD capital
      stock, which is not publicly traded;

    - information concerning CTD's and Endorex's respective businesses, plans
      and operations, technology, management, competitive position, future
      business prospects, and historical and projected financial performance;

                                       57

    - current financial market conditions and historical market prices and
      trading information with regard to Endorex's common stock;

    - the complementary and synergistic nature of CTD's and Endorex's operations
      and strategic focus, in that they both focus on new oral and mucosal
      formulations of drugs that are currently approved and commercialized;

    - the potential operational and administrative cost savings that would
      result from the merger with Endorex;

    - the amount of Endorex stock to be received by CTD's stockholders;

    - the compatibility of CTD's and Endorex's management;

    - the effect of the merger on CTD's collaborators; and

    - the terms of the merger agreement, including restrictions on CTD's ability
      to consider alternative acquisition proposals following execution of the
      merger agreement and the provisions regarding payment of a termination
      fee.

    In its deliberations concerning the merger, CTD's board of directors also
identified and considered a variety of potentially negative factors. CTD's board
considered, among other things:

    - the risk that the merger might not be consummated;

    - the risk that integration of CTD's and Endorex's operations and employees
      might not occur in a timely manner and that their operations might not be
      successfully integrated;

    - the risk of disrupting relationships with current and prospective
      corporate collaborators, academic collaborators, and key service
      providers;

    - the effects of the public announcement of the merger on CTD's ability to
      secure additional working capital financing on terms acceptable to CTD,
      its ability to attract and retain key management and technical personnel,
      and the progress of certain of its development projects;

    - the risk that the market price of Endorex common stock might decline in
      response to public announcement of the merger;

    - the risks associated with potential volatility in the market price of
      Endorex common stock;

    - the substantial legal, accounting, and other expenses to be incurred in
      connection with the merger;

    - the risk that benefits sought in the merger will not be fully realized;
      and

    - the other risks described above under "Risk Factors."

    The board of directors of CTD was made aware of and discussed the interests
of Steve H. Kanzer in the merger and Endorex. Steve H. Kanzer did not vote on
the CTD's board approval of the merger, the merger agreement and the
transactions contemplated thereby. See "The Merger--Interests of Certain Persons
in the Merger and Potential Conflicts of Interest."

    Due to the many different factors, reasons and information considered in
connection with its evaluation of the merger, CTD's board did not find it
practicable to quantify or otherwise assign relative weight or value to the
specific factors that it considered in approving the merger and the merger
agreement. Furthermore, individual CTD board members may have viewed or valued
factors considered by them differently from other CTD board members.

    The foregoing discussion of the information and factors considered by the
board of directors of CTD is not meant to be exhaustive, but includes the
principal factors considered by the board.

                                       58

INTERESTS OF CERTAIN PERSONS IN THE MERGER AND POTENTIAL CONFLICTS OF INTEREST

    In considering the proposals made in this joint proxy statement/prospectus
and the recommendations of the boards of directors of Endorex and CTD regarding
such proposals, stockholders of Endorex and CTD should be aware that certain
executive officers and directors have some interests in the merger that may be
different from or in addition to the general interests of the stockholders of
Endorex and CTD. The boards of directors of Endorex and CTD were each aware of
these interests and considered them, among other matters, in making their
recommendations. These interests include the following:

    - Pursuant to the terms of the merger agreement, CTD's current directors and
      officers will, after the merger, be indemnified by CTD and, for a period
      of six years thereafter, benefit from insurance coverage for liabilities
      that arise from their service as directors and officers of CTD prior to
      the merger.

    - Pursuant to the terms of the merger agreement, after the closing of the
      merger, Dr. Colin Bier, Guy Rico and Peter Kliem, currently directors of
      CTD, will become directors of Endorex. Mr. Rico and Mr. Kliem, as
      non-employee directors, will upon appointment and subject to the approval
      of Proposal Four by the Endorex stockholders at the Endorex annual
      meeting, receive a fully vested option exercisable for 50,000 shares of
      Endorex common stock and will thereafter each receive options exercisable
      for an additional 10,000 shares of Endorex common stock at each annual
      meeting of the Endorex stockholders vesting one year from the date of
      grant. If Proposal Four is not approved, then each will receive an option
      exercisable for 42,000 shares of Endorex common stock upon their
      appointment to the Endorex board of directors and will thereafter each
      receive an option exercisable for 12,000 shares of Endorex common stock
      for every two years they serve as a non-employee director of Endorex.

    - Concurrently with the closing of the merger, Dr. Bier, the Chairman of the
      board of directors of CTD, will enter into an agreement with Endorex to
      become the Chairman of the board of directors and the Chief Executive
      Officer of Endorex. Pursuant to this agreement, Dr. Bier will receive an
      initial annual base salary of $275,000 and options exercisable for 700,000
      shares of Endorex common stock.

    - Pursuant to the terms of the merger agreement, Steve H. Kanzer, the
      President and a director of CTD, will receive a payment of 250,000 shares
      of Endorex common stock upon the closing of the merger.

    - Concurrently with the closing of the merger, Mr. Kanzer will enter into a
      noncompetition and nonsolicitation agreement with Endorex whereby he will
      be paid approximately $250 per hour for any time incurred while assisting
      Endorex in obtaining and enforcing patents, copyrights or trademarks for
      any intellectual property acquired or discovered by Mr. Kanzer during the
      course of performing services for or acting as an employee or officer of
      CTD.

    - Pursuant to the terms of the merger agreement, Nicholas Stergiopoulos, the
      Director of Corporate Development of CTD, will receive a payment of
      133,334 shares of Endorex common stock upon the closing of the merger.

    - Concurrently with the closing of the merger, Mr. Stergiopoulos will enter
      into a consulting agreement with Endorex whereby he will be paid
      approximately $8,200 per calendar month for a period of six months. In
      addition, Mr. Stergiopoulos will receive 1% of the proceeds of any
      licensing or asset sale transaction between RxEyes, Inc., a majority owned
      subsidiary of CTD, and a certain third party or its affiliates, if that
      license agreement or asset sale was consummated due to the efforts of
      Mr. Stergiopoulos.

                                       59

    - Pursuant to a voting agreement in the form attached as Appendix II hereto
      among Endorex, CTD, Roadrunner and the other parties thereto, certain CTD
      stockholders, including CTD's directors, executive officers and their
      affiliates, owning beneficially approximately 63% and 61% of CTD's common
      stock and Series A preferred stock, respectively, outstanding as of
      October 15, 2001 have agreed to vote all of their shares of CTD common
      stock and Series A preferred stock for approval of the merger, the merger
      agreement and the transactions contemplated thereby.

    - As of October 15, 2001, the officers and directors of CTD owned in the
      aggregate options exercisable for 1,322,725 shares of CTD common stock at
      an exercise price of $.20 per share which will be exchanged for Endorex
      options exercisable for 359,042 shares of Endorex common stock at an
      exercise price of $.74 per share.

INTERLOCKING RELATIONSHIPS OF LINDSEY ROSENWALD, M.D. AND AFFILIATES

    Steve H. Kanzer is a director of Endorex and the President and Chief
Executive Officer and a director of CTD. As of October 15, 2001, Mr. Kanzer
beneficially owned 1.92% of Endorex's common stock and 21.0% of CTD's common
stock. Mr. Kanzer serves on the board of directors of Endorex as a nominee of
the Aries Master Fund II and the Aries Domestic Fund, who subsequently
transferred their right to nominate a member to the board of directors of
Endorex to Aries Select, Ltd., or Aries, and Aries Select I LLC, or Aries I,
each of which is a principal stockholder of Endorex. Aries Select II LLC, or
Aries II, is also a stockholder of Endorex.

    Paramount Capital Asset Management, Inc., or PCAM, is the investment manager
of Aries and the managing member of each of Aries I and Aries II. Lindsay A.
Rosenwald, M.D. is the Chairman and sole stockholder of PCAM and Paramount
Capital, Inc., or Paramount. As of October 15, 2001, Dr. Rosenwald beneficially
owned 34.0% of Endorex's common stock. Paramount has acted as a placement agent
in connection with certain private placements of Endorex's common stock, as a
finder in connection with a private placement of Endorex's common stock and
warrants, and as a financial advisor to Endorex. In addition, certain officers,
employees and associates of Paramount and its affiliates own securities of
Endorex and a subsidiary of Endorex.

    Dr. Rosenwald is also the Chairman and sole stockholder of Huntington Street
Company, or Huntington Street, and June Street Company, or June Street, and is
the sole member of Paramount Capital Drug Development Holdings LLC, or Paramount
Holdings. Paramount Holdings and Dr. Rosenwald's wife are principal stockholders
of CTD. Dr. Rosenwald, Huntington Street and June Street are also stockholders
of CTD. In addition, certain officers, employees and associates of Paramount and
its affiliates own securities of CTD and subsidiaries of CTD. Paramount has also
acted as a placement agent in connection with certain private placements of
CTD's Series A preferred stock. As of October 15, 2001, Dr. Rosenwald
beneficially owned 56.5% of CTD's common stock and 6.0% of CTD's Series A
preferred stock. Additionally, as of October 15, 2001, Dr. Rosenwald's wife
beneficially owned 8.9% of CTD's common stock.

    Mr. Peter Kash, an employee of Paramount who beneficially owns 5.0% of CTD's
common stock and is a security holder of Endorex, and Mr. Martin Kratchman, an
employee of Paramount who is a security holder of both Endorex and CTD, will, at
the closing of the merger, receive options to acquire an aggregate of 100,000
shares of common stock of Endorex. Mr. Kash and Mr. Kratchman are receiving the
options as compensation for their financial advisory services to Endorex in
connection with the merger.

OPERATIONS FOLLOWING THE MERGER

    Following the merger, CTD will operate as a wholly owned subsidiary of
Endorex. The stockholders of CTD will become stockholders of Endorex, and their
rights as stockholders will be

                                       60

governed by Endorex's certificate of incorporation and bylaws. Upon completion
of the merger, the members of CTD's board will be Michael S. Rosen, Richard
Dunning, Steve H. Kanzer, Steven Thornton, Dr. Paul D. Rubin, Dr. Kenneth
Tempero, Dr. Colin Bier, Guy Rico and Peter Kliem and the officers will be as
follows:



NAME                                                       OFFICE
----                            ------------------------------------------------------------
                             
Dr. Colin Bier................  Chairman of the Board and Chief Executive Officer
Michael S. Rosen..............  President, Chief Operating Officer and Secretary
Steve J. Koulogeorge..........  Chief Financial Officer


ACCOUNTING TREATMENT

    The merger will be accounted for using the purchase method under United
States generally accepted accounting principles. Under this accounting method,
Endorex will record assets and liabilities of CTD at their fair value at the
effective time of the merger, with the excess of the purchase price over the net
tangible and identifiable intangible assets acquired being recorded as goodwill.

AMEX LISTING

    The Endorex shares of common stock to be issued in connection with the
merger are required to be listed on the American Stock Exchange. Endorex expects
to obtain before the merger is completed AMEX's approval to list these shares of
common stock, subject to official notice of issuance.

FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS

    This joint proxy statement/prospectus does not cover any resales of the
Endorex common stock or warrants to be received by the CTD stockholders and
warrant holders upon completion of the merger, and no person is authorized to
make any use of this joint proxy statement/prospectus in connection with any
such resale.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

    The following general discussion summarizes certain anticipated material
United States federal income tax consequences of the merger. This discussion is
based upon current provisions of the Internal Revenue Code, current and proposed
Treasury regulations, and judicial and administrative decisions and rulings as
of the date of this joint proxy statement/prospectus, all of which are subject
to change (possibly with retroactive effect) and all of which are subject to
differing interpretation. This discussion addresses only those CTD stockholders
who hold CTD stock and will hold the Endorex common stock received in the merger
as capital assets and does not address all of the United States federal income
tax consequences that may be relevant to particular CTD stockholders in light of
their individual circumstances or to CTD stockholders who are subject to special
rules, such as:

    - persons subject to the alternative minimum tax;

    - persons who hold CTD stock through partnerships or other pass-through
      entities;

    - financial institutions;

    - tax-exempt organizations;

    - retirement plans;

    - insurance companies;

    - dealers in securities or foreign currencies;

                                       61

    - persons who are not citizens or residents of the United States or who are
      foreign corporations, foreign partnerships or foreign estates or trusts;

    - persons who hold CTD stock as part of a straddle, a hedge against currency
      risk, or as part of a constructive sale or conversion transaction; or

    - persons who acquired CTD stock upon the exercise of employee stock options
      or otherwise as compensation.

    In addition, this discussion does not address the tax consequences of the
merger under state, local and foreign laws or the tax consequences, if any, of
the amendment of CTD's certificate of incorporation such that the Liquidation
Amount (as defined in the certificate of incorporation) payable to the holders
of the CTD Series A preferred stock in connection with the consummation of the
merger does not exceed the aggregate number of shares of Endorex common stock
that the holders of CTD Series A preferred stock are entitled to receive in
exchange for their shares of Series A preferred stock in connection with the
merger.

    Consummation of the merger is conditioned upon receipt of opinions, dated as
of the date of the consummation of the merger, from Brobeck, Phleger & Harrison
LLP and Kramer Levin Naftalis & Frankel LLP to the effect that the merger
constitutes a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. Such opinions will be based on certain assumptions, and
both Brobeck and Kramer Levin will receive and rely upon representations,
unverified by counsel, contained in certificates of Endorex, CTD and possibly
others. The inaccuracy of any of those assumptions or representations might
jeopardize the validity of the opinions rendered.

    The opinions of counsel will neither bind the Internal Revenue Service nor
preclude the Internal Revenue Service from adopting positions contrary to those
expressed above, and no assurance can be given that contrary positions will not
be asserted successfully by the Internal Revenue Service or adopted by a court
if the issues are litigated. Neither Endorex nor CTD intends to obtain a ruling
from the Internal Revenue Service with respect to the tax consequences of the
merger.

    Based on the conclusion that the merger qualifies as a reorganization under
Section 368(a) of the Internal Revenue Code, the material federal income tax
consequences of the merger will be as follows:

    - no gain or loss will be recognized by Endorex, Roadrunner or CTD as a
      result of the merger;

    - no gain or loss will be recognized by CTD stockholders on the exchange of
      shares of CTD stock for shares of Endorex common stock pursuant to the
      merger, except with respect to cash, if any, received in lieu of
      fractional shares of Endorex common stock;

    - the aggregate tax basis to a CTD stockholder of the shares of Endorex
      common stock received in exchange for shares of CTD stock pursuant to the
      merger will equal such CTD stockholder's aggregate tax basis in the shares
      of CTD stock surrendered in exchange therefor, reduced by the amount of
      tax basis allocable to a fractional share interest in Endorex common stock
      for which cash is received;

    - the holding period of a CTD stockholder for shares of Endorex common stock
      received in exchange for shares of CTD stock pursuant to the merger will
      include the holder's holding period for the shares of CTD stock
      surrendered in exchange therefor; and

    - a CTD stockholder who receives cash in lieu of a fractional share of
      Endorex common stock pursuant to the merger will be treated as having
      received the fractional share in the merger and then as having sold the
      fractional share for cash. Such shareholder will generally recognize
      capital gain or loss on the deemed sale in an amount equal to the
      difference between the amount of cash received and the ratable portion of
      the stockholder's tax basis in the CTD stock surrendered in the merger
      that is allocated to the fractional share.

                                       62

    CTD stockholders receiving Endorex common stock in the merger should file a
statement with their United States federal income tax returns for the year in
which the merger occurs setting forth their tax basis in the CTD stock exchanged
in the merger and the fair market value of the Endorex common stock and the
amount of any cash, if any, received in the merger. In addition, CTD
stockholders will be required to retain permanent records of these facts
relating to the merger.

    A CTD stockholder who exercises dissenter's rights with respect to its CTD
stock and receives payment for those shares in cash generally will recognize
gain or loss equal to the difference between the amount of cash received and the
stockholder's tax basis in such shares. Any gain or loss recognized will be
long-term capital gain or loss if the stockholder's holding period for its CTD
stock exceeds twelve months at the effective time of the merger. However, it is
possible under certain circumstances for a CTD stockholder to recognize ordinary
income equal to the amount of cash received; therefore, each CTD stockholder
should consult its own tax advisor as to the income tax consequences of
exercising dissenter's rights under such stockholder's particular circumstances.

    The United States federal income tax consequences set forth above are for
general information only and are not intended to constitute a complete
description of all tax consequences relating to the merger or the tax
consequences associated with any receipt of merger consideration that is deemed
to be other than in exchange for CTD stock, including amounts paid in
consideration for services rendered. You are strongly urged to consult your own
tax advisor to determine the particular tax consequences to you of the merger,
including the applicability and effect of foreign, state, local and other tax
laws.

APPRAISAL RIGHTS OF CTD STOCKHOLDERS

    Under the Delaware General Corporation Law, any holder of shares of CTD
stock who does not wish to accept the merger consideration in respect of its
shares has the right to dissent from the merger and to seek an appraisal of, and
to be paid the fair cash value (exclusive of any element of value arising from
the accomplishment or expectation of the merger) for, its shares of stock,
determined by a court, together with a fair rate of interest, if any, provided
that the stockholder fully complies with the provisions of Section 262 of the
Delaware General Corporation Law. A copy of Section 262 is attached as
Appendix IV hereto. Section 262 requires the following:

DISSENTING STOCKHOLDERS MUST MAKE A WRITTEN DEMAND FOR APPRAISAL

    Dissenting stockholders must deliver a written demand for appraisal to CTD
before the vote at the CTD special meeting on November 29, 2001 to approve the
merger and the merger agreement.

DISSENTING STOCKHOLDERS MUST REFRAIN FROM APPROVING THE MERGER

    Dissenting stockholders must not approve the merger and the merger
agreement. If a dissenting stockholder votes in favor of the merger and the
merger agreement, that will terminate the stockholder's right to appraisal, even
if the stockholder previously filed a written demand for appraisal.

DISSENTING STOCKHOLDERS MUST CONTINUOUSLY HOLD THEIR CTD SHARES

    Dissenting stockholders must continuously hold their shares of CTD stock
from the date they make the demand for appraisal through the effective date of
the merger. Record holders of CTD stock who make a written demand for appraisal
but thereafter transfer their shares prior to the effective date of the merger
will lose any right to appraisal in respect of those shares.

                                       63

DEMAND FOR APPRAISAL

    A written demand for appraisal of CTD shares is only effective if it
reasonably informs CTD of the identity of the stockholder and that the
stockholder demands appraisal of its shares.

    Dissenting stockholders who are beneficial owners, but not the stockholder
of record, must have the stockholder of record sign a demand for appraisal.

    Dissenting stockholders who own CTD stock in a fiduciary capacity, such as a
trustee, guardian or custodian, must disclose the fact that they are signing in
that capacity the demand for appraisal.

    Dissenting stockholders who own CTD stock with more than one person, such as
in a joint tenancy or tenancy in common, must ensure that all the owners sign,
or have signed for them, the demand for appraisal. An authorized agent, which
could include one or more of the joint owners, may sign the demand for appraisal
for a stockholder of record, except that the agent must expressly disclose who
the stockholder of record is and that the agent is signing the demand as that
stockholder's agent.

    A dissenting stockholder who is a record owner, such as a broker, of shares
of CTD stock as a nominee for others may exercise a right of appraisal with
respect to the shares held for one or more beneficial owners while not
exercising that right for other beneficial owners. In such a case, the
stockholder should specify in the written demand the number of shares as to
which the stockholder wishes to demand appraisal. If the written demand does not
expressly specify the number of shares, CTD will assume that the written demand
covers all the shares of CTD capital stock that are in the nominee's name.

    Dissenting stockholders who elect to exercise appraisal rights should mail
or deliver a written demand to:

    Corporate Technology Development, Inc.
    1680 Michigan Avenue, Suite 700
    Miami, FL 33139
    Attention: President

    It is important that CTD receive all written demands promptly as provided
above. This written demand should be signed by, or on behalf of, the stockholder
of record. The written demand for appraisal should specify the stockholder's
name and mailing address, the number and class of shares of stock owned, and
that the stockholder is thereby demanding appraisal of that stockholder's
shares.

    Dissenting stockholders who fail to comply with any of these conditions will
only be entitled to receive the merger consideration specified in the merger
agreement.

WRITTEN NOTICE

    Either before or within ten days after the effective date of the merger, CTD
must give written notice to dissenting stockholders that the merger has or will
become effective and that dissenting stockholders are entitled to the rights
described in Section 262. If given on or after the effective date of the merger,
the notice must specify the effective date of the merger. If the notice does not
specify the effective date of the merger, then a second notice must be sent
prior to the effective date of the merger or within ten days of the effective
date of the merger specifying such date.

PETITION WITH THE CHANCERY COURT

    Within 120 days after the merger, either CTD or any stockholder who has
complied with the conditions of Section 262 may file a petition in the Delaware
Court of Chancery. This petition should request that the Chancery Court
determine the value of the shares of stock held by all the stockholders who are
entitled to appraisal rights. Dissenting stockholders who intend to exercise
their appraisal

                                       64

rights should file this petition in the Chancery Court. CTD has no intention at
this time to file this petition. Because CTD has no obligation to file this
petition, if no dissenting stockholder files this petition within 120 days after
the effective date of the merger, dissenting stockholders will lose their rights
of appraisal.

WITHDRAWAL OF DEMAND

    A dissenting stockholder who no longer wants to exercise appraisal rights
must withdraw the stockholder's demand for appraisal rights within 60 days after
the effective date of the merger. A stockholder may also withdraw a demand for
appraisal rights after 60 days after the effective date of the merger, but only
with the written consent of CTD. If a stockholder effectively withdraws a demand
for appraisal rights, the stockholder will receive the merger consideration
provided in the merger agreement.

REQUEST FOR APPRAISAL RIGHTS STATEMENT

    If a stockholder has complied with the conditions of Section 262, that
stockholder is entitled to receive a statement from CTD setting forth the
aggregate number of shares for which appraisal rights have been demanded and the
aggregate number of stockholders who own those shares. In order to receive this
statement, a stockholder must send a written request to CTD within 120 days
after the effective date of the merger. After the merger, CTD has ten days after
receiving a request to mail the statement, or, if later, ten days after the
period in which demands for appraisal rights must be made has expired.

CHANCERY COURT PROCEDURES

    If dissenting stockholders properly file a petition for appraisal in the
Delaware Court of Chancery and deliver a copy to CTD, CTD will then have
20 days to provide the Chancery Court with a list of the names and addresses of
all stockholders who have demanded appraisal rights and have not reached an
agreement with CTD as to the value of their shares. The Chancery Court may then
send notice to all the stockholders who have demanded appraisal rights. The
Chancery Court will then conduct a hearing to determine whether the stockholders
have fully complied with Section 262 of the Delaware General Corporation Law and
whether they are entitled to appraisal rights under that section. The Chancery
Court may also require dissenting stockholders to submit their stock
certificates to the Register in Chancery so that it can note on the certificates
that an appraisal proceeding is pending. Dissenting stockholders who do not
follow this requirement may be dismissed from the proceeding.

APPRAISAL OF SHARES

    After the Chancery Court determines which stockholders are entitled to
appraisal rights, the Chancery Court will appraise the shares of stock. To
determine the fair value of the shares, the Chancery Court will consider all
relevant factors, and will exclude any appreciation or depreciation due to the
anticipation or accomplishment of the merger. After the Chancery Court
determines the fair value of the shares, it will direct CTD to pay that value to
the stockholders who are entitled to appraisal rights, together with interest,
simple or compound, if any, as the court may direct. In order to receive payment
for their shares, dissenting stockholders must then surrender their stock
certificates to CTD.

    The Chancery Court could determine that the fair value of shares of stock is
more than, the same as, or less than the merger consideration. In other words,
dissenting stockholders who demand appraisal rights could receive less
consideration than they would receive under the merger agreement.

                                       65

COSTS AND EXPENSES OF APPRAISAL PROCEEDING

    The costs of the appraisal proceeding may be assessed against CTD and the
stockholders participating in the appraisal proceeding, as the Chancery Court
deems equitable under the circumstances. Dissenting stockholders may also
request that the Chancery Court allocate the expenses of the appraisal action
incurred by any stockholder pro rata against the value of all the shares
entitled to appraisal.

LOSS OF STOCKHOLDER'S RIGHTS

    From and after the effective date of the merger, dissenting stockholders who
demand appraisal rights will not be entitled:

    - to vote the shares of stock for which they have demanded appraisal rights
      for any purpose;

    - to receive payment of dividends or any other distribution with respect to
      the shares of stock for which they have demanded appraisal, except for
      dividends or distributions, if any, that are payable to holders of record
      as of a record date prior to the effective date of the merger; or

    - to receive the payment of the consideration provided for in the merger
      agreement (unless the holder properly withdraws the demand for appraisal).

    If no petition for an appraisal is filed within 120 days after the effective
date of the merger, a stockholder's right to an appraisal will cease. A
stockholder may withdraw a demand for appraisal and accept the merger
consideration by delivering to CTD a written withdrawal of the demand, except
that (1) any attempt to withdraw made more than 60 days after the closing of the
merger will require the written approval of CTD, and (2) an appraisal proceeding
in the Chancery Court cannot be dismissed unless the Chancery Court approves.

    Dissenting stockholders who fail to comply strictly with the procedures
described above will lose their appraisal rights. Consequently, dissenting
stockholders who wish to exercise their appraisal rights are strongly urged to
consult a legal advisor before attempting to exercise their appraisal rights.

TREATMENT OF CTD SECURITIES

COMMON STOCK

    As of October 15, 2001, CTD had outstanding 5,000,000 shares of common
stock, par value $.001 per share. Pursuant to the merger agreement, each
outstanding share of CTD common stock will be exchanged for .271443 of a share
of Endorex common stock, with cash payment being made for any fractional shares
as set forth in the merger agreement.

SERIES A PREFERRED STOCK

    As of October 15, 2001, CTD had outstanding 7,628,750 shares of Series A
preferred stock, par value $.001 per share. Pursuant to the merger agreement,
each outstanding share of CTD Series A preferred stock will be exchanged for
1.008466 shares of Endorex common stock, with cash payment being made for any
fractional shares as set forth in the merger agreement.

STOCK OPTIONS

    As of October 15, 2001, CTD had outstanding under its stock option plan
options to purchase 1,322,725 shares of CTD common stock at an exercise price of
$0.20 per share. At the effective time of the merger and without any action on
the part of the holders of CTD options, each option to acquire CTD common stock
issued and outstanding immediately prior to the merger, and all rights in
respect thereof, will be exchanged for Endorex options to acquire Endorex common
stock in substitution for

                                       66

those CTD options. Each such Endorex option will be evidenced by a new stock
option agreement issued by Endorex to each of the holders of a CTD option. Each
such Endorex option will have, and be subject to, the same terms and conditions
set forth in the applicable option holder's stock option agreements for the CTD
options, as in effect on the date of the merger agreement, except that the
number of shares and the exercise price of the CTD options will be changed to
reflect the exchange ratio of 0.271443 of a share of Endorex common stock for
each share of CTD common stock, with the number of options aggregated for each
holder and rounded down to the nearest whole share. The exercise price of each
such option for CTD common stock adjusted proportionately and rounded up to the
nearest whole cent will be $0.74 per share.

WARRANTS

    As of October 15, 2001, CTD had warrants outstanding to purchase 762,875
shares of Series A preferred stock at an exercise price of $2.20 per share. The
holders of CTD warrants have agreed to amend such warrants prior to the
effective time of the merger. At the effective time of the merger and without
any action on the part of the holders of CTD warrants issued and outstanding
immediately prior to the merger, each warrant to acquire CTD Series A preferred
stock and all rights in respect thereof will be exchanged for Endorex warrants
to acquire Endorex common stock in substitution for those CTD warrants. Each
such Endorex warrant will be evidenced by a new warrant agreement issued by
Endorex to each of the holders of a CTD warrant. Each such Endorex warrant will
have, and be subject to, the same terms and conditions set forth in the
applicable warrant holder's warrant agreement for the CTD warrants, except that
the number of shares and the exercise price of the CTD warrants will be changed
to reflect the exchange ratio of 0.271443 of a share of Endorex common stock for
each share of CTD preferred stock pursuant to the warrant and will be
exercisable for Endorex common stock instead of CTD Series A preferred stock,
with the number of warrants aggregated for each holder and rounded down to the
nearest whole share. The exercise price of each warrant for CTD Series A
preferred stock adjusted proportionately and rounded up to the nearest whole
cent will be $8.11.

RESTRICTIONS ON SALE OF SHARES BY AFFILIATES OF CTD

    The shares of Endorex common stock issued in the merger and issuable upon
exercise of Endorex options and warrants issued in connection with the merger
will be registered under the Securities Act, and these securities will be freely
transferable under the Securities Act, except for shares issued to any person
who is deemed to be an affiliate of CTD, at the time the merger is submitted to
the vote of CTD's stockholders, or an affiliate of Endorex under the Securities
Act. Persons who may be deemed to be affiliates of CTD include individuals or
entities that control, are controlled by, or are under common control with CTD
and may include some of the officers, directors or principal stockholders of
CTD. Affiliates may not sell their shares of Endorex common stock or warrants
acquired in connection with the merger except pursuant to:

    - an effective registration statement under the Securities Act covering the
      resale of those shares;

    - an exemption under paragraph (d) of Rule 145 under the Securities Act; or

    - another applicable exemption under the Securities Act.

    Endorex's registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, does not cover the resale of shares of
Endorex common stock or warrants to be received by affiliates in the merger.

    Certain affiliates of CTD have additionally agreed not to sell or transfer
their Endorex common stock, options or and warrants until the date upon which
Endorex has filed two reports on either Form 10-QSB or 10-KSB with the SEC for
any two reporting periods subsequent to the effective date of the merger and
thereafter only pursuant to an effective registration statement or an exemption
under the Securities Act.

                                       67

                        AGREEMENT AND PLAN OF MERGER AND
                     REORGANIZATION AND RELATED AGREEMENTS

    THE FOLLOWING DESCRIPTION OF THE AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION, AND CERTAIN RELATED AGREEMENTS ENTERED IN CONNECTION THEREWITH,
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO, THE MERGER AGREEMENT. A COPY OF THE MERGER AGREEMENT IS
ATTACHED AS APPENDIX I HERETO. WE ENCOURAGE YOU TO READ THE FULL AND COMPLETE
TEXT OF THE MERGER AGREEMENT AND RELATED AGREEMENTS BECAUSE THEY ARE THE LEGAL
DOCUMENTS THAT GOVERN THE MERGER.

CLOSING AND EFFECTIVE TIME OF THE MERGER

    The merger agreement provides that the closing will take place as soon as
practicable after the satisfaction or the waiver of the conditions to the merger
contained in the merger agreement unless some other time or date is agreed to by
Endorex and CTD.

    On the closing date, the parties to the merger agreement will file with the
Secretary of State of Delaware a certificate of the merger prepared and executed
in accordance with the relevant provisions of the Delaware General Corporation
Law. The merger will become effective when this certificate of merger is
accepted and recorded by the Delaware Secretary of State, unless some other time
or date is agreed to by Endorex and CTD.

WHAT CTD STOCKHOLDERS WILL RECEIVE IN THE MERGER

    Each share of CTD common stock issued and outstanding immediately prior to
the effective time of the merger will automatically convert into the right to
receive .271443 of a share of Endorex common stock. Each share of CTD Series A
preferred stock that is issued and outstanding immediately prior to the
effective time of the merger will automatically be converted into 1.008466
shares of Endorex common stock. Each CTD option will be exchanged for a new
Endorex option based on the number of shares the option can be converted into
and an adjusted strike price according to the formula listed in the merger
agreement. Each CTD warrant will also be exchanged for a new Endorex warrant
based on the number of shares issuable upon exercise of that CTD warrant and an
adjusted strike price according to the formula stated in the merger agreement.
Pursuant to the merger agreement, Endorex is not required to issue common stock
or any securities exercisable for Endorex common stock that would result in the
issuance of more than 10,000,000 shares of Endorex common stock, assuming the
exercise of any such exercisable securities at the closing of the merger.

    Pursuant to the merger agreement, at closing, Nicholas Stergiopoulos will
receive 133,334 shares of Endorex common stock from Endorex as payment of a
bonus related to his employment with CTD and Steve H. Kanzer will receive
250,000 shares of Endorex common stock from Endorex as payment of a bonus
related to his employment with CTD.

CTD STOCKHOLDERS, OPTION HOLDERS AND WARRANT HOLDERS WILL RECEIVE ENDOREX STOCK,
OPTIONS OR WARRANTS BASED ON THE MERGER AGREEMENT

    Endorex has agreed to mail to all CTD stockholders following the effective
time of the merger instructions for converting their CTD stock into Endorex
common stock or cash for fractional shares. After the effective time, all CTD
capital stock will no longer be outstanding and will automatically be cancelled
and cease to exist. CTD stockholders must surrender their shares to be eligible
for distributions and dividends on Endorex common stock. No distribution or
dividend will be paid for unsurrendered shares. Upon surrender of the CTD stock,
however, Endorex will pay all outstanding distributions and dividends for whole
shares of Endorex common stock, without interest.

    Following the effective time of the merger, all CTD options will be
exchanged for Endorex options and CTD option holders will have the right only to
exchange their CTD options for Endorex options as

                                       68

provided in the merger agreement. Endorex will mail to all CTD option holders
instructions for exchanging their CTD options for Endorex options subsequent to
the effective time of the merger.

    Following the effective time of the merger, all CTD warrants will be
exchanged for Endorex warrants and warrant holders will have the right only to
exchange their CTD warrants for Endorex warrants as provided in the merger
agreement. Endorex will mail to all CTD warrant holders instructions for
exchanging their CTD warrants for Endorex warrants subsequent to the effective
time of the merger.

WHAT CTD DISSENTING STOCKHOLDERS WILL RECEIVE

    CTD will provide CTD's dissenting stockholders all rights provided them in
Section 262 of the Delaware General Corporation Law. It is a condition precedent
to Endorex closing the merger agreement, however, that the CTD stockholders that
have exercised their dissenter's rights be entitled to receive in the merger no
more than 250,000 shares of Endorex common stock.

CONDITIONS TO OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE MERGER

    CTD and Endorex agreed that the merger will only be deemed effective and the
parties bound when the conditions stated in the merger agreement have been
fulfilled or waived. These conditions include the following:

    - no temporary restraining order, preliminary or permanent injunction or
      other order issued by any court is in effect preventing consummation of
      the merger;

    - the merger is not found to be illegal by any governmental body;

    - the parties have obtained all governmental approvals necessary for
      consummation of the merger;

    - the escrow agreement has been executed and is in full force;

    - the merger and the merger agreement have been approved by the stockholders
      of CTD;

    - the issuance of Endorex common stock, options and warrants in connection
      with the merger have been approved by the stockholders of Endorex;

    - the shares of Endorex common stock to be issued in the merger have been
      registered with the SEC under the Securities Act, the registration
      statement has become effective and the registration statement is not the
      subject of any stop order or proceedings seeking a stop order;

    - the shares of Endorex common stock to be issued in the merger have been
      approved for listing by AMEX and Endorex has not received a notice from
      AMEX indicating that Endorex is not in compliance with AMEX listing
      requirements; and

    - CTD and Endorex have received opinions, dated as of the closing date, to
      the effect that the merger will constitute a reorganization within the
      meaning of Section 368(a) of the Internal Revenue Code.

CONDITIONS TO OBLIGATIONS OF CTD

    CTD agreed to consummate the merger agreement only if the conditions listed
in the merger agreement have been satisfied or waived, including:

    - Endorex has provided all necessary documents and has been truthful and
      accurate in all material respects in the representations and warranties in
      the merger agreement;

    - Endorex has complied in all material respects with all covenants and
      obligations in the merger agreement;

                                       69

    - there has been no material adverse change in the conditions, properties,
      assets, liabilities, business operations or results of operations of
      Endorex;

    - all required consents, third-party approvals and legal opinions have been
      given;

    - at the effective time, the board consists of nine members including
      Dr. Colin Bier, Mr. Guy Rico, and Mr. Peter Kliem; and

    - Endorex has executed a consulting agreement with Nicholas Stergiopoulos,
      an employment agreement with Dr. Bier and a noncompetition and
      nonsolicitation agreement with Steve H. Kanzer.

CONDITIONS TO THE OBLIGATIONS OF ENDOREX

    Endorex has agreed to consummate the merger agreement only if the conditions
listed in the merger agreement have been satisfied or waived, including:

    - CTD has provided all necessary documents and has been truthful and
      accurate in all material respects in the representations and warranties in
      the merger agreement;

    - CTD has complied in all material respects with all covenants and
      obligations in the merger agreement;

    - there has been no material adverse change in the conditions, properties,
      assets, liabilities, business operations, or results of operations of CTD;

    - CTD's directors and officers have resigned prior to the effective time of
      the merger;

    - all required consents, third-party approvals and legal opinions have been
      given;

    - CTD has terminated all employment agreements or arrangements;

    - Mr. Stergiopoulos has executed a consulting agreement with Endorex,
      Dr. Bier has executed an employment agreement with Endorex and Mr. Kanzer
      has executed a noncompetition and nonsolicitation agreement with Endorex;

    - no CTD securities are outstanding other than as set forth in the merger
      agreement;

    - those CTD stockholders that have exercised dissenters rights are entitled
      to receive no more than 250,000 shares of Endorex common stock in the
      merger;

    - CTD has amended its warrants and certificate of incorporation in
      compliance with the merger agreement; and

    - Endorex's stockholders have approved an amendment to Endorex's stock
      option plan.

REPRESENTATIONS AND WARRANTIES

    The merger agreement contains representations and warranties of the parties
that are customary for a transaction of this nature. These representations and
warranties are related to, among other things, the parties' organizations,
capital structures, authority to enter into the transaction, filings with
regulatory authorities, compliance with governmental laws, regulations and
statutes, compliance with organizational documents, the absence of material
litigation and the accuracy of the information supplied for the merger agreement
including the accuracy of the financial statements and other matters.

CTD REPRESENTATIONS AND WARRANTIES

    The merger agreement contains various representations and warranties of CTD
relating to, among other things:

    - financial statements;

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    - absence of undisclosed liabilities;

    - absence of certain changes since December 31, 2000;

    - intellectual property rights;

    - capitalization and outstanding securities;

    - title to property;

    - interested party transactions;

    - payment of taxes and the sufficiency of reserves for current tax
      liability;

    - employee benefit plans;

    - employee matters;

    - absence of an agreement with a broker, finder or investment banker that
      requires payment of a fee or commission relating to the merger;

    - absence of any non-compete agreement that would impair the conduct of
      business;

    - environmental matters;

    - stockholder votes;

    - absence of excessive parachute payments;

    - insurance policies;

    - guaranties;

    - subsidiaries;

    - employment agreements;

    - compliance with FDA regulations;

    - results of clinical tests conducted;

    - patent and trademark applications;

    - license agreement with Dr. George McDonald;

    - sale of the assets of Intero Corp.;

    - dissolution of selected subsidiaries, including Neuropath, Inc.,
      Iopthalmics, Inc., Magyar Pharmaceuticals, Inc., CTD Drug Design, Inc.,
      Institute for Drug Research Publications, Inc., CTD Investments, LLC and
      Nodolor, Inc.; and

    - liquidation rights of Series A preferred stockholders.

ENDOREX AND ROADRUNNER REPRESENTATIONS AND WARRANTIES

    The merger agreement contains various representations and warranties of
Endorex and Roadrunner Acquisition, Inc., a wholly owned subsidiary of Endorex,
relating to, among other things:

    - timeliness and accuracy of Endorex's SEC and AMEX filings;

    - absence of undisclosed litigation;

    - absence of undisclosed liabilities;

    - absence of certain changes since December 31, 2000; and

                                       71

    - absence of an agreement with a broker, finder or investment banker that
      requires payment of a fee or commission relating to the merger.

COVENANTS

JOINT COVENANTS

    Endorex and CTD have each agreed that until the effective time of the
merger, they will do the following:

    - obtain consents required in connection with material contracts;

    - cooperate on CTD tax matters, including the preparation of tax returns;

    - provide business information and access to the other party on reasonable
      advance notice;

    - confer with the other party regarding material operational matters before
      taking any actions prior to the effective time;

    - treat and hold all confidential information as such and refrain from using
      the confidential information except in connection with the merger
      agreement;

    - consult with each other and obtain permission before issuing any press
      release or making any public disclosure regarding the merger;

    - use reasonable best efforts to effectuate the merger, fulfill all of the
      conditions of the merger agreement and notify the other party of the
      failure of any representation or warranty to be true or to comply with any
      covenant or condition under the merger agreement;

    - use best efforts to cause the merger to qualify as a reorganization under
      Section 368(a) of the Internal Revenue Code of 1986, as amended;

    - timely provide all necessary information and make all necessary filings
      under federal and state law and in compliance with SEC, AMEX and blue sky
      rules and guidelines;

    - timely prepare and file with the SEC the joint proxy statement/prospectus
      and cause the registration statement to become effective as soon as
      practicable;

    - timely and accurately respond to comments and requests from the other
      party; and

    - promptly call a meeting of the stockholders of CTD to vote on the merger
      and the merger agreement and a meeting of the Endorex stockholders to vote
      on the issuance of Endorex common stock in the merger, and coordinate
      their individual meetings of stockholders to fall on the same day, if
      possible.

CTD COVENANTS

    CTD additionally covenanted that it would do the following:

    - provide complete and accurate copies of its unaudited consolidated
      financial statements for the quarterly periods ended during the fiscal
      year 2001 prior to the effective time;

    - notify Endorex of any event or occurrence not in the ordinary course of
      business or which could have a material adverse effect on Endorex or any
      of its interests;

    - provide litigation support in connection with actions regarding the merger
      or CTD;

    - amend and terminate certain employment agreements and employment
      relationships;

    - deliver to Endorex within 30 days executed affiliate agreements from all
      affiliates of CTD;

    - amend its certificate of incorporation as contemplated in the merger
      agreement;

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    - provide information for inclusion in the joint proxy statement/prospectus;

    - amend its warrants as contemplated in the merger agreement;

    - use its best efforts to amend the license agreement with Dr. George
      McDonald; and

    - notify all relevant persons of its recent change of address.

    CTD covenanted not to do the following without the prior written consent of
Endorex:

    - permit any amendments to its certificate of incorporation, bylaws or other
      charter documents, other than those contemplated under the merger
      agreement;

    - declare or pay any dividends or make any other distributions on its
      capital stock;

    - enter into any material contracts or commitments or breach the terms of
      any material contracts;

    - issue, deliver or sell any shares of its capital stock or securities
      exchangeable for its capital stock;

    - transfer or sell its intellectual property rights;

    - sell, lease, license or otherwise dispose of or encumber its assets;

    - incur any material indebtedness or guarantee or issue or sell any debt
      securities;

    - enter into any non-budgeted operating lease;

    - pay any material claim or liability which is not part of the budget;

    - make any capital expenditures or capital improvements;

    - terminate or waive any right of substantial value;

    - adopt or amend any employee benefit, stock option or stock purchase plan;

    - hire any new employee other than secretarial staff;

    - grant any severance or termination pay or pay any bonus;

    - commence a lawsuit;

    - acquire another business;

    - change any tax election; or

    - take any action outside its ordinary course of business.

AMENDMENT TO CTD'S CERTIFICATE OF INCORPORATION

    Pursuant to the terms of the merger agreement, CTD is required, prior to the
effective time of the merger, to amend its certificate of incorporation such
that the Liquidation Amount (as defined in the certificate of incorporation)
payable to the holders of CTD Series A preferred stock in connection with the
consummation of the merger does not exceed the aggregate number of shares of
Endorex common stock that the holders of CTD Series A preferred stock are
entitled to receive in exchange for their shares of Series A preferred stock in
connection with the merger. The effect of the amendment is to reduce the number
of shares of Endorex common stock the holders of shares of CTD Series A
preferred stock would be entitled to receive in the merger and to increase the
number of shares of Endorex common stock the holders of shares of CTD common
stock would be entitled to receive in the merger.

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RESTRICTIONS ON SOLICITING ALTERNATIVE PROPOSALS

    In the merger agreement, CTD agreed that it will not directly or indirectly
do any of the following:

    - solicit, engage in, or participate in any negotiations or discussions with
      respect to an offer to acquire all or any part of CTD's stock or assets
      from any party other than Endorex;

    - disclose non-public information or permit access to the properties, books
      or records of CTD for the purpose of formulating an offer competing with
      the merger with Endorex;

    - assist, cooperate with, or encourage any person or entity making, or
      facilitate the making of a competing offer; or

    - agree to, enter into, approve, recommend or endorse a competing offer.

    CTD agreed to notify Endorex within 24 hours after learning of a competing
offer and to forward to Endorex copies of any competing proposal or request that
is made in writing and copies of all correspondence related thereto. Thereafter,
CTD will keep Endorex fully apprised of the status of the competing offer and of
any term modifications. CTD has agreed to terminate all discussions or
negotiations with any parties other than Endorex about a competing offer.

    In the merger agreement, Endorex agreed it will not directly or indirectly
do any of the following:

    - solicit, engage in, or participate in any negotiations or discussions with
      respect to any offer to acquire substantially all of the assets or equity
      interests of another entity if the proposed acquisition by Endorex would
      materially adversely affect Endorex's ability to consummate the merger
      agreement;

    - disclose non-public information or permit access to the properties, books
      or records of Endorex for the purpose of formulating another such
      acquisition by Endorex;

    - assist, cooperate with, or encourage any person or entity to make, or
      facilitate the making of, a competing offer to be acquired by Endorex; or

    - agree to, enter into, approve, recommend or endorse a competing offer to
      be acquired by Endorex.

    Endorex agreed to forward to CTD copies of any acquisition inquiries that
are made in writing and copies of all correspondences relating thereto.
Thereafter, Endorex has promised to keep CTD fully apprised of the status of any
such potential acquisition and of any term modifications. Endorex has agreed to
terminate all discussions or negotiations with any parties other than CTD about
any proposed acquisition.

    The parties acknowledged that any breach of the promise to deal exclusively
with each other will result in irreparable harm to the non-breaching party that
is not compensable with money damages and agreed that the covenants regarding
solicitation of alternative proposals will be enforceable by specific
performance and injunctive relief.

INDEMNIFICATION

    All of the representations, warranties, covenants and agreements of the
parties to the merger agreement survive and continue in effect until March 31,
2003. The parties to the merger agreement have agreed to indemnify the other
parties thereto and their respective officers, directors, employees, agents and
advisors, against all demands, claims, actions, judgments, obligations,
liabilities, losses, costs, expenses and the like resulting from any breach of
any representation or warranty or failure to perform any covenant or agreement
in the merger agreement and any other agreement entered into or document
delivered by such party in connection with the merger. Pursuant to the terms of
the merger agreement and the escrow agreement, an escrow fund containing shares
of Endorex common stock to be issued in connection with the merger will be
available to compensate Endorex and certain other

                                       74

indemnified persons for breaches of such representations, warranties, covenants
and agreements of CTD under the merger agreement.

    Except as set forth in the merger agreement, no party to the merger
agreement is entitled to make a claim for indemnification under the merger
agreement until the aggregate amount of damages incurred by such party exceeds
$100,000, at which time the party seeking indemnification may recover all
amounts up to a maximum of the closing date fair market value of the aggregate
number of shares of Endorex common stock in escrow on the date of the delivery
of the notice of indemnification. Closing date fair market value means, prior to
the closing of the merger, $1.50, and, after the closing of the merger, the
average closing price of Endorex common stock on AMEX for the 30 trading days
prior to the closing date. The parties have the option to make indemnification
payments in shares of Endorex common stock or cash.

    In particular, CTD's stockholders are required to indemnify the Endorex
parties for damages and the like resulting from a dispute between CTD and the
licensors under the license agreement relating to Metropt-TM-. Indemnification
for such dispute will not be subject to the $100,000 threshold, but shall not
exceed $200,000.

AMEX NON-COMPLIANCE NOTICE

    Endorex has agreed that if it receives an official written notice from AMEX
stating that Endorex is not in compliance with the requirements for the
continued listing of Endorex's common stock on AMEX, that Endorex will use its
reasonable best efforts to remedy the deficiencies for continued listing of
Endorex's common stock on AMEX.

TAXES

    Endorex and CTD agreed to use their best efforts to cause the merger to
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.

TERMINATION OF THE MERGER AGREEMENT

    At any time prior to the effective time of the merger, the merger agreement
may be terminated by the mutual agreement of Endorex and CTD. The merger
agreement also may be terminated by Endorex if:

    - CTD materially breaches any representation, warranty, obligation, or
      agreement that is not cured by CTD within ten days of receipt of notice
      thereof, unless Endorex is in breach of the merger agreement at that time;

    - the merger is not completed by December 31, 2001, unless Endorex is in
      breach of the merger agreement at that time;

    - the merger is enjoined by a court order not entered at the request or with
      the support of Endorex or certain of its affiliates;

    - CTD stockholders fail to approve the merger and the merger agreement;

    - Endorex stockholders fail to approve the issuance of Endorex securities in
      connection with the merger;

    - CTD's board of directors withdraws or modifies in an adverse manner its
      recommendation of the merger agreement and the merger; or

    - CTD's board of directors recommends or endorses to the CTD stockholders a
      proposal that competes with the merger agreement.

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The merger agreement may be terminated by CTD if:

    - Endorex or Roadrunner materially breaches any representation, warranty,
      obligation, or agreement that is not cured by Endorex or Roadrunner, as
      the case may be, within ten days of receipt of notice thereof, unless CTD
      is in breach of the merger agreement at that time;

    - the merger is not completed by December 31, 2001, unless CTD is in breach
      of the merger agreement at that time;

    - the merger is enjoined by a court order not entered at the request or with
      the support of CTD or certain of its affiliates;

    - Endorex stockholders fail to approve the issuance of Endorex securities in
      connection with the merger; or

    - Endorex's board of directors withdraws or modifies in an adverse manner
      its recommendation of the issuance of Endorex securities in connection
      with the merger.

TERMINATION FEE

    Under the merger agreement, CTD is obligated to pay to Endorex a termination
fee of $1,000,000, plus all reasonable costs and expenses incurred by Endorex in
connection with the merger agreement, if Endorex terminates the merger agreement
because:

    - CTD materially breached a representation, warranty, obligation, or
      agreement that was not cured by CTD within ten days of receipt of notice
      thereof and within 12 months after termination, CTD enters into another
      specified acquisition transaction with a third party that was in contact
      with the CTD prior to the termination of the merger agreement;

    - CTD stockholders fail to approve the merger and the merger agreement;

    - CTD's board of directors withdraws or modifies in an adverse manner its
      recommendation of the merger agreement and the merger; or

    - CTD's board of directors recommends or endorses to the CTD stockholders a
      proposal that competes with the merger agreement.

    Endorex is obligated to pay to CTD a termination fee of $1,000,000, plus all
reasonable costs and expenses incurred by CTD in connection with the merger
agreement, if CTD terminates the merger agreement because:

    - Endorex materially breached a representation, warranty, obligation, or
      agreement that was not cured by Endorex within ten days of receipt of
      notice thereof and within 12 months after such termination, Endorex enters
      into another specified acquisition transaction with a third party that was
      in contact with Endorex prior to the termination of the merger agreement;

    - Endorex's board of directors withdraws or modifies in an adverse manner
      its recommendation of the issuance of Endorex securities in connection
      with the merger; or

    - Endorex stockholders fail to approve the issuance of Endorex securities in
      connection with the merger and stockholders representing greater than 50%
      of the outstanding stock of Endorex eligible to vote on that issuance vote
      against the proposal, excluding from the calculation the shares held by
      and votes of Dr. Lindsey Rosenwald and his affiliates and any stockholders
      that are also stockholders of CTD or their affiliates.

EXPENSES OF THE COMBINATION

    Endorex and CTD agreed that all costs and expenses incurred as a result of
the merger agreement are the responsibility of the incurring party. CTD has
agreed that its costs and expenses incurred in

                                       76

connection with the merger agreement may not exceed $425,000 in the aggregate.
If CTD's costs and expenses exceed $425,000, two-thirds of the excess will be
deemed damages for which Endorex is entitled to indemnity and one-third will
increase the $425,000 limit by that amount, except that the limit may not exceed
$475,000. In addition, Endorex and CTD agreed to share equally any payment for:

    - the filing fee for the joint proxy statement/prospectus and the related
      registration statement

    - the fees of the escrow agent; and

    - the cost of a directors' and officers' insurance tail policy for CTD (net
      of any refunds from cancellation of the regular policy).

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

    All representations, warranties, and covenants of the parties contained in
the merger agreement shall survive until March 31, 2003.

RELATED AGREEMENTS

VOTING AGREEMENT

    Concurrently with entering into the merger agreement, Endorex, Roadrunner
Acquisition, Inc., CTD and stockholders of CTD holding approximately 63% of
CTD's outstanding common stock and 61% of CTD's outstanding Series A preferred
stock, or the Voting Agreement Stockholders, entered into a voting agreement
dated as of July 31, 2001 pursuant to which the Voting Agreement Stockholders
agreed to vote their shares of CTD stock in favor of the merger, the merger
agreement and all of the transactions contemplated by the merger agreement, and
any other matters necessary for the consummation of such transactions. The
Voting Agreement Stockholders also agreed to vote their shares of CTD capital
stock against any proposals competing with the merger agreement, changes in the
directors or capitalization of CTD, or amendment of CTD's certificate of
incorporation or bylaws, that could reasonably be expected to impede, interfere
with, delay, postpone or materially adversely affect the transactions
contemplated by the merger agreement. In connection with the execution of the
voting agreement, the Voting Agreement Stockholders executed and delivered to
Endorex and its designees an irrevocable proxy with respect to the Voting
Agreement Stockholders' shares of CTD stock to vote such shares as agreed in the
voting agreement.

    In the voting agreement, the Voting Agreement Stockholders agreed not to
grant any proxies or enter into any voting trust or agreement to vote the Voting
Agreement Stockholders' shares of CTD stock and not to sell, assign, transfer,
encumber, pledge, or dispose of those shares, or enter into any contract to do
so. Each Voting Agreement Stockholder agreed to promptly provide notice to
Endorex if that Voting Agreement Stockholder is approached or solicited by any
person with respect to the foregoing or becomes aware of a proposal competing
with the merger agreement. In addition, each Voting Agreement Stockholder waived
its appraisal rights for its shares of CTD stock in connection with the merger.

    The voting agreement and the irrevocable proxy terminate upon the earliest
to occur of (a) the mutual written consent of the parties, (b) the effective
time of the merger, and (c) the termination of the merger agreement according to
its terms.

    We encourage you to read the entire form of voting agreement, a copy of
which is attached as Appendix II hereto.

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ESCROW AGREEMENT

    At the closing of the merger, Endorex, the CTD stockholders, and Mr. Peter
Kliem, as the representative of the CTD stockholders, are required pursuant to
the terms of the merger agreement to enter into an escrow agreement with Wells
Fargo Bank Minnesota, National Association, as escrow agent, to place into
escrow 1,350,000 of the shares of Endorex common stock to be received by the CTD
Stockholders in connection with the merger. Those shares are to be held in
escrow for payment of indemnification claims that Endorex may make against the
CTD stockholders pursuant to the merger agreement. Under the escrow agreement,
Endorex may make a request to the escrow agent for indemnification pursuant to
Endorex's indemnification rights under the merger agreement. The stockholder
representative has the right to dispute any such request. The escrow agent will
disburse shares from the escrow pursuant to the terms of the escrow agreement
when the dispute is resolved.

    On each of March 31, 2002, September 30, 2002 and March 31, 2003, 674,975,
337,502 and 337,523 shares of Endorex common stock, respectively, less any
shares subject to an indemnification claim or which have been distributed to
Endorex pursuant to indemnification claims, will be distributed to the
stockholder representative from escrow. Regardless of the terms for distribution
of the escrow, Endorex and the stockholder representative may deliver a written
notice to the escrow agent specifying different distribution instructions.

    While any shares are being held in escrow, CTD stockholders will be entitled
to exercise any voting, consent and other rights with respect to those shares
and to cause the escrow agent to tender those shares pursuant to a tender or
exchange offer, with any property received pursuant to any such tender or
exchange being put into the escrow. All dividends, cash or other property
distributed in respect of the escrow shares will become escrow property to be
disbursed with the escrow shares to which the property was apportioned.

    The escrow agent will have a lien on the property in escrow to secure
payment for its services under the escrow agreement. The parties to the escrow
agreement will agree, jointly and severally, to indemnify and hold the escrow
agent harmless from any liability incurred by the escrow agent in connection
with the escrow agreement and the escrowed property.

    Under the terms of the escrow agreement, each of the CTD stockholders will
represent and warrant to Endorex that:

    - that CTD stockholder has the capacity and authority to enter into the
      escrow agreement, voting agreement and affiliate agreement, if applicable,
      or collectively the Stockholder Documents, and to perform its obligations
      thereunder;

    - execution, delivery and performance of the Stockholder Documents and
      consummation of the transactions contemplated thereby will not conflict
      with any laws, rules, regulations, judgments, orders, permits, licenses or
      the like applicable to that CTD stockholder or constitute a breach or
      default under, conflict with or require any consent under any instrument,
      contract, agreement or the like to which that CTD stockholder is a party;

    - the Stockholder Documents are valid and binding obligations of that CTD
      stockholder and are enforceable against that CTD stockholder in accordance
      with their terms, except as set forth in the escrow agreement;

    - that CTD stockholder holds the number of shares of CTD capital stock set
      forth in an exhibit to the merger agreement, free and clear of any liens,
      claims, encumbrances and the like and restrictions on transfer, other than
      pursuant to state and federal securities laws; and

    - that CTD stockholder will not enter into any agreement, contract or
      commitment requiring it to sell, transfer or otherwise dispose of any
      capital stock of CTD or any trust, proxy or other agreement with respect
      to the voting of such stock, other than the voting agreement.

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    In addition, CTD stockholders that are not individuals will, pursuant to the
terms of the escrow agreement, represent and warrant to Endorex that:

    - it is duly organized, validly existing and in good standing under the laws
      of its jurisdiction of organization and has the authority under it
      organizational documents to enter into the Stockholder Documents, to
      perform its obligations thereunder and to consummate the transactions
      contemplated thereby;

    - it has taken all organizational action necessary to enter into the
      Stockholder Documents, to perform its obligations thereunder and to
      consummate the transaction contemplated thereby; and

    - the execution, delivery and performance of the Stockholder Documents and
      the consummation of the transactions contemplated thereby will not
      constitute a violation, breach or default under, conflict with or require
      any consent under its organizational documents.

    Pursuant to the terms of the escrow agreement, each CTD stockholder will
release each of CTD, Endorex and Roadrunner and their respective officers,
directors, employees, affiliates, agents and the like from all claims, causes of
action, debts, liabilities and demands which that CTD stockholder and its
affiliates have or may thereafter have against those persons arising at or prior
to the effective time of the merger, other than pursuant to the terms of the
merger agreement, and will agree not to assert any claim or demand against such
persons which is released pursuant to the terms of the escrow agreement.

    Under the escrow agreement, CTD stockholders will each appoint Mr. Kliem as
their representative for all matters arising under the escrow agreement and will
agree to indemnify and hold him harmless from any claims, demands, obligations,
causes of action, loss, liability and the like in connection with his duties
under the escrow agreement. The escrow agreement provides that Endorex and the
escrow agent may rely upon any act of the stockholder representative as an act
of the CTD Stockholders under the escrow agreement.

    We encourage you to read the entire form of escrow agreement to be entered
into in connection with the merger, a copy of which is attached as Appendix V
hereto.

AFFILIATE AGREEMENT

    Pursuant to the terms of the merger agreement, on or before August 30, 2001,
each affiliate of CTD entered into an affiliate agreement with Endorex. Under
each affiliate agreement, the affiliate agreed not to sell, assign or transfer
any Endorex common stock, option or warrant that affiliate receives in
connection with the merger unless that transaction is registered under the
Securities Act or an exemption from registration is available. The affiliate
acknowledged that Endorex is under no obligation to register the sale, transfer
or other disposition of those shares or to take any action to make compliance
with an exemption from registration available. The affiliate agreed not to sell,
transfer, contract to sell, pledge, grant any option to purchase, make any short
sale or otherwise dispose of or reduce its risk with respect to any Endorex
securities held by it until the date upon which Endorex has filed two reports on
either Form 10-KSB or 10-QSB with the SEC for any two reporting periods ended
subsequent to the effective time of the merger. Finally, the affiliate
acknowledged that restrictive legends will be placed on certificates
representing CTD common stock it receives in connection with the merger.

EMPLOYMENT AGREEMENT

    At the closing of the merger, Endorex and Dr. Colin Bier, CTD's Chairman of
the board, will enter into an employment agreement pursuant to which Dr. Bier
will be employed by Endorex as it Chairman of the board of directors and Chief
Executive Officer. In addition, Dr. Bier will agree to serve as a director of
Endorex's subsidiaries. The employment agreement is for a term of three years

                                       79

and automatically renews for successive one year periods unless one of the
parties elects not to renew the agreement.

    Pursuant to the terms of the employment agreement, Dr. Bier will receive a
base salary of at least $275,000, subject to annual review. In addition,
Dr. Bier will be entitled to receive an annual bonus of up to 50% of his base
salary based upon certain milestones being met. Upon entering into the
employment agreement, Dr. Bier will be granted options to purchase 700,000
shares of Endorex common stock at a purchase price equal to the fair market
value on the date of the grant of the options. Of those options 200,000 will
vest on the date of grant, 175,000 will vest on the first anniversary of the
date of the employment agreement, 175,000 will vest on the second anniversary of
the date of the employment agreement, and 150,000 will vest on the third
anniversary of the date of the employment agreement, each vesting being on
condition that Dr. Bier is employed by Endorex on that date. Endorex will also
provide Dr. Bier with medical insurance, long-term disability insurance and life
insurance up to $1,000,000, in addition to other employee benefit plans and
arrangements, and at least four weeks of paid vacation.

    Dr. Bier will be based out of his home office in Montreal, Quebec, Canada,
but will be required to spend a significant portion of his time at Endorex's
principal offices. Endorex will reimburse all of Dr. Bier's expenses associated
with travel between Montreal and Endorex's offices during the first 120 days of
employment and thereafter in accordance with a reimbursement policy to be
established by a committee of the board of directors of Endorex.

    Pursuant to the terms of the employment agreement, Dr. Bier will agree to
keep Endorex's proprietary information confidential. In addition, Dr. Bier will
agree to disclose and assign to Endorex all intellectual property conceived or
first reduced to practice by Dr. Bier while performing services under the
employment agreement. The employment agreement provides that Dr. Bier will not
compete with any business of Endorex during his employment and for a period of
two years thereafter in any geographical area in which Endorex carries on its
business, nor will he employ or solicit for employment any employee of Endorex
during that period.

    Endorex may terminate the employment agreement for:

    - "Cause" as defined in the employment agreement;

    - violation of the confidentiality or invention assignment provisions
      thereof; or

    - physical or mental incapacity if Dr. Bier cannot perform his duties
      thereunder for a period of 90 consecutive days.

    Dr. Bier may voluntarily terminate the employment agreement. The employment
agreement will also terminate upon Dr. Bier's death. If the employment agreement
is terminated other than for cause, disability, death or by Dr. Bier voluntarily
for good reason, as defined in the employment agreement, which includes a change
of control, then:

    - Dr. Bier will be entitled to receive his base salary and a prorated bonus
      for a period of six months and for a subsequent six month period, subject
      to reduction during the subsequent period for earnings from other
      employment;

    - Dr. Bier will be entitled to receive his benefits for those periods until
      other coverage is obtained;

    - any unvested standard options granted to Dr. Bier will vest;

    - any unvested performance options granted to Dr. Bier will, at the
      discretion of the board of directors, vest; and

    - Dr. Bier will have one year from the date of termination to exercise his
      options.

                                       80

    CONSULTING AGREEMENT

    At the closing of the merger, Endorex and Nicholas Stergiopoulos, CTD's
director of corporate development, will enter into a consulting agreement
pursuant to which Mr. Stergiopoulos will provide consulting services to Endorex
in connection with ongoing product and business development activities related
to orBec-Registered Trademark-, Orprine-TM-, Metropt-TM-, the Allergan
Botox-Registered Trademark- program, the drug delivery technology from the
University Pharmaceuticals of Maryland, and activities related to the business,
products or services of CTD prior to the merger. The term of the consulting
agreement will be for six months, during which time Mr. Stergiopoulos will be
available to provide the consulting services for an average of 40 hours per
week. In consideration for rendering these consulting services,
Mr. Stergiopoulos will be paid $8166.66 per month. In addition, if a licensing
or asset sale of Metropt-TM- is consummated between RxEyes, a subsidiary of CTD,
and a certain third party or its affiliates during the term of the consulting
agreement due to the efforts of Mr. Stergiopoulos, Endorex will pay
Mr. Stergiopoulos one percent of any monies directly received by Endorex as a
result of that transaction.

    Under the consulting agreement, Mr. Stergiopoulos will agree not to disclose
any of Endorex's proprietary information during the term of the consulting
agreement and for a period of two years thereafter. In addition,
Mr. Stergiopoulos will agree to assign to Endorex all intellectual property
made, conceived, discovered or acquired by him pursuant to the terms of the
consulting agreement. The consulting agreement provides that during the term of
the consulting agreement and for a period of two years thereafter,
Mr. Stergiopoulos will not anywhere in the world be involved with or own any
interest in any entity that develops, researches, manufactures, processes,
markets, distributes or sells certain drugs or compounds that are currently part
of CTD's business as specified in the consulting agreement. In addition, during
the same period Mr. Stergiopoulos will agree not to employ or solicit for
employment any employee of Endorex.

NONCOMPETITION AND NONSOLICITATION AGREEMENT

    In connection with the closing of the merger, Endorex and Steve H. Kanzer,
CTD's President and Chief Executive Officer, will enter into a noncompetition
and nonsolicitation agreement pursuant to which Mr. Kanzer will agree for a
period of one year not to be involved with or own any interest in any entity
that develops, researches, manufactures, processes, markets, distributes or
sells certain drugs or compounds that are currently part of CTD's business as
specified in the agreement. In addition, during the same period Mr. Kanzer will
agree not to employ or solicit for employment any employee of Endorex or to
solicit business from any client or customers of Endorex. Under the terms of the
agreement, Mr. Kanzer will also agree not to disclose any of Endorex's
proprietary information and to assign to Endorex all intellectual property made,
conceived, discovered or acquired by him pursuant to the terms of the agreement.

                                       81

                            MARKET PRICE INFORMATION

ENDOREX MARKET PRICE INFORMATION

    As of August 6, 1998, Endorex common stock started trading on the American
Stock Exchange under the symbol "DOR." Prior to that, quotations for Endorex's
common stock appeared on the "pink sheets" published by the National Quotations
Bureau, Inc. and on the "Bulletin Board" of the National Association of
Securities Dealers, Inc. The table below sets forth the high and low sales
prices, as provided by the American Stock Exchange, for the period from
January 1, 1999 through October 15, 2001. The amounts represent inter-dealer
quotations without adjustment for retail markups, markdowns or commissions and
do not represent the prices of actual transactions.



                                                                HIGH       LOW
                                                              --------   --------
                                                                   
1999
  1st Quarter...............................................   $2.69      $1.50
  2nd Quarter...............................................   $2.23      $1.50
  3rd Quarter...............................................   $2.23      $1.50
  4th Quarter...............................................   $2.94      $1.38

2000
  1st Quarter...............................................   $9.94      $2.50
  2nd Quarter...............................................   $5.75      $1.75
  3rd Quarter...............................................   $3.81      $1.81
  4th Quarter...............................................   $2.81      $0.81

2001
  1st Quarter...............................................   $1.75      $0.75
  2nd Quarter...............................................   $1.30      $0.76
  3rd Quarter (through October 15, 2001)....................   $1.40      $0.85


    As of October 15, 2001, Endorex had 1,401 registered common stockholders, 1
registered Series B preferred stockholder and 1 registered Series C preferred
stockholder of record. Endorex currently intends to retain any earnings for use
in its business and does not anticipate paying any cash dividends in the
foreseeable future.

    On July 31, 2001, the last trading day before the proposed merger was
announced, the closing price per share of Endorex common stock on the American
Stock Exchange was $1.13. On October 15, 2001, the latest practicable trading
day before the printing of this joint proxy statement/prospectus, the closing
price per share of Endorex common stock was $.90.

    Because the market price of Endorex common stock is subject to fluctuation,
the market value of the shares of Endorex common stock that holders of CTD
common stock will receive in the merger may increase or decrease prior to and
following the merger. We urge stockholders to obtain current market quotations
for Endorex common stock. No assurance can be given as to the future prices or
markets for Endorex common stock.

CTD MARKET PRICE INFORMATION

    As of October 15, 2001, CTD had 37 registered common stockholders and 43
registered Series A preferred stockholders of record. CTD is unable to provide
information with respect to the market price of the CTD shares of stock because
there is no established trading market for them.

                                       82

                             DESCRIPTION OF ENDOREX

    THE FOLLOWING SECTION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. ENDOREX'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS, INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND ELSEWHERE IN THIS JOINT
PROXY STATEMENT/PROSPECTUS.

BUSINESS

    Endorex is a development stage drug delivery company incorporated in 1987 in
the state of Delaware under its former name Immunotherapeutics, Inc.
Immunotherapeutics was a wholly owned subsidiary of Biological
Therapeutics, Inc., a North Dakota corporation formed in 1984. Biological
Therapeutics commenced operations in 1985 and in 1987 was merged with and into
Immunotherapeutics with Immunotherapeutics continuing as the surviving entity.
The technology being developed at that time was peptide-based immunomodulators
formulated in liposomes for the treatment of various types of cancer. During the
period from 1987 to 1996, Immunotherapeutics was headquartered in Fargo, North
Dakota. In 1996, Immunotherapeutics changed its name to Endorex to reflect the
change in direction of the company after majority ownership of Endorex was
acquired by the Aries Funds, managed by Paramount Capital, Inc. A new management
team, including a new president and chief executive officer, and board of
directors was put in place to change the direction of Endorex. The new
management team established executive offices in Lake Bluff, Illinois, a Chicago
suburb, and then relocated all company operations to its new headquarters in
Lake Forest, Illinois, in early 1998.

    In December 1996, Endorex began to move its business into drug delivery by
licensing a new drug delivery technology from the Massachusetts Institute of
Technology. This new delivery technology is intended to enable the oral delivery
of protein and peptide-based drugs and vaccines, which normally would be
delivered via injection. This delivery system is based on novel liposomes which
are polymerized, increasing the ability of the liposome to withstand the acids
and enzymatic activity of the stomach and upper gastrointestinal tract and
thereby protecting the protein or peptide-based drug from degradation before it
can be absorbed through the stomach or intestinal lining. Endorex began
development of this delivery system, called the Orasome-TM- system, in 1997.

    In 1997, Endorex licensed a new cancer drug from the Wisconsin Alumni
Research Foundation, the repository of new technology and intellectual property
of the University of Wisconsin-Madison. This drug, perillyl alcohol, was
completing phase I clinical trials in cancer patients and about to enter
multiple phase II trials for different types of cancer.

    In 1998, Endorex formed two drug delivery joint ventures with Elan
Corporation, plc. The purpose of the first joint venture, InnoVaccines
Corporation, is to research, develop and commercialize novel delivery systems
for the human and veterinary vaccine markets. Innovaccines initiated evaluation
of the oral and nasal delivery of a tetanus vaccine and another vaccine. The
second joint venture, Endorex Newco, Ltd., focuses on the utilization of the
MEDIPAD-Registered Trademark- microinfusion pump, developed by Elan, to deliver
iron chelators for the treatment of a series of genetic blood disorders known as
iron overload disorders.

    In 1999, InnoVaccines acquired from Vaxcel, Inc. the exclusive license
rights to an additional oral vaccine delivery technology and a portfolio of
intellectual property owned by and invented at the Southern Research Institute,
or SRI, and the University of Alabama at Birmingham, or University of Alabama.
At the end of 1999, Endorex entered into a research and option agreement with
Novo Nordisk A/S to develop an oral form of Novo's human growth hormone product
Norditropin-Registered Trademark-, based on Novo's previous research into human
growth hormone. Also in 1999, InnoVaccines licensed from Elan a tissue-targeting
technology that had the potential to enhance the uptake of oral and/or nasal
vaccines.

                                       83

    In 2000, Endorex announced that it had decided to concentrate on drug
delivery, and it began the process of divesting its oncology technology and
business. In addition, Newco entered into a license agreement with Schein
Pharmaceutical Inc., or Schein, to develop and market the
MEDIPAD-Registered Trademark- microinfusion pump to deliver an iron chelator
drug for the treatment of iron overload disorders. Schein subsequently merged
with Watson Pharmaceuticals Inc., or Watson. Also in 2000, InnoVaccines began
evaluating SRI/University of Alabama vaccine technology for an oral tetanus
vaccine together with a vaccine adjuvant.

    During 2001, Newco has continued its research and development of the
MEDIPAD-Registered Trademark- iron chelation product candidate. However, in May
2001, Watson indicated that it will not continue to meet the obligations
originally agreed to by Schein, although no definitive agreements have been
reached by Newco and Watson for the termination of the Schein agreement.
Subsequently, Watson discontinued its collaboration efforts. In light of this,
Endorex and Elan are considering terminating Newco, and Newco is evaluating
other commercialization partners for its iron chelation delivery system.
InnoVaccines' development activities during 2001 included further evaluation of
development work of the Orasome-TM- delivery system for oral and mucosal
delivery of the tetanus and influenza vaccines and the development of mucosal
tissue targeting technology for this delivery system. Work in this area has been
focused on the PLGA microparticle system licensed from SRI. In addition, oral
delivery of tetanus and influenza vaccines has been further evaluated in
preclinical animal studies. Although activities to evaluate the efficacy of
selected oral vaccines are still underway in InnoVaccines through research
conducted by Endorex, Endorex and Elan are discussing the possible termination
of InnoVaccines and the terms of such termination. On August 28, 2001, Novo
Nordisk terminated the research and option agreement with Endorex.

BUSINESS STRATEGY

    Endorex's objective is to be a leader in developing oral and mucosal
formulations of therapeutic macromolecular and small molecule drugs currently
available only by injection. Its business strategy includes entering into
strategic alliances with pharmaceutical and biotech partners who have products
or compounds in development that would benefit from Endorex's drug delivery
technology. Endorex believes the benefit for such partners would be the creation
of a new differentiated product form, which could potentially enhance patient
compliance via an easier to use format, and extend its partners' product life by
combining their product with Endorex's patented technology. Endorex may also
look to develop its core drug delivery expertise, lipid-based systems, to create
other delivery systems to enhance the therapeutic use of its partner's products.
When necessary, Endorex will look to in-license and develop compatible drug
delivery systems from other institutions to enhance its delivery capability and
portfolio, as was done with SRI/University of Alabama. Endorex will also seek to
develop its own product candidates through early clinical development and seek
partnerships, joint ventures or corporate collaborations to continue later stage
clinical development and commercialization.

THE DRUG DELIVERY INDUSTRY

    The drug delivery industry seeks to provide new, improved or alternative
methods for delivery of drugs that enhance patient compliance, quality of life
and ease-of-use in taking medicines. Additionally, major pharmaceutical
companies have extended the life of their effective market exclusivity periods
for existing pharmaceutical products by developing new differentiated forms and
obtaining new patents based upon new formulations of existing drugs that are
administered via alternative methods. As the drug delivery industry has grown
and become more specialized, different companies have focused on core
technologies to deliver drugs in unique ways: transdermal (through the skin),
nasal (through the nasal passages), implant (delayed release of injections for
weeks or months at a time), and oral (either liquid, pills, or a spray into the
mouth) delivery comprise some of the new delivery pathways. Generally, the
regulatory hurdles for approval of a drug delivery system are less stringent
than that of a new chemical entity or new pharmaceutical product because most
drug delivery companies look at

                                       84

delivering already approved and marketed drugs where the safety and efficacy of
the drug has been established.

    One of the most difficult challenges of drug delivery has been to deliver
macromolecular drugs, the chemical structure of which is much larger than
traditional "small molecule" drugs. These drugs are based on peptides or
proteins and today are primarily available in only injectable form, although
there are companies testing pulmonary, nasal, and transdermal delivery of these
drugs to humans. Injectable therapy has two major limitations. First, many
patients find injectable therapies unpleasant due to the pain associated with
the injection. When injectable therapy is necessary for chronic and subchronic
diseases, patient compliance often decreases. Poor acceptance and compliance can
lead to higher health costs due to an increase in medical complications. Second,
studies from the Center for Disease Control have demonstrated that the vaccine
itself is often a small part of the total cost of administering the treatment,
which includes paying medical personnel to administer the injection, the cost of
the syringe, the cost to dispose of the syringe, and the like.

    While all of these new delivery options offer advantages for the patient
over the traditional injectable format, oral delivery is the patient-preferred
format due to simplicity of use. However, from a technical perspective oral
delivery of this class of drugs has been extremely difficult, due to low
bioavailability of oral delivery systems to date versus the injectable version
and the fragility of these drugs resulting in their inability to withstand
transit through the stomach and upper gastrointestinal tract intact without
degradation destroying a therapeutic effect of the drug.

ENDOREX'S ORAL AND NASAL DRUG AND VACCINE DELIVERY TECHNOLOGY

    Endorex is developing core lipid-based technology for a new generation of
drugs and vaccines that may be taken by mouth, thereby replacing painful
injections and increasing patient compliance. Endorex's proprietary oral and
nasal drug delivery technology could potentially convert injectable-only therapy
into the patient preferred oral therapy format. This conversion process includes
encapsulating protein and/or peptide-based (large molecule or macromolecular)
drugs for oral delivery using proprietary patented technology developed
internally by Endorex and from the Massachusetts Institute of Technology. Many
vaccines and macromolecular drugs are exceptionally fragile and thus cannot
survive the digestive process of the gastrointestinal tract. By employing
proprietary lipid drug delivery systems that utilize specially engineered,
polymerized lipids and liposomes that can encapsulate proteins or peptide-based
vaccines and drugs, many of these agents might be made orally available at
therapeutic levels. Applications of this technology under development by Endorex
could enable preparation of oral formulations of peptide hormones, such as
insulin and human growth hormone, other sensitive peptide drugs and proteins,
and nucleic acids. Virtually all of these compounds are currently given to
patients solely via injection.

    As estimated by the investment banking firm of S. G. Cowen and Company,
expected sales of protein and peptide based injectable drugs could reach
$18.5 billion in 2001, and includes such drug categories as monoclonal
antibodies, insulin, growth factors, vaccines, colony stimulating factors,
hormones, and the like.

    Endorex's lipid based drug delivery systems represent a series of
improvements in encapsulation technology resulting in properties that may enable
efficient uptake by crucial cells in the gastrointestinal tract. Because of the
unique ability of polymerized lipids and liposomes to withstand the activity of
bile salts, digestive enzymes, and gastric acids, this proprietary technology
may be utilized practically and commercially for the oral delivery of many
therapeutics, including both water soluble and water insoluble drugs.

    These polymerized lipids and liposomes encapsulate fragile drugs and hold
them within a membrane envelope that is resistant to the environmental stress of
the gastrointestinal tract. Lipids and liposomes can also be engineered to
release their contents in a controlled fashion and to contain surface ligands,
or biological "magnets," capable of targeting specific receptors in the
intestine and

                                       85

other tissues. By comparison, conventional liposomes and lipids appear to be
chemically and physically unstable and tend to be unsuitable for oral delivery
because they degrade rapidly upon introduction into the gastrointestinal tract.
If the encapsulated drug or vaccine is released into this environment, the
active material is destroyed and the therapeutic effect negated. In vitro
studies with Endorex's lipid systems, including studies with polymerized
liposomes as the type of lipid, have demonstrated high stability under harsh
conditions similar to conditions found in the human intestinal tract, such as
exposure to acidic pH, simulated bile salts, and detergents.

    Conventional lipid and liposomal formulations have been scaled up and
manufactured commercially by others. Examples of such formulations include the
cancer drugs liposomal doxorubicin and liposomal daunorubicin as well as the
anti-fungal agent liposomal amphotericin B, which have been approved by the FDA
and are currently being marketed.

    Endorex believes that its lipid based drug delivery systems comprise a
platform technology that has the potential to satisfy a number of criteria
necessary for a successful drug delivery system, including:

    - flexibility for incorporating numerous drug and vaccine types (both water
      soluble and insoluble drugs, as well as drugs of various molecular weight
      ranges and size);

    - stability of the drug or vaccine through the gastrointestinal tract;

    - enhanced mucosal uptake of the drug or vaccine;

    - compatibility of the delivery system with current manufacturing
      techniques; and

    - no apparent toxicity of the lipids in animal studies to date.

    Endorex has demonstrated the bioavailability and bioactivity of selected
drugs when delivered using these lipids in animal models as well as the
stimulation of an appropriate and acceptable immune response to selected orally
delivered vaccines in similar animal models. Human growth hormone and insulin
are two of the selected drugs Endorex has tested in conjunction with these lipid
drug delivery systems on animal models. Endorex believes that oral versions of
protein and peptide based drugs could provide product differentiation,
convenience and improved compliance. Daily oral delivery could offer an
attractive alternative to multiple weekly injections or slow release
formulations, particularly for chronic therapies.

    During 2000, advances in Endorex's liposome technology were made in process
development, scale up and initial toxicology studies. A key criterion for
initiating clinical trials is production of batches of product and obtaining
batch to batch consistency of results for quantities sufficient for clinical
trials. This objective was achieved during 2000 as were enhancements in loading
the drug "payload" (amount of the drug to be encapsulated in the lipids).
Additionally, recent toxicology data suggests that these liposomes do not cause
genetic mutations in animals, which is a key test required by the FDA. Endorex
believes that additional toxicology testing necessary to demonstrate the safety
of this technology, and therefore required for initiating phase I clinical
trials, will be completed during 2001. Also during 2000 and early 2001, 4
patents on the drugs and drug delivery technology were issued to Endorex and its
licensors in the United States. Endorex's drug and vaccine delivery intellectual
property portfolio now includes 11 United States patents and more than 45
patents issued in other countries, which are owned or licensed to Endorex.

                                       86

PRODUCT CANDIDATES CURRENTLY IN DEVELOPMENT



    PRODUCT CANDIDATE            THERAPEUTIC AREA            DEVELOPMENT STATUS              PARTNER/LICENSOR
--------------------------  --------------------------  -----------------------------   --------------------------
                                                                               
Oral insulin                Diabetes                            Preclinical             Self developed

Oral human growth hormone   Growth disorders                    Preclinical             Self developed

Oral tetanus vaccine        Infectious diseases                 Preclinical             Elan Corporation/SRI

Intranasal tetanus vaccine  Infectious diseases                 Preclinical             Elan Corporation

Oral influenza vaccine      Infectious diseases                 Preclinical             Elan Corporation/SRI

MEDIPAD-Registered Trademark- Iron overload disorders           Preclinical             Watson Pharmaceutical/Elan
iron chelator (drug         (Beta-thalassemia & sickle                                  Corporation
undisclosed)                cell anemia)


DIABETES

ORAL INSULIN

    According to the International Diabetes Federation, in 1998 approximately
143 million people suffered form diabetes throughout the world, of which
approximately 10%, or 14.3 million, are Type 1 diabetics. Type 1 diabetics are
insulin-dependent and require regular insulin therapy. The International
Diabetes Federation expects the number of diabetics to reach 300 million by the
year 2025. IMS estimated that sales of insulin in the United States during 2000
were approximately $1.1 billion. Currently, Novo Nordisk, Eli Lilly, Aventis and
a number of smaller companies market insulin. Insulin currently is available
only in an injectable format requiring insulin-dependent diabetics to receive
one or more injections daily. Insulin is a peptide with a molecular weight of
approximately 6 kilodaltons, considerably smaller than human growth hormone
which is approximately 22 kilodaltons in size, and as a result insulin is easier
to deliver orally than peptides that have greater molecular weight. During 2001,
Endorex began evaluating an oral formulation of insulin in rodent models using
Endorex's lipid-based delivery systems, including the Orasome-TM- delivery
system. The purpose of such evaluations is to determine the efficacy of this
oral formulation in reducing blood glucose levels as well as the
bioavailablility of insulin delivered via Endorex's lipid-based delivery
systems.

GROWTH DISORDERS

ORAL HUMAN GROWTH HORMONE

    Worldwide sales of human growth hormone were estimated by S.G. Cowen to be
about $.9 billion for 2001. This injectable product is marketed by 5 major
pharmaceutical companies. Recently, Genentech introduced to the market an
implantable human growth hormone product which still requires periodic
injections, but reduces the number of injections needed. At the end of 1999,
Endorex signed a research and option agreement with Novo Nordisk to evaluate the
oral delivery of Novo's brand of human growth hormone
Norditropin-Registered Trademark-. During 2000 and early 2001, Endorex tested
oral versions of different formulations of human growth hormone in two animal
models (mice and rats) and improved its process for scale-up manufacturing and
loading human growth hormone into lipids. Subsequently, on August 28, 2001, Novo
Nordisk terminated the research and option agreement.

INFECTIOUS DISEASES

ORAL VACCINES

    According to a Frost & Sullivan market research report on human vaccines,
the worldwide vaccine market was projected at $7 billion in 2001. In order to
participate in this market with new delivery alternatives, in 1998 Endorex
established InnoVaccines Corporation, a joint venture, with Elan Corporation for
the research, development and commercialization of oral and mucosal vaccines.

                                       87

    During the last three years, InnoVaccines has been evaluating two vaccine
delivery systems for oral and intranasal delivery. Additionally, in 1999
InnoVaccines acquired the rights to an additional oral vaccine delivery
technology. Elan also has added targeting technology to the joint venture for
targeting vaccines to key mucosal sites. InnoVaccines has worked on the
screening and identification of key ligands (biological "magnets" or "hooks") to
attach to the surface of the Orasomes and has performed further in vivo work on
the Orasomes and a tetanus vaccine candidate with the addition of various
vaccine adjuvants for oral and nasal delivery. InnoVaccines and SRI also worked
together to separately encapsulate a tetanus vaccine and an influenza vaccine in
another delivery system, also incorporating an adjuvant. InnoVaccines
development activities during 2001 have included further evaluation of
development work of the Orasome-TM- delivery system for oral and mucosal
delivery of the tetanus and influenza vaccines and the development of mucosal
tissue targeting technology for this delivery system. Endorex and Elan are
currently discussing the termination of InnoVaccines and the terms of such
termination.

