-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DJt6+SL4Axc/oqWLnFJ7OFS9UcJ4D7JnzE9QsEQ11hy27/BNTVlWzc8N6WfzKiSh w02CHGwDZ5hfGIKdKCmnag== 0000950144-97-011590.txt : 19971107 0000950144-97-011590.hdr.sgml : 19971107 ACCESSION NUMBER: 0000950144-97-011590 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19971022 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971106 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYTRX CORP CENTRAL INDEX KEY: 0000799698 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 581642740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-15327 FILM NUMBER: 97709457 BUSINESS ADDRESS: STREET 1: 154 TECHNOLOGY PKWY STREET 2: TECHNOLOGY PARK/ATLANTA CITY: NORCROSS STATE: GA ZIP: 30092 BUSINESS PHONE: 4043689500 MAIL ADDRESS: STREET 1: 154 TECHNOLOGY PARKWAY CITY: NORCROSS STATE: GA ZIP: 30092 8-K 1 CYTRX CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): October 22, 1997 ---------------- CYTRX CORPORATION ----------------- (Exact Name of Registrant as Specified in Charter) Delaware 000-15237 58-1642740 - --------------- ------------ ------------------- (State or Other Commission (IRS Employer Jurisdiction of File Number Identification No.) 154 Technology Parkway Norcross, Georgia 30092 ----------------------- (Addresses of Principal Executive Offices, including Zip Code) (770) 368-9500 ----------------------- (Registrant's Telephone Number, including Area Code) Page 1 of 6 Pages Exhibit Index appears on Page 5 2 ITEM 5. OTHER EVENTS. On October 22, 1997 (the "Closing Date"), pursuant to the Private Securities Subscription Agreements, dated as of October 22, 1997, (the "Subscription Agreements" attached hereto as Exhibits 2.1 - 2.5 and incorporated herein by reference) by and between CytRx Corporation (the "Corporation") and each of GUNDYCO in trust for R.R.S.P. 550-98866-19, Excalibur Limited Partnership, Pine Street Asset Management, Charles N. Eckert and David Kosloff (together, the "Investors"), the Corporation privately placed two million dollars of certain debentures (the "Debentures" attached hereto as Exhibits 3.1 - - 3.5 and incorporated herein by reference), convertible into shares of common stock of the Corporation (the "Shares"), and certain share purchase warrants (the"Warrants" attached hereto as Exhibits 4.1 - 4.5 and incorporated herein by reference) (the Subscription Agreements, the Debentures and the Warrants, collectively, are hereinafter called the "Transaction Documents"). The Debentures were sold at par and will bear interest at the rate of 6% per annum. The Debentures are not convertible into Shares for sixty (60) days after the Closing Date. Thereafter, the Investors have the option of converting the Debentures at the lesser of eighty-five percent (85%) of the average closing bid price for the ten (10) trading days preceding such conversion or $5.68 per Share. If the conversion price is below four dollars ($4.00), the Corporation has the right to redeem the Debentures at one hundred ten percent (110%) of par. The Warrants allow the Investors to purchase 40,000 Shares at a price of $5.68 per share. Furthermore, the Corporation also has the option of selling the Investors an additional two million dollars ($2,0000,000) of debentures at any time between ninety (90) and two hundred seventy (270) days after the shelf registration statement, required to be filed with the Securities and Exchange Commission (the "Commission") pursuant to Rule 415 of the Securities Act of 1933 and in accordance with the Registration Rights Agreement, dated October 22, 1997, entered into by and among the Corporation and the Investors (the "Registration Rights Agreement" attached hereto as Exhibit 5.1 and incorporated herein by reference), has been declared effective by the Commission subject to certain conditions. If the Corporation issues additional debentures, then it will also issue warrants to purchase an additional 40,000 Shares. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS. No financial statements are required to be filed as part of this Report. The following exhibits are filed as part of this Report:
EXHIBITS -------- 2.1 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and GUNDYCO in trust for R.R.S.P. 550-98866-19 2.2 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and Excalibur Limited Partnership 2.3 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and Pine Street Asset Management 2.4 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and Charles N. Eckert 2.5 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and David Kosloff
-2- 3 3.1 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of GUNDYCO in trust for R.R.S.P. 550-98866-19 3.2 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of Excalibur Limited Partnership 3.3 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of Pine Street Asset Management 3.4 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of Charles N. Eckert 3.5 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of David Kosloff 4.1 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of GUNDYCO in trust for R.R.S.P. 550-98866-19 4.2 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of Excalibur Limited Partnership 4.3 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of Pine Street Asset Management 4.4 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of Charles N. Eckert 4.5 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of David Kosloff 5.1 Registration Rights Agreement dated as of October 22, 1997 by and among CytRx Corporation, GUNDYCO in trust for 550-98866-19, Excalibur Limited Partnership, Pine Street Asset Management, Charles N. Eckert and David Kosloff 5.2 Press Release dated October 22, 1997
-3- 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CYTRX CORPORATION (REGISTRANT) Date: November 6, 1997 By: /s/ Jack J. Luchese ------------------------ Jack J. Luchese, Chairman, President and Chief Executive Officer (Principal Executive Officer)
-4- 5 INDEX TO EXHIBITS -----------------
SEQUENTIAL EXHIBIT PAGE NO. - ------- -------- 2.1 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and GUNDYCO in trust for R.R.S.P. 550-98866-19 2.2 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and Excalibur Limited Partnership 2.3 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and Pine Street Asset Management 2.4 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and Charles N. Eckert 2.5 Private Securities and Subscription Agreement dated as of October 22, 1997 by and between CytRx Corporation and David Kosloff 3.1 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of GUNDYCO in trust for R.R.S.P. 550-98866-19 3.2 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of Excalibur Limited Partnership 3.3 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of Pine Street Asset Management 3.4 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of Charles N. Eckert 3.5 CytRx Corporation 6% Convertible Debenture dated as of October 22, 1997 in favor of David Kosloff
6 4.1 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of GUNDYCO in trust for R.R.S.P. 550-98866-19 4.2 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of Excalibur Limited Partnership 4.3 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of Pine Street Asset Management 4.4 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of Charles N. Eckert 4.5 CytRx Corporation Stock Purchase Warrant dated as of October 22, 1997 in favor of David Kosloff 5.1 Registration Rights Agreement dated as of October 22, 1997 by and among CytRx Corporation, GUNDYCO in trust for 550-98866-19, Excalibur Limited Partnership, Pine Street Asset Management, Charles N. Eckert and David Kosloff 5.2 Press Release dated October 22, 1997
EX-2.1 2 SECURITIES AGREEMENT CYTRX AND GUNDYCO 1 EXHIBIT 2.1 PRIVATE SECURITIES SUBSCRIPTION AGREEMENT CYTRX CORPORATION (REGULATION "D") THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the "Agreement") has been executed by the undersigned in connection with the purchase in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), of certain debentures (hereinafter the "Debentures"), convertible into shares of common stock (hereinafter the "Shares"), and certain share purchase warrants (hereinafter the "Warrants") from CytRx Corporation ("CYTR") 154 Technology Parkway, Technology Parkway, Atlanta, Georgia, 30092, USA, a corporation organized under the laws of Delaware (hereinafter the "COMPANY" or "SELLER") by Name: Gundyco in trust for R.R.S.P. 550-98866-19 located at 4120 Yonge Street, Suite 416; City: North York; Province/State; Ontario; Zip/Postal Code: M2P 2B8; Country: Canada a trust organized under the laws of Ontario and Canada (hereinafter "BUYER"). SELLER and BUYER (hereinafter collectively the "parties") each hereby represents, warrants and agrees as follows: 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE: (i) SELLER and BUYER are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "Commission") under the Securities Act; and (ii) BUYER hereby subscribes for Four Hundred Thousand Dollars (USD $400,000) U.S. principal amount of Debentures, substantially in the form attached as Exhibit A to and forming an integral part of this Agreement. (iii) BUYER will receive 8,000 Warrants substantially in the form attached as Exhibit B to and forming an integral part of this Agreement. Each Warrant will entitle BUYER to purchase one treasury Common Share at the price of $5.68. The Warrants will expire two (2) years after the Closing; and (iv) BUYER shall on or before the Closing execute a copy of the Registration Rights Agreement (the "Registration Rights Agreement") substantially in the form attached as Exhibit "A" to and forming an integral part of this Agreement. 2 2. BUYER'S REPRESENTATIONS BUYER represents and warrants follows: (i) Authorization: Such BUYER has full power and authority to enter into this Agreement, the Debenture, the Warrant and the Registration Rights Agreement (collectively, the "Transaction Documents") and that the Transaction Documents, when executed and delivered will constitute a valid and legally binding obligation of BUYER in accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (ii) Purchase Entirely for Own Account. This Agreement is made with BUYER in reliance upon BUYER'S representation to the Company, which by such BUYER'S execution of this Agreement BUYER hereby confirms, that the Debentures and Warrants to be purchased by BUYER and the Common Stock issuable upon conversion thereof (collectively, the "Securities") will be acquired for investment for BUYERS own account, not a nominee as agent, and not with a view to the resale or distribution of any part thereof. By execution of this Agreement, Buyer further represents that Buyer does not have any contract, undertaking, agreement or arrangement with any person, to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. (iii) Reliance Upon BUYER'S Representations. BUYER understands that the Debentures and the Warrants are not, and any Common Stock acquired on conversion thereof at the time of issuance may not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof and that the Company's reliance on such exemption is predicated on the BUYERS' representations set forth herein. Buyer also understands that no prospectus or offering memorandum has been received by Buyer or filed by the Seller with any Canadian securities commission or similar authority in connection with the sale of the Debentures and Warrants, and that no prospectus or offering memorandum shall be received by the Seller or so filed by Buyer in connection with any sale of Shares issued on the conversion of the Debentures or Warrants, and that as a result the Buyer will be unable to rely upon civil or contractual remedies that might otherwise be available to it if the Debentures, Warrants and/or Shares had been issued by the Seller by way of a prospectus or offering memorandum, respectively, and the prospectus or offering -2- 3 memorandum, as the case may be, contained a misrepresentation as that term is defined in the Securities Act (Ontario). (iv) Buyer is not a corporation, syndicate, partnership or other form of unincorporated entity or corporation created solely to permit the purchase of the Securities by a group of individuals who individual share in the aggregate acquisition cost of the Securities is less than $150,000 and Buyer is not purchasing the Securities as the result of an advertisement of the Securities, including an advertisement in printed media of general and regular paid circulation, radio or television. (v) BUYER believes BUYER has received all the information BUYER considers necessary or appropriate for deciding whether to purchase any of the Securities. BUYER further represents that BUYER has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering any of the Securities and the business, properties, prospects, and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without reasonable effort or expense) necessary to verify the accuracy of any information furnished to BUYER or to which BUYER had access. (vi) BUYER represents that BUYER is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that BUYER is able to fend for himself, herself or itself, can bear the economic risk of BUYER'S investment, and has such knowledge and experience in financial and business matters that BUYER is capable of evaluating the merits and risks of the investment in the Debentures and Warrants. If other than an individual, BUYER also represents BUYER has not been organized for the purpose of acquiring the Debentures and Warrants. (vii) The BUYER represents that BUYER is an Accredited Investor. The term "Accredited Investor" as used herein refers to: (1) A person or entity who is a direct or executive officer of the Company; (2) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as -3- 4 defined in Section 2(a(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21)of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by the persons that are Accredited Investors. (3) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; (4) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of the purchase exceeds $1,000,000; (6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment; or (8) Any entity in which all of the equity owners are Accredited Investors. -4- 5 As used in this Paragraph 3.(vii) the term "net worth" means the excesses of total assets over total liabilities. For the purpose of determining a person's net worth, the principal residence owned by an individual should be valued at fair market value, including the cost of improvements, net of current encumbrances. As used in this paragraph "income" means actual economic income, which may differ from adjusted gross income for income tax purposes. Accordingly, Buyer should consider whether Buyer should add any or all of the following items to Buyer's adjusted gross income for income tax purposes in order to reflect more accurately Buyer's actual economic income; any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions an IRA or keogh retirement plan, and alimony payments. (viii) BUYER understands that the Securities may not be sold, transferred or otherwise disposed of in the United States without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering any of the Securities or an available exemption from registration under the Securities Act, the Securities must be held indefinitely. In particular, BUYER is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the condition of that Rule are met. BUYER also understands that any resale of the Securities must be conducted in accordance with the applicable requirements of the Securities Act (Ontario). (ix) Buyer acknowledges that no person has made to Buyer any written or oral representations: (i) that any person will resell or repurchase the Securities; (ii) that any person will refund the purchase price of the Securities; and (iii) as to the future price or value of the Securities. 3. SELLER'S REPRESENTATIONS SELLER represents and warrants as follows: (i) SELLER has not conducted any general solicitation or general advertising (as defined in Regulation D) with respect to any of the Securities offered hereby; (ii) The Debentures, when issued and delivered pursuant to the terms of this Agreement, will have been duly authorized, executed, issued and delivered and will constitute valid and legally binding obligations of the Company in -5- 6 accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (iii) The Shares, when issued and delivered upon conversion of the Debentures in accordance with their terms, will be duly and validly authorized and issued, fully-paid and non assessable and will not subject the holders thereof to personal liability by reason of being such holders. There are no preemptive rights of any shareholder of SELLER with respect to the Shares contained in SELLER'S Certificate of Incorporation or any agreement to which SELLER is a party; (iv) This Agreement has been duly authorized, validly executed and delivered on behalf of SELLER and is a valid and binding agreement of SELLER in accordance with its terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (v) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement do not and will not conflict with or result in a breach by SELLER of any of the terms or provisions of, or constitute a default under, the certificate of incorporation (or charter) or by-laws of SELLER, or any indenture, mortgage, deed of trust or other material agreement or instrument to which SELLER is a party or by which it or any of its properties or assets are bound, or any existing applicable decree, judgment or order of any court, federal or state regulatory body, administrative agency or other governmental body having jurisdiction over SELLER or any of its properties or assets; (vi) No authorization, approval or consent of or filing with any federal, state or local governmental body of the United States is legally required for the issuance and sale of the Debentures and (provided no commission or other remuneration is paid or given directly or indirectly by SELLER for soliciting such conversion) the issuance of the Shares upon conversion of the Debentures in accordance with their terms, as contemplated by this Agreement, except the filing of a Form D with the Commission; -6- 7 (vii) To the best of the Company's knowledge after reasonable investigation, the information contained in the Company's Annual Report on Form 10K for the year ended December 31, 1996, Proxy statement relating to the Annual Meeting of Shareholders held on June 26, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as filed with the Commission does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are made, not misleading. Since September 30, 1997, there has been no material adverse development in the business, properties, operations, financial condition or results of operations of SELLER. (viii) SELLER will issue one or more certificates representing the Debentures in the name of BUYER in such denominations (in multiples of $25,000) to be specified by BUYER prior to closing and will issue one or more certificates representing the Shares in such denominations to be specified by Buyer upon conversion of the Debentures. SELLER further warrants that the Debentures and the Shares shall be transferable on the books and records of SELLER as and to the extent provided in the Transaction Documents, subject to compliance with Federal and State securities laws. Nothing in this Section shall affect in any way BUYER'S obligations and agreement to comply with all applicable securities laws upon resale of the Securities. 4. CLOSING. Debentures and Warrants shall be delivered to BUYER and the funds therefor shall be delivered to SELLER on the 22nd day of October, 1997 (the "Closing") or at such time to be mutually agreed in accordance with the following procedures. SELLER shall execute the appropriate copies of the Transaction Documents (the "Seller's Closing Documents") and deliver the executed documents to Gowling, Strathy & Henderson, counsel for BUYER, with instructions to hold the documents in trust and not to release the documents to BUYER until advised to do so by SELLER. BUYER shall execute the appropriate copies of the Transaction Documents (the "BUYER'S Closing Documents") and deliver the executed documents to Alston & Bird, counsel for SELLER, with instructions to hold the documents in trust and not to release the documents to SELLER until advised to do so by BUYER. Immediately after BUYER has confirmed that its counsel has received the SELLER'S Closing Documents executed by SELLER, then BUYER shall pay to SELLER the principal amount of the Debentures for which BUYER subscribed (the "Purchase Price"). BUYER shall pay the Purchase Price, less all appropriate legal fees and commissions by wire transfer of immediately available funds in accordance with the following instructions: -7- 8 Mellon Bank, Pittsburgh, P.A. ABA# 0430-0026-1 Credit: Merrill Lynch Acct# 101-1730 For further credit to CytRx Corporation Acct# 701-96D69 On the banking day that SELLER has confirmed that its counsel has received the BUYER'S Closing Documents and is credited with having received the Purchase Price (the "Closing Date"), SELLER shall advise BUYER. Immediately thereafter, SELLER shall advise Gowling, Strathy & Henderson to release the SELLER'S Closing Documents to BUYER and BUYER shall advise Alston & Bird to release the BUYER'S Closing Documents to SELLER. The Transaction Documents shall not be deemed to have been delivered except in accordance with the procedure described in this Section 4. If the Closing Date does not occur before October 23, 1997, then either party may terminate this Agreement immediately upon written notice to the other party and all Transaction Documents shall be deemed to be null and void. 5. CONDITIONS TO CLOSING (i) BUYER understands that SELLER'S obligation to sell the Debentures and the Warrants is conditioned upon the receipt in immediately available funds of the amount set forth in Paragraph 1 hereof and an opinion of counsel substantially in the form attached as D to and forming an integral part of this Agreement, SELLER shall have the right to reject any given Agreement which is tendered to SELLER, for the reason that SELLER reasonably believes any representations and warranties of BUYER to be untrue and in such event SELLER shall provide BUYER written notice of such rejection and the reason therefore and shall provide reasonable opportunity for a response to such stated reason. Also, SELLER may decline to accept this Agreement for any other reason which in the sole discretion of SELLER may materially affect SELLER. (ii) SELLER understands that BUYER'S obligation to purchase the Debentures is conditioned upon delivery of certificate(s) representing Debentures as described in Paragraph 1(ii) hereto and provision of an opinion of counsel attached as Exhibit E substantially in the form and forming an integral part of this Agreement. 