CYTRX CORP, DEF 14A, 1999-04-23

CYTRX CORP
DEF 14A, 1999-04-23
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

CytRx Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

CYTRX CORPORATION
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092

May 10, 1999

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
CytRx Corporation on Thursday, June 10, 1999, at 10:00 a.m. local time at the
Hilton Hotel at Peachtree Corners, 5993 Peachtree Industrial Boulevard,
Norcross, Georgia 30092.

At this meeting, you will hear a current report on the activities of CytRx.
You will also have the opportunity to meet members of the Board of Directors and
the management team.

Two items of business, which will be considered and voted upon this year,
are explained in the accompanying Proxy Statement. Even if you are planning to
attend, please complete the enclosed proxy card and return it in the enclosed
envelope so that your shares may be voted. You will still be able to vote your
shares in person if you attend the Annual Meeting.

On behalf of the Officers and Directors, I thank you for your interest in
CytRx and your confidence in its future.

Sincerely,
/s/ Jack J. Luchese

Jack J. Luchese
President and
Chief Executive Officer
<PAGE> 3

CYTRX CORPORATION
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092

NOTICE TO THE HOLDERS OF COMMON STOCK
OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1999

Notice is hereby given to the holders of the $.001 par value per share
Common Stock (the "Common Stock") of CytRx Corporation (the "Company") that the
Annual Meeting of Stockholders of the Company will be held at the Hilton Hotel
at Peachtree Corners, 5993 Peachtree Industrial Boulevard, Norcross, Georgia
30092, on Thursday, June 10, 1999, at 10:00 a.m., local time (the "Annual
Meeting"), for the following purposes:

(i) To elect two Class II directors to serve until the 2002 Annual Meeting
of Stockholders;

(ii) To ratify the selection of Ernst & Young LLP as independent auditors
for the fiscal year ending December 31, 1999; and

(iii) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.

Only those stockholders of record at the close of business on April 12,
1999, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The transfer books will not be closed. A complete list of
stockholders entitled to vote at the Annual Meeting will be available at the
Annual Meeting.

By Order of the Board of Directors,
/s/Mark W. Reynolds
Mark W. Reynolds
Secretary

May 10, 1999

WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN,
DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY APPOINTMENT AND VOTE IN PERSON.
<PAGE> 4

CYTRX CORPORATION
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092

PROXY STATEMENT

May 10, 1999

INTRODUCTION

This Proxy Statement is furnished to holders of the $.001 par value per
share Common Stock ("Common Stock") of CytRx Corporation, a Delaware corporation
(the "Company" or "CytRx"), in connection with the solicitation of proxies by
the Company's Board of Directors from holders of the outstanding shares of
Common Stock for use at the Annual Meeting of Stockholders to be held at 10:00
a.m. local time at the Hilton Hotel at Peachtree Corners, 5993 Peachtree
Industrial Boulevard, Norcross, Georgia 30092, on Thursday, June 10, 1999, and
at any adjournments thereof (the "Annual Meeting").

At the Annual Meeting, the stockholders of the Company will vote upon the
following matters: (i) a proposal to elect two Class II directors to the
Company's Board of Directors; (ii) a proposal to ratify the selection of Ernst &
Young LLP as independent auditors for the fiscal year ending December 31, 1999;
and (iii) such other matters as may properly come before the Annual Meeting or
any adjournment thereof.

The Company's mailing address and the location of its principal executive
offices are 154 Technology Parkway, Norcross, Georgia 30092. This Proxy
Statement and the accompanying Proxy are first being mailed to stockholders of
the Company on or about May 10, 1999.

STOCKHOLDERS ENTITLED TO VOTE

Only stockholders of record of the Company at the close of business on
April 12, 1999 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. Notwithstanding the Record Date specified above, the
Company's stock transfer books will not be closed and shares may be transferred
subsequent to the Record Date. However, all votes must be cast in the names of
stockholders of record on the Record Date.

On the Record Date, there were 7,640,854 shares of the Common Stock issued
and outstanding held by approximately 1,500 stockholders of record. Holders of
Common Stock are entitled to one vote per share.

QUORUM AND VOTING REQUIREMENTS

The Bylaws provide that the holders of shares of the Common Stock entitled
to cast a majority of the votes on the matters at issue at the Annual Meeting,
present in person or by proxy, shall constitute a quorum. For the purpose of
determining the presence of a quorum, abstentions will be counted as present,
but broker non-votes will not be counted.

The affirmative vote of a plurality of the votes cast at the Annual Meeting
will be required for approval of Proposal I to elect two Class II directors to
the Company's Board of Directors. The affirmative vote of a majority of the
votes cast at the Annual Meeting will be required for approval of Proposal II,
to ratify Ernst & Young LLP as independent auditors for the fiscal year ending
December 31, 1999.

With regard to the election of directors: (i) votes that are withheld will
be excluded entirely from the vote and will have no effect and votes that are
withheld for a particular nominee will be excluded from the vote for that
nominee only; and (ii) abstentions and broker non-votes will have no effect
since approval by a specified percentage of the shares present or outstanding is
not required.

Abstentions may be specified on proposals other than the election of
directors. Abstentions will be considered present and entitled to vote at the
meeting but will not be counted as votes cast. Therefore, abstentions will have
no effect on the adoption of Proposals II. Broker non-votes are not considered
entitled to vote and thus will have no effect the adoption of any of the
proposals.
<PAGE> 5

PROXIES

If the enclosed Proxy is executed, returned in time and not revoked, the
shares represented thereby will be voted in accordance with the instructions
indicated in such Proxy. IF NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED
IN FAVOR OF ALL PROPOSALS DESCRIBED IN THIS PROXY STATEMENT AND, IF THE COMPANY
DID NOT HAVE NOTICE ON OR BEFORE MARCH 27, 1999 OF ANY OTHER MATTERS WHICH
PROPERLY COMES BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF, IN THE
BEST JUDGEMENT OF THE HOLDERS OF SUCH PROXIES AS TO SUCH OTHER MATTERS.

A stockholder who has given a Proxy may revoke it at any time prior to its
exercise at the Annual Meeting by either (i) giving written notice of revocation
to the Secretary of the Company, (ii) properly submitting to the Company a duly
executed Proxy bearing a later date, or (iii) appearing at the Annual Meeting
and voting in person. All written notices of revocation of Proxies should be
addressed as follows: CytRx Corporation, 154 Technology Parkway, Norcross,
Georgia 30092, Attention: Mark W. Reynolds, Secretary.