IRON OVERLOAD DISORDERS

    It is estimated by Cooley's Anemia Society that 4.5% of all humans have a
hemoglobin or thalassemia mutation. It is also estimated by Cooley's Anemia
Society that one million Americans are afflicted with hereditary
hemochromatosis. These genetic blood diseases are all related to the body
absorbing too much iron. Iron overload occurs because the defective gene
interferes with the normal function of the intestinal lining and allows too much
iron to pass through to the bloodstream, where it is carried to certain organs
that are sensitive to it, especially the liver. An overload of iron causes
inflammation, which damages the organs. Hemochromatosis is the more mild form of
this disease while Beta-Thalassemia is the severe form impacting those in early
childhood and requiring frequent blood transfusions. The only approved therapy
today is iron chelation requiring continuous infusions with standard infusion
pumps. Continuous infusion is required for 8-12 hours per day, 5-7 days per week
in Beta-Thalassemia patients. Cooley's Anemia Society estimates that there are
more than 175,000 Beta-Thalassemia patients around the world and approximately
10,000 in the United States. Because of the difficulties in complying with the
rigors of the current therapy and conventional infusion pumps, many patients are
not adequately treated. The average life span of Beta-Thalessemia patients is
only 30 years. In October 1998, Endorex established a second joint venture with
Elan, Endorex Newco, Ltd., to research, develop and commercialize the
MEDIPAD-Registered Trademark- drug delivery system for delivering iron chelators
to treat iron overload disorders.

    MEDIPAD-Registered Trademark- is Elan's unique microinfusion pump designed
for the subcutaneous delivery of selected drugs that require continuous infusion
via pump. Each MEDIPAD-Registered Trademark- is a low cost, disposable drug
delivery device with an adhesive backing. Its light weight enables it to be worn
in a manner similar to a transdermal patch. MEDIPAD-Registered Trademark- is
expected to replace conventional infusion pumps, which are expensive and
cumbersome. While conventional pumps impede patient compliance, Endorex believes
MEDIPAD-Registered Trademark- will improve patient compliance.

THE WATSON PHARMACEUTICALS (SCHEIN PHARMACEUTICAL) AGREEMENT

    In February 2000, Newco entered into a ten-year exclusive worldwide license,
development, and supply agreement with Schein to develop and commercialize
MEDIPAD-Registered Trademark- in combination with a Schein iron chelator.
Pursuant to that agreement, Schein committed to market this product in the
United States. Subsequent to the date of the agreement, Watson acquired Schein.

    Under the agreement, Newco is responsible for development of the
MEDIPAD-Registered Trademark- delivery system for use with Watson's iron
chelator product in accordance with product specifications as defined jointly by
Newco and Watson. Watson is responsible for the development, sourcing and supply
of the iron chelator compound and for the packaging, selling and distribution of
the MEDIPAD-Registered Trademark-/iron chelator in the United States. Subject to
approval of Newco, Watson may sublicense commercialization of the
MEDIPAD-Registered Trademark-/iron chelator product in countries outside of the
United States. In May 2001, Watson

                                       88

indicated that it will not continue to meet the obligations originally agreed to
by Schein, although no definitive agreements have been reached by Newco and
Watson for the termination of the Schein agreement. Subsequently, Watson
discontinued its collaboration efforts. As a result, Newco is evaluating other
commercialization partners for its iron chelation delivery system. Endorex and
Elan are also discussing the termination of Newco and the terms of such
termination. If Endorex and Elan terminate Newco, Newco may lose its rights to
the MEDIPAD-Registered Trademark- technology.

ONCOLOGY PROGRAM

    On March 1, 2000 Endorex announced its decision to divest its oncology
business in favor of focusing on the development of its drug delivery business,
in spite of several active phase I and II trials with its two oncology drugs,
perillyl alcohol and ImmTher-Registered Trademark-. Further development of the
oncology business would require a substantial increase in investment in product
development and human resources at a time when Endorex is facing a similar
requirement in its drug delivery business that has already attracted initial
partners. While oncology had been Endorex's focus for many years prior to 2000,
to be a serious participant in this highly competitive arena would require a
significant restructuring of its business and significantly higher financial
resources. Endorex has continued to maintain clinical trial activity with both
drugs due to the interest and the significant financial sponsorship by many of
the participating institutions and hospitals. Endorex has continued to provide
these institutions with a clinical drug supply and keep current stability work
on the drugs. Endorex's efforts to divest this business in 2000 resulted in the
sale of an exclusive option to purchase the assets of one of the drugs for
$250,000. An asset purchase agreement was also negotiated. However, the option
was not exercised by the end of the option period. Endorex continues to look at
various strategies to divest its oncology business. This is not currently an
active business segment for Endorex and Endorex does not plan to expend
significant funds in this area. Endorex may completely eliminate this business
in 2001.

COMPETITION

    Endorex's success as a drug delivery company depends upon maintaining a
competitive position in the oral and mucosal delivery of protein and
peptide-based drugs and obtaining additional patents. Although several
alternative delivery systems have emerged for protein and peptide- based drugs,
including implants, transdermal, pulmonary, nasal, and oral, Endorex believes
there are sufficient products in this class of drugs to represent substantial
commercial opportunities. S.G. Cowens & Co. estimates that the worldwide sales
for protein and peptide-based drugs in 2001 will be approximately
$18.5 billion. Likewise, the number of pharmaceutical and biotech potential
partners for this class of drugs is large and expected to grow. Endorex expects
that the "Genomics Revolution" will produce even more protein-based drugs with
delivery challenges.

    The biotechnology industry is intensely competitive, subject to rapid change
and sensitive to new product introductions or enhancements. Competitors may
develop competing technologies and obtain government approval for products
before Endorex does. Virtually all of Endorex's existing competitors have
greater financial resources, larger technical staffs, and larger research
budgets than Endorex has, as well as greater experience in developing products
and conducting clinical trials. Furthermore, Endorex's current and future
corporate partners and collaborators may compete against Endorex. Endorex's
competitors in the field of oral and nasal delivery of protein and peptide-based
drugs include Emisphere Technologies, which has started phase III trials for
oral heparin and phase I trials with oral calcitonin and oral insulin (through
its collaborator Novartis); Unigene Laboratories, which has an oral calcitonin
product in phase I/II trials; Nobex Corp. (formerly known as Protein Delivery)
which has an oral insulin in phase II trials; and Generex which has an oral
insulin spray in phase I trials. Endorex's competitors in the vaccine delivery
field include Aviron, which is developing a nasal flu vaccine that is in phase
III clinical trials, I.D. Biomedical, which is in phase I and II trials with an
intranasal flu vaccine and another vaccine, specialized biotechnology firms,
universities, and governmental agencies.

                                       89

Endorex's competitors in the liposomal formulation field include The Liposome
Company (owned by Elan Corporation), NexStar (owned by Gilead Sciences, Inc.)
and Sequus (owned by ALZA Corporation). In addition, there may be other
companies which are currently developing competitive technologies and products
or which may in the future develop technologies and products that are comparable
or superior to Endorex's technologies and products.

GOVERNMENT REGULATION

    Prior to marketing, each of Endorex's products must undergo an extensive
regulatory approval process conducted by the FDA and applicable agencies in
other countries. Testing, manufacturing, commercialization, advertising,
promotion, export and marketing, among other things, of the proposed products
are subject to extensive regulation by government authorities in the United
States and other countries. All products must go through a series of tests,
including advanced human clinical trials, which the FDA is allowed to suspend as
it deems necessary.

PATENTS AND OTHER PROPRIETARY RIGHTS

    Endorex relies on patent rights, trade secrets and nondisclosure agreements
to establish and protect its proprietary rights to its technologies. Despite
these precautions, it may be possible for unauthorized third parties to utilize
Endorex's technology, to obtain and use information that Endorex regards as
proprietary, to design around Endorex's proprietary rights, or to create
superior competing technologies. The laws of some foreign countries do not
protect Endorex's proprietary rights in processes and products to the same
extent as the laws of the United States.

    Endorex currently has four issued drug delivery patents in the United States
relating to the Orasome-TM- drug delivery system, of which three were original
inventions of the Massachusetts Institute of Technology and the fourth was
issued to Endorex in February 2001. Endorex's patents issued in the United
States expire between 2015 and 2021. InnoVaccines has licensed the rights to a
series of vaccine delivery patents from SRI, seven of which were issued in the
United States and over 45 of which were issued outside the United States.
Additionally, Endorex has four United States patents relating to
muramyldipeptide products, as well as several foreign counterparts.

RESEARCH AND DEVELOPMENT EXPENSE

    Research and development expenditures were approximately $1.0 million for
the year ended December 31, 2000 and $2.0 million for the year ended
December 31, 1999, and $1.2 million for the sixth months ended June 30, 2001 and
$0.5 million for the six months ended June 30, 2000. As a development stage
company, the research and development expenditures have not been borne by
customers of Endorex.

EMPLOYEES

    As of October 15, 2001 Endorex had 22 employees, 18 of which are full-time
employees, including six Ph.D.s, one M.D. and six masters-level employees.
Endorex plans to increase this level to approximately 25 employees by the end of
2001 to expand its drug delivery research and development team.

SCIENTIFIC ADVISORY BOARD

    Endorex utilizes a Scientific Advisory Board consisting of members who are
prominent researchers and academics in their fields. Scientific Advisory Board
Co-Chairman Dr. Robert Langer, Sc.D., is recognized as a leading expert on drug
delivery technology, is a member of three National Academies (Sciences, Medicine
and Engineering), holds 265 patents and has authored over 500 articles.
Dr. Langer is a Professor of Biomedical and Chemical Engineering and is
co-inventor of the Orasome technology. Scientific Advisory Board Co-Chairman
Dr. Henry Brem, M.D., is a Professor of

                                       90

Neurology, Ophthalmology and Oncology at Johns Hopkins University. Drs. Langer
and Brem have significant involvement with Endorex as advisors, consultants and
stockholders.

FACILITIES

    Endorex's executive offices and research and development center are located
in a leased facility of approximately 7,500 square feet in Lake Forest,
Illinois. The lease expires on December 31, 2003. Endorex believes that their
current leased facilities are sufficient to meet their current needs, but may
not be sufficient for the foreseeable future and that suitable additional
laboratory space may not be available if and as needed.

LEGAL PROCEEDINGS

    Endorex is not a party to any legal proceedings.

                                       91

                      ENDOREX MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    THE FOLLOWING DISCUSSION AND ANALYSIS PROVIDES INFORMATION THAT ENDOREX
BELIEVES IS RELEVANT TO AN ASSESSMENT AND UNDERSTANDING OF ITS RESULTS OF
OPERATION AND FINANCIAL CONDITION. YOU SHOULD READ THIS ANALYSIS IN CONJUNCTION
WITH OUR AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED
ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS REPORT CONTAINS
STATEMENTS OF A FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR ENDOREX'S
FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS ARE ONLY PREDICTIONS AND ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, YOU
SHOULD CAREFULLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE INDICATED IN ANY FORWARD-LOOKING STATEMENTS, INCLUDING THOSE SET FORTH IN
"RISK FACTORS" IN THIS JOINT PROXY STATEMENT/PROSPECTUS.

PLAN OF OPERATION

    Endorex has been focusing its efforts on oral delivery of macromolecular
drugs which are currently available commercially only in an injectable format.
Most of Endorex's efforts have focused on the higher molecular weight drugs,
generally 20 kilodaltons, or kd, or above. Examples of these types of drugs
include vaccines, which generally range from 50 to 100 kd, and human growth
hormone, which is 22 kd. This contrasts with traditional orally delivered drugs,
most of which are small molecule drugs with molecular weights under .5 kd and
for which oral delivery is generally much easier. Endorex's competition is
mainly in the area of oral delivery of macromolecular drugs, focusing on drugs
ranging from .5 to 10 kd, such as peptides, while most of Endorex's work has
focused on protein-based drugs ranging above 10 kd.

    Endorex is currently in the process of shifting its business strategy,
research and development and technology focus to include the oral delivery of
small molecule drugs. Over the next 12 months Endorex plans to continue to shift
its focus to evaluate its delivery systems for oral delivery of drugs in the
lower macromolecular weight range as well as oral delivery of other classes of
drugs not currently available in oral formulations. A large number of small
molecule drugs also present delivery challenges, particularly water insoluble
drugs, such as drugs used for chemotherapy and immunosuppressant drugs. Endorex
expects to evaluate a number of such drugs to identify those that are compatible
with its oral drug delivery systems and which it may decide to take into human
clinical trials in the future.

    Endorex's proposed acquisition of CTD fits strategically with Endorex's
business plans, as CTD has acquired and is developing new formulations of small
molecule ACEs for new proprietary therapeutic uses. Its two lead drug candidates
are in human clinical trials, including orBec-TM-, for which CTD has initiated a
multicenter phase III trial in the United States. Endorex envisions that CTD's
product candidates will become its key products, with Endorex's proprietary oral
delivery systems potentially allowing the oral delivery of such products.

    Endorex may assemble a small sales and marketing group to directly market
these product candidates in the United States since the initial product
indications are for niche markets with limited number of specialists (requiring
a small but targeted sales force), such as organ transplant specialists and
hematologists. With its own sales force, Endorex could potentially capture more
of the product revenue stream than it would by using a sales and marketing
partner.

    Endorex believes the cash of the combined companies is sufficient to fund
operations and the research and development of certain key product candidates
and programs of the combined companies for the next 24 months. Endorex expects
that it will need to seek additional funding for the development of the drugs
for additional therapeutic indications for larger market segments and diseases
with greater prevalence, particularly in the area of gastrointestinal disorders.
Endorex will seek to prioritize the research and development programs of the
combined companies after the merger to best

                                       92

utilize the combined assets of the companies. Endorex will also seek to reduce
and eliminate duplicative administrative expenses between the companies after
the merger.

    Endorex may need to expand its current facilities and is currently exploring
the possibility leasing additional space adjacent to its existing facility.
Endorex is also investigating the possibility of conducting animal testing
in-house which may result in cost savings over using third party contractors.
This may also provide Endorex with greater control over the testing. Endorex
plans to continue to contract out its manufacturing needs to FDA-certified
contract manufacturers.

    The acquisition of CTD may require Endorex to enhance its regulatory,
clinical development and manufacturing skills by either hiring additional
employees or hiring specialized consultants to assist the combined company over
the next 12 months. Endorex may also hire additional scientists over the next
12 months.

    Endorex is currently discussing the termination of its two joint ventures
with Elan and expects to determine the status of these joint ventures by the end
of 2001. Endorex is also exploring other commercial collaborations with Elan,
including the possibility of licensing the MEDIPAD-Registered Trademark-
technology from Elan. Watson has indicated its desire to terminate the existing
license agreement with Newco for the iron chelation delivery project and is in
discussions with Endorex regarding the terms of such termination. Additionally,
on August 28, 2001, Novo Nordisk terminated the research and option agreement
with Endorex.

RESULTS OF OPERATIONS

SIX-MONTH PERIODS ENDED JUNE 30, 2001 AND 2000

    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development, or R&D,
expenses, for the six month period ended June 30, 2001 were $1,171,494, a
150 percent increase when compared with R&D expenses of $468,193 for the
corresponding period ended June 30, 2000. This increase in R&D expenses was due
to the hiring of additional R&D personnel and expansion of proprietary
pre-clinical R&D drug delivery activities during 2001.

    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
for the six month period ended June 30, 2001 were $908,269 compared to $981,521
for the same period ended June 30, 2000, an 8 percent decrease. General and
administrative expenses during the period ended June 30, 2001 were lower because
additional legal and accounting expenses as well as the payment of SEC filing
fees related to the Company's private placement were incurred during the same
period in 2000.

    OPERATING EXPENSES.  Operating expenses of $2,079,763 for the six month
period ended June 30, 2001 increased 44 percent compared to $1,449,714 for the
same period last year, due primarily to the increased spending in R&D
pre-clinical drug delivery activities during 2001.

    EQUITY LOSSES IN JOINT VENTURES.  Equity losses in joint ventures for the
six months ended June 30, 2001 were $577,661 compared with losses of $1,578,856
during the same period in 2000, a 63 percent decrease. These losses pertain to
the two joint ventures with Elan. Endorex's share of the research, development
and business expenditures of these joint ventures is recorded as equity losses
in joint ventures. The decrease in expenses represents a reduction of activities
in each joint venture due to the possible termination of each.

    INTEREST INCOME.  Interest income for the six months ended June 30, 2001 of
$294,686 decreased 8 percent compared to $320,965 for the same period last year,
reflecting a reduction in interest rates as well as a reduction in the cash
available for investment in 2001.

    INTEREST EXPENSE.  Interest expense increased to $27,320, or 16 percent,
during the six months ended June 30, 2001 from $23,019 for the same period
during 2001. The increase in interest expense was due to increased interest
payments under a line of credit with Finova Technology Finance, Inc.

                                       93

    NET LOSS.  Net loss for the six months ended June 30, 2001 of $3,128,777
decreased 9 percent from a net loss of $3,418,002 for the same period in 2000.
The decrease in net loss year to date versus the prior year period reflects an
overall decrease in joint venture research and development activities as Endorex
redirected its activities towards more proprietary drug delivery research and
development. Additionally, net loss decreased during the first six months of
2001 due to a reduction in expenses because Endorex incurred additional expenses
in connection with its private placement during the first six months of 2000.

YEARS ENDED DECEMBER 31, 2000 AND 1999

    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses for
the twelve months ended December 31, 2000 were $956,742 as compared to
$2,028,945 for the twelve months ended December 31, 1999, a decrease of
53 percent. Approximately $700,000 of this decrease was due to reduced research
and development expenses in 2000 related to Endorex's decision to divest its
oncology business. The remaining decrease was due to reductions in personnel
expenditures (salaries, benefits, travel) related to managing the oncology
business.

    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
for the twelve months ended December 31, 2000 were $2,101,767 as compared to
$3,046,684 for the twelve months ended December 31, 1999, a decrease of
31 percent. This decrease was primarily due to completion of amortization of the
fair value of warrants issued in connection with financial advisory agreements
of approximately $1,300,000. The warrants, which were amortized over a two-year
period, were fully amortized by the end of the third quarter of 1999. The
decrease was partially offset by increased legal fees of approximately $100,000
and accounting fees of approximately $200,000 during 2000.

    OPERATING EXPENSES.  Operating expenses of $3,058,509 for fiscal year 2000
decreased 40 percent compared to $5,075,629 for fiscal year 1999, due primarily
to reduced costs related to the decision to divest the oncology business and the
full amortization of the warrants during 1999.

    EQUITY LOSSES IN JOINT VENTURES.  Equity losses in joint ventures for the
year ended December 31, 2000 were $2,682,368 compared with losses of $2,865,908
for the year ended December 31, 1999, a decrease of 6 percent. The decrease in
equity losses in joint ventures from 1999 to 2000 was due to a decrease in
research and development activities in Newco and costs related thereto.

    OTHER INCOME.  Other income increased to $250,000 in 2000 from $3,790 in
1999 due to the sale of the option to purchase a portion of Endorex's oncology
business assets.

    INTEREST INCOME.  Interest income for the twelve months December 31, 2000
was $747,073 as compared to $488,582 for the twelve months ended December 31,
1999, an increase of 53 percent. This increase was primarily due to interest
from the investment of the net proceeds from Endorex's April 2000 private
placement.

    INTEREST EXPENSE.  Interest expense remained constant at $51,889 for fiscal
year 2000 compared to $51,854 for fiscal year 1999.

    NET LOSS.  For the twelve months ended December 31, 2000, Endorex had a net
loss applicable to common stockholders of $6,177,893 as compared to $8,786,432
for the twelve months ended December 31, 1999, a decrease of 30 percent. Net
loss applicable to common stockholders included the impact of preferred stock
dividends, which totaled $1,382,200 in 2000, as compared to $1,285,413 in 1999.
Reductions in operating expenses from $5,075,629 in 1999 to $3,058,509 in 2000
contributed significantly to the reduction in net loss. Additionally in 2000,
equity losses from Endorex's two joint ventures with Elan were $2,682,368 as
compared to $2,865,908 for 1999. Other factors contributing to the reduction in
net loss for 2000 were an increase in interest income from $488,582 in 1999 to
$747,073 in 2000, and the sale of an option to purchase some of Endorex's
oncology assets, which has subsequently expired.

                                       94

                ENDOREX'S MANAGEMENT AND EXECUTIVE COMPENSATION

DIRECTORS AND EXECUTIVE OFFICERS



NAME                                             AGE                      POSITION(S) HELD
----                                           --------   ------------------------------------------------
                                                    
Kenneth Tempero..............................     62      Chairman of the Board

Michael S. Rosen.............................     49      President, Chief Executive Officer and Director

Steven J. Koulogeorge........................     42      Controller, Assistant Secretary and Assistant
                                                          Treasurer

John McCracken...............................     49      Vice President, Business Development

Panayiotis P. Constantinides.................     49      Vice President, Research and Development

Richard Dunning..............................     55      Director

Steve H. Kanzer..............................     37      Director

Paul D. Rubin................................     47      Director

H. Laurence Shaw.............................     55      Director

Steven Thornton..............................     44      Director


    KENNETH TEMPERO, M.D., Ph.D., M.B.A., 62, was elected Chairman of the
Endorex board of directors in May 1999 and has served as a member of the board
of directors since September 1996. Since April 1996, Dr. Tempero has been a
principal at KTC, Inc., a consulting company. Prior thereto, he served as
Chairman and Chief Executive Officer of MGI PHARMA, Inc., a company that focuses
on the development and sale of cancer therapeutics and related products. From
November 1983 to August 1987, Dr. Tempero held various positions with G.D.
Searle & Co., a pharmaceutical company, most recently as Senior Vice President
of Research and Development. Dr. Tempero holds M.S. and Ph.D. degrees in
Pharmacology from Northwestern University, an M.D. in Medicine and Surgery from
Northwestern University and an M.B.A. in Pharmaceutical Marketing from Fairleigh
Dickinson University.

    MICHAEL S. ROSEN, M.B.A., 49, has served as President, Chief Executive
Officer and a member of the board of directors since August 1996. From
January 1995 until August 1996, he was President and Chief Executive Officer of
PharmaMar, S.A., a European biotechnology company. From June 1991 until
January 1995, Mr. Rosen was General Manager of the northern Latin American
businesses for Monsanto Company, a multinational chemical/pharmaceutical
company. Mr. Rosen received a B.A. in Sociology/International Relations from
Beloit College and an M.B.A. in International Business from the University of
Miami. He has undertaken post-graduate courses at Northwestern University and
Sophia University in Tokyo, Japan.

    STEVEN J. KOULOGEORGE, M.B.A., C.P.A., 42, has served as Controller,
Assistant Secretary and Assistant Treasurer since September 2000. From 1983 to
1997, Mr. Koulogeorge held several accounting and finance positions with Kraft
General Foods, the last of which was Director of Finance at Alliant Foodservice.
From 1997 to 2000, Mr. Koulogeorge held several positions with Illinois Tool
Works, including Controller of the Industrial Finishing unit. Mr. Koulogeorge
received his B.S. in Finance from Drake University and received his M.B.A in
Finance from DePaul University. Mr. Koulogeorge is also a Certified Public
Accountant in the State of Illinois.

    JOHN MCCRACKEN, M.B.A., 49, has served as Vice President, Business
Development since February 2001. From 1999 to 2000, Mr. McCracken was Global
Operations Director of Life Cycle Management at Pharmacia Corporation, where he
directed product life cycle initiatives with global commercial focus, including
commercial assessment of drug delivery systems. From 1981 to 1999,
Mr. McCracken directed business initiatives for G.D. Searle where he held
several executive positions ranging from Director of International Operations,
Senior Director and Assistant to the President and

                                       95

CEO to his last position as Managing Director for Global Operations.
Mr. McCracken received his B.A. in Economics from Carleton College and earned
his M.B.A. in Finance and Accounting from Northwestern University.

    PANAYIOTIS P. CONSTANTINIDES, Ph.D., 49, has served as Vice President,
Research and Development since January 2001. From 1997 until joining Endorex,
Dr. Constantinides was Director of Research at SONUS Pharmaceuticals, where he
was responsible for building the company's drug delivery program. From 1995 to
1997, Dr. Constantinides was the Section Head of Formulation Development for
Abbott Laboratories' Pharmaceutical Products Division. Dr. Constantinides
received a University Diploma in Chemistry from the National and Kapodistrian
University and a Ph.D. in Biochemistry from Brown University. He then completed
a postdoctoral fellowship in Pharmacology at Yale University and continued as an
Associate Research Scientist in the Comprehensive Cancer Center of Yale
University School of Medicine. Dr. Constantinides has written 36 publications
and filed numerous patents that deal with physicochemical and biopharmaceutical
aspects of surfactant micelles, liposomes, emulsions and self-emulsifying drug
delivery systems.

    RICHARD DUNNING, 55, has served as a member of the board of directors of
Endorex since August 1997. He has been Chairman and Chief Executive Officer of
Nexell Therapeutics Inc. since May 1999. Prior to that, he was President and
Chief Executive Officer of Nexell since April 1996. Nexell, formerly known as
VIMRX Pharmaceuticals Inc., is the leading developer and marketer of innovative
diagnostics and ex vivo cell therapies for cancer, autoimmune, metabolic and
genetic diseases. Prior to joining Nexell, Mr. Dunning played an instrumental
role in the formation of The DuPont Merck Pharmaceutical Company and acted as
that organization's Executive Vice President and Chief Financial Officer from
1991 to 1995. Mr. Dunning received a B.S. in Economics and an M.B.A. in Finance
from the University of Delaware.

    STEVE H. KANZER, C.P.A., Esq., 37, has served as a member of the board of
directors since June 1996. Since December 1997, Mr. Kanzer has been President
and Chief Executive Officer of Corporate Technology Development, Inc. Since
December 2000, Mr. Kanzer has also been Chairman, Chief Executive Officer and
President of Accredited Equities, Inc., a venture capital and investment banking
firm based in Miami, and President of several private biopharmaceutical
companies also based in Miami. From 1992 until December 1998, Mr. Kanzer was a
founder and Senior Managing Director of Paramount Capital, Inc., an investment
bank specializing in the biotechnology and biopharmaceutical industries, and
Senior Managing Director--Head of Venture Capital of Paramount Capital
Investments, LLC, a biotechnology and biopharmaceutical venture capital and
merchant banking firm that is affiliated with Paramount Capital, Inc. From 1993
until June 1998, Mr. Kanzer was a founder and a member of the board of directors
of Boston Life Sciences, Inc., a publicly traded pharmaceutical research and
development company. From 1994 until June 2000, Mr. Kanzer was a founder and
Chairman of Discovery Laboratories, Inc., a publicly traded pharmaceutical
research and development company. Mr. Kanzer is a member of the board of
directors of Atlantic Technology Ventures, Inc., a publicly traded
pharmaceutical research and development company. Prior to joining Paramount
Capital, Inc., Mr. Kanzer was an attorney with Skadden, Arps, Slate, Meagher &
Flom LLP in New York, New York from September 1988 to October 1991. He received
his J.D. from New York University School of Law in 1988 and a B.B.A. in
Accounting from Baruch College in 1985. Mr. Kanzer is a nominee of the Aries
Domestic Fund, LP and the Aries Master Fund II to Endorex's board of directors.
Aries Domestic Fund, L.P. and Aries Master Fund II subsequently transferred
their right to nominate a member of the board of directors of Endorex to Aries
Select, Ltd. and Aries Select I LLC. Both Aries Select, Ltd. and Aries Select I
LLC are affiliates of PCAM, PCI, Paramount and Lindsay Rosenwald, M.D.

    PAUL D. RUBIN, M.D., 47, has served as a member of the board of directors of
Endorex since November 1997. Since 1999, he has been Executive Vice President
for Drug Development at Sepracor, Inc., having previously been Senior Vice
President since 1996. He is responsible for managing

                                       96

research and development programs for Sepracor's improved chemical entities
portfolio, which includes the management of Discovery Research, Regulatory,
Clinical, Preclinical, and Project Management teams. Dr. Rubin also plays a key
role in the evaluation of external technology and licensing opportunities. From
1993 to 1996, Dr. Rubin was the Vice President and Worldwide Director of Early
Clinical Development and Clinical Pharmacology at Glaxo Wellcome. Prior to
Glaxo, Dr. Rubin held various executive research positions at Abbott
Laboratories. Dr. Rubin received his M.D. from Rush Medical College in Chicago
and completed his residency in Internal Medicine at the University of Wisconsin
Hospitals and clinics in Madison, Wisconsin.

    H. LAURENCE SHAW, M.D., 55, has served as a member of the board of directors
of Endorex since August 1997. In 1999, he was appointed as Chief Executive
Officer of Applied Spectral Imaging, a company focused on the application of
technology that combines conventional imaging with spectroscopy to display
previously undetected information with applications in diverse areas such as
cytogenetics, pathology and ophthalmology, as well as fields unrelated to
healthcare. He was Chairman, President and Chief Executive Officer of Pacific
Pharmaceuticals, Inc. from December 1996 until March 1999. From 1995 to 1996,
Dr. Shaw was Corporate Vice President Research and Development for C.R.
Bard, Inc. in New Jersey. From September 1993 to 1995, he was Founder, President
and Chief Executive Officer of Atlantic Pharmaceuticals, Inc. Dr. Shaw graduated
from University College Hospital Medical School, London, England.

    STEVEN THORNTON, 44, has served as a member of the board of directors since
February 1998. He has served as Executive Vice President of Commercial
Development for Elan Pharmaceutical Technologies since December 1997. Prior to
joining Elan Pharmaceutical Technologies, Mr. Thornton served from July 1994 as
President of Schein Bayer Pharmaceutical Services Inc., a joint venture of Bayer
and Schein Pharmaceutical Inc. From 1991 to 1994, he served with Bayer as Region
Director with responsibility for pharmaceutical operations in Australia, New
Zealand and South Africa. Mr. Thornton graduated with honors from Lancaster
University in 1978, receiving a B.A. in applied social psychology. Mr. Thornton
is the nominee of the holders of Endorex's Series B preferred stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Endorex's directors, executive officers, and persons who beneficially own
more than 10% of a registered class of its equity securities must file initial
reports of ownership and reports of changes in ownership of any equity
securities of Endorex with the Securities and Exchange Commission. Copies of the
reports must be furnished to Endorex. To Endorex's knowledge, based solely on
review of the copies of such reports furnished to it, all persons subject to
these reporting requirements filed the required reports on a timely basis with
respect to Endorex's most recent fiscal year other than Mr. Thornton and
Mr. Tempero. Inadvertently, the Form 5 of Mr. Thornton and Form 5 of
Mr. Tempero for fiscal year 2000 were filed late.

                                       97

EXECUTIVE COMPENSATION

    The following table sets forth information concerning the compensation paid
during Endorex's fiscal years ended December 31, 2000, 1999 and 1998 to its
Chief Executive Officer and its two other executive officers as of December 31,
2000 whose base salary during the year was in excess of $100,000 and one other
person for whom disclosure would have been required if they were serving as an
executive officer of Endorex at December 31, 2000, collectively referred to
herein as the Named Executive Officers.

                           SUMMARY COMPENSATION TABLE



                                                                                              LONG-TERM
                                                      ANNUAL COMPENSATION                    COMPENSATION
                                      ----------------------------------------------------   ------------
                                                                                              SECURITIES
                                                                            OTHER ANNUAL      UNDERLYING
NAME AND PRINCIPAL POSITION             YEAR     SALARY ($)   BONUS ($)   COMPENSATION ($)   OPTIONS (#)
---------------------------           --------   ----------   ---------   ----------------   ------------
                                                                              
Michael S. Rosen....................  12/31/00     249,600     25,000(1)        3,340(4)            --
  President and Chief Executive       12/31/99     249,600     12,500(2)        6,997(4)            --
  Officer                             12/31/98     248,808     72,000(3)        1,219(4)        25,000

Robert N. Brey......................  12/31/00     136,000         --              --           30,000
  Vice President of Research and      12/31/99     131,904      7,000(2)       19,000(6)        10,000
  Development(5)                      12/31/98     126,829     13,270(3)           --               --

Frank C. Reid.......................  12/31/00     111,833         --              --           60,000
  Vice President, Finance and
  Corporate Development(7)

Steve J. Koulogeorge................  12/31/00      29,886      3,675(1)           --           15,000
  Controller and Assistant
  Treasurer(8)


------------------------

(1) Bonuses accrued in 2000 and paid entirely in 2001.

(2) Bonuses accrued in 1999 and paid entirely in 2000.

(3) Bonuses accrued in 1998 and paid entirely in 1999.

(4) Life insurance premiums incurred and paid during the period.

(5) Mr. Brey served as an executive officer of Endorex until November 30, 2000.

(6) Reimbursed relocation expenditures.

(7) Mr. Reid resigned from Endorex on December 31, 2000.

(8) Mr. Koulogeorge joined Endorex on September 25, 2000.

                                       98

    The following table contains information concerning options granted to the
Named Executive Officers during the fiscal year ended December 31, 2000. No SARs
were granted during the period.

                       OPTION GRANTS IN LAST FISCAL YEAR



                                                                   PERCENTAGE OF
                                                                   TOTAL OPTIONS
                                            NUMBER OF SECURITIES     GRANTED TO       EXERCISE
                                             UNDERLYING OPTION      EMPLOYEES IN       PRICE       EXPIRATION
                                                GRANTED (#)        FISCAL YEAR(1)   ($/SHARE)(2)      DATE
                                            --------------------   --------------   ------------   ----------
                                                                                       
Michael S. Rosen..........................             --                --               --              --
Robert N. Brey............................         30,000                17%           $3.94          2/8/10
Frank C. Reid.............................         60,000                34%           $3.94         9/28/10
Steve J. Koulogeorge......................         15,000                 8%           $2.31          2/8/10


------------------------

(1) Based on an aggregate of 176,500 options granted to employees and
    non-employee board members in the fiscal year ended December 31, 2000,
    including options granted to the Named Executive Officers.

(2) The exercise price of each grant is equal to the fair market value of
    Endorex's common stock on the date of the grant.

    The following table sets forth certain information concerning exercisable
and unexercisable stock options held as of December 31, 2000 by each of the
Named Executive Officers:

   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES



                                                             NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                SHARES                      UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS
                             ACQUIRED ON       VALUE        OPTIONS AT 12/31/00 (#)          AT 12/31/00 ($)
NAME                         EXERCISE (#)   REALIZED ($)   EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE(1)
----                         ------------   ------------   -------------------------   ----------------------------
                                                                           
Michael S. Rosen...........           --            --        534,375/134,375             140,625/191,504
Robert N. Brey.............           --            --         40,000/50,000              98,800/128,125
Frank C. Reid..............           --            --           0/60,000                       0/0
Steve J. Koulogeorge.......           --            --           0/15,000                       0/0


------------------------

(1) Based on the difference between the closing price on December 31, 2000
    ($1.00) and the exercise price of outstanding options.

COMPENSATION OF DIRECTORS

    CASH COMPENSATION.  Endorex directors receive a $2,000 fee for attending
quarterly meetings of the board of directors in person and $500 for telephonic
attendance at such meetings and for attendance at committee meetings, and are
reimbursed for travel expenses incurred in connection with performing their
respective duties as directors of Endorex.

    DIRECTOR FEE OPTION GRANT PROGRAM.  Each non-employee director has the right
to apply all or a portion of his annual cash retainer fee to the acquisition of
a special option grant under the Director Fee Option Grant Program pursuant to
Endorex's Amended and Restated 1995 Omnibus Incentive Plan. The grant will
automatically be made on the first trading day in January following the filing
of the stock-in-lieu-of-cash election and will have an exercise price per share
equal to one-third of the fair market value of the option shares on the grant
date. The number of shares subject to the option will be determined by dividing
the amount of the retainer fee applied to the program by two-thirds of the fair
market value per share of common stock on the grant date. As a result, the total
spread on the option

                                       99

(the fair market value of the option shares on the grant date less the aggregate
exercise price payable for those shares) will be equal to the portion of the
retainer fee invested in that option. The option will become exercisable for 50%
of the option shares upon the director's completion of six months of board
service in the calendar year in which the option is granted. The balance of the
option shares will become exercisable in six successive equal monthly
installments upon the director's completion of each additional month of board
service during that calendar year. The option will remain exercisable until the
earlier of (i) the expiration of the ten-year option term or (ii) the end of the
three-year period measured from the date of the director's cessation of board
service. The option will become immediately exercisable in its entirety should
the director die or become permanently disabled while a board member. In
addition, upon the successful completion of a hostile take over, each option may
be surrendered to Endorex for a cash distribution per surrendered option share
in an amount equal to the excess of (a) the take-over price per share over
(b) the exercise price payable for such share. This program has not been
implemented by Endorex.

    AUTOMATIC OPTION GRANT PROGRAM.  Subject to approval of Proposal Four by the
Endorex stockholders at the Endorex annual meeting, each non-employee director
will automatically receive a fully vested option to purchase 50,000 shares of
common stock at the commencement of board service. In addition, on the date of
each annual meeting of the Endorex stockholders, each non-employee director who
continues to serve on the board will automatically be granted an option to
purchase an additional 10,000 shares of common stock. Each 10,000 share option
granted under the Automatic Option Grant Program will be immediately exercisable
for any or all of the option shares. However, any shares purchased under the
option are subject to repurchase by Endorex, at the exercise price paid per
share, upon the director's cessation of board service prior to completion of one
year of board service measured from the option grant. The exercise price per
share of each option granted under the Automatic Option Grant Program will be
equal to the fair market value per share of common stock on the date of grant.
If Proposal Four is not approved, then each newly elected or appointed
non-employee director will receive an option to purchase 42,000 shares upon
commencement of board service; in addition, each continuing non-employee
director will be granted an option to purchase 12,000 shares on the second
anniversary of the date of grant of the initial 42,000 share option and every
two years thereafter. Each initial grant of 42,000 options will vest, and
Endorex's repurchase right will lapse, (1) with respect to 30,000 shares in a
series of two successive equal annual installments upon the Optionee's
completion of each year of board service over the two-year period measured from
the option grant date and (2) with respect to 12,000 shares in a series of eight
successive equal quarterly installments on the last day of each calendar quarter
over the two-year period measured from the option grant date, provided the
director has attended the regular board meeting held during such quarter.
Accordingly, subject to the approval of Proposal Four and subject to
consummation of the merger, Guy Rico and Peter Kleim will each receive a 50,000
share option on the date of his appointment and, subject to the approval of
Proposal Four, each continuing director will receive a 10,000 share option on
the date of the annual meeting.

    DISCRETIONARY OPTION GRANT PROGRAM.  On February 21, 2001, Endorex's board
granted a fully vested option to purchase 50,000 shares of Endorex common stock
to each of Endorex's non-employee board members, subject to approval of Proposal
Five by the Endorex stockholders at the Endorex annual meeting. The options have
an exercise price of $1.25 per share, which was the closing price per share on
AMEX on February 21, 2001. The options have a term of ten years.

    CONSULTING AGREEMENT WITH CHAIRMAN.  On May 17, 2000, Endorex entered into a
consulting agreement with Dr. Kenneth Tempero, as an independent consultant, to
provide, on a non-exclusive basis, assistance and advice to Endorex regarding
its business, licensing opportunities, corporate partnering activities and
research and development activities. The term of the consulting agreement ends
upon the first meeting of the board after the 2001 annual meeting of Endorex
stockholders; provided, however, that the term of the consulting agreement may
be extended upon mutual consent. Dr. Tempero is the Chairman of the Endorex
board of directors. Pursuant to his consulting agreement,

                                      100

Dr. Tempero is entitled to receive compensation of $5,600 per month in exchange
for rendering 32 hours per month of consulting services to Endorex. For all time
in excess of 32 hours per month, Dr. Tempero is compensated at a rate of $215
per hour. Pursuant to his consulting agreement, Dr. Tempero also received an
option to purchase up to 12,000 shares of common stock at an exercise price of
$3.25 per share, of which options to purchase 3,000 shares of common stock shall
vest every quarter after the date of the consulting agreement. Endorex also
agreed to pay up to $10,606 annually of Dr. Tempero's healthcare costs. Pursuant
to his consulting agreement, Dr. Tempero received payments from Endorex totaling
$159,270 during the fiscal year ended December 31, 2000.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
  ARRANGEMENTS

    On May 17, 2000, Endorex entered into an employment agreement with Michael
S. Rosen pursuant to which Mr. Rosen will serve as the President, Chief
Executive Officer, and a director of Endorex. The term of Mr. Rosen's employment
agreement with Endorex commenced on February 8, 2000 and ends upon termination
of the employment agreement pursuant to its terms. Pursuant to his employment
agreement, Mr. Rosen is entitled currently to receive (i) an annual base salary
of $254,600 and (ii) an annual bonus of up to 50% of his annual base salary upon
achieving certain milestones. Endorex must also maintain medical, long-term
disability and life insurance with coverage of up to $1,000,000 for Mr. Rosen.
In the event Mr. Rosen's employment is terminated other than for cause, which
includes a change of control, or if Mr. Rosen terminates for good reason,
including a material reduction in his duties or responsibilities, then
(i) Mr. Rosen will be entitled to receive his base salary and a prorated bonus
for a period of six months and for a subsequent six month period, subject to
reduction during the subsequent period for earnings from other employment,
(ii) Mr. Rosen will be entitled to receive his benefits for those periods until
other coverage is obtained, (iii) any unvested standard options granted to
Mr. Rosen will vest, and (iv) Mr. Rosen will have one year from the date of
termination to exercise his options. Mr. Rosen will also receive cash payments
equal to the cost of providing life and disability insurance for six months
following initial 6 month period. Upon consummation of the merger, Mr. Rosen
would have the right to terminate his employment with Endorex within thirty days
and receive his severance benefits. Mr. Rosen and Endorex are currently
negotiating a new employment agreement to take effect subsequent to the merger.

    On September 19, 2000, Endorex entered into an employment agreement with
Steven J. Koulogeorge to serve as the Assistant Treasurer and Controller.
Mr. Koulogeorge's employment commenced on September 25, 2000 and the agreement
terminates on September 24, 2004. Pursuant to his employment agreement,
Mr. Koulogeorge is entitled to receive (i) an annual base salary of $102,480 and
(ii) an annual bonus of up to 15% of his annual base salary at the discretion of
Endorex's board of directors. Pursuant to his employment agreement,
Mr. Koulogeorge also received an option to purchase up to 15,000 shares of
common stock at an exercise price of $2.3125 per share that vest equally over
4 years starting on September 28, 2001. In the event Mr. Koulogeorge is
terminated other than for cause or if he terminates his employment for good
reason within 4 months of a change of control of Endorex, Mr. Koulogeorge is
entitled to receive for a period 4 months his base monthly salary and any unpaid
bonus, subject to set off for amounts earned from alternative employment.

    On December 1, 1996, Endorex entered into an employment agreement with
Robert Brey to serve as Vice President of Research and Development. Mr. Brey's
employment commenced December 1, 1996 and his employment agreement terminated on
November 30, 2000. Under his employment agreement, Mr. Brey was entitled to
receive (i) a minimum annual base salary of $115,000 and (ii) an annual bonus of
up to 25% of his annual base salary at the discretion of Endorex's board of
directors. Mr. Brey was also granted an option to purchase up to 100,000 shares
of common stock. Subsequently, in October 1997, this option was cancelled and
Dr. Brey was granted a new option to purchase 50,000 shares of common stock at
an exercise price of $2.47 per share, vesting at a rate of 3,125 shares at the
end of each three-month period thereafter commencing October 1997. Subsequent to
the

                                      101

termination of his employment as Vice President of Research and Technology,
Mr. Brey was engaged by Endorex as a consultant.

    On March 10, 1997, Endorex entered into an employment agreement with David
G. Franckowiak to serve as Controller and Treasurer. Mr. Franckowiak's
employment agreement commenced on April 1, 1997. Pursuant to the terms of his
employment agreement, Mr. Franckowiak was entitled to receive (i) a minimum
annual base salary of $127,000, (ii) an annual bonus of up to 15% of his annual
base salary at the discretion of Endorex's board of directors and (iii) options
to purchase up to 50,000 shares of common stock at an exercise price of $2.00
per share, which vest at a rate of 3,125 shares every quarter starting June 30,
1997. Pursuant to a letter agreement dated March 13, 2000, Mr. Franckowiak
resigned from Endorex on March 31, 2000 but agreed to assist Endorex for up to
four months to transition certain of his duties. Pursuant to the letter
agreement, Mr. Franckowiak was entitled to receive (i) the pro rata portion of
his annual base salary for up to four months, (ii) a $6000 bonus upon
satisfactory completion of certain duties and (iii) the continued vesting of his
options for up to four months.

    On February 8, 2000, Endorex entered into an employment agreement with Frank
C. Reid to serve as Vice President of Finance and Corporate Development.
Mr. Reid's employment commenced February 21, 2000. Mr. Reid was entitled to
receive (i) an annual base salary of $130,000, (ii) a bonus of up to 30% of his
annual base salary at the discretion of Endorex's President and Chief Executive
Officer and board of directors and (iii) options to purchase up to 60,000 shares
of common stock at an exercise price of $3.94 per share. Mr. Reid resigned from
Endorex as of December 31, 2000.

    On January 4, 2001, Endorex entered into an employment agreement with
Panayiotis P. Constantinides to serve as the Vice President of Research and
Development. Mr. Constantinides' employment commenced January 12, 2001 and the
agreement terminates on January 11, 2004. Pursuant to his employment agreement,
Mr. Constantinides is entitled to receive (i) an annual base salary of $170,000
and (ii) an annual bonus of up to 30% of his annual base salary at the
discretion of Endorex's Chief Executive Officer and board of directors. Pursuant
to his employment agreement, Mr. Constantinides also received an option to
purchase up to 60,000 shares of common stock at an exercise price of $1.50 per
share that vest equally over 4 years upon the anniversary date of his employment
agreement. In the event Mr. Constantinides is terminated other than for cause or
if he terminates his employment for good reason within 12 months of a change of
control of Endorex, Mr. Constantinides is entitled to receive for a period of
six months his base monthly salary and any unpaid bonus, subject to set off for
amounts earned from alternative employment.

    On February 12, 2001, Endorex entered into an employment agreement with John
McCracken to serve as Vice President of Business Development. Mr. McCracken's
employment commenced February 26, 2001 and the agreement terminates on
February 25, 2005. Pursuant to his employment agreement, Mr. McCracken is
entitled to receive (i) an annual base salary of $175,000 and (ii) an annual
bonus of up to 35% of his annual base salary at the discretion of Endorex's
board of directors. Pursuant to his employment agreement, Mr. McCracken also
received an option to purchase up to 100,000 shares of common stock at an
exercise price of $1.25 per share. Options to purchase 75,000 shares of common
stock vest equally over 4 years upon each anniversary date of Mr. McCracken's
employment agreement and the remaining options to purchase 25,000 shares of
common stock vest upon meeting certain milestones. Upon receipt by Endorex of at
least $2,000,000 in revenue or income from business development activities,
Mr. McCracken's base annual salary increases by $20,000. In the event
Mr. McCracken is terminated other than for cause, Mr. McCracken is entitled to
receive for a period of seven months his base monthly salary and any unpaid
bonus, subject to set off for amounts earned from alternative employment. In the
event Mr. McCracken terminates his employment for good reason within six months
of a change of control of Endorex, Mr. McCracken is entitled to receive for a
period six months his base monthly salary and any unpaid bonus, subject to set
off for amounts earned from alternative employment.

                                      102

    The Compensation Committee has the authority to provide for the accelerated
vesting of the options granted to the Chief Executive Officer and Endorex's
other executive officers under the Endorex Amended and Restated 1995 Omnibus
Incentive Plan in the event of (i) a change in control of Endorex effected
through a successful tender offer for more than 50% of Endorex's outstanding
common stock or a change in the majority of the board as a result of one or more
contested elections for board membership, or (ii) the individual's termination
of employment (whether involuntarily or through a forced resignation) within a
designated period following such a change in control or an acquisition of
Endorex by merger or asset sale.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Endorex and its management and security holders and their respective
affiliates engage in a variety of transactions between or among each other in
the ordinary course of their respective businesses. All of these related party
transactions that are material to Endorex are described below. As a general
rule, Endorex has not retained an independent third party to evaluate these
transactions, and there has been no independent committee of its board of
directors to evaluate these transactions. Notwithstanding this fact, Endorex
believes that the terms and conditions of these transactions, including the fees
or other amounts paid by it, took into account transactions of a similar nature
entered into by Endorex with unaffiliated third parties and/or market
transactions of a similar nature entered into by unaffiliated third parties.
There can be no assurance that Endorex could not have obtained more favorable
terms from an unaffiliated third party.

    On June 13, 1996, Dominion Resources, Inc. entered into an agreement with
The Aries Fund and the Aries Domestic Fund, L.P., collectively referred to
herein as the Aries Funds, with Endorex as a party to the agreement, whereby the
Aries Funds purchased an aggregate of 266,667 shares of Endorex common stock
from Dominion Resources at $1.50 per share. As part of the transaction, Dominion
Resources transferred to the Aries Funds certain of its rights under an existing
agreement with Endorex, including the right to designate one of the directors of
Endorex and the right to have the shares registered under the Securities Act.
Upon completion of the transaction, Steven H. Kanzer was elected to the board of
directors as a designee of the Aries Funds. On June 26, 1996, the Aries Funds
purchased from Endorex an additional 333,334 shares of common stock at a price
of $3.00 per share. The purchase agreements relating to such shares contains
various representations and warranties concerning Endorex and its activities and
also various affirmations and negative covenants. The agreements grant to the
Aries Funds the right to have the shares registered under the Securities Act and
restrict Endorex from entering into mergers, acquisitions, or sales of Endorex's
assets without the prior approval of the Aries Funds and the Aries Fund nominee
on the board. In 2001, the Aries Funds transferred the shares of Endorex common
stock and the rights under the purchase agreements to Aries Select, Ltd. and
Aries Select I LLC. Aries Select, Ltd. and Aries Select I LLC each beneficially
own in excess of 5% of Endorex's common stock, based upon the shares of common
stock and shares of common stock issuable upon exercise of warrants beneficially
owned by each of them.

    In connection with a credit agreement entered into by Endorex and the Aries
Funds on May 19, 1997, Endorex issued to the Aries Funds warrants to purchase an
aggregate of 66,668 shares of common stock. Such warrants are exercisable until
May 19, 2002, at an exercise price of $2.31250 per share, subject to adjustment
under certain circumstances. Paramount Capital Asset Management, Inc., or PCAM,
is the investment manager of the Aries Funds and the general partner of the
Aries Domestic Fund, L.P. In 2001, the Aries Funds transferred their Endorex
warrants to Aries Select, Ltd. and Aries Select I LLC, both of which are
affiliates of PCAM, Paramount Capital, Inc., or Paramount, and Lindsay
Rosenwald, M.D. Dr. Rosenwald is the President and sole stockholder of PCAM and
Paramount. PCAM and Dr. Rosenwald each beneficially own in excess of 5% of
Endorex's outstanding common stock, based upon the shares of common stock and
shares of common stock issuable upon exercise of warrants beneficially owned by
each of them.

                                      103

    Endorex issued and sold an aggregate of 8,648,718 shares of common stock to
certain accredited investors in a private placement on July 16, October 10, and
October 16, 1997, for an aggregate purchase price of $20,000,000. The net
proceeds to Endorex after deducting commissions and expenses of Paramount, which
acted as the placement agent for the private placement, were $17,400,000.
Paramount is an affiliate of PCAM and Dr. Rosenwald.

    In connection with the private placement, Endorex issued and sold to
Paramount and/or its designees warrants to purchase up to an aggregate of
864,865 shares of common stock. Also in connection with the execution of a
financial advisory agreement, dated October 16, 1997, between Endorex and
Paramount, Endorex issued and sold to Paramount warrants to purchase up to an
aggregate of 1,297,297 shares of common stock. Such warrants are exercisable
until April 16, 2003, at an exercise price of $2.54375 per share, subject to
adjustment under certain circumstances.

    On January 21, 1998, Endorex established a joint venture, InnoVaccines
Corporation, with Elan Corporation, PLC for the exclusive research, development
and commercialization of oral and mucosal prophylactic and therapeutic vaccines.
As part of the transaction, Elan International Services, Ltd., or, Elan
International, a wholly owned subsidiary of Elan, made a $2.0 million investment
in Endorex by purchasing 307,692 shares of common stock and warrants to acquire
230,770 shares of common stock. The warrants are exercisable until January 21,
2004 at an exercise price of $10.00 per share, subject to adjustment under
certain circumstances. In addition, in connection with the joint venture and the
execution of a license agreement, Endorex issued $8.0 million of Series B
preferred stock to Elan International. Upon completion of the transaction,
Steven Thornton was elected to the board of directors as a designee of Elan
International. As of December 31, 2000, Elan has paid approximately $1,643,412
of Endorex's funding obligations for InnoVaccines. Based upon the shares of
common stock and shares of common stock issuable upon conversion of the
Series B preferred stock and Series C preferred stock beneficially owned, Elan
International beneficially owns in excess of 5% of the common stock of Endorex.

    On October 21, 1998, Endorex established a second joint venture, Endorex
Newco, Ltd., with Elan for the exclusive research, development and
commercialization of the MEDIPAD-Registered Trademark- disposable drug delivery
system for an iron chelation therapy. In connection with the joint venture and
the execution of a license agreement, Endorex issued $8.4 million of Series C
preferred stock to Elan International. Endorex has a committed credit
availability of approximately $4,800,000 from Elan for the purposes of funding
Endorex Newco, Ltd.

    Pursuant to a Financial Advisory Agreement dated as of October 25, 1999
between Paramount and Endorex, Paramount provided to Endorex financial advisory
services for a period of twelve months from the date of the agreement. Paramount
received as compensation for its services $5,000 per month for the term of the
Financial Advisory Agreement and received options for 46,000 shares of common
stock at an exercise price of $2.54 per share. Of these options, options for
10,000 shares of common stock were immediately exercisable upon the issuance of
such options and expired on October 25, 2000; options for 9,000 shares of common
stock became exercisable after October 25, 2000 and expire on October 25, 2009;
options for 9,000 shares of common stock became exercisable after April 25, 2001
and expire on October 25, 2009; and options for 18,000 shares of common stock
become exercisable after October 25, 2002 and expire on October 25, 2009.

    Pursuant to a Finder Agreement dated as of February 29, 2000, as amended on
April 6, 2000, between Paramount and Endorex, Paramount agreed to act as a
finder in connection with Endorex's April 2000 private placement of common stock
and warrants. In return for its services under the Finder Agreement, Paramount
received a cash payment of $598,500 and warrants exercisable for 226,190 shares
of common stock at an exercise price of $5.25 per share, subject to adjustment
under certain circumstances. The warrants became exercisable on October 12, 2000
and expire on October 11, 2007.

                                      104

                       PRINCIPAL STOCKHOLDERS OF ENDOREX

    The table below sets forth information regarding the beneficial ownership of
Endorex's common stock and Series B preferred stock as of October 15, 2001, by
the following individuals or groups:

    - each person or entity who is known by Endorex to own beneficially more
      than 5.0% of Endorex's outstanding common stock or Series B preferred
      stock;

    - each of Endorex's Named Executive Officers;

    - each of Endorex's directors and nominees for director; and

    - all of Endorex's directors and executive officers as a group.

    Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Shares of Endorex's common stock that are subject to warrants, options or other
convertible securities that are presently exercisable or exercisable within
60 days of October 15, 2001 are deemed to be outstanding and beneficially owned
by the person holding the warrants or stock options for the purpose of computing
the percentage of ownership of that person, but are not treated as outstanding
for the purpose of computing the percentage of any other person. As of
October 15, 2001, Endorex had 12,741,858 shares of common stock outstanding.



                                                                                   SERIES B
                                                         COMMON                   CONVERTIBLE
                                                         STOCK                  PREFERRED STOCK
                                                      BENEFICIALLY   PERCENT     BENEFICIALLY     PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER                     OWNED       OF CLASS        OWNED        OF CLASS
------------------------------------                  ------------   --------   ---------------   --------
                                                                                      
Aries Select I LLC(1)...............................   2,369,986      18.38%             --          --
  c/o Paramount Capital Asset Management, Inc.
  787 Seventh Avenue
  New York, NY 10019

Aries Select, Ltd.(2)...............................   1,076,081       8.39%             --          --
  c/o Paramount Capital Asset Management, Inc.
  787 Seventh Avenue
  New York, NY 10019

Elan International Services, Ltd.(3)................   2,990,945      19.01%        100,410         100%
  102 St. James Court
  Flatts Smith, SL 04
  Bermuda

Lindsay A. Rosenwald, M.D.(4).......................   4,900,384      34.00%             --          --
  787 Seventh Avenue,
  New York, NY 10019

Paramount Capital Asset Management, Inc.(5).........   4,900,384      34.00%             --          --
  787 Seventh Avenue,
  New York, NY 10019

Robert Brey(6)(7)...................................      64,375          *              --          --

Richard Dunning(6)(7)...............................     104,000          *              --          --

Steve H. Kanzer(6)(7)...............................     249,000       1.92%             --          --

Steve Koulogeorge(6)(7).............................          --         --              --          --

Frank Reid(6)(7)....................................          --         --              --          --

Michael S. Rosen(6)(7)..............................     634,985       4.75%             --          --


                                      105




                                                                                   SERIES B
                                                         COMMON                   CONVERTIBLE
                                                         STOCK                  PREFERRED STOCK
                                                      BENEFICIALLY   PERCENT     BENEFICIALLY     PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER                     OWNED       OF CLASS        OWNED        OF CLASS
------------------------------------                  ------------   --------   ---------------   --------
                                                                                      
Paul Rubin(6)(7)....................................     104,000          *              --          --

H. Lawrence Shaw(6)(7)..............................     104,000          *              --          --

Kenneth Tempero(6)(7)...............................     157,000       1.22%             --          --

Steven Thornton(6)(7)...............................      92,000          *              --          --

All directors and officers as a group...............   1,509,360      10.59%             --          --


------------------------

*   Represents less than 1% of outstanding common stock or voting power.

(1) Number of shares beneficially owned includes 23,334 shares of common stock
    issuable upon exercise of warrants exercisable until May 19, 2002 at a price
    of $2.3125 per share, and 56,533 shares of common stock issuable upon
    exercise of warrants exercisable until April 16, 2003 at a price of $2.54375
    per share. Does not include warrants to purchase 1,434,032 shares of common
    stock held by Lindsay A. Rosenwald, M.D., the Chairman of PCAM, which is the
    managing member of Aries Select I LLC, in his individual capacity.
    Dr. Rosenwald and PCAM share the power to vote and/or dispose of the shares
    of common stock held by the Aries Select I LLC, but disclaim beneficial
    ownership thereof except to the extent of their pecuniary interest therein,
    if any.

(2) Number of shares beneficially owned includes 43,334 shares of common stock
    issuable upon exercise of warrants exercisable until May 19, 2002 at a price
    of $2.3125 per share, and 112,159 shares of common stock issuable upon
    exercise of warrants exercisable until April 16, 2003 at a price of $2.54375
    per share. Does not include warrants to purchase 1,434,032 shares of common
    stock held by Lindsay A. Rosenwald, M.D., the Chairman of PCAM, which is the
    investment manager of Aries Select, Ltd., in his individual capacity.
    Dr. Rosenwald and PCAM share the power to vote and/or dispose of the shares
    of common stock held by Aries Select, Ltd., but disclaim beneficial
    ownership thereof except to the extent of their pecuniary interest therein,
    if any.

(3) Number of shares beneficially owned includes 1,350,569 shares of common
    stock issuable upon conversion of Series B preferred stock, 1,101,614 shares
    of common stock issuable upon conversion of Series C preferred stock and
    230,770 shares of common stock issuable upon exercise of warrants
    exercisable until January 21, 2004 at a price of $10.00 per share.

(4) Lindsay A. Rosenwald, M.D., is the Chairman and sole stockholder of PCAM and
    Paramount Capital, Inc. The securities beneficially owned by Dr. Rosenwald
    include 1,434,032 shares of common stock issuable upon exercise of warrants
    exercisable until April 16, 2003 at a price of $2.54375 per share, 2,369,986
    shares beneficially owned by Aries Select I LLC, 1,076,081 shares
    beneficially owned by Aries Select, Ltd. and 20,284 shares beneficially
    owned by Aries Select II LLC. Dr. Rosenwald disclaims beneficial ownership
    of the shares owned by Aries Select I LLC, Aries Select, Ltd. and Aries
    Select II LLC, except to the extent of any pecuniary interest therein.

(5) PCAM, the investment manager of Aries Select, Ltd. is also the managing
    member of Aries Select I LLC and Aries Select II, LLC, each of which also
    owns securities of Endorex. PCAM disclaims beneficial ownership of the
    securities held by the funds, except to the extent of its pecuniary interest
    therein, if any. PCAM disclaims beneficial ownership of warrants to purchase
    1,434,032 shares of common stock owned by Lindsay A. Rosenwald, M.D.

(6) The address of this individual is c/o Endorex Corporation, 28101 Ballard,
    Lake Forest, IL 60045.

(7) Consists entirely of shares issuable upon exercise of options that are
    exercisable within the 60-day period following October 15, 2001.

                                      106

                      DESCRIPTION OF ENDOREX CAPITAL STOCK

    The following summarizes all of the material terms and provisions of
Endorex's capital stock. It does not purport to be complete, however, and is
qualified in its entirety by the actual terms and provisions contained in
Endorex's certificate of incorporation.

AUTHORIZED CAPITAL STOCK

    Endorex has 55,000,000 total authorized shares of capital stock, of which
50,000,000 are shares of common stock, par value $.001 per share; 4,600,000 are
shares of preferred stock, par value $.001 per share; 200,000 are shares of
Series B preferred stock, par value $.05 per share; and 200,000 are shares of
Series C preferred stock, par value $.05 per share.

STOCK RESERVED FOR ISSUANCE

    As of October 15, 2001, Endorex has reserved 2,231,625 shares of common
stock for issuance upon exercise of outstanding stock options, 3,136,794 shares
for issuance upon exercise of outstanding warrants, 1,350,569 shares for
issuance upon conversion of Series B preferred stock and 1,101,614 shares for
issuance upon conversion of Series C preferred stock. Endorex has not reserved
any shares of preferred stock for issuance.

COMMON STOCK

VOTING RIGHTS

    Each outstanding share of Endorex common stock is entitled to one vote per
share. Endorex stockholders do not have cumulative voting rights.

DIVIDENDS

    Subject to preferences that may be applicable to any outstanding preferred
stock, the holders of Endorex common stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the board of
directors of Endorex out of funds legally available for that purpose. Since
inception, Endorex has not declared any dividends on its common stock and does
not intend to do so in the foreseeable future.

LIQUIDATION RIGHTS

    In the event of Endorex's liquidation, dissolution or winding up, the
holders of Endorex common stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
preferred stock, if any, then outstanding. The holders of common stock have no
preemptive or conversion rights or other subscription rights.

    There are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and nonassessable.
The shares of common stock to be issued in the merger will be fully paid and
nonassessable.

PREFERRED STOCK

    Endorex's board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common

                                      107

stock until the board of directors determines the specific rights of the holders
of such preferred stock. However, the effects might include, among other things:

    - restricting dividends on the common stock;

    - diluting the voting power of the common stock;

    - impairing the liquidation rights of the common stock; or

    - delaying or preventing a change in control of Endorex without further
      action by the stockholders.

    There are currently two series of preferred stock issued and outstanding,
Series B preferred stock and Series C preferred stock. The current series, and
any future series, of preferred stock may discourage or make more difficult a
merger, tender offer, business combination, proxy contest, or assumption of
control by a holder of a large block of Endorex securities or the removal of
incumbent management even if these events were favorable to the interests of
stockholders. The board of directors, without stockholder approval, may issue
preferred stock with voting and conversion rights and dividend and liquidation
preferences which may adversely affect the holders of common stock. Below is a
brief description of Endorex's current outstanding preferred stock.

SERIES B CONVERTIBLE PREFERRED STOCK VOTING, DIVIDEND, AND LIQUIDATION RIGHTS

VOTING RIGHTS

    Series B preferred stockholders have full voting rights and powers equal to
the voting rights and powers of the common stock, including one vote for each
whole share of common stock into which their Series B preferred stock could be
converted according to their conversion rights as described in the certificate
of incorporation. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as converted basis (after aggregating
all shares into which shares of Series B preferred stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward). As of October 15, 2001, each share of Series B preferred
stock was convertible into approximately 13.55 shares of common stock.
Furthermore, without the approval of holders of Series B preferred stock
representing at least a majority of the then outstanding shares of Series B
preferred stock, Endorex may not authorize the issuance of any equity security
having voting, dividend, liquidation or redemptive preferences superior to the
Series B preferred stock.

DIVIDENDS

    Series B preferred stock is paid a dividend at the rate of eight percent
(8%) per annum payable in shares of Series B preferred stock. Such dividends are
cumulative and accrue annually. In addition, if the board of directors pays a
dividend or a distribution to the then outstanding stockholders of common stock
of Endorex (other than a dividend payable solely in shares of common stock), the
holders of the Series B preferred stock are entitled to the amount of dividends
per share they would have received if they converted their shares into whole
shares of common stock.

LIQUIDATION RIGHTS

    In the event of a liquidation, before any payment to the common stockholders
or any preferred stockholder subordinate in liquidation preference, Series B
preferred stockholders are entitled to receive, out of the assets of Endorex
legally available for distribution to its stockholders, the original purchase
price per share and any amount due from declared but unpaid dividends. If the
legal funds are insufficient to fully pay the amount due to the Series B
preferred stockholders, the Series B

                                      108

preferred stockholders will share ratably in any distribution of assets in
proportion to the respective amounts which would be payable to them.

ADDITIONAL RIGHTS

    Endorex may redeem the Series B preferred stock by meeting the requirements
set forth in Endorex's certificate of incorporation. Series B preferred
stockholders may convert their shares into common stock by following the
requirements set forth in the certificate of incorporation. If not converted
earlier, and in the event that Endorex's common stock meets certain trading and
listing requirements set forth in its certificate of incorporation, on or after
January 21, 2003, the Series B preferred stock shall automatically convert into
common stock. As of October 15, 2001, the total number of shares of Series B
preferred stock outstanding was 100,410, convertible into 1,350,569 shares of
Endorex common stock.

SERIES C CONVERTIBLE PREFERRED STOCK VOTING, DIVIDEND, AND LIQUIDATION RIGHTS

VOTING RIGHTS

    The Series C preferred stock is generally non-voting stock. Without the
approval of holders of Series C preferred stock representing at least a majority
of the then outstanding shares of Series C preferred stock, however, Endorex may
not authorize the issuance of any equity security having voting, dividend,
liquidation or redemptive preferences superior to the Series C preferred stock.

DIVIDENDS

    The Series C preferred stock is paid a dividend at the rate of seven percent
(7%) per annum payable in shares of Series C preferred stock. Such dividends are
cumulative and accrue annually. In addition, if the board of directors pays a
dividend or a distribution to the then outstanding stockholders of common stock
of Endorex (other than a dividend payable solely in shares of common stock), the
holders of the Series C preferred stock are entitled to the amount of dividends
per share they would have received if they converted their shares into whole
shares of common stock.

LIQUIDATION RIGHTS

    In the event of a liquidation, before any payment to the common stockholders
or any preferred stockholder subordinate in liquidation preference, Series C
preferred stockholders are entitled to receive, out of the assets legally
available for distribution to its stockholders, the original purchase price per
share and any amount due from declared but unpaid dividends. If the legal funds
are insufficient to fully pay the amount due to the Series C preferred
stockholders, the Series C preferred stockholders will share ratably in any
distribution of assets in proportion to the respective amounts which would be
payable to them.

ADDITIONAL RIGHTS

    The Series C preferred stock may be exchanged for the common stock of
Endorex Newco, Ltd. or converted into Endorex common stock by following the
requirements set forth in the certificate of incorporation. The Series C
preferred stock is not redeemable. If not converted earlier, the Series C
preferred stock will automatically convert into common stock of Endorex on
October 21, 2002. As of October 15, 2001, the total number of shares of
Series C preferred stock outstanding was 97,603, convertible into 1,101,614
shares of Endorex common stock.

DIVIDENDS

    Endorex has never paid a cash dividend and has no plans to pay cash
dividends in the future.

                                      109

ANTITAKEOVER EFFECTS OF DELAWARE LAW

    Endorex is subject to the provisions of Section 203 of the Delaware General
Corporation Law, or DGCL. Subject to certain exceptions, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a certain period of time. That period is
three years after the date of the transaction in which the person became an
interested stockholder, unless the interested stockholder attained that status
with the approval of the board of directors or unless the business combination
is approved in a prescribed manner. A "business combination" includes certain
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with his or her affiliates and
associates, owns, or owned within three years prior, 15% or more of the
corporation's voting stock. The existence of this provision may have an
anti-takeover effect with respect to transactions not approved in advance by the
board of directors, including discouraging attempts that might result in a
premium over the market price for shares of common stock held by stockholders.

PROVISIONS OF ENDOREX CERTIFICATE OF INCORPORATION AND BYLAWS THAT MAY PREVENT
TAKEOVERS

    Endorex's certificate of incorporation contains provisions that may delay,
defer or prevent a change in control and make removal of its management more
difficult. As described before, the board of directors of Endorex may issue and
designate shares of preferred stock without stockholder approval. Such preferred
stock could have a dilutive effect on the shares outstanding, thereby
discouraging a takeover.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

    Endorex's certificate of incorporation limits the liability of directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law. In addition, Endorex's certificate of incorporation and bylaws provide that
Endorex will indemnify its directors and officers to the fullest extent
permitted by the Delaware General Corporation Law.

TRANSFER AGENT AND REGISTRAR

    The transfer agent and registrar for Endorex's common stock is American
Stock Transfer & Trust Co.

                                      110

            COMPARISON OF RIGHTS OF STOCKHOLDERS OF CTD AND ENDOREX

    SET FORTH BELOW IS A DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN THE RIGHTS
OF CTD AND ENDOREX STOCKHOLDERS. WHILE WE BELIEVE THAT THE DESCRIPTION COVERS
THE MATERIAL DIFFERENCES BETWEEN THE TWO, THIS SUMMARY MAY NOT CONTAIN ALL THE
INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD READ CAREFULLY THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE REFER FOR A MORE
COMPLETE UNDERSTANDING OF THE DIFFERENCES IN THE RIGHTS OF HOLDERS OF CTD AND
ENDOREX SECURITIES.



                  ENDOREX                                             CTD
                 (DELAWARE)                                        (DELAWARE)
--------------------------------------------      --------------------------------------------
                                               
                                      SECURITIES MARKETS

-  Endorex common stock is traded on the          -  There is no established trading market
   American Stock Exchange under the symbol          for CTD common stock.
   "DOR."

                                 CAPITALIZATION: COMMON STOCK

-  50,000,000 shares of common stock, $0.001      -  25,000,000 shares of common stock, $0.001
   par value per share.                              par value per share.

-  12,741,858 shares of Endorex's common          -  5,000,000 shares of CTD's common stock
   stock were outstanding as of October 15,          were outstanding as of October 15, 2001.
   2001.

                               CAPITALIZATION: PREFERRED STOCK

-  4,600,000 shares of preferred stock,           -  10,000,000 shares of preferred stock,
   $0.001 par value per share, of which              $0.001 par value per share, of which
   200,000 shares are designated Series B            9,515,000 shares are designated as Series
   convertible preferred stock, $0.05 par            A convertible preferred stock.
   value per share, and 200,000 shares are
   designated as Series C convertible
   preferred stock, par value $0.05 per
   share.

-  Endorex's board of directors may               -  CTD's board of directors may establish
   establish from time to time the number of         from time to time the number of shares to
   shares to be included in a series and fix         be included in a series and fix the
   the designation, powers, preferences and          designation, powers, preferences and
   rights of the shares to be included in            rights of the shares to be included in
   each series and the qualifications,               each series and the qualifications,
   limitations and restrictions thereof              limitations and restrictions thereof
   (subject to certain limitations relating          (subject to certain limitations relating
   to the issuance of preferred stock senior         to the issuance of preferred stock senior
   to existing classes). The holders of              to existing classes). The holders of
   shares of Series B and Series C preferred         shares of Series A preferred stock are
   stock are not entitled to any preemptive          not entitled to any preemptive or
   or subscription rights in respect of any          subscription rights in respect of any
   securities of Endorex.                            securities of CTD.

-  100,410 shares of Series B preferred           -  7,628,750 shares of Series A preferred
   stock were outstanding as of October 15,          stock were outstanding as of October 15,
   2001.                                             2001.

-  97,603 shares of Series C preferred stock
   were outstanding as of October 15, 2001.


                                      111




                  ENDOREX                                             CTD
                 (DELAWARE)                                        (DELAWARE)
--------------------------------------------      --------------------------------------------
                                               
                                        VOTING RIGHTS

-  COMMON STOCK. Entitled to one vote per         -  COMMON STOCK. Entitled to one vote per
   share on all matters to be voted upon by          share on all matters to be voted upon by
   the common stockholders.                          the common stockholders.

-  SERIES B PREFERRED. Entitled to one vote       -  SERIES A PREFERRED. Entitled to the
   for each full share of common stock into          number of votes equal to the largest
   which each share of Series B preferred            number of full shares of common stock
   stock could then be converted at the              into which the shares of Series A
   record date for the vote at issue. In any         preferred stock of the applicable holder
   vote by the holders of shares of Series B         could be converted at the record date for
   preferred stock acting as a class, each           the determination of the stockholders
   holder of shares of Series B preferred            entitled to vote on such matters or, if
   stock is entitled to one vote for each            no such record date is established, at
   share of Series B preferred stock held.           the date such vote is taken.

-  SERIES C PREFERRED. In any vote by the
   holders of shares of Series C preferred
   stock acting as a class, each holder of
   shares of Series C preferred stock is
   entitled to one vote for each share of
   Series C preferred stock held.

                                      CUMULATIVE VOTING

    Under the DGCL, cumulative voting in the election of directors is not available unless
specifically provided for in the certificate of incorporation.

-  The Endorex certificate of incorporation       -  The CTD certificate of incorporation does
   does not specifically provide for                 not specifically provide for cumulative
   cumulative voting, so cumulative voting           voting, so cumulative voting is not
   is not available to Endorex stockholders.         available to CTD stockholders.

                                          DIVIDENDS

-  COMMON STOCK. Dividends may be declared        -  COMMON STOCK. Subject to preferences that
   and paid from funds lawfully available            may be applicable to any outstanding CTD
   therefor as and when determined by the            preferred stock, the holders of CTD
   board of directors and subject to any             common stock are entitled to receive such
   preferential dividend rights of any then          dividends, if any, as may be declared
   outstanding preferred stock. As of the            from time to time by the CTD board out of
   date of this joint proxy                          legally available funds. As of the date
   statement/prospectus, no such dividends           of this joint proxy statement/prospectus,
   have ever been declared or paid.                  no such dividends have ever been declared
                                                     or paid.


                                      112




                  ENDOREX                                             CTD
                 (DELAWARE)                                        (DELAWARE)
--------------------------------------------      --------------------------------------------
                                               
-  SERIES B PREFERRED STOCK. The holders of       -  SERIES A PREFERRED STOCK. The holders of
   the shares of Series B preferred stock            Series A preferred stock are entitled to
   are entitled to receive dividends at the          receive dividends, out of any assets
   rate of 8% per year, payable in shares of         legally available, in cash, stock or
   Series B preferred stock.                         otherwise. Such dividends are payable
                                                     only when, as and if declared by the CTD
                                                     board; however, such dividends shall
                                                     accrue and accumulate and are payable
                                                     upon a liquidation event. As of the date
                                                     of this prospectus, no such dividends
                                                     have ever been declared paid.

-  SERIES C PREFERRED STOCK. The holders of
   shares of Series C Preferred are entitled
   to receive dividends at the rate of 7%
   per year, payable in shares of Series C
   preferred stock.

                 PREFERENCES RELATING TO LIQUIDATION, DISSOLUTION, WINDING UP

-  COMMON STOCK. In the event of a                -  COMMON STOCK. In the event of a
   liquidation, dissolution or winding up of         liquidation, dissolution or winding up of
   Endorex, the holders of Endorex common            CTD, the holders of CTD common stock are
   stock are entitled to receive an equal            entitled to share ratably in all assets
   portion of the net assets of Endorex              remaining after payment of liabilities,
   available for distribution to the common          subject to prior rights of CTD preferred
   stockholders, subject to any preferential         stock, if any, then outstanding.
   rights of Endorex preferred stockholders,
   if any, then outstanding.

-  PREFERRED STOCK. In the event of a             -  SERIES A PREFERRED STOCK. In the event of
   liquidation, dissolution or winding up of         a liquidation, dissolution or winding up
   Endorex, each holder of shares of Series          of CTD, each holder of shares of Series A
   B or Series C preferred stock is entitled         preferred stock entitled to receive,
   to receive, prior to any payment or               prior and in preference to holders of all
   distribution to the holders of common             other series of CTD preferred stock and
   stock, an amount equal to the sum of (1)          common stock, an amount equal to $2.00
   the original purchase price per share,            per share (subject to adjustments for
   which is $100 per share, and (2) an               stock splits, stock combinations and the
   amount equal to any declared but unpaid           like) plus declared but unpaid dividends,
   dividends thereon.                                if any, and all accrued but unpaid
                                                     preferred dividends (as described in
                                                     CTD's certificate of incorporation) on
                                                     those shares (collectively, the
                                                     "Liquidation Amount").

               PROVISIONS RELATING TO MERGER, CONSOLIDATION, OR SALE OF ASSETS

-  COMMON STOCK. None.                            -  COMMON STOCK. None.


                                      113




                  ENDOREX                                             CTD
                 (DELAWARE)                                        (DELAWARE)
--------------------------------------------      --------------------------------------------
                                               
-  PREFERRED STOCK. Endorex's certificate of      -  SERIES A PREFERRED STOCK. CTD's
   incorporation provides that a                     certificate of incorporation provides
   liquidation, dissolution, or winding up           that in the event of consolidation or
   of Endorex is deemed to have occurred             merger of CTD or sale of all or
   upon the (A) acquisition of Endorex by            substantially all of CTD's assets,
   another entity unless Endorex's                   holders of Series A preferred stock are
   stockholders of record immediately prior          entitled to receive for each share, in
   to that acquisition will, immediately             cash or securities received from the
   after that acquisition (by virtue of              acquiring corporation, an amount equal to
   securities issued as consideration for            the Liquidation Amount. (Prior to
   Endorex's acquisition) hold at least 50%          effectiveness of the merger, CTD is
   of the voting power of the surviving or           required to amend this provision so as to
   acquiring entity; or (B) sale of all or           limit the maximum aggregate amount
   substantially all of the assets of                payable to the holders of the Series A
   Endorex. Consequently, any such                   preferred stock to the merger
   acquisition or sale would trigger the             consideration payable to them as set
   preferred stock liquidation preference            forth in the merger agreement.)
   described above.

                                     REDEMPTION; EXCHANGE

-  COMMON STOCK. Not redeemable.                  -  COMMON STOCK. Not redeemable.

-  SERIES B PREFERRED STOCK. Endorex may, at      -  SERIES A PREFERRED STOCK. CTD may, at its
   its option, if the requirements set forth         option at any time after May 9, 2003,
   in Section C.4 of the Endorex certificate         redeem the Series A preferred stock in
   of incorporation are met, redeem those            whole, but not in part for an amount per
   shares by paying an amount in cash equal          share equal to $2.00 (subject to
   to the then-applicable liquidation                appropriate adjustment to reflect any
   preference and accrued and unpaid                 stock split, combination,
   dividends for those shares in accordance          reclassification or reorganization of the
   with Section C.4 of the Endorex                   Series A preferred stock) plus all
   certificate of incorporation.                     declared and unpaid dividends thereon, to
                                                     and including the redemption date and all
                                                     accrued but unpaid preferred dividends
                                                     (in accordance with Section 7 of the CTD
                                                     certificate of incorporation) to and
                                                     including the redemption date.

-  SERIES C PREFERRED. Not redeemable at any
   time after the issuance of shares of
   Series C preferred stock. Each holder of
   those shares may, at its option, on one
   occasion, elect to exchange those shares
   for shares of common stock, par value
   $1.00 per share, of Endorex Newco, Ltd.,
   a Bermuda corporation, provided that all
   of the holders of Series C preferred
   stock elect to exercise this exchange
   right at the same time and have not
   previously exercised any portion of their
   conversion rights (as described below).


                                      114




                  ENDOREX                                             CTD
                 (DELAWARE)                                        (DELAWARE)
--------------------------------------------      --------------------------------------------
                                               
                                      CONVERSION RIGHTS

-  COMMON STOCK. None.                            -  COMMON STOCK. None.

-  SERIES B PREFERRED STOCK. Each share of        -  SERIES A PREFERRED STOCK. Each holder of
   Series B preferred stock is convertible,          shares of Series A preferred stock is
   at the option of the holder thereof, at           entitled at any time to convert those
   any time after the date of issuance of            shares into CTD common stock at a ratio
   that share, into the number of common             equal to one share of CTD common stock
   shares as is determined in accordance             for each share of Series A preferred
   with Section C.5.(a) of the Endorex               stock, subject to adjustment pursuant to
   certificate of incorporation.                     CTD's certificate of incorporation. All
   Additionally, each share of Series B              outstanding shares of Series A preferred
   preferred stock will automatically be             stock will be automatically converted
   converted into shares of common stock in          into shares of common stock upon
   accordance with Section C.5.(b) of the            occurrence of certain events stated in
   Endorex certificate of incorporation.             CTD's certificate of incorporation.

-  SERIES C PREFERRED STOCK. Each share of
   Series C preferred stock is convertible,
   at the option of the holder thereof, at
   any time two years after the date of
   issuance of that share into the number of
   common shares as is determined in
   accordance with Section D.5.(a) of the
   Endorex certificate of incorporation.
   Additionally, each share of Series C
   preferred stock will automatically be
   converted into shares of common stock in
   accordance with Section D.5.(b) of the
   Endorex certificate of incorporation.

                                    PROTECTIVE PROVISIONS

-  COMMON STOCK. None.                            -  COMMON STOCK. None.

-  PREFERRED STOCK. Approval of holders of        -  SERIES A PREFERRED. Approval of holders
   at least a majority of the                        of at least a majority of the
   then-outstanding shares of Series B or            then-outstanding shares of Series A
   Series C preferred stock, voting                  preferred stock, voting separately as a
   separately as a class, is required before         class, is required before CTD may take
   Endorex may (1) increase or decrease the          any of certain actions described in CTD's
   authorized or outstanding number of               certificate of incorporation, except as
   shares of such series so as to adversely          provided therein.
   affect that series' stockholders, or (2)
   authorize or issue any other equity
   securities, or securities convertible
   into or exercisable for any equities
   security, with a preference over, or on a
   parity with, such Series B or Series C
   preferred stock with respect to voting,
   dividends, liquidation or redemption.


                                      115




                  ENDOREX                                             CTD
                 (DELAWARE)                                        (DELAWARE)
--------------------------------------------      --------------------------------------------
                                               
                                       SPECIAL MEETINGS

-  The Endorex bylaws provide that special        -  Under the CTD bylaws, special meetings of
   meetings of the stockholders may be               the stockholders may be called by the
   called by the Chairman of the board of            Chairman of the board of directors.
   directors or the President, and may be
   called by the President or Secretary at
   the request in writing of a majority of
   the Endorex board or of stockholders
   owning a majority of the shares of
   Endorex capital stock issued and
   outstanding and entitled to vote.

-  Under the Endorex bylaws, special              -  The CTD bylaws provide that special
   meetings of the board of directors may be         meetings of the board of directors may be
   called by the Chairman of the board of            called by the Chairman of the board of
   directors, the President, or by two or            directors or the President.
   more directors on at least two days'
   notice by telegram, or on at least three
   days' notice if sent by mail.

                                      BOARD OF DIRECTORS

-  The Endorex board currently consists of        -  The CTD board currently consists of four
   seven directors. (Under the merger                directors. Under the CTD bylaws, the
   agreement, Endorex is required to cause           board may not have more than nine or less
   the board to consist of nine directors            than three members. Election of CTD
   upon effectiveness of the merger.) The            directors need not be by written ballot.
   Endorex certificate of incorporation and
   bylaws provide that the number of
   directors may be fixed in the bylaws or
   by amendment thereof duly adopted by the
   Endorex board or the Endorex
   stockholders. However, if no such
   determination is made by either the
   Endorex board or its stockholders, the
   number of Endorex directors will be
   three. Election of Endorex directors need
   not be by written ballot.

                                       WRITTEN CONSENTS

    Under the DGCL, stockholders may take action by written consent in lieu of voting at a
stockholders' meeting unless a corporation eliminates stockholder ability to act by written
consent in its certificate of incorporation.

-  The Endorex certificate of incorporation       -  The CTD certificate of incorporation and
   and bylaws specifically provide for               bylaws do not address the ability of its
   action by written consent of its                  stockholders to act by written consent,
   stockholders.                                     and accordingly CTD stockholders may act
                                                     by written consent.


                                      116




                  ENDOREX                                             CTD
                 (DELAWARE)                                        (DELAWARE)
--------------------------------------------      --------------------------------------------
                                               
                           VACANCIES ON BOARD; REMOVAL OF DIRECTORS

-  Vacancies on the Endorex board may be          -  Vacancies on the CTD board may be filled
   filled by a majority vote of the                  by a majority vote of the remaining
   remaining board.                                  board.

-  Directors may be removed with or without       -  Directors may be removed with or without
   cause at any time by majority vote of             cause at any time by majority vote of
   stockholders.                                     stockholders.

                                     AMENDMENTS TO BYLAWS

-  The Endorex certificate of incorporation       -  The CTD certificate of incorporation and
   and bylaws provide that the Endorex board         bylaws provide that the CTD board may
   may alter or repeal the Endorex bylaws by         make, alter or repeal the CTD bylaws
   an affirmative vote of a majority of the          subject to the power of the stockholders
   entire board.                                     to alter or repeal the bylaws.

                               LIMITATION ON DIRECTOR LIABILITY

-  Directors' liability is limited to the         -  Directors' liability is limited to the
   fullest extent permitted by Delaware Law.         fullest extent permitted by Delaware Law.

                                       INDEMNIFICATION

-  Indemnification of officers and directors      -  Indemnification of officers and directors
   provided to the fullest extent of                 provided to the fullest extent of
   Delaware Law.                                     Delaware Law.