6. SELLER'S OPTION ADDITIONAL $2,000,000 TO BUYER AND OTHER CONCURRENT BUYERS CONVERSION AND WARRANT PRICE -8- 9 SELLER shall have the option (the "Option") to require BUYER to purchase Four Hundred Thousand Dollars (USD $400,000) of additional Debentures at any time between 90 and 270 days (the "Option Period") after the Shelf Registration (as defined in the Rights Registration Agreement) has been declared effective by the Commission subject to the following conditions: (i) The ten day Average Closing Bid Price of the Shares shall not be below $3.50 per share on (a) the day SELLER gives BUYER notice of SELLER'S election to exercise this Option and (b) the day before the closing of the Option; (ii) SELLER shall not be in default under any material borrowings from any financial institution or other persons; (iii) the class of common stock into which the Debentures are convertible shall continue to be listed by Nasdaq; or (iv) the Company shall not have been convicted of any fraud in the sale of its securities. The closing of the purchase of the additional Debentures will take place 10 business days after the day of SELLER'S notice to BUYER. With the exception of any further option in favour of SELLER, and the Conversion Price and Warrant Price and the maturity dates which will have to be reset, the terms and conditions in connection with the funding and closing of the Option will be the same as those relating to the initial funding of October, 1997. Provided however if the Black-Out Period as defined in Section 1(ii) of the Debenture is invoked, then the actual number of days of the Black-Out Period shall be added to each of the 90 and 270 days comprising the Option Period. If the Option is completed: "Average Closing Bid Price" for the purposes of this Section 6 means the average of the daily last bid price for the shares of Common Stock for the five (5) or ten (10), as the case may be, consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on Nasdaq National Market (as reported by Bloomberg Business News, or, if not reported thereby, any other authoritative source selected by the Company ending at the close of the trading on the trading day immediately preceding the measurement date. "Conversion Price" shall mean the lessor of (A:) one hundred ten percent (110%) of the five day Average Closing Bid Price, calculated using the closing date as the measurement date, or (B) eighty five percent (85%) of the ten day Average -9- 10 Closing Bid Price calculated using the date of conversion as the measurement date, provided, however, but if the holder will have delivered a Forbearance Request to the Company in accordance with what is presently Section 5(ii) of the Debenture used in the October 1997 Closing, within twenty-four (24) hours before it will have delivered a conversion notice of the Company in accordance with what is presently Section 4.3.1 of the Debenture, then the ten day Average Closing Bid Price for the portion of the debenture that the Holder will have identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. "Exercise Price" for per share under each Warrant shall be one hundred ten percent (110%) of the five day Average Closing Bid Price calculated as of the Closing Date of the Option. The Exercise Price shall be paid in cash. "Right of First Refusal Period" shall mean the period that begins on the Closing Date and ends on the earlier of (a) the closing date of the Option, (b) the refusal of Buyer to purchase the Debentures covered by the Option because Seller failed to meet the conditions set forth in clauses (i) to (iv) above, or (c) the end of the Option Period. The "closing date" means the closing date of the Option. If, during the Right of First Refusal Period, but only ninety (90) days after the Closing Date the Company proposes to undertake an issuance of any securities pursuant to Regulations D or S promulgated under the Securities Act (the "New Securities"), then the Company shall give written notice of the Company's intention to BUYER, describing the type of the securities, and their price and the general terms upon which the Company proposes to issue the same. The Debenture is being issued in connection with debentures on similar terms to Charles N. Eckert, David Kosloff, Pine Street Asset Management and Gundyco in trust for R.R.S.P. 550-98866-19 (collectively, the "Other Buyers"). Each of the BUYER and the Other Buyer who remain Accredited Investors ("Qualified Buyer") shall have twenty (20) days after any such notice is mailed or delivered to agree to purchase all of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. Each of the Qualified Buyers shall be entitled to purchase New Securities in the proportion of its purchase of Debentures and if one or more buyers decline, or is not qualified, to so purchase, then the others, as the case may be, shall be entitled to purchase the New Securities not taken by the Qualified Buyer(s), as the case may be within the original twenty (20) day period. "New Securities" does not include (i) securities issued pursuant to the acquisition of another business entity or segment of any such entity by the Company by merger, asset purchase, stock purchase or otherwise, (ii) any borrowings, direct or -10- 11 indirect, from financial institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company, (iii) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement, (iv) securities issued to vendors or customers or to other persons in similar commercial situations with the Company, (v) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person, (vi) securities issued in connection with any stock split, stock dividend or recapitalization of the Company, or (vi) securities issued in connection with corporate partnering transactions. If the Qualified Buyers fail to exercise fully the right of first refusal within the prescribed twenty (20) day period, then the Company shall have one hundred twenty (120) days thereafter to sell or enter into an agreement to sell the New Securities, at a price and on terms no more favourable to the purchasers thereof than specified in the notice to the Qualified Buyers. If the Company has not sold or entered into an agreement to sell the New Securities in accordance with the foregoing within the one hundred twenty (120) day period, then the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Qualified Buyers in accordance with this Section 6. 7. GOVERNING LAW; INTERPRETATION AND DISPUTES. This Agreement shall be governed by and construed under the laws of the State of Delaware and the laws applicable therein without regard to its choice of law principles. 8. ARBITRATION All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the SELLER and BUYER in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by SELLER, BUYER and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement, provided, however, if necessary, such decision and satisfaction procedure may be enforced by either SELLER or BUYER in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by -11- 12 the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by SELLER as one party and BUYER as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 9. CONFIDENTIALITY. The parties hereto agree to maintain the confidentiality of this Agreement and not to disclose to any person or entity information concerning the transaction contemplated hereby unless required by law to do so. 10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereof with respect to the subject matter hereof and supersedes any and all prior or contemporaneous representations, warranties, agreements and understandings in connection therewith. This Agreement may be amended only by a writing executed by all parties hereto. This Agreement may be executed in counterparts and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original. [Signatures begin on next page] 11. FULL NAME AND ADDRESS OF BUYER FOR REGISTRATION PURPOSES: NAME: Gundyco, in trust for R.R.S.P. 550-98866-19 ADDRESS: 4120 Yonge Street Suite 416 North York, Ontario M2P 2B8 Tel. No. (416) 225-7980 Fax. No. (416) 225-7950 Contact Name: Mark Shoom -12- 13 12. DELIVERY INSTRUCTIONS: (IF DIFFERENT FROM REGISTRATION NAME): NAME: ------------------------------- ADDRESS: ------------------------------- ------------------------------- ------------------------------- Tel. No. ------------------------------- Fax. No. ------------------------------- Contact Name: ------------------------------- Special Instructions: ------------------------------- ------------------------------- ------------------------------- -13- 14 IN WITNESS WHEREOF, this Agreement was duly executed or the date first written below. Dated this 21st day of the month of October, 1997. Company Name: Gundyco, in trust for R.R.S.P. 550-98866-19 by its Owner, Mark Shoom By: ------------------------------ Mark Shoom Title: Owner Country of Execution: Canada CYTRX CORPORATION By: ------------------------------------ I have the full authority to bind CYTRX CORPORATION _________ (initial) Name: Jack J. Luchese Title: President -14- EX-2.2 3 SECURITIES AGREEMENT CYTRX AND EXCALIBUR 1 EXHIBIT 2.2 PRIVATE SECURITIES SUBSCRIPTION AGREEMENT CYTRX CORPORATION (REGULATION "D") THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the "Agreement") has been executed by the undersigned in connection with the purchase in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), of certain debentures (hereinafter the "Debentures"), convertible into shares of common stock (hereinafter the "Shares"), and certain share purchase warrants (hereinafter the "Warrants") from CytRx Corporation ("CYTR") 154 Technology Parkway, Technology Parkway, Atlanta, Georgia, 30092, USA, a corporation organized under the laws of Delaware (hereinafter the "COMPANY" or "SELLER") by Name: Excalibur Limited Partnership, c/o H&H Securities Limited located at: 205 Vesta Drive; City: Toronto; Province/State: Ontario; Zip/Postal Code: M5P 3A1; Country: Canada a limited partnership organized under the laws of Ontario and Canada (hereinafter "Buyer"). SELLER and BUYER (hereinafter collectively the "parties") each hereby represents, warrants and agrees as follows: 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE: (i) SELLER and BUYER are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "Commission") under the Securities Act; and (ii) BUYER hereby subscribes for Four Hundred Thousand Dollars (USD $400,000) U.S. principal amount of Debentures, substantially in the form attached as Exhibit A to and forming an integral part of this Agreement. (iii) BUYER will receive 8,000 Warrants substantially in the form attached as Exhibit B to and forming an integral part of this Agreement. Each Warrant will entitle BUYER to purchase one treasury Common Share at the price of $5.68. The Warrants will expire two (2) years after the Closing; and (iv) BUYER shall on or before the Closing execute a copy of the Registration Rights Agreement (the "Registration Rights Agreement") substantially in the form attached as Exhibit "A" to and forming an integral part of this Agreement. 2 2. BUYER'S REPRESENTATIONS BUYER represents and warrants follows: (i) Authorization: Such BUYER has full power and authority to enter into this Agreement, the Debenture, the Warrant and the Registration Rights Agreement (collectively, the "Transaction Documents") and that the Transaction Documents, when executed and delivered will constitute a valid and legally binding obligation of BUYER in accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (ii) Purchase Entirely for Own Account. This Agreement is made with BUYER in reliance upon BUYER'S representation to the Company, which by such BUYER'S execution of this Agreement BUYER hereby confirms, that the Debentures and Warrants to be purchased by BUYER and the Common Stock issuable upon conversion thereof (collectively, the "Securities") will be acquired for investment for BUYERS own account, not a nominee as agent, and not with a view to the resale or distribution of any part thereof. By execution of this Agreement, Buyer further represents that Buyer does not have any contract, undertaking, agreement or arrangement with any person, to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. (iii) Reliance Upon BUYER'S Representations. BUYER understands that the Debentures and the Warrants are not, and any Common Stock acquired on conversion thereof at the time of issuance may not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof and that the Company's reliance on such exemption is predicated on the BUYERS' representations set forth herein. Buyer also understands that no prospectus or offering memorandum has been received by Buyer or filed by the Seller with any Canadian securities commission or similar authority in connection with the sale of the Debentures and Warrants, and that no prospectus or offering memorandum shall be received by the Seller or so filed by Buyer in connection with any sale of Shares issued on the conversion of the Debentures or Warrants, and that as a result the Buyer will be unable to rely upon civil or contractual remedies that might otherwise be available to it if the Debentures, Warrants and/or Shares had been issued by the Seller by way of a prospectus or offering memorandum, respectively, and the prospectus or offering 3 memorandum, as the case may be, contained a misrepresentation as that term is defined in the Securities Act (Ontario). (iv) Buyer is not a corporation, syndicate, partnership or other form of unincorporated entity or corporation created solely to permit the purchase of the Securities by a group of individuals who individual share in the aggregate acquisition cost of the Securities is less than $150,000 and Buyer is not purchasing the Securities as the result of an advertisement of the Securities, including an advertisement in printed media of general and regular paid circulation, radio or television. (v) BUYER believes BUYER has received all the information BUYER considers necessary or appropriate for deciding whether to purchase any of the Securities. BUYER further represents that BUYER has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering any of the Securities and the business, properties, prospects, and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without reasonable effort or expense) necessary to verify the accuracy of any information furnished to BUYER or to which BUYER had access. (vi) BUYER represents that BUYER is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that BUYER is able to fend for himself, herself or itself, can bear the economic risk of BUYER'S investment, and has such knowledge and experience in financial and business matters that BUYER is capable of evaluating the merits and risks of the investment in the Debentures and Warrants. If other than an individual, BUYER also represents BUYER has not been organized for the purpose of acquiring the Debentures and Warrants. (vii) The BUYER represents that BUYER is an Accredited Investor. The term "Accredited Investor" as used herein refers to: (1) A person or entity who is a direct or executive officer of the Company; (2) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as -3- 4 defined in Section 2(a(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21)of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by the persons that are Accredited Investors. (3) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; (4) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of the purchase exceeds $1,000,000; (6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment; or (8) Any entity in which all of the equity owners are Accredited Investors. -4- 5 As used in this Paragraph 3.(vii) the term "net worth" means the excesses of total assets over total liabilities. For the purpose of determining a person's net worth, the principal residence owned by an individual should be valued at fair market value, including the cost of improvements, net of current encumbrances. As used in this paragraph "income" means actual economic income, which may differ from adjusted gross income for income tax purposes. Accordingly, Buyer should consider whether Buyer should add any or all of the following items to Buyer's adjusted gross income for income tax purposes in order to reflect more accurately Buyer's actual economic income; any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions an IRA or keogh retirement plan, and alimony payments. (viii) BUYER understands that the Securities may not be sold, transferred or otherwise disposed of in the United States without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering any of the Securities or an available exemption from registration under the Securities Act, the Securities must be held indefinitely. In particular, BUYER is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the condition of that Rule are met. BUYER also understands that any resale of the Securities must be conducted in accordance with the applicable requirements of the Securities Act (Ontario). (ix) Buyer acknowledges that no person has made to Buyer any written or oral representations: (i) that any person will resell or repurchase the Securities; (ii) that any person will refund the purchase price of the Securities; and (iii) as to the future price or value of the Securities. 3. SELLER'S REPRESENTATIONS SELLER represents and warrants as follows: (i) SELLER has not conducted any general solicitation or general advertising (as defined in Regulation D) with respect to any of the Securities offered hereby; (ii) The Debentures, when issued and delivered pursuant to the terms of this Agreement, will have been duly authorized, executed, issued and delivered and will constitute valid and legally binding obligations of the Company in -5- 6 accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (iii) The Shares, when issued and delivered upon conversion of the Debentures in accordance with their terms, will be duly and validly authorized and issued, fully-paid and non assessable and will not subject the holders thereof to personal liability by reason of being such holders. There are no preemptive rights of any shareholder of SELLER with respect to the Shares contained in SELLER'S Certificate of Incorporation or any agreement to which SELLER is a party; (iv) This Agreement has been duly authorized, validly executed and delivered on behalf of SELLER and is a valid and binding agreement of SELLER in accordance with its terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (v) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement do not and will not conflict with or result in a breach by SELLER of any of the terms or provisions of, or constitute a default under, the certificate of incorporation (or charter) or by-laws of SELLER, or any indenture, mortgage, deed of trust or other material agreement or instrument to which SELLER is a party or by which it or any of its properties or assets are bound, or any existing applicable decree, judgment or order of any court, federal or state regulatory body, administrative agency or other governmental body having jurisdiction over SELLER or any of its properties or assets; (vi) No authorization, approval or consent of or filing with any federal, state or local governmental body of the United States is legally required for the issuance and sale of the Debentures and (provided no commission or other remuneration is paid or given directly or indirectly by SELLER for soliciting such conversion) the issuance of the Shares upon conversion of the Debentures in accordance with their terms, as contemplated by this Agreement, except the filing of a Form D with the Commission; -6- 7 (vii) To the best of the Company's knowledge after reasonable investigation, the information contained in the Company's Annual Report on Form 10K for the year ended December 31, 1996, Proxy statement relating to the Annual Meeting of Shareholders held on June 26, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as filed with the Commission does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are made, not misleading. Since September 30, 1997, there has been no material adverse development in the business, properties, operations, financial condition or results of operations of SELLER. (viii) SELLER will issue one or more certificates representing the Debentures in the name of BUYER in such denominations (in multiples of $25,000) to be specified by BUYER prior to closing and will issue one or more certificates representing the Shares in such denominations to be specified by Buyer upon conversion of the Debentures. SELLER further warrants that the Debentures and the Shares shall be transferable on the books and records of SELLER as and to the extent provided in the Transaction Documents, subject to compliance with Federal and State securities laws. Nothing in this Section shall affect in any way BUYER'S obligations and agreement to comply with all applicable securities laws upon resale of the Securities. 