PROPOSAL I
ELECTION OF DIRECTORS

Pursuant to the Company's Bylaws, the Board of Directors has set the number
of directors of the Company at six and proxies cannot be voted for a greater
number of persons. The Restated Certificate of Incorporation and ByLaws of the
Company provide that the members of the Board of Directors shall be divided into
three classes, one class to be elected at each annual meeting of stockholders
and to serve for a term of three years.

CURRENT NOMINEES

The Board of Directors has nominated the following individuals for election
by the holders of Common Stock as Class II directors of the Company to serve
until the Company's 2002 annual meeting of stockholders or until their
successors are elected and qualified, or their earlier death, resignation or
removal.

Raymond C. Carnahan, Jr.
Herbert H. McDade, Jr.

The persons designated as proxies intend to vote the shares represented
thereby in favor of the election to the Board of Directors of the nominees whose
names appear above, unless either authority to vote for the nominees is withheld
or such proxy has previously been revoked. It is believed that the nominees will
be available and able to serve as directors. In the event that the nominees are
unable to serve (which is not anticipated), the persons designated as proxies
will cast votes for such other persons as they may select. It is anticipated
that management stockholders of the Company will vote for the election of the
nominees.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR ELECTION AS
DIRECTORS. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE SHARES
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE
VOTED "FOR" THE NOMINEES. THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES OF
SHARES OF COMMON STOCK REPRESENTED AND ENTITLED TO VOTE IN THE ELECTION AT THE
ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE ELECTION OF THE
NOMINEES.

CERTAIN INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS

The following table sets forth, for the nominees for election as directors,
and for those persons who were elected as directors of the Company at previous
annual meetings of stockholders, the names and ages of such persons, the year in
which each such person was first elected a director, all positions and offices
with the Company held by each such person, the business experience during at
least the last five years of each such person, and any other directorships held
by such person in companies that are subject to the reporting requirements of
the Securities Exchange Act of 1934 or any company registered as an investment
company
2
<PAGE> 6

under the Investment Company Act of 1940. None of the following persons serves
as a director pursuant to any arrangement or understanding between him and any
other person. For information concerning membership on Committees of the Board
of Directors, see "Meetings of the Board of Directors and Committees" below. For
information concerning directors' ownership of Common Stock, see "Beneficial
Owners of More Than Five Percent of the Company's Common Stock; Shares Held by
Directors and Executive Officers" below.

<TABLE>
<CAPTION>
CURRENT
DIRECTOR TERM POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
NAME AND AGE SINCE EXPIRES DURING AT LEAST THE PAST FIVE YEARS, AND OTHER DIRECTORSHIPS
- ------------ -------- ------- ------------------------------------------------------------
<S> <C> <C> <C>
Jack L. Bowman (66).................. 1994 2000 From 1987 until his retirement at the end of 1993, Mr.
Bowman was Company Group Chairman at Johnson & Johnson
Company. From 1991 to 1993, Mr. Bowman was responsible for
Johnson & Johnson Company's diagnostic, blood glucose
monitoring, and certain over-the-counter pharmaceutical
businesses. Prior to that assignment at Johnson & Johnson,
he was responsible for a major portion of Johnson &
Johnson's global pharmaceutical businesses. From 1983 to
1987, he was Executive Vice President of American Cyanamid
Company where he was responsible for the pharmaceutical,
medical device and over the counter and toiletry
businesses. Mr. Bowman has also served as President,
Lederle Laboratories Division and Executive Vice
President, CIBA-GEIGY Pharmaceutical Division. Mr. Bowman
also serves as a director of NeoRx Corporation, Targeted
Genetics, Inc., Cell Therapeutics, Inc., Cellergy
Pharmaceuticals, Inc., Osiris Therapeutics, Inc. and
Vaxcel, Inc.
Raymond C. Carnahan, Jr. (73)........ 1991 1999 Mr. Carnahan has over 39 years of experience in cost
(Current Nominee) controls and operational systems in a variety of indus-
tries. From 1974 until his retirement in 1991, Mr.
Carnahan served as Manager, International Cost Analysis
planning for Johnson & Johnson International. Mr. Carnahan
has provided consulting services to Waterford-Wedgewood
Corporation in England and to Torf Pharmaceutical
Corporation in Poland and serves as President for the
Morristown Memorial Hospital Chaplaincy Service in
Morristown, New Jersey.
Lyle A. Hohnke (56).................. 1998 2001 Dr. Hohnke served as a director of Zynaxis, Inc. from April
1996 until its merger with Vaxcel, Inc. (a then
wholly-owned subsidiary of CytRx) in May 1997, at which
time he was elected to the Vaxcel, Inc. Board of
Directors. Since 1994, Dr. Hohnke has served as a member
of Javelin Capital Fund, LLC, a general partner of Javelin
Ventures, LP, a company engaged in venture capital
investments. From 1991 to 1994 Dr. Hohnke was General
Partner for Heart Land Seed Capital Fund. Dr. Hohnke also
serves as a director of Heska Corporation as well as a
number of privately-held companies.
</TABLE>

3
<PAGE> 7

<TABLE>
<CAPTION>
CURRENT
DIRECTOR TERM POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
NAME AND AGE SINCE EXPIRES DURING AT LEAST THE PAST FIVE YEARS, AND OTHER DIRECTORSHIPS
- ------------ -------- ------- ------------------------------------------------------------
<S> <C> <C> <C>
Max Link (58)........................ 1996 2000 From May 1993 to June 1994, Dr. Link served as the Chief
Executive Officer of Corange U.S. Holdings, Inc. (the
holding company for Boehringer Mannheim Therapeutics,
Boehringer Mannheim Diagnostics and DePuy International).
From 1992 to 1993, Dr. Link was Chairman of Sandoz Pharma.
From 1987 to 1992, Dr. Link was the Chief Executive
Officer of Sandoz Pharma, Ltd. and a member of the
Executive Board of Sandoz, Ltd., Basel. Prior to 1987, Dr.
Link served in various capacities with the United States
operations of Sandoz, including President and Chief
Executive Officer. Dr. Link also serves as a director of
Alexion Pharmaceuticals, Inc., Human Genome Sciences,
Inc., Procept, Inc., Cell Therapeutics, Inc. and Access
Pharmaceuticals.
Jack J. Luchese (50)................. 1989 2001 Mr. Luchese was named President and Chief Executive Officer
of the Company in March 1989 and became Chairman of the
Board in June 1995. Prior to joining the Company, Mr.
Luchese served as Vice President and General Manager of
the Armour Pharmaceutical Corporation, and as Vice
President, Corporate Business Development and a member of
the Management Committee of Rorer Group, Inc. (now Rhone-
Poulenc Rorer). Prior to joining Rorer Group, Inc. , Mr.
Luchese was with Johnson & Johnson Company for 15 years
where he held various positions in business development,
licensing, sales, new product marketing, and finance. Mr.
Luchese also serves as a director of Vaxcel, Inc.
Herbert H. McDade, Jr. (72).......... 1990 1999 From 1989 to 1996, Mr. McDade served as Chairman, President
(Current Nominee) and Chief Executive Officer of Chemex Pharmaceuticals,
Inc., and since January 1996 he has served as Chairman of
Access Pharmaceutical Co. (the successor corporation to
Chemex). From 1986 to 1989, he was Chairman and President
of Armour Pharmaceutical Corporation, a wholly-owned
subsidiary of Rorer Group, Inc. (now Rhone-Poulenc Rorer).
Prior to 1986, Mr. McDade served as Vice President of the
Revlon Corporation. Mr. McDade also serves as a director
of Vaxcel, Inc.
</TABLE>