                                       APPRAISAL RIGHTS

    Under the DGCL, a stockholder of a corporation participating in certain major corporate
transactions may be entitled, under varying circumstances, to appraisal rights pursuant to
which that stockholder may receive cash in the amount of the fair market value of its shares
in lieu of the consideration it would otherwise receive in the transaction. These rights are
not available with respect to a merger or consolidation by a corporation with shares either
listed on a national securities exchange or held of record by more than 2,000 holders. See
"The Merger--Appraisal Rights."

-  Endorex common stock is listed on the          -  CTD is not publicly traded and has fewer
   American Stock Exchange. Therefore,               than 2,000 stockholders. Therefore,
   appraisal rights may not be available to          appraisal rights are available to CTD
   Endorex stockholders in the event Endorex         stockholders in connection with the
   is acquired by another corporation.               merger.


                                      117

                               DESCRIPTION OF CTD

    THE FOLLOWING SECTION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. CTD'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND ELSEWHERE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS.

OVERVIEW OF CTD'S BUSINESS

    CTD is a development stage pharmaceutical company. Its primary strategy is
to develop, through its subsidiaries, innovative oral and mucosal formulations
and new therapeutic indications of drugs that previously have been approved by
the FDA for marketing in the United States. Such compounds are known as approved
chemical entities, or ACEs; medicinal compounds that have not been approved by
the FDA are known as new chemical entities, or NCEs. CTD currently has in
clinical development two ACE drug products, orBec-TM- and Oraprine-TM-;
orBec-TM- is in phase III clinical trials and Oraprine-TM- is in phase I
clinical trials. CTD also has a drug product, Metropt-TM-, in preclinical
development for which an Investigational New Drug, or IND, application has been
filed with and approved by the FDA. CTD believes that its strategy of developing
new oral or mucosal formulations of ACEs and products based upon ACEs to treat
new indications will allow it to develop marketable products faster, with fewer
risks, and less expensively than is usually the case with traditional drug
development. During fiscal years 2000 and 1999, CTD's expenditures on research
and development were $1,324,000 and $955,000, respectively.

THE DRUG APPROVAL PROCESS

    The drug approval process is extremely expensive and is rigorously regulated
by governmental agencies, including, in the United States, the FDA. Each drug
must undergo a series of preclinical and clinical trials before the FDA will
consider approving it for commercial sale. The FDA or any company conducting
drug trials can discontinue those trials at any time if it feels that patients
are being exposed to an unacceptable health risk or if there is not enough
evidence that the drug is effective. The FDA may also require a company to
provide additional information or conduct additional tests before it will permit
a drug to proceed from one phase of trials to the next.

ADVANTAGES OF DEVELOPING ACE DRUG PRODUCTS

    CTD's primary strategy is to focus on developing new oral or mucosal
formulations of ACEs and products based upon ACEs to treat new indications.
There are significant advantages to developing products from drugs that have
already been approved by the FDA.

SPEED AND COST

    The ACEs on which CTD's products are based have established safety and
therapeutic profiles for uses that differ from the uses CTD plans. CTD believes
that as a consequence, the approval process will be quicker and cheaper than
would be the case with NCEs, as the FDA allows applicants developing ACE
products to rely on previous study results to support safety and efficacy
claims. To date, the FDA has not requested that CTD duplicate costly and
time-consuming preclinical animal studies and safety studies with respect to
CTD's ACE product candidates, and instead has allowed CTD to use existing data
and peer review journal articles in support of the approval process of its ACE
product candidates; this has allowed CTD to begin human clinical trials sooner
than otherwise would have been possible.

                                      118

INCREASED LIKELIHOOD OF MULTIPLE USES

    ACE products that are approved for treatment of one disease are sometimes
found effective in treating other medical conditions. Doctors and scientists
that use or prescribe a given ACE have an understanding of the chemical and
medicinal properties associated with that ACE and are often able to identify new
uses and new disease targets for that ACE.

PROPRIETARY RIGHTS

    Proprietary drug products can be distinguished from generic drug products,
which are those that any company can manufacture without restriction and without
the need to acquire rights from any other party, generally because the patent or
other source of exclusivity has expired or been revoked. Generic drug companies
rely on low-margin, high-volume sales to achieve profits.

    By developing new formulations of, or new therapeutic indications for, the
ACEs to which CTD has obtained patent rights, CTD may be able to gain an
advantage over competitors by preventing them, for a limited period, from
marketing that ACE in a manner that infringes those proprietary rights. CTD's
products represent new uses for existing drugs, and although it is not possible
to obtain composition-of-matter patents for these compounds, it is possible to
secure method-of-use patent protection for those new uses. However, a
method-of-use patent covering use of a given drug to treat a certain disease
only prevents competitors from using that drug to treat that disease, and is
therefore in practice more difficult to enforce than composition-of-matter
patents. CTD has an exclusive license to an existing United States patent that
claims the use of orally delivered beclomethasone for PREVENTION of tissue
damage associated with intestinal graft-versus-host disease, or GVHD, whereas
CTD's only phase III clinical trials are for TREATMENT of GVHD. A United States
patent provides exclusivity for 20 years from the date the patent application is
filed.

    Another source of exclusivity is the FDA's "orphan drug products" program,
which aims to promote development of new treatments for rare diseases. Without
special incentives, drug companies do not focus on a rare disease, as it
represents a small market. Under the Orphan Drug Act of 1983, the FDA is
permitted to grant "orphan drug" status to any drug products that are intended
to treat a "rare disease or condition," defined as a disease or condition that
affects fewer than 200,000 persons in the United States. A company developing an
orphan drug is accorded four to seven years of market protection from
competitors, as well as certain tax credits for the amounts spent on human
clinical trials. Although not approved for sale in the United States, the FDA
has designated orBec-TM- and Oraprine-TM- as orphan drugs for select diseases.

    Finally, the Hatch-Waxman Amendments of 1984 include exclusivity provisions
that CTD believes may apply to its ACE drug products. One is the three-year
exclusivity period for a new drug application, or NDA, that the FDA approves for
ACE drug products supported by new clinical investigations. The other is the
three-year exclusivity period for a supplemental new drug application, or sNDA,
that the FDA approves for ACE drug products that are supported by new clinical
investigations to supplement an existing NDA. These exclusivity periods would
run concurrently with any period of market protection accorded to any CTD
product under the FDA's orphan drug products program. If CTD develops orBec-TM-
or Oraprine-TM- for additional uses and files sNDAs, those products may be
eligible to apply for this extra exclusivity.

    CTD has a license to the United States Patent No. 6,096,731, which expires
on Sept. 10, 2018. With regard to those pending patent applications owned by
CTD, assuming that patents issue from CTD's existing patent applications, those
patents will generally expire between 2018 and 2021. Generally, a United States
patent provides exclusivity for 20 years from the date the patent application
was filed but this period is subject to any terminal disclaimers that apply. In
addition, it is possible that these patents, including United States Patent
No. 6,096,731, may expire at an even earlier date, if found to be invalid for
any reason.

                                      119

CTD'S PRODUCTS

    Each of CTD's principal products is listed in the following table, along
with the target disease and clinical trial status of that product and the CTD
subsidiary responsible for developing it:



        PRODUCT                   INDICATION             DEVELOPMENTAL STATUS        CTD SUBSIDIARY
-----------------------  ----------------------------   -----------------------  -----------------------
                                                                        
orBec-TM-                Treatment of intestinal GVHD   Phase III ongoing        Enteron
                                                                                 Pharmaceuticals, Inc.
                         Treatment of Crohn's disease   Phase II (planned)       Enteron
                                                                                 Pharmaceuticals, Inc.
                         Prevention of ulcerative       Phase II (planned)       Enteron
                          colitis                                                Pharmaceuticals, Inc.
                         Prevention of GVHD             Phase II (planned)       Enteron
                                                                                 Pharmaceuticals, Inc.

Oraprine-TM-             Bioequivalent to tablet form   Bioequivalency trial     Oral Solutions, Inc.
                          of AZA                        (planned); compound
                                                        requires reformulation

Oral Suspension Drug                                    Preclinical research     Formulation
  Delivery Technology                                                            Technologies, Inc.

Metropt-TM-              Blepharitis, dry eye           IND filed                RxEyes, Inc.


ORBEC-TM-

    CTD's lead product, orBec-TM-, is an oral formulation of beclomethasone
dipropionate, or BDP, a site-active corticosteroid drug that was originally
synthesized in the 1960s. It has been approved by the FDA and sold by Glaxo
Wellcome, as Beconase, in an inhaled formulation for the treatment of asthma,
allergic rhinitis, and nasal polyposis.

    CTD's development of orBec-TM- is the result of CTD's majority-owned
subsidiary, Enteron Pharmaceuticals, Inc., having obtained an exclusive license
from Dr. George McDonald to develop oral formulations of BDP to treat GVHD.
Dr. George McDonald is Head of Gastroenterology and Hepatology at the Fred
Hutchinson Cancer Research Center and a Professor of Internal Medicine and
Gastroenterology at the University of Washington Medical Center. Under this
license, Enteron obtained rights to know-how and an issued patent covering the
use of orBec-TM- to prevent tissue damage associated with GVHD. In addition,
Dr. McDonald and Nicholas Stergiopoulos, CTD's Director of Corporate
Development, assigned to Enteron three patent applications covering aspects of
treating intestinal GVHD, Crohn's disease, ulcerative colitis, and inflammatory
bowel disease.

    The composition-of-matter patent covering BDP has expired. To CTD's
knowledge, there are no issued method patents regarding the use of BDP to treat
GVHD or gastrointestinal diseases. Third parties own patents regarding use of
proprietary delivery systems, such as sustained release or suppositories, which
claim use of BDP to treat various gastrointestinal diseases. CTD believes that
its methods are substantially different from those described in the other
patents.

    The BDP used in orBec-TM- is manufactured under an FDA-approved drug master
file. orBec-TM- is formulated and tableted under good manufacturing procedures,
or GMP, at Pharmaceutics International, Inc., a contract manufacturing firm.
orBec-TM- is then packaged into blister packets by PCI Clinical Services, Inc.,
a division of Cardinal Health Corporation. CTD relies on contract manufacturing
firms and does not own or control a manufacturing facility.

    CTD is currently testing orBec-TM- in a multi-center phase III clinical
trial for the treatment of intestinal GVHD, a life-threatening disorder that can
arise following a bone marrow transplant. GVHD affects the gastrointestinal
tract, skin, and liver of patients who have received bone marrow transplants;

                                      120

it is thought to start in the gastrointestinal tract and spread to the skin and
liver. The symptoms of intestinal GVHD typically include severe diarrhea,
anorexia, vomiting, and death of the cells that line the intestinal tract.
According to the National Marrow Donor Program, 12,748 allogenic bone-marrow
transplants (transplants of blood or bone marrow cells from another person) were
performed worldwide from January 1, 2001, through July 31, 2001. According to
published studies and despite improved preventive measures, acute GVHD still
occurs in 50% to 70% of transplants where the donor was HLA-mismatched and in
30% to 40% of transplants where the donor was HLA-matched. Special blood tests,
called human leukocyte antigen, or HLA, typing, determine whether a patient has
a suitable donor for bone-marrow-cell transplant. These same studies indicate
that intestinal GVHD accounts for 15% to 30% of all cases of GVHD.

    Intestinal GVHD is typically treated by high doses of Prednisone, a potent
corticosteroid, along with Cyclosporin and other immunosuppressive agents. The
systemic immunosuppression caused by immunosuppressing and the systemic side
effects of corticosteroids can result in infection and ultimately death.
orBec-TM- allows for larger doses of BDP to be delivered to the afflicted
gastrointestinal area without the significant side effects associated with other
steroids, due to the rapid conversion and deactivation of BDP and incomplete
absorption of BDP and its metabolites. Availability of a safe and effective
treatment for GVHD should increase the number of patients who could benefit from
bone marrow transplantation by improving the risk-to-benefit ratio of the
treatment.

    orBec-TM- has completed a phase I/II clinical trial and a randomized phase
II/III clinical trial, achieving statistical significance and its primary
endpoint, increasing the caloric intake of patients suffering from intestinal
GVHD who were treated with orBec-TM- compared to those treated with a placebo.
On October 25, 2000 the FDA granted "fast track" status of CTD's application for
use of orBec-TM- for the treatment of intestinal GVHD. Under special
circumstances, the FDA grants a company's product fast track review, in which
case the FDA must review the related NDA within 6 months. Fast-track designation
is typically granted when a product treats unmet medical needs. orBec-TM- has
also been designated as an "orphan drug" by the FDA for treatment of intestinal
GVHD and prevention of GVHD. CTD started a phase III clinical trial in
May 2001. The multicenter phase III clinical trial will consist of a total of
130 patients. The results of this phase III trial will form the basis for an NDA
that CTD plans to file with the FDA.

    Concurrently with the phase III clinical trial, CTD plans to initiate one or
more phase II clinical trials of orBec-TM- for treatment of Crohn's disease and
ulcerative colitis and prevention of GVHD. Crohn's disease is a serious
inflammatory disease of the gastrointestinal tract. It predominates in the small
intestine and the large intestine, but may occur in any section of the
gastrointestinal tract. The disease can be localized in patches of bowel.
Crohn's disease usually causes diarrhea and painful abdominal cramps, often
results in fever, and at times causes rectal bleeding. Loss of appetite and
subsequent weight loss may also occur. Crohn's disease is chronic and its cause
is not known. Medication that is currently available decreases inflammation and
usually controls the symptoms, but does not provide a cure for the disease.

    Ulcerative colitis is an inflammatory disease of the large intestine and is
characterized by inflammation and ulceration of the innermost lining of the
colon. Symptoms characteristically include diarrhea with or without rectal
bleeding and, often, abdominal pain. Ulcerative colitis differs from Crohn's
disease in significant ways. It affects only the colon, where the inflammation
is maximal in the rectum and extends up the colon in a continuous manner without
any "skip" areas of normal intestine. Further, only the innermost lining of the
colon is affected. In contrast, Crohn's disease can affect the entire thickness
of the bowel wall.

    Because Crohn's disease behaves similarly to ulcerative colitis, from which
it may be difficult to differentiate, the two disorders are grouped together as
inflammatory bowel disease, or IBD. According to the Crohn's and Colitis
Foundation, there are currently in the United States approximately 800,000

                                      121

persons suffering from inflammatory bowel disease (roughly half of those
patients have Crohn's disease, while the other half have ulcerative colitis),
and each year there are in the United States approximately 20,000 new cases of
IBD.

    Upon approval by the FDA, CTD plans to conduct further clinical trials of
the effectiveness of orBec-TM- in treating ulcerative colitis and Crohn's
disease and in preventing GVHD. Assuming positive results from the clinical
trials, this will entail filing sNDAs for the above-mentioned indications.

ORAPRINE-TM-

    Through its majority-owned subsidiary, Oral Solutions, Inc., CTD is
developing Oraprine-TM-, an oral suspension of Azathioprine, or AZA. The
composition-of-matter patent covering AZA has expired. In 1999, Oral Solutions
licensed the know-how and clinical data relating to Oraprine-TM- from Dr. Joel
B. Epstein. Dr. Epstein also assigned to Oral Solutions a United States patent
application covering the use of Oraprine-TM- to treat oral autoimmune diseases.

    AZA is a widely used immunosuppressive medication in clinical medicine. AZA
is commonly prescribed in tablet form to organ transplant patients to suppress
the body's defenses against foreign bodies, specifically the transplanted organ.
This increases the chances of preventing the transplanted organ from being
rejected by the patient.

    This suppression of the body's defenses makes AZA useful in treating
rheumatoid arthritis. AZA is prescribed as a "second-line" treatment for severe,
active rheumatoid arthritis in patients who do not respond to initial arthritis
medications. According to IMS Health, in 2000 approximately one million units of
AZA were sold in the United States for total revenues of $65 million.

    A phase I bioequivalency clinical trial has been completed in the United
States for Oraprine-TM-. This phase I trial demonstrated that Oraprine-TM- is
equivalent to the currently marketed Imuran-Registered Trademark- tablet. CTD
plans to discuss these results with the FDA, and currently anticipates
conducting a larger bioequivalency trial, the results of which would be used to
file for FDA approval of the oral suspension formula of AZA. Before conducting
this trial, CTD will need to manufacture additional quantities of Oraprine-TM-.
It will at the same time reformulate the Oraprine-TM- suspension, which will add
at least several months to the approval process.

    CTD plans to file an Abbreviated New Drug Application, or ANDA, for
Oraprine-TM-. CTD proposes to position Oraprine-TM- as a specialty generic
product, to be used by patients with autoimmune disorders who cannot swallow
medicines in tablet form. In particular, children, the elderly, and cancer
patients are prone to this difficulty. Post-approval, CTD plans to conduct
studies in patients who are afflicted with chronic oral ulcerations, such as
oral GVHD and other autoimmune diseases of the mouth and upper esophagus. CTD
has completed a pilot phase I/II clinical efficacy trial using Oraprine-TM- to
treat oral GVHD and has also successfully completed a phase I bioequivalency
trial demonstrating that Oraprine-TM- is bioequivalent to the tablet
Imuran-Registered Trademark-. CTD has filed patent applications for the use of
Oraprine-TM- to treat oral autoimmune disorders. In addition, the FDA has
granted orphan drug status for CTD's application for use of Oraprine-TM- for the
treatment of oral GVHD.

ORAL-SUSPENSION DRUG DELIVERY TECHNOLOGY

    Formulation Technologies, Inc., a wholly owned subsidiary of CTD, has an
option, expiring January 20, 2002, to license an oral tablet drug delivery
technology from University Pharmaceutics of Maryland, Inc., a contract
manufacturing organization that is majority-owned by the University of Maryland.
This technology allows a pharmaceutical tablet to rapidly break apart in water
into a suspension that can be swallowed by patients.

                                      122

METROPT-TM-

    CTD's majority-owned subsidiary, RxEyes, Inc., has licensed rights to two
United States patents and certain foreign patent rights, as well as know-how,
relating to certain aspects of using Metropt-TM-, an ophthalmic formulation of
metronidazole, to treat blepharitis, dry eye, and blepharitis associated dry-eye
syndrome. Metronidazole is a broad-spectrum antibiotic that is especially
effective against anaerobic infections (infections that grow in the absence of
oxygen). In body areas where there is poor central circulation and therefore an
inadequate blood supply, only bacteria that can live without oxygen can survive.
In such conditions, the metronidazole compound changes so as to inhibit the DNA
repair enzymes that normally would repair cells. This kills anaerobic bacteria
but has no effect on aerobic tissues. Metronidazole has been approved by the FDA
for use in oral, vaginal, dermatological, and intravenous forms for a variety of
inflammation-related indications.

    CTD has an FDA-approved investigational new drug application, or IND, for
Metropt-TM-. CTD is currently seeking a partner in the ophthalmics industry to
aid in developing Metropt-TM-. CTD is in a dispute with the licensors of
Metropt-TM- regarding whether CTD is required to pay the licensors certain
payments provided for in the license agreement dated April 14, 1998, between CTD
and the licensors. In relation to this dispute, the licensor's have alleged that
CTD is in breach, and communicated their intent to terminate the license
agreement. CTD maintains that it is not required to make those payments, as the
formulation of Metropt-TM- developed by the licensors was not commercially
viable due to sterility problems and because another development stage company
that licensed Metropt-TM- was unable to develop a safe and effective product
based on this formulation. This dispute is not currently the subject of
litigation. To date, CTD has also been unable to prepare a formulation of
Metropt that can be used in the eye without causing excessive discomfort.

ALLERGAN MILESTONE PAYMENTS

    CTD's majority-owned subsidiary, Intero Corp., obtained an exclusive license
from Johns Hopkins University to two issued patents and phase II/III clinical
data relating to use of endoscopic injections of BOTOX-Registered Trademark-
(botulinum toxin type A) to treat gastrointestinal disorders, including
achalasia, morbid obesity, sphincter of oddi dysfunction, constipation, and
benign prostatic hyperplasia. CTD was near completion of an FDA-sponsored
multi-center phase II/III clinical trial for the treatment of achalasia, a rare,
life-threatening muscle spasm of the esophageal sphincter, when in
December 1999 CTD sold to Allergan, Inc. the assets of Intero, including the two
issued patents, the clinical data, and the related IND filed by Intero with the
FDA.

    As the purchase price for its assets, Intero received a payment of
$3.5 million, of which CTD received approximately $2.9 million. Intero is
entitled to receive a milestone payment of $3 million from Allergan for each of
the first two FDA approvals Allergan is granted for use of the
BOTOX-Registered Trademark- technology acquired from Intero.

MARKETING STRATEGIES

    CTD has various licensing and marketing strategies depending on the nature
of its ACE products. One such strategy is the direct marketing of niche ACE
products for rare diseases and conditions. CTD intends to market orBec-TM-, its
lead ACE product for the treatment of intestinal GVHD, directly to physicians
and centers that perform bone marrow transplants. A successful bone marrow
transplant and post-operative treatment of intestinal GVHD requires a
specialized medical team of doctors, nurses, and other support staff at these
major medical centers. Since this represents a small niche market, CTD believes
it can directly market its drug product to the GVHD and bone marrow transplant
specialists at these centers in part by means of special conferences,
symposiums, and lectures catering to the target professionals, as well as
through published papers focusing on this rare medical condition. CTD intends to
promote Oraprine-TM- to patients and medical professionals in a similar manner.
This

                                      123

strategy will allow CTD to avoid having to develop an extensive sales and
marketing infrastructure to promote its niche drug products. However, at this
time CTD has no marketing or sales personnel.

    Any ACE product that is targeted to a larger market such as Crohn's disease
and ulcerative colitis will require a larger sales force and marketing
infrastructure. CTD may enter into co-marketing arrangements or license
marketing rights to corporate partners that have established marketing forces
with supporting distribution capabilities. CTD's strategy is to negotiate
agreements with potential corporate partners for up-front payments, milestone
payments, a percentage of net product sales, or a combination of these payment
schemes. The revenues that CTD derives from those of its ACE products that
target larger markets will depend on the degree of success achieved by CTD's
corporate partners in licensing, manufacturing, distributing, and marketing
those products.

COMPETITION

    The pharmaceutical industry is highly competitive. CTD's competitors are
major pharmaceutical and biotechnology companies, most of whom have considerably
greater financial, technical, and marketing resources than CTD. Another source
of competing technologies is universities and other research institutions, and
CTD faces competition from other companies to acquire rights to those
technologies.

    Competition is particularly intense in the gastroenterology and transplant
areas being addressed by CTD. Numerous companies are attempting to develop
technologies to treat GVHD by suppressing, through various mechanisms, the
immune system. Some companies, including Sangstat, Abgenix, and Protein Design
Labs, Inc., are developing monoclonal antibodies to treat GVHD. Biotransplant,
Novartis, Medimmune, and Ariad are developing both gene therapy products and
small molecules to treat GVHD. All of these products are in various stages of
clinical development.

    Competition is also intense in the therapeutic area of IBD, including
Crohn's disease and ulcerative colitis. Several companies, including Centocor,
Immunex, and Celgene, have products that are currently FDA approved. These
products are all in the class of tumor necrosis factor modulating drugs. For
example, Centocor, a subsidiary of Johnson & Johnson, markets the drug product
Remicade-Registered Trademark-. Other drugs used to treat IBD include another
orally-active corticosteroid called budesonide, which is being marketed by
AstraZeneca in Europe and Canada under the tradename of Entocort. Entocort is
structurally similar to BDP, and AstraZeneca has recently filed for FDA approval
in the United States. In addition, Salix Pharmaceuticals, Inc. markets an
FDA-approved therapy for ulcerative colitis.

    Several companies have also established various colonic drug delivery
systems to deliver therapeutic drugs to the colon for treatment of Crohn's
disease. These companies include Ivax Corporation, Inkine Pharmaceutical
Corporation, and Elan Pharmaceuticals, Inc. Other approaches to treat
gastrointestinal disorders include antisense and gene therapy. Isis
Pharmaceuticals, Inc. is in the process of developing antisense therapy to treat
Crohn's disease.

    The pharmaceutical industry has undergone, and is expected to continue to
undergo, rapid and significant technological change, and competition is expected
to intensify as technical advances are made in each field and become more widely
known. In order to compete effectively, CTD will need to continually upgrade its
scientific expertise and technology, identify and retain capable management, and
pursue scientifically feasible and commercially viable opportunities. CTD's
competition will be determined in part by the indications for which its products
are developed and ultimately approved by the regulatory authorities. An
important factor in competition will be the timing of market introduction and
the cost of CTD's products and those of its competitors. Accordingly, the
relative speed with which CTD can develop products and complete clinical trials
and approval processes and supply commercial quantities of products to the
market will likely be an important competitive factor.

                                      124

EMPLOYEES

    As of October 15, 2001, CTD had two full-time employees and one part-time
employee, all of whom are engaged in management and research-and-development
activities. CTD, through its subsidiaries, relies heavily on consultants to
perform tasks, including regulatory analysis, medical monitoring,
pharmacokinetic analysis (relating to the distribution of drug products in the
body), and statistical analysis.

PROPERTIES

    CTD leases a 1,000-square-foot office facility in Miami Beach, Florida,
under a lease with an unaffiliated party. The lease term ends May 1, 2002.
Pursuant to an oral agreement with CTD, Steve H. Kanzer has since August 1,
2001, paid and will continue to pay through the term of this lease, half of
CTD's rent and utilities costs.

CORPORATE STRUCTURE

    CTD is a holding company that does business and carries out its operations
primarily through its subsidiaries, four of which are majority-owned and one of
which is wholly owned by CTD. CTD itself does not conduct any research, nor own
or have rights to any licenses, technology or assets other than its equity
interest in its subsidiaries. Each CTD subsidiary and CTD's percentage of
ownership of that subsidiary are listed below, together with the product or
technology being developed by that subsidiary.



CTD SUBSIDIARY                                           CTD % OWNERSHIP   PRODUCT OR TECHNOLOGY
--------------                                           ---------------   ---------------------
                                                                     
Enteron Pharmaceuticals, Inc...........................       80.43%            orBec-TM-
Oral Solutions, Inc....................................          80%           Oraprine-TM-
RxEyes, Inc............................................       82.02%           Metropt-TM-
Intero Corp............................................          85%               None
Formulation Technologies, Inc..........................         100%       Oral-suspension drug
                                                                           delivery technology


    CTD was incorporated in Delaware in December 1997 as Institute for Drug
Research, Inc. for purposes of acquiring an 87.5% ownership interest in
Institute for Drug Research, Ltd., a Hungarian limited liability company engaged
in contract research-and-development. In November 1999, after it sold its
ownership interest in the Hungarian company, it changed its name to Corporate
Technology Development, Inc. and developed its current business strategy. Each
of its subsidiaries is a Delaware corporation. CTD's principal executive offices
are located at 1680 Michigan Avenue, Suite 700 Miami Beach, Florida 33139, and
its telephone number is (305) 777-2258.

LEGAL PROCEEDINGS

    CTD is in a dispute with the licensors of Metropt-TM- regarding whether CTD
is required to pay the licensors certain payments provided for in the license
agreement dated April 14, 1998, between CTD and the licensors. CTD maintains
that it is not required to make those payments, as the formulation of
Metropt-TM- developed by the licensors is not commercially viable. This dispute
is not currently the subject of litigation.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

    COLIN BIER, PH.D., 55, has served as Chairman of the board of directors of
CTD since 2000 and as a director since 1998. Since 1989, Dr. Bier has been
Managing Director of ABA BioResearch, an independent bioregulatory consulting
firm. Prior to founding ABA BioResearch, Dr. Bier was a

                                      125

founder, President and Chief Executive Officer of ITR Laboratories, Inc., a
contract research organization. Prior thereto, he was Vice President and
Director of Experimental Toxicology and Clinical Pathology at Bio-Research
Laboratories, Ltd. in Montreal, Quebec, a contract research organization. He is
a leading authority on toxicology, pharmaceutical, and biotechnology regulatory
and strategic development. Dr. Bier serves as a director of Neurochem, Inc. and
Boston Life Sciences, Inc., both public biopharmaceutical companies. Dr. Bier is
also the chief executive of the Centre for Translational Research in Cancer R&D
of the Sir Mortimer B. Davis--Jewish General Hospital in Montreal, Canada.
Dr. Bier is also a Senior Clinical Advisor to TVM TechnoVenture Management,
CTD's largest investor. Dr. Bier received his Ph.D. in Experimental Pathology
from Colorado State University, and pursued a post-doctoral studies as a Medical
Research Council Fellow and Dr. Douglas James Fellow in pathology at McGill
University. Upon completion of the merger, Dr. Bier will become the Chairman and
Chief Executive Officer of Endorex and will serve on the Endorex board of
directors.

    PETER KLIEM, 62, has served on CTD's board of directors since 1998.
Mr. Kliem is a co-founder, Chief Operating Officer and Executive Vice President
of Enanta Pharmaceuticals, Inc., a Cambridge, Massachusetts-based drug discovery
company. Prior to establishing Enanta, he worked with Polaroid Corporation for
36 years, most recently in the positions of Senior Vice President of Business
Development, Senior Vice President of Electronic Imaging, and Senior Vice
President of Research and Development. He serves as a trustee and Vice President
of the Boston Biomedical Research Institute and served as the Chairman of PB
Diagnostics, Inc. Mr. Kliem earned his M.S. in Chemistry from Northeastern
University. Mr. Kliem is a director of Atlantic Technology Ventures, Inc., a
public biotechnology company, and he serves as Industry Advisor to TVM Techno
Venture Management. Upon consummation of the merger, Mr. Kliem will serve on the
board of directors of Endorex.

    GUY R. RICO, 55, has served on CTD's board of directors since 1999. Since
1996, Mr. Rico has been the Managing Director of Financiere Tuileries, a
management company approved by the Commission des Operations de Bourse with the
purpose of managing the assets repurchased from Union des Assurances de Paris, a
leading European insurance company. Financiere Tuileries is the European
affiliate of Paul Capital Partners, a private equity group with venture capital,
leveraged buyout, and mezzanine partnership interests in operating companies and
royalty interests in healthcare and pharmaceutical products. Prior to founding
Financiere Tuileries, Mr. Rico was the director of Compagnie Financiere de
Rombas, a Paris, France-based publicly-traded holding company and subsidiary of
Union des Assurances de Paris. From 1975 to 1985, Mr. Rico was the Head of
Equity Research at Union des Assurances de Paris, where he led a team of 11
analysts in the energy and automotive business. From 1990 to 1995, Mr. Rico sat
on the Scientific Advisory Board of the Societe des Bourses Francaises, the
managing body of the French Stock Exchange. Mr. Rico has served on the board of
several companies such as Sidec, Laboratories Pharmygiene Medipole, Superba,
Cartier, and Sheaffer. Mr. Rico holds a degree in Engineering from Ecole
Centrale and a Masters Degree of Economics and Econometrics from the University
of Economics, in Lyon, France. Mr. Rico is also is a Chartered Financial
Analyst. Upon consummation of the merger, Mr. Rico will serve on the Endorex
board of directors.

    STEVE H. KANZER, C.P.A., Esq., 37, has been President and Chief Executive
Officer of Corporate Technology Development, Inc. since December 1997. Since
December 2000, Mr. Kanzer has also been Chairman, Chief Executive Officer and
President of Accredited Equities, Inc., a venture capital and investment banking
firm based in Miami, and President of several private biopharmaceutical
companies also based in Miami. From 1992 until December 1998, Mr. Kanzer was a
founder and Senior Managing Director of Paramount Capital, Inc., an investment
bank specializing in the biotechnology and biopharmaceutical industries, and
Senior Managing Director--Head of Venture Capital of Paramount Capital
Investments, LLC, a biotechnology and biopharmaceutical venture capital and
merchant banking firm that is affiliated with Paramount Capital, Inc. From 1993
until June 1998, Mr. Kanzer was a founder and a member of the board of directors
of Boston Life Sciences, Inc., a publicly traded

                                      126

pharmaceutical research and development company. From 1994 until June 2000,
Mr. Kanzer was a founder and Chairman of Discovery Laboratories, Inc., a
publicly traded pharmaceutical research and development company. Mr. Kanzer is a
member of the board of directors of Endorex. Prior to joining Paramount
Capital, Inc., Mr. Kanzer was an attorney with Skadden, Arps, Slate, Meagher &
Flom LLP in New York, New York from September 1988 to October 1991. He received
his J.D. from New York University School of Law in 1988 and a B.B.A. in
Accounting from Baruch College in 1985.

    NICHOLAS STERGIOPOULOS, 27, has served as Secretary, Treasurer, and Director
of Corporate Development of CTD since 1998. Prior to joining CTD, from 1997 to
1998 Mr. Stergiopoulos was an associate with Paramount Capital Investments, LLC,
a biotechnology, biomedical, and biopharmaceutical merchant banking firm, where
he participated in the startup, acquisition, and financing of several
biotechnology companies. Prior to joining Paramount, from 1997 to 1998,
Mr. Stergiopoulos worked briefly in the sales and trading department of CIBC
Oppenheimer & Company. Mr. Stergiopoulos received his M.S. in biology from New
York University in 1997 and a B.S. in biology from the University at Albany,
State University of New York. Mr. Stergiopoulos is also a member of the New York
Chapter of the Licensing Executive Society.

EXECUTIVE COMPENSATION

    The following table sets forth information relating to compensation paid
during CTD's fiscal years ended December 31, 2000, 1999 and 1998 to its Chief
Executive Officer. No other executive officers of CTD at December 31, 2000 had a
base salary during the year in excess of $100,000.

                           SUMMARY COMPENSATION TABLE



                                                                                        LONG-TERM
                                                          ANNUAL COMPENSATION         COMPENSATION
                                                         ----------------------   ---------------------
                                                                                  SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION                     YEAR     SALARY ($)   BONUS ($)        OPTIONS (#)
---------------------------                   --------   ----------   ---------   ---------------------
                                                                      
Steve H. Kanzer,............................  12/31/00     185,750      74,375                --
  President & Chief Executive Officer         12/31/99      31,447     181,250                --
                                              12/31/98      64,591          --           772,725


    No options or SARs that would be reportable were granted by CTD to its Chief
Executive Officer during the fiscal year ended December 31, 2000.

    The following table sets forth information with respect to CTD's Chief
Executive Officer concerning exercisable and unexercisable options that he held
as of December 31, 2000. CTD's Chief Executive Officer did not exercise any
options during fiscal year 2000 and CTD has never granted stock appreciation
rights. The value of unexercised in-the-money options at fiscal year-end equals
(1) the assumed fair market value of CTD common stock at December 31, 2000,
which CTD has determined to be $0.20 per share, which is the per share exercise
price of stock options granted during fiscal year 2000, minus (2) the per share
exercise price of stock options granted during fiscal year 2000, which is $0.20.

   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES



                                                                     NUMBER OF
                                                               SECURITIES UNDERLYING       VALUE OF UNEXERCISED
                                  SHARES                        UNEXERCISED OPTIONS        IN-THE-MONEY OPTIONS
                               ACQUIRED ON       VALUE            AT 12/31/00 (#)             AT 12/31/00 ($)
NAME                           EXERCISE (#)   REALIZED ($)   EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE
----                           ------------   ------------   -------------------------   -------------------------
                                                                             
Steve H. Kanzer..............       --             --                618,180/0                      0/0


                                      127

EMPLOYMENT AGREEMENTS

    CTD has an employment agreement with Nicholas Stergiopoulos, its Director of
Corporate Development, for a term expiring June 2002. This agreement provides
for Mr. Stergiopoulos to receive a base salary of $98,000 per year, with
cost-of-living adjustments beginning May 1, 2000. It also provides that
Mr. Stergiopoulos is entitled to a bonus of up to $20,000 per year, at the
discretion of the board of directors, and is entitled, on October 1, 1998, and
each year thereafter, to receive an option to purchase 100,000 shares of CTD
common stock (up to a total of 400,000 shares) at a purchase price of $0.20 per
share, with each option having a term of five years. Mr. Stergiopoulos is
entitled to a bonus of 1% of the gross proceeds of any acquisition of CTD, and
is entitled to a $50,000 bonus upon CTD becoming public through a reverse merger
or other alternative means. Pursuant to the merger agreement, this agreement
will be terminated prior to consummation of the merger.

CERTAIN TRANSACTIONS OF CTD

    On April 24, 2000, CTD entered into an agreement with Dr. Nicholas Bodor, a
stockholder and former director of CTD. Other parties to this agreement were
Precision Pharmaceuticals, Inc., or Precision, which has since been dissolved,
as well as Magyar Pharmaceuticals, Inc., or Magyar, which has since been
dissolved but which was then owned 90% by CTD and 10% by Dr. Bodor, and CTD Drug
Design, Inc., a wholly owned subsidiary of CTD that has since been dissolved.
The purpose of the agreement was to restructure contractual relations between
the parties.

    Dr. Bodor and Precision were party to two license agreements dated
October 31, 1997, and amended December 31, 1998, pursuant to which Dr. Bodor
granted to Precision an exclusive license to patents and know-how to make, use,
and sell orally or rectally administered loteprednol etabonate and topically
administered loteprednol etabonate (collectively, Loteprednol), along with the
right to grant sublicenses (collectively, the Loteprednol License Agreements).
Pursuant to a sublicense agreement dated December 31, 1998, between Precision
and Magyar, or the Sublicense Agreement, Precision granted Magyar an exclusive
sublicense under the Loteprednol License Agreements. In the agreement, Precision
and Dr. Bodor terminated the Loteprednol License Agreements and Precision and
Magyar terminated the Sublicense Agreement. In addition, Dr. Bodor agreed to pay
CTD 25% of any revenue he receives from certain named entities in connection
with commercialization of Loteprednol. Dr. Bodor, RM Drugs, Inc., a corporation
wholly owned by Dr. Bodor and his wife, and CTD Drug Design were party to an
agreement and plan of reorganization dated as of December 31, 1998, which
provided for acquisition by CTD Drug Design of the assets of RM Drugs. In the
agreement between Dr. Bodor and CTD, Dr. Bodor agreed that the agreement and
plan of reorganization was terminated, and he also agreed to release CTD Drug
Design from any claims related thereto. CTD did not retain an independent party
to evaluate this transaction and it was not evaluated by an independent
committee of CTD's board of directors. Nevertheless, CTD believes that the terms
of this transaction were fair to CTD and were negotiated without regard to
Dr. Bodor's being a stockholder or former director of CTD.

                                      128

                  CTD MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

    Since its inception, CTD has focused its efforts and resources on developing
and commercializing pharmaceutical products and technologies. CTD has not been
profitable since it was founded and has incurred a cumulative deficit of
approximately $7.5 million through December 31, 2000. CTD expects its operating
losses to increase significantly over the next several years, primarily due to
expansion of its research and development programs, including clinical trials
for some or all of its existing products and technologies and other products and
technologies that it may acquire or develop.

    CTD's ability to achieve profitability depends upon, among other things, its
ability to discover and develop products, obtain regulatory approval for its
proposed products, and enter into agreements to in-license, research and
develop, manufacture, and commercialize products. Moreover, there can be no
assurance that CTD will ever achieve significant revenues or profitable
operations from the sale of any of its products or technologies.

    CTD was originally organized in 1997 as the Institute for Drug
Research, Inc. to acquire Institute for Drug Research, Ltd., or IDR Hungary, a
drug research facility located in Budapest, Hungary. In early 1998, CTD acquired
an 87.5% ownership interest in IDR Hungary and concurrently obtained
$15.2 million of financing through a private placement of shares of its
Series A preferred stock. CTD's initial business plan was to conduct contract
research on behalf of biotechnology and pharmaceutical companies.

    During December 1998, in an effort to build its product pipeline, CTD
acquired a number of companies that owned or held licenses to various compounds
and technologies in various stages of clinical development. CTD acquired these
companies from Paramount Capital Investments, LLC for $162,000 and CTD's
assumption of $107,000 of liabilities.

    On October 12, 1999, CTD sold its majority ownership in IDR Hungary to IVAX
Corporation, a specialty pharmaceutical company, for $5,750,000. After this
sale, CTD changed its name to Corporate Technology Development, Inc.

    During early December 1999, Intero Corp., an 85%-owned subsidiary of CTD,
sold substantially all of its assets to Allergan Botox Limited for $3,500,000 in
cash paid by Allergan, Inc. Intero's principal asset was a license agreement
dated February 5, 1999, between Intero and Johns Hopkins University for a patent
portfolio relating to the internal uses of neurotoxins, specifically botulinum
toxin.

    Since CTD's inception, CTD has not generated any revenue. However, CTD may
receive two milestone payments of $2,000,000 and $1,000,000 from Allergan Botox
Limited upon satisfaction of certain conditions, including the successful
commercialization of the patents and intellectual property acquired from Intero.
In addition, CTD is also entitled to 25% of any amounts recovered by IDR Hungary
in a lawsuit it brought in Hungary against a large Hungarian pharmaceuticals and
specialty chemicals company for nonpayment of royalties. CTD cannot be assured
of receiving these milestone payments or any payments from IDR Hungary's
lawsuit.

    CTD is currently engaged in developing and commercializing drugs in the area
of transplantation medicine and gastroenterology. CTD anticipates that during
the next 18 to 24 months it will conduct substantial research and development of
the products it is developing.

    At the end of 2000, CTD relocated its executive offices from New York, New
York, to Miami, Florida, and as a result has reduced the number of its employees
from four to two.

    CTD anticipates that the primary focus of its research-and-development
activities will be to complete the proposed phase III clinical trial, started in
May 2001, for the use of orBec-TM- to treat

                                      129

intestinal graft-versus-host disease, or GVHD. CTD intends to enroll
approximately 130 patients in this trial, which is to be conducted at up to 15
clinical sites in the United States and Europe. CTD expects that this trial will
last approximately 14 to 18 months. In addition, CTD intends to initiate in the
fourth quarter of 2001 two phase II clinical trials for the use of orBec-TM- to
treat Crohn's disease and ulcerative colitis, and intends in the first quarter
of 2002 to initiate a phase II clinical trial for the use orBec-TM- to prevent
GVHD. In addition, during the fourth quarter of 2000, CTD initiated a phase I
bioequivalency trial for Oraprine-TM- that demonstrated that Oraprine-TM- is
equivalent to the tablet Imuran-Registered Trademark-.

RESULTS OF OPERATIONS

COMPARISON OF SIX-MONTH PERIODS ENDED JUNE 30, 2001 AND 2000

    CTD's research and development expense in the first half of 2001 was
approximately $880,000, as compared to approximately $558,000 during the same
period of 2000. This increase was primarily due to preparation for the phase III
clinical trial for the use of orBec-TM- to treat intestinal GVHD.

    General and administrative expense in the first half of 2001 was
approximately $724,000, as compared to $607,000 during the same period of 2000.
This increase was primarily due to increased legal and accounting costs
associated with negotiating the merger of CTD with Endorex.

    Interest income for the first six months of 2001 was $173,000, as compared
to $230,000 during the first six months of 2000. This decrease was primarily due
to a decrease in cash available for investment because of the increases in
research and development spending.

    CTD's net loss for the first six months of 2001 was $1,431,000, as compared
to $935,000 during the first six months of 2000. This increase was primarily due
to preparation for the phase III clinical trial for orBec-TM-.

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999

    CTD's research-and-development expense during 2000 was approximately
$1.3 million, as compared to $955,000 during 1999. This increase was primarily
due to preparation for the phase III clinical trial for the use of orBec-TM- to
treat intestinal GVHD.

    General and administrative expense during 2000 was approximately
$1.3 million, as compared to $1.5 million during 1999. This decrease was due to
CTD having reduced its number of employees from eight to two.

    Interest income during 2000 was approximately $428,000, as compared to
$167,000 during 1999. This increase was primarily due to an increase in the
amount of cash held by CTD resulting from CTD's sale of its 87.5% ownership
interest in IDR Hungary and sale of the assets of its subsidiary, Intero Corp.
to Allergan Botox Limited.

    During 1999, CTD recorded a write-off of licenses in the amount of
$1,822,000 due to its having terminated license agreements with the University
of Florida Research Foundation, Inc. and Dr. Nicholas Bodor. Also in 1999, CTD
recognized a gain of $3,052,000 upon the sale of assets of its subsidiary Intero
Corp. to Allergan Botox Limited. There were no such write-offs or sales in 2000.

    CTD incurred a loss of $4,852,000 from the operations of its majority owned
subsidiary, IDR Hungary, from January 1, 1999 through October 12, 1999, the date
CTD sold to IVAX Corporation its ownership interest in IDR Hungary. CTD
recognized a gain of $4,956,000 upon the sale.

    CTD's net loss for 2000 was $2.25 million as compared to $1.3 million for
1999. This increase is primarily due to the absence in 2000 of transactions
comparable to the 1999 transactions described above.

                                      130

LIQUIDITY

    As of June 30, 2001, and December 31, 2000, CTD had working capital of
approximately $4.8 million and $6.3 million, respectively. CTD's primary sources
of cash have been the net proceeds of $13,150,000 from the 1998 Series A
preferred stock financing, proceeds of approximately $5.75 million from the sale
in October 1999 of its majority ownership in IDR Hungary to IVAX Corporation,
and approximately $2.9 million from CTD's share of the proceeds of the sale in
December 1999 of substantially all of Intero's assets to Allergan Botox Limited.
CTD's gross proceeds from sale of its ownership interest in IDR Hungary were
approximately $3 million less than CTD's investment in, and advances to, IDR
Hungary.

    CTD believes its current working capital is sufficient to meet its planned
research and development activities through the first quarter of 2003. CTD will,
however, need additional financing from investors or collaborators to complete
research and development, commercialization and launch of its current product
candidates.

    Historically, CTD's working capital has been secured through private
financings. In May and July 1998, pursuant to a private placement offering, CTD
sold 152.575 units, each unit consisting of 50,000 shares of Series A preferred
stock, with a price per unit of $100,000 ($2.00 per share of Series A preferred
stock). Net proceeds from the private placement were approximately $13,150,000.
As of June 30, 2001, aggregate unpaid accrued dividends equaled $30,515,000.

    The placement agent for the private placement, Paramount Capital, Inc.,
received approximately $1,998,000 in cash plus warrants to acquire through
January 15, 2008, 762,875 shares of CTD's Series A preferred stock at a price of
$2.20 per share. Paramount subsequently transferred these warrants to its
employees and brokers. The warrants contain certain anti-dilution provisions and
may be exercised on a "cashless exercise" basis.

    CTD's capital requirements will depend on many factors. These factors
include:

    - expenses associated with completing the merger;

    - problems, delays, expenses and complications frequently encountered by
      development stage companies;

    - the progress of CTD's research, development and clinical trial programs;

    - the extent and terms of any future collaborative research, manufacturing,
      marketing or other funding arrangements;

    - the cost and timing of, and any delays in, seeking and obtaining
      regulatory approvals of CTD's products;

    - the ability to enter into corporate partnerships and collaborations to
      in-license, acquire, research and develop and commercialize CTD products;

    - the success of CTD's sales and marketing programs;

    - the costs of filing, prosecuting and defending and enforcing any patent
      claims and other intellectual property rights; and

    - changes in economic, regulatory, or competitive conditions of CTD's
      planned business.

    Estimates of the adequacy of funding for CTD's activities are based on
certain assumptions, including the assumption that testing and regulatory
procedures relating to CTD's products can be conducted at projected costs. There
can be no assurance that changes in CTD's development plans, acquisitions or
other events will not result in accelerated or unexpected expenditures.

                                      131

    CTD's working capital requirements will depend upon numerous factors,
including without limitation the progress of CTD's research and development
programs, preclinical and clinical testing, the timing and cost of obtaining
regulatory approvals, the resources that CTD devotes to developing manufacturing
and marketing capabilities, technological advances, the status of competitors,
and CTD's ability to establish collaborative arrangements with other
organizations.

                                      132

                         PRINCIPAL STOCKHOLDERS OF CTD

    The following table contains information regarding the beneficial ownership
of CTD common stock and Series A preferred stock as of October 15, 2001, by the
following individuals or groups:

    - each person or entity who is known by CTD to own beneficially more than 5%
      of its common stock or Series A preferred stock;

    - each of the chief executive officer and the four other executive officers
      who earned more than $100,000 during 2000;

    - each of CTD's directors; and

    - all directors and executive officers of CTD as a group.

    Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Except as indicated by footnote, and subject to community property laws where
applicable, the stockholders named in the table below have sole voting and
investment power with respect to all shares of CTD common stock and preferred
stock shown as beneficially owned by them. Percentage ownership is based on
5,000,000 shares of CTD common stock and 7,628,750 shares of Series A preferred
stock outstanding on October 15, 2001. Options or warrants for CTD's common
stock and Series A preferred stock that are currently exercisable or exercisable
within 60 days of October 15, 2001 are deemed to be outstanding and beneficially
owned by the person holding the warrants or stock options for purposes of
computing the percentage ownership of that person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.



                                                          COMMON STOCK         SERIES A PREFERRED STOCK
                                                     ----------------------   --------------------------
                                                      NUMBER     PERCENTAGE      NUMBER      PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER                 OF SHARES    OF CLASS     OF SHARES      OF CLASS
------------------------------------                 ---------   ----------   ------------   -----------
                                                                                 
Lindsay A. Rosenwald, M.D.(1) .....................  3,094,169      56.5%        478,819         6.0%
  787 Seventh Avenue, 48th Floor
  New York, NY 10019

TVM Techno                                                              %                           %
  Medical Ventures GmbH & Co. KG(2) ...............  1,350,000      21.3       1,350,000        17.7
  101 Arch Street, Suite 500
  Boston, MA 02110

Nomura Bank(3) ....................................  1,200,000      19.4%      1,200,000        15.7%
  (Switzerland) Ltd.
  Kasamaristrasse I
  Zurich, Switzerland CH8021

Rivki Rosenwald(4) ................................    445,000       8.9%             --          --
  787 Seventh Avenue, 48th Floor
  New York, NY 10019

Imprimus Investors, LLC(5) ........................    500,000       9.1%        500,000         6.6%
  411 West Putman Avenue
  Greenwich, CT 06830

Bristol Rittenhouse                                                     %                           %
  Investments, LP(5) ..............................    500,000       9.1         500,000         6.6
  1 Rockefeller Plaza
  Suite 1010
  New York, NY 10020


                                      133




                                                          COMMON STOCK         SERIES A PREFERRED STOCK
                                                     ----------------------   --------------------------
                                                      NUMBER     PERCENTAGE      NUMBER      PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER                 OF SHARES    OF CLASS     OF SHARES      OF CLASS
------------------------------------                 ---------   ----------   ------------   -----------
                                                                                 
Peter Kash(6) .....................................    260,813       5.0%        170,813         2.1%
  c/o Paramount Capital, Inc.
  787 Seventh Avenue
  48th Floor
  New York, NY 10019

Nicholas Bodor ....................................    250,000       5.0%             --          --
  3929 SW 69th Avenue
  Gainesville, FL 32608

Kenneth Johnson ...................................    250,000       5.0%             --          --
  2201 Williams Pt. Drive
  Stoughton, WI 53589

MANAGEMENT:

Steve H. Kanzer(7) ................................  1,182,180      21.0%             --          --
  300 South Point Drive,
  Suite 3501
  Miami Beach, FL 33139

Nicholas Stergiopoulos(8) .........................    552,773      10.1%             --          --
  1541 Brickell Avenue, Apt. 2706
  Miami, FL 33129

Colin Bier, Ph.D.(9) ..............................     50,000         *              --          --
  677 Dr. Frederik Philips
  Saint-Laurent, Quebec
  Canada H4M-2W4

Guy Rico(10) ......................................  1,037,500      17.2%      1,000,000        13.1%
  28, Avenue de Messine
  75008 Paris, France

Peter Kliem(11) ...................................     50,000         *              --          --
  750 Main Street
  Cambridge, MA 02139

All directors and officers as a group
  (5 persons) .....................................  2,872,453      39.7%      1,000,000        13.1%


------------------------

   * Less than 1%

 (1) Includes 2,515,350 shares of CTD common stock held by Paramount Capital
     Drug Development Holdings LLC, of which Dr. Rosenwald is the sole member.
     Includes 50,000 shares of CTD common stock held by Huntington Street
     Company and 50,000 shares of CTD common stock held by June Street Company.
     Dr. Rosenwald is the sole stockholder of both Huntington Street Company and
     June Street Company. Also includes (i) 303,819 shares of CTD Series A
     preferred stock issuable upon exercise of a warrant exercisable within
     60 days of October 15, 2001, and the 303,819 shares of CTD common stock
     issuable upon conversion of those shares of CTD Series A preferred stock
     and (ii) 175,000 shares of CTD common stock issuable upon conversion of
     175,000 shares of preferred stock. Dr. Rosenwald disclaims any beneficial
     ownership of shares beneficially owned by his wife, Rivki Rosenwald and any
     shares held by Mrs. Rosenwald as

                                      134

     custodian for the benefit of Dr. and Mrs. Rosenwald's children, Doni
     Rosenwald, Joshy Rosenwald, Demi Rosenwald, and Davy Rosenwald.

 (2) Includes 1,350,000 shares of CTD common stock issuable upon conversion of
     1,350,000 shares of preferred stock.

 (3) Includes 1,200,000 shares of CTD common stock issuable upon conversion of
     1,200,000 shares of CTD Series A preferred stock.

 (4) Includes 200,000 shares of CTD common stock held by Rivki Rosenwald as
     custodian for the benefit of Mrs. Rosenwald's children, Doni Rosenwald,
     Joshy Rosenwald, Demi Rosenwald and Davy Rosenwald (50,000 shares each).

 (5) Includes 500,000 shares of CTD common stock issuable upon conversion of
     500,000 shares of CTD Series A preferred stock.

 (6) Includes 50,000 shares of CTD common stock held by Peter and Donna Kash and
     40,000 shares of CTD common stock held by the Kash Family Foundation. Also
     includes 170,813 shares of CTD common stock issuable upon conversion of
     170,813 shares of CTD Series A preferred stock issuable upon exercise of a
     warrant exercisable within 60 days of October 15, 2001.

 (7) Includes options exercisable within 60 days of October 15, 2001 to purchase
     618,180 shares of CTD common stock.

 (8) Includes options exercisable within 60 days of October 15, 2001 to purchase
     477,273 shares of CTD common stock.

 (9) Represents an option exercisable within 60 days of October 15, 2001 to
     purchase 50,000 shares of CTD common stock.

 (10) Includes 892,400 shares of CTD Series A preferred stock held by Paul
      Capital V, L.P., 75,100 shares of CTD Series A preferred stock held by
      Paul Capital Partners V (Domestic Annex Fund) L.P., and 32,500 shares of
      CTD Series A preferred stock held by Paul Capital Partners V
      International, L.P., and the 1,000,000 shares of common stock issuable
      upon conversion of those shares of preferred stock. Mr. Rico may be
      considered a beneficial owner of shares owned by Paul Capital V, L.P.,
      Paul Capital Partners V (Domestic Annex Fund) L.P., and Paul Capital
      Partners V International, L.P. by virtue of his authority to vote and
      dispose of those shares in his capacity as partner of Paul Capital
      Partners. Also includes an option exercisable within 60 days of
      October 15, 2001 to purchase 37,500 shares of common stock.

 (11) Represents an option exercisable within 60 days of October 15, 2001 to
      purchase 50,000 shares of common stock.

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               PROPOSALS TO BE VOTED UPON BY ENDOREX STOCKHOLDERS
                         AT THE ENDOREX ANNUAL MEETING

    At the Endorex annual meeting of stockholders, Endorex's stockholders will
be asked to consider and vote on the following proposals.

    1.  to approve the issuance of shares of Endorex common stock, options and
       warrants pursuant to the merger agreement, dated as of July 31, 2001 by
       and among Endorex, CTD, and Roadrunner Acquisition, Inc., a wholly owned
       subsidiary of Endorex, under which CTD will become a wholly owned
       subsidiary of Endorex;

    2.  to amend Endorex's Amended and Restated Certificate of Incorporation
       changing Endorex's name to DOR BioPharma, Inc.;

    3.  to elect six directors to serve until the next annual meeting of the
       stockholders of Endorex or until their successors are duly elected and
       qualified;

    4.  to amend Endorex's Amended and Restated 1995 Omnibus Incentive Plan, or
       the 1995 plan, to (i) increase the number of shares of Endorex common
       stock reserved for issuance by an additional 2,165,664 shares,
       (ii) implement a maximum annual limit of 500,000 shares of common stock
       by which the share reserve may increase annually over the term of the
       1995 Plan under the automatic share increase provision and (iii) modify
       the automatic option grant program to (a) increase the initial option
       grants to newly-elected Board members to 50,000 shares vesting
       immediately and (b) provide for annual option grants to continuing board
       members for 10,000 shares vesting over one year;

    5.  to approve February 21, 2001 option grants to each non-employee member
       of the Endorex board of directors to purchase 50,000 shares of Endorex
       common stock; and

    6.  to ratify the appointment of Ernst & Young LLP as Endorex's independent
       auditors for the fiscal year ending December 31, 2001.

    None of the proposals is contingent upon the passage of any other proposal.

                                      136

        PROPOSAL ONE: APPROVAL OF THE ISSUANCE OF ENDOREX COMMON STOCK,
                      OPTIONS AND WARRANTS PURSUANT TO THE
                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

    Endorex's board of directors adopted on July 13, 2001, resolutions approving
the merger, the merger agreement and the transactions contemplated thereby. The
issuance of the shares of Endorex common stock, options and warrants pursuant to
the merger agreement must be approved by the affirmative vote of the holders of
a majority of the shares of Endorex common stock, voting together with the
holders of Endorex Series B preferred stock on an as converted basis, entitled
to vote and that are present or represented by proxy at the Endorex annual
meeting of stockholders. Unless this happens, the merger contemplated by the
merger agreement cannot be completed. See "The Merger" and "Agreement and Plan
of Merger and Reorganization and Related Agreements." Unless otherwise
instructed in writing, the proxy holders will vote the proxies received by them
"FOR" the approval of the issuance of Endorex common stock, option and warrants
pursuant to the merger agreement.

RECOMMENDATION OF THE BOARD OF DIRECTORS

    Endorex's board of directors recommends that Endorex stockholders vote "FOR"
approval of the issuance of the shares of Endorex common stock, options and
warrants pursuant to the merger agreement.

                                      137

                 PROPOSAL TWO: APPROVAL OF AMENDMENT TO AMENDED
                   AND RESTATED CERTIFICATE OF INCORPORATION

    On September 26, 2001, Endorex's board of directors adopted resolutions
proposing to amend Endorex's Amended and Restated Certificate of Incorporation
to change Endorex's name to DOR BioPharma, Inc. Endorex's board of directors
believes the name change will more appropriately reflect the new focus of
Endorex. This amendment to Endorex's Amended and Restated Certificate of
Incorporation must be approved by the affirmative vote, in person or by proxy,
of the holders of a majority of the outstanding shares of Endorex common stock,
voting together with the holders of Endorex Series B preferred stock on an as
converted basis. Unless otherwise instructed in writing, the proxy holders will
vote the proxies received by them "FOR" the approval of the amendment of
Endorex's Amended and Restated Certificate of Incorporation changing Endorex's
name to DOR BioPharma, Inc.

RECOMMENDATION OF THE BOARD OF DIRECTORS

    The board of directors recommends that the stockholders of Endorex vote
"FOR" the approval of the amendment of Endorex's Amended and Restated
Certificate of Incorporation changing Endorex's name to DOR BioPharma, Inc.

                                      138

                     PROPOSAL THREE: ELECTION OF DIRECTORS

    At the annual meeting, six directors are to be elected, each of whom will
serve until the next annual meeting of stockholders or until his successor is
elected and qualified, or until his death, resignation, or removal. It is
intended that any proxies granted will be voted for the six nominees named below
unless authority to vote for any such nominee is withheld. Each of the nominees
is currently a director of Endorex. Each nominee has agreed to serve if elected,
and the board of directors has no reason to believe that any nominee will be
unavailable or will decline to serve. If, however, at the time of the annual
meeting any nominee is unable or declines to serve as a director, all proxies
will be voted for any nominee who is designated by the current board of
directors to fill the vacancy. The six candidates receiving the highest number
of affirmative votes of shares present or represented by proxy at the annual
meeting and entitled to vote on this proposal will be elected directors of
Endorex. All nominees were elected by stockholders to the board of directors at
the 2000 annual stockholders meeting. If Proposal One is approved by Endorex
stockholders and the merger closes, (a) the size of the board of directors will
increase to nine members, (b) Dr. Colin Bier, Guy Rico and Peter Kliem,
currently directors of CTD, will become directors of Endorex, and
(c) Dr. Kenneth Tempero will resign as Chairman of the Endorex board of
directors and Dr. Colin Bier will be appointed the new Chairman of the Endorex
board of directors.

    The affirmative vote of a plurality of those shares of Endorex's outstanding
common stock and Series B preferred stock, voting together on an as converted
basis, that are represented and voting at the annual meeting, in person or by
proxy, is required to elect the directors.

NOMINEES FOR ELECTION AS DIRECTORS

    Each nominee furnished to Endorex the following information with respect to
the principal occupation or employment, other affiliations, and business
experience of each nominee during the last five years.

    MICHAEL S. ROSEN, M.B.A., 49, has served as President, Chief Executive
Officer and a member of the board of directors since August 1996. From
January 1995 until August 1996, he was President and Chief Executive Officer of
PharmaMar, S.A., a European biotechnology company. From June 1991 until
January 1995, Mr. Rosen was General Manager of the northern Latin American
businesses for Monsanto Company, a multinational chemical/pharmaceutical
company. Mr. Rosen received a B.A. in Sociology/International Relations from
Beloit College and an M.B.A. in International Business from the University of
Miami. He has undertaken post-graduate courses at Northwestern University and
Sophia University in Tokyo, Japan.

    RICHARD DUNNING, 55, has served as a member of the board of directors of
Endorex since August 1997. He has been Chairman and Chief Executive Officer of
Nexell Therapeutics Inc. since May 1999. Prior to that, he was President and
Chief Executive Officer of Nexell since April 1996. Nexell, formerly known as
VIMRX Pharmaceuticals Inc., is the leading developer and marketer of innovative
diagnostics and ex vivo cell therapies for cancer, autoimmune, metabolic and
genetic diseases. Prior to joining Nexell, Mr. Dunning played an instrumental
role in the formation of The DuPont Merck Pharmaceutical Company and acted as
that organization's Executive Vice President and Chief Financial Officer from
1991 to 1995. Mr. Dunning received a B.S. in Economics and an M.B.A. in Finance
from the University of Delaware.

    STEVE H. KANZER, C.P.A., Esq., 37, has served as a member of the board of
directors since June 1996. Since December 1997, Mr. Kanzer has been President
and Chief Executive Officer of Corporate Technology Development, Inc. Since
December 2000, Mr. Kanzer has also been Chairman, Chief Executive Officer and
President of Accredited Equities, Inc., a venture capital and investment banking
firm based in Miami, and President of several private biopharmaceutical
companies also based in Miami. From 1992 until December 1998, Mr. Kanzer was a
founder and Senior Managing Director

                                      139

of Paramount Capital, Inc., an investment bank specializing in the biotechnology
and biopharmaceutical industries, and Senior Managing Director--Head of Venture
Capital of Paramount Capital Investments, LLC, a biotechnology and
biopharmaceutical venture capital and merchant banking firm that is affiliated
with Paramount Capital, Inc. From 1993 until June 1998, Mr. Kanzer was a founder
and a member of the board of directors of Boston Life Sciences, Inc., a publicly
traded pharmaceutical research and development company. From 1994 until
June 2000, Mr. Kanzer was a founder and Chairman of Discovery
Laboratories, Inc., a publicly traded pharmaceutical research and development
company. Mr. Kanzer is a member of the board of directors of Atlantic Technology
Ventures, Inc., a publicly traded pharmaceutical research and development
company. Prior to joining Paramount Capital, Inc., Mr. Kanzer was an attorney
with Skadden, Arps, Slate, Meagher & Flom LLP in New York, New York from
September 1988 to October 1991. He received his J.D. from New York University
School of Law in 1988 and a B.B.A. in Accounting from Baruch College in 1985.
Mr. Kanzer is a nominee of the Aries Domestic Fund, LP and the Aries Master Fund
II to Endorex's board of directors. Aries Domestic Fund, L.P. and Aries Master
Fund II subsequently transferred their right to nominate a member of the board
of directors of Endorex to Aries Select, Ltd. and Aries Select I LLC. Both Aries
Select, Ltd. and Aries Select I LLC are affiliates of PCAM, PCI, Paramount and
Lindsay Rosenwald, M.D.

    PAUL D. RUBIN, M.D., 47, has served as a member of the board of directors of
Endorex since November 1997. Since 1999, he has been Executive Vice President
for Drug Development at Sepracor, Inc., having previously been Senior Vice
President since 1996. He is responsible for managing research and development
programs for Sepracor's improved chemical entities portfolio, which includes the
management of Discovery Research, Regulatory, Clinical, Preclinical, and Project
Management teams. Dr. Rubin also plays a key role in the evaluation of external
technology and licensing opportunities. From 1993 to 1996, Dr. Rubin was the
Vice President and Worldwide Director of Early Clinical Development and Clinical
Pharmacology at Glaxo Wellcome. Prior to Glaxo, Dr. Rubin held various executive
research positions at Abbott Laboratories. Dr. Rubin received his M.D. from Rush
Medical College in Chicago and completed his residency in Internal Medicine at
the University of Wisconsin Hospitals and clinics in Madison, Wisconsin.

    KENNETH TEMPERO, M.D., PH.D., M.B.A., 62, was elected Chairman of the
Endorex board of directors in May 1999 and has served as a member of the board
of directors since September 1996. Since April 1996, Dr. Tempero has been a
principal at KTC, Inc., a consulting company. Prior thereto, he served as
Chairman and Chief Executive officer of MGI PHARMA, Inc., a company that focuses
on the development and sale of cancer therapeutics and related products. From
November 1983 to August 1987, Dr. Tempero held various positions with G.D.
Searle & Co., a pharmaceutical company, most recently as Senior Vice President
of Research and Development. Dr. Tempero holds M.S. and Ph.D. degrees in
Pharmacology from Northwestern University, an M.D. in Medicine and Surgery from
Northwestern University and an M.B.A. in Pharmaceutical Marketing from Fairleigh
Dickinson University.

    STEVEN THORNTON, 44, has served as a member of the board of directors since
February 1998. He has served as Executive Vice President of Commercial
Development for Elan Pharmaceutical Technologies since December 1997. Prior to
joining Elan Pharmaceutical Technologies, Mr. Thornton served from July 1994 as
President of Schein Bayer Pharmaceutical Services Inc., a joint venture of Bayer
and Schein Pharmaceutical Inc. From 1991 to 1994, he served with Bayer as Region
Director with responsibility for pharmaceutical operations in Australia, New
Zealand and South Africa. Mr. Thornton graduated with honors from Lancaster
University in 1978, receiving a B.A. in applied social psychology. Mr. Thornton
is the nominee of the holders of Endorex's Series B preferred stock.

                                      140

BOARD AND COMMITTEE MEETINGS

    During the year ended December 31, 2000, the board of directors held 6
formal meetings, of which all members of the board of directors of Endorex,
other than Paul Rubin and Steve Thornton, attended at least 75 percent of the
meetings. In addition to formal meetings, the board of directors and the members
of the Executive, Mergers and Acquisitions, Audit and Compensation Committees
confer frequently on an informal basis.

    The Compensation Committee of the board of directors determines the salaries
and incentive compensation of the officers of Endorex and provides
recommendations for the salaries and incentive compensation of the other
employees and consultants of Endorex. The Compensation Committee also
administers various incentive compensation, stock and benefit plans. Mr. Shaw
and Dr. Tempero served on the Compensation Committee until May 16, 2000, and as
of May 17, 2000, Dr. Rubin and Mr. Kanzer have served on the Compensation
Committee; Dr. Rubin is the Chairman. The Compensation Committee had 2 meetings
during fiscal year 2000, of which all the members of the Compensation Committee
attended at least 75 percent of the meetings that occurred during the period in
which they served as a member of the Compensation Committee.

    The Executive Committee of the board of directors acts on the matters
referred to it by the full board of directors. Dr. Tempero, the Chairman of the
Executive Committee, Mr. Thornton and Mr. Rosen are currently the Executive
Committee members. Mr. Dunning served on the Executive Committee until May 16,
2000, and was subsequently replaced by Mr. Thornton on May 17, 2000. The
Executive Committee had 2 meetings during fiscal year 2000, of which all the
members of the Executive Committee, other than Mr. Thornton, attended at least
75 percent of the meetings that occurred during the period in which they served
as a member of the Executive Committee.

    The M&A Committee of the board of directors of Endorex acts on any matters
referred to it by the full board of directors related to current or potential
mergers or acquisitions. Dr. Tempero, the Chairman of the M&A Committee, Richard
Dunning and Dr. Rubin are the current members of the M&A Committee. The M&A
Committee of Endorex held no meetings during the fiscal year 2000.

    The Audit Committee of the board of directors reviews, acts on and reports
to the board of directors with respect to various auditing and accounting
matters, including the selection of Endorex's independent public accountants,
the scope of the annual audits, fees to be paid to the auditors, the performance
of Endorex's auditors and the accounting practices of Endorex. Mr. Dunning,
Chairman of the Audit Committee, and Dr. Shaw are currently the Audit Committee
members. Mr. Kanzer and Dr. Rubin served on the Audit Committee until May 16,
2000, and were subsequently replaced by Dr. Shaw and Mr. Dunning on May 17,
2000. The Audit Committee had 6 meetings during fiscal year 2000; of the members
of the Audit Committee, only Mr. Dunning attended at least 75 percent of the
meetings that occurred during the period in which they served as a member of the
Audit Committee. Mr. Dunning and Dr. Shaw are independent as defined by
Section 121(A) of the American Stock Exchange's listing standards.

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

                                                              SEPTEMBER 28, 2001

    Endorex's Audit Committee is comprised of two independent members, each of
whom is able to read and understand fundamental financial statements and at
least one of whom has past employment experience in finance or accounting or
other comparable experience. The Audit Committee reviews the accounting
principles and procedures of Endorex and its annual financial reports and
statements, discusses the audited financial statements with management,
recommends to the board of directors the engagement of Endorex's independent
accountants, reviews with the independent accountants the plans and results of
the auditing engagement and considers the independence of Endorex's auditors.

                                      141

    The main function of the Audit Committee is to ensure that effective
accounting policies are implemented and that internal controls are put in place
in order to deter fraud, anticipate financial risks and promote accurate, high
quality and timely disclosure of financial and other material information to the
public markets, the board and the stockholders. The Audit Committee also reviews
and recommends to the board the approval of the annual financial statements and
provides a forum, independent of management, where Endorex's auditors can
communicate any issues of concern.

    The independent members of the Audit Committee believe that the present
composition of the Audit Committee accomplishes all of the necessary goals and
functions of an audit committee as recommended by the Blue Ribbon Committee on
Improving the Effectiveness of Corporate Audit Committees and adopted by the
United States stock exchanges and the Securities and Exchange Commission. In
accordance with the promulgated new rules regarding audit committees, the Audit
Committee has adopted a formal, written charter, or, the Audit Committee
Charter, approved by the full board of directors. The Audit Committee Charter
specifies the scope of the Audit Committee's responsibilities and how it should
carry out those responsibilities. The Audit Committee has reviewed and discussed
the audited financial statements of Endorex for the fiscal year ended
December 31, 2000, with Endorex's management. The Audit Committee has discussed
with Ernst & Young LLP, Endorex's independent public accountants, the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Audit Committee has also received the
written disclosures and the letter from Ernst & Young LLP required by
Independence Standards Board Standard No. 1 (Independence Discussion with Audit
Committees) and the Audit Committee has discussed the independence of Ernst &
Young LLP with that firm.

    Based on the review and discussions with Endorex's auditors for the fiscal
year ended December 31, 2000, the Audit Committee recommended to the board of
directors that the financial statements be included in Endorex's Annual Report
on Form 10-KSB.


                                            
                                               THE AUDIT COMMITTEE
                                               Richard Dunning
                                               H. Laurence Shaw


    NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF ENDOREX'S
PREVIOUS OR FUTURE FILINGS UNDER THE SECURITIES ACT OR THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE THIS JOINT PROXY
STATEMENT/PROSPECTUS OR FUTURE FILINGS MADE BY ENDOREX UNDER THOSE STATUTES, THE
AUDIT COMMITTEE REPORT, AUDIT COMMITTEE CHARTER, AND REFERENCE TO THE
INDEPENDENCE OF THE AUDIT COMMITTEE MEMBERS ARE NOT DEEMED FILED WITH THE SEC
AND ARE NOT DEEMED INCORPORATED BY REFERENCE INTO ANY OF THOSE PRIOR FILINGS OR
INTO ANY FUTURE FILINGS MADE BY ENDOREX UNDER THOSE STATUTES.

DIRECTOR COMPENSATION

    See "Endorex Management and Executive Compensation."

RECOMMENDATION OF THE BOARD OF DIRECTORS

    The board of directors recommends that Endorex stockholders vote "FOR" the
election of all of the nominees listed above.

                                      142

                    PROPOSAL FOUR: APPROVAL OF AMENDMENT TO
            ENDOREX AMENDED AND RESTATED 1995 OMNIBUS INCENTIVE PLAN

    Endorex stockholders are being asked to approve an amendment to the Endorex
Amended and Restated 1995 Omnibus Incentive Plan, or 1995 Plan, which will have
the following effects:

        (i) increase the number of shares of common stock issuable under the
    1995 Plan by an additional 2,165,664 shares;

        (ii) implement a maximum annual limit of 500,000 shares of common stock
    by which the share reserve may increase annually over the term of the 1995
    Plan under the automatic share increase provision; and

       (iii) modify the automatic option grant program to (a) increase the
    initial option grants to newly-elected board members to 50,000 shares of
    Endorex common stock vesting immediately and (b) provide for annual option
    grants to continuing board members for 10,000 shares vesting over one year.

    The board believes the amendment to increase the share reserve is necessary
to assure that a sufficient reserve of common stock remains available for
issuance under the 1995 Plan in order to allow Endorex to continue to utilize
equity incentives to attract and retain the services of key individuals
essential to Endorex's long-term growth and financial success. The
implementation of a limit by which the share reserve may increase annually is
necessary to ensure that Endorex can grant incentive stock options on the basis
of such increases. The board of directors of Endorex believes that the
amendments to increase the awards and simplify the vesting schedule of the
automatic option grants to board members are necessary in order to attract
certain qualified members of the board. Endorex relies significantly on equity
incentives in the form of stock option grants in order to attract and retain key
employees and believes that such equity incentives are necessary for it to
remain competitive in the marketplace for executive talent and other key
employees. Option grants made to newly-hired or continuing employees will be
based on both competitive market conditions and individual performance.

    The 1995 Plan was initially adopted in April 1995. The 1995 Plan was
subsequently amended in July 1996, October 1997 and February 1998 to effect
increases to the share reserve and certain other amendments; all such amendments
were approved by the stockholders. The board of directors adopted the amendments
to the 1995 Plan that are the subject of this proposal on February 21, 2001
((iii) above), May 16, 2001 ((i) above) and September 26, 2001 ((i), (ii) and
(iii) above), subject to stockholder approval at the annual meeting of the
Endorex stockholders.

    The following is a summary of the principal features of the 1995 Plan, as
most recently amended. Any stockholder who wishes to obtain a copy of the actual
plan document may do so upon written request to Endorex at 28101 Ballard Drive,
Suite F, Lake Forest, Illinois 60045.

EQUITY INCENTIVE PROGRAMS

    The 1995 Plan consists of four separate equity incentive programs: (1) the
Discretionary Option Grant Program, (2) the Salary Investment Option Grant
Program, (3) the Automatic Option Grant Program for non-employee board members
and (4) the Director Fee Option Grant Program for non-employee board members.
The principal features of each program are described below. The Compensation
Committee of the board will administer the Discretionary Option Grant Program,
determine the calendar year or years in which the Salary Investment Option Grant
Program will be in effect and select the individuals who are to participate in
such program. The board may at any time appoint a secondary committee of one or
more board members to have separate but concurrent authority with the
Compensation Committee to make option grants under the Discretionary Option
Grant Program to individuals other than Endorex's executive officers and
non-employee board members. All grants under the Salary Investment Option Grant,
the Automatic Option Grant and the

                                      143

Director Fee Option Grant Programs will be made in strict compliance with the
express provisions of each such program. Neither the Compensation Committee nor
any secondary committee will exercise any administrative discretion under those
programs.

    The term plan administrator, as used in this summary, will mean the
Compensation Committee and any secondary committee, to the extent each such
entity is acting within the scope of its administrative jurisdiction under the
1995 Plan.

SHARE RESERVE

    An aggregate of 4,500,000 shares of common stock has been reserved for
issuance over the term of the 1995 Plan, including the additional increase of
2,165,664 shares of common stock that forms part of this proposal. In addition,
on the first trading day of each calendar year during the term of the 1995 Plan,
the number of shares of common stock available for issuance under the 1995 Plan
will automatically increase by an amount equal to one percent (1%) of the total
number of shares of Endorex's common stock outstanding on the last trading day
of the immediately preceding fiscal year. In no event will any such annual
increase exceed 500,000 shares of common stock.

    As of October 15, 2001, 2,334,336 shares of common stock were subject to
outstanding options under the 1995 Plan, 97,056 shares of common stock had been
issued pursuant to the exercise of options granted under the 1995 Plan, and
2,806,862 shares of common stock remained available for future issuance,
assuming stockholder approval of this proposal.

    No participant in the 1995 Plan may receive option grants or separately
exercisable stock appreciation rights for more than 750,000 shares of common
stock in the aggregate per calendar year. Stockholder approval of this proposal
will also constitute a reapproval of the 750,000 share limitation for purposes
of Internal Revenue Code Section 162(m).

    The shares of common stock issuable under the 1995 Plan may be drawn from
shares of Endorex's authorized but unissued shares of common stock or from
shares of common stock reacquired by Endorex, including shares repurchased on
the open market.

    In the event any change is made to the outstanding shares of common stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the receipt of consideration by Endorex, appropriate adjustments will be
made to: (1) the maximum number and/or class of securities issuable under the
1995 Plan, (2) the maximum number and/or class of securities by which the share
reserve may increase annually under the automatic share increase reserve
provisions, (3) the number and/or class of securities for which any one person
may be granted options or separately exercisable stock appreciation rights per
calendar year, (4) the number and/or class of securities for which automatic
option grants are to be subsequently granted to eligible directors, and (5) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option (including any options incorporated from the
predecessor 1994 Non-Employee Stock Option Plan and Incentive Stock Option Plan
which were incorporated into the 1995 Plan).

ELIGIBILITY

    Employees, non-employee board members and independent consultants in the
service of Endorex or its parent and subsidiaries (whether now existing or
subsequently established) are eligible to participate in the Discretionary
Option Grant Program. Executive officers and other highly paid employees are
also eligible to participate in the Salary Investment Option Grant Program.
Participation in the Automatic Option Grant and Director Fee Option Grant
Programs is limited to non-employee members of the board.

                                      144

    As of October 15, 2001, five executive officers, six non-employee board
members and approximately 21 other employees and consultants were eligible to
participate in the Discretionary Option Grant Program. The five executive
officers were also eligible to participate in the Salary Investment Option Grant
Program, and the six non-employee board members were also eligible to
participate in the Automatic Option Grant and Director Fee Option Grant
Programs.

VALUATION

    The fair market value per share of common stock on any relevant date under
the 1995 Plan is deemed to be equal to the closing selling price per share on
that date on a stock exchange where shares of Endorex's common stock are traded.
On October 15, 2001, the fair market value per share determined on such basis
was $0.90.

DISCRETIONARY OPTION GRANT PROGRAM

    The plan administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals are to receive
option grants, the time or times when those grants are to be made, the number of
shares subject to each such grant, the status of any granted option as either an
incentive stock option or a non-statutory option under the federal tax laws, the
vesting schedule (if any) to be in effect for the option grant and the maximum
term for which any granted option is to remain outstanding.

    Each granted option will have an exercise price per share no less than 85%
of the fair market value of the shares on the grant date unless otherwise
determined by the plan administrator. No granted option will have a term in
excess of 10 years, and the option will generally become exercisable in one or
more installments over a specified period of service measured from the grant
date. However, one or more options may be structured so that they will be
immediately exercisable for any or all of the option shares. The shares acquired
under immediately exercisable options will be subject to repurchase by Endorex,
at the exercise price paid per share, if the optionee ceases service with
Endorex prior to vesting in those shares.

    Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for vested
shares. The plan administrator will have complete discretion to extend the
period following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.

    The plan administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:

        TANDEM STOCK APPRECIATION RIGHTS, which provide the holders with the
    right to surrender their options for an appreciation distribution from
    Endorex equal in amount to the excess of (a) the fair market value of the
    vested shares of common stock subject to the surrendered option over
    (b) the aggregate exercise price payable for such shares. Such appreciation
    distribution may, at the discretion of the plan administrator, be made in
    cash or in shares of common stock.

        LIMITED STOCK APPRECIATION RIGHTS, which may be granted to the officers
    of Endorex as part of their option grants. Any option with such a limited
    stock appreciation right in effect may be surrendered to Endorex upon the
    successful completion of a hostile take-over of Endorex. In return for the
    surrendered option, the officer will be entitled to a cash distribution from
    Endorex in an amount per surrendered option share equal to the excess of
    (a) the take-over price per share over (b) the exercise price payable for
    such share.

                                      145

    The plan administrator also has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (and
outstanding options incorporated from the predecessor 1994 Non-Employee Stock
Option Plan and Incentive Stock Option Plan which were incorporated into the
1995 Plan) that have exercise prices in excess of the then-current market price
of Endorex's common stock and to issue replacement options with an exercise
priced on the market price of Endorex's common stock at the time of the new
grant.

SALARY INVESTMENT OPTION GRANT PROGRAM

    The Compensation Committee has complete discretion to implement the Salary
Investment Option Grant Program for one or more calendar years and in selecting
the executive officers and other eligible individuals who are to participate in
the program. As a condition to such participation, each selected individual
must, prior to the start of the calendar year of participation, file with the
Compensation Committee an irrevocable authorization directing Endorex to reduce
his or her base salary for the upcoming calendar year by a specified dollar
amount not less than $10,000 nor more than $75,000 and to apply that amount to
the acquisition of a special option grant under the program. Each selected
individual who files such a timely election will automatically be granted a
non-statutory option on or before the last trading day in January of the
calendar year for which that salary reduction is to be in effect.

    Stockholder approval of this proposal will constitute the pre-approval of
each option subsequently granted under the Salary Investment Option Grant
Program on the basis of the share increase effected pursuant to this proposal
and the subsequent exercise of that option in accordance with its terms.

    The number of shares subject to each option will be determined by dividing
the salary reduction amount by two-thirds of the fair market value per share of
Endorex's common stock on the grant date. The exercise price will be equal to
one-third of the fair market value of Endorex's common stock per share on the
grant date. As a result, the total spread on the option shares at the time of
grant (the fair market value of the option shares on the grant date less the
aggregate exercise price payable for those shares) will be equal to the amount
by which the optionee's salary is to be reduced for the calendar year. In
effect, the salary reduction serves as an immediate prepayment, as of the time
of the option grant, of two thirds of the then-current market price of the
shares of common stock subject to the option.

    The option will become exercisable in a series of 12 equal monthly
installments upon the optionee's completion of each month of service in the
calendar year for which such salary reduction is in effect and will become
immediately exercisable for all the option shares on an accelerated basis should
Endorex experience certain changes in ownership or control. Each option will
remain exercisable for any vested shares until the earlier of (1) the expiration
of the ten-year option term or (2) the end of the three-year period measured
from the date of the optionee's cessation of service.

    Endorex has not yet implemented the Salary Investment Option Grant Program.

AUTOMATIC OPTION GRANT PROGRAM

    Under the Automatic Option Grant Program, eligible non-employee board
members receive a series of option grants over their period of board service.
Each non-employee board member will, at the time of his or her initial election
or appointment to the board on or after this annual stockholders meeting,
receive a non-statutory stock option grant for 50,000 shares of common stock. In
addition, on the date of each annual stockholders meeting beginning with this
annual stockholder meeting, each individual who is re-elected to serve as a
non-employee board member will be automatically granted an option to purchase
10,000 shares of common stock (provided such individual has served as a
non-employee board member for at least six months). There will be no limit on
the number of such

                                      146

10,000-share option grants any one eligible non-employee board member may
receive over his or her period of continued board service.

    Stockholder approval of this proposal will also constitute pre-approval of
each option granted under the Automatic Option Grant Program on or after the
date of the annual stockholders meeting and the subsequent exercise of that
option in accordance with the terms of the program summarized below.

    Each automatic grant will have an exercise price per share equal to the fair
market value per share of common stock on the grant date and will have a maximum
term of 10 years, subject to earlier termination following the optionee's
cessation of board service.

    The shares subject to each initial 50,000-share automatic grant will
immediately vest. Each 10,000-share option will be immediately exercisable for
the option shares and the shares acquired under the option will be subject to
repurchase by Endorex at the option exercise price paid per share, upon the
optionee's cessation of board service prior to vesting in those shares. The
shares subject to each annual 10,000-share grant will vest upon the completion
of one year of Board service measured from the option grant date.

    Each outstanding automatic option grant will automatically accelerate and
become immediately exercisable for any or all of the option shares as
fully-vested shares upon certain changes in control or ownership of Endorex or
upon the optionee's death or disability while a board member. Following the
optionee's cessation of board service for any reason, each option will remain
exercisable for a 12-month period and may be exercised during that time for any
or all shares in which the optionee is vested at the time of such cessation of
board service.

DIRECTOR FEE OPTION GRANT PROGRAM

    The Compensation Committee has complete discretion to implement the Director
Fee Option Grant Program for one or more calendar years in which non-employee
board members may participate. As a condition to such participation, each
non-employee board member must, prior to the start of the calendar year of
participation, file with Endorex's Chief Financial Officer an irrevocable
authorization directing Endorex to apply all or a portion of his or her cash
retainer fee for the upcoming calendar year to the acquisition of a special
option grant under the program.

    Each non-employee board member who files such a timely election will
automatically be granted a non-statutory option on the first trading day in
January of the calendar year for which that retainer fee election is to be in
effect.