4. CLOSING. Debentures and Warrants shall be delivered to BUYER and the funds therefor shall be delivered to SELLER on the 22nd day of October, 1997 (the "Closing") or at such time to be mutually agreed in accordance with the following procedures. SELLER shall execute the appropriate copies of the Transaction Documents (the "Seller's Closing Documents") and deliver the executed documents to Gowling, Strathy & Henderson, counsel for BUYER, with instructions to hold the documents in trust and not to release the documents to BUYER until advised to do so by SELLER. BUYER shall execute the appropriate copies of the Transaction Documents (the "BUYER'S Closing Documents") and deliver the executed documents to Alston & Bird, counsel for SELLER, with instructions to hold the documents in trust and not to release the documents to SELLER until advised to do so by BUYER. Immediately after BUYER has confirmed that its counsel has received the SELLER'S Closing Documents executed by SELLER, then BUYER shall pay to SELLER the principal amount of the Debentures for which BUYER subscribed (the "Purchase Price"). BUYER shall pay the Purchase Price, less all appropriate legal fees and commissions by wire transfer of immediately available funds in accordance with the following instructions: -7- 8 Mellon Bank, Pittsburgh, P.A. ABA# 0430-0026-1 Credit: Merrill Lynch Acct# 101-1730 For further credit to CytRx Corporation Acct# 701-96D69 On the banking day that SELLER has confirmed that its counsel has received the BUYER'S Closing Documents and is credited with having received the Purchase Price (the "Closing Date"), SELLER shall advise BUYER. Immediately thereafter, SELLER shall advise Gowling, Strathy & Henderson to release the SELLER'S Closing Documents to BUYER and BUYER shall advise Alston & Bird to release the BUYER'S Closing Documents to SELLER. The Transaction Documents shall not be deemed to have been delivered except in accordance with the procedure described in this Section 4. If the Closing Date does not occur before October 23, 1997, then either party may terminate this Agreement immediately upon written notice to the other party and all Transaction Documents shall be deemed to be null and void. 5. CONDITIONS TO CLOSING (i) BUYER understands that SELLER'S obligation to sell the Debentures and the Warrants is conditioned upon the receipt in immediately available funds of the amount set forth in Paragraph 1 hereof and an opinion of counsel substantially in the form attached as D to and forming an integral part of this Agreement, SELLER shall have the right to reject any given Agreement which is tendered to SELLER, for the reason that SELLER reasonably believes any representations and warranties of BUYER to be untrue and in such event SELLER shall provide BUYER written notice of such rejection and the reason therefore and shall provide reasonable opportunity for a response to such stated reason. Also, SELLER may decline to accept this Agreement for any other reason which in the sole discretion of SELLER may materially affect SELLER. (ii) SELLER understands that BUYER'S obligation to purchase the Debentures is conditioned upon delivery of certificate(s) representing Debentures as described in Paragraph 1(ii) hereto and provision of an opinion of counsel attached as Exhibit E substantially in the form and forming an integral part of this Agreement. 6. SELLER'S OPTION ADDITIONAL $2,000,000 TO BUYER AND OTHER CONCURRENT BUYERS CONVERSION AND WARRANT PRICE -8- 9 SELLER shall have the option (the "Option") to require BUYER to purchase Four Hundred Thousand Dollars (USD $400,000) of additional Debentures at any time between 90 and 270 days (the "Option Period") after the Shelf Registration (as defined in the Rights Registration Agreement) has been declared effective by the Commission subject to the following conditions: (i) The ten day Average Closing Bid Price of the Shares shall not be below $3.50 per share on (a) the day SELLER gives BUYER notice of SELLER'S election to exercise this Option and (b) the day before the closing of the Option; (ii) SELLER shall not be in default under any material borrowings from any financial institution or other persons; (iii) the class of common stock into which the Debentures are convertible shall continue to be listed by Nasdaq; or (iv) the Company shall not have been convicted of any fraud in the sale of its securities. The closing of the purchase of the additional Debentures will take place 10 business days after the day of SELLER'S notice to BUYER. With the exception of any further option in favour of SELLER, and the Conversion Price and Warrant Price and the maturity dates which will have to be reset, the terms and conditions in connection with the funding and closing of the Option will be the same as those relating to the initial funding of October, 1997. Provided however if the Black-Out Period as defined in Section 1(ii) of the Debenture is invoked, then the actual number of days of the Black-Out Period shall be added to each of the 90 and 270 days comprising the Option Period. If the Option is completed: "Average Closing Bid Price" for the purposes of this Section 6 means the average of the daily last bid price for the shares of Common Stock for the five (5) or ten (10), as the case may be, consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on Nasdaq National Market (as reported by Bloomberg Business News, or, if not reported thereby, any other authoritative source selected by the Company ending at the close of the trading on the trading day immediately preceding the measurement date. "Conversion Price" shall mean the lessor of (A:) one hundred ten percent (110%) of the five day Average Closing Bid Price, calculated using the closing date as the measurement date, or (B) eighty five percent (85%) of the ten day Average -9- 10 Closing Bid Price calculated using the date of conversion as the measurement date, provided, however, but if the holder will have delivered a Forbearance Request to the Company in accordance with what is presently Section 5(ii) of the Debenture used in the October 1997 Closing, within twenty-four (24) hours before it will have delivered a conversion notice of the Company in accordance with what is presently Section 4.3.1 of the Debenture, then the ten day Average Closing Bid Price for the portion of the debenture that the Holder will have identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. "Exercise Price" for per share under each Warrant shall be one hundred ten percent (110%) of the five day Average Closing Bid Price calculated as of the Closing Date of the Option. The Exercise Price shall be paid in cash. "Right of First Refusal Period" shall mean the period that begins on the Closing Date and ends on the earlier of (a) the closing date of the Option, (b) the refusal of Buyer to purchase the Debentures covered by the Option because Seller failed to meet the conditions set forth in clauses (i) to (iv) above, or (c) the end of the Option Period. The "closing date" means the closing date of the Option. If, during the Right of First Refusal Period, but only ninety (90) days after the Closing Date the Company proposes to undertake an issuance of any securities pursuant to Regulations D or S promulgated under the Securities Act (the "New Securities"), then the Company shall give written notice of the Company's intention to BUYER, describing the type of the securities, and their price and the general terms upon which the Company proposes to issue the same. The Debenture is being issued in connection with debentures on similar terms to Charles N. Eckert, David Kosloff, Pine Street Asset Management and Gundyco in trust for R.R.S.P. 550-98866-19 (collectively, the "Other Buyers"). Each of the BUYER and the Other Buyer who remain Accredited Investors ("Qualified Buyer") shall have twenty (20) days after any such notice is mailed or delivered to agree to purchase all of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. Each of the Qualified Buyers shall be entitled to purchase New Securities in the proportion of its purchase of Debentures and if one or more buyers decline, or is not qualified, to so purchase, then the others, as the case may be, shall be entitled to purchase the New Securities not taken by the Qualified Buyer(s), as the case may be within the original twenty (20) day period. "New Securities" does not include (i) securities issued pursuant to the acquisition of another business entity or segment of any such entity by the Company by merger, asset purchase, stock purchase or otherwise, (ii) any borrowings, direct or -10- 11 indirect, from financial institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company, (iii) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement, (iv) securities issued to vendors or customers or to other persons in similar commercial situations with the Company, (v) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person, (vi) securities issued in connection with any stock split, stock dividend or recapitalization of the Company, or (vi) securities issued in connection with corporate partnering transactions. If the Qualified Buyers fail to exercise fully the right of first refusal within the prescribed twenty (20) day period, then the Company shall have one hundred twenty (120) days thereafter to sell or enter into an agreement to sell the New Securities, at a price and on terms no more favourable to the purchasers thereof than specified in the notice to the Qualified Buyers. If the Company has not sold or entered into an agreement to sell the New Securities in accordance with the foregoing within the one hundred twenty (120) day period, then the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Qualified Buyers in accordance with this Section 6. 7. GOVERNING LAW; INTERPRETATION AND DISPUTES. This Agreement shall be governed by and construed under the laws of the State of Delaware and the laws applicable therein without regard to its choice of law principles. 8. ARBITRATION All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the SELLER and BUYER in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by SELLER, BUYER and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement, provided, however, if necessary, such decision and satisfaction procedure may be enforced by either SELLER or BUYER in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by -11- 12 the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by SELLER as one party and BUYER as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 9. CONFIDENTIALITY. The parties hereto agree to maintain the confidentiality of this Agreement and not to disclose to any person or entity information concerning the transaction contemplated hereby unless required by law to do so. 10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereof with respect to the subject matter hereof and supersedes any and all prior or contemporaneous representations, warranties, agreements and understandings in connection therewith. This Agreement may be amended only by a writing executed by all parties hereto. This Agreement may be executed in counterparts and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original. [Signatures begin on next page] 11. FULL NAME AND ADDRESS OF BUYER FOR REGISTRATION PURPOSES: NAME: Excalibur Limited Partnership ADDRESS: c/o H&H Securities Limited 205 Vesta Drive Toronto, Ontario M5P 3AI Tel. No. (416) 964-9077 Fax. No. (416) 964-8868 Contact Name: William S. Hechter 12. DELIVERY INSTRUCTIONS: (IF DIFFERENT FROM REGISTRATION NAME): -12- 13 NAME: ----------------------------- ADDRESS: ----------------------------- ----------------------------- ----------------------------- Tel. No. ----------------------------- Fax. No. ----------------------------- Contact Name: ----------------------------- Special Instructions: ----------------------------- ----------------------------- ----------------------------- -13- 14 IN WITNESS WHEREOF, this Agreement was duly executed or the date first written below. Dated this 21st day of the month of October, 1997. Company Name: Excalibur Limited Partnership. by its General Partner, Excalibur Capital Management Inc. By: ------------------------------- William S. Hechter Title: President Country of Execution: Canada CYTRX CORPORATION By: ---------------------------------- I have the full authority to bind CYTRX CORPORATION _________ (initial) Name: Jack J. Luchese Title: President EX-2.3 4 SECURITIES AGREEMENT CYTRX AND PINE STREET 1 EXHIBIT 2.3 PRIVATE SECURITIES SUBSCRIPTION AGREEMENT CYTRX CORPORATION (REGULATION "D") THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the "Agreement") has been executed by the undersigned in connection with the purchase in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), of certain debentures (hereinafter the "Debentures"), convertible into shares of common stock (hereinafter the "Shares"), and certain share purchase warrants (hereinafter the "Warrants") from CytRx Corporation ("CYTR") 154 Technology Parkway, Technology Parkway, Atlanta, Georgia, 30092, USA, a corporation organized under the laws of Delaware (hereinafter the "COMPANY" or "SELLER") by Name: Pine Asset Management located at: c/o Shipley Raidy Capital Partners, One Tower Bridge, Suite 1370; City: West Conshohocken; Province/State: Pennsylvania; Zip/Postal 19428; Country: U.S.A. a limited partnership organized under the laws of the State of Pennsylvania and the U.S.A. (hereinafter "BUYER"). SELLER and BUYER (hereinafter collectively the "parties") each hereby represents, warrants and agrees as follows: 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE: (i) SELLER and BUYER are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "Commission") under the Securities Act; and (ii) BUYER hereby subscribes for Four Hundred Thousand Dollars (USD $400,000) U.S. principal amount of Debentures, substantially in the form attached as Exhibit A to and forming an integral part of this Agreement. (iii) BUYER will receive 8,000 Warrants substantially in the form attached as Exhibit B to and forming an integral part of this Agreement. Each Warrant will entitle BUYER to purchase one treasury Common Share at the price of $5.68. The Warrants will expire two (2) years after the Closing; and (iv) BUYER shall on or before the Closing execute a copy of the Registration Rights Agreement (the "Registration Rights Agreement") substantially in the form attached as Exhibit "A" to and forming an integral part of this Agreement. 2 2. BUYER'S REPRESENTATIONS BUYER represents and warrants follows: (i) Authorization: Such BUYER has full power and authority to enter into this Agreement, the Debenture, the Warrant and the Registration Rights Agreement (collectively, the "Transaction Documents") and that the Transaction Documents, when executed and delivered will constitute a valid and legally binding obligation of BUYER in accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (ii) Purchase Entirely for Own Account. This Agreement is made with BUYER in reliance upon BUYER'S representation to the Company, which by such BUYER'S execution of this Agreement BUYER hereby confirms, that the Debentures and Warrants to be purchased by BUYER and the Common Stock issuable upon conversion thereof (collectively, the "Securities") will be acquired for investment for BUYERS own account, not a nominee as agent, and not with a view to the resale or distribution of any part thereof. By execution of this Agreement, Buyer further represents that Buyer does not have any contract, undertaking, agreement or arrangement with any person, to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. (iii) Reliance Upon BUYER'S Representations. BUYER understands that the Debentures and the Warrants are not, and any Common Stock acquired on conversion thereof at the time of issuance may not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof and that the Company's reliance on such exemption is predicated on the BUYERS' representations set forth herein. Buyer also understands that no prospectus or offering memorandum has been received by Buyer or filed by the Seller with any Canadian securities commission or similar authority in connection with the sale of the Debentures and Warrants, and that no prospectus or offering memorandum shall be received by the Seller or so filed by Buyer in connection with any sale of Shares issued on the conversion of the Debentures or Warrants, and that as a result the Buyer will be unable to rely upon civil or contractual remedies that might otherwise be available to it if the Debentures, Warrants and/or Shares had been issued by the Seller by way of a prospectus or offering memorandum, respectively, and the prospectus or offering -2- 3 memorandum, as the case may be, contained a misrepresentation as that term is defined in the Securities Act (Ontario). (iv) Buyer is not a corporation, syndicate, partnership or other form of unincorporated entity or corporation created solely to permit the purchase of the Securities by a group of individuals who individual share in the aggregate acquisition cost of the Securities is less than $150,000 and Buyer is not purchasing the Securities as the result of an advertisement of the Securities, including an advertisement in printed media of general and regular paid circulation, radio or television. (v) BUYER believes BUYER has received all the information BUYER considers necessary or appropriate for deciding whether to purchase any of the Securities. BUYER further represents that BUYER has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering any of the Securities and the business, properties, prospects, and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without reasonable effort or expense) necessary to verify the accuracy of any information furnished to BUYER or to which BUYER had access. (vi) BUYER represents that BUYER is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that BUYER is able to fend for himself, herself or itself, can bear the economic risk of BUYER'S investment, and has such knowledge and experience in financial and business matters that BUYER is capable of evaluating the merits and risks of the investment in the Debentures and Warrants. If other than an individual, BUYER also represents BUYER has not been organized for the purpose of acquiring the Debentures and Warrants. (vii) The BUYER represents that BUYER is an Accredited Investor. The term "Accredited Investor" as used herein refers to: (1) A person or entity who is a direct or executive officer of the Company; (2) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as -3- 4 defined in Section 2(a(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21)of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by the persons that are Accredited Investors. (3) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; (4) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of the purchase exceeds $1,000,000; (6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment; or (8) Any entity in which all of the equity owners are Accredited Investors. -4- 5 As used in this Paragraph 3.(vii) the term "net worth" means the excesses of total assets over total liabilities. For the purpose of determining a person's net worth, the principal residence owned by an individual should be valued at fair market value, including the cost of improvements, net of current encumbrances. As used in this paragraph "income" means actual economic income, which may differ from adjusted gross income for income tax purposes. Accordingly, Buyer should consider whether Buyer should add any or all of the following items to Buyer's adjusted gross income for income tax purposes in order to reflect more accurately Buyer's actual economic income; any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions an IRA or keogh retirement plan, and alimony payments. (viii) BUYER understands that the Securities may not be sold, transferred or otherwise disposed of in the United States without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering any of the Securities or an available exemption from registration under the Securities Act, the Securities must be held indefinitely. In particular, BUYER is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the condition of that Rule are met. BUYER also understands that any resale of the Securities must be conducted in accordance with the applicable requirements of the Securities Act (Ontario). (ix) Buyer acknowledges that no person has made to Buyer any written or oral representations: (i) that any person will resell or repurchase the Securities; (ii) that any person will refund the purchase price of the Securities; and (iii) as to the future price or value of the Securities. 