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

Board of Directors. The property, affairs and business of the Company are
under the general management of its Board of Directors as provided by the laws
of Delaware and the Bylaws of the Company. The Company has standing Audit and
Compensation Committees of the Board of Directors.

The Board of Directors held seven meetings during 1998. Each director
attended at least 75% of the combined total meetings of the Board and the
committees on which they served during 1998, with the exception of Dr. Hohnke,
who first became a Board member in June 1998.

Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the

4
<PAGE> 8

independence of the independent public accountants, considers the range of audit
and non-audit fees and reviews the adequacy of the Company's internal accounting
controls. The current members of the Audit Committee are Raymond C. Carnahan,
Jr. (Chairman), Jack L. Bowman and Lyle A. Hohnke. The Audit Committee held one
meeting during 1998.

Compensation Committee. The Compensation Committee is authorized to review
annual salaries and bonuses and has the authority to determine the recipients of
options, the time or times at which options shall be granted, the exercise price
of each option, and the number of shares to be issuable upon the exercise of
each option. The Committee also is authorized to interpret the CytRx Corporation
1986, 1994 and 1995 Stock Option Plans and the CytRx Corporation 1998 Long-Term
Incentive Plan (collectively, "the Plans"), to prescribe, amend and rescind
rules and regulations relating to the Plans, to determine the term and
provisions of the respective option agreements, and to make all other
determinations deemed necessary or advisable for the administration of the
Plans. Its current members are Herbert H. McDade, Jr. (Chairman), Raymond C.
Carnahan, Jr. and Lyle A. Hohnke. The Compensation Committee held three meetings
during 1998.

COMPENSATION OF DIRECTORS

Directors who are employees of the Company receive no compensation for
their services as directors or as members of committees. Non-employee directors
receive a fee of (i) $3,000 for each two-day Board meeting attended, $2,000 for
single-day Board meetings and $750 for Board meetings attended by teleconference
and (ii) $500 for each committee meeting attended. Non-employee directors who
chair a Board committee receive an additional $250 for each committee meeting
attended.

Each non-employee director receives an initial stock option grant to
purchase 5,000 shares of Common Stock upon the date he or she first becomes a
member of the Board. Options to purchase 2,500 shares of Common Stock are
granted to each non-employee director annually. Stock option grants to directors
pursuant to the Plan discussed above contain the same terms and provisions as
stock option grants to employees, except that options granted to directors are
considered Non-Qualified Stock Options for income tax reporting purposes.
Non-employee directors who also serve as a director of one of the Company's
majority-owned subsidiaries receive an initial stock option grant to purchase
5,000 shares of the subsidiary's common stock upon the date he or she first
becomes a member of the subsidiary Board and an annual stock option grant to
purchase 2,500 shares of the subsidiary's Common Stock.

On April 8, 1998, each of the then non-employee directors (Mssrs. Bowman,
Carnahan, Link and McDade) received a special stock option grant equivalent to
50% of their options outstanding at that date. Such options contain vesting
criteria contingent upon specified price targets for CytRx's Common Stock.

During 1998, Mr. Raymond C. Carnahan, Jr. performed certain consultation
services for the Company for which he received a fee of $2,000.

5
<PAGE> 9

BENEFICIAL OWNERS OF MORE THAN FIVE PERCENT OF THE COMPANY'S COMMON STOCK;
SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS

Based solely upon information made available to the Company, the following
table sets forth certain information with respect to the beneficial ownership of
Common Stock as of April 12, 1999 by (i) each person who is known by the Company
to beneficially own more than five percent of the Common Stock; (ii) each
director and nominee for director of the Company; (iii) each of the Named
Executive Officers (as defined under "Executive Compensation" below); and (iv)
all officers and directors as a group. Except as otherwise indicated, the
holders listed below have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
-------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENTAGE(1)
- ------------------------------------ --------- -------------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS(2):
Jack L. Bowman(3)........................................... 13,746 *%
Raymond C. Carnahan, Jr.(4)................................. 12,342 *
R. Martin Emanuele(5)....................................... 153,543 2.0
William B. Fleck(6)......................................... 102,331 1.3
J. Michael Grindel.......................................... 82,931 1.1
Max Link(7)................................................. 19,582 *
Jack J. Luchese(8).......................................... 1,306,134 14.7
Herbert H. McDade, Jr.(9)................................... 20,972 *
Mark W. Reynolds(10)........................................ 108,729 1.4
All executive officers and directors as a group (10
persons)(11).............................................. 1,821,976 19.5

OTHER 5% STOCKHOLDERS:
Robert L. Hunter, Jr........................................ 517,428 6.8
University of Texas Medical School
Department of Pathology
6431 Fannin MSB2136
Houston, Texas 77030
</TABLE>

- ---------------

* Less than 1%.
(1) Based on 7,640,854 shares of Common Stock outstanding on April 12, 1999.
(2) The business address of all such persons is: c/o CytRx Corporation, 154
Technology Parkway, Norcross, Georgia 30092.
(3) Includes options to purchase 13,021 shares of Common Stock exercisable
within 60 days.
(4) Includes options to purchase 12,092 shares of Common Stock exercisable
within 60 days.
(5) Includes options to purchase 136,097 shares of Common Stock exercisable
within 60 days.
(6) Includes options to purchase 87,495 shares of Common Stock exercisable
within 60 days.
(7) Includes options to purchase 2,041 shares of Common Stock exercisable
within 60 days.
(8) Includes warrants to purchase 1,238,677 shares of Common Stock exercisable
within 60 days.
(9) Includes options to purchase 19,972 shares of Common Stock exercisable
within 60 days.
(10) Includes options to purchase 92,084 shares of Common Stock exercisable
within 60 days.
(11) Includes options and warrants to purchase 1,680,645 shares of Common Stock
exercisable within 60 days.