    The number of shares subject to each such option will be determined by
dividing the amount of the retainer fee for the calendar year to be applied to
the program by two-thirds of the fair market value per share of Endorex's common
stock on the grant date. The exercise price will be equal to one-third of the
fair market value of Endorex's common stock per share on the grant date. As a
result, the total spread on the option shares at the time of grant (the fair
market value of the option shares on the grant date less the aggregate exercise
price payable for those shares) will be equal to the portion of the retainer fee
that optionee has elected to be applied to the program. In effect, the portion
of the annual retainer fee otherwise payable in cash serves as an immediate
prepayment, as of the time of the option grant, of two thirds of the
then-current market price of the shares of common stock subject to the option.

    The option will become exercisable for 50% of the option shares upon the
optionee's completion of six months of service in the calendar year for which
such retainer fee election is in effect and the balance in a series of six equal
monthly installments upon the optionee's completion of each additional month of
service during that calendar year. The option will become immediately
exercisable for all the option shares on an accelerated basis should Endorex
experience certain changes in ownership or

                                      147

control. Each option will remain exercisable for any vested shares until the
earlier of (1) the expiration of the ten-year option term or (2) the end of the
three-year period measured from the date of the optionee's cessation of service.

    Endorex has not yet implemented the Director Fee Option Grant Program.

GENERAL PROVISIONS

ACCELERATION

    In the event that Endorex is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program that is not to
be assumed or replaced by the successor corporation will automatically
accelerate in full, and all unvested shares outstanding under the Discretionary
Option Grant Program will immediately vest, except to the extent Endorex's
repurchase rights with respect to those shares are to be assigned to the
successor corporation.

    The plan administrator will have the authority under the Discretionary
Option Grant Program to provide that options granted under such program will
automatically vest in full (1) upon an acquisition of Endorex, whether or not
those options are assumed or replaced, (2) upon a hostile change in control of
Endorex effected through a tender offer for more than 50% of Endorex's
outstanding voting stock or by proxy contest for the election of board members,
or (3) in the event the individual's service is terminated, whether
involuntarily or through a resignation for good reason, within a designated
period (not to exceed 18 months) following an acquisition in which those options
are assumed or replaced or a hostile change in control. The options granted
under the Salary Investment Option Grant Program, the Automatic Option Grant
Program and the Director Fee Option Grant Program will automatically accelerate
and become exercisable in full upon an acquisition or change in control
transaction.

    The acceleration of vesting in the event of a change in the ownership or
control of Endorex may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts to
gain control of Endorex.

LIMITED STOCK APPRECIATION RIGHTS

    Each option granted under the Automatic Option Grant and Director Fee Option
Grant Programs includes a limited stock appreciation right so that upon the
successful completion of a hostile tender offer for more than 50% of Endorex's
outstanding voting securities, the option may be surrendered to Endorex in
return for a cash distribution from Endorex. The amount of the distribution per
surrendered option share will be equal to the excess of (1) the fair market
value per share at the time the option is surrendered or, if greater, the tender
offer price paid per share in the hostile take-over over (2) the exercise price
payable per share under such option. In addition, the plan administrator may
grant such rights to officers of Endorex as part of their option grants under
the Discretionary Option Grant Program.

    Stockholder approval of this proposal will also constitute pre-approval of
each limited stock appreciation right granted under the Automatic Option Grant
Director Fee Option Grant Programs and the subsequent exercise of those rights
in accordance with the foregoing terms.

FINANCIAL ASSISTANCE

    The plan administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options under the
Discretionary Option Grant Program through full-recourse interest-bearing
promissory notes. However, the maximum amount of financing provided any
participant may not exceed the cash consideration payable for the issued shares
plus all applicable withholding taxes incurred in connection with the
acquisition of those shares.

                                      148

SPECIAL TAX ELECTION

    The plan administrator may provide one or more holders of non-statutory
options under the 1995 Plan with the right to have Endorex withhold a portion of
the shares otherwise issuable to such individuals in satisfaction of the
withholding taxes to which such individuals become subject in connection with
the exercise of those options or the vesting of those shares. Alternatively, the
plan administrator may allow such individuals to deliver previously acquired
shares of common stock in payment of such withholding tax liability.

AMENDMENT AND TERMINATION

    The board may amend or modify the 1995 Plan at any time, subject to any
required stockholder approval pursuant to applicable laws and regulations.
Unless sooner terminated by the board, the 1995 Plan will terminate on the
earliest of (1) April 23, 2005, (2) the date on which all shares available for
issuance under the 1995 Plan have been issued as fully-vested shares or (3) the
termination of all outstanding options in connection with certain changes in
control or ownership of Endorex.

STOCK AWARDS

    The table below shows, as to Endorex's Chief Executive Officer, the three
other most highly compensated executive officers of Endorex (with base salary
and bonus for the past fiscal year in excess of $100,000) and the other
individuals and groups indicated, the number of shares of common stock subject
to option grants made under the 1995 Plan from January 1, 2000 through June 30,
2001, together with the weighted average exercise price payable per share.

                                      149

                              OPTION TRANSACTIONS



                                                              NUMBER OF SHARES   WEIGHTED AVERAGE
                                                                 UNDERLYING       EXERCISE PRICE
NAME AND POSITION                                             OPTIONS GRANTED     PER SHARE ($)
-----------------                                             ----------------   ----------------
                                                                           
Michael S. Rosen ...........................................        160,000          $ 1.250
  President, Chief Executive Officer and Director

Robert N. Brey .............................................         30,000          $ 3.938
  Senior Advisor for Technology Assessment and Intellectual
  Property(1)

Frank C. Reid ..............................................         60,000          $ 3.938
  Vice President, Finance and Corporate Development(2)

Panayiotis P. Constantinides ...............................         60,000          $ 1.500
  Vice President of Research and Development

John McCracken .............................................        100,000          $ 1.250
  Vice President, Business Development

Steve J. Koulogeorge .......................................         30,000          $ 1.781
  Controller, Assistant Secretary and Assistant Treasurer

All current executive officers as a group...................        380,000          $ 1.544

Richard Dunning ............................................         50,000(3)       $ 1.250
  Director

Steve H. Kanzer ............................................         50,000(3)       $ 1.250
  Director

Paul D. Rubin ..............................................         50,000(3)       $ 1.250
  Director

H. Laurence Shaw ...........................................         50,000(3)       $ 1.250
  Director

Kenneth Tempero ............................................         62,000(3)       $ 1.637
  Director

Steven Thornton ............................................         62,000(3)       $ 1.952
  Director

All current non-employee directors as a group
  (6 persons)...............................................        324,000          $ 1.458

All employees, including current officers, as a group
  (approximately 18 persons)................................        488,500          $ 1.617


------------------------

(1) Mr. Brey served as an executive officer of Endorex in the capacity of Vice
    President of Research and Development until November 30, 2000.

(2) Mr. Reid resigned from Endorex on December 31, 2000.

(3) Includes an option to purchase 50,000 shares of Endorex common stock granted
    on February 21, 2001, subject to stockholder approval.

                                      150

FEDERAL INCOME TAX CONSEQUENCES

OPTION GRANTS

    Options granted under the 1995 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:

    INCENTIVE OPTIONS.  No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed.
For Federal tax purposes, dispositions are divided into two categories:
(1) qualifying and (2) disqualifying. A qualifying disposition occurs if the
sale or other disposition is made after the optionee has held the shares for
more than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.

    If the optionee makes a disqualifying disposition of the purchased shares,
Endorex will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (1) the fair market value
of such shares on the option exercise date over (2) the exercise price paid for
the shares. If the optionee makes a qualifying disposition, Endorex will not be
entitled to any income tax deduction.

    NON-STATUTORY OPTIONS.  No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares on the exercise date over the
exercise price paid for the shares, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income.

    If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by Endorex in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when Endorex's repurchase right lapses, an amount
equal to the excess of (1) the fair market value of the shares on the date the
repurchase right lapses over (2) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (1) the fair market value of the purchased shares on the
exercise date over (2) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionee will not recognize any additional
income as and when the repurchase right lapses.

    Endorex will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of Endorex in which such ordinary income is recognized by the optionee.

STOCK APPRECIATION RIGHTS

    No taxable income is recognized upon receipt of a stock appreciation right.
The holder will recognize ordinary income, in the year in which the stock
appreciation right is exercised, in an amount equal to the appreciation
distribution. Endorex will be entitled to an income tax deduction equal to the
appreciation distribution in the taxable year in which such ordinary income is
recognized by the optionee.

                                      151

DEDUCTIBILITY OF EXECUTIVE COMPENSATION

    Endorex anticipates that any compensation deemed paid by it in connection
with the disqualifying dispositions of incentive stock option shares or the
exercise of non-statutory options with exercise prices equal to the fair market
value of the option shares on the grant date will qualify as performance-based
compensation for purposes of Code Section 162(m) and will not have to be taken
into account for purposes of the $1 million limitation per covered individual on
the deductibility of the compensation paid to certain executive officers of
Endorex. Accordingly, all compensation deemed paid with respect to those options
will remain deductible by Endorex without limitation under Code Section 162(m).

ACCOUNTING TREATMENT

    Option grants under the Discretionary Option Grant and Automatic Option
Grant Programs with exercise prices equal to the fair market value of the option
shares on the grant date will not result in any direct charge to Endorex's
reported earnings. However, the fair value of those options is required to be
disclosed in the notes to Endorex's financial statements, and Endorex must also
disclose, in footnotes to the financial statements, the pro forma impact those
options would have upon Endorex's reported earnings were the fair value of those
options at the time of grant treated as a compensation expense. In addition, the
number of outstanding options may be a factor in determining Endorex's earnings
per share on a fully diluted basis.

    Option grants made under the 1995 Plan with exercise or issue prices less
than the fair market value of the shares on the grant or issue date will result
in a direct compensation expense in an amount equal to the excess of such fair
market value over the exercise or issue price. The expense must be amortized
against Endorex's earnings over the period that the option shares or issued
shares are to vest.

    On March 31, 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, which is an interpretation of APB Opinion No. 25
governing the accounting principles applicable to equity incentive plans. Under
the Interpretation, option grants made to consultants (but not non-employee
board members) after December 15, 1998 will result in a direct charge to
Endorex's reported earnings based upon the fair value of the option measured
initially as of the grant date and then subsequently on the vesting date of each
installment of the underlying option shares. Such charge will accordingly
include the appreciation in the value of the option shares over the period
between the grant date of the option (or, if later, the July 1, 2000 effective
date of the Interpretation) and the vesting date of each installment of the
option shares. In addition, any options which are repriced after December 15,
1998 will also trigger a direct charge to Endorex's earnings measured by the
appreciation in the value of the underlying shares over the period between the
grant date of the option (or, if later, the July 1, 2000 effective date of the
Interpretation) and the date the option is exercised for those shares.

    Should one or more individuals be granted tandem stock appreciation rights
under the 1995 Plan, then such rights would result in a compensation expense to
be charged against Endorex's reported earnings. Accordingly, at the end of each
fiscal quarter, the amount (if any) by which the fair market value of the shares
of common stock subject to such outstanding stock appreciation rights has
increased from the prior quarter-end would be accrued as compensation expense,
to the extent such fair market value is in excess of the aggregate exercise
price in effect for those rights.

NEW PLAN BENEFITS

    As of October 15, 2001, no stock options had been granted, and no shares of
common stock had been issued, on the basis of the share increases which are the
subject of this proposal. However, subject to approval of this proposal, on the
date of the annual meeting, each of Messrs. Dunning, Kanzer, Rubin, Shaw,
Tempero and Thornton will receive an option to purchase 10,000 shares of Endorex
common stock. In addition, subject to consummation of the merger, each of
Messrs. Rico and Kliem

                                      152

will receive on the date of their initial appointment to the Endorex board of
directors an option to purchase 50,000 shares of Endorex common stock.

STOCKHOLDER APPROVAL

    The affirmative vote of the holders of a majority of the shares of Endorex
common stock, voting together with the holders of Endorex Series B preferred
stock on an as converted basis, entitled to vote and that are present or
represented by proxy at the Endorex annual meeting of stockholders is required
for approval of the amendment to the 1995 Plan. Should such stockholder approval
not be obtained, then: (a) the 2,165,664-share increase to the share reserve
under the 1995 Plan will not be implemented and any stock options granted under
the 1995 Plan on the basis of the increase will immediately terminate without
ever becoming exercisable for the shares of common stock subject to those
options, (b) there will be no maximum annual limit of shares of common stock by
which the share reserve may increase annually under the automatic share increase
provision of the 1995 Plan, and (c) the changes to the number of shares and
vesting schedule applicable to the initial and continuing option grants under
the automatic option grant program to non-employee board members will not be
implemented. The 1995 Plan will, however, continue in effect as previously
approved by the stockholders, and option grants may continue to be made under
the 1995 Plan (including option grants under the automatic option grant program
as previously approved by the stockholders) until all the shares available for
issuance under the 1995 Plan has been issued pursuant to such option grants.
Endorex does not have to consummate the merger unless its stockholders approve
the increase of the number of shares of common stock issuable under the 1995
Plan, although this condition may be waived by Endorex.

RECOMMENDATION OF THE BOARD OF DIRECTORS

    The board of directors recommends that the stockholders vote "FOR" the
approval of the amendments to the 1995 Plan.

                                      153

                  PROPOSAL FIVE: APPROVAL OF FEBRUARY 21, 2001
                         OPTION GRANTS TO NON-EMPLOYEE
                       MEMBERS OF THE BOARD OF DIRECTORS

    Endorex's stockholders are being asked to approve certain stock option
grants to the non-employee members of Endorex's board of directors under the
Discretionary Option Grant Program of the Endorex's Amended and Restated 1995
Omnibus Incentive Plan. The Endorex board believes that it is in Endorex's best
interests to provide additional incentives to Endorex's non-employee board
members to remain in service.

MATERIAL TERMS OF THE OPTIONS

    On February 21, 2001, Endorex's board of directors granted a fully vested
option to purchase 50,000 shares of Endorex common stock to each of Endorex's
non-employee board members--Richard Dunning, Steve H. Kanzer, Dr. Paul D. Rubin,
Dr. H. Laurence Shaw, Dr. Kenneth Tempero, and Steven Thornton--subject to
subsequent approval by the stockholders at the annual meeting of stockholders.

    The material terms and conditions of each option grant may be summarized as
follows:

        (i) Each option has an exercise price equal to $1.25 per share, the
    closing price per share of the common stock on the February 21, 2001 grant
    date, as reported on the AMEX. On October 15, 2001, the closing price per
    share on the AMEX was $0.90.

        (ii) Each option is immediately exercisable for all of the option shares
    as fully vested shares.

       (iii) Each option has a maximum term of ten (10) years measured from the
    February 21, 2001 grant date, subject to earlier termination upon the
    cessation of service of the non-employee board member. If the non-employee
    board members terminate service for any reason other than death or
    disability, then such individuals will have a twelve (12)-month period
    following their termination date in which to exercise their option. Should
    the non-employee board members die or become disabled while the option
    remains outstanding, then such individuals or their legal representatives
    will have a twelve (12)-month period in which to exercise the option.

        (iv) The exercise price may be paid in cash or in shares of Endorex's
    common stock held for the requisite period necessary to avoid a charge to
    Endorex's earnings. Each option may also be exercised through a same-day
    sale program, pursuant to which a designated brokerage firm effects the
    immediate sale of the shares purchased under the option and pays over to
    Endorex, out of the sale proceeds available on the settlement date,
    sufficient funds to cover the exercise price for the purchased shares plus
    all applicable withholding taxes.

        (v) In the event that Endorex is acquired by merger or asset sale, each
    option will terminate and cease to be exercisable, except to the extent
    assumed by the successor corporation. If the options are so assumed, the
    exercise price and number of shares subject to the option will be
    appropriately adjusted so that the aggregate exercise price remains the
    same.

        (vi) Each option contains a limited stock appreciation right which will
    trigger the automatic cancellation of the option upon the successful
    completion of a hostile tender offer for more than 50% of Endorex's
    outstanding voting securities. In return for the cancelled option, the
    non-employee board member will be entitled to a cash distribution from
    Endorex in an amount per cancelled option share equal to the excess of
    (a) the highest price per share of common stock paid in connection with the
    tender offer over (b) the exercise price payable for such share.

       (vii) In the event any change is made to the common stock issuable under
    the option by reason of any stock split, stock dividend, recapitalization,
    combination of shares, exchange of shares, or other change in corporate
    structure effected without Endorex's receipt of consideration,

                                      154

    appropriate adjustments will be made to the number and/or class of
    securities subject to the option and the exercise price payable per share.

      (viii) The remaining terms and conditions of each option grant is
    substantially the same as those summarized above in the "Discretionary
    Option Grant Program" section of Proposal Four above.

FEDERAL INCOME TAX CONSEQUENCES

    The option grants which are part of this proposal are non-statutory stock
options which are not intended to satisfy the requirements of Section 422 of the
Internal Revenue Code.

    No taxable income is recognized by the non-employee board member upon the
grant of the option. The non-employee board member will recognize ordinary
income, in the year in which the option is exercised, equal to the excess of the
fair market value of the purchased shares on the exercise date over the exercise
price paid for the shares.

    Endorex will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the non-employee board members with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of Endorex in which such ordinary income is recognized by the
non-employee board members.

DEDUCTIBILITY OF COMPENSATION

    Endorex anticipates that any compensation deemed paid by it in connection
with the exercise of the option grants to the non-employee board members will be
fully deductible by Endorex.

ACCOUNTING TREATMENT

    The option grants to the non-employee board members will not result in any
direct charge to Endorex's reported earnings. However, the fair value of those
options is required to be disclosed in the notes to Endorex's financial
statements, and Endorex must also disclose, in footnotes to the financial
statements, the pro forma impact those options would have upon Endorex's
reported earnings were the fair value of those options at the time of grant
treated as a compensation expense. In addition, the number of outstanding
options may be a factor in determining Endorex's earnings per share on a fully
diluted basis.

    On March 31, 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, which is an interpretation of APB Opinion No. 25
governing the accounting principles applicable to equity incentive plans. Under
the Interpretation, any options which are repriced after December 15, 1998 will
also trigger a direct charge to Endorex's earnings measured by the appreciation
in the value of the underlying shares over the period between the grant date of
the option and the date the option is exercised for those shares.

STOCK AWARDS

    The table below shows the number of shares of common stock subject to option
grants made to non-employee board members under the 1995 Plan from January 1,
2000 through June 30, 2001, together with the weighted average exercise price
payable per share.

                                      155

                              OPTION TRANSACTIONS



                                                              NUMBER OF SHARES   WEIGHTED AVERAGE
                                                                 UNDERLYING       EXERCISE PRICE
NAME AND POSITION                                             OPTIONS GRANTED     PER SHARE ($)
-----------------                                             ----------------   ----------------
                                                                           
Richard Dunning ............................................          50,000(1)      $ 1.250
  Director

Steve H. Kanzer ............................................          50,000(1)      $ 1.250
  Director

Paul D. Rubin ..............................................          50,000(1)      $ 1.250
  Director

H. Laurence Shaw ...........................................          50,000(1)      $ 1.250
  Director

Kenneth Tempero ............................................          62,000(1)      $ 1.637
  Director

Steven Thornton ............................................          62,000(1)      $ 1.952
  Director

All current non-employee directors as a group (6 persons)...         324,000         $ 1.458


------------------------

(1) Includes an option to purchase 50,000 shares of Endorex common stock granted
    on February 21, 2001, subject to stockholder approval under this proposal.

NEW PLAN BENEFITS

    As of October 15, 2001, options to purchase 300,000 shares of Endorex common
stock had been granted on the basis of this Proposal.

STOCKHOLDER APPROVAL

    The affirmative vote of the holders of a majority of the shares of Endorex
common stock, voting together with the holders of Endorex Series B preferred
stock on an as converted basis, entitled to vote and that are present or
represented by proxy at the Endorex annual meeting of stockholders is required
for approval of the option grants to the non-employee board members. Should such
stockholder approval not be obtained, then the option grants to the non-employee
board members will immediately terminate without ever becoming exercisable for
the shares of common stock subject to those options.

RECOMMENDATION OF THE BOARD OF DIRECTORS

    The board of directors recommends that the stockholders vote "FOR" the
approval of the 50,000-share option grants to the non-employee board members on
February 21, 2001.

                                      156

          PROPOSAL SIX: RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

    Upon the recommendation of the Audit Committee, the board of directors
appointed Ernst & Young LLP, or E&Y, independent public accountants and
auditors, as auditors of Endorex to serve for the year ending December 31, 2001,
subject to the ratification of such appointment by stockholders at the annual
meeting. The affirmative vote of the holders of a majority of the shares of
Endorex common stock, voting together with the holders of Endorex Series B
preferred stock on an as converted basis, entitled to vote and that are present
or represented by proxy at the Endorex annual meeting stockholders. is required
to ratify the appointment of the auditors. Unless otherwise instructed, the
proxy holders will vote the proxies received by them "FOR" the ratification of
E&Y, to serve as Endorex's auditors for the year ending December 31, 2001.

    A representative of E&Y is expected to be available at the annual meeting,
will have the opportunity to make a statement if he or she desires to do so, and
will be available to respond to appropriate questions.

    On November 2, 2000, Endorex engaged E&Y as its independent public
accountant and dismissed PricewaterhouseCoopers LLP, or PwC. The decision to
change independent public accountants was recommended and approved by Endorex's
Audit Committee.

    PwC's reports on the financial statements of Endorex for the fiscal years
ended December 31, 1998 and 1999 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle.

    In connection with its audits for the fiscal years ended December 31, 1998
and 1999 and through November 2, 2000, there were no disagreements with PwC on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to PwC's
satisfaction, would have caused them to make reference to the subject matter of
the disagreements in their report on the financial statements for such years.

    During the fiscal years ended December 31, 1998 and 1999 and through
November 2, 2000 there were no reportable events except that in connection with
its review of the June 30, 2000 financial statements, PwC reported a material
weakness in Endorex's internal control structure relative to the employees of
Endorex not having expertise in the area of generally accepted accounting
principles and financial reporting procedures. Endorex did not have a certified
public accountant on its full-time staff at that time. Endorex has since hired a
certified public accountant to serve as Endorex's corporate controller.
Endorex's management and Audit Committee believe that the concerns expressed by
PwC have been adequately addressed with the hiring of the certified public
accountant as controller. Furthermore, Endorex's management and Audit Committee
do not believe that the reported material weakness in Endorex's internal control
structure relative to the employees of Endorex not having expertise in the area
of generally accepted accounting principles and financial reporting procedures
had an effect on Endorex's financial statements.

    Prior to engaging E&Y, Endorex did not consult E&Y with respect to the
application of accounting principles to a specific completed transaction or
contemplated transaction, or the type of audit opinion that might be rendered on
Endorex's financial statements. Endorex provided a copy of PwC's letter
reporting the material weakness to E&Y and authorized PwC to respond fully to
the inquiries of E&Y regarding the letter.

AUDIT FEES

    The aggregate fees for professional services rendered by E&Y and PwC in
connection with their audit and review of Endorex's consolidated financial
statements included in Endorex's Quarterly Reports on Form 10-QSB and Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2000 were
approximately $123,150 and $26,285, respectively.

                                      157

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

    There were no professional services rendered by E&Y or PwC in the fiscal
year ended December 31, 2000 relating to financial information systems design
and implementation.

ALL OTHER FEES

    The aggregate fees for all other services rendered by E&Y during fiscal year
ended December 31, 2000 was $2,500 for audit related services and $16,800 for
nonaudit related services. The aggregate fees for all other services rendered by
PwC during fiscal year ended December 31, 2000 was $24,770. Audit related
services consisted of accounting consultations and registration statements filed
with the SEC. Nonaudit services related to Endorex's income tax filings.

    The Audit Committee, in conducting its review of auditor independence,
considered whether the performance of services by E&Y, in addition to their
audit services, was compatible with maintaining the independence of Ernst &
Young LLP as auditors.

RECOMMENDATION OF THE BOARD OF DIRECTORS

    The board of directors recommends that Endorex stockholders vote "FOR"
ratification of E&Y as Endorex's independent public accountants for the year
ending December 31, 2001.

                                      158

                             STOCKHOLDER PROPOSALS

    The rules of the SEC permit stockholders of a company to present proposals
for stockholder action in the company's proxy statement if those proposals are
consistent with applicable law, pertain to matters appropriate for stockholder
action and are not properly omitted by company action in accordance with the
proxy rules. Endorex expects to hold on or about May 16, 2002, its annual
meeting of stockholders following the end of fiscal year 2001. In order for
Endorex to include stockholder proposals in the proxy statement for that
meeting, they must comply with the proxy rules and Endorex must receive them
before March 15, 2001. If Endorex is not notified of a stockholder proposal by
March 15, 2001, then the proxy solicited by the board of directors for the 2002
annual meeting will confer discretionary authority to vote against that
stockholder proposal. Endorex's bylaws also contain procedures to be followed to
submit stockholder proposals to a vote of stockholders including the nomination
of directors.

                                 OTHER MATTERS

    Endorex management knows of no matters that are to be presented for action
at the meeting other than those set forth above. If any other matters properly
come before the meeting, the persons named in the enclosed form of proxy will
vote the shares represented by proxies in accordance with their best judgment on
those matters.

                                      159

                 PROPOSAL TO BE VOTED UPON BY CTD STOCKHOLDERS
                           AT THE CTD SPECIAL MEETING

    At the CTD special meeting of stockholders, CTD's stockholders will be asked
to consider and vote on the following proposal:

    To approve and adopt the merger and the Agreement and Plan of Merger and
Reorganization dated as of July 31, 2001, by and among CTD, Endorex and
Roadrunner Acquisition, Inc.

    CTD's board of directors adopted on July 6, 2001, resolutions approving the
merger, the merger agreement and the transactions contemplated thereby. The
merger and the merger agreement must be approved by the affirmative vote, in
person or by proxy, of the holders of a majority of the outstanding shares of
CTD common stock voting together with the holders of Series A preferred stock,
on an as converted basis. The merger contemplated by the merger agreement cannot
be completed unless CTD stockholders holding the requisite number of shares of
CTD capital stock approve the merger and the merger agreement. See "The Merger"
and "Agreement and Plan of Merger and Reorganization and Related Agreements."
Unless otherwise instructed in writing, the proxy holders will vote the proxies
received by them to approve the merger and the merger agreement.

RECOMMENDATION OF THE BOARD OF DIRECTORS

    The board of directors recommends that CTD stockholders vote "FOR" the
approval of the merger and the merger agreement.

OTHER MATTERS

    The management of CTD knows of no matters that are to be presented for
action at the meeting other than those set forth above. If any other matters
properly come before the meeting, the persons named in the enclosed form of
proxy will vote the shares represented by proxies in accordance with their best
judgment on such matters.

                                      160

                                    EXPERTS

    The consolidated financial statements of Endorex at December 31, 2000, and
for the year then ended, included in this joint proxy statement/prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports appearing elsewhere herein, and are included in reliance upon such
reports given on the authority of such firms as experts in accounting and
auditing.

    The financial statements as of December 31, 1999 and for the year then
ended, and for the period cumulative from inception (February 15, 1985) to
December 31, 1999 included in this joint proxy statement/prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

    The consolidated financial statements of CTD at December 31, 2000 and
December 31, 1999 and for the years then ended, and for the cumulative period
from commencement of operations (January 1, 1998) to December 31, 2000, included
in this joint proxy statement/prospectus have been audited by Richard A.
Eisner & Company, LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, which, as to the period from January 1, 1998
through December 31, 2000 is based in part on the report of other auditors. The
financial statements referred to above are included in reliance upon such
reports given on the authority of said firm as experts in accounting and
auditing.

    Representatives of Ernst & Young LLP are expected to be present at the
Endorex annual meeting, will have the opportunity to make a statement at the
Endorex annual meeting if they desire to do so and are expected to be available
to respond to appropriate questions.

    Representatives of Richard A. Eisner & Company, LLP are expected to be
present at the CTD special meeting, will have the opportunity to make a
statement at the CTD special meeting if they desire to do so and are expected to
be available to respond to appropriate questions.

                                 LEGAL MATTERS

    Certain legal matters in connection with the combination will be passed upon
by Brobeck, Phleger & Harrison LLP on behalf of Endorex, and by Kramer Levin
Naftalis & Frankel LLP on behalf of CTD.

                      WHERE YOU CAN FIND MORE INFORMATION

    Endorex files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information Endorex files at the SEC's Public Reference Rooms at 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the SEC's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, Suite 1300, New York, New York 10048. You may obtain information
on the operation of the Public Reference Rooms by calling the SEC at
1-800-SEC-0330. Endorex filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC
(http://www.sec.gov).

    COPIES OF ENDOREX'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
DECEMBER 31, 2000 (EXCLUDING EXHIBITS) AND THE CONSOLIDATED FINANCIAL STATEMENTS
THEREIN MAY BE OBTAINED WITHOUT CHARGE FROM ENDOREX BY SENDING A WRITTEN REQUEST
TO THE ASSISTANT SECRETARY OF ENDOREX AT 28101 BALLARD DRIVE, SUITE F, LAKE
FOREST, ILLINOIS 60045.

    Endorex has supplied all information contained in this document relating to
Endorex. CTD has supplied all information in this document relating to CTD.

                                      161

        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

    The following Unaudited Pro Forma Condensed Consolidated Financial
Statements relate to Endorex's proposed acquisition of CTD. The transaction will
be accounted for under the purchase method of accounting. Under the purchase
method of accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on estimated fair values. Based on the closing price
of Endorex's common stock on June 30, 2001, the acquisition is valued at
approximately $10 million. The amount of the consideration issued to the former
shareholders and option or warrant holders of CTD was determined by arms-length
negotiations between the parties.

    The following Unaudited Pro Forma Condensed Consolidated Balance sheet at
June 30, 2001 reflects the combined historical financial position with pro forma
adjustments as though the acquisition of CTD had occurred on June 30, 2001.

    The Unaudited Pro Forma Condensed Consolidated Statements of Operations for
the year ended December 30, 2000 and the six months ended June 30, 2001 reflect
the combined historical results of operations with pro forma adjustments as
though the acquisition of CTD had occurred on January 1, 2000. The Unaudited Pro
Forma Condensed Consolidated Statements of Operations are based on the
following: 1) historical results of operations of Endorex for the year ended
December 31, 2000 derived from audited financial statements included in
Form 10-KSB; 2) historical results of CTD derived from audited financial
statements for the year ended December 31, 2000; and 3) unaudited financial
statements of Endorex and CTD for the six months ended June 30, 2001.

    The Unaudited Pro Forma Financial Statements and the accompanying notes, or
Pro Forma Financial Information, should be read in conjunction with, and are
qualified by, the historical financial statements and notes thereto of Endorex
and CTD.

    The Unaudited Pro Forma Financial Statements are intended for informational
purposes only and are not necessarily indicative of the combined results that
would have occurred had the acquisition taken place on January 1, 2000, nor is
it necessarily indicative of results that may occur in the future.

                                      P-1

                              ENDOREX CORPORATION

                   UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                                 BALANCE SHEET

                                 JUNE 30, 2001



                                                                         PRO FORMA
                                             ENDOREX          CTD       ADJUSTMENTS    PRO FORMA
                                           ------------   -----------   -----------   ------------
                                                                          
ASSETS
Current Assets:
  Cash and cash equivalents..............  $  9,808,676   $ 5,072,000   $        --   $ 14,880,676
  Receivable from related party..........        26,745            --            --         26,745
  Prepaid expenses.......................        52,930         1,000            --         53,930
                                           ------------   -----------   -----------   ------------
    Total current assets.................     9,888,351     5,073,000            --     14,961,351
Leasehold improvements and equipment,
  net....................................       407,373        13,000            --        420,373
Patent issuance costs, net...............       281,845       116,000            --        397,845
Identifiable intangibles.................            --            --     5,372,513 c    5,372,513
Other assets.............................     1,004,608         3,000    (1,004,608)d        3,000
                                           ------------   -----------   -----------   ------------
TOTAL ASSETS.............................  $ 11,582,177   $ 5,205,000   $ 4,367,905   $ 21,155,082
                                           ============   ===========   ===========   ============
LIABILITIES
Current liabilities:
  Accounts payable and accrued
    expenses.............................  $    674,319   $   242,000   $        --   $    916,319
  Accrued compensation...................       174,616            --            --        174,616
  Dur to joint ventures..................     2,285,831            --            --      2,285,831
  Current portion of capital lease
    obligations..........................       126,611            --            --        126,611
                                           ------------   -----------   -----------   ------------
    Total current liabilities............     3,261,377       242,000            --      3,503,377
Long-term portion of capital lease
  obligations............................       162,754            --            --        162,754
                                           ------------   -----------   -----------   ------------
    Total liabilities....................     3,424,131       242,000            --      3,666,131

Series C Preferred stock.................    10,004,315            --            --     10,004,315

Stockholders' equity (deficit):
  Preferred stock........................            --         8,000        (8,000)b           --
  Series B convertible preferred stock...    10,439,339            --            --     10,439,339
  Common Stock...........................        12,861         5,000         9,050 a       21,911
                                                                             (5,000)b
  Additional paid-in capital.............    39,633,107    13,971,000     9,328,909 a   48,962,016
                                                                        (13,971,000)b
  Deferred compensation..................        (6,350)      (66,000)       (7,054)c      (13,404)
                                                                             66,000 b
  Deficit accumulated during the
    development stage....................   (51,481,746)   (8,955,000)    8,955,000 b  (51,481,746)
  Unrealized gain on marketable
    securities...........................           270            --            --            270
  Treasury stock.........................      (443,750)           --            --       (443,750)
                                           ------------   -----------   -----------   ------------
    Total stockholders' equity
      (deficit)..........................    (1,846,269)    4,963,000     4,367,905      7,484,636
                                           ------------   -----------   -----------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY.................................  $ 11,582,177   $ 5,205,000   $ 4,367,905   $ 21,155,082
                                           ============   ===========   ===========   ============


                                      P-2

                              ENDOREX CORPORATION

                   UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                            STATEMENT OF OPERATIONS

                     FOR THE SIX MONTHS ENDED JUNE 30, 2001



                                                                           PRO FORMA
                                                ENDOREX         CTD       ADJUSTMENTS    PRO FORMA
                                              -----------   -----------   -----------   -----------
                                                                            
SBIR contract revenue.......................  $        --   $        --    $      --    $        --
Expenses:
  SBIR contract research and development....           --            --           --             --
  Proprietary research and development......    1,171,494       880,000           --      2,051,494
  General and administrative................      908,269       724,000           --      1,632,269
  Intangible amortization...................           --            --      537,251c       537,251
                                              -----------   -----------    ---------    -----------
Total Expenses..............................    2,079,763     1,604,000      537,251      4,221,014
                                              -----------   -----------    ---------    -----------
Loss from operations........................   (2,079,763)   (1,604,000)    (537,251)    (4,221,014)
Equity in losses from joint ventures........     (577,661)           --           --       (577,661)
Other income................................       (1,577)           --           --         (1,577)
Interest income.............................      294,686       173,000           --        467,686
Interest expense............................      (27,320)           --           --        (27,320)
                                              -----------   -----------    ---------    -----------
Net loss....................................   (2,391,635)   (1,431,000)    (537,251)    (4,359,886)
Preferred stock dividends...................     (737,142)           --           --       (737,142)
                                              -----------   -----------    ---------    -----------
Net loss applicable to common
  stockholders..............................  $(3,128,777)  $(1,431,000)   $(537,251)   $(5,097,028)
                                              ===========   ===========    =========    ===========
Basic and diluted net loss per share
  applicable to common stockholders.........  $     (0.25)                              $     (0.23)
Basic and diluted weighted average common
  shares outstanding........................   12,741,858                                22,175,742


                                      P-3

                              ENDOREX CORPORATION

                   UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                            STATEMENT OF OPERATIONS

                      FOR THE YEAR ENDED DECEMBER 31, 2000



                                                                          PRO FORMA
                                               ENDOREX         CTD       ADJUSTMENTS    PRO FORMA
                                             -----------   -----------   -----------   -----------
                                                                           
SBIR contract revenue......................  $        --   $        --   $        --   $        --
Expenses:
  SBIR contract research and development...           --            --                          --
  Proprietary research and development.....      956,742     1,324,000                   2,280,742
  General and administrative...............    2,101,767     1,354,000                   3,455,767
  Intangible amortization..................           --            --     1,074,503     1,074,503
  Stock option compensation................           --            --         7,054 c       7,054
                                             -----------   -----------   -----------   -----------
Total Expenses.............................    3,058,509     2,678,000     1,081,557     6,818,066
                                             -----------   -----------   -----------   -----------
Loss from operations.......................   (3,058,509)   (2,678,000)   (1,081,557)   (6,818,066)
Equity in losses from joint ventures.......   (2,682,368)           --                  (2,682,368)
Other income...............................      250,000            --                     250,000
Interest income............................      747,073       428,000                   1,175,073
Interest expense...........................      (51,889)           --                     (51,889)
                                             -----------   -----------   -----------   -----------
Net loss...................................   (4,795,693)   (2,250,000)   (1,081,557)   (8,127,250)
Preferred stock dividends..................   (1,382,200)           --                  (1,382,200)
                                             -----------   -----------   -----------   -----------
Net loss applicable to common
  stockholders.............................  $(6,177,893)  $(2,250,000)  $(1,081,557)  $(9,509,450)
                                             ===========   ===========   ===========   ===========
Basic and diluted net loss per share
  applicable to common stockholders........  $     (0.51)                              $     (0.44)
Basic and diluted weighted average common
  shares outstanding.......................   12,194,260                                21,628,144


                                      P-4

                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS

(1) To record the June 30, 2001 acquisition of CTD.

    A summary of the purchase price for the acquisition is as follows:


                                                      
Stock..................................................  $ 9,056,529
Stock options and warrants.............................      274,376
Direct acquisition costs...............................    1,004,608
                                                         -----------
Total Purchase price...................................  $10,335,513
                                                         ===========


    The purchase price was allocated as follows:


                                                      
Cash acquired..........................................  $ 5,072,000
Other current assets...................................        4,000
Equipment..............................................       13,000
Licenses...............................................      116,000
Accounts payable and accrued expenses..................     (242,000)
Indentifiable Intangibles..............................    5,372,513
                                                         -----------
                                                         $10,335,513
                                                         ===========


    Purchase accounting adjustments include:

       a)  The issuance of Endorex common stock as part of the purchase price.

       b)  The elimination of CTD's equity prior to the transaction.

       c)  The recognition of identifiable intangibles and unearned
           compensation. Identifiable intangible amortization has been based
           upon a five year life. Unearned compensation amortization has been
           based upon the remaining average vesting period of the unvested
           options (5 months).

       d)  The recognition of estimated closing costs of $1,004,608.

(2) Pro Forma basic and diluted net loss per share are computed by dividing the
    pro forma net loss attributable to common shareholders by the pro forma
    weighted average number of common shares outstanding. Potentially dilutive
    securities were not taken into account because their effects would be
    anti-dilutive. A reconciliation of shares used to compute historical basic
    and diluted net loss per share to shares used to compute pro forma basic and
    diluted net loss per share is as follows:



                                                       SIX MONTHS ENDED      YEAR ENDED
                                                        JUNE 30, 2001     DECEMBER 31, 2000
                                                       ----------------   -----------------
                                                                    
Shares used to compute historical basic and diluted
  net loss per share.................................     12,741,858         12,194,260
Shares issued in acquisition.........................      9,433,884          9,433,884
                                                          ----------         ----------
Shares used to compute pro forma basic and diluted
  net loss per share.................................     22,175,742         21,628,144
                                                          ==========         ==========


                                      P-5

                   INDEX OF CONSOLIDATED FINANCIAL STATEMENTS


                                                           
               ENDOREX CORPORATION AND ITS SUBSIDIARIES

Report of Independent Auditors..............................     F-4

Report of Independent Accountants...........................     F-5

Balance Sheets as of December 31, 2000 and 1999.............     F-6

Statements of Operations for the years ended December 31,
  2000 and 1999 and the cumulative period February 15, 1985
  (Inception) to December 31, 2000..........................     F-7

Statements of Stockholders' Equity from February 15, 1985
  (Inception) to December 31, 2000..........................     F-8

Statements of Cash Flows for the years ended December 31,
  2000 and 1999 and the cumulative period February 15, 1985
  (Inception) to December 31, 2000..........................    F-11

Notes to Financial Statements...............................    F-12

Balance Sheets as of June 30, 2000 and 1999 (unaudited).....    F-22

Statements of Operations for the six months ended June 30,
  2001 and 2000 and the cumulative period February 15, 1985
  (Inception) to June 30, 2001 (unaudited)..................    F-23

Statements of Operations for the three months ended
  June 30, 2001 and 2000 (unaudited)........................    F-24

Statements of Cash Flows for the six months ended June 30,
  2001 and 2000 and the cumulative period February 15, 1985
  (Inception) to December 31, 2000 (unaudited)..............    F-25

Notes to Financial Statements (unaudited)...................    F-26

               CORPORATE TECHNOLOGY DEVELOPMENT, INC.

Report of Independent Auditors..............................    F-28

Balance Sheets as of December 31, 2000 and 1999 and as of
  June 30, 2000 (unaudited).................................    F-29

Statements of Operations for the years ended December 31,
  2000 and 1999 and the cumulative period January 1, 1998
  (Inception) to December 31, 2000 and the six months ended
  June 30, 2001 and June 30, 2000 (unaudited) and the
  cumulative period January 1, 1998 (Inception) to June 30,
  2001 (unaudited)..........................................    F-30

Statements of Changes in Stockholders' Equity from
  January 1, 1998 (Inception) to December 31, 2000 and as of
  June 30, 2001 (unaudited).................................    F-31

Statements of Cash Flows for the years ended December 31,
  2000 and 1999 and the cumulative period January 1, 1998
  (Inception) to December 31, 2000, the six months ended
  June 30, 2001 and June 30, 2000 (unaudited) and the
  cumulative period January 1, 1998 (Inception) to June 30,
  2001 (unaudited)..........................................    F-32

Notes to Financial Statements...............................    F-33


                                      F-1

                 (This page has been left blank intentionally.)

                                      F-2

                           ENDOREX CORPORATION, INC.
                                AND SUBSIDIARIES
                         (A DEVELOPMENT STAGE COMPANY)
                       CONSOLIDATED FINANCIAL STATEMENTS

                                      F-3

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Endorex Corporation
(A Development Stage Enterprise)

    We have audited the accompanying balance sheet of Endorex Corporation (the
Company, a development stage enterprise) as of December 31, 2000, and the
related statements of operations, stockholders' equity, and cash flows for the
year then ended, and for the period February 15, 1985 (inception) through
December 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements as of
December 31, 1999 and for the year then ended and for the period February 15,
1985 (inception) through December 31, 1999, were audited by other auditors whose
report dated February 4, 2000 expressed an unqualified opinion on those
statements. The financial statements for the period February 15, 1985
(inception) through December 31, 1999 include total revenues and net loss of
$100,000 and $(42,758,195), respectively. Our opinion on the statements of
operations, stockholders' equity, and cash flows for the period February 15,
1985 (inception) through December 31, 2000, insofar as it relates to amounts for
prior periods through December 31, 1999, is based solely on the report of other
auditors.

    We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit and the report of other
auditors provide a reasonable basis for our opinion.

    In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of the Company at December 31, 2000 and the results of
its operations and its cash flows for the year then ended and the period from
February 15, 1985 (inception) through December 31, 2000, in conformity with
accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP
Milwaukee, Wisconsin
February 15, 2001

                                      F-4

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Endorex Corporation
(A Development Stage Enterprise):

    In our opinion, the accompanying consolidated balance sheet as of
December 31, 1999 and the related consolidated statements of operations, of
stockholders' equity and of cash flows for the year ended December 31, 1999, and
for the period cumulative from inception (February 15, 1985) to December 31,
1999, present fairly, in all material respects, the financial position, results
of operations and cash flows of Endorex Corporation and its subsidiaries (a
development stage enterprise) at December 31, 1999 and for the year ended
December 31, 1999, and for the period cumulative from inception (February 15,
1985) to December 31, 1999, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. We have not
audited the consolidated financial statements of Endorex Corporation for any
period subsequent to December 31, 1999.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois
February 4, 2000

                                      F-5

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                          CONSOLIDATED BALANCE SHEETS



                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2000           1999
                                                              ------------   ------------
                                                                       
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 10,831,266   $  4,995,906
  Marketable securities--available for sale.................     2,014,984      3,547,847
  Receivable from related party.............................       126,538         34,339
  Prepaid expenses..........................................        58,803         68,207
                                                              ------------   ------------
    Total current assets....................................    13,031,591      8,646,299
Leasehold improvements and equipment net of, accumulated
  amortization of $800,066 and $649,092.....................       384,162        448,951
Patent issuance costs, net of accumulated amortization of
  $10,970 and $5,088........................................       253,705        176,875
                                                              ------------   ------------
TOTAL ASSETS................................................  $ 13,669,458   $  9,272,125
                                                              ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable and accrued expenses.....................  $    642,440   $    496,889
  Accrued compensation......................................       147,205        184,508
  Due to joint ventures.....................................     2,010,713        942,333
  Current portion of capital lease obligations..............       118,793        110,342
                                                              ------------   ------------
    Total current liabilities...............................     2,919,151      1,734,072
Long-term portion of capital lease obligations..............       204,162        281,899
                                                              ------------   ------------
    Total Liabilities.......................................     3,123,313      2,015,971

Series C exchangeable convertible preferred stock, $.05 par
  value. Authorized 200,000 shares; 97,603 and 91,218 issued
  and outstanding, at liquidation value.....................     9,665,512      9,027,012

Stockholders' equity (deficit):
  Preferred stock, $.001 par value. Authorized 4,600,000
    shares; none issued and outstanding.....................            --             --
  Series B convertible preferred stock, $.05 par value.
    Authorized 200,000 shares; 100,410 and 92,973 issued &
    outstanding, at liquidation value.......................    10,041,000      9,297,300
  Common stock, $.001 par value. Authorized 50,000,000
    shares; 12,860,500 and 10,874,295 issued, 12,741,858 and
    10,755,653 outstanding..................................        12,861         10,878
  Additional paid-in capital................................    40,365,410     33,659,131
  Deferred compensation.....................................        (4,853)            --
  Deficit accumulated during the development stage..........   (49,090,110)   (44,294,417)
  Unrealized gain on marketable securities..................            75             --
                                                              ------------   ------------
                                                                 1,324,383     (1,327,108)
  Less: Treasury stock, at cost, 118,642 shares.............      (443,750)      (443,750)
                                                              ------------   ------------
    Total Stockholders' Equity (Deficit)....................       880,633     (1,770,858)
                                                              ------------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........  $ 13,669,458   $  9,272,125
                                                              ============   ============


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-6

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                     CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                                    CUMULATIVE PERIOD
                                                                                      FEBRUARY 15,
                                                       YEAR ENDED     YEAR ENDED    1985 (INCEPTION)
                                                      DECEMBER 31,   DECEMBER 31,    TO DECEMBER 31,
                                                          2000           1999             2000
                                                      ------------   ------------   -----------------
                                                                           
SBIR contract revenue...............................  $        --    $        --      $    100,000
Expenses:
  SBIR contract research and development............           --             --            86,168
  Proprietary research and development..............      956,742      2,028,945        14,833,005
  General and administrative........................    2,101,767      3,046,684        13,072,044
                                                      -----------    -----------      ------------
Total expenses......................................    3,058,509      5,075,629        27,991,217
                                                      -----------    -----------      ------------
Loss from operations................................   (3,058,509)    (5,075,629)      (27,891,217)
Equity in losses from joint ventures................   (2,682,368)    (2,865,908)      (22,646,251)
Other income........................................      250,000          3,790           255,302
Interest income.....................................      747,073        488,582         3,041,588
Interest expense....................................      (51,889)       (51,854)         (313,310)
                                                      -----------    -----------      ------------
Loss before income taxes............................   (4,795,693)    (7,501,019)      (47,553,888)
Income taxes........................................           --             --                --
                                                      -----------    -----------      ------------
Net loss............................................   (4,795,693)    (7,501,019)      (47,553,888)
Preferred stock dividends...........................   (1,382,200)    (1,285,413)       (3,380,800)
                                                      -----------    -----------      ------------
Net loss applicable to common stockholders..........  $(6,177,893)   $(8,786,432)     $(50,934,688)
                                                      ===========    ===========      ============
Basic and diluted net loss per share applicable to
  common stockholders...............................  $     (0.51)   $     (0.82)     $     (16.30)
Basic and diluted weighted average common shares
  outstanding.......................................   12,194,260     10,755,328         3,125,041


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-7

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY


                                                                                                                    (DEFICIT)
                                                                                                                   ACCUMULATED
                                                        COMMON STOCK           PREFERRED STOCK       ADDITIONAL     DURING THE
                                                   ----------------------   ----------------------     PAID-IN     DEVELOPMENT
                                                     SHARES     PAR VALUE    SHARES       VALUE        CAPITAL        STAGE
                                                   ----------   ---------   --------   -----------   -----------   ------------
                                                                                                 
Common stock issued for cash in February 1985 at
  $1.50 per share................................         667    $     1                             $       999   $         --
Net earnings for the period from February 15,
  1985 to January 31, 1986.......................          --         --                                      --          6,512
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1986........................         667          1                                     999          6,512
Common stock issued for cash in October 1986 at
  $750.00 per share..............................         666          1                                 499,999             --
Excess of fair market value over option Price of
  non-qualified stock option granted.............          --         --                                  13,230             --
Net loss for the year............................          --         --                                      --        (34,851)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1987........................       1,333          2                                 514,228        (28,339)
Common stock issued in May 1987 at $750.00 per
  share for legal services performed for the
  company........................................           7         --                                   5,000             --
Net proceeds from initial public stock offering
  in June 1987 at $6,000.00 per share, less
  issuance costs.................................         333         --                               1,627,833             --
Non-qualified stock options exercised............          48         --                                  33,808             --
Amortization of deferred compensation............          --         --                                      --             --
Excess of fair market value over option price of
  non-qualified stock options granted............          --         --                                  75,063             --
Net loss for the year............................          --         --                                      --       (627,652)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1988........................       1,721          2                               2,255,932       (655,991)
Non-qualified stock options exercised............          18         --                                     256             --
Stock warrants exercised.........................           1         --                                  12,000             --
Common stock redeemed and retired................         (10)        --                                    (150)            --
Excess of fair market value over option price of
  non-qualified stock options granted............          --         --                                  36,524             --
Amortization of deferred compensation............          --         --                                      --             --
Net loss for the Year............................          --         --                                      --     (1,092,266)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1989........................       1,730          2                               2,304,562     (1,748,257)
Non-qualified stock options exercised............          71         --                                   1,060             --
Common stock redeemed and retired................         (12)        --                                    (175)            --
Excess of fair market value over option price of
  non-qualified stock options granted............          --         --                                 113,037             --
Net proceeds from secondary public stock offering
  in April 1989 at $525.00 per share, less
  issuance cost..................................       2,174          2                                 980,178             --
Amortization of deferred compensation............          --         --                                      --             --
Net loss for the year............................          --         --                                      --     (1,129,477)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1990........................       3,963          4                               3,398,662     (2,877,734)
Common stock issued for cash in October 1990
  through January 1991 at $9.00 per share........       5,694          6                                  51,244             --
Excess of fair market value over option price of
  non-qualified stock options granted............          --         --                                  30,635             --
Net loss for the year............................          --         --                                      --       (854,202)
                                                   ----------    -------    -------    -----------   -----------   ------------



                                                       OTHER          TREASURY STOCK                                       TOTAL
                                                   COMPREHENSIVE   --------------------     DEFERRED        NOTE       STOCKHOLDERS'
                                                      INCOME        SHARES      COST      COMPENSATION   RECEIVABLE       EQUITY
                                                   -------------   --------   ---------   ------------   -----------   -------------
                                                                                                     
Common stock issued for cash in February 1985 at
  $1.50 per share................................    $     --           --    $      --    $      --     $        --   $      1,000
Net earnings for the period from February 15,
  1985 to January 31, 1986.......................                       --           --           --              --          6,512
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1986........................                       --           --           --              --          7,512
Common stock issued for cash in October 1986 at
  $750.00 per share..............................                       --           --           --              --        500,000
Excess of fair market value over option Price of
  non-qualified stock option granted.............                       --           --           --              --         13,230
Net loss for the year............................                       --           --           --              --        (34,851)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1987........................                       --           --           --              --        485,891
Common stock issued in May 1987 at $750.00 per
  share for legal services performed for the
  company........................................                       --           --           --              --          5,000
Net proceeds from initial public stock offering
  in June 1987 at $6,000.00 per share, less
  issuance costs.................................                       --           --           --              --      1,627,833
Non-qualified stock options exercised............                       --           --      (28,188)             --          5,620
Amortization of deferred compensation............                       --           --        7,425              --          7,425
Excess of fair market value over option price of
  non-qualified stock options granted............                       --           --           --              --         75,063
Net loss for the year............................                       --           --           --              --       (627,652)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1988........................                       --           --      (20,763)             --      1,579,180
Non-qualified stock options exercised............                       --           --           --              --            256
Stock warrants exercised.........................                       --           --           --              --         12,000
Common stock redeemed and retired................                       --           --           --              --           (150)
Excess of fair market value over option price of
  non-qualified stock options granted............                       --           --           --              --         36,524
Amortization of deferred compensation............                       --           --       19,113              --         19,113
Net loss for the Year............................                       --           --           --              --     (1,092,266)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1989........................                       --           --       (1,650)             --        554,657
Non-qualified stock options exercised............                       --           --           --              --          1,060
Common stock redeemed and retired................                       --           --           --              --           (175)
Excess of fair market value over option price of
  non-qualified stock options granted............                       --           --           --              --        113,037
Net proceeds from secondary public stock offering
  in April 1989 at $525.00 per share, less
  issuance cost..................................                       --           --           --              --        980,180
Amortization of deferred compensation............                       --           --        1,650              --          1,650
Net loss for the year............................                       --           --           --              --     (1,129,477)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1990........................                       --           --           --              --        520,932
Common stock issued for cash in October 1990
  through January 1991 at $9.00 per share........                       --           --           --              --         51,250
Excess of fair market value over option price of
  non-qualified stock options granted............                       --           --           --              --         30,635
Net loss for the year............................                       --           --           --              --       (854,202)
                                                     --------      -------    ---------    ---------     -----------   ------------


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-8

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)


                                                                                                                    (DEFICIT)
                                                                                                                   ACCUMULATED
                                                        COMMON STOCK           PREFERRED STOCK       ADDITIONAL     DURING THE
                                                   ----------------------   ----------------------     PAID-IN     DEVELOPMENT
                                                     SHARES     PAR VALUE    SHARES       VALUE        CAPITAL        STAGE
                                                   ----------   ---------   --------   -----------   -----------   ------------
                                                                                                 
BALANCE--JANUARY 31, 1991--FORWARD...............       9,657    $    10                             $ 3,480,541   $ (3,731,936)
Common stock issued for cash in February 1991
  through April 1991 at $9.00 per share..........       2,772          3                                  24,947             --
Common stock issued for cash and services in
  November 1991 at $1.50 per share...............      15,333         15                                  22,985             --
Common stock issued for cash and note in December
  1991 at $0.75 per share........................     296,949        297                                 200,018             --
Excess of fair market value over option price of
  non-qualified stock options granted............          --         --                                  16,570             --
Non-qualified stock options exercised............           1         --                                       1             --
Net loss for the year............................          --         --                                      --       (410,149)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1992........................     324,712        325                               3,745,062     (4,142,085)
Payment on note receivable.......................          --         --                                      --             --
Net proceeds from secondary public stock offering
  in August 1992 at $112.50 per share, less
  issuance costs.................................      66,666         66                               6,230,985             --
Non-qualified stock options exercised............       2,000          2                                      28             --
Net loss for the year............................          --         --                                      --       (564,173)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1993........................     393,378        393                               9,976,075     (4,706,258)
Excess of fair market value over option price of
  non-qualified stock options granted............          --         --                                 126,000             --
Amortization of deferred compensation............          --         --                                      --             --
Non-qualified stock options exercised............          67         --                                      57             --
Collection of note receivable....................          --         --                                      --             --
Net loss for the year............................          --         --                                      --     (1,012,882)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1994........................     393,445        393                              10,102,132     (5,719,140)
Acquisition of treasury stock....................          --         --                                      --             --
Forfeiture of non-qualified stock options
  granted........................................          --         --                                 (22,402)            --
Amortization of deferred compensation............          --         --                                      --             --
Net loss for the year............................          --         --                                      --     (1,349,678)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1995........................     393,445        393                              10,079,730     (7,068,818)
Acquisition of treasury stock....................          --         --                                      --             --
Forfeiture of non-qualified stock options
  granted........................................          --         --                                  (1,379)            --
Amortization of deferred compensation............          --         --                                      --             --
Net loss for the year............................          --         --                                      --     (1,187,985)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--JANUARY 31, 1996........................     393,445        393                              10,078,351     (8,256,803)
Common stock issued at $0.975 per share..........     333,333        333                                 324,667             --
Common stock issued at $3.00 per share...........     333,333        333                                 999,667             --
Non-qualified stock options exercised............     145,283        146                                 379,003             --
Net loss for the period..........................          --         --                                      --     (1,962,877)
                                                   ----------    -------    -------    -----------   -----------   ------------



                                                       OTHER          TREASURY STOCK                                       TOTAL
                                                   COMPREHENSIVE   --------------------     DEFERRED        NOTE       STOCKHOLDERS'
                                                      INCOME        SHARES      COST      COMPENSATION   RECEIVABLE       EQUITY
                                                   -------------   --------   ---------   ------------   -----------   -------------
                                                                                                     
BALANCE--JANUARY 31, 1991--FORWARD...............                       --    $      --    $      --     $        --   $   (251,385)
Common stock issued for cash in February 1991
  through April 1991 at $9.00 per share..........                       --           --           --              --         24,950
Common stock issued for cash and services in
  November 1991 at $1.50 per share...............                       --           --           --              --         23,000
Common stock issued for cash and note in December
  1991 at $0.75 per share........................                       --           --           --         (50,315)       150,000
Excess of fair market value over option price of
  non-qualified stock options granted............                       --           --           --              --         16,570
Non-qualified stock options exercised............                       --           --           --              --              1
Net loss for the year............................                       --           --           --              --       (410,149)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1992........................                       --           --           --         (50,315)      (447,013)
Payment on note receivable.......................                       --           --           --          11,300         11,300
Net proceeds from secondary public stock offering
  in August 1992 at $112.50 per share, less
  issuance costs.................................                       --           --           --              --      6,231,051
Non-qualified stock options exercised............                       --           --           --              --             30
Net loss for the year............................                       --           --           --              --       (564,173)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1993........................                       --           --           --         (39,015)     5,231,195
Excess of fair market value over option price of
  non-qualified stock options granted............                       --           --     (126,000)             --             --
Amortization of deferred compensation............                       --           --       40,750              --         40,750
Non-qualified stock options exercised............                       --           --           --              --             57
Collection of note receivable....................                       --           --           --          39,015         39,015
Net loss for the year............................                       --           --           --              --     (1,012,882)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1994........................                       --           --      (85,250)             --      4,298,135
Acquisition of treasury stock....................                   41,975     (300,000)          --              --       (300,000)
Forfeiture of non-qualified stock options
  granted........................................                       --           --       22,402              --             --
Amortization of deferred compensation............                       --           --       49,348              --         49,348
Net loss for the year............................                       --           --           --              --     (1,349,678)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1995........................                   41,975     (300,000)     (13,500)             --      2,697,805
Acquisition of treasury stock....................                   76,667     (143,750)          --              --       (143,750)
Forfeiture of non-qualified stock options
  granted........................................                       --           --        1,379              --             --
Amortization of deferred compensation............                       --           --       12,121              --         12,121
Net loss for the year............................                       --           --           --              --     (1,187,985)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--JANUARY 31, 1996........................                  118,642     (443,750)          --              --      1,378,191
Common stock issued at $0.975 per share..........                       --           --           --              --        325,000
Common stock issued at $3.00 per share...........                       --           --           --              --      1,000,000
Non-qualified stock options exercised............                       --           --           --              --        379,149
Net loss for the period..........................                       --           --           --              --     (1,962,877)
                                                     --------      -------    ---------    ---------     -----------   ------------


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-9

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)


                                                                                                                    (DEFICIT)
                                                                                                                   ACCUMULATED
                                                        COMMON STOCK           PREFERRED STOCK       ADDITIONAL     DURING THE
                                                   ----------------------   ----------------------     PAID-IN     DEVELOPMENT
                                                     SHARES     PAR VALUE    SHARES       VALUE        CAPITAL        STAGE
                                                   ----------   ---------   --------   -----------   -----------   ------------
                                                                                                 
BALANCE--DECEMBER 31, 1996--FORWARD..............   1,205,394    $ 1,205               $             $11,781,688   $(10,219,680)
Warrants exercised at $1.20 per share............       1,173          1                                   1,407             --
Proceeds on exercise of stock options............          --         --                                   5,000             --
Warrants Issued..................................                                                      5,407,546
Net proceeds from private placement at $2.3125
  per share, less issuance cost..................   8,648,718      8,650                              15,122,943             --
Net loss for the year............................          --         --                                      --     (3,244,326)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--DECEMBER 31, 1997.......................   9,855,285      9,856                              32,318,584    (13,464,006)
Net proceeds from issuance of common stock and
  warrants.......................................     307,692        308                               1,871,537             --
Proceeds from exercise of stock options..........      25,000         25                                  61,725             --
Purchase and retirement of common stock..........    (133,335)      (134)                               (129,866)
Net proceeds from issuance of Series B Preferred
  Stock at $100 per share........................                            80,100      8,010,000
Accrued preferred stock dividends................                             5,986        598,666      (713,187)
Net loss for the year............................          --         --                                      --    (21,793,170)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--DECEMBER 31, 1998.......................  10,054,642     10,055     86,086      8,608,666    33,408,793    (35,257,176)
Proceeds from exercise of stock options..........         334          4                                     347             --
Common stock dividends issued....................     819,319        819                               1,535,403     (1,536,222)
Accrued preferred stock dividends................                             6,887        688,634    (1,285,412)
Net loss for the year............................          --         --                                      --     (7,501,019)
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--DECEMBER 31, 1999.......................  10,874,295     10,878     92,973      9,297,300    33,659,131    (44,294,417)
Net proceeds from private placement at $4.725 per
  share, less issuance cost......................   1,809,520      1,810                               7,772,738
Issuance of options issued in exchange for
  financial advisory services....................                                                         87,373
Issuance of options issued in exchange for
  consulting services............................                                                         12,787
Amortization of deferred compensation............
Proceeds from exercise of stock options..........      71,722         69                                 215,685
Non-cash exercise of warrants....................     104,963        104                                    (104)
Accrued preferred stock dividends................                             7,437        743,700    (1,382,200)
Unrealized gain on marketable securities.........
Net loss for the year............................                                                                    (4,795,693)
Comprehensive loss...............................
                                                   ----------    -------    -------    -----------   -----------   ------------
BALANCE--DECEMBER 31, 2000.......................  12,860,500    $12,861    100,410    $10,041,000   $40,365,410   $(49,090,110)
                                                   ==========    =======    =======    ===========   ===========   ============



                                                       OTHER          TREASURY STOCK                                       TOTAL
                                                   COMPREHENSIVE   --------------------     DEFERRED        NOTE       STOCKHOLDERS'
                                                      INCOME        SHARES      COST      COMPENSATION   RECEIVABLE       EQUITY
                                                   -------------   --------   ---------   ------------   -----------   -------------
                                                                                                     
BALANCE--DECEMBER 31, 1996--FORWARD..............                  118,642    $(443,750)   $      --     $        --   $  1,119,463
Warrants exercised at $1.20 per share............                       --           --           --              --          1,408
Proceeds on exercise of stock options............                       --           --           --              --          5,000
Warrants Issued..................................                                                                         5,407,546
Net proceeds from private placement at $2.3125
  per share, less issuance cost..................                       --           --           --              --     15,131,593
Net loss for the year............................                       --           --           --              --     (3,244,326)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--DECEMBER 31, 1997.......................                  118,642     (443,750)          --              --     18,420,684
Net proceeds from issuance of common stock and
  warrants.......................................                       --           --           --              --      1,871,845
Proceeds from exercise of stock options..........                       --           --           --              --         61,750
Purchase and retirement of common stock..........                                                                          (130,000)
Net proceeds from issuance of Series B Preferred
  Stock at $100 per share........................                                                                         8,010,000
Accrued preferred stock dividends................                                                                          (114,521)
Net loss for the year............................                       --           --           --              --    (21,793,170)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--DECEMBER 31, 1998.......................                  118,642     (443,750)          --              --      6,326,588
Proceeds from exercise of stock options..........                       --           --           --              --            351
Common stock dividends issued....................                                                                                --
Accrued preferred stock dividends................                                                                          (596,778)
Net loss for the year............................                       --           --           --              --     (7,501,019)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--DECEMBER 31, 1999.......................                  118,642     (443,750)          --              --     (1,770,858)
Net proceeds from private placement at $4.725 per
  share, less issuance cost......................                                                                         7,774,548
Issuance of options issued in exchange for
  financial advisory services....................                                            (87,373)                            --
Issuance of options issued in exchange for
  consulting services............................                                            (12,787)                            --
Amortization of deferred compensation............                                             95,307                         95,307
Proceeds from exercise of stock options..........                                                                           215,754
Non-cash exercise of warrants....................                                                                                --
Accrued preferred stock dividends................                                                                          (638,500)
Unrealized gain on marketable securities.........          75                                                                    75
Net loss for the year............................                                                                        (4,795,693)
Comprehensive loss...............................                                                                        (4,795,618)
                                                     --------      -------    ---------    ---------     -----------   ------------
BALANCE--DECEMBER 31, 2000.......................    $     75      118,642    $(443,750)   $  (4,853)    $        --   $    880,633
                                                     ========      =======    =========    =========     ===========   ============


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-10

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                      CONSOLIDATED STATEMENTS OF CASH FLOW



                                                                                              CUMULATIVE PERIOD
                                                                                              FEBRUARY 15, 1985
                                                               YEAR ENDED      YEAR ENDED       (INCEPTION) TO
                                                              DECEMBER 31,    DECEMBER 31,       DECEMBER 31,
                                                                  2000            1999               2000
                                                              -------------   -------------   ------------------
                                                                                     
OPERATING ACTIVITIES:
  Net Loss..................................................  $ (4,795,693)    $(7,501,019)      $(47,553,888)
  Adjustments to reconcile net loss to cash used in
    operating activities:
    Depreciation and amortization...........................       156,856         153,894          1,374,580
    Gain on sale of marketable Securities--available for
      sale..................................................            --        (110,244)          (110,244)
    Noncash stock compensation..............................        95,307                            755,773
    Equity in losses from joint ventures....................     2,682,368       2,865,908         22,646,251
      Amortization of fair value of warrants................            --       1,253,856          3,307,546
    Gain on sale of assets..................................            --          (3,790)            (4,530)
    Write off patent issuance cost..........................            --         327,078            439,725
  Changes in assets and liabilities:
    Restricted cash.........................................            --         500,000                 --
    Receivable from related party...........................       (92,199)        (34,339)          (126,538)
    Prepaid expenses........................................         9,404          (2,446)           (58,803)
    Accounts payable and accrued expenses...................       145,551         188,503            732,410
    Accrued compensation....................................       (37,303)        (56,509)           147,205
    Due to joint ventures...................................    (1,613,988)        442,333           (671,655)
                                                              ------------     -----------       ------------
        Total adjustments...................................     1,345,996       5,524,244         28,431,720
                                                              ------------     -----------       ------------
NET CASH USED IN OPERATING ACTIVITIES.......................    (3,449,697)     (1,976,775)       (19,122,168)

INVESTING ACTIVITIES:
  Patent issuance cost......................................       (82,712)       (152,530)          (759,225)
  Investment in joint ventures..............................            --      (2,465,408)       (19,963,883)
  Organizational costs incurred.............................            --              --               (135)
  Purchases of leasehold improvements.......................            --         (20,054)          (695,613)
  Purchases of office and lab equipment.....................       (86,185)       (107,873)          (997,461)
  Proceeds from assets sold.................................            --           3,790              4,790
  Purchases of marketable securities--available for sale....    (5,390,981)     (4,663,099)       (11,004,080)
  Proceeds from sale of marketable securities--available for
    sale....................................................     6,923,919       2,175,496          9,099,415
                                                              ------------     -----------       ------------
NET CASH USED IN INVESTING ACTIVITIES.......................     1,364,041      (5,229,678)       (24,316,192)

FINANCING ACTIVITIES:
  Net proceeds from issuance of common stock................     7,774,548              --         37,799,270
  Net proceeds from issuance of preferred stock.............            --              --         16,325,712
  Proceeds from exercise of options.........................       215,754             351            417,092
  Proceeds from borrowings under line of credit.............        45,621          95,774          1,196,534
  Repayment of borrowings under line of credit..............      (114,907)        (96,181)          (873,579)
  Proceeds from notes payable...............................            --              --            342,300
  Payments on notes payable.................................            --              --           (342,300)
  Repayment of long-term note receivable....................            --              --             50,315
  Repayment of note payable issued in exchange for legal
    service.................................................            --              --            (71,968)
  Purchase and retirement of common stock...................            --              --           (130,000)
  Purchase of treasury stock................................            --              --           (443,750)
                                                              ------------     -----------       ------------
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES..........     7,921,016             (56)        54,269,626
                                                              ------------     -----------       ------------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS.........     5,835,360      (7,206,509)        10,831,266
CASH AND CASH EQUIVALENTS--BEGINNING OF PERIOD..............     4,995,906      12,202,415                 --
                                                              ------------     -----------       ------------
CASH AND CASH EQUIVALENTS--END OF PERIOD....................  $ 10,831,266     $ 4,995,906       $ 10,831,266
                                                              ============     ===========       ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW:
  Cash paid for interest....................................  $     51,889     $    51,950       $    160,341
NON-CASH TRANSACTIONS
  Issuance of common stock dividends in kind................  $         --     $ 1,536,223       $  1,536,223
  Issuance of preferred stock dividends in kind.............     1,382,200       1,285,413          3,380,800


   The accompanying notes are an integral part of the consolidated financial
                                   statements

                                      F-11

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION AND NATURE OF OPERATIONS

    BASIS OF PRESENTATION--Endorex Corporation (Endorex, or the Company) and
Subsidiaries was incorporated in January 1987 as ImmunoTherapeutics, Inc, a
wholly owned subsidiary of BiologicalTherapeutics, Inc. ("BTI"). BTI was
incorporated on December 19, 1984 and commenced operations on February 15, 1985
{inception date}. On March 30, 1987 BTI was merged into Endorex. The Company's
financial statements include the accounts of the predecessor, BTI, for all
periods presented. In October 1996 Endorex formed its first subsidiary, Orasomal
Technologies, Inc. ("Orasomal"), and in July 1997, formed a second subsidiary,
Wisconsin Genetics, Inc. ("WGI").

    NATURE OF BUSINESS--Endorex is a development stage, drug delivery company.
The Company's core drug delivery technology focuses on oral/mucosal delivery of
drugs and vaccines previously delivered only by injection. The Company's
Orasome-TM- system utilizes technology licensed from MIT to develop the
oral/mucosal delivery of vaccines, proteins and peptides.

    In 1998 the Company formed two joint ventures with Elan Corporation, plc
("Elan"), one of the world's leading drug delivery companies. The purpose of the
first joint venture, InnoVaccines Corporation ("InnoVaccines"), is to research,
develop, and commercialize novel delivery systems for the human and veterinary
vaccine markets. The second joint venture, Endorex Newco, LTD. ("Newco"),
focuses on the utilization of the MEDIPAD-Registered Trademark- microinfusion
pump, developed by Elan, to deliver iron chelators for the treatment of a series
of genetic blood disorders known as iron overload disorders.

2.  DEVELOPMENT STAGE ENTERPRISE

    The Company's activities to date principally have been conducting research
and development in conjunction with developing new products. Consequently, as
shown in the accompanying financial statements, the Company has not realized
substantial revenue and has a deficit accumulated during the development stage
for the period from inception, February 15, 1985 through December 31, 2000 of
$49.1 million. The company will continue to be a development stage company, as
defined in Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises", until it begins normal operations
with revenue.

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
Endorex and its subsidiaries, Orasomal and WGI. All significant intercompany
accounts and transactions have been eliminated in consolidation.

    SEGMENT AND GEOGRAPHIC INFORMATION--The Company operates in the
biotechnology drug delivery industry and do not have reportable operating
segments as defined by Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information."

    EQUITY METHOD ACCOUNTING FOR INVESTMENTS IN COMMON STOCK--The Company
accounts for investments in common stock of non-controlled entities (i.e.,
InnoVaccines and Newco joint ventures) using the equity method, in accordance
with Accounting Principles Board Opinion (APB) No. 18. The Company discontinues
application of the equity method when the investment is reduced to zero and does
not provide for additional losses, provided that the Company has not guaranteed
the obligations

                                      F-12

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the investee and is not otherwise committed to provide further financial
support for the investee. See Note 4 for a description of the Company's
investment in joint ventures.

    CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments with a maturity of 90 days or less when purchased to be cash
equivalents.

    MARKETABLE SECURITIES--Marketable securities are comprised of high-grade
commercial paper and short-term government agency notes that have maturities
ranging from three to twelve months from the purchase date. The fair value of
marketable securities classified as available for sale approximates the carrying
value of these assets at December 31, 2000 and 1999 due to the short maturity of
the instruments.

    RESEARCH AND DEVELOPMENT COSTS--Expenditures for research and development
activities are charged to operations as incurred.

    PATENT COSTS--Patent costs, principally legal fees, are capitalized and,
upon issuance of the patent, are amortized on a straight-line basis over the
estimated useful life of the patent or the estimated remaining economic life.

    IMPAIRMENT OF LONG-LIVED ASSETS--Equipment, leasehold improvements and
intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference
between the fair value and the carrying value of the related asset or group of
assets. Such analyses necessarily involve significant judgement.

    NET LOSS PER SHARE--In accordance with generally accepted accounting
principles, basic and diluted net loss per share has been computed using the
weighted-average number of shares of common stock outstanding during the
respective periods. The effect of stock options, warrants and convertible
preferred stock is antidilutive for all periods presented.

    INCOME TAXES--Deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year-end, based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the current tax payable for the period plus or minus the
change during the period in deferred tax assets and liabilities. No current or
deferred income taxes have been provided through December 31, 2000 because of
the net operating losses incurred by the Company since its inception.

    STOCK BASED COMPENSATION--The Company accounts for stock-based compensation
for awards to employees using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and has adopted the disclosure only alternative of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). Stock compensation expense for options granted to
nonemployees has been determined in accordance with FAS 123 and EITF 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services," and represents
the fair value of the consideration received, or the fair value of the equity
instruments

                                      F-13

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
issued, whichever may be more reliably measured. For options that vest over
future periods, the fair value of options granted to non-employees is
periodically remeasured as the underlying value of the securities changes.

    FAIR VALUE OF FINANCIAL INSTRUMENTS--Generally accepted accounting
principles require that fair values be disclosed for most of the company's
financial instruments. The carrying amounts of the Company's financial
instruments, which include cash and cash equivalents, marketable securities,
receivables from related party, current liabilities and capital lease
obligations are considered to be representative of their respective fair values.

    USE OF ESTIMATES--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

    RISK AND UNCERTAINTIES--The Company is subject to risks common to companies
in the biotechnology industry, including, but not limited to, litigation,
product liability, development of new technological innovations, dependence on
key personnel, protections of proprietary technology, and compliance with FDA
regulations.

    RECLASSIFICATIONS--Certain reclassifications have been made to the 1999
financial statements to conform to the 2000 presentation.

    NEW ACCOUNTING PRONOUNCEMENTS--In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard No. 133 (SFAS
No. 133), "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133, as amended, will be effective for the Company
on January 1, 2001 and requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The Company does not expect the effect of adopting the provisions
of SFAS no. 133 to have a significant impact on its financial position or
results of operations.

4.  INVESTMENT IN JOINT VENTURES

    In 1998 Endorex formed two joint ventures with Elan as follows:

INNOVACCINES CORPORATION

    InnoVaccines was established in January 1998 pursuant to agreements between
Endorex and Elan. At closing, the Company issued to Elan International
Services, Ltd. ("EIS") 307,692 shares of Endorex common stock and a six-year
warrant for the purchase an additional 230,770 shares of Endorex common stock at
an exercise price of $10.00 per share for an aggregate purchase price of
$2.0 million. In addition, EIS purchased $8.0 million of Endorex Series B
convertible preferred stock, which is convertible into Endorex common stock at a
price of $7.38 per share, subject to adjustment. The Series B convertible
preferred stock pays an 8% annual in-kind dividend, which was $743,700 and
$688,634 in 2000 and 1999, respectively.

                                      F-14

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  INVESTMENT IN JOINT VENTURES (CONTINUED)
    InnoVaccines is owned 80.1% by Endorex and 19.9% by Elan. Although Endorex
is the majority shareholder, the joint development agreement of InnoVaccines
gives management participation to both Endorex and Elan equally. Therefore,
because the minority shareholder, Elan, has substantive participating veto
rights, Endorex accounts for its investment in the joint venture using the
equity method of accounting, in accordance with EITF-96-16 "Investor's
Accounting for an Investee, When the Investor Has a Majority of the Voting
Interest but the Minority Shareholder of Shareholders Have Certain Approval or
Veto Rights". InnoVaccines licensed certain technology from Elan and certain
other technology from Orasomal. Endorex and Elan originally invested $8.0 and
$2.0 million in the joint venture, respectively.

    At closing, InnoVaccines paid Elan an initial $10.0 million license payment.
Elan may receive future milestone payments and royalties based on the joint
venture's performance. As the technology did not yet represent a commercial
product, the joint venture recorded an expense in 1998 for the initial license
fee. The Company recorded its $8.0 million share of the license fee expense in
accordance with the equity method.

    Orasomal sub-licensed to InnoVaccines oral vaccine rights to its proprietary
Orasome polymerized liposome technology exclusively licensed from MIT. In
consideration of the license, Orasomal may receive milestone payments and
royalties.

    The InnoVaccines joint venture entity contracts with both Endorex and Elan,
which perform research and development on behalf of the joint venture. Elan and
Endorex each funded research and development related to InnoVaccines technology
equally from the inception of the joint venture through March 31, 1999, in
accordance with the joint development and operating agreement. Such payments
were not funded through the joint venture and Endorex expensed the payments.
Subsequent to April 1, 1999, Endorex and Elan are responsible for funding joint
venture expenditures in proportion to their respective ownership levels through
the joint venture entity (as a loan). During the years ended December 31, 2000
and 1999, Endorex incurred research and development and general and
administrative expenditures aggregating $1.7 and $1.5 million, respectively,
which were billed to InnoVaccines.

    Endorex has a payable due to the joint venture of approximately
$1.7 million as of December 31, 2000, which consists of Endorex's share of the
joint venture's net losses to date in excess of Endorex's initial investment
less amounts billed by the Company to the joint venture. The InnoVaccines joint
venture has a payable due to Elan of $1.7 million, representing the amount Elan
has contributed to InnoVaccines in excess of its funding obligation.

    Endorex and Elan also incurred $677,000 and $870,000 of expenditures during
the years ended December 31, 2000 and 1999, respectively, related to certain
licenses that Endorex and Elan acquired for further development on behalf of
InnoVaccines. Elan and Endorex each agreed to pay 50% of the license costs
outside of the joint venture entity. The receivable from related party of
$126,538 and $34,339 at December 31, 2000 and 1999, respectively, on the
accompanying consolidated balance sheets represent reimbursements not yet
received from Elan. The Company's portion of the license costs have been
included in equity in losses from joint ventures in the accompanying statements
of operations. These amounts were not capitalized, because the technology does
not yet represent a commercial product.

                                      F-15

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  INVESTMENT IN JOINT VENTURES (CONTINUED)
ENDOREX NEWCO, LTD.

    Newco was established in October 1998 pursuant to agreements between Endorex
and Elan. At closing, Endorex and EIS purchased $8.4 million and $2.1 million of
Newco's common stock, respectively. In addition, Elan purchased $8,410,500 of
Endorex Series C Convertible Preferred Stock. The Series C Preferred Stock is
exchangeable at Elan's option for an additional 30.1% ownership interest of
Newco's common stock, or it may be converted into Endorex's common stock at a
price of $8.86 per share. The Series C Preferred Stock pays a 7% annual in-kind
dividend, which was $638,500 and $596,778 in 2000 and 1999, respectively.

    Newco is owned 80.1% by Endorex and 19.9% by EIS. Although Endorex is the
majority shareholder, the joint development agreement of Newco gives management
participation to both Endorex and Elan equally. Therefore, because the minority
shareholder, Elan, has substantive participating veto rights, Endorex accounts
for its investment in the joint venture using the equity method of accounting in
accordance with EITF-96-16. At closing, Newco paid Elan an initial
$10.0 million license payment. Because the technology did not represent a
commercial product, Newco recorded an expense in 1998 for the initial license
fee expense. The Company recorded its $8.0 million share of the license fee in
accordance with the equity method. Elan may also receive future milestone
payments and royalties based on Newco's performance.

    In consideration of the license fee, Newco has obtained an exclusive
worldwide license to the MEDIPAD drug delivery system developed by Elan with two
drugs. Newco is focusing on development of the first of those drugs,
Norditropin, an iron chelator for the treatment of a series of genetic blood
disorders known as iron overload disorders. MEDIPAD is a lightweight,
microinfusion pump, which combines the simplicity of a patch with the extensive
delivery capabilities of an infusion pump.

    The Newco joint venture entity contracts with both Endorex and Elan, which
perform research and development on behalf of the joint venture. During 2000 and
1999, Elan and Endorex were required to fund Newco expenditures according to
their respective ownership interests. Endorex may choose to borrow from a
multi-draw convertible note with Elan to fund its portion of Newco's research
and development expenses. Through December 31, 2000, no amounts have been
borrowed under this note.

    During the years ended December 31, 2000 and 1999, Endorex incurred research
and development and general and administrative expenditures aggregating $42,000
and $148,000, respectively, related to the joint venture and billed to Newco.
Endorex has a payable due to Newco of $334,000 at December 31, 2000, which
consists of Endorex's initial investment less amounts billed by the Company to
the joint venture.

                                      F-16

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  INVESTMENT IN JOINT VENTURES (CONTINUED)
UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR UNCONSOLIDATED JOINT VENTURES

    Condensed, unaudited financial statement information of the joint ventures
is stated below. The joint ventures had no revenues in any period.



                                                           DECEMBER 31,
                                                     -------------------------
                                                        2000          1999
                                                     -----------   -----------
                                                             
InnoVaccines net loss..............................  $(3,466,101)  $(2,679,643)
Newco net loss.....................................     (168,945)     (682,902)
                                                     -----------   -----------
Total net loss.....................................  $(3,635,046)  $(3,362,545)
                                                     ===========   ===========
Reconciliation of joint venture net losses to
  equity in losses from joint ventures:
Total joint venture net losses.....................  $(3,635,046)  $(3,362,545)
  Endorex mark up(a)...............................      617,925       509,683
  Elan Minority Interest...........................      723,374       669,146
  InnoVaccine license costs incurred by Endorex,
    outside of joint venture.......................     (388,621)     (682,192)
                                                     -----------   -----------
  Equity in losses from joint ventures.............  $(2,682,368)  $(2,865,908)
                                                     ===========   ===========


------------------------

(a) The Company invoices the joint venture at cost, plus a mark-up that is
    agreed to by Elan, which is intended to approximate overhead costs.

5.  LEASEHOLD IMPROVEMENTS AND EQUIPMENT

    Office and lab equipment is stated at cost. Depreciation is computed on a
straight-line basis over five years. Leasehold improvements are amortized
utilizing the straight-line method over the term of the lease. Depreciation
expense was $151,024 and $138,582 and for the periods ended December 31, 2000
and 1999, respectively. Leasehold improvements and equipment consisted of the
following at December 31:



                                                          2000         1999
                                                       ----------   ----------
                                                              
Leasehold improvements...............................  $  255,888   $  255,888
Laboratory equipment.................................     786,902      730,803
Office equipment.....................................     141,438      111,302
                                                       ----------   ----------
                                                        1,184,228    1.097,993
Accumulated depreciation.............................    (800,066)    (649,042)
                                                       ----------   ----------
                                                       $  384,162   $  448,951
                                                       ==========   ==========


6.  LINES OF CREDIT

    On December 31, 1998, Endorex obtained a $750,000 equipment financing line
with Finova Technology Financing, Inc. ("Finova"). At December 31, 2000,
approximately $503,000 has been used to finance equipment and leasehold
improvements under capital leases (see Note 10). Interest rates for each draw
are based upon a base interest rate of 7.4%, plus an index rate equivalent to
the highest yield published for three-year United States Treasury Notes two days
prior to the loan draw. The

                                      F-17

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.  LINES OF CREDIT (CONTINUED)
aggregate interest rates incurred to date range from 12.15% to 13.82%. Draws are
payable in monthly installments over a period of 48 months, with a final payment
in June 2004.

    On May 19, 1997, Endorex entered into a senior line of credit agreement with
The Aries Funds, two of the Company's major stockholders, to borrow up to
$500,000 (the "Bridge Loan"). During 1997, the Company paid the outstanding
principal and interest on the Bridge Loan. In partial consideration of the
Bridge Loan, the Company granted warrants to purchase an aggregate of 66,668
shares of common stock at an initial exercise price equal to $2.3125 per share.
The warrant exercise price and the number of shares that can be purchased are
subject to adjustment in certain circumstances. The warrants are exercisable
until May 19, 2002.

7.  STOCKHOLDERS' EQUITY

    Private Placements--In April 2000, the Company issued and sold an aggregate
of 1,809,520 shares of common stock. Gross proceeds of these issuances were
$8.6 million with net proceeds, after deducting commissions and expenses, of
$7.8 million.

    In connection with the April 2000 private placement, the Company issued
warrants to the investors for the purchase of 452,383 shares of its common
stock. The warrants issued to these investors are immediately exercisable at
$5.91 per share and expire in April 2005. Also, as part of the compensation
received by Paramount Capital, Inc. ("Paramount") for its assistance in the
private placement, Paramount received warrants to purchase 226,190 shares of
Endorex common stock. These warrants are immediately exercisable at $5.25 per
share, expire in October 2007 and may be called if the closing bid price of the
common stock equals or exceeds $13.125 per share for at least 20 consecutive
trading days.