3. SELLER'S REPRESENTATIONS SELLER represents and warrants as follows: (i) SELLER has not conducted any general solicitation or general advertising (as defined in Regulation D) with respect to any of the Securities offered hereby; (ii) The Debentures, when issued and delivered pursuant to the terms of this Agreement, will have been duly authorized, executed, issued and delivered and will constitute valid and legally binding obligations of the Company in -5- 6 accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (iii) The Shares, when issued and delivered upon conversion of the Debentures in accordance with their terms, will be duly and validly authorized and issued, fully-paid and non assessable and will not subject the holders thereof to personal liability by reason of being such holders. There are no preemptive rights of any shareholder of SELLER with respect to the Shares contained in SELLER'S Certificate of Incorporation or any agreement to which SELLER is a party; (iv) This Agreement has been duly authorized, validly executed and delivered on behalf of SELLER and is a valid and binding agreement of SELLER in accordance with its terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (v) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement do not and will not conflict with or result in a breach by SELLER of any of the terms or provisions of, or constitute a default under, the certificate of incorporation (or charter) or by-laws of SELLER, or any indenture, mortgage, deed of trust or other material agreement or instrument to which SELLER is a party or by which it or any of its properties or assets are bound, or any existing applicable decree, judgment or order of any court, federal or state regulatory body, administrative agency or other governmental body having jurisdiction over SELLER or any of its properties or assets; (vi) No authorization, approval or consent of or filing with any federal, state or local governmental body of the United States is legally required for the issuance and sale of the Debentures and (provided no commission or other remuneration is paid or given directly or indirectly by SELLER for soliciting such conversion) the issuance of the Shares upon conversion of the Debentures in accordance with their terms, as contemplated by this Agreement, except the filing of a Form D with the Commission; -6- 7 (vii) To the best of the Company's knowledge after reasonable investigation, the information contained in the Company's Annual Report on Form 10K for the year ended December 31, 1996, Proxy statement relating to the Annual Meeting of Shareholders held on June 26, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as filed with the Commission does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are made, not misleading. Since September 30, 1997, there has been no material adverse development in the business, properties, operations, financial condition or results of operations of SELLER. (viii) SELLER will issue one or more certificates representing the Debentures in the name of BUYER in such denominations (in multiples of $25,000) to be specified by BUYER prior to closing and will issue one or more certificates representing the Shares in such denominations to be specified by Buyer upon conversion of the Debentures. SELLER further warrants that the Debentures and the Shares shall be transferable on the books and records of SELLER as and to the extent provided in the Transaction Documents, subject to compliance with Federal and State securities laws. Nothing in this Section shall affect in any way BUYER'S obligations and agreement to comply with all applicable securities laws upon resale of the Securities. 4. CLOSING. Debentures and Warrants shall be delivered to BUYER and the funds therefor shall be delivered to SELLER on the 22nd day of October, 1997 (the "Closing") or at such time to be mutually agreed in accordance with the following procedures. SELLER shall execute the appropriate copies of the Transaction Documents (the "SELLER'S Closing Documents") and deliver the executed documents to Gowling, Strathy & Henderson, counsel for BUYER, with instructions to hold the documents in trust and not to release the documents to BUYER until advised to do so by SELLER. BUYER shall execute the appropriate copies of the Transaction Documents (the "BUYER'S Closing Documents") and deliver the executed documents to Alston & Bird, counsel for SELLER, with instructions to hold the documents in trust and not to release the documents to SELLER until advised to do so by BUYER. Immediately after BUYER has confirmed that its counsel has received the SELLER'S Closing Documents executed by SELLER, then BUYER shall pay to SELLER the principal amount of the Debentures for which BUYER subscribed (the "Purchase Price"). BUYER shall pay the Purchase Price, less all appropriate legal fees and commissions by wire transfer of immediately available funds in accordance with the following instructions: -7- 8 Mellon Bank, Pittsburgh, P.A. ABA# 0430-0026-1 Credit: Merrill Lynch Acct# 101-1730 For further credit to CytRx Corporation Acct# 701-96D69 On the banking day that SELLER has confirmed that its counsel has received the BUYER'S Closing Documents and is credited with having received the Purchase Price (the "Closing Date"), SELLER shall advise BUYER. Immediately thereafter, SELLER shall advise Gowling, Strathy & Henderson to release the SELLER'S Closing Documents to BUYER and BUYER shall advise Alston & Bird to release the BUYER'S Closing Documents to SELLER. The Transaction Documents shall not be deemed to have been delivered except in accordance with the procedure described in this Section 4. If the Closing Date does not occur before October 23, 1997, then either party may terminate this Agreement immediately upon written notice to the other party and all Transaction Documents shall be deemed to be null and void. 5. CONDITIONS TO CLOSING (i) BUYER understands that SELLER'S obligation to sell the Debentures and the Warrants is conditioned upon the receipt in immediately available funds of the amount set forth in Paragraph 1 hereof and an opinion of counsel substantially in the form attached as D to and forming an integral part of this Agreement, SELLER shall have the right to reject any given Agreement which is tendered to SELLER, for the reason that SELLER reasonably believes any representations and warranties of BUYER to be untrue and in such event SELLER shall provide BUYER written notice of such rejection and the reason therefore and shall provide reasonable opportunity for a response to such stated reason. Also, SELLER may decline to accept this Agreement for any other reason which in the sole discretion of SELLER may materially affect SELLER. (ii) SELLER understands that BUYER'S obligation to purchase the Debentures is conditioned upon delivery of certificate(s) representing Debentures as described in Paragraph 1(ii) hereto and provision of an opinion of counsel attached as Exhibit E substantially in the form and forming an integral part of this Agreement. 6. SELLER'S OPTION ADDITIONAL $2,000,000 TO BUYER AND OTHER CONCURRENT BUYERS CONVERSION AND WARRANT PRICE -8- 9 SELLER shall have the option (the "Option") to require BUYER to purchase Four Hundred Thousand Dollars (USD $400,000) of additional Debentures at any time between 90 and 270 days (the "Option Period") after the Shelf Registration (as defined in the Rights Registration Agreement) has been declared effective by the Commission subject to the following conditions: (i) The ten day Average Closing Bid Price of the Shares shall not be below $3.50 per share on (a) the day SELLER gives BUYER notice of SELLER'S election to exercise this Option and (b) the day before the closing of the Option; (ii) SELLER shall not be in default under any material borrowings from any financial institution or other persons; (iii) the class of common stock into which the Debentures are convertible shall continue to be listed by Nasdaq; or (iv) the Company shall not have been convicted of any fraud in the sale of its securities. The closing of the purchase of the additional Debentures will take place 10 business days after the day of SELLER'S notice to BUYER. With the exception of any further option in favour of SELLER, and the Conversion Price and Warrant Price and the maturity dates which will have to be reset, the terms and conditions in connection with the funding and closing of the Option will be the same as those relating to the initial funding of October, 1997. Provided however if the Black-Out Period as defined in Section 1(ii) of the Debenture is invoked, then the actual number of days of the Black-Out Period shall be added to each of the 90 and 270 days comprising the Option Period. If the Option is completed: "Average Closing Bid Price" for the purposes of this Section 6 means the average of the daily last bid price for the shares of Common Stock for the five (5) or ten (10), as the case may be, consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on Nasdaq National Market (as reported by Bloomberg Business News, or, if not reported thereby, any other authoritative source selected by the Company ending at the close of the trading on the trading day immediately preceding the measurement date. "Conversion Price" shall mean the lessor of (A:) one hundred ten percent (110%) of the five day Average Closing Bid Price, calculated using the closing date as the measurement date, or (B) eighty five percent (85%) of the ten day Average -9- 10 Closing Bid Price calculated using the date of conversion as the measurement date, provided, however, but if the holder will have delivered a Forbearance Request to the Company in accordance with what is presently Section 5(ii) of the Debenture used in the October 1997 Closing, within twenty-four (24) hours before it will have delivered a conversion notice of the Company in accordance with what is presently Section 4.3.1 of the Debenture, then the ten day Average Closing Bid Price for the portion of the debenture that the Holder will have identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. "Exercise Price" for per share under each Warrant shall be one hundred ten percent (110%) of the five day Average Closing Bid Price calculated as of the Closing Date of the Option. The Exercise Price shall be paid in cash. "Right of First Refusal Period" shall mean the period that begins on the Closing Date and ends on the earlier of (a) the closing date of the Option, (b) the refusal of Buyer to purchase the Debentures covered by the Option because Seller failed to meet the conditions set forth in clauses (i) to (iv) above, or (c) the end of the Option Period. The "closing date" means the closing date of the Option. If, during the Right of First Refusal Period, but only ninety (90) days after the Closing Date the Company proposes to undertake an issuance of any securities pursuant to Regulations D or S promulgated under the Securities Act (the "New Securities"), then the Company shall give written notice of the Company's intention to BUYER, describing the type of the securities, and their price and the general terms upon which the Company proposes to issue the same. The Debenture is being issued in connection with debentures on similar terms to Charles N. Eckert, David Kosloff, Pine Street Asset Management and Gundyco in trust for R.R.S.P. 550-98866-19 (collectively, the "Other Buyers"). Each of the BUYER and the Other Buyer who remain Accredited Investors ("Qualified Buyer") shall have twenty (20) days after any such notice is mailed or delivered to agree to purchase all of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. Each of the Qualified Buyers shall be entitled to purchase New Securities in the proportion of its purchase of Debentures and if one or more buyers decline, or is not qualified, to so purchase, then the others, as the case may be, shall be entitled to purchase the New Securities not taken by the Qualified Buyer(s), as the case may be within the original twenty (20) day period. "New Securities" does not include (i) securities issued pursuant to the acquisition of another business entity or segment of any such entity by the Company by merger, asset purchase, stock purchase or otherwise, (ii) any borrowings, direct or -10- 11 indirect, from financial institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company, (iii) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement, (iv) securities issued to vendors or customers or to other persons in similar commercial situations with the Company, (v) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person, (vi) securities issued in connection with any stock split, stock dividend or recapitalization of the Company, or (vi) securities issued in connection with corporate partnering transactions. If the Qualified Buyers fail to exercise fully the right of first refusal within the prescribed twenty (20) day period, then the Company shall have one hundred twenty (120) days thereafter to sell or enter into an agreement to sell the New Securities, at a price and on terms no more favourable to the purchasers thereof than specified in the notice to the Qualified Buyers. If the Company has not sold or entered into an agreement to sell the New Securities in accordance with the foregoing within the one hundred twenty (120) day period, then the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Qualified Buyers in accordance with this Section 6. 7. GOVERNING LAW; INTERPRETATION AND DISPUTES. This Agreement shall be governed by and construed under the laws of the State of Delaware and the laws applicable therein without regard to its choice of law principles. 8. ARBITRATION All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the SELLER and BUYER in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by SELLER, BUYER and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement, provided, however, if necessary, such decision and satisfaction procedure may be enforced by either SELLER or BUYER in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by -11- 12 the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by SELLER as one party and BUYER as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 9. CONFIDENTIALITY. The parties hereto agree to maintain the confidentiality of this Agreement and not to disclose to any person or entity information concerning the transaction contemplated hereby unless required by law to do so. 10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereof with respect to the subject matter hereof and supersedes any and all prior or contemporaneous representations, warranties, agreements and understandings in connection therewith. This Agreement may be amended only by a writing executed by all parties hereto. This Agreement may be executed in counterparts and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original. [Signatures begin on next page] 11. FULL NAME AND ADDRESS OF BUYER FOR REGISTRATION PURPOSES: NAME: Pine Street Asset Management ADDRESS: One Tower Bridge Suite 1370 West Conshohocken, Pennsylvania 19428 U.S.A. Tel. No. (610) 941-9090 Fax. No. (610) 828-4131 Contact Name: Kevin Raidy -12- 13 12. DELIVERY INSTRUCTIONS: (IF DIFFERENT FROM REGISTRATION NAME): NAME: ---------------------------- ADDRESS: ---------------------------- ---------------------------- ---------------------------- Tel. No. ---------------------------- Fax. No. ---------------------------- Contact Name: ---------------------------- Special Instructions: ---------------------------- ---------------------------- ---------------------------- -13- 14 IN WITNESS WHEREOF, this Agreement was duly executed or the date first written below. Dated this 21st day of the month of October, 1997. Company Name: Pine Street Asset Management by its General Partner, Samuel Shipley By: -------------------------------------- Samuel Shipley Title: General Partner Country of Execution: U.S.A. CYTRX CORPORATION By: ----------------------------- I have the full authority to bind CYTRX CORPORATION _________ (initial) Name: Jack J. Luchese Title: President -14- EX-2.4 5 SECURITIES AGREEMENT CYTRX AND CHARLES ECKERT 1 EXHIBIT 2.4 PRIVATE SECURITIES SUBSCRIPTION AGREEMENT CYTRX CORPORATION (REGULATION "D") THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the "Agreement") has been executed by the undersigned in connection with the purchase in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), of certain debentures (hereinafter the "Debentures"), convertible into shares of common stock (hereinafter the "Shares"), and certain share purchase warrants (hereinafter the "Warrants") from CytRx Corporation ("CYTR") 154 Technology Parkway, Technology Parkway, Atlanta, Georgia, 30092, USA, a corporation organized under the laws of Delaware (hereinafter the "COMPANY" or "SELLER") by Name: Charles N. Eckert located at: c/o Shipley Raidy Capital Partners, One Tower Bridge, Suite 1370; City: West Conshohocken; Province/State: Pennsylvania; Zip/Postal Code: 19428; Country: U.S.A., an individual resident in the State of Pennsylvania (hereinafter "BUYER"). SELLER and BUYER (hereinafter collectively the "parties") each hereby represents, warrants and agrees as follows: 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE: (i) SELLER and BUYER are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "Commission") under the Securities Act; and (ii) BUYER hereby subscribes for Four Hundred Thousand Dollars (USD $400,000) U.S. principal amount of Debentures, substantially in the form attached as Exhibit A to and forming an integral part of this Agreement. (iii) BUYER will receive 8,000 Warrants substantially in the form attached as Exhibit B to and forming an integral part of this Agreement. Each Warrant will entitle BUYER to purchase one treasury Common Share at the price of $5.68. The Warrants will expire two (2) years after the Closing; and (iv) BUYER shall on or before the Closing execute a copy of the Registration Rights Agreement (the "Registration Rights Agreement") substantially in the form attached as Exhibit "A" to and forming an integral part of this Agreement. 2 2. BUYER'S REPRESENTATIONS BUYER represents and warrants follows: (i) Authorization: Such BUYER has full power and authority to enter into this Agreement, the Debenture, the Warrant and the Registration Rights Agreement (collectively, the "Transaction Documents") and that the Transaction Documents, when executed and delivered will constitute a valid and legally binding obligation of BUYER in accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (ii) Purchase Entirely for Own Account. This Agreement is made with BUYER in reliance upon BUYER'S representation to the Company, which by such BUYER'S execution of this Agreement BUYER hereby confirms, that the Debentures and Warrants to be purchased by BUYER and the Common Stock issuable upon conversion thereof (collectively, the "Securities") will be acquired for investment for BUYERS own account, not a nominee as agent, and not with a view to the resale or distribution of any part thereof. By execution of this Agreement, Buyer further represents that Buyer does not have any contract, undertaking, agreement or arrangement with any person, to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. (iii) Reliance Upon BUYER'S Representations. BUYER understands that the Debentures and the Warrants are not, and any Common Stock acquired on conversion thereof at the time of issuance may not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof and that the Company's reliance on such exemption is predicated on the BUYERS' representations set forth herein. Buyer also understands that no prospectus or offering memorandum has been received by Buyer or filed by the Seller with any Canadian securities commission or similar authority in connection with the sale of the Debentures and Warrants, and that no prospectus or offering memorandum shall be received by the Seller or so filed by Buyer in connection with any sale of Shares issued on the conversion of the Debentures or Warrants, and that as a result the Buyer will be unable to rely upon civil or contractual remedies that might otherwise be available to it if the Debentures, Warrants and/or Shares had been issued by the Seller by way of a prospectus or offering memorandum, respectively, and the prospectus or offering -2- 3 memorandum, as the case may be, contained a misrepresentation as that term is defined in the Securities Act (Ontario). (iv) Buyer is not a corporation, syndicate, partnership or other form of unincorporated entity or corporation created solely to permit the purchase of the Securities by a group of individuals who individual share in the aggregate acquisition cost of the Securities is less than $150,000 and Buyer is not purchasing the Securities as the result of an advertisement of the Securities, including an advertisement in printed media of general and regular paid circulation, radio or television. (v) BUYER believes BUYER has received all the information BUYER considers necessary or appropriate for deciding whether to purchase any of the Securities. BUYER further represents that BUYER has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering any of the Securities and the business, properties, prospects, and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without reasonable effort or expense) necessary to verify the accuracy of any information furnished to BUYER or to which BUYER had access. (vi) BUYER represents that BUYER is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that BUYER is able to fend for himself, herself or itself, can bear the economic risk of BUYER'S investment, and has such knowledge and experience in financial and business matters that BUYER is capable of evaluating the merits and risks of the investment in the Debentures and Warrants. If other than an individual, BUYER also represents BUYER has not been organized for the purpose of acquiring the Debentures and Warrants. (vii) The BUYER represents that BUYER is an Accredited Investor. The term "Accredited Investor" as used herein refers to: (1) A person or entity who is a direct or executive officer of the Company; (2) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as -3- 4 defined in Section 2(a(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21)of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by the persons that are Accredited Investors. (3) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; (4) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of the purchase exceeds $1,000,000; (6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment; or (8) Any entity in which all of the equity owners are Accredited Investors. -4- 5 As used in this Paragraph 3.