EXECUTIVE OFFICERS OF THE COMPANY

Except for Jack J. Luchese, discussed above under "Certain Information
Concerning Nominee and Continuing Directors", the following table sets forth the
names of the executive officers of the Company, their ages, their positions with
the Company and their principal occupations and employers for at least the last
five years. For information concerning executive officers' ownership of Common
Stock, see "Beneficial Owners of

6
<PAGE> 10

More Than Five Percent of the Company's Common Stock; Shares Held by Directors
and Executive Officers."

<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY AND PRINCIPAL OCCUPATIONS
NAME AGE DURING AT LEAST THE PAST FIVE YEARS
- ---- --- ----------------------------------------------------
<S> <C> <C>
R. Martin Emanuele, Ph.D.................. 44 Dr. Emanuele joined CytRx in 1988 as the project
director for the Company's RheothRx(R) project (now
FLOCOR(TM)). Dr. Emanuele assumed the duties of
Vice President, Preclinical Development in June
1990 and became Vice President, Research and
Business Development in October 1997. Before
joining CytRx in 1988, he worked as a clinical
research scientist at DuPont Critical Care and as
a visiting scientist at Institute Choay.
William B. Fleck.......................... 41 Mr. Fleck joined CytRx in April 1993 as Vice
President, Human Resources. From 1992 to 1993 Mr.
Fleck served as Director, Human Resources and
Training for Central Health Services (CHS). During
1991, he was Director, Human Resources for
Knowledgeware, Inc. Prior to joining
Knowledgeware, Mr. Fleck held senior human re-
sources management positions with MCI
Communications from 1989 to 1991 and Harris/3M
from 1984 to 1989.
J. Michael Grindel, Ph.D.................. 52 Dr. Grindel joined CytRx in October 1997 as Vice
President, Drug Development. From 1994 to 1997 Dr.
Grindel served as Vice President, Preclinical
Development for Hybridon, Inc. in Cambridge, MA.
From 1989 to 1994 Dr. Grindel was Vice President
for Project Planning and Management at the R. W.
Johnson Pharmaceutical Research Institute (a
subsidiary of Johnson & Johnson) in Raritan, NJ.
Prior to that Dr. Grindel served in various
research and development management positions with
McNeil Pharmaceutical from 1976 to 1989 and the
Walter Reed Army Institute of Research from 1973
to 1976.
Mark W. Reynolds.......................... 37 Mr. Reynolds joined CytRx in 1988 as Controller,
becoming Chief Financial Officer and Corporate
Secretary in 1996. Prior to joining CytRx, Mr.
Reynolds was employed as a certified public
accountant with Arthur Andersen LLP in Atlanta,
Georgia.
</TABLE>

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<PAGE> 11

EXECUTIVE COMPENSATION

The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1996, 1997 and 1998 for
(i) the President and Chief Executive Officer of the Company; and (ii) each of
the four other most highly compensated executive officers of the Company whose
total salary and bonus exceeded $100,000 (determined as of December 31, 1998 and
collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Jack J. Luchese........................... 1998 $334,250 $37,500 1,382,427(1) $ 5,000(2)
President and Chief Executive Officer 1997 321,000 75,000 50,000 4,750(2)
1996 307,000 80,000 200,000 4,750(2)
R. Martin Emanuele........................ 1998 $170,850 $15,000 154,098(1) $ 5,000(2)
Vice President, Research & Business 1997 167,500 7,500 5,000 4,750(2)
Development 1996 162,500 15,000 5,000 4,750(2)
William B. Fleck.......................... 1998 $ 84,375 $40,000 112,162(1) $ 5,000(2)
Vice President, Human Resources 1997 120,000 50,000 7,500 4,750(2)
1996 113,500 -- 20,000 4,750(2)
J. Michael Grindel(4)..................... 1998 $195,000 $20,000 173,000(1) $81,172(3)
Vice President, Drug Development 1997 40,000 20,000 100,000 1,200(2)
1996 -- -- -- --
Mark W. Reynolds.......................... 1998 $101,000 $25,000 118,418(1) $ 5,000(2)
Chief Financial Officer and Secretary 1997 94,000 12,500 7,500 4,750(2)
1996 82,333 25,000 25,000 4,750(2)
</TABLE>

- ---------------

(1) Includes shares underlying previously issued options and warrants which were
repriced (see "Ten-Year Option Repricings").
(2) Represents matching contributions by the Company under the Company's 401(k)
Profit Sharing Plan.
(3) Amount shown includes $5,000 in matching contributions by the Company under
the Company's 401(k) Profit-Sharing Plan and $76,172 in costs associated
with the officer's relocation.
(4) Dr. Grindel joined the Company in October 1997.

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<PAGE> 12

OPTION GRANTS IN LAST FISCAL YEAR

The following table summarizes the stock options and warrants granted
during the fiscal year ended December 31, 1998 to each of the Company's
executive officers named in the Summary Compensation Table above.

<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM($)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ----------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- -------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack J. Luchese............. 450,000(1) 22.2% $2.9375 4/8/08 $831,320 $2,106,728
50,000(3) 2.5 1.00 6/6/07 27,566 67,897
200,000(3) 9.9 1.00 3/26/06 95,491 228,718
100,000(3) 4.9 1.00 12/31/04 34,010 77,156
32,427(3) 1.6 1.00 3/24/03 8,959 19,797
50,000(3) 2.5 1.00 2/22/01 7,881 16,550
500,000(3) 24.7 1.00 12/31/04 170,048 385,781
R. Martin Emanuele.......... 13,000(2) 0.6 1.00 12/3/08 8,176 20,719
50,000(1) 2.5 2.9375 4/8/08 92,369 234,081
5,000(3) 0.2 1.00 12/3/07 2,757 6,790
5,000(3) 0.2 1.00 12/5/06 2,387 5,718
3,750(3) 0.2 1.00 12/8/05 1,527 3,558
18,333(3) 0.9 1.00 3/14/05 7,464 17,393
13,125(3) 0.6 1.00 3/30/05 5,343 12,452
6,250(3) 0.3 1.00 12/8/04 2,126 4,822
2,297(3) 0.1 1.00 11/29/03 635 1,402
1,303(3) 0.1 1.00 3/31/03 360 795
1,665(3) 0.1 1.00 11/30/02 359 773
4,375(3) 0.2 1.00 11/14/01 690 1,448
18,750(3) 0.9 1.00 5/29/01 2,955 6,206
3,750(3) 0.2 1.00 12/7/00 384 788
2,500(3) 0.1 1.00 10/31/00 256 525
3,750(3) 0.2 1.00 4/28/00 384 788
1,250(3) 0.1 1.00 2/2/00 128 263
William B. Fleck............ 13,000(2) 0.6 1.00 12/3/08 8,176 20,719
50,000(1) 2.5 2.9375 4/8/08 92,369 234,081
7,500(3) 0.4 1.00 12/3/07 4,135 10,185
20,000(3) 1.0 1.00 12/5/06 9,549 22,872
3,750(3) 0.2 1.00 12/8/05 1,527 3,558
3,750(3) 0.2 1.00 12/8/04 1,275 2,893
2,297(3) 0.1 1.00 11/29/03 635 1,402
1,656(3) 0.1 1.00 7/22/03 458 1,011
10,209(3) 0.5 1.00 4/16/03 2,821 6,233
</TABLE>