    During 1997, the Company issued and sold an aggregate of 8,648,718 shares of
common stock to certain accredited investors. The gross proceeds of these
issuances were $20 million with net proceeds, after deducting commissions and
expenses, of $15.1 million.

    In connection with the 1997 private placement, the Company issued warrants
for the purchase of 864,865 shares of Endorex common stock at an exercise price
of $2.54375 per share to Paramount, the placement agent, and certain of its
affiliates and employees. The Company also issued warrants to purchase 1,297,297
shares of Endorex common stock at an exercise price of $2.54375 per share to
certain employees of Paramount. The estimated fair value at the warrants' grant
date was $3.16 million, which was recorded as a deferred cost and amortized to
expense over two years, the term of the agreement. The warrants are exercisable
and expire on April 16, 2003. Through December 31, 2000, 148,161 warrants have
been exercised.

    Common Stock Dividend--The terms of the 1997 private placement also included
5%, semi-annual dividends payable in additional shares of common stock based on
the number of shares held as of the record date, including previous dividend
distributions. The first and second semi-annual common stock dividends were
payable to holders of stock with dividend rights as of the record date of
April 16, 1999 and October 16, 1999, respectively. The Company distributed the
first and second dividends on June 1, 1999 and November 16, 1999, respectively.
No dividends were paid during 2000; dividend rights were terminated effective
March 20, 2000.

                                      F-18

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.  STOCK OPTION PLANS

    The Amended and Restated 1995 Omnibus Plan ("the Plan") is intended to
promote Endorex's interests by providing eligible persons with the opportunity
to acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Company as an incentive for them to remain in the service of
the Company. The Plan is divided into three separate equity programs: 1) the
Discretionary Option Grant Program, under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
common stock, 2) the Salary Investment Option Grant Program, under which
eligible employees may elect to have a portion of their base salary invested
each year in options to purchase shares of common stock, 3) the Automatic Option
Grant Program, under which eligible non-employee Board members will
automatically receive options at periodic intervals to purchase shares of common
stock, and 4) the Director Fee Option Grant Program, under which non-employee
Board members may elect to have all, or any portion, of their annual retainer
fee otherwise payable in cash applied to a special option grant.

    The Board of Directors' Compensation Committee determines the terms of the
options, including vesting periods. No one person participating in the Plan may
receive options and separately exercisable stock appreciation rights for more
than 750,000 shares of common stock per calendar year.

    As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting For Stock-Based Compensation" (SFAS No. 123), the Company follows
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", in accounting for its stock option plans. Had the Company accounted
for its stock option plans based on the fair value at the grant date for options
granted under the plan, based on provisions of SFAS 123, the Company's pro forma
net loss and pro forma net loss per share would have increased by approximately
$0.1 million, or $.01 per share, and $0.4 million, or $0.03 per share, for 2000
and 1999, respectively. Net loss and net loss per share would have increased as
follows:



                                                                 2000          1999
                                                              -----------   -----------
                                                                      
Net loss applicable to common stockholders:
  As reported...............................................  $(6,177,893)  $(8,786,431)
  Pro forma.................................................   (6,325,952)   (9,118,581)
Basic and diluted net loss per share applicable to common
  stockholders
  As reported...............................................  $     (0.51)  $     (0.82)
  Pro forma.................................................        (0.52)        (0.85)


    The weighted average fair value of options granted with an exercise price
equal to the fair market value of the stock was $0.75 and $1.45 for 2000 and
1999, respectively.

    The fair value of options in accordance with SFAS 123 was estimated using
the Black-Scholes option-pricing model and the following weighted-average
assumptions: dividend yield 0%, expected life of four years, volatility of 102%
and 139% in 2000 and 1999, respectively and average risk-free interest rates in
2000 and 1999 of 5.5% and 5.63%, respectively.

                                      F-19

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.  STOCK OPTION PLANS (CONTINUED)
    Option activity for the periods ended December 31, 2000 and 1999 was as
follows:



                                                                 WEIGHTED AVERAGE
                                                                     OPTIONS
                                                      OPTIONS     EXERCISE PRICE
                                                     ---------   ----------------
                                                           
Balance at December 31, 1998.......................  1,460,776        $3.18
Granted............................................    229,000         1.93
Exercised..........................................       (334)        1.05
Forfeited..........................................   (117,940)        5.11
                                                     ---------        -----
Balance at December 31, 1999.......................  1,571,502         2.82
Granted............................................    176,500         3.78
Exercised..........................................    (71,722)        3.01
Forfeited..........................................   (157,155)        4.76
                                                     ---------        -----
Balance at December 31, 2000.......................  1,519,125        $2.73
                                                     =========        =====


    The weighted average exercise price, by price range, for all outstanding
options as of December 31, 2000 is:



                                        WEIGHTED AVERAGE
                                           REMAINING
                                          CONTRACTUAL      OUTSTANDING      OPTIONS
                                              LIFE           OPTIONS     EXCERCISEABLE
                                        ----------------   -----------   -------------
                                                                
Price Range $1.38 - $2.54.............     8.2 years        1,272,625      1,059,248
Price Range $3.25 - $4.88.............     9.2 years          161,500         22,800
Price Range $5.50 - $6.75.............     7.0 years           85,000         85,000
                                                            ---------      ---------
                                                            1,519,125      1,167,048
                                                            =========      =========


9.  INCOME TAXES

    The types of temporary differences between tax bases of assets and
liabilities and their financial reporting amounts that give rise to the deferred
tax asset (liability) and their approximate tax effects are as follows:



                                                   DECEMBER 31
                                                       2000           1999
                                                   ------------   ------------
                                                            
Deferred tax assets:
  Net operating loss carryforwards...............  $  5,858,000   $  5,414,000
  Research and development credit carryforward...       618,000        618,000
  Licensing fees--amortization...................     4,778,000      5,045,000
  Other..........................................        98,000        108,000
                                                   ------------   ------------
                                                     11,352,000     11,185,000
Valuation allowance..............................   (11,352,000)   (11,185,000)
                                                   ------------   ------------
Net deferred tax assets..........................  $         --   $         --
                                                   ============   ============


    At December 31, 2000, the Company had net operating loss carryforwards of
approximately $17 million for U.S. Federal and state tax purposes, which expire
beginning in 2007. In the event of a change in ownership greater than 50% in a
three-year period, utilization of the net operating losses

                                      F-20

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.  INCOME TAXES (CONTINUED)
may be subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986 and similar state
provisions

10.  LEASE COMMITMENTS

    The Company leases executive offices and research facilities under operating
leases, which provide for annual minimum rent and additional rent based on
increases in operating costs and real estate taxes. Rental expense was $59,318
during 2000 and $83,153 during 1999.

    Future minimum lease payments under capital leases and non-cancelable
operating leases with initial terms of one year or more consisted of the
following at December 31, 2000:



                                                          CAPITAL    OPERATING
                                                           LEASES     LEASES
                                                          --------   ---------
                                                               
2001....................................................  $151,965   $ 55,632
2002....................................................   179,886     57,300
2003....................................................    35,835     59,018
2004....................................................    10,619         --
Thereafter..............................................        --         --
                                                          --------   --------
Total Minimum Lease Payments............................  $378,305   $171,950
                                                          ========   ========
Amount representing interest............................   (55,350)
Present value of net minimum lease payments, including
  current portion.......................................  $322,955
                                                          ========


    At December 31, 2000, the gross amount of equipment and leasehold
improvements recorded under capital leases and related accumulated amortization
was approximately, $503,088 and $206,842, respectively.

                                      F-21

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                          CONSOLIDATED BALANCE SHEETS

                                  (UNAUDITED)



                                                                JUNE 30,     DECEMBER 31,
                                                                  2001           2000
                                                              ------------   -------------
                                                                       
ASSETS
Current assets:
  Cash and cash equivalents.................................  $  9,808,676   $ 10,831,266
  Marketable securities--available for sale.................             0      2,014,984
  Related party receivable..................................        26,745        126,538
  Prepaid expenses..........................................        52,930         58,803
                                                              ------------   ------------
    Total current assets....................................     9,888,351     13,031,591
Leasehold improvements and equipment, net of accumulated
  amortization of $883,409..................................       407,373        384,162
Patent issuance costs, net of accumulated amortization of
  $13,030...................................................       281,845        253,705
Other Assets:
  Prepaid Acquisition Cost..................................     1,004,608              0
                                                              ------------   ------------
TOTAL ASSETS................................................  $ 11,582,177   $ 13,669,458
                                                              ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses.....................  $    674,319   $    642,440
  Accrued compensation......................................       174,616        147,205
  Due to joint ventures.....................................     2,285,831      2,010,713
  Current portion of line of credit.........................       126,611        118,793
                                                              ------------   ------------
    Total current liabilities...............................     3,261,377      2,919,151
Long-term liabilities:
  Long-term portion of line of credit.......................       162,754        204,162
                                                              ------------   ------------
    Total long-term liabilities.............................       162,754        204,162
                                                              ------------   ------------
    Total Liabilities.......................................     3,424,131      3,123,313

Series C exchangeable convertible preferred stock, $.05 par
  value. Authorized 200,000 shares; 97,603 issued and
  outstanding at liquidation value..........................    10,004,315      9,665,512

Stockholders' equity:
  Preferred stock, $.001 par value. Authorized 4,600,000
    shares; none issued and outstanding.....................            --             --
  Series B convertible preferred stock, $.05 par value.
    Authorized 200,000 shares; 100,410 issued & outstanding
    at liquidation value....................................    10,439,339     10,041,000
  Common stock, $.001 par value. Authorized 50,000,000
    shares; 12,860,500 issued, and 12,741,858 outstanding...        12,861         12,861
  Additional paid-in capital................................    39,633,107     40,365,410
  Unearned compensation.....................................        (6,350)        (4,853)
  Deficit accumulated during the development stage..........   (51,481,746)   (49,090,110)
  Unrealized gain/(loss) on marketable securities...........           270             75
                                                              ------------   ------------
                                                                (1,402,519)     1,324,383
  Less: Treasury stock, at cost, 118,642 shares.............      (443,750)      (443,750)
                                                              ------------   ------------
    Total Stockholders' Equity..............................    (1,846,269)       880,633
                                                              ------------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................  $ 11,582,177   $ 13,669,458
                                                              ============   ============


           See accompanying condensed notes to financial statements.

                                      F-22

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)



                                                                                    CUMULATIVE FROM
                                                      SIX MONTHS ENDED JUNE 30,    FEBRUARY 15, 1985
                                                      -------------------------   (DATE OF INCEPTION)
                                                         2001          2000        TO JUNE 30, 2001
                                                      -----------   -----------   -------------------
                                                                         
Revenue:
  SBIR contract revenue.............................  $        --   $        --        $    100,000
Expenses:
  SBIR contract research and development............           --            --              86,168
  Proprietary research and development..............    1,171,494       468,193          16,004,499
  General and administrative........................      908,269       981,521          13,980,313
                                                      -----------   -----------        ------------
Total operating expenses............................    2,079,763     1,449,714          30,070,980
                                                      -----------   -----------        ------------
Loss from operations................................   (2,079,763)   (1,449,714)        (29,970,980)
Equity losses in joint ventures.....................     (577,661)   (1,578,856)        (23,223,912)
Other income........................................       (1,575)           --             253,725
Interest income.....................................      294,685       320,965           3,336,274
Interest expense....................................      (27,321)      (23,019)           (340,630)
                                                      -----------   -----------        ------------
Net loss............................................   (2,391,635)   (2,730,624)        (49,945,523)
Preferred stock dividends...........................     (737,142)     (687,378)         (4,117,942)
                                                      -----------   -----------        ------------
Net loss available to common stockholders...........  $(3,128,777)  $(3,418,002)       $(54,063,465)
                                                      ===========   ===========        ============
Basic and diluted net loss per share available to
  common stockholders...............................  $     (0.25)  $     (0.29)       $     (15.83)
Basic and diluted weighted average common shares
  outstanding.......................................   12,741,858    11,646,663           3,416,117


           See accompanying condensed notes to financial statements.

                                      F-23

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)



                                                               THREE MONTHS ENDED JUNE 30,
                                                              -----------------------------
                                                                  2001            2000
                                                              -------------   -------------
                                                                        
Revenue:
  SBIR contract revenue.....................................   $        --     $        --

Expenses:
  SBIR contract research and development....................            --              --
  Proprietary research and development......................       585,642         217,112
  General and administrative................................       439,515         615,559
                                                               -----------     -----------
Total operating expenses....................................     1,025,157         832,671
                                                               -----------     -----------
Loss from operations........................................    (1,025,157)       (832,671)
Equity losses in joint ventures.............................      (260,603)       (648,779)
Other income................................................            --              --
Interest income.............................................       120,317         198,165
Interest expense............................................       (16,728)        (11,221)
                                                               -----------     -----------
Net loss....................................................    (1,182,171)     (1,294,506)
Preferred stock dividends...................................      (370,608)       (342,747)
                                                               -----------     -----------
Net loss available to common stockholders...................   $(1,552,779)    $(1,637,253)
                                                               ===========     ===========
Basic and diluted net loss per share available to common
  stockholders..............................................   $     (0.12)    $     (0.13)
Basic and diluted weighted average common shares
  outstanding...............................................    12,741,858      12,488,842


           See accompanying condensed notes to financial statements.

                                      F-24

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (UNAUDITED)



                                                                    SIX MONTHS           CUMULATIVE PERIOD
                                                                  ENDED JUNE 30,         FEBRUARY 15, 1985
                                                             -------------------------    (INCEPTION) TO
                                                                2001          2000         JUNE 30, 2001
                                                             -----------   -----------   -----------------
                                                                                
NET CASH USED IN OPERATING ACTIVITIES......................  $(1,279,328)  $(1,319,747)     $(20,401,496)

INVESTING ACTIVITIES:
  Patent issuance cost.....................................      (30,201)      (33,454)         (789,426)
  Investment in joint ventures.............................     (577,661)     (964,064)      (20,541,544)
  Organizational costs incurred............................           --            --              (135)
  Purchases of leasehold improvements......................       (7,098)           --          (702,711)
  Purchases of office and lab equipment....................      (87,893)      (52,236)       (1,085,354)
  Proceeds from assets sold................................           --            --             4,790
  Purchases of marketable securities--available for sale...   (3,973,724)   (3,456,799)      (14,977,804)
  Proceeds from sale of marketable securities--available
    for sale...............................................    5,988,708     3,000,000        15,088,123
  Prepaid acquisition cost.................................   (1,004,608)           --        (1,004,608)
                                                             -----------   -----------      ------------
NET CASH USED IN INVESTING ACTIVITIES......................      307,523    (1,506,553)      (24,008,669)

FINANCING ACTIVITIES:
  Net proceeds from issuance of common stock...............           --     7,797,238        37,799,270
  Net proceeds from issuance of preferred stock............           --            --        16,325,712
  Proceeds from exercise of options........................           --       215,888           417,092
  Proceeds from borrowings under line of credit............           --        45,621         1,196,534
  Repayment of borrowings under line of credit.............      (50,785)      (57,971)         (924,364)
  Repayment of long-term note receivable...................           --            --            50,315
  Repayment of note payable issued in exchange for legal
    service................................................           --                         (71,968)
  Purchase and retirement of common stock..................           --            --          (130,000)
  Purchase of treasury stock...............................           --            --          (443,750)
                                                             -----------   -----------      ------------
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES.........      (50,785)    8,000,776        54,218,841
                                                             -----------   -----------      ------------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS........   (1,022,590)    5,174,476         9,808,676
CASH AND CASH EQUIVALENTS--BEGINNING OF PERIOD.............   10,831,266     4,995,906                --
                                                             -----------   -----------      ------------
CASH AND CASH EQUIVALENTS--END OF PERIOD...................  $ 9,808,676   $10,170,382      $  9,808,676
                                                             ===========   ===========      ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW:
  Cash paid for interest...................................  $    27,321   $    23,020      $    187,662
NON-CASH TRANSACTIONS
  Issuance of common stock dividends in kind...............  $        --            --      $  1,536,223
  Issuance of preferred stock dividends in kind............      737,142       687,378        (4,117,942)


   The accompanying notes are an integral part of the consolidated financial
                                   statements

                                      F-25

                              ENDOREX CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)

                    CONDENSED NOTES TO FINANCIAL STATEMENTS

    We prepared these unaudited interim consolidated financial statements under
the rules and regulations for reporting on Form 10-QSB. Accordingly, we omitted
some information and footnote disclosures normally accompanying the annual
financial statements. You should read these interim financial statements and
notes in conjunction with the consolidated financial statements and their notes
included in our latest annual report on Form 10-KSB, as amended. It is our
opinion that the consolidated financial statements include all adjustments
necessary for a fair statement of the results of operations, financial position
and cash flows for the interim periods. All adjustments were of a normal
recurring nature. The results of operations for interim periods are not
necessarily indicative of the results for the full fiscal year.

NET LOSS PER SHARE

    Net loss per share is presented on the Consolidated Statements of Operations
in accordance with SFAS No. 128 for the current and prior periods. Endorex had a
net loss for all periods being presented, which resulted in diluted and basic
earnings per share being the same for all periods presented. The potential
impact of warrants and stock options outstanding was not included in the
calculation because their inclusion would have been anti-dilutive.

JOINT VENTURE ESTIMATES

    The preparation of the quarterly consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts
related to the activities of InnoVaccines Corporation, or InnoVaccines and
Endorex Newco, Ltd., or Newco, our joint ventures with Elan Corporation, plc, or
"Elan", including the reported net liabilities related to the joint ventures and
the reported amounts of equity in losses from joint ventures. Actual results
could differ from those estimates.

UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR UNCONSOLIDATED JOINT VENTURES

    Condensed, unaudited financial statement information of the joint ventures
is stated below. The joint ventures had no revenues. Net expenses equaled the
net loss for all periods.

For the six months ended



                                                                     JUNE 30,
                                                              -----------------------
                                                                2001         2000
                                                              ---------   -----------
                                                                    
InnoVaccines, net of Endorex mark up on billings to
  InnoVaccines..............................................  $(482,202)  $(2,077,843)
Newco, net of Endorex mark up on billings to Newco..........   (230,825)     (131,496)
                                                              ---------   -----------
Total net loss..............................................  $(713,027)  $(2,209,339)
                                                              =========   ===========
Reconciliation to equity in losses from joint ventures:
Total joint venture net losses..............................  $(713,027)  $(2,209,339)
Less: Elan minority interest................................    135,366       630,454
                                                              ---------   -----------
Equity in losses from joint ventures........................  $(577,661)  $(1,578,885)
                                                              =========   ===========


                                      F-26

                     CORPORATE TECHNOLOGY DEVELOPMENT, INC.
                                AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)
                       CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

                                      F-27

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Corporate Technology Development, Inc.
New York, New York

    We have audited the accompanying consolidated balance sheets of Corporate
Technology Development, Inc. and subsidiaries (a development stage company) as
of December 31, 2000 and 1999, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of
the years then ended and for the period from January 1, 1998 (commencement of
operations) through December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
1998 financial statements of Institute for Drug Research, Limited ("IDRL"), a
foreign subsidiary which is accounted for as a discontinued operation. Those
financial statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for IDRL, is based solely on the report of the other auditors.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.

    In our opinion, based on our audits and with respect to the period from
January 1, 1998 through December 31, 2000, the report of the other auditors, the
financial statements enumerated above present fairly, in all material respects,
the consolidated financial position of Corporate Technology Development, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the consolidated results
of their operations and their consolidated cash flows for each of the years then
ended and for the period from January 1, 1998 (commencement of operations)
through December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.

/s/ Richard A. Eisner & Company, LLP

New York, New York
March 9, 2001

With respect to Note I[2]
July 31, 2001

                                      F-28

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                          CONSOLIDATED BALANCE SHEETS



                                                                            DECEMBER 31,
                                                         JUNE 30,     -------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
                                                        (UNAUDITED)
                                                                           
ASSETS
Current assets:
  Cash and cash equivalents...........................  $ 5,072,000   $ 6,508,000   $ 8,904,000
  Prepaid expenses and other current assets...........        1,000        20,000
                                                        -----------   -----------   -----------
    Total current assets..............................    5,073,000     6,528,000     8,904,000
Office equipment, net.................................       13,000         9,000        10,000
Licenses..............................................      116,000       108,000       103,000
Other assets..........................................        3,000
                                                        -----------   -----------   -----------
                                                        $ 5,205,000   $ 6,645,000   $ 9,017,000
                                                        ===========   ===========   ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses...............  $   242,000   $   279,000   $   577,000
                                                        -----------   -----------   -----------

Commitments

Stockholders' equity:
  Preferred stock--$.001 par value; authorized
    10,000,000 shares; issued and outstanding
    7,628,750 shares (liquidation preference including
    dividends in arrears $45,773,000 at June 30, 2001
    and $38,144,000 at December 31, 2000).............        8,000         8,000         8,000
  Common stock--$.001 par value; authorized 25,000,000
    shares; issued and outstanding 5,000,000 shares...        5,000         5,000         5,000
  Additional paid-in capital..........................   13,971,000    13,971,000    14,015,000
  Deficit accumulated during the development stage....   (8,955,000)   (7,524,000)   (5,274,000)
  Subscription receivable.............................                                   (3,000)
  Unearned compensation...............................      (66,000)      (94,000)     (311,000)
                                                        -----------   -----------   -----------
                                                          4,963,000     6,366,000     8,440,000
                                                        -----------   -----------   -----------
                                                        $ 5,205,000   $ 6,645,000   $ 9,017,000
                                                        ===========   ===========   ===========


                       See notes to financial statements

                                      F-29

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF OPERATIONS



                                                      PERIOD FROM                                    PERIOD FROM
                                                    JANUARY 1, 1998                                JANUARY 1, 1998
                                                     (COMMENCEMENT                                  (COMMENCEMENT
                            SIX MONTHS ENDED         OF OPERATIONS)           YEAR ENDED            OF OPERATIONS)
                                JUNE 31,                THROUGH              DECEMBER 31,              THROUGH
                        -------------------------       JUNE 30,       -------------------------     DECEMBER 31,
                           2001          2000             2001            2000          1999             2000
                        -----------   -----------   ----------------   -----------   -----------   ----------------
                               (UNAUDITED)            (UNAUDITED)
                                                                                 

Interest income.......  $   173,000   $   230,000      $   982,000     $   428,000   $   167,000      $   809,000
                        -----------   -----------      -----------     -----------   -----------      -----------
Expenses:
  Research and
    development.......      880,000       558,000        3,255,000       1,324,000       955,000        2,375,000
  General and
    administrative....      724,000       607,000        4,597,000       1,354,000     1,528,000        3,873,000
  License fee written
    off...............                                   1,822,000                     1,822,000        1,822,000
                        -----------   -----------      -----------     -----------   -----------      -----------
                          1,604,000     1,165,000        9,674,000       2,678,000     4,305,000        8,070,000
                        -----------   -----------      -----------     -----------   -----------      -----------
                         (1,431,000)     (935,000)      (8,692,000)     (2,250,000)   (4,138,000)      (7,261,000)
Gain on sale of
  license.............                                   3,052,000                     3,052,000        3,052,000
                        -----------   -----------      -----------     -----------   -----------      -----------
Loss before minority
  interest and
  discontinued
  operations..........   (1,431,000)     (935,000)      (5,640,000)     (2,250,000)   (1,086,000)      (4,209,000)
Minority interest in
  net income of
  subsidiary..........                                    (298,000)                     (298,000)        (298,000)
                        -----------   -----------      -----------     -----------   -----------      -----------
Loss from continuing
  operations..........   (1,431,000)     (935,000)      (5,938,000)     (2,250,000)   (1,384,000)      (4,507,000)
Loss from operations
  of discontinued
  subsidiary..........                                  (7,973,000)                   (4,852,000)      (7,973,000)
Gain on sale of
  discontinued
  subsidiary..........                                   4,956,000                     4,956,000        4,956,000
                        -----------   -----------      -----------     -----------   -----------      -----------
Net loss..............  $(1,431,000)  $  (935,000)     $(8,955,000)    $(2,250,000)  $(1,280,000)     $(7,524,000)
                        ===========   ===========      ===========     ===========   ===========      ===========


                       See notes to financial statements

                                      F-30

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


                                     PREFERRED STOCK          COMMON STOCK       ADDITIONAL
                                   --------------------   --------------------     PAID-IN     ACCUMULATED   SUBSCRIPTION
                                    SHARES      AMOUNT     SHARES      AMOUNT      CAPITAL       DEFICIT      RECEIVABLE
                                   ---------   --------   ---------   --------   -----------   -----------   ------------
                                                                                        
Sale of common shares to founders
  at $.001 per share.............                         5,150,000    $5,000                                   $(5,000)
Issuance of private placement
  units at $2.00 per share, net
  offering expenses of
  $2,108,000.....................  7,628,750    $8,000                           $13,142,000
Compensatory stock options
  granted........................                                                    645,000
Compensation expense
  recognized.....................
Net loss.........................                                                              $(3,994,000)
Translation adjustment...........
                                   ---------    ------    ---------    ------    -----------   -----------      -------
BALANCE AT DECEMBER 31, 1998.....  7,628,750     8,000    5,150,000     5,000     13,787,000   (3,994,000)       (5,000)
Subscriptions collected..........                                                                                 2,000
Compensatory stock options
  granted........................                                                    228,000
Compensation expense
  recognized.....................
Net loss.........................                                                              (1,280,000)
Translation adjustment realized
  upon sale of subsidiary........
                                   ---------    ------    ---------    ------    -----------   -----------      -------
BALANCE AT DECEMBER 31, 1999.....  7,628,750     8,000    5,150,000     5,000     14,015,000   (5,274,000)       (3,000)
Subscribed common shares
  cancelled......................                          (150,000)
Subscriptions collected..........                                                                                 3,000
Compensatory stock options
  cancelled......................                                                    (82,000)
Compensatory stock options
  granted........................                                                     38,000
Compensation expense
  recognized.....................
Net loss.........................                                                              (2,250,000)
                                   ---------    ------    ---------    ------    -----------   -----------      -------
BALANCE AT DECEMBER 31, 2000.....  7,628,750     8,000    5,000,000     5,000     13,971,000   (7,524,000)            0
Net loss (unaudited).............                                                              (1,431,000)
Compensation expense recognized
  (unaudited)....................
                                   ---------    ------    ---------    ------    -----------   -----------      -------
BALANCE AT JUNE 30, 2001
  (UNAUDITED)....................  7,628,750    $8,000    5,000,000    $5,000    $13,971,000   $(8,955,000)     $     0
                                   =========    ======    =========    ======    ===========   ===========      =======


                                                                      OTHER
                                     UNEARNED     COMPREHENSIVE   COMPREHENSIVE
                                   COMPENSATION      (LOSS)           LOSS           TOTAL
                                   ------------   -------------   -------------   -----------
                                                                      
Sale of common shares to founders
  at $.001 per share.............                                                 $         0
Issuance of private placement
  units at $2.00 per share, net
  offering expenses of
  $2,108,000.....................                                                  13,150,000
Compensatory stock options
  granted........................   $(645,000)                                              0
Compensation expense
  recognized.....................     295,000                                         295,000
Net loss.........................                  $(3,994,000)                    (3,994,000)
Translation adjustment...........                     (153,000)     $(153,000)       (153,000)
                                    ---------      -----------      ---------     -----------
                                                   $(4,147,000)
                                                   ===========
BALANCE AT DECEMBER 31, 1998.....    (350,000)                       (153,000)      9,298,000
Subscriptions collected..........                                                       2,000
Compensatory stock options
  granted........................    (228,000)                                              0
Compensation expense
  recognized.....................     267,000                                         267,000
Net loss.........................                   (1,280,000)                    (1,280,000)
Translation adjustment realized
  upon sale of subsidiary........                      153,000        153,000         153,000
                                    ---------      -----------      ---------     -----------
                                                   $(1,127,000)
                                                   ===========
BALANCE AT DECEMBER 31, 1999.....    (311,000)                              0       8,440,000
Subscribed common shares
  cancelled......................
Subscriptions collected..........                                                       3,000
Compensatory stock options
  cancelled......................      82,000                                               0
Compensatory stock options
  granted........................     (38,000)                                              0
Compensation expense
  recognized.....................     173,000                                         173,000
Net loss.........................                                                  (2,250,000)
                                    ---------                       ---------     -----------
BALANCE AT DECEMBER 31, 2000.....     (94,000)                              0       6,366,000
Net loss (unaudited).............                                                  (1,431,000)
Compensation expense recognized
  (unaudited)....................      28,000                                          28,000
                                    ---------                       ---------     -----------
BALANCE AT JUNE 30, 2001
  (UNAUDITED)....................   $ (66,000)                      $       0     $ 4,963,000
                                    =========                       =========     ===========


                       See notes to financial statements

                                      F-31

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)
                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                                                   PERIOD FROM
                                                                    PERIOD FROM                                  JANUARY 1, 1998
                                                                  JANUARY 1, 1998                                 (COMMENCEMENT
                                          SIX MONTHS ENDED         (COMMENCEMENT            YEAR ENDED            OF OPERATIONS)
                                              JUNE 30,             OF OPERATIONS)          DECEMBER 31,              THROUGH
                                      -------------------------       THROUGH        -------------------------     DECEMBER 31,
                                         2001          2000        JUNE 30, 2001        2000          1999             2000
                                      -----------   -----------   ----------------   -----------   -----------   ----------------
                                             (UNAUDITED)            (UNAUDITED)
                                                                                               
CASH FLOWS FROM OPERATING
  ACTIVITIES:
  Net loss..........................  $(1,431,000)  $  (935,000)    $(8,955,000)     $(2,250,000)  $(1,280,000)    $(7,524,000)
  Add loss from operations of
    discontinued subsidiary.........                                  7,973,000                      4,852,000       7,973,000
  Less gain on sale of discontinued
    subsidiary......................                                 (4,956,000)                    (4,956,000)     (4,956,000)
                                      -----------   -----------     -----------      -----------   -----------     -----------
  Loss from continuing operations...   (1,431,000)     (935,000)     (5,938,000)      (2,250,000)   (1,384,000)     (4,507,000)
  Adjustments to reconcile loss from
    continuing operations to net
    cash used in operating
    activities:
    Gain on sale of license.........                                 (3,052,000)                    (3,052,000)     (3,052,000)
    Minority interest in net income
      of subsidiary.................                                    298,000                        298,000         298,000
    License fee written-off.........                                  1,822,000                      1,822,000       1,822,000
    Depreciation and amortization...        7,000         6,000         171,000           11,000       152,000         164,000
    Compensation expense recognized
      from stock options............       28,000        11,000         763,000          173,000       267,000         735,000
    Changes in:
      Prepaid expenses and other
        current assets..............       19,000                        (1,000)         (20,000)      689,000         (20,000)
      Other assets..................       (3,000)                       (3,000)                        50,000
      Accounts payable and accrued
        expenses....................      (37,000)     (232,000)        242,000         (298,000)      366,000         279,000
                                      -----------   -----------     -----------      -----------   -----------     -----------
        Net cash used in operating
          activities................   (1,417,000)   (1,150,000)     (5,698,000)      (2,384,000)     (792,000)     (4,281,000)
                                      -----------   -----------     -----------      -----------   -----------     -----------
CASH FLOWS FROM INVESTING
  ACTIVITIES:
  Acquisition of office equipment...       (5,000)                      (19,000)                        (5,000)        (14,000)
  Acquisition of license............      (14,000)                   (2,228,000)         (15,000)   (2,078,000)     (2,214,000)
  Advances to unconsolidated
    subsidiary......................                                 (3,240,000)                    (2,186,000)     (3,240,000)
  Collection of advances to
    subsidiary......................                                  3,240,000                      3,240,000       3,240,000
  Proceeds from sale of interest in
    subsidiary......................                                  2,510,000                      2,510,000       2,510,000
  Investment in subsidiary..........                                 (5,527,000)                      (122,000)     (5,527,000)
  Proceeds from sale of license.....                                  3,177,000                      3,177,000       3,177,000
  Distribution to minority
    stockholders....................                                   (298,000)                      (298,000)       (298,000)
                                      -----------                   -----------      -----------   -----------     -----------
        Net cash (used in) provided
          by investing activities...      (19,000)                   (2,385,000)         (15,000)    4,238,000      (2,366,000)
                                      -----------                   -----------      -----------   -----------     -----------
CASH FLOWS FROM FINANCING
  ACTIVITIES:
  Proceeds from subscriptions of
    common stock....................                      3,000           5,000            3,000         2,000           5,000
  Proceeds from private placement
    offering........................                                 15,258,000                                     15,258,000
  Private placement offering
    costs...........................                                 (2,108,000)                                    (2,108,000)
                                      -----------   -----------     -----------      -----------   -----------     -----------
        Net cash provided by
          financing activities......                      3,000      13,155,000            3,000         2,000      13,155,000
                                      -----------   -----------     -----------      -----------   -----------     -----------
NET (DECREASE) INCREASE IN CASH.....   (1,436,000)   (1,147,000)      5,072,000       (2,396,000)    3,448,000       6,508,000
Cash--beginning of year.............    6,508,000     8,904,000                        8,904,000     5,456,000
                                      -----------   -----------     -----------      -----------   -----------     -----------
CASH--END OF YEAR...................  $ 5,072,000   $ 7,757,000     $ 5,072,000      $ 6,508,000   $ 8,904,000     $ 6,508,000
                                      ===========   ===========     ===========      ===========   ===========     ===========
SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
  Cash paid for income taxes........  $        --   $    28,000     $    87,000      $    28,000   $    59,000     $    87,000
  Noncash investing activity:
    Amount payable for acquisition
      of license....................                                                                               $ 1,843,000


                       See notes to financial statements

                                      F-32

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE A--THE COMPANY AND BASIS OF PRESENTATION

    Institute for Drug Research, Inc. (the "Company") was incorporated in
Delaware on December 12, 1997 and commenced operations on January 1, 1998. The
Company was formed to license and develop pharmaceutical products to treat a
variety of human diseases. In November 1999, the Company changed its name to
Corporate Technology Development, Inc.

    On December 31, 1998, the Company entered into an option agreement with
Paramount Capital Investments, LLC ("Paramount"), an affiliate of one of the
Company's stockholders, whereby Paramount granted to the Company an option to
purchase all of Paramount's rights and interests in all of the capital stock of
the following companies which were owned by Paramount:



                                                            % OF STOCK PREVIOUSLY
                                                             OWNED BY PARAMOUNT
                                                            ---------------------
                                                         
Neuropath, Inc. ..........................................          93.00%
RxEyes, Inc. .............................................          82.02%
Intero Corp. (formerly Synergy Therapeutics, Inc.)........          86.75%
Enteron Pharmaceuticals, Inc. ............................          80.43%
Oral Solutions, Inc. .....................................          80.00%


    The option was exercised in January 1999 by the Company by payment of
$162,000 and the assumption by the Company of liabilities in an aggregate amount
of $107,000.

    The Company's subsidiaries and percentages of ownership are as follows:


                                                           
Enteron Pharmaceuticals, Inc. ..............................    80.43%
Magyar Pharmaceuticals, Inc. ("MPI")*.......................    90.00%
RxEyes Inc. ................................................    82.02%
Oral Solutions, Inc. .......................................    80.00%
Neuropath, Inc.*............................................    93.00%
Iophthalmics, Inc.*.........................................   100.00%
CTD Drug Design Incorporated*...............................   100.00%
Institute for Drug Research, Limited ("IDRL") (sold in
  October 1999 (see Note C[1])).............................    87.50%
Intero Corp. (sold in December 1999 (see Note C[2]))........    85.00%
Formulation Technologies, Inc. (formed in February 2001)....   100.00%


------------------------

*   These companies were dissolved on September 20, 2000.

    IDRL is a limited liability company registered under the laws of the
Republic of Hungary; its activities centered on original drug research, contract
research activity and generic drug development (see Note C[1] with respect to
its disposition).

                                      F-33

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE A--THE COMPANY AND BASIS OF PRESENTATION (CONTINUED)
    The accompanying financial statements include the accounts of the Company
and its subsidiaries. Intercompany balances and transactions have been
eliminated. Results of operations of entities sold or dissolved are included to
the dates of their disposition.

    As reflected in the accompanying financial statements, since inception, the
Company has incurred substantial losses from operations. As a result of the
start-up nature of its business, the Company can expect to continue incurring
substantial operating losses for at least the next several years and significant
additional financing will be required. Continuation of the Company is dependent
on its ability to obtain additional financing and, ultimately, on its ability to
achieve profitable operations. There is no assurance however, that such
financing will be available or that the Company's efforts will ultimately be
successful.

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1] CASH AND CASH EQUIVALENTS:

        The Company considers all highly liquid investments purchased with a
    maturity of three months or less to be cash equivalents.

[2] OFFICE EQUIPMENT:

        Office equipment is recorded at cost. Depreciation is computed using the
    straight-line method over the estimated useful lives of the assets (five
    years).

[3] LICENSES:

        Licenses are being amortized on a straight-line basis over their
    remaining terms.

[4] RESEARCH AND DEVELOPMENT:

        Research and development costs are charged to operations as incurred.

[5] USE OF ESTIMATES:

        The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of the financial
    statements and the reported amounts of revenues and expenses during the
    reporting period. Actual results could differ from those estimates.

[6] LONG-LIVED ASSETS:

        In accordance with Statement of Financial Accounting Standards No. 121,
    "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
    Assets to be Disposed of," the Company intends to record impairment losses
    on long-lived assets used in operations, including intangible assets, when
    events and circumstances indicate that the assets might be impaired. No such
    losses have been recorded.

                                      F-34

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[7] STOCK-BASED COMPENSATION:

        The Company adopted Statement of Financial Accounting Standards
    No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The
    provisions of SFAS No. 123 allow companies to either expense the estimated
    fair value of employee stock options or to continue to follow the intrinsic
    value method set forth in Accounting Principles Board Opinion 25,
    "Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro
    forma effects on net income (loss) had the fair value of the options been
    expensed. The Company has elected to continue to apply APB 25 in accounting
    for its employee stock option incentive plans. See Note F to the financial
    statements for further information.

[8] INTERIM FINANCIAL STATEMENTS:

        The accompanying financial statements as of June 30, 2001 and for the
    six months ended June 30, 2001 and 2000 and the period from January 1, 1998
    (commencement of operations) to June 30, 2001 are unaudited. In the opinion
    of management, such statements include all adjustments (consisting only of
    normal recurring items), which are considered necessary for a fair
    presentation of the consolidated financial position of the Company at
    June 30, 2001, and the consolidated results of its operations, and cash
    flows for such periods. The results of operations for the six-month period
    ended June 30, 2001 are not necessarily indicative of the operating results
    for the full year.

NOTE C--ACQUISITIONS AND DISPOSITIONS

[1] INSTITUTE FOR DRUG RESEARCH, LIMITED:

        On February 23, 1998, the Company purchased an 83 1/3% interest from
    existing quotaholders of IDRL for $3,500,000 cash. Immediately following the
    purchase of the quotas, the Company contributed $1,400,000 to IDRL, thereby
    increasing its interest in IDRL to 87.5%. In addition, the Company incurred
    acquisition costs of $505,000. The excess ($3,567,000) of cost over the
    value of identifiable net assets acquired was being accounted for as
    goodwill which was being amortized over 15 years. As of December 31, 1998,
    the Company had loaned IDRL $1,054,000.

        On October 12, 1999, the Company sold its 87.5% interest in IDRL to
    third parties for $2,510,000 cash. The buyers also repaid the
    interest-bearing debt of IDRL to the Company which, as of October 12, 1999,
    aggregated $3,240,000. IDRL was accounted for as a discontinued operation in
    the accompanying 1999 statement of operations as the Company plans to
    discontinue the types of activities carried on by IDRL. Results of
    operations of IDRL through the date of sale is reflected in the Company's
    1999 statement of operations as loss from operations of discontinued
    subsidiary.

                                      F-35

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE C--ACQUISITIONS AND DISPOSITIONS (CONTINUED)
        The condensed statement of income (loss) of IDRL is presented below.



                                                                  YEAR ENDED
                                                              DECEMBER 31, 1999
                                                              ------------------
                                                           
Net sales...................................................      $ 1,002,000
Costs and expenses..........................................       (2,743,000)
Minority interest share in losses...........................          218,000
Write-off of goodwill.......................................       (3,329,000)
                                                                  -----------
Loss from operations of discontinued subsidiary.............      $(4,852,000)
                                                                  ===========


[2] SALE OF ASSETS OF INTERO CORP.:

        In December 1999, the Company sold substantially all of the assets of
    its 86.75% owned subsidiary, Intero Corp., which was formed in
    February 1999. The Company received $3,500,000 for the assets which
    consisted principally of Intero's rights to various consulting agreements,
    scientific advisory board agreement and a license agreement with the Johns
    Hopkins University for which the Company paid approximately $125,000 in
    February 1999. The Company recorded a gain of $3,052,000 on the sale. The
    Company may also receive a maximum of $3,000,000 upon the approval by the
    Food and Drug Administration of the various treatments discussed in the
    licensed agreement.

NOTE D--SUBLICENSE AGREEMENT

[1] MPI:

        On December 31, 1998, MPI entered into a sublicense agreement with
    Precision Pharmaceuticals, Inc. ("Precision"). Precision is an exclusive
    licensee, with a right to grant sublicenses, of the University of Florida
    Research Foundation, Inc. ("UFRF") and of Nicholas Bodor ("Bodor"), a former
    director of the Company, under license agreements dated October 31, 1997 as
    amended. Pursuant to the sublicense agreement, Precision granted MPI an
    exclusive worldwide sublicense of all of its rights and interest in the
    licensed patents and know-how as defined in the license agreements to make,
    use and sell licensed products and to use licensed processes in exchange for
    license fees paid by MPI of $750,000 and milestone payments aggregating
    $1,100,000. The agreement also provides for the payment by MPI of royalties
    of (a) 6.25% of gross selling price for licensed products or licensed
    processes that are covered by one or more licensed patents, and (b) 4.25% of
    the selling price of licensed products or licensed processes which are not
    covered by one or more licensed patents but which include or are derived
    from the know-how. In connection therewith, the Company incurred costs of
    approximately $114,000 which it included in cost of the license. In
    April 1999 and April 2000, the sublicense agreements with UFRF and Bodor,
    respectively, were terminated and Bodor's shares of the Company's common
    stock were cancelled. As a result, the Company wrote off the unamortized
    balance of the license fee amounting to $1,822,000 as of December 31, 1999.

                                      F-36

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE D--SUBLICENSE AGREEMENT (CONTINUED)
[2] RXEYES, INC.:

        On April 14, 1998, RxEyes, Inc. ("RxEyes") entered into a license
    agreement with Neil F. Martin, M.D., Howard N. Robinson, M.D., Marvin S.
    Towsend, Esquire and Leonard Bloom, Esquire (collectively the "Licensor").
    Pursuant to the license agreement, Licensor granted RxEyes an exclusive
    license in the licensed patents and know-how as defined in the license
    agreement to make, use and sell licensed products and to use licensed
    processes in exchange for license fees of $50,000 and milestone payments
    aggregating $750,000. The agreement also provides for the payment of
    royalties of 6% of selling price for licensed products or licensed processes
    that are covered by one or more licensed patents. In connection therewith,
    the Company incurred costs of approximately $33,000 which are included in
    the cost of the license.

        On February 26, 2001, RxEyes received a notice of termination of the
    license agreement from the Licensor alleging nonpayment by RxEyes of a
    $200,000 penalty payment. RxEyes maintains that it is not required to make
    such payment.

[3] ENTERON PHARMACEUTICALS, INC.:

        On November 24, 1998, Enteron Pharmaceuticals, Inc. ("Enteron") entered
    into a license agreement with George B. McDonald, M.D. ("Licensor").
    Pursuant to the license agreement, Licensor granted Enteron an exclusive
    license in the licensed patents and know-how as defined in the license
    agreement to make, use and sell licensed products and to use licensed
    processes in exchange for license fees of $20,000 and milestone payment of
    $300,000. The agreement also provides for the payment of royalties of 6% to
    8% of net selling price, as defined, for licensed products or licensed
    processes that are covered by one or more licensed patents and 25% to 33% of
    sublicense fees, as defined, received from third parties for the right to
    practice the licensed processes. In connection therewith, the Company
    incurred costs of approximately $7,000 which are included in cost of the
    license. On March 5, 2001, Enteron and the Licensor amended the license
    agreement whereby the milestone payment of $300,000 was increased to
    $400,000.

[4] ORAL SOLUTIONS, INC.:

        On June 8, 1999, Oral Solutions, Inc. ("OSI") entered into a license
    agreements with Joel B. Epstein, D.M.D. ("Licensor"). Pursuant to the
    license agreement, Licensor granted OSI an exclusive license with the right
    to grant sublicenses under the licensed patents and know-how as defined in
    the license agreement to make, use and sell licensed products and to use
    licensed processes. The agreement also provides for the payment of 2% of
    royalties received by OSI from the sales by any sublicensee of the licensed
    products.

                                      F-37

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE E--STOCKHOLDERS' EQUITY

[1] PRIVATE PLACEMENT:

        In May and July 1998, pursuant to a private placement offering, the
    Company sold 152.575 units, each unit consisting of 50,000 shares of
    Series A Convertible Preferred Stock of the Company at a price per unit of
    $100,000 ($2.00 per preferred share). Pursuant to the terms of the offering,
    the holders of each share of Preferred Stock are entitled to (a) convert the
    preferred share to common stock on a share-for-share basis subject to
    adjustments for changes in capital stock, (b) vote on an as converted basis,
    (c) receive cumulative dividends when as and if declared by the Board of
    Directors as follows: (1) two dollars ($2.00) per share effective the first
    day following the final closing date and (2) effective on the date that is
    eighteen (18) months from the final closing date, and every twelve
    (12) months thereafter, a one dollar ($1.00) dividend per share, and (d) a
    liquidation preference of $2.00 per share plus any dividends accrued and
    unpaid. The Series A Convertible Preferred Stock is redeemable at the option
    of the Company in whole, but not in part, upon not less than 30 days nor
    more than 60 days written notice, at a price equal to the liquidation
    amount. Net proceeds from the private placement approximated $13,150,000.
    Dividends in arrears as of December 31, 2000 aggregated $22,886,000. In
    January 2001, additional dividends aggregating $7,629,000 accrued.

        The placement agent for the offering received approximately $1,998,000
    in cash plus warrants which, pursuant to the Placement Agency Agreement give
    the holders thereof the right to acquire 762,875 shares of Series A
    Convertible Preferred Stock of the Company at a price of $2.20 per share
    through January 15, 2009. The warrants contain certain anti-dilution
    provisions and may be exercised on a "cashless exercise" basis pursuant to a
    provision that does not require the payment of any cash to the Company.

[2] COMMON SHARES RESERVED FOR ISSUANCE:

        The Company has reserved shares of common stock for issuance upon
    conversion of preferred stock and exercise of options as follows:


                                                               
  (i)  Series A Convertible Preferred Stock                          7,628,750
 (ii)  Placement agent warrants conversion of preferred stock          762,875
(iii)  Stock options                                                 1,322,725


NOTE F--STOCK OPTIONS

    The Company applies APB No. 25 in accounting for stock options granted,
which requires recognition of employee compensation expense for the difference
between the fair value of the underlying common stock and the exercise price of
the option at the grant date. The effect of applying SFAS No. 123 on pro forma
net income (loss) is not necessarily representative of the effects on reported
net income (loss) for future years due to, among other things, (1) the vesting
period of stock options and the (2) fair value of additional stock options in
future years. Had the compensation expense been determined based upon the fair
value at the grant date, as prescribed under SFAS

                                      F-38

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE F--STOCK OPTIONS (CONTINUED)
No. 123, the Company's pro forma net loss for the years ended December 31, 2000
and 1999 would have been approximately $2,525,000 and $1,600,000, respectively.

    The weighted average fair value of the options granted during 2000 and 1999
is estimated to be $0.45 and $0.66, respectively. The fair value of the options
on the grant date was computed using the Black-Scholes option-pricing model. The
following assumptions were used for this valuation: dividend yield of 0%,
volatility of 80%, risk free interest rate of 5.65% and expected life of options
of 5 years.



                                                                    DECEMBER 31,
                                 JUNE 30,    -----------------------------------------------------------
                                   2001                  2000                           1999
                                 ---------   ----------------------------   ----------------------------
                                                         WEIGHTED AVERAGE               WEIGHTED AVERAGE
                                  SHARES      SHARES      EXERCISE PRICE     SHARES      EXERCISE PRICE
                                 ---------   ---------   ----------------   ---------   ----------------
                                                                         
Outstanding, beginning of
  year.........................  1,322,725   1,372,725        $0.20         1,172,725        $0.20
Granted during the year........                154,545         0.20           450,000         0.20
Cancelled during the year......               (204,545)        0.20          (250,000)
                                 ---------   ---------                      ---------
Outstanding, end of year.......  1,322,725   1,322,725         0.20         1,372,725         0.20
                                 =========   =========                      =========
Exercisable, end of year.......  1,146,464   1,146,464         0.20           776,389         0.20
                                 =========   =========                      =========


    The following table summarizes stock option information as of December 31,
2000:



                                      OPTIONS OUTSTANDING
                                       WEIGHTED AVERAGE
      EXERCISE            NUMBER           REMAINING          OPTIONS
        PRICE           OUTSTANDING    CONTRACTUAL LIFE     EXERCISABLE
---------------------   -----------   -------------------   -----------
                                                   
        $0.20              100,000            2.67              83,334
         0.20              772,725            2.92             729,796
         0.20               50,000            3.00              33,334
         0.20              400,000            3.50             300,000
                         ---------                           ---------
                         1,322,725            3.00           1,146,464
                         =========                           ---------


NOTE G--COMMITMENTS

[1] The Company has an employment agreement with its Chief Executive Officer
    which expires June 2001. The agreement provides for, (1) annual compensation
    of $198,000 (reduced to $100,000 effective October 25, 2000) plus bonuses to
    be determined at the sole discretion of the Board of Directors, and (2) the
    grant of options to purchase 772,725 shares of common stock of the Company
    at a purchase price of $0.20 per share (including "cashless exercise"
    feature, as defined which may result in a charge to operations which may be
    material), for a period of five years, which vested 193,181 shares on
    December 1, 1998 and the remainder, quarterly in advance over nine quarterly
    periods beginning February 1, 1999, provided that the CEO is still employed
    by the

                                      F-39

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE G--COMMITMENTS (CONTINUED)
    Company. The options, which were valued at $406,000, were recorded as
    unearned compensation. For the years ended December 31, 2000 and 1999, the
    Company recorded compensation expense of approximately $56,000 and $135,000,
    respectively, in connection with the options issued.

        On November 25, 2000, the Company and the Chief Executive Officer agreed
    to cancel fully exercisable stock options to purchase 154,545 shares of
    common stock of the Company granted to the Chief Executive Officer in
    December 1998. The cancelled stock options, at the request of the Chief
    Executive Officer, were reissued to three employees of the Company.

[2] The Company has an employment agreement with its Director of Corporate
    Development for a term expiring June 2002. The agreement provides for,
    (1) annual compensation of $60,000 plus bonuses to be determined at the sole
    discretion of the Board of Directors, and (2) the grant of options to
    purchase 400,000 shares of common stock of the Company at a purchase price
    of $0.20 per share (including "cashless exercise" feature, as defined which
    may result in a charge to operations which may be material), for a period of
    five years, which vested 100,000 shares on October 1, 1998 and the remainder
    vesting annually in advance in equal installments, provided that the officer
    is still employed by the Company. The options, which were valued at
    $228,000, were recorded as unearned compensation. For the year ended
    December 31, 2000 and 1999, the Company recorded compensation expense of
    approximately $57,000 and $71,000, respectively, in connection with the
    options issued.

NOTE H--INCOME TAXES

    At December 31, 2000, the Company has available for Federal income tax
purposes a net consolidated operating loss carryforward of approximately
$2,400,000, which will expire in 2018 through 2020. In addition, the Company has
incurred an operating loss of $1,431,000 for the period January 1, 2001 through
June 30, 2001. The Company also has a $3,017,000 capital loss carryforward which
expires in 2004, an orphan drug credit of $611,000 expiring through 2020 and
research and development credits of $47,000 expiring through 2020. The Company's
ability to utilize these carryforwards may be subject to annual limitations
pursuant to Section 382 of the Internal Revenue Code if future changes in
ownership occur.

                                      F-40

            CORPORATE TECHNOLOGY DEVELOPMENT, INC. AND SUBSIDIARIES
                  (FORMERLY INSTITUTE FOR DRUG RESEARCH, INC.)
                         (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

                   (UNAUDITED WITH RESPECT TO JUNE 30, 2001)

NOTE H--INCOME TAXES (CONTINUED)
    The Company's deferred tax assets are attributable to the following:



                                                                             DECEMBER 31,
                                                          JUNE 30,     -------------------------
                                                            2001          2000          1999
                                                         -----------   -----------   -----------
                                                                            
Net operating loss carryforward........................  $ 1,450,000   $   950,000   $   639,000
Capital loss carryforward..............................    1,388,000     1,388,000     1,388,000
Orphan drug and research and development credits.......      658,000       658,000
                                                         -----------   -----------   -----------
                                                           3,496,000     2,996,000     2,027,000
Valuation allowance....................................   (3,496,000)   (2,996,000)   (2,027,000)
                                                         -----------   -----------   -----------
Net....................................................  $         0   $         0   $         0
                                                         ===========   ===========   ===========


    The Company has provided a valuation allowance against the full amount of
the deferred tax asset as realization is uncertain.

NOTE I--SUBSEQUENT EVENTS

[1] LICENSE OPTION:

        On February 20, 2001, Formulation Technologies, Inc. ("Formulation"), a
    newly formed and wholly-owned subsidiary of the Company, entered into a
    twelve-month preliminary exclusive license option agreement with University
    Pharmaceuticals of Maryland, Inc,. ("UPM"). UPM is an exclusive licensee,
    with a right to grant sublicenses, of certain patented technology from the
    University of Maryland. Pursuant to the option agreement, UPM granted
    Formulation an exclusive option to license the patent and technology, as
    defined, in exchange for an option fee of $10,000. Formulation has a twelve
    month option to enter into a sub-license agreement with UPM whereby UPM will
    grant Formulation an exclusive sublicense of all of its rights and interest
    in the licensed patent and know-how as defined to make, use and sell
    licensed products and to use licensed processes in exchange for license fees
    to be paid by Formulation amounting to $35,000 and milestone payments
    aggregating $1,000,000. The proposed agreement will provide for the payment
    by Formulation of royalties of 3% of gross selling price for licensed
    products or licensed processes that are covered by the licensed patent.

[2] MERGER:

        The Company has entered into a merger agreement with Endorex Corporation
    ("Endorex") whereby Endorex has agreed to acquire the Company in exchange
    for the issuance of Endorex common stock, options and warrants to the
    existing stockholders, warrant holders and option holders of the Company as
    described in the agreement and plan of merger and reorganization dated
    July 31, 2001. There are no assurances that the merger will take place.

                                      F-41

                              INDEX TO APPENDICES


                                                                                         
Appendix I                     --   Agreement and Plan of Merger and Reorganization.............     I-1
Appendix II                    --   Voting Agreement............................................    II-1
Appendix III                   --   Opinion of Wells Fargo Van Kasper, financial advisor to
                                      Endorex Corporation.......................................   III-1
Appendix IV                    --   Section 262 of the Delaware General Corporation Law.........    IV-1
Appendix V                     --   Escrow Agreement............................................     V-1
Appendix VI                    --   Form of Amended and Restated 1995 Omnibus Incentive Plan, as
                                      proposed to be amended....................................    VI-1
Appendix VII                   --   Endorex Audit Committee Charter.............................   VII-1


                                      IA-1

                                   APPENDIX I

                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

                                  BY AND AMONG

                              ENDOREX CORPORATION,

                         ROADRUNNER ACQUISITION, INC.,

                                      AND

                     CORPORATE TECHNOLOGY DEVELOPMENT, INC.

                           DATED AS OF JULY 31, 2001

                               TABLE OF CONTENTS



                                                                                        PAGE
                                                                                      --------
                                                                                
ARTICLE I  THE MERGER...............................................................       I-1
  1.1                   The Merger..................................................       I-1
  1.2                   Closing; Effective Time.....................................       I-2
  1.3                   Effect of the Merger........................................       I-2
  1.4                   Certificate of Incorporation; Bylaws........................       I-2
  1.5                   Directors and Officers......................................       I-2
  1.6                   Merger Consideration........................................       I-2
  1.7                   Dissenting Shares...........................................       I-4
  1.8                   Surrender of Certificates...................................       I-5
  1.9                   Lost, Stolen or Destroyed Certificates......................       I-7
  1.10                  Closing of Company's Transfer Books.........................       I-7
  1.11                  Tax Consequences............................................       I-7
  1.12                  No Liability................................................       I-7
  1.13                  Affiliates..................................................       I-8
  1.14                  Taking of Necessary Action; Further Action..................       I-8

ARTICLE II  REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS OF COMPANY...
                                                                                           I-8
  2.1                   Organization, Standing and Power............................       I-8
  2.2                   Capital Structure...........................................       I-8
  2.3                   Authority...................................................       I-9
  2.4                   No Conflicts; Required Filings and Consents.................       I-9
  2.5                   Permits; Compliance with Laws...............................      I-10
  2.6                   Financial Statements........................................      I-11
  2.7                   Absence of Certain Changes..................................      I-11
  2.8                   Absence of Undisclosed Liabilities..........................      I-12
  2.9                   Litigation..................................................      I-12
  2.10                  Restrictions on Business Activities.........................      I-12
  2.11                  Title to Property...........................................      I-12
  2.12                  Intellectual Property.......................................      I-13
  2.13                  Taxes.......................................................      I-15
  2.14                  Employee Benefit Plans......................................      I-17
  2.15                  Employees; Employee Matters.................................      I-18
  2.16                  Interested Party Transactions...............................      I-18
  2.17                  Complete Copies of Materials; Bank Accounts.................      I-18
  2.18                  Material Contracts..........................................      I-19
  2.19                  No Breach of Material Contracts.............................      I-19
  2.20                  Brokers.....................................................      I-20
  2.21                  No Business Activity Restriction............................      I-20
  2.22                  Environmental Matters.......................................      I-20
  2.23                  Company Stockholders' Approval..............................      I-21
  2.24                  No Excess Parachute Payments................................      I-21
  2.25                  Completeness of the Company Information.....................      I-22
  2.26                  Insurance...................................................      I-22
  2.27                  Guaranties..................................................      I-22
  2.28                  Subsidiaries................................................      I-22
  2.29                  Anti-Takeover Matters.......................................      I-22
  2.30                  FDA Matters.................................................      I-22


                                      I-i




                                                                                        PAGE
                                                                                      --------
                                                                                
  2.31                  Studies.....................................................      I-23
  2.32                  Employment Agreements.......................................      I-23
  2.33                  Patent and Trademark Applications...........................      I-23
  2.34                  McDonald License Agreement..................................      I-24
  2.35                  Allergan Transaction........................................      I-24
  2.36                  Liquidation Amount..........................................      I-24
  2.37                  Parent Securities...........................................      I-24
  2.38                  Dissolution.................................................      I-24
  2.39                  Common Stock................................................      I-24
  2.40                  Representations Complete....................................      I-24

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................
                                                                                          I-25
  3.1                   Organization and Standing...................................      I-25
  3.2                   Capital Structure of Parent.................................      I-25
  3.3                   Authority...................................................      I-25
  3.4                   No Conflict; Required Filings and Consents..................      I-25
  3.5                   SEC Filings; Financial Statements of Parent.................      I-26
  3.6                   Litigation..................................................      I-26
  3.7                   No Undisclosed Liabilities..................................      I-26
  3.8                   Absence of Certain Changes..................................      I-27
  3.9                   Brokers.....................................................      I-27
  3.10                  Reorganization..............................................      I-27
  3.11                  Representations Complete....................................      I-28

ARTICLE IV  CONDUCT PRIOR TO THE EFFECTIVE TIME.....................................      I-28
  4.1                   Conduct of Business of Company..............................      I-28
  4.2                   Exclusivity.................................................      I-30
  4.3                   Notices of Certain Events...................................      I-31

ARTICLE V  ADDITIONAL AGREEMENTS....................................................      I-31
  5.1                   Access to Information.......................................      I-31
  5.2                   Confidentiality.............................................      I-32
  5.3                   Public Disclosure...........................................      I-32
  5.4                   Reasonable Efforts and Further Assurances...................      I-33
  5.5                   Notification of Certain Matters.............................      I-33
  5.6                   Employment and Consulting Agreements; Employees.............      I-33
  5.7                   No Liability of Parent if Transaction is Not Tax-Free.......      I-34
  5.8                   Company Disclosure Schedule.................................      I-34
  5.9                   Litigation Support..........................................      I-34
  5.10                  Transition..................................................      I-34
  5.11                  Tax Treatment...............................................      I-34
  5.12                  Joint Proxy Statement/Prospectus; Registration Statement....      I-35
  5.13                  Stockholders Meetings.......................................      I-35
  5.14                  Affiliate Agreements........................................      I-35
  5.15                  Registration Statement; Joint Proxy Statement/Prospectus....      I-36
  5.16                  Directors' and Officers' Indemnification and Insurance......      I-36
  5.17                  Amendment to Company's Certificate of Incorporation.........      I-36
  5.18                  McDonald License Agreement..................................      I-36
  5.19                  Address Change Notices......................................      I-37
  5.20                  Amendment of the Warrants...................................      I-37


                                      I-ii




                                                                                        PAGE
                                                                                      --------
                                                                                
  5.21                  AMEX Noncompliance Notice...................................      I-37

ARTICLE VI  CONDITIONS TO THE MERGER................................................      I-37
  6.1                   Conditions to Obligations of Each Party to Consummate the
                        Merger......................................................      I-37
  6.2                   Additional Conditions to Obligations of Company.............      I-38
  6.3                   Additional Conditions to Obligations of Parent and Merger
                        Sub.........................................................      I-39

ARTICLE VII  TERMINATION AND AMENDMENT..............................................      I-40
  7.1                   Termination.................................................      I-40
  7.2                   Effect of Termination.......................................      I-42
  7.3                   Certain Payments............................................      I-42

ARTICLE VIII  REMEDIES, ESCROW AND INDEMNIFICATION..................................      I-43
  8.1                   Survival of Representations and Warranties..................      I-43
  8.2                   Escrow Fund.................................................      I-43
  8.3                   Limitations on Indemnification..............................      I-43
  8.4                   Indemnification by the Stockholders.........................      I-44
  8.5                   Indemnification by Parent and Surviving Corporation.........      I-45
  8.6                   Third Party Claims..........................................      I-45

ARTICLE IX  GENERAL PROVISIONS......................................................      I-45
  9.1                   Expenses....................................................      I-45
  9.2                   Notices.....................................................      I-46
  9.3                   Certain Definitions; Interpretation.........................      I-47
  9.4                   Counterparts................................................      I-47
  9.5                   Entire Agreement; Parties in Interest; Nonassignability.....      I-47
  9.6                   Severability................................................      I-47
  9.7                   Governing Law...............................................      I-48
  9.8                   Rules of Construction.......................................      I-48
  9.9                   Extension; Waiver...........................................      I-48
  9.10                  No Third-Party Beneficiary..................................      I-48
  9.11                  Attorneys' Fees.............................................      I-48
  9.12                  Amendment...................................................      I-48


                                     I-iii

EXHIBITS


                              
Exhibit A               --          Form of Delaware Certificate of Merger
Exhibit B               --          Directors and Officers of Surviving Corporation
Exhibit C               --          Form of Escrow Agreement
Exhibit D               --          Form of Bier Employment Agreement
Exhibit E               --          Company Affiliates
Exhibit F               --          Form of Affiliate Agreement
Exhibit G               --          Form of Legal Opinions of Counsel to Company
Exhibit H               --          Form of Legal Opinion of Counsel to Parent and Merger Sub
Exhibit I               --          Executing Stockholders and Form of Voting Agreement
Exhibit J               --          Form of Stergiopoulos Consulting Agreement
Exhibit K               --          Form of Kanzer Noncompetition/Nonsolicitation Agreement
Exhibit L               --          Certificate of Incorporation and Bylaws of Surviving
                                    Corporation
Exhibit M               --          Escrow Shares
Exhibit N               --          2001 Company Budget
Exhibit O               --          Form of Amended Warrant


SCHEDULES

Company Disclosure Schedule
Parent Disclosure Schedule

                                      I-iv

                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

    THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "AGREEMENT") is
made and entered into as of July 31, 2001, by and among Endorex Corporation, a
Delaware corporation ("PARENT"); Roadrunner Acquisition, Inc., a Delaware
corporation and wholly-owned subsidiary of Parent ("MERGER SUB"); and Corporate
Technology Development, Inc., a Delaware corporation ("COMPANY").

                                    RECITALS

    A. The Boards of Directors of Company, Merger Sub and Parent believe it is
in the best interests of their respective corporations and the stockholders of
their respective corporations to enter into a business combination by means of a
statutory merger of Merger Sub with and into Company (the "MERGER") and, in
furtherance thereof, have approved the Merger.

    B.  Pursuant to the Merger, among other things, the outstanding shares of
common stock, $.001 par value per share, of Company (the "COMPANY COMMON STOCK")
and the outstanding shares of Series A Convertible Preferred Stock, par value
$.001 per share, of Company ("SERIES A PREFERRED" and, together with the Company
Common Stock, the "COMPANY STOCK") shall be converted into the right to receive
shares of common stock of Parent, $.001 par value per share (the "PARENT COMMON
STOCK"), on the terms and subject to the conditions set forth herein. Parent
will issue options to acquire Parent Common Stock (the "PARENT OPTIONS")
pursuant to Parent's Amended and Restated 1995 Omnibus Incentive Plan, as
amended (the "PARENT PLAN"), to holders of options (the "COMPANY OPTIONS")
issued pursuant to Company's 1998 Stock Incentive Plan (the "COMPANY PLAN") in
substitution for the Company Options. All outstanding warrants of Company to
acquire shares of Series A Preferred (the "WARRANTS") shall be amended to be
substantially in the form set forth in EXHIBIT O attached hereto (the "AMENDED
WARRANTS") prior to the Effective Time (defined in Section 1.2), and Parent
shall issue warrants exercisable for shares of Parent Common Stock in
substitution for the Amended Warrants (the "PARENT WARRANTS").

    C.  The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE"), and the Treasury Regulations promulgated
thereunder, and intend that the Merger qualify as a reorganization within the
meaning of Section 368(a) of the Code.

    D. Concurrently with the execution of this Agreement, each of the security
holders of the Company set forth on EXHIBIT I attached hereto is executing and
delivering to Parent a Voting Agreement substantially in the form set forth in
EXHIBIT I attached hereto (the "VOTING AGREEMENT").

    NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:

                                   ARTICLE I
                                   THE MERGER

    1.1  THE MERGER.  At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions set forth in this Agreement and the
applicable provisions of the Delaware General Corporation Law ("DELAWARE LAW"),
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation and as a wholly-owned subsidiary of Parent. Company, as the
surviving corporation after the Merger, is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."

                                      I-1

    1.2  CLOSING; EFFECTIVE TIME.  The closing of the Merger (the "CLOSING")
shall take place as soon as practicable after the satisfaction or waiver of each
of the conditions set forth in Article VI or at such other time as the parties
hereto agree (the "CLOSING DATE"). The Closing shall take place at the offices
of Brobeck, Phleger & Harrison LLP, 370 Interlocken Boulevard, Suite 500,
Broomfield, Colorado 80021, or at such other location as the parties hereto
agree. At the Closing and simultaneously therewith, the parties hereto shall
cause the Merger to be consummated by filing a Certificate of Merger
substantially in the form attached hereto as EXHIBIT A (the "DELAWARE
CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the time of filing of
the Delaware Certificate of Merger being the "EFFECTIVE TIME").

    1.3  EFFECT OF THE MERGER.  At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Delaware Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Company and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation, and the Surviving Corporation shall be a wholly-owned subsidiary of
Parent.

    1.4  CERTIFICATE OF INCORPORATION; BYLAWS.

        (a)  CERTIFICATE OF INCORPORATION.  Unless otherwise determined by
    Parent prior to the Effective Time, at the Effective Time the Certificate of
    Incorporation of Merger Sub, as in effect immediately prior to the Effective
    Time, shall be the Certificate of Incorporation of the Surviving Corporation
    (except the name of the Surviving Corporation shall be amended to become
    "Corporate Technology Development, Inc.") until thereafter amended, as
    provided by Delaware Law and such Certificate of Incorporation.

        (b)  BYLAWS.  Unless otherwise determined by Parent prior to the
    Effective Time, at the Effective Time the Bylaws of Merger Sub, as in effect
    immediately prior to the Effective Time, shall be the Bylaws of the
    Surviving Corporation, until thereafter amended, as provided by Delaware
    Law, the Surviving Corporation's Certificate of Incorporation and such
    Bylaws.

    1.5  DIRECTORS AND OFFICERS.

        (a)  SURVIVING CORPORATION.  From and after the Effective Time, the
    directors and officers of the Surviving Corporation shall be as set forth on
    EXHIBIT B annexed hereto, in each case until their respective successors are
    duly elected or appointed and qualified.

        (b)  PARENT.  Parent shall take, or cause to be taken, such action so
    that, at the Effective Time, the Board of Directors of Parent (the "PARENT
    BOARD") shall consist of nine (9) members, three of whom shall be Dr. Colin
    Bier, Mr. Guy Rico and Mr. Peter Kliem, who shall serve until their
    successors are duly elected and qualified. Without limiting the foregoing,
    if necessary to comply with this Section 1.5(b), Parent shall cause the
    number of directors that shall constitute the Parent Board to be increased
    by resolution of the Parent Board. Dr. Bier will become the Chief Executive
    Officer of Parent and be appointed by the Parent Board as the Chairman of
    the Parent Board and Dr. Bier shall serve as the Chairman until such time as
    a successor is appointed by the Parent Board.

    1.6  MERGER CONSIDERATION.

        (a)  CONVERSION OF COMPANY STOCK.  At the Effective Time by virtue of
    the Merger and without any action on the part of the holders of Company
    Common Stock, each share of Company Common Stock issued and outstanding
    immediately prior to the Effective Time (excluding those held in the
    treasury of Company), and all rights in respect thereof, shall forthwith
    cease to exist and be converted into .271443 of a share (the "COMMON STOCK
    EXCHANGE RATIO") of Parent

                                      I-2

    Common Stock. At the Effective Time by virtue of the Merger and without any
    action on the part of the holders of shares of Series A Preferred, each
    share of Series A Preferred issued and outstanding immediately prior to the
    Effective Time (excluding those held in the treasury of Company), and all
    rights in respect thereof, shall forthwith cease to exist and be converted
    into 1.008466 shares of Parent Common Stock (the "PREFERRED STOCK EXCHANGE
    RATIO," and, together with the Common Stock Exchange Ratio, the "EXCHANGE
    RATIOS"). At the Effective Time by virtue of the Merger and without any
    action on the part of the holders of the Company Options, each Company
    Option issued and outstanding immediately prior to the Effective Time, and
    all rights in respect thereof, shall forthwith cease to exist and Parent
    Options shall be substituted therefor. Each such Parent Option shall be
    evidenced by a new stock option agreement issued by Parent to each of the
    holders of a Company Option (each a "PARENT GRANT AGREEMENT"). Each such
    Parent Grant Agreement shall have, and be subject to, the same terms and
    conditions set forth in the applicable stock option agreements for the
    Company Options, as in effect on the date hereof (each a "COMPANY OPTION
    AGREEMENT"), except that each Parent Option will be exercisable for the
    number of shares of Parent Common Stock equal to the product of the number
    of shares of Company Common Stock that were subject to such corresponding
    Company Option immediately prior to the Effective Time multiplied by the
    Common Stock Exchange Ratio, rounded down to the nearest whole share, and
    the per share exercise price for the shares of Parent Common Stock issuable
    upon exercise of such Parent Option will be equal to the quotient determined
    by dividing the exercise price per share of Company Common Stock at which
    such Company Option was exercisable immediately prior to the Effective Time
    by the Common Stock Exchange Ratio, rounded up to the nearest whole cent. At
    the Effective Time by virtue of the Merger and without any action on the
    part of the holders of the Amended Warrants, each Amended Warrant issued and
    outstanding immediately prior to the Effective Time, and all rights in
    respect thereof, shall forthwith cease to exist and Parent Warrants shall be
    substituted therefor. Each such Parent Warrant shall have, and be subject
    to, the same terms and conditions set forth in the applicable Amended
    Warrant, except that each Parent Warrant will be exercisable for the number
    of shares of Parent Common Stock equal to the product of the number of
    shares of Series A Preferred that were subject to such corresponding Amended
    Warrant immediately prior to the Effective Time multiplied by the Common
    Stock Exchange Ratio, rounded down to the nearest whole share, and the per
    share exercise price for the shares of Parent Common Stock issuable upon
    exercise of such Parent Warrent will be equal to the quotient determined by
    dividing the exercise price per share of Series A Preferred at which such
    Amended Warrant was exercisable immediately prior to the Effective Time by
    the Common Stock Exchange Ratio, rounded up to the nearest whole cent.
    Except pursuant to the terms of Sections 1.6(d) or 8.5, in no event shall
    Parent be required to issue any Parent Common Stock or options, warrants or
    other securities exercisable for or convertible into in excess of 10,000,000
    shares of Parent Common Stock pursuant to the terms of this Agreement,
    including, but not limited to, the Parent Common Stock issuable upon
    exercise of the Parent Options, the Parent Common Stock issuable upon
    exercise of the Parent Warrants, the Parent Common Stock to be issued to
    Nicholas Stergiopoulos pursuant to Section 1.6(g) and the Parent Common
    Stock to be issued to Steve Kanzer pursuant to Section 1.6(h). An aggregate
    of 1,350,000 shares of the Merger Consideration (as defined below) payable
    to the stockholders of Company (the "STOCKHOLDERS") as set forth on EXHIBIT
    M attached hereto shall be subject to escrow pursuant to Sections
    1.8(b) and 8.2. The aggregate number of shares of Parent Common Stock
    issuable (i) pursuant to this Section 1.6(a), (ii) upon exercise of the
    Parent Options and the Parent Warrants, and (iii) pursuant to
    Section 1.6(d) are collectively referred to herein as the "MERGER
    CONSIDERATION". The aggregate number of shares of Parent Common Stock that
    the holders of the Series A Preferred receive pursuant to this
    Section 1.6(a) is referred to herein as the "SERIES A PREFERRED MERGER
    CONSIDERATION."

                                      I-3

        (b)  CANCELLATION OF CAPITAL STOCK OWNED BY COMPANY.  At the Effective
    Time, all shares of capital stock of Company that are held in the treasury
    of Company or owned by Company or any subsidiary of Company immediately
    prior to the Effective Time shall be canceled and extinguished without any
    conversion thereof and without payment of any consideration therefor.

        (c)  NO FRACTIONAL SHARES.  No certificate or scrip representing
    fractional shares of Parent Common Stock shall be issued upon the surrender
    for exchange of certificates that immediately prior to the Effective Time
    represented outstanding shares of Company Stock (the "COMPANY
    CERTIFICATES"), no dividend or distribution of Parent shall relate to such
    fractional share interests, and such fractional share interests will not
    entitle the owner thereof to vote or to any other rights of a stockholder of
    Parent. Notwithstanding any other provision of this Agreement, each holder
    of shares of Company Stock exchanged pursuant to the Merger who would
    otherwise have been entitled to receive a fraction of a share of Parent
    Common Stock (after taking into account all Company Certificates delivered
    by such holder) shall receive, in lieu thereof, cash (without interest) in
    an amount equal to such fractional part of a share of Parent Common Stock
    multiplied by the Closing Date Fair Market Value (as defined in
    Section 8.3(d)).

        (d)  ADJUSTMENTS TO EXCHANGE RATIOS.  The Exchange Ratios shall be
    adjusted to reflect fully the effect of any stock split, reverse split,
    stock dividend (including any dividend or distribution of securities
    convertible into Parent Common Stock or securities of Company),
    reorganization, recapitalization or other like change with respect to Parent
    Common Stock or securities of Company occurring after the date hereof and
    prior to the Effective Time; PROVIDED, HOWEVER, that the Exchange Ratios
    shall not be adjusted for any dividend of Parent's securities on Parent's
    Series B Convertible Preferred Stock or Series C Convertible Preferred Stock
    pursuant to the terms of Parent's Amended and Restated Certificate of
    Incorporation.

        (e)  CONVERSION OF MERGER SUB COMMON STOCK.  At the Effective Time, each
    share of common stock of Merger Sub issued and outstanding immediately prior
    to the Effective Time shall remain outstanding and shall represent one
    validly issued, fully paid and nonassessable share of common stock of the
    Surviving Corporation.

        (f)  OUTSTANDING CAPITAL STOCK OF COMPANY.  After the Effective Time, no
    share of capital stock of Company shall be deemed to be outstanding or to
    have any rights other than those set forth in this Section 1.6.

        (g)  STERGIOPOULOS PAYMENT.  At the Closing, Nicholas Stergiopoulos
    shall receive 133,334 shares of Parent Common Stock from Parent as payment
    of a bonus pursuant to Section 3(a)(iv) of the Stergiopoulos Employment
    Agreement (as defined in Section 5.6(c)).

        (h)  KANZER PAYMENT.  At the Closing, Steve Kanzer shall receive 250,000
    shares of Parent Common Stock from Parent as payment of a bonus related to
    his employment with CTD.

    1.7  DISSENTING SHARES.

        (a)  DISSENTER'S RIGHTS.  Notwithstanding any provision of this
    Agreement to the contrary, any capital stock of Company held by a holder who
    has exercised such holder's dissenter's rights in accordance with
    Section 262 of Delaware Law, and who, as of the Effective Time, has not
    effectively withdrawn or lost such dissenter's rights ("DISSENTING SHARES"),
    shall not be converted into or represent a right to receive Parent Common
    Stock pursuant to Section 1.6, but the holder of the Dissenting Shares shall
    only be entitled to such rights as are granted by Section 262 of Delaware
    Law.

        (b)  LOSS OF DISSENTER'S RIGHTS.  Notwithstanding the provisions of
    Section 1.7(a), if any holder of capital stock of Company who demands
    dissenter's rights with respect to such capital stock shall effectively
    withdraw or lose (through failure to perfect or otherwise) his rights to
    receive payment

                                      I-4

    for the fair market value of such capital stock under Delaware Law, then, as
    of the later of the Effective Time or the occurrence of such event, such
    holder's capital stock of Company shall automatically be converted into and
    represent only the right to receive Parent Common Stock and payment for
    fractional shares as provided in Section 1.6(c), without interest, upon
    surrender of the Company Certificates representing such shares to Parent
    pursuant to Section 1.8.

        (c)  NOTICE.  Company shall give Parent (i) prompt notice of any written
    demands for payment with respect to capital stock of Company pursuant to
    Section 262 of Delaware Law, withdrawals of such demands, and any other
    instruments served pursuant to Delaware Law and received by Company, and
    (ii) the opportunity to participate in all negotiations and proceedings with
    respect to demands for dissenter's rights under Delaware Law. Company shall
    not, except with the prior written consent of Parent, voluntarily make any
    payment with respect to any demands for dissenter's rights with respect to
    capital stock of Company or offer to settle or settle any such demands.

    1.8  SURRENDER OF CERTIFICATES.

        (a)  EXCHANGE PROCEDURES.

           (i) From and after the Effective Time, all shares of capital stock of
       Company shall no longer be outstanding and shall automatically be
       cancelled and retired and shall cease to exist, and each holder of a
       Company Certificate shall cease to have any rights with respect thereto,
       except the holders of Company Stock shall have the right, upon surrender
       to Parent of Company Certificates for cancellation, to receive in
       exchange therefor a certificate (a "PARENT CERTIFICATE") representing the
       number of whole shares of Parent Common Stock, less the number of shares
       of Parent Common Stock to be deposited into escrow on such holder's
       behalf pursuant to Article VIII and the Escrow Agreement (as defined in
       Section 6.1(c)), plus cash in lieu of fractional shares, if any, and the
       Company Certificate so surrendered shall forthwith be canceled. Until so
       surrendered, each outstanding Company Certificate that, prior to the
       Effective Time, represented shares of Company Stock will be deemed from
       and after the Effective Time, for all corporate purposes, other than the
       payment of dividends, to evidence only the right to receive that number
       of whole shares of Parent Common Stock issuable in exchange for such
       shares of Company Stock, plus cash in lieu of fractional shares, if any.

           (ii) As soon as reasonably practicable after the Effective Time,
       Parent shall mail to each holder of record of Company Certificates whose
       shares were converted pursuant to Section 1.6 into the right to receive
       shares of Parent Common Stock, (A) a letter of transmittal (which shall
       specify that delivery shall be effected, and risk of loss and title to
       the Company Certificates shall pass, only upon delivery of the Company
       Certificates to Parent and shall be in such form and have such other
       provisions as Parent and Company may reasonably specify) and (B)
       instructions for effecting the surrender of the Company Certificates in
       exchange certificates representing shares of Parent Common Stock, plus
       cash in lieu of fractional shares, if any. Upon surrender of a Company
       Certificate for cancellation to Parent or to such other agent or agents
       as may be appointed by Parent, together with such letter of transmittal,
       duly executed, the holder of such Company Certificate shall be entitled
       to receive in exchange therefor a certificate representing that number of
       whole shares of Parent Common Stock which such holder has the right to
       receive pursuant to the provisions of this Article I, plus cash in lieu
       of fractional shares, if any.

        (b)  ESCROW.  Subject to and in accordance with the provisions of
    Article VIII and the Escrow Agreement and subject to the surrender to Parent
    of all Company Certificates held by the Stockholders, Parent shall cause to
    be distributed to the Escrow Agent (as defined in Section 8.2) a certificate
    or certificates representing 1,350,000 shares of the Merger Consideration
    issuable to

                                      I-5

    the Stockholders pursuant to Section 1.6 (the "ESCROW SHARES"). The Escrow
    Shares shall be held in escrow and shall be available to compensate Parent
    for certain damages as provided in Article VIII. To the extent not used to
    compensate Parent for such damages, such shares shall be released to the
    Stockholders, all as provided in Article VIII and the Escrow Agreement.

        (c)  DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.  No dividends or
    other distributions with respect to Parent Common Stock with a record date
    after the Effective Time will be paid to the holder of any unsurrendered
    Company Certificate with respect to the shares of Parent Common Stock
    represented thereby until the holder of record of such Company Certificate
    shall surrender such Company Certificate to Parent as provided in
    Section 1.8(a)(ii). Subject to applicable law, following surrender of any
    such Company Certificate, there shall be paid to the record holder of the
    certificates representing whole shares of Parent Common Stock issued in
    exchange therefor, without interest, at the time of such surrender, the
    amount of any such dividends or other distributions with a record date after
    the Effective Time theretofore payable (but for the first sentence of this
    Section 1.8(c)) with respect to such shares of Parent Common Stock.

        (d)  TRANSFERS OF OWNERSHIP.  If any certificate for shares of Parent
    Common Stock is to be issued, or any cash is to be paid, in a name other
    than that in which the Company Certificate surrendered in exchange therefor
    is registered, it will be a condition of the issuance thereof that the
    Company Certificate so surrendered will be properly endorsed and otherwise
    in proper form for transfer and that the person requesting such exchange
    will have paid to Parent or any agent designated by it any transfer or other
    Taxes (as defined in Section 2.13(m)(i)) required by reason of the issuance
    of a certificate for shares of Parent Common Stock (or the payment of cash)
    in any name other than that of the registered holder of the Company
    Certificate surrendered, or established to the satisfaction of Parent or any
    agent designated by it that such Tax has been paid or is not payable.

        (e)  OPTIONS.

           (i) From and after the Effective Time, all Company Options shall no
       longer be outstanding and shall automatically be cancelled and retired
       and shall cease to exist, and each holder of a Company Option shall cease
       to have any rights with respect thereto, except the holders of Company
       Options shall have the right, upon surrender to Parent of a Company Grant
       Agreement for cancellation, to receive in exchange therefor a Parent
       Grant Agreement, and the Company Grant Agreement so surrendered shall
       forthwith be canceled. Until so surrendered, each outstanding Company
       Option that, prior to the Effective Time, represented the right to
       acquire shares of Company Stock will be deemed from and after the
       Effective Time, for all purposes, to evidence only the right to receive
       Parent Options as described in Section 1.6(a).

           (ii) As soon as reasonably practicable after the Effective Time,
       Parent shall mail to each holder of record of Company Options which were
       converted pursuant to Section 1.6 into the right to receive Parent
       Options, (A) a letter of transmittal (which shall specify that delivery
       shall be effected, and risk of loss and title to the Company Options
       shall pass, only upon delivery of the Company Grant Agreement to Parent
       and shall be in such form and have such other provisions as Parent and
       Company may reasonably specify) and (B) instructions for effecting the
       surrender of the Company Grant Agreement in exchange for a Parent Grant
       Agreement. Upon surrender of a Company Grant Agreement for cancellation
       to Parent or to such other agent or agents as may be appointed by Parent,
       together with such letter of transmittal, duly executed, the holder of
       such Company Grant Agreement shall be entitled to receive in exchange
       therefor a Parent Grant Agreement representing that number of Parent
       Options which such holder has the right to receive pursuant to the
       provisions of this Article I.

                                      I-6

        (f)  AMENDED WARRANTS.

           (i) From and after the Effective Time, all Amended Warrants shall no
       longer be outstanding and shall automatically be cancelled and retired
       and shall cease to exist, and each holder of an Amended Warrant shall
       cease to have any rights with respect thereto, except the holders of
       Amended Warrants shall have the right, upon surrender to Parent of an
       Amended Warrant for cancellation, to receive in exchange therefor a
       Parent Warrant, and the Amended Warrant so surrendered shall forthwith be
       canceled. Until so surrendered, each outstanding Amended Warrant that,
       prior to the Effective Time, represented the right to acquire shares of
       Series A Preferred will be deemed from and after the Effective Time, for
       all purposes, to evidence only the right to receive Parent Warrants as
       described in Section 1.6(a).