(vii) the term "net worth" means the excesses of total assets over total liabilities. For the purpose of determining a person's net worth, the principal residence owned by an individual should be valued at fair market value, including the cost of improvements, net of current encumbrances. As used in this paragraph "income" means actual economic income, which may differ from adjusted gross income for income tax purposes. Accordingly, Buyer should consider whether Buyer should add any or all of the following items to Buyer's adjusted gross income for income tax purposes in order to reflect more accurately Buyer's actual economic income; any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions an IRA or keogh retirement plan, and alimony payments. (viii) BUYER understands that the Securities may not be sold, transferred or otherwise disposed of in the United States without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering any of the Securities or an available exemption from registration under the Securities Act, the Securities must be held indefinitely. In particular, BUYER is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the condition of that Rule are met. BUYER also understands that any resale of the Securities must be conducted in accordance with the applicable requirements of the Securities Act (Ontario). (ix) Buyer acknowledges that no person has made to Buyer any written or oral representations: (i) that any person will resell or repurchase the Securities; (ii) that any person will refund the purchase price of the Securities; and (iii) as to the future price or value of the Securities. 3. SELLER'S REPRESENTATIONS SELLER represents and warrants as follows: (i) SELLER has not conducted any general solicitation or general advertising (as defined in Regulation D) with respect to any of the Securities offered hereby; (ii) The Debentures, when issued and delivered pursuant to the terms of this Agreement, will have been duly authorized, executed, issued and delivered and will constitute valid and legally binding obligations of the Company in -5- 6 accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (iii) The Shares, when issued and delivered upon conversion of the Debentures in accordance with their terms, will be duly and validly authorized and issued, fully-paid and non assessable and will not subject the holders thereof to personal liability by reason of being such holders. There are no preemptive rights of any shareholder of SELLER with respect to the Shares contained in SELLER'S Certificate of Incorporation or any agreement to which SELLER is a party; (iv) This Agreement has been duly authorized, validly executed and delivered on behalf of SELLER and is a valid and binding agreement of SELLER in accordance with its terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (v) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement do not and will not conflict with or result in a breach by SELLER of any of the terms or provisions of, or constitute a default under, the certificate of incorporation (or charter) or by-laws of SELLER, or any indenture, mortgage, deed of trust or other material agreement or instrument to which SELLER is a party or by which it or any of its properties or assets are bound, or any existing applicable decree, judgment or order of any court, federal or state regulatory body, administrative agency or other governmental body having jurisdiction over SELLER or any of its properties or assets; (vi) No authorization, approval or consent of or filing with any federal, state or local governmental body of the United States is legally required for the issuance and sale of the Debentures and (provided no commission or other remuneration is paid or given directly or indirectly by SELLER for soliciting such conversion) the issuance of the Shares upon conversion of the Debentures in accordance with their terms, as contemplated by this Agreement, except the filing of a Form D with the Commission; -6- 7 (vii) To the best of the Company's knowledge after reasonable investigation, the information contained in the Company's Annual Report on Form 10K for the year ended December 31, 1996, Proxy statement relating to the Annual Meeting of Shareholders held on June 26, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as filed with the Commission does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are made, not misleading. Since September 30, 1997, there has been no material adverse development in the business, properties, operations, financial condition or results of operations of SELLER. (viii) SELLER will issue one or more certificates representing the Debentures in the name of BUYER in such denominations (in multiples of $25,000) to be specified by BUYER prior to closing and will issue one or more certificates representing the Shares in such denominations to be specified by Buyer upon conversion of the Debentures. SELLER further warrants that the Debentures and the Shares shall be transferable on the books and records of SELLER as and to the extent provided in the Transaction Documents, subject to compliance with Federal and State securities laws. Nothing in this Section shall affect in any way BUYER'S obligations and agreement to comply with all applicable securities laws upon resale of the Securities. 4. CLOSING. Debentures and Warrants shall be delivered to BUYER and the funds therefor shall be delivered to SELLER on the 22nd day of October, 1997 (the "Closing") or at such time to be mutually agreed in accordance with the following procedures. SELLER shall execute the appropriate copies of the Transaction Documents (the "SELLER'S Closing Documents") and deliver the executed documents to Gowling, Strathy & Henderson, counsel for BUYER, with instructions to hold the documents in trust and not to release the documents to BUYER until advised to do so by SELLER. BUYER shall execute the appropriate copies of the Transaction Documents (the "BUYER'S Closing Documents") and deliver the executed documents to Alston & Bird, counsel for SELLER, with instructions to hold the documents in trust and not to release the documents to SELLER until advised to do so by BUYER. Immediately after BUYER has confirmed that its counsel has received the SELLER'S Closing Documents executed by SELLER, then BUYER shall pay to SELLER the principal amount of the Debentures for which BUYER subscribed (the "Purchase Price"). BUYER shall pay the Purchase Price, less all appropriate legal fees and commissions by wire transfer of immediately available funds in accordance with the following instructions: -7- 8 Mellon Bank, Pittsburgh, P.A. ABA# 0430-0026-1 Credit: Merrill Lynch Acct# 101-1730 For further credit to CytRx Corporation Acct# 701-96D69 On the banking day that SELLER has confirmed that its counsel has received the BUYER'S Closing Documents and is credited with having received the Purchase Price (the "Closing Date"), SELLER shall advise BUYER. Immediately thereafter, SELLER shall advise Gowling, Strathy & Henderson to release the SELLER'S Closing Documents to BUYER and BUYER shall advise Alston & Bird to release the BUYER'S Closing Documents to SELLER. The Transaction Documents shall not be deemed to have been delivered except in accordance with the procedure described in this Section 4. If the Closing Date does not occur before October 23, 1997, then either party may terminate this Agreement immediately upon written notice to the other party and all Transaction Documents shall be deemed to be null and void. 5. CONDITIONS TO CLOSING (i) BUYER understands that SELLER'S obligation to sell the Debentures and the Warrants is conditioned upon the receipt in immediately available funds of the amount set forth in Paragraph 1 hereof and an opinion of counsel substantially in the form attached as D to and forming an integral part of this Agreement, SELLER shall have the right to reject any given Agreement which is tendered to Seller, for the reason that SELLER reasonably believes any representations and warranties of BUYER to be untrue and in such event SELLER shall provide BUYER written notice of such rejection and the reason therefore and shall provide reasonable opportunity for a response to such stated reason. Also, SELLER may decline to accept this Agreement for any other reason which in the sole discretion of SELLER may materially affect SELLER. (ii) SELLER understands that BUYER'S obligation to purchase the Debentures is conditioned upon delivery of certificate(s) representing Debentures as described in Paragraph 1(ii) hereto and provision of an opinion of counsel attached as Exhibit E substantially in the form and forming an integral part of this Agreement. 6. SELLER'S OPTION ADDITIONAL $2,000,000 TO BUYER AND OTHER CONCURRENT BUYERS CONVERSION AND WARRANT PRICE -8- 9 SELLER shall have the option (the "Option") to require BUYER to purchase Four Hundred Thousand Dollars (USD $400,000) of additional Debentures at any time between 90 and 270 days (the "Option Period") after the Shelf Registration (as defined in the Rights Registration Agreement) has been declared effective by the Commission subject to the following conditions: (i) The ten day Average Closing Bid Price of the Shares shall not be below $3.50 per share on (a) the day SELLER gives BUYER notice of SELLER'S election to exercise this Option and (b) the day before the closing of the Option; (ii) SELLER shall not be in default under any material borrowings from any financial institution or other persons; (iii) the class of common stock into which the Debentures are convertible shall continue to be listed by Nasdaq; or (iv) the Company shall not have been convicted of any fraud in the sale of its securities. The closing of the purchase of the additional Debentures will take place 10 business days after the day of SELLER'S notice to BUYER. With the exception of any further option in favour of SELLER, and the Conversion Price and Warrant Price and the maturity dates which will have to be reset, the terms and conditions in connection with the funding and closing of the Option will be the same as those relating to the initial funding of October, 1997. Provided however if the Black-Out Period as defined in Section 1(ii) of the Debenture is invoked, then the actual number of days of the Black-Out Period shall be added to each of the 90 and 270 days comprising the Option Period. If the Option is completed: "Average Closing Bid Price" for the purposes of this Section 6 means the average of the daily last bid price for the shares of Common Stock for the five (5) or ten (10), as the case may be, consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on Nasdaq National Market (as reported by Bloomberg Business News, or, if not reported thereby, any other authoritative source selected by the Company ending at the close of the trading on the trading day immediately preceding the measurement date. "Conversion Price" shall mean the lessor of (A:) one hundred ten percent (110%) of the five day Average Closing Bid Price, calculated using the closing date as the measurement date, or (B) eighty five percent (85%) of the ten day Average -9- 10 Closing Bid Price calculated using the date of conversion as the measurement date, provided, however, but if the holder will have delivered a Forbearance Request to the Company in accordance with what is presently Section 5(ii) of the Debenture used in the October 1997 Closing, within twenty-four (24) hours before it will have delivered a conversion notice of the Company in accordance with what is presently Section 4.3.1 of the Debenture, then the ten day Average Closing Bid Price for the portion of the debenture that the Holder will have identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. "Exercise Price" for per share under each Warrant shall be one hundred ten percent (110%) of the five day Average Closing Bid Price calculated as of the Closing Date of the Option. The Exercise Price shall be paid in cash. "Right of First Refusal Period" shall mean the period that begins on the Closing Date and ends on the earlier of (a) the closing date of the Option, (b) the refusal of Buyer to purchase the Debentures covered by the Option because Seller failed to meet the conditions set forth in clauses (i) to (iv) above, or (c) the end of the Option Period. The "closing date" means the closing date of the Option. If, during the Right of First Refusal Period, but only ninety (90) days after the Closing Date the Company proposes to undertake an issuance of any securities pursuant to Regulations D or S promulgated under the Securities Act (the "New Securities"), then the Company shall give written notice of the Company's intention to BUYER, describing the type of the securities, and their price and the general terms upon which the Company proposes to issue the same. The Debenture is being issued in connection with debentures on similar terms to Charles N. Eckert, David Kosloff, Pine Street Asset Management and Gundyco in trust for R.R.S.P. 550-98866-19 (collectively, the "Other Buyers"). Each of the BUYER and the Other Buyer who remain Accredited Investors ("Qualified Buyer") shall have twenty (20) days after any such notice is mailed or delivered to agree to purchase all of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. Each of the Qualified Buyers shall be entitled to purchase New Securities in the proportion of its purchase of Debentures and if one or more buyers decline, or is not qualified, to so purchase, then the others, as the case may be, shall be entitled to purchase the New Securities not taken by the Qualified Buyer(s), as the case may be within the original twenty (20) day period. "New Securities" does not include (i) securities issued pursuant to the acquisition of another business entity or segment of any such entity by the Company by merger, asset purchase, stock purchase or otherwise, (ii) any borrowings, direct or -10- 11 indirect, from financial institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company, (iii) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement, (iv) securities issued to vendors or customers or to other persons in similar commercial situations with the Company, (v) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person, (vi) securities issued in connection with any stock split, stock dividend or recapitalization of the Company, or (vi) securities issued in connection with corporate partnering transactions. If the Qualified Buyers fail to exercise fully the right of first refusal within the prescribed twenty (20) day period, then the Company shall have one hundred twenty (120) days thereafter to sell or enter into an agreement to sell the New Securities, at a price and on terms no more favourable to the purchasers thereof than specified in the notice to the Qualified Buyers. If the Company has not sold or entered into an agreement to sell the New Securities in accordance with the foregoing within the one hundred twenty (120) day period, then the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Qualified Buyers in accordance with this Section 6. 7. GOVERNING LAW; INTERPRETATION AND DISPUTES. This Agreement shall be governed by and construed under the laws of the State of Delaware and the laws applicable therein without regard to its choice of law principles. 8. ARBITRATION All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the SELLER and BUYER in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by SELLER, BUYER and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement, provided, however, if necessary, such decision and satisfaction procedure may be enforced by either SELLER or BUYER in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by -11- 12 the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by SELLER as one party and BUYER as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 9. CONFIDENTIALITY. The parties hereto agree to maintain the confidentiality of this Agreement and not to disclose to any person or entity information concerning the transaction contemplated hereby unless required by law to do so. 10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereof with respect to the subject matter hereof and supersedes any and all prior or contemporaneous representations, warranties, agreements and understandings in connection therewith. This Agreement may be amended only by a writing executed by all parties hereto. This Agreement may be executed in counterparts and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original. [Signatures begin on next page] 11. FULL NAME AND ADDRESS OF BUYER FOR REGISTRATION PURPOSES: NAME: Charles N. Eckert ADDRESS: One Tower Bridge Suite 1370 West Conshohocken, Pennsylvania 19428 U.S.A. Tel. No. (610) 941-9090 Fax. No. (610) 828-4131 Contact Name: Charles N. Eckert -12- 13 12. DELIVERY INSTRUCTIONS: (IF DIFFERENT FROM REGISTRATION NAME): NAME: ---------------------------- ADDRESS: ---------------------------- ---------------------------- ---------------------------- Tel. No. ---------------------------- Fax. No. ---------------------------- Contact Name: ---------------------------- Special Instructions: ---------------------------- ---------------------------- ---------------------------- -13- 14 IN WITNESS WHEREOF, this Agreement was duly executed or the date first written below. Dated this 21st day of the month of October, 1997. Name: ---------------------------- Charles N. Eckert Country of Execution: U.S.A. CYTRX CORPORATION By: ---------------------------- I have the full authority to bind CYTRX CORPORATION _________ (initial) Name: Jack J. Luchese Title: President -14- EX-2.5 6 SECURITIES AGREEMENT CYTRX AND DAVID KOSLOFF 1 EXHIBIT 2.5 PRIVATE SECURITIES SUBSCRIPTION AGREEMENT CYTRX CORPORATION (REGULATION "D") THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the "Agreement") has been executed by the undersigned in connection with the purchase in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), of certain debentures (hereinafter the "Debentures"), convertible into shares of common stock (hereinafter the "Shares"), and certain share purchase warrants (hereinafter the "Warrants") from CytRx Corporation ("CYTR") 154 Technology Parkway, Technology Parkway, Atlanta, Georgia, 30092, USA, a corporation organized under the laws of Delaware (hereinafter the "COMPANY" or "SELLER") by Name: David Kosloff located at c/o Shipley Raidy Capital Partners, One Tower Bridge, Suite 1370; City: West Conshohocken; Province/State: Pennsylvania; Zip/Postal 19428; Country: U.S.A. an individual resident of the State of Pennsylvania (hereinafter "BUYER"). SELLER and BUYER (hereinafter collectively the "parties") each hereby represents, warrants and agrees as follows: 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE: (i) SELLER and BUYER are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "Commission") under the Securities Act; and (ii) BUYER hereby subscribes for Four Hundred Thousand Dollars (USD $400,000) U.S. principal amount of Debentures, substantially in the form attached as Exhibit A to and forming an integral part of this Agreement. (iii) BUYER will receive 8,000 Warrants substantially in the form attached as Exhibit B to and forming an integral part of this Agreement. Each Warrant will entitle BUYER to purchase one treasury Common Share at the price of $5.68. The Warrants will expire two (2) years after the Closing; and (iv) BUYER shall on or before the Closing execute a copy of the Registration Rights Agreement (the "Registration Rights Agreement") substantially in the form attached as Exhibit "A" to and forming an integral part of this Agreement. 