9
<PAGE> 13

- ---------------

(1) These options vest upon the achievement of specified price targets of the
Company's Common Stock and are exercisable for ten years from the date of
grant. Exercise price is based on the market price of CytRx Common Stock as
of the date of grant. These options were subsequently repriced to $1.00 on
September 15, 1999.
(2) These options vest in equal annual installations over a three year period
and are exercisable for ten years from the date of grant. Exercise price is
based on the market price of CytRx Common Stock as of the date of grant.
(3) These are previously issued options which were repriced on September 15,
1998 (see "Ten Year Option Repricings").

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUE AT DECEMBER 31,
1998

The following table sets forth the number and total value of unexercised
in-the-money options at December 31, 1998 for each of the executive officers of
the Company named in the Summary Compensation Table above, using the price per
share of the Common Stock of $.96875 on December 31, 1998. No stock options were
exercised during 1998 by any of the Company's Named Executive Officers.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1998(#) AT DECEMBER 31, 1998($)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jack J. Luchese.................................. 782,427 600,000 $ -- $ --
R. Martin Emanuele............................... 86,097 68,001 -- --
William B. Fleck................................. 37,495 74,667 -- --
J. Michael Grindel............................... 17,500 155,500 -- --
Mark W. Reynolds................................. 42,084 76,334 -- --
</TABLE>

10
<PAGE> 14

TEN YEAR OPTION REPRICINGS

On September 15, 1998, CytRx's Board of Directors approved a stock option
repricing plan whereby all options held by current employees were repriced,
based on the market price of the Company's Common Stock on the date of Board
approval ($1.00). No option terms were extended in connection with the
repricing. The following table sets forth certain information with respect to
adjustments to the exercise price of stock options previously awarded to any
executive officers during the last ten fiscal years.

<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION
SHARES OF MARKET PRICE EXERCISE TERM
STOCK UNDERLYING OF STOCK AT PRICE AT TIME NEW REMAINING
OPTIONS TIME OF OF EXERCISE AT DATE OF
NAME DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) REPRICING
- ---- ------- ---------------- ------------ ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jack J. Luchese.............. 9/15/98 450,000 $ 1.00 $2.94 $ 1.00 9.6 yrs
President and Chief 9/15/98 50,000 1.00 4.13 1.00 8.7 yrs
Executive Officer 9/15/98 200,000 1.00 3.69 1.00 7.5 yrs
9/15/98 100,000 1.00 7.00 1.00 6.3 yrs
9/15/98 32,427 1.00 7.00 1.00 4.5 yrs
9/15/98 50,000 1.00 4.50 1.00 2.4 yrs
1/1/95 500,000 1.00 4.50 1.00 6.3 yrs
1/1/95 32,427 5.25 17.00 7.00 8.2 yrs
1/1/95 75,000 5.25 16.00 7.00 9.5 yrs
R. Martin Emanuele........... 9/15/98 50,000 1.00 2.94 1.00 9.6 yrs
Vice President, 9/15/98 5,000 1.00 4.06 1.00 9.2 yrs
Research and Business
Development 9/15/98 5,000 1.00 3.63 1.00 8.2 yrs
9/15/98 3,750 1.00 4.00 1.00 7.2 yrs
9/15/98 12,500 1.00 2.75 1.00 6.5 yrs
9/15/98 2,500 1.00 3.75 1.00 6.5 yrs
9/15/98 833 1.00 4.52 1.00 6.5 yrs
9/15/98 2,500 1.00 4.52 1.00 6.5 yrs
9/15/98 13,125 1.00 7.00 1.00 6.5 yrs
9/15/98 6,250 1.00 7.00 1.00 6.2 yrs
9/15/98 2,297 1.00 7.00 1.00 5.2 yrs
9/15/98 1,303 1.00 7.00 1.00 4.5 yrs
9/15/98 1,665 1.00 7.00 1.00 4.2 yrs
9/15/98 4,375 1.00 7.00 1.00 3.2 yrs
9/15/98 18,750 1.00 7.00 1.00 2.7 yrs
9/15/98 3,750 1.00 4.00 1.00 2.2 yrs
9/15/98 2,500 1.00 4.13 1.00 2.1 yrs
9/15/98 3,750 1.00 7.00 1.00 1.6 yrs
9/15/95 1,250 1.00 7.00 1.00 1.4 yrs
1/1/95 1,250 5.25 9.50 7.00 5.1 yrs
1/1/95 3,750 5.25 11.63 7.00 5.3 yrs
1/1/95 18,750 5.25 7.88 7.00 6.4 yrs
1/1/95 4,375 5.25 17.50 7.00 6.9 yrs
1/1/95 1,665 5.25 23.00 7.00 7.9 yrs
1/1/95 1,303 5.25 17.63 7.00 8.2 yrs
1/1/95 2,297 5.25 20.00 7.00 8.9 yrs
William B. Fleck............. 9/15/98 50,000 1.00 2.94 1.00 9.6 yrs
Vice President, 9/15/98 7,500 1.00 4.06 1.00 9.2 yrs
Human Resources 9/15/98 20,000 1.00 3.63 1.00 8.2 yrs
9/15/98 3,750 1.00 4.00 1.00 7.2 yrs
</TABLE>