           (ii) As soon as reasonably practicable after the Effective Time,
       Parent shall mail to each holder of record of an Amended Warrant which
       was converted pursuant to Section 1.6 into the right to receive a Parent
       Warrant, (A) a letter of transmittal (which shall specify that delivery
       shall be effected, and risk of loss and title to the Amended Warrent
       shall pass, only upon delivery of the Amended Warrant to Parent and shall
       be in such form and have such other provisions as Parent and Company may
       reasonably specify) and (B) instructions for effecting the surrender of
       the Amended Warrant in exchange for a Parent Warrant. Upon surrender of
       an Amended Warrant for cancellation to Parent or to such other agent or
       agents as may be appointed by Parent, together with such letter of
       transmittal, duly executed, the holder of such Amended Warrant shall be
       entitled to receive in exchange therefor a Parent Warrant exercisable for
       the number of shares of Parent Common Stock determined pursuant to the
       formula set forth in Section 1.6(a).

    1.9  LOST, STOLEN OR DESTROYED CERTIFICATES.  In the event any Company
Certificates shall have been lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Company Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock as may be required pursuant to Section 1.6; PROVIDED, HOWEVER, that
Parent may, in its discretion and as a condition precedent to the issuance and
payment thereof, require the owner of such lost, stolen or destroyed Company
Certificates to deliver to Parent an affidavit of loss, theft or destruction in
form reasonably satisfactory to Parent and to indemnify and hold harmless Parent
from and against any claim that may be made against Parent, the Surviving
Corporation, Company or any of their directors, officers, employees, affiliates
or agents with respect to the Company Certificates alleged to have been lost,
stolen or destroyed.

    1.10  CLOSING OF COMPANY'S TRANSFER BOOKS.  At and after the Effective Time,
holders of Company Stock shall cease to have any rights as stockholders of
Company, except for the right to receive shares of Parent Common Stock, plus
cash in lieu of fractional shares, if any, pursuant to Section 1.6. At the
Effective Time, the stock transfer books of Company shall be closed and no
transfer of shares of Company Stock and any other securities of Company,
including, but not limited to, any options and warrants, which were outstanding
immediately prior to the Effective Time shall thereafter be made.

    1.11  TAX CONSEQUENCES.  It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code.

    1.12  NO LIABILITY.  Notwithstanding anything to the contrary in this
Article I, none of Parent, Merger Sub, the Surviving Corporation or any party
hereto shall be liable to any person in respect of any shares of Parent Common
Stock delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.

                                      I-7

    1.13  AFFILIATES.  Notwithstanding anything herein to the contrary, Company
Certificates surrendered for exchange by any Affiliate (as defined in
Section 5.14) of Company shall not be exchanged until Parent has received an
executed Affiliate Agreement (as defined in Section 5.14) from such Affiliate.

    1.14  TAKING OF NECESSARY ACTION; FURTHER ACTION.  If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Parent with control over, and to vest the
Surviving Corporation with full right, title and possession to, all assets,
property, rights, privileges, powers and franchises of Company, the officers and
directors of Company, Parent and Merger Sub shall, in the name of their
respective corporations or otherwise, take all such lawful and necessary action
as may be requested by Parent.

                                   ARTICLE II
     REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS OF COMPANY

    Except for specific references to, and as set forth in the Company
Disclosure Schedule attached hereto and referring by numbered section (and,
where applicable, by lettered subsection) of the representations and warranties
in this Article II (the "COMPANY DISCLOSURE SCHEDULE"), Company represents and
warrants to Parent and Merger Sub as follows:

    2.1  ORGANIZATION, STANDING AND POWER.  Company and each of its direct or
indirect corporate or non-corporate subsidiaries and any other entity in which
Company or such subsidiaries have a direct or indirect equity participation
("SUBSIDIARIES") is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Company and each of
its Subsidiaries has the corporate power to own its properties and to carry on
its business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction where it
is required by law to be so qualified, except where such failure to qualify
would not have a Material Adverse Effect (as defined in Section 9.3) on Company
or any of its Subsidiaries. Section 2.1 of the Company Disclosure Schedule sets
forth (i) the name of Company and each of its Subsidiaries, (ii) the
jurisdiction of organization of the Company and each of its Subsidiaries,
(iii) each jurisdiction in which Company and each of its Subsidiaries is duly
qualified to do business and in good standing, and (iv) all former names and all
fictitious or assumed names under which Company and each of its Subsidiaries
does or has done business. True, correct and complete copies of the Certificate
of Incorporation and Bylaws or other charter documents, as applicable, of each
of Company and its Subsidiaries, as amended to the date of this Agreement, have
been delivered to Parent and are included in Section 2.1 of the Company
Disclosure Schedule. Neither Company nor any of its Subsidiaries is in violation
of any of the provisions of its Certificate of Incorporation or Bylaws or other
charter documents, as applicable. Neither Company nor any of its Subsidiaries
owns or ever has owned directly or indirectly any equity or similar interest in,
or any interest convertible or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture, limited
liability company or other business association or entity, other than Company's
current ownership interest in its Subsidiaries. Section 2.1 of the Company
Disclosure Schedule sets forth a list of each of the officers and directors of
Company and each of its Subsidiaries.

    2.2  CAPITAL STRUCTURE.  The authorized capital stock of Company consists of
25,000,000 shares of Common Stock, par value $.001 per share, of which 5,000,000
shares were issued and outstanding as of the date hereof, and 10,000,000 shares
of Preferred Stock, par value $.001 per share, of which 9,515,000 shares are
designated Series A Convertible Preferred Stock, of which 7,628,750 shares were
issued and outstanding as of the date hereof. As of the date hereof, Company has
Company Options outstanding to acquire 1,322,725 shares of Company Common Stock
at the exercise prices and for the time periods set forth in Section 2.2 of the
Company Disclosure Schedule, all of which, except as set forth in Section 2.2 of
the Company Disclosure Schedule, are fully vested. As of the date hereof,
Company has Warrants outstanding to acquire 762,875 shares of Series A Preferred
at the exercise prices and for the

                                      I-8

time periods set forth in Section 2.2 of the Company Disclosure Schedule, all of
which, except as set forth in Section 2.2 of the Company Disclosure Schedule,
are fully vested. At the Effective Time, no Warrants will be outstanding. All of
the security holders of Company and each of its Subsidiaries and their
respective holdings, including any holders of options, warrants or any other
right to acquire securities of Company or any of its Subsidiaries, as of the
date hereof, are as set forth on Section 2.2 of the Company Disclosure Schedule.
Other than such securities, there are no other outstanding shares of capital
stock or other securities of Company or any of its Subsidiaries and no
outstanding commitments to issue any shares of capital stock or securities of
Company or any of its Subsidiaries after the date hereof. All outstanding shares
of capital stock of Company and its Subsidiaries are duly authorized, validly
issued, fully paid and non-assessable and are free and clear of any restrictions
on transfer (other than restrictions under the Securities Act of 1933, as
amended (the "ACT") and state securities laws), Taxes, security interests,
charges, liens, encumbrances, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands), and are not subject to preemptive
rights or rights of first refusal created by statute, the Certificate of
Incorporation or Bylaws or other charter documents, as applicable, of the
respective entity or any agreement to which the respective entity is a party or
by which it is bound. Except for the rights created pursuant to this Agreement,
there are no other options, warrants, calls, rights, commitments, contracts or
agreements of any character to which any of Company, its Subsidiaries or
security holders of Company is a party or by which they are bound obligating the
respective person or entity to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of
capital stock or other securities of Company or any of its Subsidiaries or any
securities convertible or exchangeable therefor or obligating Company or any of
its Subsidiaries to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. Except for this Agreement, as contemplated hereby or as
set forth in Section 2.18(h) of the Company Disclosure Schedule, there are no
contracts, commitments, trusts, proxies or agreements relating to voting,
purchase or sale of Company's or any of its Subsidiaries' securities
(i) between or among the respective entity and any of its security holders, and
(ii) between or among any of the respective entity's security holders. There are
no outstanding or authorized stock appreciation rights, phantom stock, profit
participation, dividend equivalent rights, or similar rights with respect to
Company or any of its Subsidiaries. All outstanding securities of Company and
each of its Subsidiaries were issued in compliance with all applicable federal
and state securities laws.

    2.3  AUTHORITY.  Company and each security holder of Company that is not a
natural person has all requisite corporate power and authority to execute and
deliver this Agreement (if applicable), the Escrow Agreement (if applicable),
the Voting Agreement (if applicable), the Affiliate Agreement (if applicable)
and any other agreement contemplated hereunder (the "TRANSACTION AGREEMENTS"),
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Each security holder of Company
that is a natural person has full legal right, power and authority to execute
and deliver the Transaction Agreements, to perform their obligations thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of the Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Company and each
security holder of Company that is not a natural person, subject only to the
approval of the Merger by the stockholders of Company as contemplated by
Section 6.1(d). This Agreement has been duly executed and delivered by Company
and constitutes the valid and binding obligation of Company, enforceable against
Company in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally, and is subject to general principles of
equity.

    2.4  NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.

        (a)  NO CONFLICT.  Except as set forth in Section 2.4(a) of the Company
    Disclosure Schedule, the execution and delivery of the Transaction
    Agreements by Company and each security holder of

                                      I-9

    Company do not, and the performance by Company and each security holder of
    Company of their obligations hereunder and thereunder, and the consummation
    of the Merger will not, (i) conflict with or violate any provision of the
    Certificate of Incorporation, Bylaws or other charter document, as
    applicable, of Company or any of its Subsidiaries or any security holder of
    Company, (ii) conflict with or violate any statute, law, ordinance, rule,
    regulation, judgment, decree, order, injunction, writ, permit or license
    applicable to Company or any of its Subsidiaries or any security holder of
    Company or by which any property or asset of Company or any of its
    Subsidiaries or any security holder of Company is bound or affected, or
    (iii) conflict with, result in any breach of, violate or constitute a
    default (or an event which with the giving of notice or lapse of time or
    both could reasonably be expected to become a default) under, or give to
    others any right of termination, amendment, acceleration or cancellation of,
    or result in the creation of a lien, security interest, charge or other
    encumbrance on any property or asset of Company or any of its Subsidiaries
    or any security holder of Company pursuant to, any note, bond, mortgage,
    indenture, contract, agreement, lease, license, permit, franchise or other
    instrument or obligation, except where such breach or default would not have
    a Material Adverse Effect on Company or any of its Subsidiaries or any
    security holder of Company or impair Company's or any security holder of
    Company's ability to consummate the transactions contemplated hereby.

        (b)  GOVERNMENTAL FILINGS.  No filing or registration with, or
    notification to, and no permit, authorization, consent or approval of, any
    United States Federal, state or local or any foreign governmental,
    regulatory or administrative authority, agency or commission or any court,
    tribunal or arbitral body ("GOVERNMENT ENTITY") is necessary for the
    execution and delivery of the Transaction Agreements by Company and any
    security holder of Company or the consummation by Company and any security
    holder of Company of the transactions contemplated by the Transaction
    Agreements, except (i) the filing of the Delaware Certificate of Merger,
    (ii) the filing of the Joint Proxy Statement (as defined in Section 5.15)
    with the U.S. Securities and Exchange Commission (the "SEC") in accordance
    with the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
    (iii) such filings, registrations, notifications, permits, authorizations,
    registrations, declarations and filings as may be required under applicable
    state securities laws, and (iv) such filings, registrations, notifications,
    permits, authorizations, consents or approvals that result from the specific
    legal or regulatory status of Parent or as a result of any other facts that
    specifically relate to the business or activities in which Parent is engaged
    other than the business of Company.

        (c)  THIRD PARTY CONSENTS AND NOTICES.  Except as set forth in
    Section 2.4(c) of the Company Disclosure Schedule, neither Company nor any
    of its Subsidiaries is required to obtain the consent of, or give notice to,
    any third party by reason of the transactions contemplated by the
    Transaction Agreements.

    2.5  PERMITS; COMPLIANCE WITH LAWS.

    Except for such Company Permits (as defined below) the non-compliance with
which would not have a Material Adverse Effect on Company or any of its
Subsidiaries, Company and each of its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, easements, variances, exceptions, consents,
certificates, identification and registration numbers, approvals and orders of
any Government Entity necessary for Company and each of its Subsidiaries to own,
lease and operate their properties or to offer or perform their services or to
develop, produce, store, distribute and market their products or otherwise to
carry on their business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and none of the Company Permits has been suspended or cancelled nor
is any such suspension or cancellation pending or, to the knowledge of Company,
threatened. All of the Company Permits are set forth in Section 2.5 of the
Company Disclosure Schedule. Company and each of its Subsidiaries is not in
conflict with, or in default or violation of, (i) any law, statute, order, rule,
regulation, ordinance or judgment applicable to Company and each of its
Subsidiaries or by which any property or asset of Company or any of its
Subsidiaries is

                                      I-10

bound or affected or (ii) any Company Permits, except where such conflict would
not have a Material Adverse Effect on Company or any of its Subsidiaries. There
are no actions, proceedings, investigations or surveys pending or, to the
knowledge of Company, threatened against Company and each of its Subsidiaries
that could reasonably be expected to result in the suspension or cancellation of
any Company Permit. Since its inception, neither Company nor any of its
Subsidiaries has received from any Government Entity any written notification
with respect to possible conflicts, defaults or violations of any law, statute,
order, rule, regulation, ordinance or judgment. The Merger will not result in
the suspension or cancellation of any Company Permit.

    2.6  FINANCIAL STATEMENTS.  Section 2.6 of the Company Disclosure Schedule
includes true, complete and correct copies of Company's audited consolidated
financial statements (balance sheet, statement of operations and statement of
cash flows) as at, and for the fiscal years ended December 31, 1998, December
31, 1999, and December 31, 2000 (collectively, the "FINANCIAL STATEMENTS"). As
soon as reasonably practical after the respective period ends, Company shall
provide Parent true, complete and correct copies of Company's unaudited
consolidated financial statements (balance sheet, statement of operations and
statement of cash flows) as at, and for the quarterly periods ended during
fiscal year 2001 prior to the Effective Time (collectively, the "NEW FINANCIAL
STATEMENTS"). The Financial Statements have been, and the New Financial
Statements will be, prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated and with each other. The Financial Statements were, and the
New Financial Statements will be, prepared from and in accordance with the books
and records maintained by Company and fairly present, in all material respects,
the financial condition, operating results and cash flow of Company as of the
dates, and for the periods, indicated therein, subject to the absence of
footnotes and normal year-end audit adjustments which will not be material in
nature or in amount for the New Financial Statements. Company maintains and will
continue to maintain books and records established and administered in
accordance with GAAP.

    2.7  ABSENCE OF CERTAIN CHANGES.  Except as set forth in Section 2.7 of the
Company Disclosure Schedule, since December 31, 2000, Company and each of its
Subsidiaries have conducted their business only in the ordinary course
consistent with past practice and there has not occurred (i) any Material
Adverse Effect on Company or any of its Subsidiaries, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of
Company's obligations pursuant to the Transaction Agreements or the consummation
of the Merger by Company, (iii) any change by Company or any of its Subsidiaries
in its accounting methods, principles or practices, (iv) any declaration,
setting aside or payment of any dividend or distribution in respect of the
shares of capital stock of Company or any of its Subsidiaries or any redemption,
purchase or other acquisition of any of Company's or any of its Subsidiaries'
securities, (v) any increase in the compensation or benefits or establishment or
payment of any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any
employees, officers, consultants or directors of Company or any of its
Subsidiaries, (vi) any issuance, grants or sale of any stock, options, warrants,
notes, bonds or other securities, or entering into any agreement with respect
thereto by Company or any of its Subsidiaries, (vii) any amendment to the
Certificate of Incorporation or bylaws or other charter documents, as
applicable, of Company or any of its Subsidiaries, (viii) other than in the
ordinary course of business consistent with past practice, any (w) capital
expenditures, (x) purchase, sale, assignment or transfer of any material amount
of assets, (y) mortgage, pledge or existence of any lien, encumbrance or charge
on any assets or properties, tangible or intangible, except for liens for taxes
not yet due and such other liens, encumbrances or charges which do not,
individually or in the aggregate, have a Material Adverse Effect on Company or
any of its Subsidiaries, or (z) cancellation, compromise, release or waiver of
any rights of material value or any material debts or claims by Company or any
of its Subsidiaries, (ix) any incurrence of any material liability (absolute or

                                      I-11

contingent) by Company or any of its Subsidiaries, except for current
liabilities and obligations incurred in the ordinary course of business
consistent with past practice, (x) any incurrence of any damage, destruction or
similar loss, whether or not covered by insurance, materially affecting the
business or properties of Company or any of its Subsidiaries, (xi) any entering
into any agreement, contract, lease or license by Company or any of its
Subsidiaries other than in the ordinary course of business consistent with past
practice, (xii) any acceleration, termination, modification or cancellation of
any agreement, contract, lease or license to which Company or any of its
Subsidiaries is a party or by which any of them is bound, (xiii) any entering
into any loan or other transaction by Company or any of its Subsidiaries with
any officers, directors or employees of Company or any of its Subsidiaries,
(xiv) any charitable or other capital contribution or pledge therefore by
Company or any of its Subsidiaries, (xv) any entering into any transaction of a
material nature by Company or any of its Subsidiaries other than in the ordinary
course of business consistent with past practice, or (xvi) any negotiation or
agreement by Company or any of its Subsidiaries to do any of the things
described in the preceding clauses (i) through (xv).

    2.8  ABSENCE OF UNDISCLOSED LIABILITIES.  Except to the extent set forth on
the balance sheet of Company as of December 31, 2000 included in the Financial
Statements (the "COMPANY BALANCE SHEET") and except for current liabilities
incurred in the ordinary course of business consistent with past practice since
December 31, 2000, Company does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP.

    2.9  LITIGATION.  Except as set forth in Section 2.9 of the Company
Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim, arbitration, complaint, allegation, dispute or, to the
knowledge of Company, investigation pending before any governmental department,
commission, authority, arbitrator, agency, court or tribunal, foreign or
domestic, or, to the knowledge of Company, threatened against Company or any of
its Subsidiaries or any of their assets, Intellectual Property Rights (as
defined in Section 2.12(h)) or properties or any of their officers or directors
(in their capacities as such). There is no judgment, decree, injunction,
rule or order against Company or any of its Subsidiaries, or any of their
directors or officers (in their capacities as such), limiting the conduct of
business by Company or any of its Subsidiaries or that could prevent, enjoin, or
alter or delay any of the transactions contemplated by this Agreement or have an
adverse effect on Company or any of its Subsidiaries. There is no litigation
(including arbitrations) by Company or any of its Subsidiaries which is pending
against any other person or entity.

    2.10  RESTRICTIONS ON BUSINESS ACTIVITIES.  There is no agreement, judgment,
injunction, order or decree binding upon or governmental or regulatory action
taken against or involving Company or any of its Subsidiaries or any of their
assets or properties which has had or could reasonably be expected to have the
effect of prohibiting or impairing any current or future business practice of
Company or any of its Subsidiaries, any acquisition of property by Company or
any of its Subsidiaries or the conduct of business by Company or any of its
Subsidiaries as currently conducted or as currently proposed to be conducted.

    2.11  TITLE TO PROPERTY.  Neither Company nor any of its Subsidiaries owns
any real property. Section 2.11 of the Company Disclosure Schedule sets forth a
list of material assets and property owned, leased or licensed by Company or any
of its Subsidiaries. Company and each of its Subsidiaries has good and
marketable title to all of its respective assets and properties reflected in the
Company Balance Sheet and in Section 2.11 of the Company Disclosure Schedule, or
with respect to leased properties and assets, valid leasehold interests therein,
free and clear of all mortgages, liens, pledges, charges or encumbrances of any
kind or character, except for (a) mechanic's, materialman's, and similar liens,
(b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings and for which adequate
reserves have been established on the books of Company and its Subsidiaries, and
(c) purchase money liens and liens securing rental

                                      I-12

payments under capital lease arrangements. All properties used in the operations
of Company or any of its Subsidiaries are reflected on the Company Balance Sheet
to the extent GAAP requires the same to be reflected and on Section 2.11 of the
Company Disclosure Schedule.

    2.12  INTELLECTUAL PROPERTY.

        (a)  LIST OF COMPANY INTELLECTUAL PROPERTY.  Section 2.12(a) of the
    Company Disclosure Schedule contains a true and complete list of Company's
    and each of its Subsidiaries' license or other agreements relating to
    Intellectual Property Rights (including the parties thereto and the date and
    subject matter thereof) (each a "LICENSE AGREEMENT" and collectively
    "LICENSE AGREEMENTS"), patents, patent applications, registered and
    unregistered trademarks and services marks, trade names, trademark and
    service mark applications, Internet domain names, Internet domain name
    applications, copyright registrations and applications and other filings and
    formal actions made or taken pursuant to Federal, state, local and foreign
    laws by Company and each of its Subsidiaries to protect their interests in
    their Intellectual Property Rights, and includes details of all due dates
    for further filings, registrations, maintenance, payments or other actions
    falling due in respect of their Intellectual Property Rights within
    twelve (12) months of the Effective Time. Company has delivered, or has made
    available, to Parent a copy of each of the items listed in Section 2.12(a)
    of the Company Disclosure Schedule. All of Company's and each of its
    Subsidiaries' patents, patent applications, registered trademarks, trademark
    applications and registered copyrights remain in good standing with all fees
    paid and filings made. Company has delivered to Parent all letters,
    analyses, reports and other documentation concerning the ownership,
    validity, infringement of, or freedom to use, the Intellectual Property
    Rights of Company or any of its Subsidiaries, any third party Intellectual
    Property Rights or any License Agreement.

        (b)  COMPANY INTELLECTUAL PROPERTY RIGHTS.  The Intellectual Property
    Rights of Company and each of its Subsidiaries contain only those items and
    rights which are: (i) owned by Company or any of its Subsidiaries, or
    (ii) rightfully used by Company or any of its Subsidiaries pursuant to a
    valid and enforceable License Agreement. Except as set forth in
    Section 2.12(b) of the Company Disclosure Schedule, Company and each of its
    Subsidiaries have all rights, including, without limitation, rights to make,
    have made, use, reproduce, modify, adopt, create derivative works based on,
    translate, distribute (directly and indirectly), transmit, display, license
    and, other than with respect to the License Agreements, assign and sell, in
    their Intellectual Property Rights necessary to permit Company and each of
    its Subsidiaries to carry out Company's and its Subsidiaries' current
    activities and their future activities to the extent such future activities
    are already planned.

        (c)  INFRINGEMENT.  To the knowledge of Company, neither (i) the
    reproduction, manufacturing, distribution, licensing, sublicensing, testing,
    invention, use, sale or offer to sell or any other exercise of Intellectual
    Property Rights by Company or any of its Subsidiaries, nor (ii) the conduct
    of business by Company or any of its Subsidiaries as currently conducted or
    as currently proposed to be conducted, infringes on any third party's
    Intellectual Property Rights anywhere in the world. Neither Company nor any
    of its Subsidiaries has received notice of any pending or threatened claims
    (i) challenging the validity, effectiveness or ownership by Company or any
    of its Subsidiaries of any Intellectual Property Rights, or (ii) to the
    effect that the use, testing, manufacturing, distribution, licensing,
    sublicensing, sale or offer to sell or any other exercise of rights in any
    product, invention, know-how, technology or process as now used or offered
    or proposed for use, licensing, sublicensing or sale by Company or its
    Subsidiaries or their agents or use by their customers infringes or will
    infringe on or misappropriate any third party's Intellectual Property
    Rights. To Company's knowledge there exist no valid grounds for any bona
    fide claim of any such kind. All of the rights within the Intellectual
    Property Rights of Company and each of its Subsidiaries are enforceable and
    subsisting. To the knowledge of Company, there is

                                      I-13

    no unauthorized use, infringement or misappropriation of any Intellectual
    Property Rights of Company and each of its Subsidiaries by any third party,
    employee or former employee.

        (d)  NONDISCLOSURE AGREEMENTS AND ASSIGNMENTS.  All personnel, including
    employees, agents, consultants and contractors, who have contributed to or
    participated in the conception and development of Intellectual Property
    Rights on behalf of Company or any of its Subsidiaries, have executed
    nondisclosure agreements and either (i) have been a party to an enforceable
    agreement with Company or any of its Subsidiaries in accordance with
    applicable national and state law that accords Company or any of its
    Subsidiaries full, effective, exclusive and original ownership of all
    tangible and intangible property, works of authorship, inventions (whether
    patentable or not) and developments arising from the efforts of such
    personnel, or (ii) have executed appropriate instruments of assignment in
    favor of Company or any of its Subsidiaries that have conveyed to Company or
    any of its Subsidiaries full, effective and exclusive ownership of all
    tangible and intangible property arising from the efforts of such personnel.

        (e)  NO VIOLATION.  The execution or delivery of the Transaction
    Agreements, or performance of Company's obligations hereunder or thereunder,
    will not cause the diminution, termination or forfeiture of any of the
    Intellectual Property Rights of Company or any of its Subsidiaries.

        (f)  ENCUMBRANCES.  Except for restrictions provided for in the License
    Agreements, the Intellectual Property Rights of Company and each of its
    Subsidiaries are free and clear of any and all mortgages, pledges, liens,
    security interests, conditional sale agreements, encumbrances or charges of
    any kind.

        (g)  ROYALTIES.  Except as set forth in Section 2.12(g) of the Company
    Disclosure Schedule, to the knowledge of Company, neither Company nor any of
    its Subsidiaries owes any royalties, payments, penalties, milestone payments
    or other payments to third parties in respect of Intellectual Property
    Rights of Company and each of its Subsidiaries or the License Agreements.

        (h)  DEFINITION.  "INTELLECTUAL PROPERTY RIGHTS" means, collectively,
    with respect to any person or entity, all of the following worldwide
    intangible legal rights of such person or entity, including those existing
    or acquired by ownership, license or other legal operation, whether or not
    filed, perfected, registered or recorded and whether now or hereafter
    existing, filed, issued or acquired: (i) patents, patent applications, and
    patent rights, including any and all continuations, continuations-in-part,
    divisions, reissues, reexaminations or extensions thereof; (ii) inventions
    (whether patentable or not in any country), invention disclosures,
    industrial designs, improvements, trade secrets, proprietary information,
    know-how, INDs, technology and technical or clinical data; (iii) rights
    associated with works of authorship (including audiovisual works),
    including, without limitation, copyrights, copyright applications and
    copyright registrations, moral rights, database rights, mask work rights,
    mask work applications and mask work registrations; (iv) rights in trade
    secrets, including, without limitation, rights in industrial property,
    customer, vendor and prospect lists and all associated information or
    databases and other confidential or proprietary information, and all rights
    relating to the protection of the same, including, without limitation,
    rights under nondisclosure agreements; (v) any other proprietary rights in
    technology, including software, all source and object code, algorithms,
    architecture, structure, display screens, layouts, inventions, development
    tools and all documentation and media constituting, describing or relating
    to the above, including, without limitation, manuals, memoranda, records,
    business information, or trade marks, trade dress or names, anywhere in the
    world; (vi) any rights analogous thereto in the preceding clauses and any
    other proprietary rights relating to intangible property, including, without
    limitation, brand names, trademarks, service marks, domain names, trademark
    and service mark registrations and applications therefor, trade names,
    rights in trade dress and packaging and all goodwill associated with the
    same; (vii) all rights to sue or make any claims for any past, present or
    future infringement, misappropriation or unauthorized use of any of the
    foregoing rights and the right to all income, royalties, damages and other
    payments that are now or may hereafter

                                      I-14

    become due or payable with respect to any of the foregoing rights,
    including, without limitation, damages for past, present or future
    infringement, misappropriation or unauthorized use thereof; and
    (viii) rights under license agreements for the foregoing.

    2.13  TAXES.

        (a)  RETURNS.  Company and each of its Subsidiaries have duly and timely
    filed or caused to be filed all Federal, state, local and foreign income Tax
    Returns (as defined in Section 2.13(m)(ii)) and all other material Tax
    Returns required to be filed by it to date and will duly and timely file or
    cause to be filed all Tax Returns required to be filed by it prior to the
    Effective Time. As of the date hereof, Company and each of its Subsidiaries
    have not filed any income Tax Returns for the year ended December 31, 2000.
    All such Tax Returns (including all amendments thereto) as of the time of
    filing were or will be complete and accurate in all material respects. No
    claim has ever been made by a Taxing authority in any jurisdiction in which
    the Company or any of its Subsidiaries does not file Tax Returns that such
    person is or may be subject to Taxes in such jurisdiction.

        (b)  PAYMENTS.  All Taxes payable by Company and each of its
    Subsidiaries (whether or not shown on any Tax Return) have been paid or will
    be paid, when due, other than Taxes that are being contested in good faith.

        (c)  RESERVES; ACCRUALS.  The liabilities and reserves for Taxes
    reflected in the Company Balance Sheet are adequate to cover all liabilities
    for unpaid Taxes of Company and each of its Subsidiaries (including those
    that are being contested in good faith) for all periods or portions of
    periods through the date thereof. Neither Company nor any of its
    Subsidiaries has incurred or accrued any Taxes for periods or portions of
    periods after December 31, 2000, and will not incur or accrue any Taxes
    prior to the Effective Time, other than Taxes arising in the ordinary course
    of business.

        (d)  PROCEEDINGS.  No action, suit, proceeding or audit concerning any
    Tax liability of Company or any of its Subsidiaries is pending or, to the
    knowledge of Company, has been threatened against Company or any of it
    Subsidiaries. There are no claims or assessments against Company or any of
    its Subsidiaries for an alleged Tax deficiency and, to the knowledge of
    Company, no such claims or assessments have been proposed.

        (e)  LIENS.  To the knowledge of Company, there are no charges, liens,
    encumbrances or adverse claims for Taxes upon any properties or assets of
    Company or any of its Subsidiaries, except for liens described in
    Section 2.11(b).

        (f)  WITHHOLDINGS.  Company and each of its Subsidiaries have properly
    withheld and paid over all withholding, employment or other similar Taxes
    and all unemployment compensation and similar obligations required to be
    withheld or paid over and have complied with all material information
    reporting and backup withholding requirements, including maintenance of
    required records with respect thereto.

        (g)  TAX SHARING AGREEMENTS; CONSOLIDATED GROUP.  Other than with
    respect to Company and its Subsidiaries, neither Company nor any of its
    Subsidiaries is a party to any agreement (i) providing for the allocation or
    sharing of Taxes with any entity that is not, directly or indirectly, a
    wholly-owned corporate subsidiary of Company, or (ii) contractually
    obligating Company or any of its Subsidiaries to indemnify any other person
    with respect to Taxes (except for agreements to indemnify lenders or
    security holders in respect of Taxes as set forth in Section 2.13(g) of the
    Company Disclosure Schedule). Neither Company nor any of its Subsidiaries
    has ever been a member of a consolidated, unitary or combined group other
    than a group of which Company is and has been the common parent.

                                      I-15

        (h)  REAL PROPERTY HOLDING CORPORATION.  Neither Company nor any of its
    Subsidiaries has been a United States real property holding corporation
    within the meaning of Section 897(c)(2) during the period specified in
    Section 897(c)(1)(A)(ii) of the Code.

        (i)  STATUTE OF LIMITATIONS.  Neither Company nor any of its
    Subsidiaries has consented to extend the time in which any Tax may be
    assessed and collected by any Taxing authority.

        (j)  DOCUMENTS PROVIDED.  Company and each of its Subsidiaries has
    provided to Parent true, correct and complete copies of all federal, state
    and local income and franchise Tax Returns, examination reports, and
    statements of deficiencies assessed against or agreed to by Company or any
    of its Subsidiaries for the taxable periods ending December 31, 1997,
    December 31, 1998 and December 31, 1999.

        (k)  OTHER.  Neither Company nor any of its Subsidiaries has, with
    regard to any assets or property held, acquired or to be acquired by any of
    them, filed a consent to the application of Section 341(f) of the Code.
    Neither Company nor any of its Subsidiaries will be required to include any
    item of income in, or exclude any item of deduction from, taxable income for
    any period (or portion thereof) ending after the Closing Date as a result of
    any (i) change in method of accounting for a taxable period ending on or
    prior to the Closing Date under Code Section 481(c) (or any corresponding or
    similar provision of state, local or foreign income Tax law), (ii) "closing
    agreement" as described in Code Section 7121 (or any corresponding or
    similar provision of state, local or foreign income tax law) executed on or
    prior to the Closing Date; (iii) installment sale made prior to the Closing
    Date; or (iv) deferred intercompany gain described in Treasury Regulation
    Section 1.1502-13 or any excess loss account described in Treasury
    Regulation Section 1.1502-19 and 1.1502-32 (or any corresponding or similar
    provision of federal state, local or foreign law) arising on or before the
    Closing Date. Neither Company nor any of its Subsidiaries is a party to any
    agreement, contract, arrangement or plan that has resulted or would result
    separately or in the aggregate, in the payment of any "excess parachute
    payment" within the meaning of Code Section 280G (or similar provision of
    state, local or foreign law).

        (l)  REORGANIZATION.  To the knowledge of Company, neither Company nor
    any of its affiliates has taken or agreed to take any action (other than
    actions contemplated by this Agreement) that could be expected to prevent
    the Merger from constituting a "reorganization" under Section 368(a) of the
    Code. Company is not aware of any agreement or plan to which Company or any
    of its affiliates is a party or other circumstances relating to Company or
    any of its affiliates that could reasonably be expected to prevent the
    Merger from so qualifying as a reorganization under Section 368(a) of the
    Code.

        (m)  CERTAIN DEFINED TERMS.  As used in this Agreement:

           (i) "TAX" OR "TAXES" means all taxes, charges, fees, duties, levies
       or other assessments, however denominated, imposed by any federal, state,
       local or foreign government or any agency or political subdivision of
       such government, which taxes shall include income or profits, gross
       receipts, net proceeds, ad valorem, franchise, sales, use, transfer,
       value added, registration, business license, user, excise, utility,
       environmental, communications, excess profits, real or personal property
       (tangible and intangible), capital stock, payroll, wage or other
       withholding, employment, social security, severance, stamp, occupation,
       alternative, add-on minimum, estimated, and other obligations of the same
       or a similar nature to any of the foregoing, including interest,
       penalties, and additions to tax related thereto.

           (ii) "TAX RETURNS"  means returns, declarations, reports, claims for
       refund, information returns or other documents (including any related or
       supporting schedules, statements, or information) filed or required to be
       filed with any federal, state, local or foreign government entity or
       other authority in connection with the determination, assessment or
       collection of

                                      I-16

       Taxes of any party or the administration of any laws, regulations, or
       administrative requirements relating to any Taxes.

    2.14  EMPLOYEE BENEFIT PLANS.

        (a)  COMPANY EMPLOYEE PLANS.  Section 2.14(a) of the Company Disclosure
    Schedule lists, with respect to Company and each of its Subsidiaries,
    (i) all employee benefit plans (as defined in Section 3(3) of the Employee
    Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each
    loan to a non-officer employee of Company or any of its Subsidiaries, loans
    to officers and directors and any stock option, stock purchase, phantom
    stock, stock appreciation right, dividend equivalent right, supplemental
    retirement, severance, sabbatical, medical, dental, vision care, disability,
    employee relocation, cafeteria benefit (Code Section 125) or dependent care
    (Code Section 129), life insurance or accident insurance plans, programs or
    arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
    compensation or incentive plans, programs or arrangements, (iv) other fringe
    or employee benefit plans, programs or arrangements, and (v) any current or
    former employment or executive compensation or severance agreements, written
    or otherwise, for the benefit of, or relating to, any present or former
    employee, consultant or director of Company or any of its Subsidiaries
    (together, the "COMPANY EMPLOYEE PLANS").

        (b)  COMPANY EMPLOYEE PLAN ACTIONS.  (i) There have been no prohibited
    transactions within the meaning of Section 406 or 407 of ERISA or Code
    Section 4975 with respect to any of the Company Employee Plans that could
    result in penalties, taxes or liabilities which, singly or in the aggregate,
    would have a Material Adverse Effect on Company or any of its Subsidiaries,
    (ii) none of the Company Employee Plans promises or provides retiree medical
    or other retiree welfare benefits to any person, except as required by
    applicable law, (iii) all contributions required to be made by Company or
    any of its Subsidiaries to any Company Employee Plan have been timely made,
    (iv) each Company Employee Plan can be amended, terminated or otherwise
    discontinued after the Effective Time in accordance with its terms, without
    liability to Parent or Company or any of their subsidiaries (other than
    ordinary administrative expenses typically incurred in a termination event),
    (v) to the extent applicable, Company and each of its Subsidiaries has
    materially complied with the applicable health care continuation and notice
    provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 and
    the regulations thereunder, (vi) neither Company nor any of its Subsidiaries
    currently maintain, sponsor, participate in or contribute to, or has ever
    maintained, established, sponsored, participated in, or contributed to, any
    pension plan (within the meaning of Section 3(2) of ERISA) which is subject
    to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or
    Section 412 of the Code, (vii) neither Company nor any of its Subsidiaries
    is a party to, or has made any contribution to or otherwise incurred any
    obligation to contribute to, any "multiemployer plan" as defined in
    Section 3(37) of ERISA, (viii) each of the Company Employee Plans has been
    operated and administered in all material respects in accordance with
    applicable laws during the period of time covered by the applicable statute
    of limitations, and (ix) to the knowledge of Company, there are no pending,
    threatened or anticipated claims involving any of the Company Employee Plans
    other than claims for benefits in the ordinary course.

        (c)  PLAN DOCUMENTS.  Company has furnished to Parent a copy of each of
    the Company Employee Plans and related plan documents (including trust
    documents, insurance policies or contracts, employee booklets, summary plan
    descriptions and other authorizing documents, Forms 5500, Internal Revenue
    Service determination letters and any material employee communications
    relating thereto).

                                      I-17

    2.15  EMPLOYEES; EMPLOYEE MATTERS.

        (a)  SALARIES.  Section 2.15(a) of the Company Disclosure Schedule
    contains a true and complete list of the names and salaries of all current
    employees, consultants and independent contractors of Company and each of
    its Subsidiaries.

        (b)  COMPLIANCE WITH LAWS.  Company and each of its Subsidiaries are in
    compliance with all currently applicable laws and regulations respecting
    employment, discrimination in employment, terms and conditions of
    employment, wages, hours and occupational safety and health and employment
    practices, except for instances of noncompliance that would not have a
    Material Adverse Effect on Company or any of its Subsidiaries, and are not
    engaged in any unfair labor practice. Company and each of its Subsidiaries
    have withheld all amounts required by law or by agreement to be withheld
    from the wages, salaries, and other payments to employees; and are not
    liable for any arrears of wages or any Taxes or any penalty for failure to
    comply with any of the foregoing, except for any such liabilities that would
    not, individually or in the aggregate, have a Material Adverse Effect on
    Company or any of its Subsidiaries.

        (c)  NO VIOLATIONS.  To Company's knowledge, no employees, consultants
    or independent contractors of Company or any of its Subsidiaries are in
    violation of any term of any employment contract, patent disclosure
    agreement, noncompetition agreement, consulting agreement or any restrictive
    covenant to a third party relating to the right of any such employee,
    consultant or independent contractor to be employed or engaged by Company or
    any of its Subsidiaries because of the nature of the business conducted or
    presently proposed to be conducted by Company or any of its Subsidiaries or
    to the use of trade secrets or proprietary information of others.

        (d)  CONTROVERSIES.  There are no material controversies pending or, to
    the knowledge of Company, threatened between Company or any of its
    Subsidiaries on the one hand and any representatives of any of their
    employees on the other hand.

        (e)  ORGANIZATIONAL EFFORTS.  To the knowledge of Company, there are no
    organizational efforts presently being made involving any of the presently
    unorganized employees of Company or any of its Subsidiaries.

        (f)  WARN ACT.  Neither Company nor any of its Subsidiaries is in
    violation of the Worker Adjustment and Retraining Notification Act of 1988,
    or any similar state or local law, in each case that would have a Material
    Adverse Effect on Company or any of its Subsidiaries.

        (g)  SEVERANCE.  The consummation of the transactions contemplated by
    this Agreement will not (i) entitle any current or former employee or other
    service provider of Company or any of its Subsidiaries to severance benefits
    or any other payment, except as expressly provided in this Agreement, or
    (ii) accelerate the time of payment or vesting, or increase the amount of
    compensation due any such employee or service provider.

    2.16  INTERESTED PARTY TRANSACTIONS.  Neither Company nor any of its
Subsidiaries is indebted to any director, officer, employee, consultant, agent
or affiliate ("INTERESTED PARTY") of Company or any of its Subsidiaries (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses), and no Interested Party is indebted to Company or any of its
Subsidiaries (except for cash advances for ordinary business expenses). Except
as set forth in Section 2.16 of the Company Disclosure Schedule, there have been
no agreements, transactions or understandings between Company or any of its
Subsidiaries on the one hand and any Interested Party on the other hand which
were not arm's length transactions entered into in the ordinary course of
business and consistent with past practice.

    2.17  COMPLETE COPIES OF MATERIALS; BANK ACCOUNTS.  Company has delivered or
made available true, correct and complete copies of each document which has been
requested by Parent or its legal counsel

                                      I-18

or accountants in connection with their legal and accounting review of Company
and each of its Subsidiaries. Company has furnished to Parent a true and
complete list setting forth the names and addresses of all banks, other
institutions and state governmental departments at which Company and each of its
Subsidiaries have accounts, deposits or the like, and the names of all persons
authorized to draw on or give instructions with respect thereto or holding a
power-of-attorney on behalf of Company or any of its Subsidiaries.

    2.18  MATERIAL CONTRACTS.  Section 2.18 of the Company Disclosure Schedule
sets forth the material contracts, agreements and arrangements (written or oral)
to which Company or any of its Subsidiaries is a party (collectively, the
"MATERIAL CONTRACTS"), including, without limitation:

        (a) any sales, advertising, distribution, co-branding, sponsorship,
    agency, investor relations or public relations contract;

        (b) any continuing contract for the purchase of materials, supplies,
    equipment or services involving in the case of any such contact more than
    five thousand dollars ($5,000) per year;

        (c) any trust indenture, mortgage, promissory note, loan agreement or
    other contract for the borrowing of money, any currency exchange,
    commodities or other hedging arrangement or any leasing transaction of the
    type required to be capitalized in accordance with GAAP;

        (d) any contract for capital expenditures;

        (e) any contract pursuant to which Company or any of its Subsidiaries is
    a lessor of any machinery, equipment, motor vehicles, office furniture,
    fixtures or other personal property, pursuant to which payments in excess of
    five thousand dollars ($5,000) remain outstanding;

        (f) any employment contract, arrangement or policy (including without
    limitation any collective bargaining contract or union agreement);

        (g) any stockholders agreement, voting agreement, registration rights
    agreement or other agreement to which Company, any of its Subsidiaries or
    any stockholder of Company or any of its Subsidiaries is a party;

        (h) any contract with any person or entity with whom Company or any of
    its Subsidiaries does not deal at arm's length within the meaning of the
    Code;

        (i) any agreement of guarantee, support, indemnification, assumption or
    endorsement of, or any similar commitment with respect to, the obligations,
    liabilities (whether accrued, absolute, contingent or otherwise) or
    indebtedness of any other person;

        (j) any consulting, independent contractor, license, joint venture,
    collaboration, development or similar agreements; or

        (k) any lease agreement for real property.

    2.19  NO BREACH OF MATERIAL CONTRACTS.  Except as set forth in Section 2.19
of the Company Disclosure Schedule, Company and each of its Subsidiaries are
entitled to all material benefits under each, and are not in or alleged to be in
material default, breach or violation of, any Material Contract. Each of the
Material Contracts is valid, binding and in full force and effect with respect
to Company and each of its Subsidiaries and, to the knowledge of Company, with
respect to the other parties thereto, and has not been amended, and, except as
set forth in Section 2.19 of the Company Disclosure Schedule, there exists no
default, breach or violation or event of default or event, occurrence, condition
or act, with respect to Company or any of its Subsidiaries or, to Company's
knowledge, with respect to the other contracting party, which, with the giving
of notice, the lapse of time or the happening of any other event or conditions,
would become a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been delivered to
Parent. Except for

                                      I-19

the Material Contracts, there are no other material contracts or other
arrangements under which goods, equipment or services are provided, leased or
rendered by, or are to be provided, leased or rendered to, Company or any of its
Subsidiaries.

    2.20  BROKERS.  No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of Company or any of its
Subsidiaries.

    2.21  NO BUSINESS ACTIVITY RESTRICTION.  There is no non-competition or
other similar agreement, commitment, judgment, injunction, order or decree to
which Company or any of its Subsidiaries is a party or subject to that has or
could reasonably be expected to have the effect of prohibiting or impairing the
conduct of business by Company or any of its Subsidiaries. Neither Company nor
any of its Subsidiaries has entered into any agreement under which Company or
any of its Subsidiaries is restricted from selling, licensing or otherwise
distributing any of its technology or products to, or providing services to,
customers or potential customers or any class of customers, in any geographic
area, during any period of time or in any segment of the market or line of
business.

    2.22  ENVIRONMENTAL MATTERS.

        (a)  NO VIOLATION.  To the knowledge of Company, (i) Company and each of
    its Subsidiaries have conducted their respective businesses in compliance
    with all applicable Environmental Laws (as defined in Section 2.22(b)),
    including, without limitation, having all permits, licenses and other
    approvals and authorizations necessary for the operation of their respective
    businesses as presently conducted, (ii) none of the properties owned or
    leased by Company or any of its Subsidiaries contain any Hazardous Substance
    (as defined in Section 2.22(c)) as a result of any activity of Company or
    any of its Subsidiaries in amounts exceeding the levels permitted by
    applicable Environmental Laws, (iii) neither Company nor any of its
    Subsidiaries has received any notices, demand letters or requests for
    information from any Federal, state, local or foreign governmental entity or
    third party indicating that Company or any of its Subsidiaries may be in
    violation of, or liable under, any Environmental Law in connection with the
    ownership or operation of their businesses, (iv) there are no civil,
    criminal or administrative actions, suits, demands, claims, hearings,
    investigations or proceedings pending or threatened against Company or any
    of its Subsidiaries relating to any violation, or alleged violation, of any
    Environmental Law, (v) no reports have been filed, or are required to be
    filed, by Company or any of its Subsidiaries concerning the release of any
    Hazardous Substance or the threatened or actual violation of any
    Environmental Law, (vi) no Hazardous Substance has been disposed of,
    released or transported in violation of any applicable Environmental Law
    from any properties owned or leased by Company or any of its Subsidiaries
    during the time such properties were owned, leased or operated by Company or
    any of its Subsidiaries, (vii) there have been no environmental
    investigations, studies, audits, tests, reviews or other analyses regarding
    compliance or noncompliance with any applicable Environmental Law conducted
    by or which are in the possession of Company or any of its Subsidiaries,
    (viii) there are no underground storage tanks on, in or under any properties
    owned or leased by Company or any of its Subsidiaries and no underground
    storage tanks have been closed or removed from any of such properties during
    the time such properties were owned, leased or operated by Company or any of
    its Subsidiaries, (ix) there is no asbestos or asbestos containing material
    present in any of the properties owned or leased by Company and its
    Subsidiaries, and no asbestos has been removed from any of such properties
    during the time such properties were owned, leased or operated by Company or
    any of its Subsidiaries, and (x) none of Company, its Subsidiaries nor any
    of their respective properties are subject to any material liabilities or
    expenditures (fixed or contingent) relating to any suit, settlement, court
    order, administrative order, regulatory requirement, judgment or claim
    asserted or arising under any Environmental Law, except for violations of
    the foregoing clauses (i) through (x) that, individually or in the
    aggregate, would not have a Material Adverse Effect on Company or any of its
    Subsidiaries.

                                      I-20

        (b)  ENVIRONMENTAL LAW.  For purposes of this Agreement, "ENVIRONMENTAL
    LAW" means any Federal, state, local or foreign law, statute, ordinance,
    rule, regulation, code, license, permit, authorization, approval, consent,
    legal doctrine, order, judgment, decree, injunction, requirement or
    agreement with any governmental entity relating to (x) the protection,
    preservation or restoration of the environment (including, without
    limitation, air, water vapor, surface water, groundwater, drinking water
    supply, surface land, subsurface land, plant and animal life or any other
    natural resource) or to human health or safety or (y) the exposure to, or
    the use, storage, recycling, treatment, generation, transportation,
    processing, handling, labeling, production, release or disposal of Hazardous
    Substances, in each case as amended. The term Environmental Law includes,
    without limitation, (i) the Federal Comprehensive Environmental Response,
    Compensation and Liability Act of 1980, the Superfund Amendments and
    Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
    Federal Clean Air Act, the Federal Clean Water Act, the Safe Drinking Water
    Act, the Hazardous Materials Transportation Act, the Federal Resource
    Conservation and Recovery Act of 1976 (including the Hazardous and Solid
    Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal
    Toxic Substances Control Act, the Federal Insecticide, Fungicide and
    Rodenticide Act, the Federal Occupational Safety and Health Act of 1970,
    each as amended, or any state counterpart thereof, and (ii) any common law
    or equitable doctrine (including, without limitation, injunctive relief and
    tort doctrines such as negligence, nuisance, trespass and strict liability)
    that may impose liability or obligations for injuries, damages or penalties
    due to, or threatened as a result of, the presence of, effects of or
    exposure to any Hazardous Substance.

        (c)  HAZARDOUS SUBSTANCE.  For purposes of this Agreement, "HAZARDOUS
    SUBSTANCE" means any substance presently or hereafter listed, defined,
    designated or classified as hazardous, toxic, radioactive, or dangerous, or
    otherwise regulated, under any Environmental Law. Hazardous Substance
    includes any substance to which exposure is regulated by any government
    authority or any Environmental Law including, without limitation, any toxic
    waste, pollutant, contaminant, hazardous substance, toxic substance,
    hazardous waste, special waste, industrial substance or petroleum or any
    derivative or by-product thereof, radon, radioactive material, asbestos or
    asbestos containing material, urea formaldehyde foam insulation, lead or
    polychlorinated biphenyls.

    2.23  COMPANY STOCKHOLDERS' APPROVAL.  The affirmative vote of stockholders
of Company required for approval and adoption of this Agreement and the Merger
is a majority of the votes represented by the outstanding shares of Company
Common Stock and Series A Preferred, on a combined basis. The affirmative vote
of stockholders of Company required to amend the Certificate of Incorporation as
contemplated by Section 5.17 is a majority of the votes represented by the
outstanding shares of Company Common Stock and Series A Preferred, on a combined
basis, and the consent of the holders of Series A Preferred representing at
least two thirds of the outstanding shares of Series A Preferred. Except for
shares of Company Stock, the Amended Warrants and the Company Options set forth
in Section 2.23 of the Company Disclosure Schedule, immediately prior to the
Effective Time, no options, warrants, capital stock, securities or other rights
to exchange for or convert into Company securities will be outstanding. Except
as required to comply with Section 5.17, no other vote of the stockholders of
Company is required by law, the Certificate of Incorporation, as amended, or
Bylaws of Company or otherwise in order for Company to consummate the Merger and
the transactions contemplated hereby. The Voting Agreements executed and
delivered to Parent secure the number of votes of securities of Company
necessary to approve and adopt this Agreement and the Merger at the meeting of
stockholders of Company called to approve same and such Voting Agreements and
the irrevocable proxies granted in connection therewith are in full force and
effect.

    2.24  NO EXCESS PARACHUTE PAYMENTS.  Neither Company nor any of its
Subsidiaries has any contracts, arrangements or understandings pursuant to which
any person may receive any amount or entitlement from Company or any of its
Subsidiaries (including cash or property or the vesting of

                                      I-21

property) that may be characterized as an "EXCESS PARACHUTE PAYMENT" (as such
term is defined in Code Section 280G(b)(1)) as a result of any of the
transactions contemplated by this Agreement. No person is entitled to receive
any additional payment from Company, its Subsidiaries or any other person in the
event that the 20 percent (20%) parachute excise tax of Code
Section 4999(a) is imposed on such person.

    2.25  COMPLETENESS OF THE COMPANY INFORMATION.  Company has delivered to
Parent, Brobeck, Phleger & Harrison LLP or Ernst & Young LLP all material
documents, items and other information responsive to all requests of Parent,
Brobeck, Phleger & Harrison LLP or Ernst & Young LLP (the "Company
Information"), as the case may be.

    2.26  INSURANCE.  Except to the extent there would be no Material Adverse
Effect on Company or any of its Subsidiaries, all of Company's and each of its
Subsidiaries' liability, theft, health, fire, worker's compensation and other
forms of insurance, surety bonds and umbrella policies, insuring Company and any
of its Subsidiaries and their directors, officers, employees, independent
contractors, properties, assets and business (the "POLICIES"), are valid and in
full force and effect without any premium past due or pending notice of
cancellation, and are, in the reasonable judgment of Company, adequate for the
business of Company and each of its Subsidiaries as now conducted. There are no
claims, singly or in the aggregate, under the Policies in excess of $5,000,
which, in any event, are not in excess of the limitations of coverage set forth
in the Policies. All of the Policies are "OCCURRENCE" policies and no Policy is
a "CLAIMS MADE" policy. Company has no knowledge of any fact indicating that
such policies will not continue to be available to Company and each of its
Subsidiaries upon substantially similar terms subsequent to the Effective Time.
The provision and/or reserves in the most recent Financial Statements are
adequate for any and all self insurance programs maintained by Company or any of
its Subsidiaries. Section 2.26 of the Company Disclosure Schedule sets forth a
list of the Policies and self insurance programs maintained by Company or any of
its Subsidiaries and a description of the general terms and coverages thereof.

    2.27  GUARANTIES.  Neither Company nor any of its Subsidiaries is a
guarantor or otherwise is liable for any liability or obligation (including
indebtedness) of any other person.

    2.28  SUBSIDIARIES.  None of Company and any of its Subsidiaries controls
directly or indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary set forth in Section 2.1 of the Company Disclosure Schedule. No
outstanding securities of any Subsidiary is convertible into or exchangeable for
any securities of Company or any other Subsidiaries of Company, whether by their
terms or pursuant to any other agreement or arrangement, and no holder of
securities of any of any Subsidiary has any right by agreement, arrangement or
otherwise to receive any Parent Common Stock issued as Merger Consideration.

    2.29  ANTI-TAKEOVER MATTERS.  No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation is applicable
to Company or (by reason of Company's participation therein) the Merger or the
other transactions contemplated by this Agreement.

    2.30  FDA MATTERS.  Company and each of its Subsidiaries are in compliance
with all statutes, rules and regulations of the U.S. Food and Drug
Administration or similar United States or foreign governmental authority
("FDA") with respect to the evaluation, testing, labeling and manufacturing of
all of their products, in whatever stage of development, to the extent that the
same are applicable to Company's and each of its Subsidiaries' business as it is
currently conducted. To the knowledge of Company, Company and each of its
Subsidiaries, as well as their contractors, adhere to "Good Laboratory
Practices," "Good Clinical Practices" and "Good Manufacturing Practices," as
required by the FDA. Company and each of its Subsidiaries has all requisite FDA
permits, designations, approvals or the like to conduct Company's and each of
its Subsidiaries' business as it is currently conducted. Company has previously
delivered to Parent an index of all information concerning all Investigational

                                      I-22

New Drug Applications obtained by Company and each of its Subsidiaries from the
FDA or required in connection with the conduct of Company's and each of its
Subsidiaries' business as it is currently conducted and has made all such
information available to Parent. Section 2.30 of the Company Disclosure Schedule
contains a list of (a) all communications between Company and each of its
Subsidiaries on the one hand and the FDA on the other hand from inception
through the date hereof, and (b) all designations or approvals by the FDA or any
similar governmental or quasi-governmental agencies throughout the world of
orphan drug designations or any applications with the FDA for Investigational
New Drug Applications, New Drug Applications or Biologics License Applications,
or any similar applications with any similar governmental or quasi-governmental
agencies throughout the world.

    2.31  STUDIES.  To the knowledge of Company, the clinical, preclinical and
other studies and tests conducted by or on behalf of or sponsored by Company or
any of its Subsidiaries or in which Company or any of its Subsidiaries or
Company's or any of its Subsidiaries' products or product candidates under
development have participated, were and, if still pending, are being conducted
in accordance with standard medical and scientific research procedures. Neither
Company nor any of its Subsidiaries has received any notices or other
correspondence from the FDA or any other governmental agency requiring the
termination, suspension or modification of any clinical or pre-clinical studies
or tests.

    2.32  EMPLOYMENT AGREEMENTS.

        (a)  KANZER EMPLOYMENT AGREEMENT PAYMENTS.  Other than the payment
    referred to in Section 1.6(h), all amounts owed to Steve H. Kanzer (cash,
    equity or otherwise) pursuant to the terms of the Kanzer Employment
    Agreement (as defined in Section 5.6(b)) or otherwise, including but not
    limited to any and all amounts (cash, equity or otherwise) owed under
    Section 3 of the Kanzer Employment Agreement, have been paid in full or
    waived by Mr. Kanzer, and Company owes no amounts (cash, equity or
    otherwise) to Mr. Kanzer other than the periodic payment of his base salary
    pursuant to the Kanzer Employment Agreement.

        (b)  STERGIOPOULOS EMPLOYMENT AGREEMENT.  Other than the payment
    referred to in Section 1.6(g), all amounts owed to Nicholas Stergiopoulos
    (cash equity or otherwise) pursuant to the Stergiopoulos Employment
    Agreement (as defined in Section 5.6(c)) or otherwise have been paid in full
    or waived by Mr. Stergiopoulos, and Company owes no amounts (cash equity or
    otherwise) to Mr. Stergiopoulos other than the periodic payment of his base
    salary pursuant to the Stergiopoulos Employment Agreement.

    2.33  PATENT AND TRADEMARK APPLICATIONS.

        (a)  DR. MCDONALD.  Pursuant to the terms of the Consulting Agreement
    dated October 1, 1998 by and between Dr. George McDonald and Enteron
    Pharmaceuticals, Inc. ("ENTERON"), Dr. McDonald has assigned all right,
    title and interest in the following patent applications to Enteron: (i) Use
    of Oral Beclomethasone Dipropionate to Treat Liver Inflammation, filed
    January 3, 2001, (ii) Method of Long-Term Treatment of Graft-Versus-Host
    Disease Using Topical Active Corticosteroids, filed January 3, 2001, and
    (iii) Method of Treating inflammatory disorders of the Gastrointestinal
    Tract using Topically Active Corticosteroids, filed March 15, 2001.

        (b)  DR. EPSTEIN.  Pursuant to the terms of the Consulting Agreement
    dated June 8, 1999 by and between Dr. Joel Epstein and Oral Solutions, Inc.
    ("ORAL SOLUTIONS"), Dr. Epstein has assigned all right, title and interest
    in the following U.S. and PCT patent applications to Oral Solutions:
    (i) Topical Azathioprine for the Treatment of Oral Autoimmune Disorders,
    No. 09/433,418, filed November 4, 1999, and (ii) Topical Azathioprine for
    the Treatment of Oral Immune Disorders, No. PCT/US/00/21959, filed
    August 11, 2000.

                                      I-23

        (c)  MR. STERGIOPOULOS.  Mr. Nicholas Stergiopoulos has assigned all
    right, title and interest in the following patent applications to Enteron:
    (i) U.S. Patent Application entitled Method of Long-Term Treatment of
    Graft-Versus-Host Disease Using Topical Active Corticosteriods, filed
    January 3, 2001, and (ii) Method of Treating inflammatory disorders of the
    Gastrointestinal Tract using Topically Active Corticosteroids, filed
    March 15, 2001. Mr. Stergiopoulos has assigned all right, title and interest
    to all Intellectual Property Rights that relate to carrying out Company's
    and each of its Subsidiary's current activities and their future activities
    to the extent such future activities are already planned.

        (d)  MR. KANZER.  Mr. Steve H. Kanzer has no interest in any
    Intellectual Property Rights that relate to carrying out Company's and each
    of its Subsidiary's current activities and their future activities to the
    extent such future activities are already planned.

        (e)  INVENTIONS, TRADE SECRETS AND WORKS OF AUTHORSHIP.  All inventions
    conceived of (whether patentable or not), trade secrets, know-how and works
    of authorship developed or created by Mr. Steve H. Kanzer and Mr. Nicholas
    Stergiopoulos have been assigned to Company.

        (f)  TRADEMARK FEE.  Company has paid the registration fee for the mark
    "Metropt" in Japan.

    2.34  MCDONALD LICENSE AGREEMENT.  Enteron has paid, or Dr. George McDonald
has waived, all penalty payments owed to him by Enteron pursuant to the terms of
the Exclusive License Agreement dated November 24, 1998 by and between Enteron
and Dr. McDonald (the "MCDONALD LICENSE AGREEMENT") and no amounts are owed to
Dr. McDonald pursuant to the terms thereof.

    2.35  ALLERGAN TRANSACTION.

        (a)  LICENSE AGREEMENT.  The obligations of Intero Corp. ("INTERO") to
    John Hopkins University ("JHC") pursuant to Section 4.2 of the Exclusive
    License Agreement effective February 5, 1999, by and between Intero and JHC
    have been paid in full and no amounts are owed to JHC pursuant to the terms
    thereof.

        (b)  SALE OF ASSETS.  Company has paid each stockholder of Intero
    his/her/its pro rata portion of the consideration paid or to be paid by
    Allergan Botox Limited ("ALLERGAN") to Company in connection with the
    transactions consummated pursuant to the Asset Purchase Agreement dated
    December 1, 1999, by and between Intero and Allergan, including any
    milestone payments thereunder.

    2.36  LIQUIDATION AMOUNT.  At the Effective Time, the total Liquidation
Amount (as defined in Company's Certificate of Incorporation, as amended) due to
all holders of the Series A Preferred in connection with the consummation of the
Merger will not exceed the Series A Preferred Merger Consideration.

    2.37  PARENT SECURITIES.  Neither Company nor any of its Subsidiaries owns
any outstanding securities of Parent.

    2.38  DISSOLUTION.  Company's Subsidiaries Neuropath, Inc.; Iopthalmics,
Inc.; Magyar Pharmaceuticals, Inc.; CTD Drug Design, Inc. (formerly known as IDR
Drug Design, Inc.); Institute for Drug Research Publications, Inc.; CTD
Investments, LLC; and Nodolor, Inc. have been dissolved in accordance with the
laws of the respective jurisdictions of their incorporation.

    2.39  COMMON STOCK.  All the certificates representing shares of Company
Common Stock were issued subsequent to January 5, 1998.

    2.40  REPRESENTATIONS COMPLETE.  None of the representations or warranties
made by Company herein or in any schedule hereto, including the Company
Disclosure Schedule, or certificate or other document furnished by Company or
the security holders of Company pursuant to this Agreement, contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will

                                      I-24

omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.

                                  ARTICLE III
            REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

    Except as otherwise set forth in any Parent Reports (as defined in Section
3.5(a)) or for specific references to, and as set forth in the Parent Disclosure
Schedule attached hereto and referring by numbered section (and, where
applicable, by lettered subsection) of the representations and warranties in
this Article III (the "PARENT DISCLOSURE SCHEDULE"), Parent and Merger Sub,
jointly and severally, represent and warrant to Company as follows:

    3.1  ORGANIZATION AND STANDING.  Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of Parent and Merger Sub has the
corporate power, is duly qualified to do business and is in good standing in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not have, individually or in the aggregate, a
Material Adverse Effect on Parent.

    3.2  CAPITAL STRUCTURE OF PARENT.  As of May 1, 2001, the authorized capital
stock of Parent consists of 50,000,000 shares of Parent Common Stock, 4,600,000
shares of Preferred Stock, $.001 par value per share, 200,000 shares of
Series B Convertible Preferred Stock, par value $.05 per share, and 200,000
shares of Series C Convertible Preferred Stock, par value $.05 per share, of
which 12,741,858 shares of Parent Common Stock, no shares of Preferred Stock,
102,390 shares of Series B Convertible Preferred Stock and 99,287 shares of
Series C Convertible Preferred Stock were issued and outstanding. All
outstanding shares of Parent Common Stock have been duly authorized, validly
issued, fully paid and are nonassessable and free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon the holders
thereof. The shares of Parent Common Stock to be issued pursuant to the Merger
will be duly authorized and validly issued, and, upon receipt by Parent of
Company Certificates in exchange therefor, will be fully paid and
non-assessable. The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, $.001 par value per share, all of which were issued and
outstanding and held of record by Parent as of the date hereof.

    3.3  AUTHORITY.  Subject to approval of the Parent Voting Proposal by the
stockholders of Parent, Parent and Merger Sub have all requisite corporate power
and authority to execute and deliver the Transaction Agreements, to perform
their obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Subject to approval of the Parent Voting
Proposal by the stockholders of Parent, the execution, delivery and performance
of the Transaction Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub. This Agreement has been
duly executed and delivered by Parent and Merger Sub and constitutes the valid
and binding obligation of Parent and Merger Sub enforceable against Parent and
Merger Sub in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally and by general principles of equity.

    3.4  NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

        (a)  NO CONFLICT.  Except for the filing of the Delaware Certificate of
    Merger, any applicable federal or state securities filings (including,
    without limitation, the filing with the SEC of the Joint Proxy Statement and
    the Registration Statement), and as set forth on Section 3.4(a) of the
    Parent Disclosure Schedule and except for such conflicts, violations,
    breaches or defaults which would not have a Material Adverse Effect on
    Parent, the execution and delivery of this Agreement by Parent

                                      I-25

    and Merger Sub, do not, and the performance by Parent and Merger Sub of
    their obligations hereunder and/or thereunder, as the case may be, and the
    consummation of the Merger will not, (i) conflict with or violate any
    provision of the Certificate of Incorporation or Bylaws of Parent or Merger
    Sub, (ii) conflict with or violate any law applicable to Parent or Merger
    Sub, or (iii) result in any breach of or constitute a default (or an event
    which with the giving of notice or lapse of time or both could reasonably be
    expected to become a default) under, or give to others any right of
    termination, amendment, acceleration or cancellation of, or result in the
    creation of a lien or other encumbrance on any material property or asset of
    Parent or Merger Sub pursuant to, any material note, bond, mortgage,
    indenture, contract, agreement, lease, license, permit, franchise or other
    instrument or obligation.

        (b)  GOVERNMENTAL FILINGS.  Assuming the accuracy of the representations
    and warranties of Company set forth in Article II, except for the filing of
    the Delaware Certificate of Merger and any applicable federal or state
    securities filings (including, without limitation, the filing with the SEC
    of the Joint Proxy Statement and the Registration Statement) and except for
    such consents, approvals or authorizations, permits or filings which, if not
    obtained or made, would not have a Material Adverse Effect on Parent, the
    execution and delivery of this Agreement by Parent and Merger Sub do not and
    the performance by Parent and Merger Sub of their obligations hereunder and
    the consummation of the Merger will not, require any consent, approval,
    authorization or permit of, or filing by Parent with or notification by
    Parent to, any Governmental Entity.

    3.5  SEC FILINGS; FINANCIAL STATEMENTS OF PARENT.

        (a)  PARENT REPORTS.  Parent has timely filed all forms, reports,
    statements and documents required to be filed by it with the SEC and the
    American Stock Exchange (the "AMEX") since December 31, 2000 (collectively
    together with any such forms, reports, statements and documents Parent may
    file subsequent to the date hereof until the Closing, the "PARENT REPORTS").
    Each Parent Report was prepared in accordance with the requirements of the
    Act, the Exchange Act, or the AMEX, as the case may be, and did not at the
    time it was filed contain any untrue statement of a material fact or omit to
    state a material fact required to be stated therein or necessary in order to
    make the statements made therein, in the light of the circumstances under
    which they were made, not misleading.

        (b)  FINANCIAL STATEMENTS.  Each of the consolidated financial
    statements (including, in each case, any notes thereto) contained in Parent
    Reports are true and complete as at, and for the periods reported therein,
    and was prepared in accordance with GAAP applied on a consistent basis
    throughout the periods indicated (except as may be indicated in the notes
    thereto) and each presented fairly, in all material respects, the
    consolidated financial position of Parent and the consolidated Subsidiaries
    of Parent as at the respective dates thereof and for the respective periods
    indicated therein, except as otherwise noted therein (subject, in the case
    of unaudited statements, to the absence of notes and normal recurring
    year-end audit adjustments that will not be material in nature or in
    amount).

    3.6  LITIGATION.  Except as set forth in Section 3.6 of the Parent
Disclosure Schedule, there is (i) no private or governmental action, suit,
proceeding, claim, arbitration or, to the knowledge of Parent, investigation
pending before any agency, court or tribunal, foreign or domestic, or, to the
knowledge of Parent, threatened against Parent or any of its assets or
properties or any of its officers or directors (in their capacities as such),
and (ii) no judgment, decree or order against Parent, or, to the knowledge of
Parent, any of its directors or officers (in their capacities as such), in each
case limiting the conduct of business by Parent or that could prevent, enjoin,
or alter or delay any of the transactions contemplated by this Agreement or have
a Material Adverse Effect on Parent.

    3.7  NO UNDISCLOSED LIABILITIES.  Except to the extent set forth in the
balance sheet of Parent as of December 31, 2000 included in the Parent Reports
and except for liabilities incurred in the ordinary

                                      I-26

course of business consistent with past practice since December 31, 2000, Parent
does not have any obligations or liabilities, whether or not accrued, contingent
or otherwise, that individually or in the aggregate would have a Material
Adverse Effect on Parent.

    3.8  ABSENCE OF CERTAIN CHANGES.  Except as set forth in Section 3.8 of the
Parent Disclosure Schedule and as contemplated by this Agreement, since
December 31, 2000, Parent and each of its subsidiaries have conducted their
business only in the ordinary course consistent with past practice and there has
not occurred (i) any Material Adverse Effect on Parent or any of its
subsidiaries, (ii) any event that could reasonably be expected to prevent or
materially delay the performance of Parent's obligations pursuant to the
Transaction Agreements or the consummation of the Merger by Parent, (iii) any
change by Parent or any of its subsidiaries in its accounting methods,
principles or practices, (iv) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of capital stock of Parent or
any of its subsidiaries or any redemption, purchase or other acquisition of any
of Parent's or any of its subsidiaries' securities, (v) any increase in the
compensation or benefits or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any employees, officers,
consultants or directors of Parent or any of its subsidiaries, (vi) other than
issuances of options pursuant to the Parent Plan, any issuance, grants or sale
of any stock, options, warrants, notes, bonds or other securities, or entering
into any agreement with respect thereto of Parent and any of its subsidiaries,
(vii) any amendment to the Certificate of Incorporation or Bylaws of Parent or
any of its subsidiaries, (viii) other than in the ordinary course of business
consistent with past practice, any (w) capital expenditures, (x) purchase, sale,
assignment or transfer of any material assets, (y) mortgage, pledge or existence
of any lien, encumbrance or charge on any material assets or properties,
tangible or intangible, except for liens for taxes not yet due and such other
liens, encumbrances or charges which do not, individually or in the aggregate,
have a Material Adverse Effect on Parent, or (z) cancellation, compromise,
release or waiver of any rights of material value or any material debts or
claims, (ix) any incurrence of any material liability (absolute or contingent),
except for current liabilities and obligations incurred in the ordinary course
of business consistent with past practice, (x) any incurrence of any damage,
destruction or similar loss, whether or not covered by insurance, materially
affecting the business or properties of Parent, (xi) any entering into any
agreement, contract, lease or license other than in the ordinary course of
business consistent with past practice, (xii) any acceleration, termination,
modification or cancellation of any agreement, contract, lease or license to
which Parent or any of its subsidiaries is a party or by which any of them is
bound, (xiii) any entering into any loan or other transaction with any officers,
directors or employees of Parent or any of its subsidiaries, (xiv) any
charitable or other capital contribution or pledge therefore, (xv) any entering
into any transaction of a material nature other than in the ordinary course of
business consistent with past practice, or (xvi) any negotiation or agreement by
the Parent or any of its subsidiaries to do any of the things described in the
preceding clauses (i) through (xv).

    3.9  BROKERS.  Other than fees, commissions, reimbursements of costs and
expenses and other payments due under the engagement letter between Parent and
Wells Fargo Van Kasper dated as of March 11, 2001 and as set forth on Section
3.9 of the Parent Disclosure Schedule, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent.

    3.10  REORGANIZATION.  To the knowledge of Parent, neither Parent nor any of
its affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that could be expected to prevent the Merger
from constituting a "reorganization" under Section 368(a) of the Code. Parent is
not aware of any agreement or plan to which Parent or any of its affiliates is a
party or other

                                      I-27

circumstances relating to Parent or any of its affiliates that could reasonably
be expected to prevent the Merger from so qualifying as a reorganization under
Section 368(a) of the Code.

    3.11  REPRESENTATIONS COMPLETE.  None of the representations or warranties
made by Parent or Merger Sub herein or in a certificate or other document
furnished by Parent or Merger Sub pursuant to this Agreement, contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.

                                   ARTICLE IV
                      CONDUCT PRIOR TO THE EFFECTIVE TIME

    4.1  CONDUCT OF BUSINESS OF COMPANY.  During the period from and including
the date of this Agreement and continuing until the earlier of the termination
of this Agreement in accordance with its terms or the Effective Time, Company
agrees (except as consented to in writing by Parent) to carry on its and each of
its Subsidiaries' businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted. Company further agrees to
pay its and each of its Subsidiaries' debts and Taxes when due, to pay or
perform its and each of its Subsidiaries' other obligations when due, and to use
all reasonable efforts consistent with past practice and policies to preserve
intact its and each of its Subsidiaries' present business organizations, keep
available the services of its and each of its Subsidiaries' present officers and
key employees and preserve its and each of its Subsidiaries' relationships with
customers, suppliers, distributors, licensors, licensees, consultants, joint
venture partners, collaborators, and others having business dealings with it and
each of its Subsidiaries to the end that its and each of its Subsidiaries'
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Company agrees to promptly notify Parent of any event or occurrence not in the
ordinary course of business or which could have a Material Adverse Effect on
Company or any of its Subsidiaries. By way of amplification and not limitation,
Company and each of its Subsidiaries shall not, between the date of this
Agreement and the Effective Time, directly or indirectly, do, or agree to do,
any of the following without the prior written consent of Parent, which consent
shall not be unreasonably withheld:

        (a) cause or permit any amendments to their Certificates of
    Incorporation, Bylaws or other charter documents, as applicable, except as
    contemplated by Section 5.17;

        (b) declare or pay any dividends on or make any other distributions
    (whether in cash, stock or property) in respect of any of their capital
    stock, or split, combine or reclassify any of their capital stock or issue
    or authorize the issuance of any other securities in respect of, in lieu of
    or in substitution for shares of their capital stock, or repurchase or
    otherwise acquire, directly or indirectly, any shares of their capital stock
    except from former employees, directors and consultants in accordance with
    agreements providing for the repurchase of shares in connection with any
    termination of service;

        (c) enter into any material contract or commitment, or violate, amend or
    otherwise modify or waive any of the terms of any of the Material Contracts;

        (d) issue, deliver or sell or authorize or propose the issuance,
    delivery or sale of, any shares of their capital stock or securities
    exchangeable for or convertible into, or subscriptions, rights, warrants or
    options to acquire, or other agreements or commitments of any character
    obligating them to issue any such shares or other convertible or
    exchangeable securities, other than the issuance of shares of Company Common
    Stock pursuant to the exercise of stock options, warrants or other rights or
    the conversion of Series A Preferred outstanding as of the date of this
    Agreement and the issuance of the Amended Warrants as contemplated by
    Section 5.20;

                                      I-28

        (e) transfer to any person or entity any rights to any Intellectual
    Property Rights of Company or any of its Subsidiaries;

        (f) sell, lease, license or otherwise dispose of or encumber any of
    Company's or any of its Subsidiaries' properties or assets;

        (g) incur any indebtedness for borrowed money or guarantee any such
    indebtedness or issue or sell any debt securities or guarantee any debt
    securities of others;

        (h) enter into any operating lease which is not included in the fiscal
    year 2001 Company budget attached hereto as EXHIBIT N (the "BUDGET") or
    pursuant to which payments in excess of twenty thousand dollars ($20,000)
    may be required;

        (i) pay, discharge or satisfy, any claim, liability or obligation
    (absolute, accrued, asserted or unasserted, contingent or otherwise) which
    is not included in the Budget or in an amount in excess of twenty thousand
    dollars ($20,000) in any one case or sixty thousand dollars ($60,000) in the
    aggregate, other than the payment, discharge or satisfaction of liabilities
    reflected or reserved against in the Financial Statements or incurred in the
    ordinary course of business consistent with past practice and reasonable
    expenses incurred in connection with the transactions contemplated by this
    Agreement, subject to Section 9.1;

        (j) make any capital expenditures, capital additions or capital
    improvements;

        (k) terminate or waive any right of substantial value;

        (l) adopt or amend any employee benefit or stock purchase or option
    plan, or hire any new director, officer, consultant or employee (other than
    secretarial staff), pay any special bonus or special remuneration to any
    officer, employee, consultant or director or increase the salaries, wage
    rates, bonus or compensation of any director, officer, employee or
    consultant;

        (m) grant any severance or termination pay to any director, officer,
    consultant or employee;

        (n) commence a lawsuit;

        (o) acquire or agree to acquire by merging or consolidating with,
    purchasing equity interests, or purchasing a substantial portion of the
    assets of, or by any other manner, any business or any corporation,
    partnership, association or other business organization or division thereof,
    or otherwise acquire or agree to acquire any assets;

        (p) make or change any election in respect of Taxes, adopt or change any
    accounting method in respect of Taxes, file any amendment to a material Tax
    Return, enter into any closing agreement, settle any claim or assessment in
    respect of Taxes, or consent to any extension or waiver of the limitation
    period applicable to any claim or assessment in respect of Taxes;

        (q) take any other action outside the ordinary course of their business
    consistent with past practice; or

        (r) take or agree in writing or otherwise to take, any of the actions
    described in Sections 4.1(a) through (q), or any action which would make any
    of Company's representations or warranties contained in this Agreement
    untrue or incorrect in any material respect or prevent Company from
    performing or cause it not to perform its covenants hereunder in any
    material respect.

                                      I-29

    4.2  EXCLUSIVITY.

        (a)  COMPETING PROPOSAL.  Except for the transactions contemplated by
    this Agreement, until the earlier of the Effective Time or the date of
    termination of this Agreement in accordance with its terms, Company shall
    not take (and since February 27, 2001, inclusive, Company has not taken),
    nor shall Company authorize, cause or encourage any of its directors,
    officers, agents, employees, consultants, affiliates, attorneys,
    accountants, financial advisers or other representatives (collectively,
    "REPRESENTATIVES") to, directly or indirectly: (i) solicit, encourage,
    initiate, engage, entertain, review, respond to, continue or participate in
    any negotiations or discussions with respect to an offer or proposal
    (whether formal or informal, oral, written, or otherwise) to acquire all or
    any part of Company's or any of its Subsidiaries' stock or assets, whether
    by purchase of stock or assets, license, joint venture, merger,
    consolidation, reorganization or other form of business combination, or
    otherwise (a "COMPETING PROPOSAL"), (ii) disclose any heretofore nonpublic
    information, or afford access to the properties, books or records of Company
    or any of its Subsidiaries, to any person or entity concerning Company or
    any of its Subsidiaries for the purposes of considering or formulating a
    Competing Proposal, (iii) assist, cooperate with, facilitate or encourage
    any person or entity to make a Competing Proposal, (iv) agree to, enter into
    a contract regarding, approve, recommend or endorse any transaction
    involving a Competing Proposal, or (v) authorize or permit any of Company's
    Representatives to take any action within the scope of the immediately
    preceding clauses (i) through (iv). If Company or any of its Subsidiaries or
    Company's Representatives becomes aware of a Competing Proposal or if any
    request for nonpublic information relating to Company or any of its
    Subsidiaries or for access to the properties, books or records of Company or
    any of its Subsidiaries is made by any person or entity that has made a
    Competing Proposal or has advised Company that it may be considering making
    a Competing Proposal, Company, any of its Subsidiaries or Company's
    Representatives shall within 24 hours notify Parent of the material details
    of such Competing Proposal or request (including the identity of the person
    or entity making such Competing Proposal, the terms thereof and the
    information requested thereby) and shall within 24 hours provide Parent with
    a copy of any Competing Proposal or request that is made in writing and
    copies of all correspondence relating thereto. Thereafter Company shall keep
    Parent fully apprised on a current basis of the status of any such Competing
    Proposal and of any modifications to the terms thereof. Company, its
    Subsidiaries and Company's Representatives shall immediately cease and cause
    to be terminated all existing discussions or negotiations with any parties
    other than Parent conducted heretofore with respect to any Competing
    Proposal.

        (b)  PARENT PROPOSAL.  Except for the transactions contemplated by this
    Agreement, until the earlier of the Effective Time or the date of
    termination of this Agreement in accordance with its terms, Parent shall not
    take (and since February 27, 2001, inclusive, Parent has not taken), nor
    shall Parent authorize, cause or encourage any of its Representatives to,
    directly or indirectly: (i) solicit, encourage, initiate, engage, entertain,
    review, respond to, continue or participate in any negotiations or
    discussions with respect to an offer or proposal (whether formal or
    informal, oral, written, or otherwise) for the acquisition by Parent of all
    or substantially all of the assets or equity interests of any entity,
    whether by purchase of stock or assets, license, joint venture, merger,
    consolidation, reorganization or other form of business combination or
    otherwise if such proposed acquisition by Parent would materially adversely
    effect the ability of Parent to consummate the Merger ("PARENT PROPOSAL"),
    (ii) disclose any heretofore nonpublic information, or afford access to the
    properties, books or records of Parent or any of its subsidiaries, to any
    person or entity concerning Parent or any of its subsidiaries for the
    purposes of considering or formulating a Parent Proposal, (iii) assist,
    cooperate with, facilitate or encourage any person or entity to make a
    Parent Proposal, (iv) agree to, enter into a contract regarding, approve,
    recommend or endorse any transaction involving a Parent Proposal, or
    (v) authorize or permit any of Parent's Representatives to take any action
    within the scope of the immediately preceding clauses (i) through (iv). If
    the

                                      I-30

    Parent or any of Parent's Representatives becomes aware of a Parent Proposal
    or if a Parent Proposal is hereafter made or if any request for nonpublic
    information relating to Parent or any of its subsidiaries or for access to
    the properties, books or records of Parent or any of its subsidiaries is
    made by any person or entity that has made a Parent Proposal or has advised
    Parent that it may be considering making a Parent Proposal, Parent or
    Parent's Representatives shall within 24 hours notify Company of the
    material details of such Parent Proposal or request (including the identity
    of the person or entity making such Parent Proposal, the terms thereof and
    the information requested thereby) and shall within 24 hours provide Company
    with a copy of any Parent Proposal or request that is made in writing and
    copies of all correspondence relating thereto. Thereafter Parent shall keep
    Company fully apprised on a current basis of the status of any such Parent
    Proposal and of any modifications to the terms thereof. Parent and Parent's
    Representatives immediately shall cease and cause to be terminated all
    existing discussions or negotiations with any parties other than Company
    conducted heretofore with respect to any Parent Proposal.

        (c)  REMEDY.  Each party (i) acknowledges that a breach of any of its
    covenants contained in this Section 4.2 will result in irreparable harm to
    Parent or Company, as the case may be, which will not be compensable in
    money damages, and (ii) agrees that such covenants shall be specifically
    enforceable and that specific performance and injunctive relief shall be a
    remedy properly available to the parties for a breach of such covenants.

    4.3  NOTICES OF CERTAIN EVENTS.  Each of Parent and Company shall give
prompt notice to the other of (i) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting Parent, Merger Sub or
Company or any of its Subsidiaries, or that relate to the consummation of the
Merger; (iv) the occurrence of a default or event that, with the giving of
notice or lapse of time or both, will become a default under any Material
Contract; and (v) any change that would have a Material Adverse Effect on Parent
or a Material Adverse Effect on Company or any of its Subsidiaries, or delay or
impede the ability of Parent, Merger Sub, Company or the security holders of
Company to perform their respective obligations pursuant to the Transaction
Agreements and to effect the consummation of the Merger.

                                   ARTICLE V
                             ADDITIONAL AGREEMENTS

    5.1  ACCESS TO INFORMATION.

        (a)  ACCESS.  Each party to this Agreement shall afford any other party
    hereto reasonable access during normal business hours, on reasonable advance
    notice, during the period prior to the earlier of the Effective Time or the
    date of termination of this Agreement in accordance with its terms, to
    (i) all of such party's and each of its subsidiaries' properties, books,
    contracts, commitments and records, and (ii) all other information
    concerning the business, operations, properties, assets, taxes, condition
    (financial or other) results of operations and personnel of such party and
    any of its subsidiaries as the other party may reasonably request. Each
    party agrees to provide to the other party and its Representatives copies of
    internal financial statements promptly upon request.

        (b)  CONFERENCES.  Subject to compliance with applicable law, from the
    date hereof until the earlier of the Effective Time or the date of
    termination of this Agreement in accordance with its terms, each of Parent
    and Company shall confer on a regular basis with one or more Representatives
    of the other party to consult with respect to operational matters of
    materiality and the general status of ongoing operations prior to taking any
    actions with respect thereto.

                                      I-31

        (c)  REPRESENTATIONS AND WARRANTIES.  No information or knowledge
    obtained in any investigation pursuant to this Section 5.1 shall affect or
    be deemed to modify any representation or warranty contained herein or the
    conditions to the obligations of the parties to consummate the Merger.

        (d)  REVIEW OF COMPANY TAX FILINGS.

           (i) All income Tax Returns of Company and each of its Subsidiaries
       for the year ended December 31, 2000 that are filed on or before the
       Closing Date shall be prepared in a manner consistent with Company's past
       Tax accounting practices.

           (ii) A draft of each income Tax Return or any amendment thereto that
       is filed by Company or any of its Subsidiaries after the date hereof and
       prior to the Closing Date shall be delivered to Parent no later than
       thirty (30) days prior to the time such Tax Return or amendment is to be
       filed. Parent may request in writing changes to be made to any such draft
       returns or amendment no later than fifteen (15) days after receipt of
       such Tax Return or amendment. Company shall consider such request and
       prepare a final Tax Return or amendment considering, in Company's
       reasonable discretion, Parent's requests.