2 2. BUYER'S REPRESENTATIONS BUYER represents and warrants follows: (i) Authorization: Such BUYER has full power and authority to enter into this Agreement, the Debenture, the Warrant and the Registration Rights Agreement (collectively, the "Transaction Documents") and that the Transaction Documents, when executed and delivered will constitute a valid and legally binding obligation of BUYER in accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (ii) Purchase Entirely for Own Account. This Agreement is made with BUYER in reliance upon BUYER'S representation to the Company, which by such BUYER'S execution of this Agreement BUYER hereby confirms, that the Debentures and Warrants to be purchased by BUYER and the Common Stock issuable upon conversion thereof (collectively, the "Securities") will be acquired for investment for BUYERS own account, not a nominee as agent, and not with a view to the resale or distribution of any part thereof. By execution of this Agreement, Buyer further represents that Buyer does not have any contract, undertaking, agreement or arrangement with any person, to sell, transfer or grant participation to such person or to any third person, with respect to any of the Securities. (iii) Reliance Upon BUYER'S Representations. BUYER understands that the Debentures and the Warrants are not, and any Common Stock acquired on conversion thereof at the time of issuance may not be, registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof and that the Company's reliance on such exemption is predicated on the BUYERS' representations set forth herein. Buyer also understands that no prospectus or offering memorandum has been received by Buyer or filed by the Seller with any Canadian securities commission or similar authority in connection with the sale of the Debentures and Warrants, and that no prospectus or offering memorandum shall be received by the Seller or so filed by Buyer in connection with any sale of Shares issued on the conversion of the Debentures or Warrants, and that as a result the Buyer will be unable to rely upon civil or contractual remedies that might otherwise be available to it if the Debentures, Warrants and/or Shares had been issued by the Seller by way of a prospectus or offering memorandum, respectively, and the prospectus or offering -2- 3 memorandum, as the case may be, contained a misrepresentation as that term is defined in the Securities Act (Ontario). (iv) Buyer is not a corporation, syndicate, partnership or other form of unincorporated entity or corporation created solely to permit the purchase of the Securities by a group of individuals who individual share in the aggregate acquisition cost of the Securities is less than $150,000 and Buyer is not purchasing the Securities as the result of an advertisement of the Securities, including an advertisement in printed media of general and regular paid circulation, radio or television. (v) BUYER believes BUYER has received all the information BUYER considers necessary or appropriate for deciding whether to purchase any of the Securities. BUYER further represents that BUYER has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering any of the Securities and the business, properties, prospects, and financial condition of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without reasonable effort or expense) necessary to verify the accuracy of any information furnished to BUYER or to which BUYER had access. (vi) BUYER represents that BUYER is experienced in evaluating and investing in private placement transactions of securities of companies in a similar stage of development and acknowledges that BUYER is able to fend for himself, herself or itself, can bear the economic risk of BUYER'S investment, and has such knowledge and experience in financial and business matters that BUYER is capable of evaluating the merits and risks of the investment in the Debentures and Warrants. If other than an individual, BUYER also represents BUYER has not been organized for the purpose of acquiring the Debentures and Warrants. (vii) The BUYER represents that BUYER is an Accredited Investor. The term "Accredited Investor" as used herein refers to: (1) A person or entity who is a direct or executive officer of the Company; (2) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as -3- 4 defined in Section 2(a(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21)of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by the persons that are Accredited Investors. (3) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; (4) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of the purchase exceeds $1,000,000; (6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment; or (8) Any entity in which all of the equity owners are Accredited Investors. -4- 5 As used in this Paragraph 3.(vii) the term "net worth" means the excesses of total assets over total liabilities. For the purpose of determining a person's net worth, the principal residence owned by an individual should be valued at fair market value, including the cost of improvements, net of current encumbrances. As used in this paragraph "income" means actual economic income, which may differ from adjusted gross income for income tax purposes. Accordingly, Buyer should consider whether Buyer should add any or all of the following items to Buyer's adjusted gross income for income tax purposes in order to reflect more accurately Buyer's actual economic income; any amounts attributable to tax-exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions an IRA or keogh retirement plan, and alimony payments. (viii) BUYER understands that the Securities may not be sold, transferred or otherwise disposed of in the United States without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering any of the Securities or an available exemption from registration under the Securities Act, the Securities must be held indefinitely. In particular, BUYER is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the condition of that Rule are met. BUYER also understands that any resale of the Securities must be conducted in accordance with the applicable requirements of the Securities Act (Ontario). (ix) Buyer acknowledges that no person has made to Buyer any written or oral representations: (i) that any person will resell or repurchase the Securities; (ii) that any person will refund the purchase price of the Securities; and (iii) as to the future price or value of the Securities. 3. SELLER'S REPRESENTATIONS SELLER represents and warrants as follows: (i) SELLER has not conducted any general solicitation or general advertising (as defined in Regulation D) with respect to any of the Securities offered hereby; (ii) The Debentures, when issued and delivered pursuant to the terms of this Agreement, will have been duly authorized, executed, issued and delivered and will constitute valid and legally binding obligations of the Company in -5- 6 accordance with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (iii) The Shares, when issued and delivered upon conversion of the Debentures in accordance with their terms, will be duly and validly authorized and issued, fully-paid and non assessable and will not subject the holders thereof to personal liability by reason of being such holders. There are no preemptive rights of any shareholder of SELLER with respect to the Shares contained in SELLER'S Certificate of Incorporation or any agreement to which SELLER is a party; (iv) This Agreement has been duly authorized, validly executed and delivered on behalf of SELLER and is a valid and binding agreement of SELLER in accordance with its terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings therefor may be brought and (C) to the extent that the indemnification provisions contained in the Registration Rights Agreement may be limited by applicable laws. (v) The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement do not and will not conflict with or result in a breach by SELLER of any of the terms or provisions of, or constitute a default under, the certificate of incorporation (or charter) or by-laws of SELLER, or any indenture, mortgage, deed of trust or other material agreement or instrument to which SELLER is a party or by which it or any of its properties or assets are bound, or any existing applicable decree, judgment or order of any court, federal or state regulatory body, administrative agency or other governmental body having jurisdiction over SELLER or any of its properties or assets; (vi) No authorization, approval or consent of or filing with any federal, state or local governmental body of the United States is legally required for the issuance and sale of the Debentures and (provided no commission or other remuneration is paid or given directly or indirectly by SELLER for soliciting such conversion) the issuance of the Shares upon conversion of the Debentures in accordance with their terms, as contemplated by this Agreement, except the filing of a Form D with the Commission; -6- 7 (vii) To the best of the Company's knowledge after reasonable investigation, the information contained in the Company's Annual Report on Form 10K for the year ended December 31, 1996, Proxy statement relating to the Annual Meeting of Shareholders held on June 26, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as filed with the Commission does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are made, not misleading. Since September 30, 1997, there has been no material adverse development in the business, properties, operations, financial condition or results of operations of SELLER. (viii) SELLER will issue one or more certificates representing the Debentures in the name of BUYER in such denominations (in multiples of $25,000) to be specified by BUYER prior to closing and will issue one or more certificates representing the Shares in such denominations to be specified by Buyer upon conversion of the Debentures. SELLER further warrants that the Debentures and the Shares shall be transferable on the books and records of SELLER as and to the extent provided in the Transaction Documents, subject to compliance with Federal and State securities laws. Nothing in this Section shall affect in any way BUYER'S obligations and agreement to comply with all applicable securities laws upon resale of the Securities. 4. CLOSING. Debentures and Warrants shall be delivered to BUYER and the funds therefor shall be delivered to SELLER on the 22nd day of October, 1997 (the "Closing") or at such time to be mutually agreed in accordance with the following procedures. SELLER shall execute the appropriate copies of the Transaction Documents (the "SELLER'S Closing Documents") and deliver the executed documents to Gowling, Strathy & Henderson, counsel for BUYER, with instructions to hold the documents in trust and not to release the documents to BUYER until advised to do so by SELLER. BUYER shall execute the appropriate copies of the Transaction Documents (the "BUYER'S Closing Documents") and deliver the executed documents to Alston & Bird, counsel for SELLER, with instructions to hold the documents in trust and not to release the documents to SELLER until advised to do so by BUYER. Immediately after BUYER has confirmed that its counsel has received the SELLER'S Closing Documents executed by SELLER, then BUYER shall pay to SELLER the principal amount of the Debentures for which BUYER subscribed (the "Purchase Price"). BUYER shall pay the Purchase Price, less all appropriate legal fees and commissions by wire transfer of immediately available funds in accordance with the following instructions: -7- 8 Mellon Bank, Pittsburgh, P.A. ABA# 0430-0026-1 Credit: Merrill Lynch Acct# 101-1730 For further credit to CytRx Corporation Acct# 701-96D69 On the banking day that SELLER has confirmed that its counsel has received the BUYER'S Closing Documents and is credited with having received the Purchase Price (the "Closing Date"), SELLER shall advise BUYER. Immediately thereafter, SELLER shall advise Gowling, Strathy & Henderson to release the SELLER'S Closing Documents to BUYER and BUYER shall advise Alston & Bird to release the BUYER'S Closing Documents to SELLER. The Transaction Documents shall not be deemed to have been delivered except in accordance with the procedure described in this Section 4. If the Closing Date does not occur before October 23, 1997, then either party may terminate this Agreement immediately upon written notice to the other party and all Transaction Documents shall be deemed to be null and void. 5. CONDITIONS TO CLOSING (i) BUYER understands that SELLER'S obligation to sell the Debentures and the Warrants is conditioned upon the receipt in immediately available funds of the amount set forth in Paragraph 1 hereof and an opinion of counsel substantially in the form attached as D to and forming an integral part of this Agreement, SELLER shall have the right to reject any given Agreement which is tendered to Seller, for the reason that SELLER reasonably believes any representations and warranties of BUYER to be untrue and in such event SELLER shall provide BUYER written notice of such rejection and the reason therefore and shall provide reasonable opportunity for a response to such stated reason. Also, SELLER may decline to accept this Agreement for any other reason which in the sole discretion of SELLER may materially affect SELLER. (ii) SELLER understands that BUYER'S obligation to purchase the Debentures is conditioned upon delivery of certificate(s) representing Debentures as described in Paragraph 1(ii) hereto and provision of an opinion of counsel attached as Exhibit E substantially in the form and forming an integral part of this Agreement. 6. SELLER'S OPTION ADDITIONAL $2,000,000 TO BUYER AND OTHER CONCURRENT BUYERS CONVERSION AND WARRANT PRICE -8- 9 SELLER shall have the option (the "Option") to require BUYER to purchase Four Hundred Thousand Dollars (USD $400,000) of additional Debentures at any time between 90 and 270 days (the "Option Period") after the Shelf Registration (as defined in the Rights Registration Agreement) has been declared effective by the Commission subject to the following conditions: (i) The ten day Average Closing Bid Price of the Shares shall not be below $3.50 per share on (a) the day SELLER gives BUYER notice of SELLER'S election to exercise this Option and (b) the day before the closing of the Option; (ii) SELLER shall not be in default under any material borrowings from any financial institution or other persons; (iii) the class of common stock into which the Debentures are convertible shall continue to be listed by Nasdaq; or (iv) the Company shall not have been convicted of any fraud in the sale of its securities. The closing of the purchase of the additional Debentures will take place 10 business days after the day of SELLER'S notice to BUYER. With the exception of any further option in favour of SELLER, and the Conversion Price and Warrant Price and the maturity dates which will have to be reset, the terms and conditions in connection with the funding and closing of the Option will be the same as those relating to the initial funding of October, 1997. Provided however if the Black-Out Period as defined in Section 1(ii) of the Debenture is invoked, then the actual number of days of the Black-Out Period shall be added to each of the 90 and 270 days comprising the Option Period. If the Option is completed: "Average Closing Bid Price" for the purposes of this Section 6 means the average of the daily last bid price for the shares of Common Stock for the five (5) or ten (10), as the case may be, consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on Nasdaq National Market (as reported by Bloomberg Business News, or, if not reported thereby, any other authoritative source selected by the Company ending at the close of the trading on the trading day immediately preceding the measurement date. "Conversion Price" shall mean the lessor of (A:) one hundred ten percent (110%) of the five day Average Closing Bid Price, calculated using the closing date as the measurement date, or (B) eighty five percent (85%) of the ten day Average -9- 10 Closing Bid Price calculated using the date of conversion as the measurement date, provided, however, but if the holder will have delivered a Forbearance Request to the Company in accordance with what is presently Section 5(ii) of the Debenture used in the October 1997 Closing, within twenty-four (24) hours before it will have delivered a conversion notice of the Company in accordance with what is presently Section 4.3.1 of the Debenture, then the ten day Average Closing Bid Price for the portion of the debenture that the Holder will have identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. "Exercise Price" for per share under each Warrant shall be one hundred ten percent (110%) of the five day Average Closing Bid Price calculated as of the Closing Date of the Option. The Exercise Price shall be paid in cash. "Right of First Refusal Period" shall mean the period that begins on the Closing Date and ends on the earlier of (a) the closing date of the Option, (b) the refusal of Buyer to purchase the Debentures covered by the Option because Seller failed to meet the conditions set forth in clauses (i) to (iv) above, or (c) the end of the Option Period. The "closing date" means the closing date of the Option. If, during the Right of First Refusal Period, but only ninety (90) days after the Closing Date the Company proposes to undertake an issuance of any securities pursuant to Regulations D or S promulgated under the Securities Act (the "New Securities"), then the Company shall give written notice of the Company's intention to BUYER, describing the type of the securities, and their price and the general terms upon which the Company proposes to issue the same. The Debenture is being issued in connection with debentures on similar terms to Charles N. Eckert, David Kosloff, Pine Street Asset Management and Gundyco in trust for R.R.S.P. 550-98866-19 (collectively, the "Other Buyers"). Each of the BUYER and the Other Buyer who remain Accredited Investors ("Qualified Buyer") shall have twenty (20) days after any such notice is mailed or delivered to agree to purchase all of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. Each of the Qualified Buyers shall be entitled to purchase New Securities in the proportion of its purchase of Debentures and if one or more buyers decline, or is not qualified, to so purchase, then the others, as the case may be, shall be entitled to purchase the New Securities not taken by the Qualified Buyer(s), as the case may be within the original twenty (20) day period. "New Securities" does not include (i) securities issued pursuant to the acquisition of another business entity or segment of any such entity by the Company by merger, asset purchase, stock purchase or otherwise, (ii) any borrowings, direct or -10- 11 indirect, from financial institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company, (iii) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement, (iv) securities issued to vendors or customers or to other persons in similar commercial situations with the Company, (v) securities issued in connection with obtaining lease financing, whether issued to a lessor, guarantor or other person, (vi) securities issued in connection with any stock split, stock dividend or recapitalization of the Company, or (vi) securities issued in connection with corporate partnering transactions. If the Qualified Buyers fail to exercise fully the right of first refusal within the prescribed twenty (20) day period, then the Company shall have one hundred twenty (120) days thereafter to sell or enter into an agreement to sell the New Securities, at a price and on terms no more favourable to the purchasers thereof than specified in the notice to the Qualified Buyers. If the Company has not sold or entered into an agreement to sell the New Securities in accordance with the foregoing within the one hundred twenty (120) day period, then the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Qualified Buyers in accordance with this Section 6. 7. GOVERNING LAW; INTERPRETATION AND DISPUTES. This Agreement shall be governed by and construed under the laws of the State of Delaware and the laws applicable therein without regard to its choice of law principles. 