11
<PAGE> 15

<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION
SHARES OF MARKET PRICE EXERCISE TERM
STOCK UNDERLYING OF STOCK AT PRICE AT TIME NEW REMAINING
OPTIONS TIME OF OF EXERCISE AT DATE OF
NAME DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) REPRICING
- ---- ------- ---------------- ------------ ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
9/15/98 3,750 1.00 7.00 1.00 6.2 yrs
William B. Fleck (continued) 9/15/98 2,297 1.00 7.00 1.00 5.2 yrs
9/15/98 1,656 1.00 7.00 1.00 4.9 yrs
9/15/98 10,209 1.00 7.00 1.00 4.6 yrs
1/1/95 10,209 5.25 15.00 7.00 8.3 yrs
1/1/95 1,656 5.25 18.50 7.00 8.6 yrs
1/1/95 2,297 5.25 20.00 7.00 8.9 yrs
J. Michael Grindel........... 9/15/98 6,000 1.00 2.94 1.00 9.6 yrs
Vice President, Drug
Development 9/15/98 100,000 1.00 4.81 1.00 9.1 yrs
Mark W. Reynolds............. 9/15/98 50,000 1.00 2.94 1.00 9.6 yrs
Chief Financial Officer 9/15/98 7,500 1.00 4.06 1.00 9.2 yrs
and Secretary 9/15/98 20,000 1.00 3.63 1.00 8.2 yrs
9/15/98 5,000 1.00 4.00 1.00 8.1 yrs
9/15/98 1,875 1.00 4.00 1.00 7.2 yrs
9/15/98 3,750 1.00 7.00 1.00 6.5 yrs
9/15/98 1,250 1.00 7.00 1.00 6.5 yrs
9/15/98 1,667 1.00 4.52 1.00 6.5 yrs
9/15/98 1,875 1.00 7.00 1.00 6.2 yrs
9/15/98 460 1.00 7.00 1.00 5.2 yrs
9/15/98 666 1.00 7.00 1.00 4.2 yrs
9/15/98 2,625 1.00 7.00 1.00 3.2 yrs
9/15/98 3,750 1.00 6.75 1.00 2.8 yrs
9/15/98 2,500 1.00 4.00 1.00 2.2 yrs
9/15/98 2,500 1.00 4.13 1.00 2.1 yrs
1/1/95 1,250 5.25 9.50 7.00 .1 yrs
1/1/95 3,750 5.25 11.63 7.00 .3 yrs
1/1/95 3,750 5.25 17.50 7.00 6.9 yrs
1/1/95 1,250 5.25 23.00 7.00 7.9 yrs
1/1/95 750 5.25 20.00 7.00 8.9 yrs
</TABLE>

EMPLOYMENT AGREEMENT

Jack J. Luchese was named President and Chief Executive Officer of the
Company in March 1989. Under his current employment agreement (the "Agreement")
which terminates on December 31, 1999, Mr. Luchese is paid an annual base salary
of $295,000 (effective January 1, 1995), adjusted annually in proportion to the
average annual merit increases for all other employees. During 1998, Mr.
Luchese's base salary in accordance with this formula was $334,250. In addition
to his annual base salary, Mr. Luchese is eligible to receive cash bonuses with
respect to each calendar year during the term of the Agreement as determined
from time to time by the Board of Directors of the Company in its sole
discretion. The Agreement also contains confidentiality and noncompetition
provisions.

The Agreement grants Mr. Luchese warrants to purchase an aggregate of
682,427 shares of CytRx Common Stock (the "Warrants") subject to the exercise
requirements set forth in the agreement. Warrants to purchase 50,000 shares at
$4.50 per share expire on February 22, 2001. Warrants to purchase 32,427 shares
at $7.00 per share expire on March 24, 2003. Warrants to purchase 100,000 shares
at $7.00 per share expire on December 31, 2004. Warrants to purchase 500,000
shares at $4.50 per share expire on December 31, 2004. In March 1996, Mr.
Luchese was granted additional warrants to purchase an aggregate of 200,000
shares at $3.69

12
<PAGE> 16

per share (the "1996 Warrants") and in June 1997, he was granted warrants to
purchase an aggregate of 50,000 shares at $4.13 per share (the "1997 Warrants").
The 1996 Warrants vest upon the achievement of certain corporate financing
milestones as set forth in the agreement. The 1997 Warrants vest at the rate of
6,250 shares at the end of each calendar quarter from March 31, 1999 until
December 31, 1999, as to 25,000 warrants, with the remaining 25,000 warrants to
vest upon the achievement of price targets for the Common Stock as specified in
the agreement. In April 1998, Mr. Luchese was granted additional warrants to
purchase an aggregate of 450,000 shares at $2.9375 per share (the "1998
Warrants"), which vest upon the achievement of specified price targets of the
Company's Common Stock. As of April 12, 1999, 1,238,677 of the total 1,382,427
warrants are vested. All of the Warrants that have vested on the termination of
the Agreement may be exercised by Mr. Luchese at any time until the expiration
of the Warrants. On September 15, 1998, the exercise prices of all of Mr.
Luchese's outstanding warrants were adjusted to $1.00 (see "Ten-Year Option
Repricings").

The shares of stock that may be acquired upon exercise of warrants held by
Mr. Luchese have been or will be registered by the Company under the Securities
Act of 1933, as amended. The warrants contain certain anti-dilution provisions
and provide for accelerated vesting in the event that Mr. Luchese's employment
is terminated by the Board of Directors without cause, in the event of his death
or disability or in the event of a change of control.

In April 1997, the Company amended the Agreement in order to delete the
provisions relating to a change in control of the Company. In consideration of
that amendment, the Company has entered into a separate Change in Control
Agreement (the "Change in Control Agreement") with Mr. Luchese. The Change in
Control Agreement will become effective if and when a Change in Control (as
defined in the Change of Control Agreement) occurs during the three-year period
following the date of the Change in Control Agreement or during any of the
one-year annual renewal periods (the "Change of Control Period"), or if Mr.
Luchese's employment is terminated in connection with or in anticipation of a
Change of Control (in either case, the "Effective Date").

Mr. Luchese's employment period under the Change in Control Agreement
begins on the Effective Date and continues for two years. During the employment
period, Mr. Luchese's position, authority, duties and responsibilities will be
at least commensurate in all material respects with those held by him during the
120-day period prior to the Change in Control and he will receive (i) a monthly
base salary equal to or greater than the highest monthly base salary paid to him
by the Company during the previous year; (ii) an annual cash bonus at least
equal to the highest bonus paid to him in any of the three fiscal years prior to
the Effective Date, and (iii) the ability to participate in all incentive,
savings, welfare benefit, fringe benefit and retirement plans of the Company.