    5.2  CONFIDENTIALITY.

        (a)  CONFIDENTIAL INFORMATION.  Prior to the Effective Time, each of the
    parties will treat and hold as such all of the Confidential Information (as
    defined below) and refrain from using any of the Confidential Information
    except in connection with this Agreement. In the event that any party is
    requested or required (by oral question or request for information or
    documents in any legal proceeding, interrogatory, subpoena, civil
    investigative demand, or similar process) to disclose any Confidential
    Information, that party will notify the party providing such Confidential
    Information (the "PROVIDING PARTY") promptly of the request or requirement
    so that the Providing Party may seek an appropriate protective order or
    waive compliance with the provisions of this Section 5.2(a). If, in the
    absence of a protective order or the receipt of a waiver hereunder, any of
    the parties is, on the advice of counsel, compelled to disclose any
    Confidential Information to any tribunal or else stand liable for contempt,
    that party may disclose the Confidential Information to the tribunal;
    PROVIDED, HOWEVER, that the disclosing party shall use its reasonable best
    efforts to obtain, at the request and expense of the Providing Party, an
    order or other assurance that confidential treatment will be accorded to
    such portion of the Confidential Information required to be disclosed as the
    Providing Party shall designate. For purposes of this Agreement,
    "CONFIDENTIAL INFORMATION" means any information concerning the business and
    affairs of Parent, Company or any of their respective Subsidiaries that is
    not already generally available to the public.

        (b)  TERMINATION.  In the event that this Agreement is terminated in
    accordance with its terms, each party shall promptly redeliver to the other
    all non-public written material provided pursuant to this Agreement and
    shall not retain any copies, extracts or other reproductions in whole or in
    part of such written material. In such event, all documents, memoranda,
    notes and other writings prepared by Parent, Company or their subsidiaries
    based on the information in such material shall be destroyed (and Parent and
    Company shall use their respective reasonable best efforts to cause their
    Representatives to similarly destroy their documents, memoranda and notes),
    and such destruction (and reasonable best efforts) shall be certified in
    writing by an authorized officer supervising such destruction.

    5.3  PUBLIC DISCLOSURE.  Unless otherwise permitted by this Agreement,
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the

                                      I-32

other (which approval shall not be unreasonably withheld), in all cases except
as may be required by law or the rules of the AMEX, in which case the parties
will make reasonable efforts to consult with each other prior to the making of
such public statement.

    5.4  REASONABLE EFFORTS AND FURTHER ASSURANCES.

        (a)  FURTHER ASSURANCES.  Each of the parties to this Agreement shall
    use its commercially reasonable efforts to effectuate the transactions
    contemplated hereby and to fulfill and cause to be fulfilled the conditions
    to Closing under this Agreement; PROVIDED, HOWEVER, that Parent shall not be
    obligated to consent to or accept any divestiture or operational limitation
    in connection with the Merger or to make any payment or commercial
    concession to any third party as a condition to obtaining any required
    consent or approval of any third party. Each party hereto, at the reasonable
    request of another party hereto, shall execute and deliver such other
    instruments and do and perform such other acts and things as may be
    necessary or desirable for effecting completely the consummation of this
    Agreement and the transactions contemplated hereby.

        (b)  REASONABLE EFFORTS.  Subject to the terms and conditions herein
    provided, each of the parties hereto shall use all commercially reasonable
    efforts to take, or cause to be taken, all action and to do, or cause to be
    done, all things necessary, proper or advisable pursuant to all agreements,
    contracts, indentures or other instruments to which the parties hereto are a
    party, or under any applicable laws and regulations, to consummate and make
    effective the transactions contemplated by this Agreement, including using
    its reasonable efforts to (i) obtain all necessary or appropriate waivers,
    consents and approvals from lenders, landlords, security holders or other
    parties whose waiver, consent or approval is required to consummate the
    Merger, (ii) effect all necessary registrations, filings and submissions,
    and (iii) lift any injunction or other legal bar to the Merger (and, in such
    case, to proceed with the Merger as expeditiously as possible), subject,
    however, to the requisite votes of the stockholders of the Parent and Merger
    Sub and the stockholders of Company.

        (c)  LITIGATION.  In the event any litigation is commenced by any person
    or entity against Company or any of its Subsidiaries relating to the
    transactions contemplated by this Agreement, Parent shall have the right, at
    its own expense, to participate therein, and Company and its Subsidiaries
    will not settle any such litigation without the consent of Parent, which
    consent will not be unreasonably withheld.

    5.5  NOTIFICATION OF CERTAIN MATTERS.  Each of Company, Parent and Merger
Sub agrees to give prompt notice to each other of, and to use their respective
reasonable best efforts to prevent or promptly remedy, (i) the occurrence or
failure to occur or the impending or threatened occurrence or failure to occur,
of any event which occurrence or failure to occur would be likely to cause any
of the representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 5.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.

    5.6  EMPLOYMENT AND CONSULTING AGREEMENTS; EMPLOYEES.

        (a)  EMPLOYMENT AGREEMENTS.  Prior to Closing, any and all employees of
    Company or any of its Subsidiaries who are parties to agreements that would
    provide to them compensation (cash or otherwise) upon a change of control
    (as defined therein) of Company, other than the Kanzer Employment Agreement
    and the Stergiopoulos Employment Agreement (collectively, the "EMPLOYMENT
    AGREEMENTS"), shall execute amendments and/or waivers of the compensation
    provisions applicable upon such a change of control (as defined therein).

                                      I-33

        (b)  KANZER EMPLOYMENT AGREEMENT.  Prior to Closing, the Employment
    Agreement dated December 14, 1998, by and between Company and Steve H.
    Kanzer (the "KANZER EMPLOYMENT AGREEMENT") shall have been terminated on
    terms reasonably satisfactory to Parent and Mr. Kanzer without severance,
    milestone, bonus or other payments, other than the bonus payment provided
    for pursuant to Section 1.6(h).

        (c)  STERGIOPOULOS EMPLOYMENT AGREEMENT.  Prior to Closing, the
    Employment Agreement dated June 28, 1999, by and between Company and
    Nicholas Stergiopoulos (the "STERGIOPOULOS EMPLOYMENT AGREEMENT") shall have
    been terminated on terms reasonably satisfactory to Parent and
    Mr. Stergiopoulos without severance, milestone, bonus or other payments,
    other than the bonus payment provided for pursuant to Section 1.6(g).

        (d)  EMPLOYEES.  Prior to Closing, all employees of Company and each of
    its Subsidiaries shall be terminated on terms reasonably satisfactory to
    Parent without severance, milestone, bonus or other payments, except as
    provided in Sections 1.6(g) and 1.6(h).

    5.7  NO LIABILITY OF PARENT IF TRANSACTION IS NOT TAX-FREE.  Except in
connection with a breach of Sections 3.10 or 5.11, neither Parent nor Merger Sub
shall be liable to any party for any amount in the event that the Merger is not
treated as a tax-free reorganization for Federal income tax purposes.

    5.8  COMPANY DISCLOSURE SCHEDULE.  Company has made available to Parent a
reasonable time prior to the Closing Date, copies of all items set forth on the
Company Disclosure Schedule and any and all other consents, documents or
agreements to be delivered hereunder which have not previously been delivered to
Parent, which items and any such other consents, documents or agreements shall
be in form and substance reasonably satisfactory to Parent and Company.

    5.9  LITIGATION SUPPORT.  In the event and for so long as Parent or Merger
Sub actively is contesting or defending against any action, suit, proceeding,
arbitration, hearing, investigation, charge, complaint, claim or demand (other
than by security holders of Company) in connection with (a) any transaction
contemplated under this Agreement, or (b) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction on or prior to the Closing involving
Company or any of its Subsidiaries, Company and each of its Subsidiaries and the
security holders of Company will cooperate with Parent and its counsel in the
contest or defense, use reasonable efforts to make available the personnel of
Company and each of its Subsidiaries and security holders of Company and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of Parent (unless Parent is entitled to indemnification therefor under
Article VIII).

    5.10  TRANSITION.  Neither Company nor any security holders of Company shall
take any action that is designed or intended to have the effect of discouraging
any lessor, licensor, customer, supplier, joint venture partner, collaborator,
consultant or other business associate of Company and any of its Subsidiaries
from maintaining the same business relationships with Company and any of its
Subsidiaries after the Closing as it maintained with Company and any of its
Subsidiaries prior to the Closing unless such action is taken in accordance with
prudent business practices.

    5.11  TAX TREATMENT.  Parent, Merger Sub and Company shall each use best
efforts to cause the Merger to qualify, and shall not knowingly take or fail to
take any actions or cause any actions to be taken which could reasonably be
expected to prevent the Merger from qualifying, as a "reorganization" under
Section 368(a) of the Code. Except as otherwise required under applicable law,
Parent shall, and shall cause the Surviving Corporation to report to the extent
required by the Code or the regulations thereunder, the Merger for income tax
purposes as a reorganization within the meaning of Section 368 of the Code. Each
of Parent and Company shall make such representations, warranties and covenants
as shall be reasonably requested in the circumstances by Brobeck, Phleger &
Harrison, LLP and

                                      I-34

Kramer Levin Naftalis & Frankel LLP in order for such firms to render the
opinions referred to in Section 6.1(g).

    5.12  JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.

        (a)  SEC FILING.  As promptly as practicable after the execution of this
    Agreement, Company and Parent shall prepare and file with the SEC the Joint
    Proxy Statement, and Parent shall prepare and file with the SEC the
    Registration Statement (as defined in Section 5.15), in which the Joint
    Proxy Statement will be included as a prospectus. Parent and Company shall
    use their reasonable best efforts to respond to the comments of the SEC in
    connection with the Joint Proxy Statement and the Registration Statement, to
    furnish all information required to prepare the Joint Proxy Statement and
    the Registration Statement and to cause the Registration Statement to become
    effective as soon after such filing as practicable. Company will use its
    reasonable best efforts to cause the Joint Proxy Statement to be mailed to
    Company's stockholders, and Parent will use its reasonable best efforts to
    cause the Joint Proxy Statement to be mailed to Parent's stockholders, in
    each case as promptly as practicable after the Registration Statement is
    declared effective under the Act. The Joint Proxy Statement shall include
    the recommendation of the Board of Directors of Company (the "COMPANY
    BOARD") in favor of this Agreement and the Merger and of the Parent Board in
    favor of the issuance of Parent Common Stock pursuant to the Merger.

        (b)  REGULATORY FILINGS.  Parent and Company shall make all necessary
    filings with respect to the Merger under the Act, the Exchange Act, AMEX
    rules, applicable state blue sky laws and the rules and regulations
    thereunder.

        (c)  COMFORT LETTER.  Company will deliver to Parent, before the date
    the Joint Proxy Statement is filed with the SEC, a letter of Richard A.
    Eisner and Company stating their conclusions as to certain information
    derived from the financial records of Company and each of its Subsidiaries
    and contained in the Joint Proxy Statement (the "COMPANY COMFORT LETTER").
    The form and substance of the Company Comfort Letter shall be reasonably
    satisfactory to Parent and customary in scope for comfort letters delivered
    by independent public accountants in connection with registration statements
    on Form S-4 under the Securities Act and shall be updated on the date the
    Registration Statement is declared effective by the SEC and the Closing
    Date.

    5.13  STOCKHOLDERS MEETINGS.  Company and Parent each shall call a meeting
of its respective stockholders to be held as promptly as practicable for the
purpose of voting, in the case of Company, upon this Agreement and the Merger
and, in the case of Parent, upon the issuance of shares of Parent Common Stock
pursuant to the Merger (the "PARENT VOTING PROPOSAL"). In accordance with
Section 251(c) of the Delaware Law, Company's obligation to call and hold its
stockholders meeting shall not be dependent on the Company Board's
recommendation. Company and Parent shall coordinate and cooperate with respect
to the timing of such meetings and shall use their reasonable best efforts to
hold such meetings on the same day and as soon as practicable after the date on
which the Registration Statement becomes effective. Each party shall use its
reasonable best efforts to solicit from its stockholders proxies in favor of the
matters set forth above and obtain a sufficient vote in favor of such matters at
its stockholders meeting (or any postponement or adjournment thereof). Parent
shall take such action with respect to Merger Sub, and cause Merger Sub to take
such action, as may be required to consummate the Merger, including without
limitation, voting all shares of Merger Sub in favor of the Merger.

    5.14  AFFILIATE AGREEMENTS.  Company has set forth on EXHIBIT E attached
hereto, a list of those persons who are "affiliates" of Company within the
meaning of Rule 145 (each person who is an "affiliate" within the meaning of
Rule 145 is referred to as an "AFFILIATE") promulgated under the Act ("RULE
145"). Company shall deliver or cause to be delivered to Parent within 30 days
after the date hereof (and in any case prior to the Effective Time) from each of
its Affiliates, or from any person who becomes an Affiliate after the date of
this Agreement and prior to the Effective Time as soon as

                                      I-35

practicable after attaining such status, an executed Affiliate Agreement
substantially in the form attached hereto as EXHIBIT F, by which each Affiliate
of Company agrees to comply with the applicable requirements of Rule 145 and
certain other provisions (an "AFFILIATE AGREEMENT"). Parent shall be entitled to
place appropriate legends on the certificates evidencing any Parent Common Stock
to be received by such Affiliates of Company pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Parent Common Stock, consistent with the terms of the Affiliate
Agreements, but regardless of the execution thereof by the Affiliate.

    5.15  REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.  The
information to be supplied by Company for inclusion in the registration
statement on Form S-4 pursuant to which shares of Parent Common Stock issued in
the Merger will be registered under the Act (the "REGISTRATION STATEMENT") shall
not at the time the Registration Statement is declared effective by the SEC
contain any untrue statement of a material fact or omit to state any material
fact required to be stated in the Registration Statement or necessary in order
to make the statements in the Registration Statement not misleading. The
information supplied by Company for inclusion in the joint proxy
statement/prospectus (the "JOINT PROXY STATEMENT") to be sent to the
stockholders of Parent and Company in connection with the meeting of Company's
stockholders to consider this Agreement and the Merger (the "COMPANY
STOCKHOLDERS' MEETING") and the meeting of Parent's stockholders to consider the
Parent Voting Proposal (the "PARENT STOCKHOLDERS' MEETING") shall not, on the
date the Joint Proxy Statement is first mailed to stockholders of Company or
Parent, at the time of the Company Stockholders' Meeting and at the time of the
Parent Stockholders' Meeting, contain any statement which, in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Joint Proxy Statement not false or misleading;
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Company Stockholders' Meeting or the Parent Stockholders' Meeting which has
become false or misleading. If at any time prior to the Effective Time any event
relating to Company or any of its Affiliates, officers or directors should be
discovered by Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement, Company
shall promptly inform Parent. If at any time prior to the Effective Time any
event relating to Parent or any of its Affiliates, officers or directors should
be discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement, Parent
shall promptly inform Company.

    5.16  DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.  The Surviving
Corporation shall cause to be maintained in effect (i) for a period of six years
after the Effective Time, the provisions regarding elimination of liability of
directors and indemnification of officers, directors and employees contained in
the Certificate of Incorporation and Bylaws of the Surviving Corporation as set
forth in EXHIBIT L attached hereto, and (ii) for a period of six years after the
Effective Time, the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by Company (provided that
the Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured if available on commercially
reasonable terms) with respect to claims arising from facts or events that
occurred on or before the Effective Time (the "TAIL POLICY").

    5.17  AMENDMENT TO COMPANY'S CERTIFICATE OF INCORPORATION.  Prior to the
Effective Time, Company shall amend, to the reasonable satisfaction of Parent,
its Certificate of Incorporation, as amended, such that the total Liquidation
Amount due to the holders of the Series A Preferred in connection with the
consummation of the Merger does not exceed the Series A Preferred Merger
Consideration.

    5.18  MCDONALD LICENSE AGREEMENT.  Company agrees to use its commercially
reasonable efforts to cause Dr. George McDonald to postpone his right to
terminate, and extend the exclusivity of the McDonald License Agreement, each to
May 24, 2005.

                                      I-36

    5.19  ADDRESS CHANGE NOTICES.  Company shall notify, prior to the Effective
Time, all other parties to its License Agreements, Material Contracts, Warrants
and Options of its change of address from 787 Seventh Avenue, 48th Floor, New
York, New York 10019 to 1680 Michigan Avenue, Suite 700, Miami, Florida 33139.

    5.20  AMENDMENT OF THE WARRANTS.  Prior to the Effective Time, Company and
the holders of the Warrants shall amend the Warrants to be substantially in the
form set forth in EXHIBIT O attached hereto. Company shall cause all outstanding
Warrants to be returned to Company for cancellation and Company shall issue to
each holder of a Warrant an Amended Warrant exercisable for the same number of
shares of Series A Preferred in exchange for each such returned Warrant.

    5.21  AMEX NONCOMPLIANCE NOTICE.  If Parent receives an official written
notice from AMEX to the effect that Parent is not in compliance with the
requirements for contniued listing of the Parent Common Stock on AMEX (a
"NONCOMPLIANCE NOTICE"), Parent shall use its reasonable best efforts to remedy
the deficiencies for continued listing of the Parent Common Stock on AMEX as set
forth in the Noncompliance Notice.

                                   ARTICLE VI
                            CONDITIONS TO THE MERGER

    6.1  CONDITIONS TO OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE MERGER.  The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, by
agreement of all the parties hereto:

        (a)  NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY.  No temporary restraining
    order, preliminary or permanent injunction or other order issued by any
    court of competent jurisdiction or other legal or regulatory restraint or
    prohibition preventing the consummation of the Merger shall be in effect,
    nor shall any proceeding brought by an administrative agency or commission
    or other governmental authority or instrumentality, domestic or foreign,
    seeking any of the foregoing be pending; nor shall there be any action
    taken, or any statute, rule, regulation or order enacted, entered, enforced
    or deemed applicable to the Merger, which makes the consummation of the
    Merger illegal. In the event an injunction or other order shall have been
    issued, each party agrees to use commercially reasonable efforts to have
    such injunction or other order lifted.

        (b)  GOVERNMENTAL APPROVAL.  Other than the filing of the Delaware
    Certificate of Merger, Parent, Merger Sub and Company shall have obtained
    from each Governmental Entity all approvals, waivers and consents, if any,
    necessary for the consummation of the Merger and the transactions
    contemplated hereby, including such approvals, waivers and consents as may
    be required under the Act and state securities laws.

        (c)  ESCROW AGREEMENT.  Parent, the Stockholders and the Escrow Agent
    shall have executed and delivered an Escrow Agreement substantially in the
    form attached hereto as EXHIBIT C (the "ESCROW AGREEMENT"), and the Escrow
    Agreement shall be in full force and effect.

        (d)  STOCKHOLDER APPROVAL.  This Agreement and the Merger shall have
    been approved by the requisite vote of the stockholders of Company as
    required by the Delaware Law and the Parent Voting Proposal shall have been
    approved by the requisite vote of the stockholders of Parent as required by
    the Delaware Law and AMEX.

        (e)  REGISTRATION STATEMENT.  The Registration Statement shall have been
    declared effective under the Act and shall not be the subject of any stop
    order or proceedings seeking a stop order.

                                      I-37

        (f)  AMEX QUOTATION.  The shares of Parent Common Stock to be issued in
    the Merger shall have been approved for listing on the AMEX, Nasdaq or any
    other national securities exchange upon which the Parent Common Stock is
    listed as of the Closing Date.

        (g)  TAX OPINIONS.  Parent and Company shall have received written
    opinions of Brobeck, Phleger & Harrison LLP and Kramer Levin Naftalis &
    Frankel LLP, respectively, in form and substance reasonably satisfactory to
    them, dated as of the Closing Date, to the effect that the Merger will
    constitute a reorganization within the meaning of Section 368(a) of the
    Code, and such opinions shall not have been withdrawn. In rendering such
    opinions, counsel shall be entitled to rely upon, among other things,
    reasonable assumptions as well as representations of Parent and Company.

        (h)  AMEX LISTING.  The Parent Common Stock shall be listed on AMEX,
    Nasdaq or any other national securities exchange and Parent shall not have
    received a Noncompliance Notice.

    6.2  ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY.  The obligation of
Company to consummate the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Company:

        (a)  REPRESENTATIONS, WARRANTIES AND COVENANTS.  The representations and
    warranties of Parent and Merger Sub in this Agreement shall be true and
    correct in all material respects (except for such representations and
    warranties that are qualified by their terms by a reference to materiality,
    which representations and warranties as so qualified shall be true and
    correct in all respects) on and as of the date made and the Effective Time
    as though such representations and warranties were made on and as of such
    time and Parent and Merger Sub shall have performed and complied in all
    material respects with all covenants, obligations and conditions of this
    Agreement required to be performed and complied with by them prior to the
    Effective Time, and Company shall have received a certificate of an officer
    of each of Parent and Merger Sub, in form and substance reasonably
    satisfactory to Company, to that effect.

        (b)  CERTIFICATES AND RESOLUTIONS.  As of the Effective Time, Company
    shall have received from Parent and Merger Sub (i) a certificate of
    existence and good standing from the state of incorporation as to the
    corporate status of each of Parent and Merger Sub, (ii) a true and complete
    copy of the resolutions of the board of directors, certified by an officer
    of Parent and of Merger Sub, respectively, adopted on behalf of each of
    Parent and Merger Sub, respectively, authorizing the execution, delivery and
    performance of this Agreement and all transactions contemplated hereby, and
    (iii) results of the vote of the stockholders of Parent approving the Parent
    Voting Proposal, certified by an officer of Parent.

        (c)  NO MATERIAL ADVERSE CHANGES.  There shall not have occurred any
    material adverse change in the condition (financial or otherwise),
    properties, assets (including intangible assets), liabilities, business,
    operations or results of operations of Parent, it being understood and
    agreed that a change in the market price of Parent Common Stock, in and of
    itself, shall not be deemed to constitute such a material adverse change.

        (d)  CONSENTS.  All required consents and approvals of third parties to
    material contracts with Parent, Merger Sub or any of Parent's subsidiaries
    shall have been obtained and be in effect at the Effective Time.

        (e)  OPINION OF COUNSEL.  Company shall have received a legal opinion,
    dated as of the Effective Time, from Brobeck, Phleger & Harrison LLP,
    counsel to Parent and Merger Sub, substantially in the form attached hereto
    as EXHIBIT G.

        (f)  BOARD MEMBERS.  As of the Effective Time, the Parent Board shall
    consist of nine members, three of whom shall be Dr. Bier, Mr. Rico and
    Mr. Kliem.

                                      I-38

        (g)  EMPLOYMENT AND CONSULTING AGREEMENTS.

           (i) Parent shall have executed and delivered a consulting agreement
       with Mr. Stergiopoulos substantially in the form attached hereto as
       EXHIBIT J (the "STERGIOPOULOS CONSULTING AGREEMENT").

           (ii) Parent shall have executed and delivered an employment agreement
       with Dr. Bier substantially in the form attached hereto as EXHIBIT D (the
       "BIER EMPLOYMENT AGREEMENT").

    6.3  ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.  The
obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Effective Time of each of the following conditions, any of
which may be waived, in writing, by Parent and Merger Sub:

        (a)  REPRESENTATIONS, WARRANTIES AND COVENANTS.  The representations and
    warranties of Company in this Agreement shall be true and correct in all
    material respects (except for such representations and warranties that are
    qualified by their terms by a reference to materiality, which
    representations and warranties as so qualified shall be true in all
    respects) on and as of the date made and the Effective Time as though such
    representations and warranties were made on and as of such time, without
    giving effect to any supplement or amendment to the Company Disclosure
    Schedule, and Company shall have performed and complied in all material
    respects with all covenants, obligations and conditions of this Agreement
    required to be performed and complied with by it prior to the Effective
    Time, and Parent and Merger Sub shall have received a certificate of an
    officer of Company, in a form reasonably satisfactory to Parent and Merger
    Sub, to that effect.

        (b)  CERTIFICATES AND RESOLUTIONS.  As of the Effective Time, Parent and
    Merger Sub shall have received from Company (i) a certificate of existence
    and good standing from the state of incorporation as to the status of
    Company and each of its Subsidiaries, (ii) a true and complete copy of the
    resolutions of the board of directors, certified by an officer of Company
    adopted on behalf of Company, authorizing the execution, delivery and
    performance of this Agreement and all transactions contemplated hereby, and
    (iii) results of the vote of the stockholders of Company approving this
    Agreement and the Merger, certified by an officer of Company.

        (c)  NO MATERIAL ADVERSE CHANGES.  There shall not have occurred any
    material adverse change in the condition (financial or otherwise),
    properties, assets (including intangible assets), liabilities, business,
    operations, results of operations or prospects of Company or any of its
    Subsidiaries.

        (d)  RESIGNATION OF DIRECTORS AND OFFICERS.  The directors and officers
    of Company and each of its Subsidiaries in office immediately prior to the
    Effective Time shall have resigned as directors and officers, as applicable,
    of Company and each of its Subsidiaries effective as of the Effective Time.

        (e)  OPINION OF COUNSEL.  Parent shall have received legal opinions,
    dated as of the Effective Time, from Kramer, Levin, Naftalis & Frankel LLP,
    counsel to Company, and from Lyon & Lyon, LLP, intellectual property counsel
    to Company, substantially in the forms attached hereto as EXHIBIT H.

        (f)  EMPLOYMENT AND CONSULTING AGREEMENTS; EMPLOYEES.

           (i) The waivers and/or amendments to the Employment Agreements
       described in Section 5.6(a) shall have been executed and delivered to
       Parent, and the same shall be in full force and effect; Mr. Kanzer and
       Company shall have terminated the Kanzer Employment Agreement as provided
       in Section 5.6(b); Mr. Stergiopoulos and Company shall have terminated
       the Stergiopoulos Employment Agreement as provided in Section 5.6(c); and
       all

                                      I-39

       employees of Company and each of its Subsidiaries shall have been
       terminated as provided in Section 5.6(d).

           (ii) Mr. Stergiopoulos shall have executed and delivered the
       Stergiopoulos Consulting Agreement.

          (iii) Dr. Bier shall have executed and delivered the Bier Employment
       Agreement.

        (g)  CONSENTS.  All required consents and approvals of third parties to
    material contracts with Company and each of its Subsidiaries shall have been
    obtained and be in effect at the Effective Time.

        (h)  COMPANY SECURITIES.  No securities of Company shall be outstanding
    other than Company Stock, the Amended Warrants and the Company Options set
    forth in Section 2.23 of the Company Disclosure Schedule; Company shall be
    under no obligation to pay any dividends on, or issue any of, its
    securities; and there shall be no right to receive any shares of Parent
    Common Stock issued as Merger Consideration other than by the exchange of
    shares of Company Stock for shares of Parent Common Stock as provided in
    Section 1.8.

        (i)  DISSENTER'S RIGHTS.  Security holders of Company entitled to
    receive in excess of 250,000 shares of Parent Common Stock in the aggregate
    as Merger Consideration shall not have exercised their appraisal rights
    under Section 262 of the Delaware Law.

        (j)  FAIRNESS OPINION.  The opinion of Wells Fargo Van Kasper, financial
    consultant to Parent, shall not have been withdrawn and shall be in full
    force and effect.

        (k)  NONCOMPETITION AGREEMENT.  Mr. Kanzer shall have executed and
    delivered to Parent a noncompetition/nonsolicitation agreement substantially
    in the form attached hereto as EXHIBIT K and the same shall be in full force
    and effect.

        (l)  AMENDMENT TO COMPANY'S CERTIFICATE OF INCORPORATION.  Company shall
    have amended, to the reasonable satisfaction of Parent, its Certificate of
    Incorporation, as amended, such that the total Liquidation Amount due to the
    holders of the Series A Preferred in connection with the consummation of the
    Merger does not exceed the Series A Preferred Merger Consideration.

        (m)  AMENDMENT TO PARENT'S AMENDED AND RESTATED 1995 OMNIBUS PLAN.  The
    stockholders of Parent shall have approved an amendment to Parent's Amended
    and Restated 1995 Omnibus Plan increasing the number of shares authorized
    for issuance thereunder to four million five hundred thousand (4,500,000)
    shares.

        (n)  AMENDMENT OF WARRANTS.  Company and the holders of the Warrants
    shall have amended the Warrants to be substantially in the form attached
    hereto as EXHIBIT O.

                                  ARTICLE VII
                           TERMINATION AND AMENDMENT

    7.1  TERMINATION.  At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of Parent or Company, this Agreement may be terminated:

        (a) by mutual agreement in writing, duly authorized by each of the
    Boards of Directors of Parent and Company.

        (b) By Parent:

           (i) by written notice to Company, if Company shall breach in any
       material respect any representation, warranty, obligation or agreement
       hereunder (except for such representations

                                      I-40

       and warranties that are qualified by their terms by reference to
       materiality, which representations and warranties as so qualified shall
       have been breached in any respect) and such breach shall not have been
       cured within ten (10) business days of receipt by Company of written
       notice of such breach (except that such 10 business day period shall not
       be applicable for a breach which cannot be cured), PROVIDED that the
       right to terminate this Agreement by Parent under this
       Section 7.1(b)(i) shall not be available to Parent where Parent or Merger
       Sub is at that time in breach of this Agreement;

           (ii) if the Merger is not completed by December 31, 2001 other than
       on account of delay or a breach of the representations and warranties or
       a failure to comply with a covenant or agreement contained in this
       Agreement on the part of Parent or Merger Sub or a failure to satisfy the
       conditions set forth in Sections 6.1 or 6.2 on the part of Parent or
       Merger Sub; PROVIDED, HOWEVER, that if Parent has received a
       Noncompliance Notice, Parent may not terminate this Agreement pursuant to
       this Section 7.1(b)(ii) for a period of 120 days after receipt by Parent
       of the Noncompliance Notice (the "AMEX DELISTING CURE PERIOD");

          (iii) if the Merger is enjoined by a final, unappealable court order
       not entered at the request or with the support of Parent, Merger Sub or
       any of Parent's five percent (5%) stockholders or any of their affiliates
       or associates other than (A) any stockholders of Company or their
       affiliates having direct or indirect beneficial ownership of any
       securities of Parent, or (B) Mr. Lindsay Rosenwald or his affiliates,
       relatives or any entity in which Mr. Rosenwald has any direct or indirect
       beneficial ownership interest;

           (iv) [RESERVED];

           (v) if, (A) at the Company Stockholders' Meeting (including any
       adjournment or postponement thereof), the requisite vote of the
       stockholders of Company in favor of this Agreement and the Merger shall
       not have been obtained, or (B) if at the Parent Stockholders' Meeting
       (including any adjournment or postponement thereof), the requisite vote
       of the stockholders of Parent in favor of the Parent Voting Proposal
       shall not have been obtained;

           (vi) if the Company Board shall have withdrawn or modified, in a
       manner adverse to Parent, its recommendation of this Agreement or the
       Merger; or

          (vii) if the Company Board shall have recommended or otherwise
       endorsed a Competing Proposal to the stockholders of Company.

        (c) By Company:

           (i) by written notice to Parent, if Parent or Merger Sub shall breach
       in any material respect any representation, warranty, obligation or
       agreement hereunder (except for such representations and warranties that
       are qualified by their terms by reference to materiality, which
       representations and warranties as so qualified shall have been breached
       in any respect) and such breach shall not have been cured within ten
       (10) business days following receipt by Parent of written notice of such
       breach (except that such 10 business day period shall not be applicable
       for a breach which cannot be cured), PROVIDED that the right to terminate
       this Agreement by Company under this Section 7.1(c)(i) shall not be
       available to Company where Company is at that time in breach of this
       Agreement;

           (ii) if the Merger is not completed by December 31, 2001, other than
       on account of delay or a breach of the representations and warranties or
       a failure to comply with a covenant or agreement contained in this
       Agreement on the part of Company or a failure to satisfy the conditions
       set forth in Sections 6.1 or 6.3 on the part of Company; PROVIDED,
       HOWEVER, that if Parent has received a Noncompliance Notice, Company may
       not terminate this Agreement

                                      I-41

       pursuant to this Section 7.1(c)(ii) until such time as the AMEX Delisting
       Cure Period shall have expired;

          (iii) if the Merger is enjoined by a final, unappealable court order
       not entered at the request or with the support of Company, any of its
       Subsidiaries, or any of their five percent (5%) stockholders, or any of
       their affiliates or associates;

           (iv) [RESERVED];

           (v) if, at the Parent Stockholders' Meeting (including any
       adjournment or postponement thereof), the requisite vote of the
       stockholders of Parent in favor of the Parent Voting Proposal shall not
       have been obtained; or

           (vi) if the Parent Board shall have withdrawn or modified, in a
       manner adverse to Company, its recommendation of the Parent Voting
       Proposal.

        (d) Any termination of this Agreement pursuant to this Section 7.1 shall
    be effective immediately upon delivery of written notice of termination by
    the terminating party to the other parties hereto.

    7.2  EFFECT OF TERMINATION.  In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub, or
Company or their respective officers, directors, shareholders or affiliates;
PROVIDED that the provisions of Section 5.2 (Confidentiality), Section 7.3
(Certain Payments), Section 9.1 (Expenses), Article IX (General Provisions) and
this Section 7.2 shall remain in full force and effect and survive any
termination of this Agreement. Nothing in this Section 7.2 shall relieve any
party from liability for any breach of this Agreement. The rights and remedies
available to each party are expressly intended to be cumulative and may be
exercised singly or concurrently at such party's sole discretion.

    7.3  CERTAIN PAYMENTS.

        (a)  COMPANY PAYMENTS.  Company shall pay Parent a termination fee of
    $1,000,000, plus all appropriately documented reasonable out-of-pocket costs
    and expenses incurred in connection with this Agreement and the transactions
    contemplated hereby (including, without limitation, the reasonable fees,
    costs and expenses of its advisors, accountants and legal counsel), upon the
    earliest to occur of the following events:

           (i) the termination of this Agreement by Parent pursuant to
       Section 7.1(b)(i), where prior to such termination a Competing Proposal
       or any indication of interest for a Competing Proposal was made or came
       to the attention of Company, and within twelve (12) months after the date
       of such termination Company consummates, or executes documentation
       providing for, such a Competing Proposal; or

           (ii) the termination of this Agreement by Parent pursuant to Sections
       7.1(b)(v)(A), 7.1(b)(vi) or 7.1(b)(vii).

        (b)  PARENT PAYMENTS.  Parent shall pay Company a termination fee of
    $1,000,000, plus all appropriately documented reasonable out-of-pocket costs
    and expenses incurred in connection with this Agreement and the transactions
    contemplated hereby (including, without limitation, the reasonable fees,
    costs and expenses of its advisors, accountants and legal counsel), upon the
    earliest to occur of the following events:

           (i) the termination of this Agreement by Company pursuant to
       Section 7.1(c)(i), where prior to such termination a Parent Proposal or
       any indication of interest for a Parent Proposal was made or came to the
       attention of Parent, and within twelve (12) months after the date of

                                      I-42

       such termination Parent consummates, or executes documentation providing
       for, such a Parent Proposal;

           (ii) the termination of this Agreement by Company pursuant to
       Section 7.1(c)(vi); or

          (iii) the termination of this Agreement by Parent pursuant to
       Section 7.1(b)(v)(B) and stockholders representing greater than fifty
       percent (50%) of the outstanding stock of Parent eligible to vote on the
       Parent Voting Proposal vote against the Parent Voting Proposal, excluding
       for the purposes of such calculation the votes of (A) any stockholders of
       Company or their affiliates having direct or indirect beneficial
       ownership of any securities of Parent, and (B) Mr. Rosenwald or his
       affiliates, relatives or any entity in which Mr. Rosenwald has any direct
       or indirect beneficial ownership interest.

        (c)  TIMING OF PAYMENTS.  The payment obligations set forth in this
    Section 7.3 shall be paid in immediately available funds within one
    (1) business day after written demand has been made by the other party
    pursuant to the notification requirements of Section 9.2.

                                  ARTICLE VIII
                      REMEDIES, ESCROW AND INDEMNIFICATION

    8.1  SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  All of the
representations, warranties, covenants and agreements of Parent, Merger Sub and
Company contained in this Agreement shall survive the Closing and continue in
full force and effect until March 31, 2003.

    8.2  ESCROW FUND.  In accordance with Sections 1.6(a) and 1.8(b) hereof,
Parent shall deliver to Wells Fargo Bank Minnesota, National Association, as
escrow agent (the "ESCROW AGENT"), an aggregate of 1,350,000 shares of the
Merger Consideration payable to the Stockholders (the "ESCROW FUND"). The Escrow
Fund shall be held by the Escrow Agent pursuant to the terms set forth in the
Escrow Agreement. The Escrow Fund shall be available to compensate Parent, the
Surviving Corporation and the other Indemnified Persons (as defined in Section
8.6) pursuant to the indemnification obligations of the Stockholders in
accordance with this Article VIII and the Escrow Agreement.

    8.3  LIMITATIONS ON INDEMNIFICATION.

        (a)  MINIMUM CLAIM.  Parent or the Surviving Corporation on the one hand
    and Company (prior to the Effective Time) or the Stockholders (subsequent to
    the Effective Time) on the other hand shall not be entitled to make a claim
    for indemnification pursuant to Sections 8.4 and 8.5, respectively, unless
    and until the aggregate amount of Damages (as defined in Section 8.4(a))
    incurred by the party making such claim exceeds $100,000 (the "BASKET"), at
    which time the party seeking indemnification may recover the aggregate
    amount of Damages beginning with the first dollar thereof irrespective of
    the Basket; PROVIDED, HOWEVER, that the Basket shall not apply to Damages
    arising out of claims pursuant to Section 8.4(ii) or Damages resulting from,
    relating to, arising out of or constituting a breach of any covenant or
    agreement of Company in Section 9.1.

        (b)  CAP.  Notwithstanding any other provision of this Agreement, the
    indemnification obligations of Parent and the Surviving Corporation on the
    one hand and Company (prior to the Effective Time) and the Stockholders
    (subsequent to the Effective Time) on the other hand pursuant to Sections
    8.4 and 8.5, respectively, will not exceed in the aggregate for such person
    or persons the Closing Date Fair Market Value (as defined in
    Section 8.3(d)) of 1,350,000 shares of Parent Common Stock (the "CAP");
    PROVIDED, HOWEVER, that the indemnification obligations of Company (prior to
    the Effective Time) and the Stockholders (subsequent to the Effective Time)
    pursuant to Section 8.4(ii) will not exceed in the aggregate $200,000.
    Notwithstanding the foregoing, (i) all claims by Indemnified Persons (as
    defined in Section 8.4) for Damages (as defined in Section 8.4) pursuant to
    Section 8.4 subsequent to the Closing shall, subject to

                                      I-43

    Section 8.3(c), be satisfied only from the Escrow Fund and (ii) all claims
    by Indemnified Persons for Damages pursuant to Section 8.5 subsequent to the
    Closing shall be limited to the Closing Date Fair Market Value of the
    aggregate number of shares of Parent Common Stock in the Escrow Fund on the
    date such claim is deemed delivered to Parent or the Surviving Corporation
    pursuant to Section 9.2.

        (c)  PAYMENT.  Subject to the provisions of this Section 8.3, (i)
    Company (prior to the Effective Time) or the Stockholders (subsequent to the
    Effective Time) shall indemnify Parent, the Surviving Corporation and the
    other Indemnified Persons pursuant to Section 8.4 below by payment in, at
    the option of Company or the Stockholders, as the case may be, either
    (A) cash equal to the amount for which such persons are to be indemnified
    (with a corresponding reduction in the number of shares in the Escrow Fund
    calculated pursuant to subparagraph (B) below), or (B) shares of Parent
    Common Stock, properly endorsed and transferred to such person, free and
    clear of all liens, claims and encumbrances, with a value equal to the
    amount for which such person is to be indemnified (each share of Parent
    Common Stock for such purposes shall have a value equal to the Closing Date
    Fair Market Value), and (ii) Parent shall indemnify Company (prior to the
    Effective Time) or the Stockholders (subsequent to the Effective Time)
    pursuant to Section 8.5 below by payment in, at the option of Parent, either
    (x) cash equal to the amount for which such person is to be indemnified, or
    (y) issuing Parent Common Stock to Company or the Stockholders, as the case
    may be, with a Closing Date Fair Market Value equal to the amount for which
    Company or the Stockholders, as the case may be, are to be indemnified.

        (d)  CLOSING DATE FAIR MARKET VALUE.  For purposes of this Agreement,
    "CLOSING DATE FAIR MARKET VALUE" shall mean, per share of Parent Common
    Stock, (i) prior to the Closing, $1.50 or (ii) subsequent to the Closing,
    the average closing price of the Parent Common Stock as reported on the AMEX
    for the thirty trading days prior to the Closing Date.

        (e)  MATERIALITY.  In determining the amount of any Damages attributable
    to a breach, any materiality standard contained in a representation,
    warranty or covenant shall be disregarded.

    8.4  INDEMNIFICATION BY THE STOCKHOLDERS.  Subject to the terms and
conditions set forth in Section 8.3, Company (prior to the Effective Time) or
the Stockholders (subsequent to the Effective Time), jointly and severally with
respect to the Stockholders, shall indemnify Parent, the Surviving Corporation
and their respective directors, officers, employees, agents or advisors, or any
of their respective successors and assigns, in respect of, and hold each of them
harmless against, any and all demands, claims, debts, actions, assessments,
judgements, settlements, sanctions, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, known or unknown, due or to
become due or otherwise), monetary damages, fines, taxes, fees, penalties,
interest obligations, deficiencies, losses, costs and expenses (including,
without limitation, amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other expenses of litigation) ("DAMAGES",
PROVIDED, HOWEVER, that Damages shall not include any consequential, speculative
or punitive damages incurred by an Indemnified Person unless actually paid to a
third party as a result of a third party claim), incurred or suffered by them
(i) resulting from, relating to, arising out of or constituting any breach of
any representation or warranty or failure to perform any covenant or agreement
of Company or the Stockholders contained, or referred to, in the Transaction
Agreements or in any certificate, agreement, letter or document delivered hereby
or thereby, or in connection with any lawsuit or claim brought against Company
or any of its Subsidiaries related to actions taken by Company or any of its
Subsidiaries prior to the Closing (including any Damages suffered through and
after the applicable survival period); or (ii) resulting from, relating to,
arising out of or in connection with the dispute set forth in Section 2.19 of
the Company Disclosure Schedule related to the Exclusive License Agreement dated
April 14, 1998 by and among Dr. Neil Martin, Dr. Howard Robinson, Leonard Bloom
and Marvin Townsend and RxEyes, Inc., including, without limitation, the payment
of any penalties

                                      I-44

pursuant thereto or the termination thereof and the loss of any license(s)
thereunder, in each case arising directly from such dispute (including any
Damages suffered through and after the applicable survival period); PROVIDED,
HOWEVER, that Parent makes a written claim for indemnification against Company
(prior to the Effective Time) or the Stockholder Representative (as defined in
the Escrow Agreement) (subsequent to the Effective Time) pursuant to this
Section 8.4 and Section 9.2 within the survival period set forth in
Section 8.1.

    8.5  INDEMNIFICATION BY PARENT AND SURVIVING CORPORATION.  Subject to the
terms and conditions set forth in Section 8.3, Parent and the Surviving
Corporation, jointly and severally, shall indemnify Company (prior to the
Effective Time) or the Stockholders (subsequent to the Effective Time) and hold
each of them harmless against any and all Damages incurred or suffered by them
resulting from, relating to, arising out of or constituting any breach of any
representation or warranty or any failure to perform any covenant or agreement
of Parent or Merger Sub contained, or referred to, in the Transaction Agreements
or in any certificate, agreement, letter or document delivered hereby or thereby
(including any Damages suffered through and after the applicable survival
period); PROVIDED, HOWEVER, that Company or the Stockholders, as the case may
be, makes a written claim for indemnification against Parent pursuant to this
Section 8.5 and Section 9.2 within the survival period set forth in
Section 8.1.

    8.6  THIRD PARTY CLAIMS.  Any party entitled to make a claim (or any of
their affiliated parties (each an "INDEMNIFIED PERSON")) pursuant to this
Article VIII shall give prompt written notification to the party obligated to
provide such indemnification (the "INDEMNIFYING PERSON") of the commencement of
any action, suit or proceeding relating to a third party claim for which
indemnification pursuant to this Article VIII may be sought; PROVIDED, HOWEVER,
that no delay on the part of the Indemnified Person in notifying the
Indemnifying Person shall relieve the Indemnifying Person from any liability or
obligation under this Article VIII unless such notification delay shall
prejudice the Indemnifying Person. Within 30 days after delivery of such
notification, the Indemnifying Person may, upon written notice thereof to the
Indemnified Person, assume control of the defense of such action, suit or
proceeding with counsel reasonably satisfactory to the Indemnified Person (and
the Indemnified Person agrees to execute such documents as are necessary to
permit the Indemnifying Person to control such defense). If the Indemnifying
Person does not so assume control of such defense, the Indemnified Person shall
control such defense. The party not controlling such defense may participate
therein at its own cost and expense; PROVIDED, that if the Indemnifying Person
assumes control of such defense and the Indemnified Person is advised by counsel
in writing that the Indemnifying Person and the Indemnified Person may have
materially conflicting interests or different defenses available with respect to
such action, suit or proceeding, the reasonable fees and expenses of counsel to
the parties shall be considered "DAMAGES" for purposes of this Agreement. The
party controlling such defense shall keep the other party advised of the status
of such action, suit or proceeding and the defense thereof and shall consider in
good faith recommendations made by the other party with respect thereto. The
Indemnifying Person shall not agree to any settlement or the entry of a judgment
in any action, suit or proceeding without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld.

                                   ARTICLE IX
                               GENERAL PROVISIONS

    9.1  EXPENSES.  Except as provided in Section 7.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees, costs and expenses of its
advisers, accountants and legal counsel) shall be paid by the party incurring
such expense, whether or not the Merger is consummated, PROVIDED, HOWEVER, that
(i) the filing fee for the Joint Proxy Statement and the Registration Statement
shall be shared equally by Parent and Company, (ii) the fees of the Escrow Agent
shall be shared equally by Parent and Company, (iii) the

                                      I-45

cost of the Tail Policy shall be shared equally by Parent and Company, (iv) any
refund or return of funds due to the cancellation of directors' and officers'
liability insurance and fiduciary liability insurance maintained by Company
shall be applied to the costs of the Tail Policy, and (v) all fees, costs and
expenses, other than those fees, costs and expenses specified in subsections
(i), (ii) and (iii) of this Section 9.1, incurred on behalf of Company and each
of its Subsidiaries in connection with this Agreement and the transactions
contemplated hereby shall be based on customary hourly rates and shall not
exceed $425,000 in the aggregate (subject to certain limited increases as
provided below, the "TRANSACTION FEE LIMIT"); PROVIDED, HOWEVER, that for any
such fees, costs and expenses under subparagraph (v) above in excess of $425,000
("EXCESS FEES"), two thirds of such Excess Fees shall be deemed Damages under
Section 8.4 and the Transaction Fee Limit shall be increased by the value of the
remaining one third of the Excess Fees (the "TRANSACTION FEE FORMULA").
Notwithstanding anything to the contrary herein, in no event shall the
Transaction Fee Limit be increased beyond $475,000 and the Transaction Fee
Formula shall not apply to any Excess Fees to the extent that the Transaction
Fee Limit would be increased beyond $475,000.

    9.2  NOTICES.  All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, the next business day
if delivered by commercial delivery service or by reputable overnight courier,
the third business day if mailed by registered or certified mail (return receipt
requested), or the day of transmission if a business day or, if not, the next
business day thereafter, if sent via facsimile (with confirmation of receipt) to
the parties at the following address (or at such other address for a party as
shall be specified by like notice):

        (a) if to Parent, Merger Sub or Surviving Corporation, to:

               Endorex Corporation
               28101 Ballard Drive, Suite F
               Lake Forest, Illinois 60045
               Attention: Michael Rosen
                       President and CEO
               Facsimile No.: (847) 573-9285

               with a copy to:

               Brobeck, Phleger & Harrison LLP
               370 Interlocken Blvd.
               Suite 500
               Broomfield, Colorado 80021
               Attention: Richard R. Plumridge, Esq.
               Facsimile No.: (303) 410-2199

        (b) if to Company, to:

               Corporate Technology Development, Inc.
               1680 Michigan Avenue, Suite 700
               Miami, Florida 33139
               Attention: Steve H. Kanzer
               Facsimile No.: (305) 777-2249

               with a copy to:

               Kramer, Levin, Naftalis & Frankel LLP
               919 Third Avenue
               New York, New York 10022
               Attention: Ezra G. Levin, Esq.
               Facsimile No.: (212) 715-8000

                                      I-46

        (c) if to the Stockholder Representative, to:

               Peter O. Kliem
               750 Main Street
               Cambridge, Massachusetts 02139
               Facsimile No.: (617) 621-9574

               With a copy to:

               Kramer, Levin, Naftalis & Frankel LLP
               919 Third Avenue
               New York, New York 10022
               Attention: Ezra G. Levin, Esq.
               Facsimile No.: (212) 715-8000

    9.3  CERTAIN DEFINITIONS; INTERPRETATION.  In this Agreement, any reference
to a "MATERIAL ADVERSE EFFECT" with respect to any entity or group of entities
means any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity. In
this Agreement, any reference to "knowledge of Company" or "Company's knowledge"
shall mean the knowledge, after due inquiry, by Company of each of its
Subsidiaries or any of its or their officers, directors or employees. When a
reference is made in this Agreement to a Section, an Article, an Exhibit or a
Schedule, such reference shall be to a Section or Article of this Agreement or
an Exhibit or Schedule to this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "but are not limited to," "but is not limited
to" and "but not limited to," respectively. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

    9.4  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

    9.5  ENTIRE AGREEMENT; PARTIES IN INTEREST; NONASSIGNABILITY.  This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits and
Schedules and the Company Disclosure Schedule and the Parent Disclosure Schedule
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
including, without limitation, the Confidentiality Agreement dated October 18,
2000 by and between Parent and Company and the Letter of Intent dated February
27, 2001 by and between Parent and Company. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void; PROVIDED, HOWEVER, that Parent may assign or
transfer this Agreement to a successor corporation or other successor entity in
the event of a merger, acquisition, consolidation or other transfer related to a
reorganization by Parent. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.

    9.6  SEVERABILITY.

    If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or obligations
of any party hereto under this Agreement will not be

                                      I-47

materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.

    9.7  GOVERNING LAW.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to such
state's principles of conflicts of law.

    9.8  RULES OF CONSTRUCTION.  The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and therefore waive the application of any law, regulation, holding or
rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.

    9.9  EXTENSION; WAIVER.  At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.

    9.10  NO THIRD-PARTY BENEFICIARY.  The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors and permitted assigns, and it is not the intention of the
parties to confer upon any other person or entity any rights or remedies;
PROVIDED, HOWEVER, that the provisions of Section 5.16 are intended for the
benefit of Messrs. Kanzer, Stergiopoulos, Bier, Rico and Kliem, who were all of
the officers and directors of Company as of the Effective Time.

    9.11  ATTORNEYS' FEES.  If any action at law or equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs, expenses and disbursements in
addition to any other relief to which that party may be entitled.

    9.12  AMENDMENT.  This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.

                          [SIGNATURE PAGES TO FOLLOW.]

                                      I-48

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger and Reorganization to be executed and delivered by their respective
officers thereunto duly authorized, as of the date first written above.


                                                        
                                                       PARENT:
                                                       ENDOREX CORPORATION

                                                       By:             /s/ MICHAEL S. ROSEN
                                                              --------------------------------------
                                                       Name:             Michael S. Rosen
                                                              --------------------------------------
                                                       Title:            President and CEO
                                                              --------------------------------------

                                                       MERGER SUB:
                                                       ROADRUNNER ACQUISITION, INC.

                                                       By:             /s/ MICHAEL S. ROSEN
                                                              --------------------------------------
                                                       Name:             Michael S. Rosen
                                                              --------------------------------------
                                                       Title:                President
                                                              --------------------------------------

                                                       COMPANY:
                                                       CORPORATE TECHNOLOGY DEVELOPMENT, INC.

                                                       By:               /s/ STEVE KANZER
                                                              --------------------------------------
                                                       Name:               Steve Kanzer
                                                              --------------------------------------
                                                       Title:                President
                                                              --------------------------------------


                                      I-49

                                  APPENDIX II

                                VOTING AGREEMENT

                                VOTING AGREEMENT

    THIS VOTING AGREEMENT, is made and entered into as of this 31st day of July,
2001 (the "AGREEMENT"), by and among Endorex Corporation ("PARENT"); Roadrunner
Acquisition, Inc., a wholly owned subsidiary of Parent ("MERGER SUB"); Corporate
Technology Development, Inc. (the "COMPANY"); TVM Techno Venture Management III
GmbH & Co. Medical Ventures; Nomura Bank (Switzerland) Ltd.; Paul Capital
Partners V, LP; Imprimus Investors, LLC; Bristol Rittenhouse Investments, LP;
Paramount Capital Drug Development Holdings LLC; Steve H. Kanzer; Peter Kleim;
Colin Bier, Ph.D.; Guy Rico; Nicholas Stergiopoulos; and Lindsay A. Rosenwald,
M.D. (each a "STOCKHOLDER" and collectively, the "STOCKHOLDERS").

                                    RECITALS

    A. Contemporaneously with the execution and delivery of this Agreement,
Parent, Merger Sub and the Company are entering into an Agreement and Plan of
Merger and Reorganization, dated as of the date hereof (the "MERGER AGREEMENT"),
which provides for, upon the terms and subject to the conditions set forth
therein, a business combination between Parent and the Company by means of a
merger of Merger Sub with and into the Company (the "MERGER").

    B.  As of the date hereof, each Stockholder beneficially owns (as defined in
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended)
the number of shares of Common Stock, par value $.001 per share, or Series A
Convertible Preferred Stock, par value $.001 per share, of the Company set forth
opposite such Stockholder's name on SCHEDULE I hereto (all such shares so owned
and which may hereafter be acquired by such Stockholder prior to the termination
of this Agreement, whether upon the exercise of options or warrants and/or
conversion of notes or preferred stock, or by any other means of purchase,
dividend, distribution or otherwise, being referred to herein as such
Stockholder's "SHARES").

    C.  As a condition to their willingness to enter into the Merger Agreement,
Parent and Merger Sub have requested that the Stockholders enter into this
Agreement.

    D. In order to induce Parent and Merger Sub to enter into the Merger
Agreement, each of the Stockholders are willing to enter into this Agreement and
to grant Parent an irrevocable proxy to vote the Shares of such Stockholder in
favor of the adoption of the Merger Agreement and the approval of the terms
thereof and each of the other transactions contemplated by the Merger Agreement.

    NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:

                                   ARTICLE I
                                VOTING AGREEMENT

    1.1  VOTING OF SHARES.  From the date hereof until the termination of this
Agreement, at any meeting of the stockholders of the Company, however called,
and in any action by consent of the stockholders of the Company, each
Stockholder shall vote such Stockholder's Shares:

        (a) in favor of the Merger, the Merger Agreement and all other
    transactions contemplated thereby (as amended from time to time pursuant to
    the terms thereof), including, but not limited to, the actions necessary to
    effectuate the requirements of Section 5.17 of the Merger Agreement,

        (b) against any Competing Proposal or any negotiations or discussions
    with respect to a Competing Proposal and against any proposal for action or
    agreement that would result in a breach of any covenant, representation or
    warranty or any other obligation or agreement of the Company under the
    Merger Agreement, any change in the directors of the Company, any change in
    the present capitalization of the Company (other than such changes necessary
    to effectuate the

                                      II-1

    requirements of Section 5.17 of the Merger Agreement) or any amendment to
    the Company's Certificate of Incorporation, as amended, or Bylaws, which in
    the case of each of the matters referred to in this clause (b) could
    reasonably be expected to impede, interfere with, delay, postpone or
    materially adversely affect the transactions contemplated by the Merger
    Agreement or the likelihood of such transactions being consummated, and

        (c) in favor of any other matter necessary for consummation of the
    transactions contemplated by the Merger Agreement and related agreements
    which is considered at any such meeting of stockholders or in such consent,

and in connection therewith shall execute any documents which are necessary in
order to effectuate the foregoing, including the ability for Parent or its
nominees to vote such Shares directly.

    1.2  IRREVOCABLE PROXY.  Each Stockholder hereby agrees to deliver to Parent
a duly executed proxy in the form attached hereto as EXHIBIT A concurrently with
the execution and delivery of this Agreement (the "PROXY"), such Proxy to cover
the Shares in respect of which Stockholder is entitled to vote at each meeting
of the stockholders of the Company (including, without limitation, each written
consent in lieu of a meeting) in favor of the Merger and the adoption and
approval of the Merger Agreement, as amended from time to time pursuant to the
terms thereof, and all transactions contemplated thereby, including, but not
limited, to the actions necessary to effectuate the requirements of
Section 5.17 of the Merger Agreement. Each Stockholder hereby revokes any and
all prior proxies or powers of attorney given by such Stockholder with respect
to the Shares.

    1.3  NO PROXIES FOR OR TRANSFERS OF STOCKHOLDER SHARES.  Except as
contemplated by the terms of this Agreement, from the date hereof until the
termination of this Agreement, each Stockholder hereby agrees that such
Stockholder shall not, without the prior written consent of Parent, which may be
withheld in the sole discretion of Parent, directly or indirectly, (i) grant any
proxies or enter into any voting trust or other agreement, arrangement or
understanding with respect to the voting of any such Stockholder's Shares or
(ii) sell, assign, transfer, encumber, pledge or otherwise dispose of, or enter
into any contract, option or other agreement, arrangement or understanding with
respect to the direct or indirect sale, assignment, transfer, encumbrance,
pledge or other disposition of, any of such Stockholder's Shares. Each
Stockholder hereby agrees such Stockholder shall not seek or solicit any such
sale, assignment, transfer, encumbrance, pledge or other disposition or any such
contract, option or other agreement, arrangement or understanding and agrees to
notify Parent promptly (but in any event, within 24 hours), and to provide all
details requested by Parent, if such Stockholder is approached or solicited,
directly or indirectly, by any person with respect to any of the foregoing.
Notwithstanding any other provision of this Section 1.3, each Stockholder may
sell or otherwise assign, with or without consideration, an unlimited amount of
such Stockholder's Shares to any spouse or member of his immediate family, or to
a custodian, trustee (including a trustee of a voting trust), executor or other
fiduciary for the account of his spouse or members of his immediate family, or
to a trust for himself, or to a charitable remainder trust, or any affiliate,
member or limited or general partner of such Stockholder, or to any entity that
is wholly owned by members of such Stockholder's immediate family; provided that
each such transferee or assignee, prior to the completion of the sale, transfer
or assignment shall have executed and delivered to Parent documents assuming the
obligations of such Stockholder under this Agreement with respect to the
transferred securities, such documents to be satisfactory to Parent in its sole
discretion.

    1.4  STOP TRANSFER.  During the term of this Agreement, no Stockholder shall
request that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of such Stockholder's
Shares, unless such transfer is made in compliance with this Agreement.

    1.5  NOTIFICATION.  If any Stockholder becomes aware of a Competing Proposal
or if any Stockholder becomes aware that a request for nonpublic information
relating to the Company or any of

                                      II-2

its Subsidiaries has been made by any person or entity that has made a Competing
Proposal or has advised such Stockholder or the Company that it may be
considering making a Competing Proposal, such Stockholder shall within 24 hours
notify Parent of those material details of such Competing Proposal or request
that are known to such Stockholder (including the identity of the person or
entity making such Competing Proposal, the terms thereof and the information
requested thereby) and shall within 24 hours provide Parent with a copy of any
Competing Proposal or request that is made in writing and copies of all
correspondence relating thereto, to the extent those items are available to such
Stockholder. Thereafter such Stockholder shall keep Parent fully apprised on a
current basis of the status of any such Competing Proposal and of any
modifications to the terms thereof, to the extent such information is available
to such Stockholder. Each Stockholder hereby agrees to immediately cease and
cause to be terminated all existing discussions or negotiations with any parties
other than Parent that it has conducted heretofore with respect to any Competing
Proposal.

    1.6  WAIVER OF APPRAISAL RIGHTS.  Each Stockholder hereby waives any and all
rights of appraisal for such Stockholder's Shares in connection with the Merger
or rights to dissent from the Merger.

                                   ARTICLE II
                 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS

    Each Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:

    2.1  DUE AUTHORIZATION, ETC.  Each Stockholder that is not a natural person
has all requisite power and authority to execute, deliver and perform this
Agreement, to appoint Parent as its proxy and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
the appointment of Parent as its proxy and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of each Stockholder that is not a natural person. Each Stockholder that is
a natural person has full legal right, power and authority to execute and
deliver this Agreement, to perform their obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by or on behalf of each Stockholder and constitutes a legal, valid and
binding obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally, and is subject to general principles of equity.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which such Stockholder is trustee whose consent is
required for the execution and delivery of this Agreement or the consummation by
such Stockholder of the transactions contemplated hereby.

    2.2  NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.

        (a) The execution and delivery of this Agreement by such Stockholder
    does not, and the performance of this Agreement by such Stockholder will
    not, (i) if such Stockholder is not a natural person, conflict with or
    result in any breach of any provision of the respective certificate of
    incorporation, bylaws or other similar documents relating to such
    Stockholder, (ii) conflict with or violate any law applicable to such
    Stockholder or by which such Stockholder or any of such Stockholder's
    properties is bound or affected or (iii) result in any material breach of or
    constitute a material default (or an event that with notice or lapse of time
    or both would become a material default) under, or give to others any rights
    of termination, acceleration or cancellation of, or result in the creation
    of a lien or encumbrance on any assets of such Stockholder, including,
    without limitation, such Stockholder's Shares, pursuant to, any note, bond,
    mortgage, indenture, contract, agreement, lease, license, permit, franchise
    or other instrument or obligation to which such Stockholder is a party or by
    which such Stockholder or any of such Stockholder's assets is bound or
    affected.

                                      II-3

        (b) The execution and delivery of this Agreement by such Stockholder
    does not, and the performance of this Agreement by such Stockholder will
    not, require any consent, approval, authorization or permit of, or filing
    with or notification to, any governmental or regulatory authority (other
    than any necessary filing under the Exchange Act), domestic or foreign,
    except where the failure to obtain such consents, approvals, authorizations
    or permits, or to make such filings or notifications, would not prevent or
    delay the performance by such Stockholder of such Stockholder's obligations
    under this Agreement.

    2.3  VALID TITLE.  Such Stockholder is the sole, true and lawful beneficial
owner of such Stockholder's Shares with no restrictions on such Stockholder's
voting rights or rights of disposition pertaining thereto. None of such
Stockholder's Shares is subject to any voting trust or other agreement or
arrangement with respect to the voting of such Shares. None of such
Stockholder's Shares is subject to any adverse claims, options, liens, charges,
encumbrances, security interests or other restrictions on transfer.

    2.4  TOTAL SHARES.  Each Stockholder is the record and beneficial owner of
the number of Shares set forth next to such Stockholder's name on SCHEDULE I
hereto. Except as set forth on SCHEDULE I hereto, neither such Stockholder nor
any beneficial owner or owners of such Stockholder's Shares own any options or
warrants to purchase or rights to subscribe for or otherwise acquire any
securities of the Company. Except as set forth on SCHEDULE I hereto, each
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in this Agreement, sole power of disposition,
sole power of conversion and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Shares beneficially
owned by such Stockholder with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement.

    2.5  NO FINDER'S FEES.  No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of such Stockholder. Such
Stockholder, on behalf of itself and its affiliates, hereby acknowledges that it
is not entitled to receive any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
hereby or by the Merger Agreement.

                                  ARTICLE III
                                 MISCELLANEOUS

    3.1  DEFINITIONS.  Capitalized terms used but not otherwise defined in this
Agreement have the respective meanings ascribed to such terms in the Merger
Agreement.

    3.2  TERMINATION.  This Agreement and each Proxy granted pursuant to
Article I shall terminate automatically and without any action of any of the
parties hereto and be of no further force and effect upon the earlier to occur
of: (i) the written mutual consent of the parties hereto and (ii) the Expiration
Date (as defined below). No such termination of this Agreement shall relieve any
party hereto from any liability for any breach of this Agreement prior to
termination or from any obligation pursuant to a notice delivered on or before
the date of such termination. As used herein, the "EXPIRATION DATE" shall mean
the earlier to occur of (i) the Effective Time of the Merger and (ii) the
termination of the Merger Agreement according to its terms.

    3.3  FURTHER ASSURANCE.  From time to time, at the request of another party
hereto and without consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.

                                      II-4

    3.4  CERTAIN EVENTS; SUCCESSORS.  Each Stockholder agrees that this
Agreement and such Stockholder's obligations hereunder shall attach to such
Stockholder's Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation of
law or otherwise, including, without limitation, such Stockholder's heirs,
executors, guardians, administrators, or successors. Notwithstanding any
transfer of Shares, the transferor shall remain liable for the performance of
all its obligations under this Agreement.

    3.5  NO WAIVER.  The failure of any party hereto to exercise any right,
power, or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, or any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.

    3.6  NOTICE.  All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, the day of
transmission if a business day or, if not, the next business day thereafter, if
delivered by telecopier (with confirmation of receipt), the next business day if
delivered by an internationally recognized overnight courier service, such as
Federal Express, or the third business day if mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):

        (a) if to Parent or Merger Sub, to:

           Endorex Corporation
           28101 Ballard Drive, Suite F
           Lake Forest, Illinois 60045
           Attention: Michael Rosen
                    President and CEO

           Facsimile No.: (847) 573-9285

           with a copy to:

           Brobeck, Phleger & Harrison LLP
           370 Interlocken Boulevard, Suite 500
           Broomfield, Colorado 80021
           Attention: Richard R. Plumridge, Esq.
           Telecopy No.: (303) 410-2199

           and

        (b) If to a Stockholder, to the address set forth below such
    Stockholder's name on SCHEDULE I hereto.

    3.7  EFFECT OF HEADINGS.  The section headings contained in this Agreement
are for convenience only and shall not affect the construction or interpretation
of this Agreement.

    3.8  SEVERABILITY.  If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

    3.9  ENTIRE AGREEMENT.  This Agreement and the Proxy contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.

    3.10  ASSIGNMENT AND BINDING EFFECT.  Except as provided in Section 1.3,
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties (whether by operation of law or
otherwise) without the prior written consent of the other parties, and any such

                                      II-5

assignment shall be void, except that Parent may assign, in its sole discretion,
any or all of its rights, interests and obligations hereunder to any direct or
indirect wholly owned subsidiary of Parent or to a successor corporation or
other successor entity in the event of a merger, acquisition, consolidation or
other transfer. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective successors and assigns.

    3.11  GOVERNING LAW.  This Agreement shall be governed by and construed in
accordance with the laws of Delaware without reference to such state's
principles of conflicts of laws.

    3.12  AMENDMENT AND MODIFICATION.  This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.

    3.13  SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF.  The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
each Stockholder set forth herein. Therefore, it is agreed that, in addition to
any other remedies that may be available to Parent upon any such violation,
Parent shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity and each Stockholder hereby waives any and all defenses which could
exist in its favor in connection with such enforcement and waives any
requirement for the security or posting of any bond in connection with such
enforcement.

    3.14  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement. This Agreement (or any counterpart
hereof) may be delivered by a party by facsimile, which facsimile shall be
effectual as if the original counterpart had been delivered.

                                      II-6

    IN WITNESS WHEREOF, Parent, Merger Sub, the Company and each of the
Stockholders have caused this Agreement to be executed as of the date first
written above.


                                                         
PARENT:                                                ENDOREX CORPORATION

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------

MERGER SUB:                                            ROADRUNNER ACQUISITION, INC.

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------

COMPANY:                                               CORPORATE TECHNOLOGY DEVELOPMENT, INC.

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------

STOCKHOLDERS:                                          TVM TECHNO VENTURE MANAGEMENT III
                                                       GMBH & CO. MEDICAL VENTURES

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------


                    SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT

                                      II-7


                                                         
                                                       NOMURA BANK (SWITZERLAND) LTD.

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------

                                                       PAUL CAPITAL PARTNERS V, LP

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------

                                                       IMPRIMUS INVESTORS, LLC

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------

                                                       BRISTOL RITTENHOUSE INVESTMENTS, L.P.

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------

                                                       PARAMOUNT CAPITAL DRUG DEVELOPMENT HOLDINGS LLC

                                                       ---------------------------------------------

                                                       By:
                                                               --------------------------------------

                                                       Title:
                                                               --------------------------------------


                                      II-8


                                                         
                                                       ---------------------------------------------
                                                       STEVE H. KANZER

                                                       ---------------------------------------------
                                                       PETER KLEIM

                                                       ---------------------------------------------
                                                       COLIN BIER, Ph.D.

                                                       ---------------------------------------------
                                                       GUY RICO

                                                       ---------------------------------------------
                                                       NICHOLAS STERGIOPOULOS

                                                       ---------------------------------------------
                                                       LINDSAY A. ROSENWALD, M.D.


                                      II-9

                                   SCHEDULE I

               STOCKHOLDERS OF CORPORATE TECHNOLOGY DEVELOPMENT, INC.



                                                                       NUMBER OF
                                                                       SHARES OF
                                                                        SERIES A     PERCENTAGE
                                            NUMBER OF     NUMBER OF    PREFERRED         OF
                                            SHARES OF     SHARES OF      STOCK        OWNERSHIP
                        NUMBER OF SHARES   COMMON STOCK    SERIES A    UNDERLYING       (ON A
                        OF COMMON STOCK     UNDERLYING    PREFERRED     WARRANTS    FULLY-DILUTED
   STOCKHOLDER NAME           HELD         OPTIONS HELD   STOCK HELD      HELD         BASIS)              ADDRESS
----------------------  ----------------   ------------   ----------   ----------   -------------   ----------------------
                                                                                  
TVM Techno Venture                --              --      1,350,000          --          9.17       101 Arch Street
Management III                                                                                      Suite 1950
GmbH & Co. Medical                                                                                  Boston, MA
Ventures                                                                                            02110

Nomura Bank                       --              --      1,200,000          --          8.16       Kasamaristrasse I
(Switzerland) Ltd.                                                                                  Zurich, Switzerland
                                                                                                    CH 8021

Paul Capital                      --              --        892,400          --          6.06       28, Avenue de
Partners V, LP                                                                                      Messine 75008
                                                                                                    Paris France
                                                                                                    75008

Imprimus Investors,               --              --        500,000          --          3.40       411 West Putman Ave.
LLC                                                                                                 Greenwich, CT
                                                                                                    06830

Bristol Rittenhouse               --              --        500,000          --          3.40       1 Rockefeller Plaza
Investments, L.P.                                                                                   Suite 1010
                                                                                                    New York, NY
                                                                                                    10020

Paramount Capital Drug     2,515,350              --             --          --         17.09       787 7th Ave.
Development Holdings                                                                                48th Flr
LLC                                                                                                 New York, NY
                                                                                                    10019

Steve H. Kanzer              564,000         618,180             --          --          8.03       300 South Point Drive
                                                                                                    Suite 3501
                                                                                                    Miami Beach, FL
                                                                                                    33139

Peter Kleim                       --          50,000             --          --          0.34       750 Main Street
                                                                                                    Cambridge, MA
                                                                                                    02139

Colin Bier, Ph.D.                 --          50,000             --          --          0.34       677 Dr Frederik
                                                                                                    Philips
                                                                                                    Saint-Laurent, Quebec
                                                                                                    Canada H4M-2W4

Guy Rico                          --          50,000             --          --          0.34       28, Avenue de
                                                                                                    Messine 75008
                                                                                                    Paris France
                                                                                                    75008

Nicholas Stergiopoulos        75,500         477,273             --          --          3.75       1541 Brickell Ave.
                                                                                                    Apt. 2706
                                                                                                    Miami, FL
                                                                                                    33129

Lindsay A. Rosenwald,             --              --        175,000     303,819          3.29       787 7th Ave.
M.D.                                                                                                48th Flr
                                                                                                    New York, NY
                                                                                                    10019


                                     II-10

                                   EXHIBIT A
                               IRREVOCABLE PROXY
                                TO VOTE STOCK OF
                     CORPORATE TECHNOLOGY DEVELOPMENT, INC.
                            (A DELAWARE CORPORATION)

    The undersigned stockholder of Corporate Technology Development, Inc., a
Delaware corporation (the "COMPANY"), hereby irrevocably (to the full extent
permitted by the Delaware General Corporation Law) appoints Endorex Corporation,
a Delaware corporation ("PARENT"), or any designee of Parent, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Company that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of the Company issued or issuable in respect thereof on or
after the date hereof (collectively, the "SHARES") in accordance with the terms
of this Irrevocable Proxy. The Shares beneficially owned by the undersigned
stockholder of the Company as of the date of this Irrevocable Proxy are listed
on the final page of this Irrevocable Proxy. Upon the undersigned's execution of
this Irrevocable Proxy, any and all prior proxies given by the undersigned with
respect to any Shares are hereby revoked and the undersigned agrees not to grant
any subsequent proxies with respect to the Shares until after the termination of
the Voting Agreement (as hereinafter defined).

    This Irrevocable Proxy is irrevocable (to the extent provided by the
Delaware General Corporation Law), is coupled with an interest, and is granted
in consideration of Parent entering into that certain Voting Agreement (the
"VOTING AGREEMENT"), dated as of               , 2001, by and among Parent;
Roadrunner Acquisition, Inc., a Delaware corporation, and a wholly owned
subsidiary of Parent (the "MERGER SUB"); and the Company; the undersigned and
certain stockholders of the Company, and that certain Agreement and Plan of
Merger and Reorganization (the "MERGER AGREEMENT"), dated as of               ,
2001, by and among the Company; Parent; and Merger Sub, which Merger Agreement
provides for the merger of Merger Sub with and into the Company (the "MERGER").

    The attorney and proxy named above is hereby authorized and empowered by the
undersigned, at any time prior to the termination of the Voting Agreement, to
act as the undersigned's attorney and proxy to vote the Shares, and to exercise
all voting and other rights of the undersigned with respect to the Shares
(including, without limitation, the power to execute and deliver written
consents pursuant to the Delaware General Corporation Law), at every annual,
special or adjourned meeting of the stockholders of the Company and in every
written consent in lieu of such meeting as follows:

        (i) in favor of the Merger and the Merger Agreement, and all other
    transactions contemplated thereby (as amended from time to time pursuant to
    the terms thereof), including, but not limited to, the actions necessary to
    effectuate the requirements of Section 5.17 of the Merger Agreement,

        (ii) against any Competing Proposal (used herein as defined in the
    Merger Agreement) or any negotiations or discussions with respect to a
    Competing Proposal and against any proposal for action or agreement that
    would result in a breach of any covenant, representation or warranty or any
    other obligation or agreement of the Company under the Merger Agreement, any
    change in the directors of the Company, any change in the present
    capitalization of the Company (other than such changes necessary to
    effectuate the requirements of Section 5.17 of the Merger Agreement) or any
    amendment to the Company's Certificate of Incorporation, as amended, or
    Bylaws, which in the case of each of the matters referred to in this
    clause (ii) could reasonably be expected to impede, interfere with, delay,
    postpone or materially adversely affect the transactions contemplated by the
    Merger Agreement or the likelihood of such transactions being consummated,

                                     II-11

        (iii) in favor of any other matter necessary for consummation of the
    transactions contemplated by the Merger Agreement and related agreements
    which is considered at any such meeting of stockholders or in such consent,
    and in connection therewith to execute any documents which are necessary in
    order to effectuate the foregoing, including the ability for Parent or its
    nominees to vote such Shares directly.

    Specifically, but in no way by limitation, this Irrevocable Proxy shall not
be used to waive or amend any material rights or obligations of the undersigned
under the Voting Agreement, the Merger Agreement or otherwise.

    All authority herein conferred shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.

    This Irrevocable Proxy is coupled with an interest as aforesaid and is
irrevocable and shall terminate automatically and without any action of any of
the undersigned and be of no further force and effect upon the earlier to occur
of: (i) the written mutual consent of the parties to the Voting Agreement and
(ii) the Expiration Date (as defined below). As used herein, the "EXPIRATION
DATE" shall mean the earlier to occur of (i) the Effective Time of the Merger
and (ii) the termination of the Merger Agreement according to its terms..

Dated:            , 2001


                                            
                                           By:    -----------------------------------------
                                                  (Signature of Stockholder)

                                           Name:
                                                  -----------------------------------------
                                                  (Print Name of Stockholder)

                                           Shares beneficially owned:

                                                  shares of Common Stock of Company
                                           -----

                                                  shares of Series A Preferred Stock of
                                           -----  Company

                                                  shares of Common Stock of Company
                                           -----  underlying options

                                                  shares of Series A Preferred Stock of
                                           -----  Company underlying warrants


                                     II-12

                                  APPENDIX III

                       OPINION OF WELLS FARGO VAN KASPER,
                    FINANCIAL ADVISOR TO ENDOREX CORPORATION



                                   
WELLS FARGO
-----------
VAN KASPER                               INVESTMENT
                                         BANKERS
                                         600 CALIFORNIA
                                         STREET, SUITE
                                         1700
                                         SAN FRANCISCO,
                                         CALIFORNIA
                                         94108
                                         415 391-5800
                                         FAX 415
                                         387-2744


July 13, 2001

Board of Directors
Endorex Corporation
28101 Ballard Drive, Suite F
Lake Forest, Illinois 60045

Gentlemen:

    You have requested that we render our opinion as to the fairness, from a
financial point of view, to the stockholders of Endorex Corporation, a Delaware
corporation ("Endorex" or "Parent") of the Merger Consideration (as defined
below) to be paid by Endorex in a proposed acquisition (the "Merger") of
Corporate Technology Development, Inc., a Delaware corporation (the "Company"),
pursuant to the proposed form of Agreement and Plan of Merger and Reorganization
provided to us and to be executed by the parties (the "Agreement"). All
capitalized terms not defined herein shall have the meanings set forth in the
Agreement.

    Our understanding of the terms of the Merger is summarized as follows:

        Pursuant to the Agreement, Roadrunner Acquisition, Inc., a Delaware
    corporation ("Merger Sub"), which is a wholly-owned subsidiary of Parent, is
    to be merged with and into the Company, the separate corporate existence of
    Merger Sub shall cease, and the Company will continue as the surviving
    corporation and as a wholly-owned subsidiary of Endorex. At the Effective
    Time:

       - each share of Company Common Stock issued and outstanding immediately
         prior to the Effective Time (excluding those held in the treasury of
         Company), shall be converted into .271443 of a share (the "Common Stock
         Exchange Ratio") of Parent Common Stock;

       - each share of Series A Preferred issued and outstanding immediately
         prior to the Effective Time (excluding those held in the treasury of
         Company), shall be converted into 1.008466 shares of Parent Common
         Stock (the "Preferred Stock Exchange Ratio");

       - each Company Option issued and outstanding immediately prior to the
         Effective Time, shall forthwith cease to exist and Parent Options shall
         be substituted therefor, which Parent Options shall have the same terms
         and conditions set forth in the applicable stock option agreements as
         in effect immediately prior to the Effective Time, except that each
         Parent Option will be exercisable for the number of shares of Parent
         Common Stock equal to the product of the number of shares of Company
         Common Stock that were subject to such corresponding Company Option
         immediately prior to the Effective Time multiplied by the Common Stock
         Exchange Ratio, rounded down to the nearest whole share, and the per
         share exercise price for the shares of Parent Common Stock issuable
         upon exercise of such Parent Option will be equal to the quotient
         determined by dividing the exercise price per share of Company Common
         Stock at which such Company Option was exercisable immediately prior to
         the Effective Time by the Common Stock Exchange Ratio, rounded up to
         the nearest whole cent; and

WELLS FARGO VAN KASPER, LLC (MEMBER NASD/SIPC), A NON-BANK AFFILIATION OF WELLS
                                FARGO & COMPANY

                                     III-1

Board of Directors
Endorex Corporation
July 13, 2001

Page 2

       - each Amended Warrant issued and outstanding immediately prior to the
         Effective Time, shall forthwith cease to exist and Parent Warrants
         shall be substituted therefor. Each such Parent Warrant shall have, and
         be subject to, the same terms and conditions set forth in the
         applicable Amended Warrant, except that each Parent Warrant will be
         exercisable for the number of shares of Parent Common Stock equal to
         the product of the number of shares of Series A Preferred that were
         subject to such corresponding Amended Warrant immediately prior to the
         Effective Time multiplied by the Common Stock Exchange Ratio, rounded
         down to the nearest whole share, and the per share exercise price for
         the shares of Parent Common Stock issuable upon exercise of such Parent
         Warrant will be equal to the quotient determined by dividing the
         exercise price per share of Series A Preferred at which such Amended
         Warrant was exercisable immediately prior to the Effective Time by the
         Common Stock Exchange Ratio, rounded up to the nearest whole cent.

        The Merger Consideration consists of the aggregate number of shares of
    Parent Common Stock issuable at the Effective Time in connection with the
    Merger upon conversion of the Company Common Stock and Series A Preferred
    and the Parent Options and the Parent Warrants to purchase shares of Parent
    Stock. Based on the number of shares of Company Common Stock and Series A
    Preferred, Company Options and Amended Warrants that the Company represents
    in the Agreement will be outstanding at the Effective Time, the Merger
    Consideration will consists of an aggregate of approximately 9,050,545
    shares of Parent Common Stock issuable at the Effective Time in connection
    with the Merger and Parent Options and Parent Warrants to purchase an
    aggregate of approximately 566,121 shares of Parent Common Stock.

        The Agreement provides that an aggregate of 1,350,000 shares of Parent
    Stock issuable as Merger Consideration to the stockholders of the Company at
    the Effective Time will be placed in escrow (the "Escrow Fund") to be
    available to satisfy the indemnification obligations of the Company or such
    stockholders for breaches of representations, warranties, covenants or
    agreements in the Transaction Agreements. The Escrow Fund is the exclusive
    method of satisfying such obligations. Subject to timely claims being made
    against the Escrow Fund, approximately 50 percent of the shares deposited
    into the Escrow Fund are scheduled for release to the Company's stockholders
    on March 31, 2002 and approximately 25 percent of the shares deposited into
    the Escrow Fund are scheduled for release to the Company's stockholders on
    each of September 30, 2002 and March 31, 2003.

        In addition to the Merger Consideration, Endorex has also agreed in the
    Agreement to issue

       - 133,334 shares of Parent Common Stock to Nicholas Stergiopoulos as
         payment of a bonus pursuant to the Stergiopoulos Employment Agreement;
         and

       - 250,000 shares of Parent Common Stock to Steve Kanzer as payment of a
         bonus related to his employment with the Company;

    PROVIDED, HOWEVER, that in no event shall Endorex be required to issue under
    the Agreement or in connection with the Merger (except as a result of stock
    splits, stock dividends and the like or to satisfy claims for
    indemnification arising from the Agreement or the Merger) more than
    10,000,000 shares of Parent Common Stock, including, but not limited to, the
    Parent Common Stock issuable to stockholders of the Company at the Effective
    Time of the Merger, upon exercise of the Parent Options or Parent Warrants
    or to Nicholas Stergiopoulos and Steve Kanzer as set forth above.

                                     III-2

Board of Directors
Endorex Corporation
July 13, 2001

Page 3

        In the Agreement, it is contemplated that at the Effective Time a number
    of ancillary agreements will be entered into with certain former employees
    of the Company, including:

       - an employment agreement between Endorex and Colin Bier Ph.D., whereby
         Dr. Bier will be employed as Chief Executive Officer and Chairman of
         the Board of Directors of Endorex following the Effective Time;

       - an option in favor Dr. Bier to purchase 700,000 shares of Parent Common
         Stock at fair market value on the date of grant;

       - a one year noncompete/nonsolicitation agreement with Mr. Steve Kanzer;
         and

       - a six month consulting and two year noncompete/nonsolicitation
         agreement with Mr. Nicholas Stergiopoulos.

    In connection with our opinion, among other things, we have (i) held
discussions with certain members of the management of Endorex and the Company
concerning among other things, the financial and other information provided to
or reviewed by us, the past and current business operations, financial condition
and future prospects of their respective companies; (ii) reviewed the most
recent draft of the Agreement in the form provided to us by Endorex, which has
been represented to us as the final version to be executed by the parties;
(iii) reviewed certain publicly available documents for Endorex; (iv) reviewed
the audited financial statements of the Company at, and for the years ended,
December 31, 1999 and 2000, and the unaudited financial statements of the
Company at and for the four months ended April 30, 2001; (v) reviewed internal
financial projections of the Company prepared by its management using
alternative business models: the "Own Sales Force Model," which assumes that the
Company retains its own sales force and sells its product directly; and the
"Outlicense Partner Model," which assumes the Company licenses its products to a
partner; (vi) reviewed publicly available data and information for companies
which we believe, based on operating, market and trading valuations, to be
similar to Endorex and the Company; (vii) reviewed the historical stock prices
for Endorex and other companies which we have determined to be comparable to
Endorex and the Company; (viii) reviewed the financial terms, to the extent
publicly available, of other recent business combinations which we have deemed
to be comparable, in whole or in part, to the Merger; and (ix) conducted such
other financial analysis as we have determined, based upon our judgment as
investment bankers, to be appropriate for purposes of this opinion.

    In our review we have assumed, with your permission, that the documents to
be prepared, used and signed by the parties to formally effect the Merger,
including any proxy or other disclosure material to be delivered to the
stockholders of Endorex to elicit any necessary approval for the Merger, will
effect the Merger on the terms set forth in the proposed form of the Agreement
provided to us by Endorex, without material alteration.

    We have not negotiated the transaction, nor provided any legal or other
advice with respect to the transaction. We have not made, nor have we been
provided with, an independent evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of Endorex or the Company nor have we made
a physical inspection of any of the properties or assets of Endorex or the
Company. We were not requested to, and did not, solicit third party indications
of interest in acquiring all or any part of the Company.

                                     III-3

Board of Directors
Endorex Corporation
July 13, 2001

Page 4

    In rendering this opinion, we have relied, without independent verification,
on the accuracy and completeness of all of the financial and other information
that was publicly available or furnished or otherwise communicated to us by
Endorex or the Company. We have assumed that there has been no material change
in the assets, financial condition, business or prospects of Endorex or the
Company since the date of the most recent historical financial statements made
available to us. We have relied upon and assumed without independent
verification, that the projected results we have used for the Company are
reasonable and reflect the best currently available estimates of the future
financial results and conditions of the Company, that such forecasts will be
realized in the amounts and time periods contemplated thereby based on the
business model adopted and reflected by such projections, and that neither the
management of the Company, nor the management of Endorex, has any information or
belief that would make the projections incomplete or misleading.

    Our opinion is based upon analyses of the foregoing factors in light of our
assessment of general economic, financial and market conditions as they exist
and as they can be evaluated by us as of the date hereof and on information made
available to us as of the date hereof.