If Mr. Luchese's employment terminates during the employment period he will
receive certain severance benefits under the Change in Control Agreement. If his
employment terminates by reason of his death or disability, he will receive
certain obligations accrued through the date of termination (e.g., salary
prorata bonus, deferred compensation and vacation pay) plus the normal death and
disability benefits, if any, to which he is otherwise entitled, including those
under the Agreement. If he is terminated by the Company for cause (as defined),
or if he voluntarily resigns without good reason (as defined) other than during
the 30-day period beginning on the first anniversary of the Effective Date, he
will receive only his accrued benefits through the termination date and any
previously-deferred benefits, plus any other post-termination benefits, if any,
to which he is otherwise entitled, including those under the Agreement. If he
(i) is terminated by the Company without cause, (ii) resigns voluntarily with
good reason, or (iii) resigns for any reason during the 30-day period beginning
on the first anniversary of the Effective Date, he will receive a lump sum cash
payment equal to: (a) his base salary through the date of termination, (b) a
prorata bonus for the year of termination, based upon his actual bonus earned in
the prior year ("Most Recent Bonus"), (c) an amount equal to two times the sum
of his base salary and Most Recent Bonus, and (d) any unpaid deferred
compensation and vacation pay. In addition, Mr. Luchese would be entitled to
continued employee welfare benefits for two years after the date of termination,
and a lump sum payment equal to the actuarial value of the service and
compensation credit under the Company's qualified and supplemental retirement
plans that he would have received had he remained employed for two years after
the date of his termination. Mr. Luchese will be required to repay to
13
<PAGE> 17

the Company, with interest, the lump-sum benefit equal to two times the sum of
his base salary and Most Recent Bonus if, during the two-year employment period,
he violates a certain non-competition covenant in the Change in Control
Agreement.

If the total payments to Mr. Luchese under the Change in Control Agreement
and from any other source would result in the imposition of an excise tax under
Section 4999 of the Code, the payments will be reduced to the extent necessary
to avoid the imposition of such excise tax, but only if such reduction would
result in a net after-tax benefit to Mr. Luchese. The Change in Control
Agreement further provides that Mr. Luchese has no obligation to mitigate
severance payments, the Company will reimburse Mr. Luchese for all legal fees
incurred in enforcing or contesting the Change in Control Agreement, and Mr.
Luchese will hold for the benefit of the Company all confidential information
concerning the Company obtained over the course of this employment. The Company
will require its successors to expressly assume its obligations under the Change
in Control Agreement.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The following report shall not be deemed incorporated by reference into any
filing under the Securities Act of 1933 (the "1933 Act") or under the Securities
an Exchange Act of 1934 (the "1934 Act"), except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under either the 1933 Act or the 1934 Act.

The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation practices of the Company, establishes the
compensation plans and specific compensation levels for executive officers and
administers the Company's stock option plans.

The Committee believes that the Chief Executive Officer's compensation
should be influenced by Company performance, although "performance" for a
company engaged in pharmaceutical research and development does not necessarily
correlate to profits. The Committee considers "performance" to include
achievement of product development targets and milestones, effective
fund-raising efforts, and effective management of personnel and capital
resources, among other criteria. The Committee also reviews the Chief Executive
Officer's compensation in light of the level of similar executive compensation
arrangements within the biopharmaceutical industry.

The specific terms of Mr. Luchese's employment agreement are discussed
under "Employment Agreement". Under his employment agreement, Mr. Luchese is
eligible for an annual salary increase based upon the overall company average
merit increases. Mr. Luchese is also eligible to be considered for an annual
cash bonus, which is solely at the discretion of the Committee based upon such
factors as the Committee deems appropriate. Mr. Luchese's performance period for
purposes of this report is January 1, 1997 through December 31, 1998. Based on
its assessment of Mr. Luchese's effectiveness in attaining corporate objectives,
the Committee awarded Mr. Luchese a cash bonus of $65,750 for 1998 (paid in
January 1999) or 20% of base salary.

The Committee also believes that stock options should be granted to the
Chief Executive Officer, as well as to other executives, primarily based on the
executive's ability to influence the Company's long-term growth and
profitability. As such, over the course of his employment, Mr. Luchese has been
granted warrants to purchase an aggregate of 1,382,427 shares of CytRx Common
Stock. These warrants include a combination of tenure-based vesting as well as
vesting upon the achievement of corporate objectives. The Committee believes
that this arrangement provides Mr. Luchese with the greatest incentive to
accelerate achievement of corporate objectives and thereby enhance long-term
shareholder value.

The Committee has adopted similar practices with respect to compensation of
other executive officers of the Company. In establishing base salaries and cash
bonuses for executive officers, the Committee considers relative company
performance, the individual's past performance and future potential, and
compensation for persons holding similarly responsible positions at other
companies in the pharmaceutical and biotechnology industries. The relative
importance of these factors varies depending upon the individual's
responsibilities; all facts are considered in establishing both base salaries
and cash bonuses. When making comparison to other

14
<PAGE> 18

companies, the Committee generally considers those companies included in the
Nasdaq Pharmaceutical Index (see "Company Performance").

The Committee, in conjunction with the Chief Executive Officer, has also
established a model composed of salary categories with specified percentages to
be applied to the overall level of employees' salaries (including executive
officers) to provide a guideline for annual cash bonuses and the number of stock
options to be granted. This model is used only as a guideline, as some
subjectivity must be applied in evaluating each individual's performance. As
with the Chief Executive Officer, the number of options granted is determined by
the evaluation of the Executive's ability to influence the Company's long-term
growth and profitability. The Committee also considers the aggregate number of
options granted in past years. All options are granted at the current market
price. Because the value of an option bears a direct relationship to the
Company's stock price, it is an effective incentive for executives to create
value for stockholders. The Committee therefore views stock options as an
important component of its long-term, performance-based compensation philosophy.

Stock Option Repricing. The Company uses stock options in its compensation
program to provide the incentive and motivation for employees to work harder, to
retain valuable employees and to align the interests of employees and
stockholders. As the Company's stock price falls below the employee's stock
option exercise price, the options may lose their motivational and retentive
value. This situation occurred at CytRx during 1997 and 1998. In order to
restore the motivational and retentive value of existing employee stock options,
on April 8, 1998 the Committee approved a stock option repricing program whereby
all outstanding options held by current employees, excluding executive officers
and directors, were repriced to $2.9375, the market value of the Company's
Common Stock at that date. On September 15, 1998, the Committee approved another
repricing program whereby all outstanding options held by current employees,
including executive officers and directors, were repriced to $1.00, the market
value of the Company's Common Stock at that date.

For 1998, the Committee considered Section 162(m), which limits tax
deductions of public companies on compensation to certain executive officers in
excess of $1 million dollars, along with other factors in determining executive
compensation. The committee will continue to consider the effect of Section 162
(m) on its compensation decisions, but has no formal policy to structure
executive compensation so that it complies with the requirements of Section
162(m).

Respectfully submitted,

Compensation Committee:
Raymond C. Carnahan, Jr.
Lyle A. Hohnke
Herbert H. McDade, Jr.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. There are no
"interlocks," as defined by the Securities and Exchange Commission, with respect
to any member of the Compensation Committee. From January 1 to June 10, 1998,
the Compensation Committee consisted of Messrs. Carnahan, Link and McDade. Since
June 10, 1998, the Compensation Committee has consisted of Messrs. Carnahan,
Hohnke and McDade.

15
<PAGE> 19

STOCKHOLDER RETURN COMPARISON

The following line graph presentation compares cumulative total stockholder
returns of the Company with the Nasdaq Stock Market Index and the Nasdaq
Pharmaceutical Index (the "Peer Index") for the five year period from December
31, 1993 to December 31, 1998. The graph and table assume that $100 was invested
in each of the Company's Common Stock, the Nasdaq Stock Market Index and the
Peer Index on December 31, 1993, and that all dividends were reinvested. This
data was furnished by the Center for Research in Security Prices, The University
of Chicago.

COMPARISON OF CUMULATIVE TOTAL RETURNS

<TABLE>
<CAPTION>
THE NASDAQ
MEASUREMENT PERIOD CYTRX STOCK
(FISCAL YEAR COVERED) CORPORATION MARKET PEER INDEX
<S> <C> <C> <C>
1993 100 100 100
1994 21 98 75
1995 18 138 138
1996 14 170 138
1997 12 209 143
1998 4 293 183
</TABLE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's common stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the registrant. Directors, executive officers and
greater than ten percent stockholders are required by Securities and Exchange
Commission regulation to furnish the registrant with copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the year ended December 31, 1998 all
Section 16(a) filing requirements applicable to directors, executive officers
and greater than ten percent beneficial owners were complied with by such
persons.

PROPOSAL II
RATIFICATION OF AUDITORS

The Company's Board of Directors has selected Ernst & Young LLP to conduct
the annual audit of the financial statements of the Company for the fiscal year
ending December 31, 1999. Ernst & Young LLP has

16
<PAGE> 20

no financial interest, direct or indirect, in the Company, and does not have any
connection with the Company except in its professional capacity as an
independent auditor.

The ratification by the holders of Common Stock of the selection of Ernst &
Young LLP as independent auditors is not required by law or by the Bylaws of the
Company. The Board of Directors, consistent with the practice of many publicly
held corporations, is nevertheless submitting this selection to the holders of
Common Stock. If this selection is not ratified at the Annual Meeting, the Board
of Directors intends to reconsider its selection of independent auditors for the
fiscal year ending December 31, 1999.

The Audit Committee, which is composed of directors who are not employees
of the Company, approves in advance all material non-audit services to be
provided by Ernst & Young LLP and believes that these services have no effect on
audit independence.

Representatives of Ernst & Young LLP will be present at the Annual Meeting
and will have an opportunity to make a statement, if they so desire, and will be
available to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1999. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THE SHARES WILL BE VOTED FOR THE PROPOSAL. THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE VOTES CAST IS REQUIRED FOR APPROVAL OF PROPOSAL III.

STOCKHOLDER PROPOSALS

Any proposal which a Company stockholder intends to present in accordance
with Rule 14a-8 of the Securities Exchange Act of 1934 at the next annual
meeting of stockholders to be held in 2000 must be received by the Company on or
before January 12, 2000. Notice of stockholder proposals submitted outside of
Rule 14a-8 of the Securities Exchange Act of 1934 will be considered untimely if
received by the Company after April 1, 2000. Only proper proposals which are
timely received will be included in the Proxy Statement and Proxy.

OTHER MATTERS

EXPENSES OF SOLICITATION

The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Company, personally, by telephone
or by telegraph. The Company has engaged Beacon Hill Partners, Inc. to
distribute proxy materials to brokers and banks for distribution to beneficial
owners of the Company's Common Stock and to solicit proxies from brokerage
firms, banks and institutional holders of shares. Beacon Hill Partners, Inc.
will be paid a fee of $2,000 plus reimbursement of expenses for its services.

MISCELLANEOUS

Management does not know of any matters to be brought before the Annual
Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Annual Meeting, the persons designated as
proxies will vote in accordance with their best judgment on such matters.

17
<PAGE> 21

AVAILABILITY OF ANNUAL REPORT

ACCOMPANYING THIS PROXY STATEMENT IS A COPY OF THE COMPANY'S ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1998. IN ADDITION, COPIES OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE WITHOUT CHARGE, EXCEPT FOR
EXHIBITS. STOCKHOLDERS WHO WOULD LIKE ADDITIONAL COPIES OF THE ANNUAL REPORT OR
THE COMPANY'S FORM 10-K SHOULD DIRECT THEIR REQUESTS IN WRITING TO: CYTRX
CORPORATION, 154 TECHNOLOGY PARKWAY, NORCROSS, GEORGIA 30092, ATTENTION: MARK W.
REYNOLDS.

By Order of the Board of Directors
/s/ Mark W. Reynolds
Mark W. Reynolds
Secretary

May 10, 1999

18
<PAGE> 22
PROXY

CYTRX CORPORATION
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092
ANNUAL MEETING OF STOCKHOLDERS

The undersigned stockholder of CytRx Corporation (the "Company"),
Norcross, Georgia, hereby constitutes and appoints Jack J. Luchese and Mark W.
Reynolds or either one of them, each with full power of substitution, to vote
the number of shares of Common Stock which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders to be held at
the Hilton Hotel at Peachtree Corners, 5993 Peachtree Industrial Boulevard,
Norcross, Georgia, on Thursday, June 10, 1999, at 10:00 a.m., local time,
or at any adjournments thereof (the "Annual Meeting"), upon the proposals
described in the Notice of Annual Meeting of Stockholders and Proxy Statement,
both dated May 10, 1999, the receipt of which is acknowledged, in the manner
specified below.

THIS PROXY IS SOLICITED ON BEHALF OF CYTRX CORPORATION'S BOARD OF DIRECTORS
AND MAY BE REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)

[ X ] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE

1. ELECTION OF DIRECTORS.

FOR [ ] WITHHOLD AUTHORITY [ ]

NOMINEES: Raymond C. Carnahan, Jr., Herbert H. McDade, Jr.

To withhold authority for the nominee, write the name of the nominee in
the space provided:

On the proposal to elect the following nominees for Class II directors to
serve until the 2002 Annual Meeting of Stockholders of the Company and
until their successors are elected and qualified.

2. SELECTION OF AUDITORS. On the proposal to ratify the selection of Ernst
& Young LLP as the Company's independent auditors for the fiscal year
ending December 31, 1999:

FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. OTHER PROPOSALS. In their sole discretion, the Proxies are authorized to
vote upon such other business as may properly come before the Annual
Meeting or any adjournments thereof of which the Company did not have
notice on or before March 27, 1999.

FOR [ ] WITHHOLD AUTHORITY [ ]

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2 AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.

SIGNATURE(S) _____________________________________________DATED:__________, 1999

NOTE: Please sign exactly as your name appears on your stock certificate and
date. Where shares are held jointly, each stockholder should sign. When
signing as executor, administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.