    This opinion is solely for the benefit and use of the Board of Directors of
Endorex in its consideration of the Merger and is not a recommendation to any
stockholder as to how such stockholder should vote with respect to the Merger.
Further, this opinion addresses only the financial fairness of the Merger
Consideration and does not address the relative merits of the Merger and any
alternatives to the Merger, Endorex's underlying decision to proceed with or
effect the Merger or any other aspect of the Merger. This opinion may not be
used or referred to, or quoted or disclosed to any person in any manner, without
our prior consent in each instance, which will not be unreasonably withheld. In
furnishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.

    Wells Fargo Van Kasper, LLC, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions. We have received a fee from Endorex
for rendering this opinion and Endorex has agreed to indemnify us for certain
liabilities that may arise in rendering this opinion.

    Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration to be paid by Endorex in the Merger of
Corporate Technology Development, Inc., is fair to the stockholders of Endorex
from a financial point of view.

                                          Very truly yours,

                                          /s/ Wells Fargo Van Kasper

                                          WELLS FARGO VAN KASPER

                                     III-4

                                  APPENDIX IV
              SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

              SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

APPRAISAL RIGHTS

    (a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.

    (b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251(g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:

        (1) Provided, however, that no appraisal rights under this section shall
    be available for the shares of any class or series of stock, which stock, or
    depository receipts in respect thereof, at the record date fixed to
    determine the stockholders entitled to receive notice of and to vote at the
    meeting of stockholders to act upon the agreement of merger or
    consolidation, were either (i) listed on a national securities exchange or
    designated as a national market system security on an interdealer quotation
    system by the National Association of Securities Dealers, Inc. or (ii) held
    of record by more than 2,000 holders; and further provided that no appraisal
    rights shall be available for any shares of stock of the constituent
    corporation surviving a merger if the merger did not require for its
    approval the vote of the stockholders of the surviving corporation as
    provided in subsection (f) of Section251 of this title.

        (2) Notwithstanding paragraph (1) of this subsection, appraisal rights
    under this section shall be available for the shares of any class or series
    of stock of a constituent corporation if the holders thereof are required by
    the terms of an agreement of merger or consolidation pursuant to
    SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
    for such stock anything except:

           a.  Shares of stock of the corporation surviving or resulting from
       such merger or consolidation, or depository receipts in respect thereof;

           b.  Shares of stock of any other corporation, or depository receipts
       in respect thereof, which shares of stock (or depository receipts in
       respect thereof) or depository receipts at the effective date of the
       merger or consolidation will be either listed on a national securities
       exchange or designated as a national market system security on an
       interdealer quotation system by the National Association of Securities
       Dealers, Inc. or held of record by more than 2,000 holders;

           c.  Cash in lieu of fractional shares or fractional depository
       receipts described in the foregoing subparagraphs a. and b. of this
       paragraph; or

           d.  Any combination of the shares of stock, depository receipts and
       cash in lieu of fractional shares or fractional depository receipts
       described in the foregoing subparagraphs a., b. and c. of this paragraph.

                                      IV-1

        (3) In the event all of the stock of a subsidiary Delaware corporation
    party to a merger effected under Section253 of this title is not owned by
    the parent corporation immediately prior to the merger, appraisal rights
    shall be available for the shares of the subsidiary Delaware corporation.

    (c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.

    (d) Appraisal rights shall be perfected as follows:

        (1) If a proposed merger or consolidation for which appraisal rights are
    provided under this section is to be submitted for approval at a meeting of
    stockholders, the corporation, not less than 20 days prior to the meeting,
    shall notify each of its stockholders who was such on the record date for
    such meeting with respect to shares for which appraisal rights are available
    pursuant to subsection (b) or (c) hereof that appraisal rights are available
    for any or all of the shares of the constituent corporations, and shall
    include in such notice a copy of this section. Each stockholder electing to
    demand the appraisal of such stockholder's shares shall deliver to the
    corporation, before the taking of the vote on the merger or consolidation, a
    written demand for appraisal of such stockholder's shares. Such demand will
    be sufficient if it reasonably informs the corporation of the identity of
    the stockholder and that the stockholder intends thereby to demand the
    appraisal of such stockholder's shares. A proxy or vote against the merger
    or consolidation shall not constitute such a demand. A stockholder electing
    to take such action must do so by a separate written demand as herein
    provided. Within 10 days after the effective date of such merger or
    consolidation, the surviving or resulting corporation shall notify each
    stockholder of each constituent corporation who has complied with this
    subsection and has not voted in favor of or consented to the merger or
    consolidation of the date that the merger or consolidation has become
    effective; or

        (2) If the merger or consolidation was approved pursuant to Section228
    or Section253 of this title, each constituent corporation either before the
    effective date of the merger or consolidation or within ten days thereafter,
    shall notify each of the holders of any class or series of stock of such
    constituent corporation who are entitled to appraisal rights of the approval
    of the merger or consolidation and that appraisal rights are available for
    any or all shares of such class or series of stock of such constituent
    corporation, and shall include in such notice a copy of this section;
    provided that, if the notice is given on or after the effective date of the
    merger or consolidation, such notice shall be given by the surviving or
    resulting corporation to all such holders of any class or series of stock of
    a constituent corporation that are entitled to appraisal rights. Such notice
    may, and, if given on or after the effective date of the merger or
    consolidation, shall, also notify such stockholders of the effective date of
    the merger or consolidation. Any stockholder entitled to appraisal rights
    may, within 20 days after the date of mailing of such notice, demand in
    writing from the surviving or resulting corporation the appraisal of such
    holder's shares. Such demand will be sufficient if it reasonably informs the
    corporation on of the identity of the stockholder and that the stockholder
    intends thereby to demand the appraisal of such holder's shares. If such
    notice did not notify stockholders of the effective date of the merger or
    consolidation, either (i) each such constituent corporation shall send a
    second notice before the effective date of the merger or consolidation
    notifying each of the holders of any class or series of stock of such
    constituent corporation that are entitled to appraisal rights of the
    effective date of the merger or consolidation or (ii) the surviving or
    resulting corporation shall send such a second notice to all such holders on
    or within 10 days after such effective date; provided, however, that if such
    second notice is sent more than 20 days following the sending of the first
    notice, such second notice need only be sent

                                      IV-2

    to each stockholder who is entitled to appraisal rights and who has demanded
    appraisal of such holder's shares in accordance with this subsection. An
    affidavit of the secretary or assistant secretary or of the transfer agent
    of the corporation that is required to give either notice that such notice
    has been given shall, in the absence of fraud, be prima facie evidence of
    the facts stated therein. For purposes of determining the stockholders
    entitled to receive either notice, each constituent corporation may fix, in
    advance, a record date that shall be not more than 10 days prior to the date
    the notice is given, provided, that if the notice is given on or after the
    effective date of the merger or consolidation, the record date shall be such
    effective date. If no record date is fixed and the notice is given prior to
    the effective date, the record date shall be the close of business on the
    day next preceding the day on which the notice is given.

    (e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.

    (f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.

    (g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

    (h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all

                                      IV-3

relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted such stockholder's certificates of
stock to the Register in Chancery, if such is required, may participate fully in
all proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.

    (i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

    (j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

    (k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.

        (1) The shares of the surviving or resulting corporation to which the
    shares of such objecting stockholders would have been converted had they
    assented to the merger or consolidation shall have the status of authorized
    and unissued shares of the surviving or resulting corporation.

                                      IV-4

                                   APPENDIX V

                                ESCROW AGREEMENT

                                ESCROW AGREEMENT

    This Escrow Agreement (the "Agreement") dated       , 2001 is by and among
Endorex Corporation, a Delaware corporation ("Parent"), the stockholders (the
"Stockholders") of Corporate Technology Development, Inc., a Delaware
corporation (the "Company"), and Peter O. Kliem, as the representative of the
Stockholders (the "Stockholder Representative", and, collectively with Parent
and the Stockholders, the "Parties"), and Wells Fargo Bank Minnesota, National
Association, a national banking association (the "Escrow Agent"). All
capitalized terms not otherwise defined herein shall have the meaning ascribed
to such terms in the Merger Agreement (as hereinafter defined).

                                    RECITALS

    WHEREAS, Parent, Roadrunner Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and the Company have entered
into that certain Agreement and Plan of Merger and Reorganization dated as of
July 31, 2001 (the "Merger Agreement") pursuant to which Merger Sub will be
merged with and into the Company, with the Company becoming a wholly-owned
subsidiary of Parent (the "Merger"); and

    WHEREAS, pursuant to Section 8.2 of the Merger Agreement, the Parties are
placing in escrow certain securities and the Escrow Agent is willing to hold and
distribute such securities in accordance with the instructions of the Parties,
the Escrow Agent and the Parties agree as follows:

                                   AGREEMENT
                             ARTICLE 1: DIRECTIONS

    1.1  ESCROWED PROPERTY:  The Parties will deposit with the Escrow Agent the
property described in the attached SCHEDULE A (collectively referred to as the
"Escrowed Property").

    1.2  INSTRUCTIONS:  The Escrow Agent shall hold, invest, if applicable, and
disburse the Escrowed Property pursuant to the instructions set forth in the
attached SCHEDULES B AND C.

    1.3  INVESTMENTS:  The Escrow Agent is not responsible or liable for any
diminution of principal or any interest penalty on the Escrowed Property,
whatsoever, for any reason.

    1.4  ASSIGNMENT OF INTEREST:  The assignment, transfer, conveyance or
hypothecation of any right, title or interest in and to the Escrowed Property
(referred to under this Section 1.4 as the "Assignment") shall be binding upon
the Escrow Agent upon delivery of notice to the Escrow Agent of the Assignment
and payment to the Escrow Agent of all of its fees in connection with the
Assignment; provided that the Escrow Agent has given its written consent to the
Assignment, which shall not be unreasonably withheld.

                  ARTICLE 2: COMPENSATION OF THE ESCROW AGENT

    The Parties agree, jointly and severally, to pay the Escrow Agent:

    (a) Its fees, charges, and expenses for all reasonable and necessary
       services rendered by it in the performance of its obligations under this
       Agreement as set forth in the attached SCHEDULE D; and

    (b) With the prior written approval of Parent and the Stockholder
       Representative, which shall not be unreasonably withheld, reasonable
       compensation for services rendered in connection with this Agreement but
       not expressly provided for in this Agreement and reimbursement for those
       reasonable expenses incurred by the Escrow Agent in rendering such
       services, including but not limited to court costs and reasonable
       attorneys' fees incurred in the event of any dispute among the parties to
       this Agreement.

                                      V-1

The Escrow Agent shall have first and prior lien upon the Escrowed Property to
secure the payments described under paragraphs (a) and (b) of this Article 2. If
any such payment is not timely received by the Escrow Agent from the appropriate
party or parties, the Parties authorize the Escrow Agent to deduct such payment
from the Escrowed Property.

                 ARTICLE 3: PROVISIONS CONCERNING ESCROW AGENT

    3.1  AUTHORITY OF PARTIES:  The Escrow Agent shall be under no duty or
obligation to ascertain the identity, authority and/or rights of the Parties or
their agents.

    3.2  OTHER AGREEMENTS:  The Escrow Agent is not a party to, or bound by, any
agreement between the Parties other than this Agreement, whether or not a copy
and/or original of such agreement is held as Escrowed Property. Accordingly, the
Escrow Agent shall have no duty to know or determine the performance or
nonperformance of any provision of any such agreement between the Parties.

    3.3  DEPOSITED INSTRUMENTS AND/OR FUNDS:  The Escrow Agent assumes no
responsibility for the validity or sufficiency of any instrument held as
Escrowed Property, except as expressly and specifically set forth in this
Agreement.

    3.4  LATE PAYMENT OR PERFORMANCE:  The Escrow Agent may accept any payment
or performance called for under this Agreement after the date such payment or
performance is due, unless subsequent to such date, but prior to the actual date
of payment or performance, the Escrow Agent is instructed in writing by the
Parties not to accept such payment or performance.

    3.5  ESCHEAT:  The Parties are aware that Escrowed Property which is
abandoned may escheat to the state. The Escrow Agent shall have no liability to
the Parties, their respective heirs, legal representatives, successors and
assigns should any of the Escrowed Property become escheatable or escheat by
operation of law.

    3.6  NON-LIABILITY:  The Escrow Agent shall not be liable for any act it may
do or omit to do as Escrow Agent while acting in good faith and in the exercise
of its prudent judgment. Any act done or omitted by the Escrow Agent pursuant to
the advice of its attorneys shall be conclusive evidence of such good faith. The
Escrow Agent shall have the right to consult with counsel at the reasonable
expense of the Parties whenever any question arises concerning this Agreement
and shall incur no liability for any delay reasonably required to obtain such
advice of counsel. The Escrow Agent shall not be liable for the outlawing of any
right permitted or given under the instructions set forth in SCHEDULES B AND C
and/or in any document deposited under this Agreement pursuant to any Statute of
Limitations or by reason of laches. The Escrow Agent shall have no further
responsibility to any or all of the Parties following a complete distribution of
the Escrowed Property pursuant to this Agreement. The Escrow Agent shall not
incur any liability with respect to any action taken or omitted to be taken in
reliance upon any document, including any written notice or instructions
provided for in this Agreement. In performing its obligations hereunder, the
Escrow Agent shall be entitled to presume, without inquiry, the due execution
and validity and effectiveness of all documents it receives.

    3.7  INDEMNIFICATION:  The Parties agree, jointly and severally, to
indemnify and hold harmless the Escrow Agent from any liability, or reasonable
costs or expenses, including but not limited to reasonable attorneys' fees,
incurred by reason of accepting this Agreement and/or Escrowed Property.

                                      V-2

    3.8  DISAGREEMENTS:  If any disagreement or dispute arises between the
Parties to this Agreement concerning the meaning or validity of any provision
under this Agreement or concerning any other matter relating to this Agreement,
the Escrow Agent:

    (a) Shall be under no obligation to act, except under process or order of
       court, or until it has been adequately indemnified to its full
       satisfaction, and shall sustain no liability for its failure to act
       pending such process or court order or indemnification; and

    (b) May deposit, in its sole and absolute discretion, the Escrowed Property
       or that portion of the Escrowed Property it then holds with a court of
       competent jurisdiction, and to interplead the Parties. Upon such deposit
       and filing of interpleader, the Escrow Agent shall be relieved of all
       liability as to the Escrowed Property and shall be entitled to recover
       from the Parties its reasonable attorneys' fees and other reasonable
       costs incurred in commencing and maintaining such action. The Parties by
       signing this Agreement submit themselves to the jurisdiction of such
       court. In no event shall the institution of such interpleader action
       impair the rights of the Escrow Agent described in Section 3.6 of this
       Agreement.

         ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

    4.1  REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS:  Each Stockholder
hereby represents and warrants to Parent and each other Stockholder as follows:

    (a) Such Stockholder has the legal capacity and right and all other
       necessary power and authority necessary to enter into this Agreement and
       any document or instrument to be executed and delivered by Stockholder
       pursuant hereto or pursuant to the Merger Agreement, including, without
       limitation, the Voting Agreement and the Affiliate Agreement, if
       applicable (the "Stockholder Documents"), to perform his/her/its
       obligations under the Stockholder Documents, and to consummate the
       transactions contemplated by the Stockholder Documents.

    (b) The execution, delivery and performance of the Stockholder Documents,
       and the consummation of the transactions contemplated by the Stockholder
       Documents, will not (i) conflict with or violate any statute, law,
       ordinance, rule, regulation, judgment, decree, order, injunction, writ,
       permit or license applicable to such Stockholder or by which any property
       or asset of such Stockholder is bound or affected, or (ii) constitute a
       violation of, or a breach or default (or an event which with the giving
       of notice or lapse of time or both could reasonably be expected to become
       a default) under, or conflict with, or require any consent under (other
       than a violation or default that has been waived or a consent that has
       been obtained), any term or provision of any note, bond, mortgage,
       instrument, contract, permit, franchise, commitment, indenture, lease,
       license, or other agreement or obligation to which such Stockholder is a
       party or by which any property or asset of such Stockholder is bound or
       affected.

    (c) The Stockholder Documents constitute valid and binding obligations of
       such Stockholder, enforceable in accordance with their terms, except to
       the extent that such enforceability may be limited by bankruptcy,
       insolvency, and similar laws affecting the rights and remedies of
       creditors generally, and by general principles of equity and public
       policy; and the Stockholder Documents, when executed and delivered in
       accordance with the provisions thereof, shall be valid and binding
       obligations of such Stockholder, enforceable in accordance with their
       terms (with the aforesaid exceptions).

    (d) As of the Effective Time, such Stockholder (i) will hold of record and
       beneficially own the number and class of shares of Company capital stock
       set forth next to such Stockholder's name in Section 2.2 of the Company
       Disclosure Schedule, free and clear of any restrictions on transfer
       (other than any restrictions under the Act and state securities laws),
       taxes, security

                                      V-3

       interests, charges, liens, encumbrances, options, warrants, purchase
       rights, contracts, commitments, equities, claims, and demands, and
       (ii) will not be a party to any option, warrant, call, right, purchase
       right or other contract, commitment or agreement (other than the Merger
       Agreement) that could require such Stockholder to deliver, sell, transfer
       or otherwise dispose of any capital stock of the Company or to any voting
       trust, proxy or other agreement or understanding with respect to the
       voting of any capital stock of the Company (other than the Voting
       Agreement, if applicable).

    4.2  REPRESENTATIONS AND WARRANTIES OF NON-INDIVIDUAL STOCKHOLDERS:  Each
Stockholder that is not a natural person hereby represents and warrants to
Parent and to each other Stockholder as follows:

    (a) Such Stockholder is duly organized, validly existing, and in good
       standing under the laws of the jurisdiction in which it is organized.
       Such Stockholder has the corporate, partnership, limited liability
       company or other power and authority to enter into the Stockholder
       Documents, to perform its obligations under the Stockholder Documents,
       and to consummate the transactions contemplated by the Stockholder
       Documents.

    (b) Such Stockholder has taken all corporate, partnership, limited liability
       company or other action necessary for it to enter into the Stockholder
       Documents, to perform its obligations under the Stockholder Documents,
       and to consummate the transactions contemplated by the Stockholder
       Documents.

    (c) The execution, delivery and performance of the Stockholder Documents,
       and the consummation of the transactions contemplated by the Stockholder
       Documents, will not constitute a violation of, or a breach or default
       under, or conflict with, or require any consent under (other than a
       violation or default that has been waived or a consent that has been
       obtained), any term or provision of the certificate or articles of
       incorporation or bylaws, partnership agreement, certificate or articles
       of formation, limited liability company agreement or other charter or
       formation documents of such Stockholder.

                ARTICLE 5: ADDITIONAL AGREEMENTS OF STOCKHOLDERS

    5.1  RELEASE OF PARENT, MERGER SUB, THE COMPANY AND THEIR OFFICERS AND
DIRECTORS:  Each Stockholder, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged and intending to be legally
bound, in order to induce Parent and Merger Sub to consummate the Merger and
thereby exchange shares of Parent Common Stock for such Stockholder's shares of
Company Stock, hereby releases and forever discharges the Company, Merger Sub
and Parent and each of their respective individual, joint or mutual, past,
present and future agents, directors, officers, employees, consultants,
advisors, affiliates, stockholders, controlling persons, subsidiaries,
successors and assigns (individually, a "Releasee" and collectively,
"Releasees") from any and all claims, demands, causes of action, obligations,
debts and liabilities whatsoever, whether known or unknown, suspected or
unsuspected, both at law or in equity, which such Stockholder or any of his, her
or its affiliates now has, have ever had or may hereafter have against the
respective Releasees arising contemporaneously with or prior to the Effective
Time or on account of or arising out of any matter, cause or event occurring
contemporaneously with or prior to the Effective Time (other than any rights to
indemnification or reimbursement from the Company pursuant to its Certificate of
Incorporation or Bylaws from former officers and directors of the Company)
whether or not relating to claims pending on, or asserted after, the Effective
Time; provided, however, that nothing contained herein shall operate to release
any obligations of the Company, Merger Sub and Parent or the Stockholders
arising under the Merger Agreement. Such Stockholder hereby irrevocably
covenants to refrain from, directly or indirectly, asserting any claim or
demand, or commencing, instituting or causing to be commenced,

                                      V-4

any proceeding of any kind against any Releasee, based upon any matter purported
to be released hereby.

    Each Stockholder that is a resident of the State of California expressly
waives any and all rights that they may have under any statute or common-law
principle that would limit the effect of the releases to those claims actually
known or suspected to exist at the time of execution of this Agreement,
including but not limited to the provisions of Section 1542 of the California
Civil Code, to the extent deemed applicable (notwithstanding that this Agreement
does not provide for the application of the California law), which provides as
follows: "[a] general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."

    5.2  APPOINTMENT OF STOCKHOLDER REPRESENTATIVE:  The Stockholders hereby
appoint the Stockholder Representative as the representative of the
Stockholders. The Stockholder Representative shall have full power and authority
to represent the Stockholders and their successors and assigns with respect to
all matters arising under this Agreement, including, without limitation, the
amendment or waiver of any provision of this Agreement, and all action taken by
the Stockholder Representative hereunder, pursuant to authority granted herein,
shall be binding upon each Stockholder and their successors and assigns as if
expressly ratified and confirmed in writing by each of them. Without limiting
the generality of the foregoing, the Stockholder Representative shall have full
power and authority, on behalf of all the Stockholders and their successors, to
interpret all the terms and provisions of this Agreement, to negotiate and
compromise any dispute which may arise under this Agreement, to sign any
releases or other documents with respect thereto, and to retain such counsel and
consultants as appropriate and necessary to carry out his duties under this
Agreement.

    The Stockholder Representative, or any successor hereafter appointed, may
resign and shall be discharged of his duties hereunder upon the appointment of a
successor Stockholder Representative as hereinafter provided. In case of such
resignation, or in the event of the death or inability to act of the Stockholder
Representative, a successor shall be named by a majority of the remaining
Stockholders. Each such successor Stockholder Representative shall have all the
power, authority, rights and privileges hereby conferred upon the original
Stockholder Representative, and the term "Stockholder Representative" as used
herein shall be deemed to include each such successor Stockholder
Representative.

    The Stockholders shall indemnify and hold harmless the Stockholder
Representative from and against any direct or indirect demand, claim, payment,
obligation, action or cause of action, assessment, loss, liability, cost or
expense, including without limitation, penalties, interest on any amount payable
to a third party as a result of the foregoing, and any legal or other expense
reasonably incurred in connection with investigating or defending any claim or
action, whether or not resulting in any liability, and any amount paid in
settlement of any claim or action, incurred in connection with the performance
of his duties hereunder, including the advancement of expenses incurred in
connection with investigating or defending any claim or action.

    The Stockholder Representative is authorized to take the actions set forth
in this Agreement on behalf of the Stockholders, and Parent and Escrow Agent
shall have no liability to the Stockholders for any act or failure to act of the
Stockholder Representative. Parent and the Escrow Agent shall be entitled to
rely upon any act of the Stockholder Representative as an act of the
Stockholders pursuant to this Agreement.

                    ARTICLE 6: GENERAL TERMS AND CONDITIONS

    6.1  EXTENSION OF BENEFITS:  All of the terms of this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by, the respective
heirs, legal representatives, successors and assigns of all of the parties to
this Agreement.

                                      V-5

    6.2  GOVERNING LAW:  This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without regard to the law of
conflicts thereof.

    6.3  NOTICES:  All notices, requests, demands and other communications
required under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered personally, the next business day if delivered by
commercial delivery service or by reputable overnight courier, the third
business day if mailed by registered or certified mail (return receipt
requested), or the day of transmission if a business day or, if not, the next
business day thereafter, if sent via facsimile (with confirmation of receipt) to
the parties at the addresses set forth below the signature blocks on the
signature pages of this Agreement; provided, however, that all notices,
requests, demands and other communications required under this Agreement to be
given to any Stockholder shall be given to the Stockholder Representative at the
address set forth below the signature block for the Stockholder Representative
on the signature pages of this Agreement. It shall be the responsibility of the
Parties to notify each other and the Escrow Agent in writing of any name or
address changes. This Section 6.3 shall govern this Agreement except as
otherwise provided in Section 1 of SCHEDULE B to this Agreement.

    6.4  ENTIRE AGREEMENT:  This Agreement sets forth the entire agreement and
understanding of the parties to this Agreement with respect to the subject
matter hereof.

    6.5  AMENDMENT:  This Agreement may be amended, modified, superseded,
rescinded or canceled only by a written instrument executed by Parent, the
Stockholder Representative and the Escrow Agent.

    6.6  WAIVERS:  The failure of any party to this Agreement at any time or
times to require performance of any provision under this Agreement shall in no
manner affect the right at a later time to enforce the same performance. A
waiver by any party to this Agreement of any such condition or breach of any
term, covenant, representation or warranty contained in this Agreement, in any
one or more instances, shall neither be construed as a further or continuing
waiver of any such condition or breach nor a waiver of any other condition or
breach of any other term, covenant, representation or warranty contained in this
Agreement.

    6.7  HEADINGS:  The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions of this Agreement.

    6.8  COUNTERPARTS:  This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original, and
such counterparts shall together constitute one and the same instrument.

    6.9  RESIGNATION OR REMOVAL OF ESCROW AGENT:  The Escrow Agent may resign at
any time by furnishing written notice of its resignation to the Parties. The
Parties may remove the Escrow Agent at any time by furnishing to the Escrow
Agent a joint written notice of its removal. Such resignation or removal, as the
case may be, shall be effective upon delivery of such notice.

                                   * * * * *

                                      V-6

IN WITNESS WHEREOF, the Parties to this Agreement have each caused this
Agreement to be duly executed and delivered as of the date first written above.

                                          PARENT:

                                          ENDOREX CORPORATION

                                          ______________________________________

                                          By:___________________________________

                                          Its:__________________________________

                                          Address:
                                          Endorex Corporation
                                          28101 Ballard Drive, Suite F
                                          Lake Forest, Illinois 60045
                                          Attn: Michael Rosen
                                              President
                                          Telephone: (847) 573-8990
                                          Fax: (847) 573-9285

                                          with a copy to:

                                          Brobeck, Phleger & Harrison, LLP
                                          370 Interlocken Boulevard
                                          Fifth Floor
                                          Broomfield, Colorado 80021
                                          Attn: Richard R. Plumridge, Esq.
                                          Telephone: (303) 410-2000
                                          Fax: (303) 410-2199

                                      V-7

                                          STOCKHOLDER REPRESENTATIVE:

                                          ______________________________________
                                          PETER O. KLIEM

                                          Address:
                                          750 Main Street
                                          Cambridge, MA 02139
                                          Telephone:   (617) 621-9575
                                          Facsimile:   (617) 621-9574

                                          STOCKHOLDERS:

                                          [Signatures of all CTD Stockholders]

                                      V-8

    The Escrow Agent, by affixing its signature below, hereby acknowledges
receipt of the Escrowed Property described in SCHEDULE A and agrees to hold,
administer, and dispose of the Escrowed Property in accordance with the terms,
conditions, and instructions of this Agreement, including those set forth in
SCHEDULES B AND C.

                                          ESCROW AGENT:
                                          WELLS FARGO BANK MINNESOTA, NATIONAL
                                          ASSOCIATION, as Escrow Agent

                                          ______________________________________

                                          By:___________________________________
                                          Title:________________________________

                                            Wells Fargo Bank Minnesota, N.A.
                                           213 Court Street, Suite 902
                                           Middletown, CT 06457
                                           Telephone: (860)-704-6216
                                           Fax: (860) 704-6219

                                      V-9

                                   SCHEDULE A
                                    DEPOSITS

1,350,000 shares of common stock, $.001 par value per share ("Common Stock"), of
Endorex Corporation, a Delaware corporation

                                      V-10

                                   SCHEDULE B
                                  INSTRUCTIONS

    1.  If Parent requests indemnification from the Stockholders pursuant to its
rights under Section 8.4 of the Merger Agreement, then Parent shall notify the
Escrow Agent in writing of such request, the number of shares of Common Stock
requested for indemnification, the calculation of such number of shares pursuant
to Article 8 of the Merger Agreement and disbursement instructions
("Indemnification Notice"). The Escrow Agent shall, within five business days of
receipt of an Indemnification Notice, provide a copy of such Indemnification
Notice to the Stockholder Representative, and, ten business days after the
Stockholder Representative is deemed pursuant to Section 6.3 of this Agreement
to have received such Indemnification Notice from the Escrow Agent, disburse to
Parent from the Escrowed Property the number of shares of Common Stock requested
by Parent in such Indemnification Notice, unless prior to the date of
disbursement the Escrow Agent receives written notice from the Stockholder
Representative disputing in good faith ("Dispute Notice") Parent's right to all
or part of the shares of Common Stock set forth in the Indemnification Notice
("Disputed Shares").

    2.  If the Stockholder Representative issues a Dispute Notice pursuant to
Section 1 above, then the Escrow Agent shall continue to hold all Disputed
Shares until receipt of written instructions jointly executed by Parent and the
Stockholder Representative or receipt of an order of any court directing the
disbursement of the Disputed Shares, and shall disburse the Disputed Shares in
accordance with such joint instructions or court order.

    3.  On or promptly after March 31, 2002, the Escrow Agent shall disburse to
the Stockholder Representative the portion of the Escrowed Property in the names
and the amounts set forth under Section 1 of SCHEDULE C, less (i) any Disputed
Shares, which shall be disbursed as provided in Section 2 above, and (ii) any
shares set forth in any Indemnification Notice that the Stockholder
Representative is deemed pursuant to Section 6.3 of this Agreement to have
received no more than ten business days prior to such disbursement and for which
the Escrow Agent has not received a Dispute Notice, which amounts shall be
disbursed as provided in Section 1 above and, if applicable, Section 2 above
(all such shares in clause (i) and (ii) being referred to herein as "Holdback
Shares"). Distributions of Escrowed Property for Stockholders pursuant to this
Section 3 shall be reduced pro rata among the Stockholders based upon the
distribution of Escrowed Property set forth in Section 1 of SCHEDULE C by an
aggregate number of shares equal to the number of Holdback Shares; PROVIDED,
HOWEVER, that no fractional shares shall be disbursed for any Stockholder
pursuant to this Section 3 and the Escrow Agent shall make such adjustments in
such pro rata reduction as are necessary for the disbursement of only whole
shares of the Escrowed Property for any Stockholder.

    4.  On or promptly after September 30, 2002, the Escrow Agent shall disburse
to the Stockholder Representative the portion of the Escrowed Property in the
names and the amounts set forth under Section 2 of SCHEDULE C, less any Holdback
Shares, which shall be disbursed as provided in Sections 1 and 2 above, as
applicable. For purposes of this Section 4, Holdback Shares shall not include
Holdback Shares withheld from disbursement under Section 3. Distributions of
Escrowed Property for Stockholders pursuant to this Section 4 shall be reduced
pro rata among the Stockholders based upon the distribution of Escrowed Property
set forth in Section 2 of SCHEDULE C by an aggregate number of shares equal to
the number of such Holdback Shares; PROVIDED, HOWEVER, that no fractional shares
shall be disbursed for any Stockholder pursuant to this Section 4 and the Escrow
Agent shall make such adjustments in such pro rata reduction as are necessary
for the distribution of only whole shares of the Escrowed Property for any
Stockholder.

    5.  On or promptly after March 31, 2003, the Escrow Agent shall disburse to
the Stockholder Representative the portion of the Escrowed Property in the names
and the amounts set forth under

                                      V-11

Section 3 of SCHEDULE C, less any Holdback Shares, which shall be disbursed as
provided in Sections 1 and 2 above, as applicable. For purposes of this
Section 5, Holdback Shares shall not include Holdback Shares withheld from
disbursement under Sections 3 and 4. Distributions of Escrowed Property for
Stockholders pursuant to this Section 5 shall be reduced pro rata among the
Stockholders based upon the distribution of Escrowed Property set forth in
Section 3 of SCHEDULE C by an aggregate number of shares equal to the number of
such Holdback Shares; PROVIDED, HOWEVER, that no fractional shares shall be
disbursed to any Stockholder pursuant to this Section 5 and the Escrow Agent
shall make such adjustments in such pro rata reduction as are necessary for the
issuance of only whole shares of the Escrowed Property for any Stockholder.

    6.  Notwithstanding the provisions of Sections 1, 2, 3, 4 or 5 above, if
Parent and the Stockholder Representative jointly execute a written notice to
the Escrow Agent providing the Escrow Agent with disbursement instructions for
all or part of the Escrowed Property, the Escrow Agent shall disburse the
portion of the Escrowed Property referred to in such notice in accordance with
the instructions contained in such notice.

    7.  The Stockholders shall have the full and unqualified right and power to
exercise any voting, consent and other rights with respect to the Escrowed
Property and to cause the Escrow Agent to tender all or part of the Escrowed
Property pursuant to a tender offer or exchange offer and neither the Escrow
Agent nor Parent shall have any duty, right or privilege to exercise any such
rights. The Escrow Agent shall exercise all such rights of the Stockholders as
directed by a certificate of the Stockholder Representative. All property
received by the Escrow Agent pursuant to a tender offer or exchange offer for
the Escrowed Property shall become Escrowed Property.

    8.  In the event of any transaction wherein dividends, cash or other
property which is or will be apportioned to the Escrowed Property are
distributed in respect of the Escrowed Property, the Escrow Agent shall take all
steps necessary to obtain such cash or other property, including presenting the
Escrowed Property for exchange, conversion or other disposition, and the Parties
will execute such certificates, instruments or other documents as may be
requested by the Escrow Agent of such cash or other property. All such property
received by the Escrow Agent shall become Escrowed Property and shall be
disbursed with, and to the Party receiving, the Escrowed Property to which such
property was apportioned.

    9.  The Parties hereby authorize the Escrow Agent to apply to the transfer
agent for the Common Stock for any division of certificates evidencing Escrowed
Property which may be required in connection with the distribution of Escrowed
Property pursuant to this SCHEDULE B to the Agreement.

    10. The Escrow Agent shall not, and is not authorized to convey, transfer or
distribute the Escrowed Property except as set forth in this SCHEDULE B to the
Agreement.

                                      V-12

                                   SCHEDULE C
                                 DISTRIBUTIONS

1.  Common Stock to be distributed by the Escrow Agent to the Stockholder
    Representative on or promptly after March 31, 2002 pursuant to Section 3 of
    SCHEDULE B:



                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
TVM Medical Ventures GmbH & Co. KG..........................      101,537
Nomura Bank (Switzerland) Ltd...............................       90,255
Paul Capital Partners V, L.P................................       67,120
Imprimus Investors LLC......................................       37,606
Bristol Rittenhouse Investments, L.P........................       37,606
Kendall Investments, LLC....................................       18,803
IMS Global Investments X Ltd................................       18,803
Richard J. Stern............................................       15,042
Stern Joint Venture, L.P....................................       15,042
Wolfson Equities............................................       15,042
Lindsay A. Rosenwald, M.D...................................       13,162
Concordia Partners..........................................       11,282
C. Benveniste-Schuler.......................................       11,282
Drax Holdings, L.P..........................................        9,401
Bernard Selz................................................        9,401
Michael Steinhardt..........................................        9,401
Keys Foundation, Curacro....................................        9,401
Albert Reichmann............................................        7,521
James D. Stern..............................................        7,521
Paul Capital Partners V (Domestic Annex Fund) L.P...........        5,648
Robert I. Falk..............................................        3,760
G&G Enterprises.............................................        3,760
Gibert Goldstein, Paul Shapiro, Trustees, UIT Howard Gittis
  Dated 12/23/88............................................        3,760
Caxton Partners.............................................        3,760
Jeffrey S. Silverman........................................        3,760
The Holding Company.........................................        3,760
Seju Suzuki.................................................        3,760
Cass & Co.Magnum Capital Growth Fund........................        3,760
Yoshimasa Yamazaki..........................................        3,760
Asahi Iron Foundry Co., Ltd.................................        3,760
Richard Vogel...............................................        3,760
Maidenhair Investments, N.V.................................        3,760
Paul Capital Partners V International, L.P..................        2,444
Leonard J. Adams............................................        1,880
Wayne Saker.................................................        1,880
Amram Kass P.C. Money Purchase Plan.........................        1,880
David A. Braver.............................................        1,880
Amram Kass PC Defined Benefit Pension Plan..................        1,880
David A. Wolf...............................................        1,880
Tis Prager..................................................        1,316
Bruno Widmer................................................        1,316
Karen Cook, IRA (KC)........................................          940
Jack Hirschfield............................................          470


                                      V-13




                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
Paramount Capital Drug Development Holdings LLC.............       50,922
Steve H. Kanzer.............................................       11,418
Nicholas Bodor..............................................        5,061
Kenneth U. Johnson..........................................        5,061
Rivki Rosenwald.............................................        4,960
Biotechnology Solutions, LLC................................        3,191
Nicholas Stergiopoulos......................................        1,528
Wayne L. Rubin..............................................        1,518
Michael Weiss...............................................        1,518
Peter and Donna Kash........................................        1,012
David R. Walner.............................................        1,012
Huntington Street Company...................................        1,012
June Street Company.........................................        1,012
Rivki Rosenwald Custodian f/b/o Doni Rosenwald..............        1,012
Rivki Rosenwald Custodian f/b/o Joshy Rosenwald.............        1,012
Rivki Rosenwald Custodian f/b/o Demi Rosenwald..............        1,012
Rivki Rosenwald Custodian f/b/o Davy Rosenwald..............        1,012
Kash Family Foundation......................................          810
Joseph E. Edelman...........................................          759
Sarah E. Laut...............................................          713
Michael Ferrari.............................................          713
Blossom Rosenwald...........................................          688
Seth Rosenwald..............................................          688
Jon Rosenwald...............................................          688
William Kanzer..............................................          607
Gary Kanzer.................................................          607
Donna Lozito................................................          222
American Friends of Hebron Yeshiva in Jerusalem.............          202
Fred Mermelstein............................................          202
Lauren S. Fischer...........................................          172
John Knox...................................................          172
David M. Tanen..............................................          172
Evan S. Borak...............................................          172
Hope Viggiani...............................................          101
Robert Klein................................................          101
Howard Schain...............................................          101
John Pappadimitropoulos.....................................           50


2.  Common Stock to be distributed by the Escrow Agent to the Stockholder
    Representative on or promptly after September 30, 2002 pursuant to
    Section 4 of SCHEDULE B:



                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
TVM Medical Ventures GmbH & Co. KG..........................       50,769
Nomura Bank (Switzerland) Ltd...............................       45,128
Paul Capital Partners V, L.P................................       33,560
Imprimus Investors LLC......................................       18,803
Bristol Rittenhouse Investments, L.P........................       18,803
Kendall Investments, LLC....................................        9,401
IMS Global Investments X Ltd................................        9,401


                                      V-14




                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
Richard J. Stern............................................        7,521
Stern Joint Venture, L.P....................................        7,521
Wolfson Equities............................................        7,521
Lindsay A. Rosenwald, M.D...................................        6,581
Concordia Partners..........................................        5,641
C. Benveniste-Schuler.......................................        5,641
Drax Holdings, L.P..........................................        4,701
Bernard Selz................................................        4,701
Michael Steinhardt..........................................        4,701
Keys Foundation, Curacro....................................        4,701
Albert Reichmann............................................        3,761
James D. Stern..............................................        3,761
Paul Capital Partners V (Domestic Annex Fund) L.P...........        2,824
Robert I. Falk..............................................        1,880
G&G Enterprises.............................................        1,880
Gibert Goldstein, Paul Shapiro, Trustees, UIT Howard Gittis
  Trust.....................................................        1,880
Caxton Partners.............................................        1,880
Jeffrey S. Silverman........................................        1,880
The Holding Company.........................................        1,880
Seju Suzuki.................................................        1,880
Cass & Co.Magnum Capital Growth Fund........................        1,880
Yoshimasa Yamazaki..........................................        1,880
Asahi Iron Foundry Co., Ltd.................................        1,880
Richard Vogel...............................................        1,880
Maidenhair Investments, N.V.................................        1,880
Paul Capital Partners V International, L.P..................        1,222
Leonard J. Adams............................................          940
Wayne Saker.................................................          940
Amram Kass P.C. Money Purchase Plan.........................          940
David A. Braver.............................................          940
Amram Kass PC Defined Benefit Pension Plan..................          940
David A. Wolf...............................................          940
Tis Prager..................................................          658
Bruno Widmer................................................          658
Karen Cook, IRA (KC)........................................          470
Jack Hirschfield............................................          235
Paramount Capital Drug Development Holdings LLC.............       25,461
Steve H. Kanzer.............................................        5,709
Nicholas Bodor..............................................        2,530
Kenneth U. Johnson..........................................        2,530
Rivki Rosenwald.............................................        2,480
Biotechnology Solutions, LLC................................        1,596
Nicholas Stergiopoulos......................................          764
Wayne L. Rubin..............................................          759
Michael Weiss...............................................          759
Peter and Donna Kash........................................          506
David R. Walner.............................................          506
Huntington Street Company...................................          506
June Street Company.........................................          506


                                      V-15




                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
Rivki Rosenwald Custodian f/b/o Doni Rosenwald..............          506
Rivki Rosenwald Custodian f/b/o Joshy Rosenwald.............          506
Rivki Rosenwald Custodian f/b/o Demi Rosenwald..............          506
Rivki Rosenwald Custodian f/b/o Davy Rosenwald..............          506
Kash Family Foundation......................................          405
Joseph E. Edelman...........................................          379
Sarah E. Laut...............................................          357
Michael Ferrari.............................................          357
Blossom Rosenwald...........................................          344
Seth Rosenwald..............................................          344
Jon Rosenwald...............................................          344
William Kanzer..............................................          304
Gary Kanzer.................................................          304
Donna Lozito................................................          111
American Friends of Hebron Yeshiva in Jerusalem.............          101
Fred Mermelstein............................................          101
Lauren S. Fischer...........................................           86
John Knox...................................................           86
David M. Tanen..............................................           86
Evan S. Borak...............................................           86
Hope Viggiani...............................................           50
Robert Klein................................................           50
Howard Schain...............................................           50
John Pappadimitropoulos.....................................           25


3.  Common Stock to be distributed by the Escrow Agent to the Stockholder
    Representative on or promptly after March 31, 2003 pursuant to Section 5 of
    SCHEDULE B:



                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
TVM Medical Ventures GmbH & Co. KG..........................       50,769
Nomura Bank (Switzerland) Ltd...............................       45,128
Paul Capital Partners V, L.P................................       33,560
Imprimus Investors LLC......................................       18,804
Bristol Rittenhouse Investments, L.P........................       18,804
Kendall Investments, LLC....................................        9,402
IMS Global Investments X Ltd................................        9,402
Richard J. Stern............................................        7,522
Stern Joint Venture, L.P....................................        7,522
Wolfson Equities............................................        7,522
Lindsay A. Rosenwald, M.D...................................        6,581
Concordia Partners..........................................        5,641
C. Benveniste-Schuler.......................................        5,641
Drax Holdings, L.P..........................................        4,701
Bernard Selz................................................        4,701
Michael Steinhardt..........................................        4,701
Keys Foundation, Curacro....................................        4,701
Albert Reichmann............................................        3,761
James D. Stern..............................................        3,761
Paul Capital Partners V (Domestic Annex Fund) L.P...........        2,825


                                      V-16




                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
Robert I. Falk..............................................        1,881
G&G Enterprises.............................................        1,881
Gibert Goldstein, Paul Shapiro, Trustees, UIT Howard Gittis
  Trust.....................................................        1,881
Caxton Partners.............................................        1,881
Jeffrey S. Silverman........................................        1,881
The Holding Company.........................................        1,881
Seju Suzuki.................................................        1,881
Cass & Co.Magnum Capital Growth Fund........................        1,881
Yoshimasa Yamazaki..........................................        1,881
Asahi Iron Foundry Co., Ltd.................................        1,881
Richard Vogel...............................................        1,881
Maidenhair Investments, N.V.................................        1,881
Paul Capital Partners V International, L.P..................        1,223
Leonard J. Adams............................................          941
Wayne Saker.................................................          941
Amram Kass P.C. Money Purchase Plan.........................          941
David A. Braver.............................................          941
Amram Kass PC Defined Benefit Pension Plan..................          941
David A. Wolf...............................................          941
Tis Prager..................................................          658
Bruno Widmer................................................          658
Karen Cook, IRA (KC)........................................          470
Jack Hirschfield............................................          235
Paramount Capital Drug Development Holdings LLC.............       25,462
Steve H. Kanzer.............................................        5,710
Nicholas Bodor..............................................        2,531
Kenneth U. Johnson..........................................        2,531
Rivki Rosenwald.............................................        2,480
Biotechnology Solutions, LLC................................        1,596
Nicholas Stergiopoulos......................................          765
Wayne L. Rubin..............................................          760
Michael Weiss...............................................          760
Peter and Donna Kash........................................          506
David R. Walner.............................................          506
Huntington Street Company...................................          506
June Street Company.........................................          506
Rivki Rosenwald Custodian f/b/o Doni Rosenwald..............          506
Rivki Rosenwald Custodian f/b/o Joshy Rosenwald.............          506
Rivki Rosenwald Custodian f/b/o Demi Rosenwald..............          506
Rivki Rosenwald Custodian f/b/o Davy Rosenwald..............          506
Kash Family Foundation......................................          405
Joseph E. Edelman...........................................          380
Sarah E. Laut...............................................          357
Michael Ferrari.............................................          357
Blossom Rosenwald...........................................          345
Seth Rosenwald..............................................          345
Jon Rosenwald...............................................          345
William Kanzer..............................................          304
Gary Kanzer.................................................          304


                                      V-17




                                                              NUMBER OF SHARES
STOCKHOLDER NAME                                              OF COMMON STOCK
----------------                                              ----------------
                                                           
Donna Lozito................................................          112
American Friends of Hebron Yeshiva in Jerusalem.............          102
Fred Mermelstein............................................          102
Lauren S. Fischer...........................................           86
John Knox...................................................           86
David M. Tanen..............................................           86
Evan S. Borak...............................................           86
Hope Viggiani...............................................           51
Robert Klein................................................           51
Howard Schain...............................................           51
John Pappadimitropoulos.....................................           26


                                      V-18

                                   SCHEDULE D
                               ESCROW AGENT FEES

                                      V-19

                                  APPENDIX VI

           FORM OF AMENDED AND RESTATED 1995 OMNIBUS INCENTIVE PLAN,
                           AS PROPOSED TO BE AMENDED

                              ENDOREX CORPORATION
                AMENDED AND RESTATED 1995 OMNIBUS INCENTIVE PLAN
                           (As of September 26, 2001)
                                  ARTICLE ONE
                               GENERAL PROVISIONS

I.  PURPOSE OF THE PLAN

    This Amended and Restated 1995 Omnibus Incentive Plan is intended to promote
the interests of Endorex Corporation, a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.

    Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.

II. STRUCTURE OF THE PLAN

    A. The Plan shall be divided into four separate equity programs:

        (i) the Discretionary Option Grant Program under which eligible persons
    may, at the discretion of the Plan Administrator, be granted options to
    purchase shares of Common Stock,

        (ii) the Salary Investment Option Grant Program under which eligible
    employees may elect to have a portion of their base salary invested each
    year in options to purchase shares of Common Stock,

        (iii) the Automatic Option Grant Program under which eligible
    non-employee Board members shall automatically receive options at periodic
    intervals to purchase shares of Common Stock, and

        (iv) the Director Fee Option Grant Program under which non-employee
    Board members may elect to have all or any portion of their annual retainer
    fee otherwise payable in cash applied to a special option grant.

    B.  The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

III. ADMINISTRATION OF THE PLAN

    A. The Board shall have the authority to administer the Discretionary Option
Grant Program with respect to Section 16 Insiders but may delegate such
authority in whole or in part to the Primary Committee. The Board or the Primary
Committee shall have sole and exclusive authority to exercise all discretionary
functions under the Salary Investment Option Grant Program.

    B.  Administration of the Discretionary Option Grant Program with respect to
all other persons eligible to participate in that program may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer that program with respect to all such
persons.

    C.  Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the
Board at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.

                                      VI-1

    D. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority to establish such rules
and regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant Program and to make such determinations under, and
issue such interpretations of, the provisions of such program and any
outstanding options thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant Program under its jurisdiction or any option
thereunder.

    E.  Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants under the Plan.

    F.  Administration of the Automatic Option Grant and Director Fee Option
Grant Programs shall be self-executing in accordance with the terms of those
programs, and no Plan Administrator shall exercise any discretionary functions
with respect to option grants made under those programs.

IV. ELIGIBILITY

    A. The persons eligible to participate in the Discretionary Option Grant
Program are as follows:

        (i) Employees,

        (ii) non-employee members of the Board or the board of directors of any
    Parent or Subsidiary, and

        (iii) consultants and other independent advisors who provide services to
    the Corporation (or any Parent or Subsidiary).

    B.  Only Employees who are Section 16 Insiders or other highly compensated
individuals shall be eligible to participate in the Salary Investment Option
Grant Program.

    C.  Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority (subject to the provisions of
the Plan) to determine, with respect to the option grants under the
Discretionary Option Grant Program, which eligible persons are to receive option
grants, the time or times when such option grants are to be made, the number of
shares to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or times at which
each option is to become exercisable, the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding.

    D. Only non-employee Board members shall be eligible to participate in the
Automatic Option Grant and Director Fee Option Grant Programs.

V.  STOCK SUBJECT TO THE PLAN

    A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
reserved for issuance over the term of the Plan shall not exceed 4,500,000
shares. Such authorized share reserve is comprised of (i) the number of shares
which remain available for issuance, as of the Plan Restatement Date, under the
Predecessor Plans as last approved by the Corporation's stockholders, including
the shares subject to the outstanding options to be incorporated into the Plan
and the additional shares which would otherwise be available for future grant
(86,667 shares), plus (ii) the additional increase of 1,413,333 shares
authorized by the Board on October 21, 1997 and subsequently approved by the
stockholders, (iii) the additional increase of 500,000 shares authorized by the
Board on February 11, 1998 and subsequently approved by the

                                      VI-2

stockholders, (iv) the 99,360 share, 107,557 share and 127,419 share increases
effected on January 4, 1999, January 3, 2000 and January 2, 2001, respectively,
pursuant to the annual share increase provisions of Section V.B., and (v) the
additional increase of 2,165,664 shares authorized by the Board on May 16, 2001
subject to approval by the stockholders at the 2001 Annual Meeting. The share
reserve numbers reflect the 1-for-15 reverse stock split effected on June 11,
1997.

    B.  The number of shares of Common Stock available for issuance under the
Plan shall automatically increase on the first trading day of each fiscal year
during the term of the Plan, beginning with the 1999 fiscal year, by an amount
equal to one percent (1%) of the shares of Common Stock outstanding on the last
trading day of the immediately preceding fiscal year, but in no event shall any
such annual increase exceed 500,000 shares. No Incentive Options may be granted
on the basis of the additional shares of Common Stock added to the share reserve
as a result of the automatic annual increases effected on January 4, 1999,
January 3, 2000 and January 2, 2001.

    C.  No one person participating in the Plan may receive options and
separately exercisable stock appreciation rights for more than 750,000 shares of
Common Stock per calendar year beginning with the 1998 calendar year.

    D. Shares of Common Stock subject to outstanding options shall be available
for subsequent issuance under the Plan to the extent (i) the options expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently repurchased
by the Corporation at the original issue price paid per share pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. However, should the exercise price of an option under the
Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an option
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock issued
to the holder of such option.

    E.  Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities by which the share
reserve may increase annually pursuant to the provisions of Section V.B.,
(iii) the number and/or class of securities for which any one person may be
granted options and separately exercisable stock appreciation rights per
calendar year, (iv) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Option Grant Program and (v) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.

                                      VI-3

                                  ARTICLE TWO
                       DISCRETIONARY OPTION GRANT PROGRAM

I.  OPTION TERMS

    Each option shall be evidenced by one or more documents in the form approved
by the Plan Administrator; PROVIDED, however, that each such document shall
comply with the terms specified below. Each document evidencing an Incentive
Option shall, in addition, be subject to the provisions of the Plan applicable
to such options.

    A.  EXERCISE PRICE.

        1.  The exercise price per share shall not be less than eighty-five
    percent (85%) of the Fair Market Value per share of Common Stock on the
    option grant date unless otherwise determined by the Plan Administrator.

        2.  The exercise price shall become immediately due upon exercise of the
    option and shall, subject to the provisions of Section I of Article Six and
    the documents evidencing the option, be payable in one or more of the forms
    specified below:

           (i) cash or check made payable to the Corporation,

           (ii) in shares of Common Stock held for the requisite period
       necessary to avoid a charge to the Corporation's earnings for financial
       reporting purposes and valued at Fair Market Value on the Exercise Date,
       or

           (iii) to the extent the option is exercised for vested shares,
       through a special sale and remittance procedure pursuant to which the
       Optionee shall concurrently provide irrevocable written instructions to
       (a) a Corporation-designated brokerage firm to effect the immediate sale
       of the purchased shares and remit to the Corporation, out of the sale
       proceeds available on the settlement date, sufficient funds to cover the
       aggregate exercise price payable for the purchased shares plus all
       applicable Federal, state and local income and employment taxes required
       to be withheld by the Corporation by reason of such exercise and (b) the
       Corporation to deliver the certificates for the purchased shares directly
       to such brokerage firm in order to complete the sale.

        Except to the extent such sale and remittance procedure is utilized,
    payment of the exercise price for the purchased shares must be made on the
    Exercise Date.

    B.  EXERCISE AND TERM OF OPTIONS.  Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

    C.  EFFECT OF TERMINATION OF SERVICE.

        1.  The following provisions shall govern the exercise of any options
    held by the Optionee at the time of cessation of Service or death:

           (i) Any option outstanding at the time of the Optionee's cessation of
       Service for any reason shall remain exercisable for such period of time
       thereafter as shall be determined by the Plan Administrator and set forth
       in the documents evidencing the option, but no such option shall be
       exercisable after the expiration of the option term.

           (ii) Any option exercisable in whole or in part by the Optionee at
       the time of death may be exercised subsequently by the personal
       representative of the Optionee's estate or by the

                                      VI-4

       person or persons to whom the option is transferred pursuant to the
       Optionee's will or in accordance with the laws of descent and
       distribution.

           (iii) During the applicable post-Service exercise period, the option
       may not be exercised in the aggregate for more than the number of vested
       shares for which the option is exercisable on the date of the Optionee's
       cessation of Service. Upon the expiration of the applicable exercise
       period or (if earlier) upon the expiration of the option term, the option
       shall terminate and cease to be outstanding for any vested shares for
       which the option has not been exercised. However, the option shall,
       immediately upon the Optionee's cessation of Service, terminate and cease
       to be outstanding to the extent the option is not otherwise at that time
       exercisable for vested shares.

           (iv) Should the Optionee's Service be terminated for Misconduct, then
       all outstanding options held by the Optionee shall terminate immediately
       and cease to be outstanding.

        2.  The Plan Administrator shall have the discretion, exercisable either
    at the time an option is granted or at any time while the option remains
    outstanding, to:

           (i) extend the period of time for which the option is to remain
       exercisable following the Optionee's cessation of Service from the period
       otherwise in effect for that option to such greater period of time as the
       Plan Administrator shall deem appropriate, but in no event beyond the
       expiration of the option term, and/or

           (ii) permit the option to be exercised, during the applicable
       post-Service exercise period, not only with respect to the number of
       vested shares of Common Stock for which such option is exercisable at the
       time of the Optionee's cessation of Service but also with respect to one
       or more additional installments in which the Optionee would have vested
       under the option had the Optionee continued in Service.

    D.  STOCKHOLDER RIGHTS.  The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.

    E.  REPURCHASE RIGHTS.  The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.

    F.  LIMITED TRANSFERABILITY OF OPTIONS.  During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for the benefit of one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.

                                      VI-5

II. INCENTIVE OPTIONS

    The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.

    A.  ELIGIBILITY.  Incentive Options may only be granted to Employees.

    B.  EXERCISE PRICE.  The exercise price per share shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.

    C.  DOLLAR LIMITATION.  The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

    D.  10% STOCKHOLDER.  If any Employee to whom an Incentive Option is granted
is a 10% Stockholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

    A. In the event of any Corporate Transaction, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall NOT so accelerate if and to the extent:
(i) such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive.

    B.  All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

    C.  Notwithstanding Section III.A. and Section III.B. of this Article Two,
the Plan Administrator shall have the discretion, exercisable either at the time
the option is granted or at any time while the option remains outstanding, to
provide for the automatic acceleration of one or more outstanding options (and
the automatic termination of one or more outstanding repurchase rights with the

                                      VI-6

immediate vesting of the shares of Common Stock subject to those rights) upon
the occurrence of a Corporate Transaction, whether or not those options are to
be assumed or replaced (or those repurchase rights are to be assigned) in the
Corporate Transaction. The Plan Administrator shall also have the discretion to
grant options which do not accelerate whether or not such options are assumed
(and to provide for repurchase rights that do not terminate whether or not such
rights are assigned) in connection with a Corporate Transaction.

    D. Immediately following the consummation of the Corporate Transaction, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof).

    E.  Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan.

    F.  The Plan Administrator shall have the discretion, exercisable at the
time the option is granted or at any time while the option remains outstanding,
to provide for the automatic acceleration of any options which are assumed or
replaced in a Corporate Transaction and do not otherwise accelerate at that time
(and the termination of any of the Corporation's outstanding repurchase rights
which do not otherwise terminate at the time of the Corporate Transaction) in
the event the Optionee's Service should subsequently terminate by reason of an
Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of such Corporate Transaction. Any
options so accelerated shall remain exercisable for fully-vested shares until
the EARLIER of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination.

    G. The Plan Administrator shall have the discretion, exercisable either at
the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a designated period (not to exceed eighteen
(18) months) following the effective date of such Change in Control. Any options
accelerated in connection with a Change in Control shall remain fully
exercisable until the expiration or sooner termination of the option term.

    H. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.

    I.  The grant of options under the Discretionary Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

                                      VI-7

IV. CANCELLATION AND REGRANT OF OPTIONS

    The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plans) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.

V.  STOCK APPRECIATION RIGHTS

    A. The Plan Administrator shall have full power and authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.

    B.  The following terms shall govern the grant and exercise of tandem stock
appreciation rights:

        (i) One or more Optionees may be granted the right, exercisable upon
    such terms as the Plan Administrator may establish, to elect between the
    exercise of the underlying option for shares of Common Stock and the
    surrender of that option in exchange for a distribution from the Corporation
    in an amount equal to the excess of (a) the Fair Market Value (on the option
    surrender date) of the number of shares in which the Optionee is at the time
    vested under the surrendered option (or surrendered portion thereof) over
    (b) the aggregate exercise price payable for such shares.

        (ii) No such option surrender shall be effective unless it is approved
    by the Plan Administrator, either at the time of the actual option surrender
    or at any earlier time. If the surrender is so approved, then the
    distribution to which the Optionee shall be entitled may be made in shares
    of Common Stock valued at Fair Market Value on the option surrender date, in
    cash, or partly in shares and partly in cash, as the Plan Administrator
    shall in its sole discretion deem appropriate.

        (iii) If the surrender of an option is rejected by the Plan
    Administrator, then the Optionee shall retain whatever rights the Optionee
    had under the surrendered option (or surrendered portion thereof) on the
    option surrender date and may exercise such rights at any time prior to the
    later of (a) five (5) business days after the receipt of the rejection
    notice or (b) the last day on which the option is otherwise exercisable in
    accordance with the terms of the documents evidencing such option, but in no
    event may such rights be exercised more than ten (10) years after the option
    grant date.

    C.  The following terms shall govern the grant and exercise of limited stock
appreciation rights:

        (i) One or more Section 16 Insiders may be granted limited stock
    appreciation rights with respect to their outstanding options.

        (ii) Upon the occurrence of a Hostile Take-Over, each such individual
    holding one or more options with such a limited stock appreciation right
    shall have the unconditional right (exercisable for a thirty (30)-day period
    following such Hostile Take-Over) to surrender each such option to the
    Corporation, to the extent the option is at the time exercisable for vested
    shares of Common Stock. In return for the surrendered option, the Optionee
    shall receive a cash distribution from the Corporation in an amount equal to
    the excess of (a) the Take-Over Price of the shares of Common Stock which
    are at the time vested under each surrendered option (or surrendered portion
    thereof) over (b) the aggregate exercise price payable for such shares. Such
    cash distribution shall be paid within five (5) days following the option
    surrender date.

        (iii) Neither the approval of the Plan Administrator nor the consent of
    the Board shall be required in connection with such option surrender and
    cash distribution.

        (iv) The balance of the option (if any) shall continue in full force and
    effect in accordance with the documents evidencing such option.

                                      VI-8

                                 ARTICLE THREE
                     SALARY INVESTMENT OPTION GRANT PROGRAM

I.  OPTION GRANTS

    The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Program is to be in effect and to select the Employees eligible to
participate in the Salary Investment Option Grant Program for those calendar
year or years. Each selected Employee who elects to participate in the Salary
Investment Option Grant Program must, prior to the start of each calendar year
of participation, file with the Plan Administrator (or its designate) an
irrevocable authorization directing the Corporation to reduce his or her base
salary for that calendar year by a designated percentage (in multiples of one
percent (1%)). However, the amount of such salary reduction must be not less
than Ten Thousand Dollars ($10,000.00) and must not be more than Seventy-Five
Thousand Dollars ($75,000.00). Each individual who files a proper salary
reduction authorization shall automatically be granted an option under this
Salary Investment Option Grant Program on or before the last trading day in
January of the calendar year for which that salary reduction is to be in effect.

II. OPTION TERMS

    Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.

    A.  EXERCISE PRICE.

        1.  The exercise price per share shall be thirty-three and one-third
    percent (33 1/3%) of the Fair Market Value per share of Common Stock on the
    option grant date.

        2.  The exercise price shall become immediately due upon exercise of the
    option and shall be payable in one or more of the alternative forms
    authorized under the Discretionary Option Grant Program. Except to the
    extent the sale and remittance procedure specified thereunder is utilized,
    payment of the exercise price for the purchased shares must be made on the
    Exercise Date.

    B.  NUMBER OF OPTION SHARES.   he number of shares of Common Stock subject
to the option shall be determined pursuant to the following formula (rounded
down to the nearest whole number):

    X = A  DIVIDED BY (B X 66 2/3%), where

    X is the number of option shares,

    A is the dollar amount of the Optionee's base salary reduction for the
calendar year, and

    B is the Fair Market Value per share of Common Stock on the option grant
date.

    C.  EXERCISE AND TERM OF OPTIONS.  The option shall become exercisable in a
series of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar year for which the
salary reduction is in effect. Each option shall have a maximum term of ten
(10) years measured from the option grant date.

    D.  EFFECT OF TERMINATION OF SERVICE.  Should the Optionee cease Service for
any reason while holding one or more options under this Article Three, then each
such option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Service, until the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under this
Article Three, then each such option may be exercised, for any

                                      VI-9

or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by the
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

    A. In the event of any Corporate Transaction while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. Each such outstanding option
shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the three (3)-year period measured from the date of Optionee's
cessation of Service.

    B.  In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for any or
all of such shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earlier of (i) the expiration of the option term
or (ii) the expiration of the three (3)-year period measured from the date of
Optionee's cessation of Service.

    C.  The grant of options under the Salary Investment Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

IV. REMAINING TERMS

    The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

                                     VI-10

                                  ARTICLE FOUR
                         AUTOMATIC OPTION GRANT PROGRAM

I.  OPTION TERMS

    A.  GRANT DATES.  Option grants shall be made on the dates specified below:

        1.  Each individual serving as a non-employee Board member on the Plan
    Restatement Date shall automatically be granted at that time a Non-Statutory
    Option to purchase 42,000 shares of Common Stock.

        2.  Each individual who is first elected or appointed as a non-employee
    Board member at any time beginning with the 2001 Annual Meeting shall
    automatically be granted, on the date of such initial election or
    appointment, a Non-Statutory Option to purchase 50,000 shares of Common
    Stock.

        3.  Each individual who is re-elected as a non-employee Board member at
    any time beginning with the 2001 Annual Meeting shall automatically be
    granted, on the date of such re-election, a Non-Statutory Option to purchase
    10,000 shares of Common Stock, provided that individual has served as a
    non-employee Board member for at least six (6) months.

    B.  EXERCISE PRICE.

        1.  The exercise price per share shall be equal to one hundred percent
    (100%) of the Fair Market Value per share of Common Stock on the option
    grant date.

        2.  The exercise price shall be payable in one or more of the
    alternative forms authorized under the Discretionary Option Grant Program.
    Except to the extent the sale and remittance procedure specified thereunder
    is utilized, payment of the exercise price for the purchased shares must be
    made on the Exercise Date.

    C.  OPTION TERM.  Each option shall have a term of ten (10) years measured
from the option grant date.

    D.  EXERCISE AND VESTING OF OPTIONS.  Each option shall be immediately
exercisable for any or all of the option shares. Each initial 50,000-share
option shall be immediately vested. However, any shares purchased under the
annual 10,000-share option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each annual 10,000-share option shall
vest, and the Corporation's repurchase right shall lapse, on the first year
anniversary of the option grant date.

    E.  TERMINATION OF BOARD SERVICE.  The following provisions shall govern the
exercise of any options outstanding at the time the Optionee ceases to serve as
a Board member:

        (i) Any option outstanding at the time of the Optionee's cessation of
    Board service for any reason shall remain exercisable for a twelve
    (12)-month period following the date of such cessation of Board service.

        (ii) Any option exercisable in whole or in part by the Optionee at the
    time of death may be exercised by the personal representative of the
    Optionee's estate or the person or persons to whom the option is transferred
    pursuant to the Optionee's will or in accordance with the laws of descent
    and distribution.

        (iii) During the twelve (12)-month exercise period, the option may not
    be exercised in the aggregate for more than the number of vested shares of
    Common Stock for which the option is exercisable at the time of the
    Optionee's cessation of Board service.

                                     VI-11

        (iv) Should the Optionee cease to serve as a Board member by reason of
    death or Permanent Disability, then all shares at the time subject to the
    option shall immediately vest so that such option may, during the twelve
    (12)-month exercise period following such cessation of Board service, be
    exercised for all or any portion of those shares as fully-vested shares of
    Common Stock.

        (v) In no event shall the option remain exercisable after the expiration
    of the option term. Upon the expiration of the twelve (12)-month exercise
    period or (if earlier) upon the expiration of the option term, the option
    shall terminate and cease to be outstanding for any vested shares for which
    the option has not been exercised. However, the option shall, immediately
    upon the Optionee's cessation of Board service for any reason other than
    death or Permanent Disability, terminate and cease to be outstanding to the
    extent the option is not otherwise at that time exercisable for vested
    shares.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

    A. In the event of any Corporate Transaction, the shares of Common Stock at
the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Immediately following the consummation of the Corporate
Transaction, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

    B.  In connection with any Change in Control, the shares of Common Stock at
the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.

    C.  Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation.

    D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.

    E.  The grant of options under the Automatic Option Grant Program shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

III. REMAINING TERMS

    The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for options made under the
Discretionary Option Grant Program.

                                     VI-12

                                  ARTICLE FIVE
                       DIRECTOR FEE OPTION GRANT PROGRAM

I.  OPTION GRANTS

    Each non-employee Board member may elect to apply all or any portion of the
annual retainer fee otherwise payable in cash for his or her service on the
Board to the acquisition of a special option grant under this Director Fee
Option Grant Program. Such election must be filed with the Corporation's Chief
Financial Officer prior to the first day of the calendar year for which the
annual retainer fee which is the subject of that election is otherwise payable.
Each non-employee Board member who files such a timely election shall
automatically be granted an option under this Director Fee Option Grant Program
on the first trading day in January in the calendar year for which the annual
retainer fee which is the subject of that election would otherwise be payable.

II. OPTION TERMS

    Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.

    A.  EXERCISE PRICE.

        1.  The exercise price per share shall be equal to thirty-three and
    one-third percent (33 1/3%) of the Fair Market Value per share of Common
    Stock on the option grant date.

        2.  The exercise price shall become immediately due upon exercise of the
    option and shall be payable in one or more of the alternative forms
    authorized under the Discretionary Option Grant Program. Except to the
    extent the sale and remittance procedure specified thereunder is utilized,
    payment of the exercise price for the purchased shares must be made on the
    Exercise Date.

    B.  NUMBER OF OPTION SHARES.  The number of shares of Common Stock subject
to the option shall be determined pursuant to the following formula (rounded
down to the nearest whole number):

    X = A  DIVIDED BY (B X 66 2/3%), where

    X is the number of option shares,

    A is the portion of the annual retainer fee subject to the non-employee
Board member's election, and

    B is the Fair Market Value per share of Common Stock on the option grant
date.

    C.  EXERCISE AND TERM OF OPTIONS.  The option shall become exercisable for
fifty percent (50%) of the option shares upon the Optionee's completion of the
first six (6) months of Board service in the calendar year for which his or her
election under this Director Fee Option Grant Program is in effect, and the
balance of the option shares shall become exercisable in a series of six
(6) successive equal monthly installments upon the Optionee's completion of each
additional month of Board service during that calendar year. Each option shall
have a maximum term of ten (10) years measured from the option grant date.

    D.  TERMINATION OF BOARD SERVICE.  Should the Optionee cease Board service
for any reason (other than death or Permanent Disability) while holding one or
more options under this Director Fee Option Grant Program, then each such option
shall remain exercisable, for any or all of the shares for which the option is
exercisable at the time of such cessation of Board service, until the EARLIER of
(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Board
service. However, each option held by the Optionee under this Director Fee
Option Grant Program at the time of his or her cessation of Board service shall
immediately terminate and cease to remain outstanding with respect to any and
all shares of Common Stock for which the option is not otherwise at that time
exercisable.

                                     VI-13

    E.  DEATH OR PERMANENT DISABILITY.  Should the Optionee's service as a Board
member cease by reason of death or Permanent Disability, then each option held
by such Optionee under this Director Fee Option Grant Program shall immediately
become exercisable for all the shares of Common Stock at the time subject to
that option, and the option may be exercised for any or all of those shares as
fully-vested shares until the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of such cessation of Board service.

    Should the Optionee die after cessation of Board service but while holding
one or more options under this Director Fee Option Grant Program, then each such
option may be exercised, for any or all of the shares for which the option is
exercisable at the time of the Optionee's cessation of Board service (less any
shares subsequently purchased by Optionee prior to death), by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. Such right of exercise shall lapse, and the
option shall terminate, upon the EARLIER of (i) the expiration of the ten
(10)-year option term or (ii) the three (3)-year period measured from the date
of the Optionee's cessation of Board service.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

    A. In the event of any Corporate Transaction while the Optionee remains a
Board member, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the EARLIER of (i) the expiration of the ten (10)-year option term or
(ii) the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service.

    B.  In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. The
option shall remain so exercisable until the EARLIER or (i) the expiration of
the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service.

    C.  Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding option grants. The Optionee shall in return be entitled to a
cash distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time subject to
each surrendered option (whether or not the Optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.

    D. The grant of options under the Director Fee Option Grant Program shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

IV. REMAINING TERMS

    The remaining terms of each option granted under this Director Fee Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.

                                     VI-14

                                  ARTICLE SIX
                                 MISCELLANEOUS

I.  FINANCING

    A. The Plan Administrator may permit any Optionee to pay the option exercise
price under the Discretionary Option Grant Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In all events, the maximum credit available to the Optionee
may not exceed the sum of (i) the aggregate option exercise price payable for
the purchased shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee in connection with the option
exercise.

    B.  The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the Corporation in
whole or in part upon such terms as the Plan Administrator may deem appropriate.

II. TAX WITHHOLDING

    A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or upon the vesting of such shares under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.

    B.  The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted under the Director Fee Option Grant
Program) with the right to use shares of Common Stock in satisfaction of all or
part of the Taxes incurred by such holders in connection with the exercise of
their options or the vesting of their shares. Such right may be provided to any
such holder in either or both of the following formats:

        (i) STOCK WITHHOLDING: The election to have the Corporation withhold,
    from the shares of Common Stock otherwise issuable upon the exercise of such
    Non-Statutory Option or the vesting of such shares, a portion of those
    shares with an aggregate Fair Market Value equal to the percentage of the
    Taxes (not to exceed one hundred percent (100%)) designated by the holder.

        (ii) STOCK DELIVERY: The election to deliver to the Corporation, at the
    time the Non-Statutory Option is exercised or the shares vest, one or more
    shares of Common Stock previously acquired by such holder (other than in
    connection with the option exercise or share vesting triggering the Taxes)
    with an aggregate Fair Market Value equal to the percentage of the Taxes
    (not to exceed one hundred percent (100%)) designated by the holder.

III. EFFECTIVE DATE AND TERM OF THE PLAN

    A. The Plan was initially adopted by the Board on April 24, 1995. The Plan
was amended on July 15, 1996 to increase the number of shares of Common Stock
available for issuance by 15,000 shares. The Plan was subsequently amended and
restated on October 21, 1997, to effect the following changes: (i) increase the
number of shares by an additional 1,413,333 shares, (ii) provide that the share
reserve shall automatically increase on the first trading day of each fiscal
year beginning with the 1999 fiscal year by an amount equal to one percent (1%)
of the shares outstanding on the last trading day of the preceding fiscal year,
(iii) implement a limit on the number of shares for which any one individual may
be granted options or separately exercisable stock appreciation rights,
(iv) implement the Salary Investment Option Grant, Automatic Option Grant and
Director Fee Option Grant Programs, (v) extend eligibility under the
Discretionary Option Grant Program to all employees of the Corporation (or any
Parent or Subsidiary), non-employee members of the Board or the board of

                                     VI-15

directors of any Parent or Subsidiary and consultants and other advisors who
provide services to the Corporation (or any parent or Subsidiary), (vi) allow
any unvested shares issued under the Plan and subsequently repurchased by the
Company at the option exercise price paid per share to be reissued under the
Plan, (vii) eliminate the stock issuance and dividend equivalent right features
of the Plan, (viii) incorporate the Corporation's existing 1994 Non-Employee
Stock Option Plan and the Incentive Stock Option Plan so that the Plan will
serve as the successor to those plans and (ix) effect a series of additional
changes to the provisions of the Plan (including the stockholder approval
requirements) in order to allow the Plan Administrator more flexibility and to
take advantage of the recent amendments to Rule 16b-3 of the 1934 Act. The Plan
was subsequently amended on February 11, 1998 to increase the share reserve by
an additional 500,000 shares.

    B.  On February 21, 2001, the Board amended the Plan to: (i) modify the
number of shares and vesting schedule applicable to the initial option grants
under the Automatic Option Grant Program from 42,000 shares vesting over a
period of two years to 50,000 shares vesting immediately and (ii) modify the
number of shares and vesting schedule applicable to the formerly bi-annual
grants under the Automatic Option Grant Program from 12,000 shares vesting over
a period of two years to an annual grant of 10,000 shares vesting over one year.
On May 16, 2001, the Board amended the Plan to increase the number of shares of
Common Stock available for issuance under the Plan by 2,165,664 shares. On
September 26, 2001, the Board amended the Plan to implement a maximum annual
limit of 500,000 shares of Common Stock by which the share reserve may increase
annually over the term of the Plan under the automatic share increase provision
(collectively the "2001 Amendments"). The 2001 Amendments remain subject to
approval by the stockholders at the 2001 Annual Meeting.

    C.  The Plan shall serve as the successor to the Predecessor Plans, and no
further option grants or direct stock issuances shall be made under the
Predecessor Plans after the date of stockholder approval of this restatement.
All options outstanding under the Predecessor Plans on the Plan Restatement Date
have been incorporated into the Plan and shall be treated as outstanding options
under the Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
no provision of the Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such incorporated options with respect
to their acquisition of shares of Common Stock.

    D. The Plan shall terminate upon the EARLIEST of (i) April 23, 2005,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan
termination, all outstanding options and unvested stock issuances shall continue
to have force and effect in accordance with the provisions of the documents
evidencing such options.

IV. AMENDMENT OF THE PLAN

    A. The Board shall have complete and exclusive power and authority to amend
or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect any rights and obligations with respect to
options, stock appreciation rights or unvested stock issuances at the time
outstanding under the Plan unless the Optionee consents to such amendment or
modification. In addition, amendments to the Plan shall be subject to approval
of the Corporation's stockholders to the extent required by applicable laws or
regulations.

    B.  Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program that are in excess of the number of shares
then available for issuance under the Plan, provided any excess shares actually
issued under such program are held in escrow until there is obtained stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess grants
are made, then (i) any unexercised

                                     VI-16

options granted on the basis of such excess shares shall terminate and cease to
be outstanding and (ii) the Corporation shall promptly refund to the Optionees
the exercise paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.

V.  USE OF PROCEEDS

    Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

    A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan and the issuance of any shares of Common Stock
upon the exercise of any option or stock appreciation right shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options and stock
appreciation rights granted under it and the shares of Common Stock issued
pursuant to it.

    B.  No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws and all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

VII. NO EMPLOYMENT/SERVICE RIGHTS

    Nothing in the Plan shall confer upon the Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining such person) or of the Optionee, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time for
any reason, with or without cause.

                                     VI-17

                                    APPENDIX

    The following definitions shall be in effect under the Plan:

    A.  AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.

    B.  BOARD shall mean the Corporation's Board of Directors.

    C.  CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:

        (i) the acquisition, directly or indirectly, by any person or related
    group of persons (other than the Corporation or a person that directly or
    indirectly controls, is controlled by, or is under common control with, the
    Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
    the 1934 Act) of securities possessing more than fifty percent (50%) of the
    total combined voting power of the Corporation's outstanding securities
    pursuant to a tender or exchange offer made directly to the Corporation's
    stockholders, which the Board does not recommend such stockholders to
    accept, or

        (ii) a change in the composition of the Board over a period of
    thirty-six (36) consecutive months or less such that a majority of the Board
    members ceases, by reason of one or more contested elections for Board
    membership, to be comprised of individuals who either (I) have been Board
    members continuously since the beginning of such period or (II) have been
    elected or nominated for election as Board members during such period by at
    least a majority of the Board members described in clause (I) who were still
    in office at the time the Board approved such election or nomination.

    D.  CODE shall mean the Internal Revenue Code of 1986, as amended.

    E.  COMMON STOCK shall mean the Corporation's common stock.

    F.  CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

        (i) a merger or consolidation in which securities possessing more than
    fifty percent (50%) of the total combined voting power of the Corporation's
    outstanding securities are transferred to a person or persons different from
    the persons holding those securities immediately prior to such transaction;
    or

        (ii) the sale, transfer or other disposition of all or substantially all
    of the Corporation's assets in complete liquidation or dissolution of the
    Corporation.

    G.  CORPORATION shall mean Endorex Corporation, a Delaware corporation, and
any corporate successor to all or substantially all of the assets or voting
stock of Endorex Corporation which shall by appropriate action adopt the Plan.

    H.  DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.

    I.  DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock option
grant in effect for non-employee Board members under Article Four of the Plan.

    J.  EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

    K.  EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.

                                     VI-18

    L.  FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

        (i) If the Common Stock is at the time traded on the Nasdaq National
    Market, then the Fair Market Value shall be the closing selling price per
    share of Common Stock on the date in question, as such price is reported by
    the National Association of Securities Dealers on the Nasdaq National Market
    or any successor system. If there is no closing selling price for the Common
    Stock on the date in question, then the Fair Market Value shall be the
    closing selling price on the last preceding date for which such quotation
    exists.

        (ii) If the Common Stock is at the time listed on any Stock Exchange,
    then the Fair Market Value shall be the closing selling price per share of
    Common Stock on the date in question on the Stock Exchange determined by the
    Plan Administrator to be the primary market for the Common Stock, as such
    price is officially quoted in the composite tape of transactions on such
    exchange. If there is no closing selling price for the Common Stock on the
    date in question, then the Fair Market Value shall be the closing selling
    price on the last preceding date for which such quotation exists.

        (iii) If the Common Stock is at the time traded on the Nasdaq OTC
    Market, then the Fair Market Value shall be the mean of the highest bid and
    lowest asked prices per share of Common Stock on the date in question, as
    such prices are quoted by the National Association of Securities Dealers. If
    both bid and asked prices are not available for the date in question, then
    the Fair Market Value shall be the average of the highest bid and lowest
    asked prices for the last preceding date for which such quotations exist.

    M.  HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such stockholders
to accept.

    N.  INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.

    O.  INVOLUNTARY TERMINATION shall mean the termination of the Service of any
individual which occurs by reason of:

        (i) such individual's involuntary dismissal or discharge by the
    Corporation for reasons other than Misconduct, or

        (ii) such individual's voluntary resignation following (A) a change in
    his or her position with the Corporation which materially reduces his or her
    level of responsibility, (B) a reduction in his or her level of compensation
    (including base salary, fringe benefits and participation in corporate-
    performance based bonus or incentive programs) by more than fifteen percent
    (15%) or (C) a relocation of such individual's place of employment by more
    than fifty (50) miles, provided and only if such change, reduction or
    relocation is effected by the Corporation without the individual's consent.

    P.  MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee, any unauthorized use or disclosure by such person
of confidential information or trade secrets of the Corporation (or any Parent
or Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the

                                     VI-19

dismissal or discharge of any Optionee or other person in the Service of the
Corporation (or any Parent or Subsidiary).

    Q.  1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

    R.  NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

    S.  OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant, Automatic Option Grant or Director Fee Option Grant
Program.

    T.  PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

    U.  PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of
the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more. However, solely
for the purposes of the Director Fee Option Grant Program, Permanent Disability
or Permanently Disabled shall mean the inability of the non-employee Board
member to perform his or her usual duties as a Board member by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.

    V.  PLAN shall mean the Corporation's Amended and Restated 1995 Omnibus
Incentive Plan, as set forth in this document.

    W.  PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under that program with respect to the persons under
its jurisdiction.

    X.  PLAN RESTATEMENT DATE shall mean October 21, 1997, the date on which the
Plan was restated by the Board.

    Y.  PREDECESSOR PLANS shall mean the 1994 Non-Employee Stock Option Plan and
the Incentive Stock Option Plan.

    Z.  PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders.

    AA.  SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment
grant program in effect under the Plan.

    BB.  SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant
Program with respect to eligible persons other than Section 16 Insiders.

    CC.  SECTION 16 INSIDER shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

    DD.  SERVICE shall mean the performance of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.

                                     VI-20

    EE.  STOCK EXCHANGE shall mean either the American Stock Exchange or the New
York Stock Exchange.

    FF.  SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

    GG.  TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the surrendered option is an Incentive Option, the
Take-Over Price shall not exceed the clause (i) price per share.

    HH.  TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting
of those shares.

    II.  10% STOCKHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).

                                     VI-21

                                  APPENDIX VII

            CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
                             OF ENDOREX CORPORATION

            CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
                             OF ENDOREX CORPORATION

I. PURPOSE

    The primary function of the Audit Committee is to assist the board of
directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Corporation to
any governmental body or the public; the Corporation's systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the corporation's policies, procedures and practices
at all levels. The Audit Committee's primary duties and responsibilities are to:

    - Serve as an independent and objective party to monitor the Corporation's
      financial reporting process and internal control system.

    - Review and appraise the audit efforts of the Corporation's independent
      accountants.

    - Provide an open avenue of communication among the independent accountants,
      financial and senior management, and the board of directors.

    The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV. of this Charter.

II. COMPOSITION

    The Audit Committee shall be comprised of two or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Corporation or an outside consultant.

    The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.

III. MEETINGS

    The Committee shall meet at least twice annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
accountants in executive sessions to discuss any matters that the Committee or
each of these groups believe should be discussed privately. In addition, the
Committee or at least its Chair should meet with the independent accountants and
management quarterly to review the Corporations financials consistent with IV.
3. below.

    At least annually, and more frequently as circumstances suggest, the
Committee shall report to the board of directors on its actions and its
recommendations.

                                     VII-1

IV. RESPONSIBILITIES AND DUTIES

    To fulfill its responsibilities and duties the Audit Committee shall:

                            DOCUMENTS/REPORTS REVIEW

1.  Review and update this Charter periodically, at least annually, as
    conditions dictate.

2.  Review the organization's annual financial statements and any reports or
    other financial information submitted to any governmental body, or the
    public, including any certification, report, opinion, or review rendered by
    the independent accountants.

3.  Review with financial management and the independent accountants the 10-Q
    prior to its filing or prior to the release of earnings. The Chair of the
    Committee may represent the entire Committee for purposes of this review.

                            INDEPENDENT ACCOUNTANTS

4.  Recommend to the board of directors the selection of the independent
    accountants, considering independence and effectiveness and approve the fees
    and other compensation to be paid to the independent accountants. On an
    annual basis, the Committee should review and discuss with the accountants
    all significant relationships the accountants have with the Corporation to
    determine the accountants' independence.

5.  Consider, in consultation with management and the independent accountants,
    the audit scope and plan of the independent accountants.

6.  Review the performance of the independent accountants and approve any
    proposed discharge of the independent accountants when circumstances
    warrant.

7.  Periodically consult with the independent accountants out of the presence of
    management about internal controls and the fullness and accuracy of the
    organization's financial statements.

                         FINANCIAL REPORTING PROCESSES

8.  In consultation with the independent accountants, review the integrity of
    the organization's financial reporting processes, both internal and
    external.

9.  Consider the independent accountants' judgments about the quality and
    appropriateness of the Corporation's accounting principles as applied in its
    financial reporting.

10. Consider and approve, if appropriate, major changes to the Corporation's
    auditing and accounting principles and practices as suggested by the
    independent accountants or management.

                              PROCESS IMPROVEMENT

11. Establish independent systems of reporting to the Audit Committee by both
    management and the independent accountants regarding any significant
    judgments made in management's preparation of the financial statements and
    the view of each as to appropriateness of such judgments.

12. Following completion of the annual audit, review with each of management and
    the independent accountants any significant difficulties encountered during
    the course of the audit, including any restrictions on the scope of work or
    access to required information.

13. Review any significant disagreement among management and the independent
    accountants in connection with the preparation of the financial statements.

14. Review with the independent accountants and management the extent to which
    changes or improvements in financial or accounting practices, as approved by
    the Audit Committee, have been

                                     VII-2

    implemented. (This review should be conducted at an appropriate of time
    subsequent to implementation of changes or improvements, as decided by the
    Committee.)

                          ETHICAL AND LEGAL COMPLIANCE

15. Review, with the organization's counsel, legal compliance matters including
    corporate securities trading policies.

16. Review, with the organization's counsel, any legal matter that could have a
    significant impact on the organization's financial statements.

17. Perform any other activities consistent with this Charter, the Corporation's
    By-laws and governing law, as the Committee or the Board deems necessary or
    appropriate.

                                     VII-3