8. ARBITRATION All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the SELLER and BUYER in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by SELLER, BUYER and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement, provided, however, if necessary, such decision and satisfaction procedure may be enforced by either SELLER or BUYER in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by -11- 12 the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by SELLER as one party and BUYER as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 9. CONFIDENTIALITY. The parties hereto agree to maintain the confidentiality of this Agreement and not to disclose to any person or entity information concerning the transaction contemplated hereby unless required by law to do so. 10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereof with respect to the subject matter hereof and supersedes any and all prior or contemporaneous representations, warranties, agreements and understandings in connection therewith. This Agreement may be amended only by a writing executed by all parties hereto. This Agreement may be executed in counterparts and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original. [Signatures begin on next page] 11. FULL NAME AND ADDRESS OF BUYER FOR REGISTRATION PURPOSES: NAME: David Kosloff ADDRESS: One Tower Bridge Suite 1370 West Conshohocken, Pennsylvania 19428 U.S.A. Tel. No. (610) 941-9090 Fax. No. (610) 828-4131 Contact Name: David Koslfof -12- 13 12. DELIVERY INSTRUCTIONS: (IF DIFFERENT FROM REGISTRATION NAME): NAME: ---------------------------- ADDRESS: ---------------------------- ---------------------------- ---------------------------- Tel. No. ---------------------------- Fax. No. ---------------------------- Contact Name: ---------------------------- Special Instructions: ---------------------------- ---------------------------- ---------------------------- -13- 14 IN WITNESS WHEREOF, this Agreement was duly executed or the date first written below. Dated this 21st day of the month of October, 1997. Name: ---------------------------- David Kosloff Country of Execution: U.S.A. CYTRX CORPORATION By: ---------------------------- I have the full authority to bind CYTRX CORPORATION _________ (initial) Name: Jack J. Luchese Title: President -14- EX-3.1 7 DEBENTURE IN FAVOR OF GUNDYCO 1 EXHIBIT 3.1 NEITHER THIS DEBENTURE, NOR THE SHARES OF COMMON STOCK FOR WHICH IT MAY BE CONVERTED, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS DEBENTURE HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION 6% CONVERTIBLE DEBENTURE $1,500,000.00 Atlanta, Georgia October 22, 1997 CYTRX CORPORATION, a Delaware corporation (the "Company"), the principal office of which is located at 154 Technology Parkway Technology Park/Atlanta, Norcross, Georgia 30092, for value received hereby promises to pay to GUNDYCO in trust for R.R.S.P. 550-98866-19, or its registered assigns, the sum of One Million Five Hundred Thousand Dollars ($1,500,000.00), or such lesser amount as shall then equal the outstanding principal amount hereof and any unpaid accrued interest hereon, as set forth below, shall be due and payable on October ____, 2001, (the "Maturity Date") (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date). Payment for all amounts due hereunder shall be made by mail to the registered address of the Holder. This Debenture is issued in connection with the transactions described in Section ___ of that certain Subscription Agreement between the Company and the Holder, dated as of October 22, 1997, as the same may from time to time be amended, modified or supplemented (the "Purchase Agreement"). The Holder is subject to certain restrictions set forth in the Purchase Agreement and shall be entitled to certain rights and privileges set forth in the Purchase Agreement. This Debenture is the Debenture referred to in the Purchase Agreement. The following is a statement of the rights of the Holder of this Debenture and conditions to which this Debenture is subject, and to which the Holder hereof, by the acceptance of this Debenture, agrees: 2 1. DEFINITIONS. As used in this Debenture, the following terms, unless the context otherwise requires, have the following meanings: (i) "Average Closing Bid Price" means the average of the daily last bid price for the shares of Common Stock for the ten (10) consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on the Nasdaq National Market (as reported by Bloomberg Business News or, if not reported thereby, any other authoritative source selected by the Company) ending at the close of trading on the trading day immediately preceding an identified measurement date. (ii) "Black-Out Period" means the number of days, if any, that the Company suspends the rights of the Holder to make sales pursuant to the Shelf Registration in accordance with Section 2(h) of the Registration Rights Agreement. (iii) "Closing Date" shall have the meaning given that term in the Purchase Agreement. (iv) "Company" includes any corporation which shall succeed to or assume the obligations of the Company under this Debenture. (v) "Common Stock" shall mean the $.001 par value common stock of the Company. (vi) "Conversion Price" shall mean the lessor of (A) $5.68 for each share of Common Stock, or (B) eighty-five percent of the Average Closing Bid Price calculated using the date of conversion as the measurement date; provided, however, but if the Holder delivered a Forbearance Request to the Company in accordance with Section 5(ii) within twenty-four (24) hours before it delivered a conversion notice to the Company in accordance with Section 4.3.1, then the Average Closing Bid Price for the portion of the Debenture that the Holder identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. (vii) "Holder," when the context refers to a holder of this Debenture, shall mean any person who shall at the time be the registered holder of this Debenture. (viii) "Redemption Payment Date" shall mean the day on which the Company is obligated to make the redemption payment to the Holder in accordance with Section 5.3. -2- 3 (ix) "Registration Rights Agreement" shall mean the Registration Rights Agreement dated as of October 22, 1997, between the Company, the Holder and the other holders of Company securities that are signatories thereto. (x) "Securities Act" shall mean the Securities Act of 1933, as amended. (xi) "Surrender Date" shall mean the day on which the Company receives the Debenture in accordance with either Section 4.4 or 5.3. 2. INTEREST. (i) Commencing on December 31, 1997, and on each June 30 and December 31 thereafter until the Maturity Date (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date, the Company shall pay interest (computed on the basis of a 365-day year) at rate of six percent (6%) per annum on the principal of this Debenture outstanding during the period beginning on the date of issuance of this Debenture and ending on the date that the principal amount of this Debenture becomes due and payable. (ii) The Company, at its option, may make any payment of interest due hereunder in whole or in part by issuing to the Holder shares of Common Stock (the "Interest Shares"). The Interest Shares shall be valued at the Average Closing Price, calculated using the date on which the interest payment is due as the measurement date. The Company shall not be obligated to issue any fractional shares. The Company may place such legends, if any, on the certificates for the Interest Shares as are required by applicable state and federal securities laws in the opinion of counsel to the Company. Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. 3. EVENTS OF DEFAULT. If any of the events specified in this Section 3 shall occur (herein individually referred to as an "Event of Default"), the Holders of more than fifty percent (50%) of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement may, so long as such condition exists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company: (i) Default in the payment of the principal and unpaid accrued interest of this Debenture when due and payable if such default is not cured by the Company within ten (10) days after the Holder has given the Company written notice of such default; or -3- 4 (ii) The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action; or (iii) If, within sixty (60) days after the commencement of an action against the Company (and service of process in connection therewith on the Company) seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated. 4. CONVERSION. 4.1 VOLUNTARY CONVERSION. At any time more than sixty (60) days after the date of this Debenture, the Holder of this Debenture has the right, at the Holder's option, to convert this Debenture, in accordance with the provisions of Section 4.3 hereof, in whole or in part, into fully paid and nonassessable shares of Common Stock; provided, however, that the Holder's right to convert this Debenture pursuant to this Section 4.1 shall be subject to the Company's right to redeem this Debenture pursuant to Section 5. The number of shares of Common Stock into which this Debenture may be converted ("Conversion Shares") shall be determined by dividing the aggregate principal amount together with all accrued interest to the date of conversion by the Conversion Price in effect at the time of such conversion. 4.2 AUTOMATIC CONVERSION. The entire principal amount of this Debenture shall be automatically converted into shares of Common Stock at the Conversion Price at the time in effect immediately prior to any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization or any transaction or series of related transactions by the Company in which in excess of fifty percent (50%) of the Company's voting power is transferred, or a sale of all or substantially all of the assets of the Company (as presently constituted, subject to proportionate adjustment in the event of any stock split, stock dividend, reverse stock split, combination, consolidation, reclassification or similar event). -4- 5 4.3 CONVERSION PROCEDURE. 4.3.1 NOTICE OF CONVERSION PURSUANT TO SECTION 4.1. Before the Holder shall be entitled to convert this Debenture into shares of Common Stock, it shall give written notice in accordance with Section 11 to the Company at its principal corporate office of the election to convert the same pursuant to Section 4.1, and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date that such notice is actually received; provided, however, that such notice shall not be effective with respect to, and the Holder shall not have the right to convert, any portion of this Debenture to be redeemed unless such notice is actually received by the Company before the close of business on the day immediately preceding the day on which the Company mails notice of redemption to the Holder. 4.3.2 NOTICE OF CONVERSION PURSUANT TO SECTION 4.2. If this Debenture is automatically converted, written notice shall be delivered to the Holder of this Debenture at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the conversion to be effected, specifying the Conversion Price, the principal amount of the Debenture to be converted, the amount of accrued interest to be converted, the date on which such conversion will occur and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the Debenture. 4.4 SURRENDER OF THE DEBENTURE. As promptly as practicable after conversion of the Debenture (but in no case later than two (2) business days thereafter), the Holder at its expense shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The person or persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock immediately prior to the close of business on the Surrender Date. 4.5 DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after the conversion of this Debenture (but in no case later than three (3) business days thereafter), the Company at its expense will issue and deliver to an express courier service for delivery to the Holder of this Debenture a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion. If the Company fails to delivery to an express courier service for delivery such certificates to the courier service within ten (10) days after the conversion of the Debenture, then the Company shall pay to the Holder, as liquidated damages for such failure, an amount equal to two hundred and fifty dollars ($250) per day for each twenty-five thousand dollars ($25,000) of principal of the Debenture that was converted until such certificates are so delivered. Notwithstanding anything to the contrary set forth herein, the Company shall not be obligated to issue or deliver any certificates, or to pay any liquidated damages for its failure to deliver such certificates, unless and until one (1) business day after the Surrender Date. 4.6 MECHANICS AND EFFECT OF CONVERSION. No fractional shares of Common Stock shall be issued upon conversion of this Debenture. In lieu of the Company issuing any fractional -5- 6 shares to the Holder upon the conversion of this Debenture, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the form as provided below. The stock certificates issued by the Company may bear such legends, if any, as are required by the Purchase Agreement and applicable state and federal securities laws in the opinion of counsel to the Company). Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. Upon conversion of this Debenture, the Company shall be forever released from all its obligations and liabilities under this Debenture, except that the Company shall be obligated to pay the Holder, within ten (10) days after the date of such conversion, any interest accrued and unpaid or unconverted to and including the date of such conversion, and no more. 5. REDEMPTION. 5.1 REDEMPTION AT THE OPTION OF THE COMPANY. At any time more than two hundred seventy (270) days after the date of this Debenture, the Company may redeem the Debenture, in whole or in part, immediately upon mailing written notice to the Holder at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest; provided, however, that the Company may not redeem the Debenture unless and until the shares of Common Stock issuable upon conversion of the Debenture have been registered under the Securities Act in accordance with the Registration Rights Agreement for at least two hundred ten (210) days plus any Black-Out Period that occurs during the two hundred ten (210) days. 5.2 REDEMPTION IN LIEN OF CONVERSION. 5.2.1 REDEMPTION RIGHT. If the Holder shall give the Company notice of the Holder's election to convert all or any part of this Debenture in accordance with Section 4.1, and the applicable Conversion Price is less than $4.00, then the Company may redeem this Debenture at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest. 5.2.2 FOREBEARANCE REQUEST. The Holder may at any time (but not more than once each calendar week) give the Company written notice of the Holder's desire to convert this Debenture (which notice shall state the portion of this Debenture to be converted) and request that the Company declare its intention to redeem the Debenture if a notice of conversion is given to the Company (a "Forbearance Request"). The Company shall respond to the Holder's Forbearance Request before the close of business on the first business day after the business day on which the Company actually receives the request. If the Company states in its response that it will not redeem the Debentures, then the Company may not redeem the Debenture as a result of the Holder's request to convert the Debenture to the extent identified in the Holder's Forbearance Request, provided that the Company receives the conversion notice before the close of business on the first business day after the business day on which the Holder actually receives the Company's response to the Holder's Forbearance Request. -6- 7 5.3 MECHANICS AND EFFECT OF REDEMPTION. As promptly as practicable after receiving notice of the Company's election to redeem the Debentures (but in no case later than three (3) business days thereafter), the Holder, at its expense, shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The Company shall make the redemption payment within fifteen (15) days after (a) the Company gives the Holder notice of redemption, in the case of a redemption pursuant to Section 5.1, or (b) the Company actually receives the notice of Holder's election to convert, in the case of a redemption pursuant to Section 5.2; provided, however, the Company shall not be obligated to make any redemption payment unless and until one (1) business day after the Surrender Date. Interest shall continue to accrue on the Debenture until the Redemption Payment Date. If the Debenture is to be redeemed in part, then upon surrender of the Debenture, the Company shall deliver to the Holder a new Debenture in the aggregate principal amount equal to the unredeemed portion thereof. 6. CONVERSION PRICE ADJUSTMENTS. 6.1 ADJUSTMENTS FOR STOCK SPLITS AND SUBDIVISIONS. In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of this Debenture shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Debenture shall be. increased in proportion to such increase of outstanding shares. 6.2 ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for this Debenture shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in out standing shares. -7- 8 6.3. NOTICES OF RECORD DATE, ETC. In the event of: (i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (ii) Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets of the Company to any other person or any consolidation or merger involving the Company; or (iii) Any voluntary or involuntary dissolution, liquidation or winding up of the Company. The Company will mail to the holder of this Debenture at least ten (10) days prior to the earliest date specified therein, a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or windingup is expected to become effective and the record date for determining stockholders entitled to vote thereon. 6.4 RESERVATION OF STOCK LSSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the Debenture such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this Debenture, in addition to such other remedies as shall be available to the holder of this Debenture, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock (and shares of its Common Stock for issuance on conversion of such Common Stock) to such number of shares as shall be sufficient for such purposes. 7. ASSIGNMENT. Subject to the restrictions on transfer described in Section 9 below, the rights and obligations of the Company and the Holder of this Debenture shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 8. WAIVER AND AMENDMENT. Any provision of this Debenture may be amended, waived or modified upon the written consent of the Company and holders of at least fifty percent of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement. -8- 9 9. TRANSFER OF THIS DEBENTURE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. With respect to any offer, sale or other disposition of this Debenture or securities into which such Debenture may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Debenture or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for the Holder is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly after such determination has been made. Each Debenture thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel for the Company such legend is not required. in order to ensure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 10. TREATMENT OF DEBENTURE. To the extent permitted by generally accepted accounting principles, the Company will treat, account and report the Debenture as debt and not equity for accounting purposes and with respect to any returns filed with federal, state or local tax authorities. 11. NOTICES. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if made by hand delivery, by an express courier company recognized nationally in the United States or Canada or by registered or certified mail, postage prepaid, at the respective addresses of the parties as set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given as of the date so delivered when personally delivered, one (1) business day (three (3) business days in the case of international deliveries) after dispatch if sent for overnight delivery by an express courier service nationally recognized in the United States or Canada and five (5) calendar days (seven (7) calendar days in the case of international deliveries) after mailing if sent by registered or certified mail in the manner set forth above. A notice of conversion given pursuant to Section 4.1 and a Forbearance Request given pursuant to Section 5(ii) may be given to the Company by facsimile transmission at 770/448-3357 and a simultaneous phone call to the Company at 770/453-0121 (or such other number as the Company shall designate), and shall be deemed to have been given and received when a legible copy has been actually received. A notice of redemption given pursuant to Section 4.3.1 and the Company's response to the Holder's Forebearance Request given pursuant to Section 5.2.2 may be given to the Holder by facsimile transmission at (___) ___________ and a simultaneous phone call to the Holder at (___) _______________ (or such other number as the Holder shall designate) and shall be deemed to have been given and received when a legible copy has been actually received. -9- 10 12. NO STOCKHOLDER RIGHTS. Nothing contained in this Debenture shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Debenture or the interest represented hereby or the Conversion Shares obtainable hereunder until, and only to the extent that, this Debenture shall have been converted. 13. GOVERNING LAW; INTERPRETATION. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware, USA excluding that body of law relating to conflict of laws. All references to dollars are to U.S. dollars. 14. ARBITRATION. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 15. HEADING; REFERENCES. All headings used herein are used for convenience only and shall not be used to construe or interpret this Debenture. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. [Signatures Appear on the Following Page] 11 IN WITNESS WHEREOF, the Company has caused this Debenture to be issued this _____ day of October, 1997. CYTRX CORPORATION By: ----------------------------- Jack J. Luchese Its: Chief Executive Officer and President Name of Holder: GUNDYCO in trust for R.R.S.P. 550-98866-19 Address: 4120 Young Street Suite 416 North York, Ontario M2P2B8 Canada -11- 12 NOTICE OF CONVERSION (To Be Signed Only Upon Conversion of Debenture) TO CYTRX CORPORATION The undersigned, the holder of the foregoing Debenture, hereby surrenders such Debenture for conversion into shares of Common Stock of CYTRX CORPORATION, to the extent of $_________ unpaid principal amount of such Debenture, and requests that the certificates for such shares be issued in the name of, and delivered to, _________________ whose address is ____________________. Dated: --------------------- ------------------------------ (Signature must conform in all respects to name of holder as specified on the face of the Debenture) ------------------------------ (Address) -12- EX-3.2 8 DEBENTURE IN FAVOR OF EXCALIBUR 1 EXHIBIT 3.2 NEITHER THIS DEBENTURE, NOR THE SHARES OF COMMON STOCK FOR WHICH IT MAY BE CONVERTED, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS DEBENTURE HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION 6% CONVERTIBLE DEBENTURE $400,000.00 Atlanta, Georgia October 22, 1997 CYTRX CORPORATION, a Delaware corporation (the "Company"), the principal office of which is located at 154 Technology Parkway Technology Park/Atlanta, Norcross, Georgia 30092, for value received hereby promises to pay to Excalibur Capital Management, or its registered assigns, the sum of Four Hundred Thousand Dollars ($400,000.00), or such lesser amount as shall then equal the outstanding principal amount hereof and any unpaid accrued interest hereon, as set forth below, shall be due and payable on October ____, 2001, (the "Maturity Date") (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date). Payment for all amounts due hereunder shall be made by mail to the registered address of the Holder. This Debenture is issued in connection with the transactions described in Section ___ of that certain Subscription Agreement between the Company and the Holder, dated as of October 22, 1997, as the same may from time to time be amended, modified or supplemented (the "Purchase Agreement"). The Holder is subject to certain restrictions set forth in the Purchase Agreement and shall be entitled to certain rights and privileges set forth in the Purchase Agreement. This Debenture is the Debenture referred to in the Purchase Agreement. The following is a statement of the rights of the Holder of this Debenture and conditions to which this Debenture is subject, and to which the Holder hereof, by the acceptance of this Debenture, agrees: 2 1. DEFINITIONS. As used in this Debenture, the following terms, unless the context otherwise requires, have the following meanings: (i) "Average Closing Bid Price" means the average of the daily last bid price for the shares of Common Stock for the ten (10) consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on the Nasdaq National Market (as reported by Bloomberg Business News or, if not reported thereby, any other authoritative source selected by the Company) ending at the close of trading on the trading day immediately preceding an identified measurement date. (ii) "Black-Out Period" means the number of days, if any, that the Company suspends the rights of the Holder to make sales pursuant to the Shelf Registration in accordance with Section 2(h) of the Registration Rights Agreement. (iii) "Closing Date" shall have the meaning given that term in the Purchase Agreement. (iv) "Company" includes any corporation which shall succeed to or assume the obligations of the Company under this Debenture. (v) "Common Stock" shall mean the $.001 par value common stock of the Company. (vi) "Conversion Price" shall mean the lessor of (A) $5.68 for each share of Common Stock, or (B) eighty-five percent of the Average Closing Bid Price calculated using the date of conversion as the measurement date; provided, however, but if the Holder delivered a Forbearance Request to the Company in accordance with Section 5(ii) within twenty-four (24) hours before it delivered a conversion notice to the Company in accordance with Section 4.3.1, then the Average Closing Bid Price for the portion of the Debenture that the Holder identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. (vii) "Holder," when the context refers to a holder of this Debenture, shall mean any person who shall at the time be the registered holder of this Debenture. (viii) "Redemption Payment Date" shall mean the day on which the Company is obligated to make the redemption payment to the Holder in accordance with Section 5.3. -2- 3 (ix) "Registration Rights Agreement" shall mean the Registration Rights Agreement dated as of October 22, 1997, between the Company, the Holder and the other holders of Company securities that are signatories thereto. (x) "Securities Act" shall mean the Securities Act of 1933, as amended. (xi) "Surrender Date" shall mean the day on which the Company receives the Debenture in accordance with either Section 4.4 or 5.3. 2. INTEREST. (i) Commencing on December 31, 1997, and on each June 30 and December 31 thereafter until the Maturity Date (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date, the Company shall pay interest (computed on the basis of a 365-day year) at rate of six percent (6%) per annum on the principal of this Debenture outstanding during the period beginning on the date of issuance of this Debenture and ending on the date that the principal amount of this Debenture becomes due and payable. (ii) The Company, at its option, may make any payment of interest due hereunder in whole or in part by issuing to the Holder shares of Common Stock (the "Interest Shares"). The Interest Shares shall be valued at the Average Closing Price, calculated using the date on which the interest payment is due as the measurement date. The Company shall not be obligated to issue any fractional shares. The Company may place such legends, if any, on the certificates for the Interest Shares as are required by applicable state and federal securities laws in the opinion of counsel to the Company. Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. 3. EVENTS OF DEFAULT. If any of the events specified in this Section 3 shall occur (herein individually referred to as an "Event of Default"), the Holders of more than fifty percent (50%) of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement may, so long as such condition exists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company: (i) Default in the payment of the principal and unpaid accrued interest of this Debenture when due and payable if such default is not cured by the Company within ten (10) days after the Holder has given the Company written notice of such default; or -3- 4 (ii) The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action; or (iii) If, within sixty (60) days after the commencement of an action against the Company (and service of process in connection therewith on the Company) seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated. 4. CONVERSION. 4.1 VOLUNTARY CONVERSION. At any time more than sixty (60) days after the date of this Debenture, the Holder of this Debenture has the right, at the Holder's option, to convert this Debenture, in accordance with the provisions of Section 4.3 hereof, in whole or in part, into fully paid and nonassessable shares of Common Stock; provided, however, that the Holder's right to convert this Debenture pursuant to this Section 4.1 shall be subject to the Company's right to redeem this Debenture pursuant to Section 5. The number of shares of Common Stock into which this Debenture may be converted ("Conversion Shares") shall be determined by dividing the aggregate principal amount together with all accrued interest to the date of conversion by the Conversion Price in effect at the time of such conversion. 4.2 AUTOMATIC CONVERSION. The entire principal amount of this Debenture shall be automatically converted into shares of Common Stock at the Conversion Price at the time in effect immediately prior to any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization or any transaction or series of related transactions by the Company in which in excess of fifty percent (50%) of the Company's voting power is transferred, or a sale of all or substantially all of the assets of the Company (as presently constituted, subject to proportionate adjustment in the event of any stock split, stock dividend, reverse stock split, combination, consolidation, reclassification or similar event). -4- 5 4.3 CONVERSION PROCEDURE. 4.3.1 NOTICE OF CONVERSION PURSUANT TO SECTION 4.1. Before the Holder shall be entitled to convert this Debenture into shares of Common Stock, it shall give written notice in accordance with Section 11 to the Company at its principal corporate office of the election to convert the same pursuant to Section 4.1, and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date that such notice is actually received; provided, however, that such notice shall not be effective with respect to, and the Holder shall not have the right to convert, any portion of this Debenture to be redeemed unless such notice is actually received by the Company before the close of business on the day immediately preceding the day on which the Company mails notice of redemption to the Holder. 4.3.2 NOTICE OF CONVERSION PURSUANT TO SECTION 4.2. If this Debenture is automatically converted, written notice shall be delivered to the Holder of this Debenture at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the conversion to be effected, specifying the Conversion Price, the principal amount of the Debenture to be converted, the amount of accrued interest to be converted, the date on which such conversion will occur and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the Debenture. 4.4 SURRENDER OF THE DEBENTURE. As promptly as practicable after conversion of the Debenture (but in no case later than two (2) business days thereafter), the Holder at its expense shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The person or persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock immediately prior to the close of business on the Surrender Date. 4.5 DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after the conversion of this Debenture (but in no case later than three (3) business days thereafter), the Company at its expense will issue and deliver to an express courier service for delivery to the Holder of this Debenture a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion. If the Company fails to delivery to an express courier service for delivery such certificates to the courier service within ten (10) days after the conversion of the Debenture, then the Company shall pay to the Holder, as liquidated damages for such failure, an amount equal to two hundred and fifty dollars ($250) per day for each twenty-five thousand dollars ($25,000) of principal of the Debenture that was converted until such certificates are so delivered. Notwithstanding anything to the contrary set forth herein, the Company shall not be obligated to issue or deliver any certificates, or to pay any liquidated damages for its failure to deliver such certificates, unless and until one (1) business day after the Surrender Date. 4.6 MECHANICS AND EFFECT OF CONVERSION. No fractional shares of Common Stock shall be issued upon conversion of this Debenture. In lieu of the Company issuing any fractional -5- 6 shares to the Holder upon the conversion of this Debenture, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the form as provided below. The stock certificates issued by the Company may bear such legends, if any, as are required by the Purchase Agreement and applicable state and federal securities laws in the opinion of counsel to the Company). Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. Upon conversion of this Debenture, the Company shall be forever released from all its obligations and liabilities under this Debenture, except that the Company shall be obligated to pay the Holder, within ten (10) days after the date of such conversion, any interest accrued and unpaid or unconverted to and including the date of such conversion, and no more. 5. REDEMPTION. 5.1 REDEMPTION AT THE OPTION OF THE COMPANY. At any time more than two hundred seventy (270) days after the date of this Debenture, the Company may redeem the Debenture, in whole or in part, immediately upon mailing written notice to the Holder at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest; provided, however, that the Company may not redeem the Debenture unless and until the shares of Common Stock issuable upon conversion of the Debenture have been registered under the Securities Act in accordance with the Registration Rights Agreement for at least two hundred ten (210) days plus any Black-Out Period that occurs during the two hundred ten (210) days. 5.2 REDEMPTION IN LIEN OF CONVERSION. 5.2.1 REDEMPTION RIGHT. If the Holder shall give the Company notice of the Holder's election to convert all or any part of this Debenture in accordance with Section 4.1, and the applicable Conversion Price is less than $4.00, then the Company may redeem this Debenture at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest. 5.2.2 FOREBEARANCE REQUEST. The Holder may at any time (but not more than once each calendar week) give the Company written notice of the Holder's desire to convert this Debenture (which notice shall state the portion of this Debenture to be converted) and request that the Company declare its intention to redeem the Debenture if a notice of conversion is given to the Company (a "Forbearance Request"). The Company shall respond to the Holder's Forbearance Request before the close of business on the first business day after the business day on which the Company actually receives the request. If the Company states in its response that it will not redeem the Debentures, then the Company may not redeem the Debenture as a result of the Holder's request to convert the Debenture to the extent identified in the Holder's Forbearance Request, provided that the Company receives the conversion notice before the close of business on the first business day after the business day on which the Holder actually receives the Company's response to the Holder's Forbearance Request. -6- 7 5.3 MECHANICS AND EFFECT OF REDEMPTION. As promptly as practicable after receiving notice of the Company's election to redeem the Debentures (but in no case later than three (3) business days thereafter), the Holder, at its expense, shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The Company shall make the redemption payment within fifteen (15) days after (a) the Company gives the Holder notice of redemption, in the case of a redemption pursuant to Section 5.1, or (b) the Company actually receives the notice of Holder's election to convert, in the case of a redemption pursuant to Section 5.2; provided, however, the Company shall not be obligated to make any redemption payment unless and until one (1) business day after the Surrender Date. Interest shall continue to accrue on the Debenture until the Redemption Payment Date. If the Debenture is to be redeemed in part, then upon surrender of the Debenture, the Company shall deliver to the Holder a new Debenture in the aggregate principal amount equal to the unredeemed portion thereof. 6. CONVERSION PRICE ADJUSTMENTS. 6.1 ADJUSTMENTS FOR STOCK SPLITS AND SUBDIVISIONS. In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of this Debenture shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Debenture shall be. increased in proportion to such increase of outstanding shares. 6.2 ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for this Debenture shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in out standing shares. -7- 8 6.3. NOTICES OF RECORD DATE, ETC. In the event of: (i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (ii) Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets of the Company to any other person or any consolidation or merger involving the Company; or (iii) Any voluntary or involuntary dissolution, liquidation or winding up of the Company. The Company will mail to the holder of this Debenture at least ten (10) days prior to the earliest date specified therein, a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or windingup is expected to become effective and the record date for determining stockholders entitled to vote thereon. 6.4 RESERVATION OF STOCK LSSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the Debenture such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this Debenture, in addition to such other remedies as shall be available to the holder of this Debenture, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock (and shares of its Common Stock for issuance on conversion of such Common Stock) to such number of shares as shall be sufficient for such purposes. 7. ASSIGNMENT. Subject to the restrictions on transfer described in Section 9 below, the rights and obligations of the Company and the Holder of this Debenture shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 8. WAIVER AND AMENDMENT. Any provision of this Debenture may be amended, waived or modified upon the written consent of the Company and holders of at least fifty percent of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement. -8- 9 9. TRANSFER OF THIS DEBENTURE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. With respect to any offer, sale or other disposition of this Debenture or securities into which such Debenture may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Debenture or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for the Holder is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly after such determination has been made. Each Debenture thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel for the Company such legend is not required. in order to ensure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 10. TREATMENT OF DEBENTURE. To the extent permitted by generally accepted accounting principles, the Company will treat, account and report the Debenture as debt and not equity for accounting purposes and with respect to any returns filed with federal, state or local tax authorities. 11. NOTICES. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if made by hand delivery, by an express courier company recognized nationally in the United States or Canada or by registered or certified mail, postage prepaid, at the respective addresses of the parties as set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given as of the date so delivered when personally delivered, one (1) business day (three (3) business days in the case of international deliveries) after dispatch if sent for overnight delivery by an express courier service nationally recognized in the United States or Canada and five (5) calendar days (seven (7) calendar days in the case of international deliveries) after mailing if sent by registered or certified mail in the manner set forth above. A notice of conversion given pursuant to Section 4.1 and a Forbearance Request given pursuant to Section 5(ii) may be given to the Company by facsimile transmission at 770/448-3357 and a simultaneous phone call to the Company at 770/453-0121 (or such other number as the Company shall designate), and shall be deemed to have been given and received when a legible copy has been actually received. A notice of redemption given pursuant to Section 4.3.1 and the Company's response to the Holder's Forebearance Request given pursuant to Section 5.2.2 may be given to the Holder by facsimile transmission at (___) ___________ and a simultaneous phone call to the Holder at (___) _______________ (or such other number as the Holder shall designate) and shall be deemed to have been given and received when a legible copy has been actually received. -9- 10 12. NO STOCKHOLDER RIGHTS. Nothing contained in this Debenture shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Debenture or the interest represented hereby or the Conversion Shares obtainable hereunder until, and only to the extent that, this Debenture shall have been converted. 13. GOVERNING LAW; INTERPRETATION. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware, USA excluding that body of law relating to conflict of laws. All references to dollars are to U.S. dollars. 14. ARBITRATION. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 15. HEADING; REFERENCES. All headings used herein are used for convenience only and shall not be used to construe or interpret this Debenture. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. [Signatures Appear on the Following Page] -10- 11 IN WITNESS WHEREOF, the Company has caused this Debenture to be issued this 22 day of October, 1997. CYTRX CORPORATION By: ------------------------------- Jack J. Luchese Its: Chief Executive Officer and President Name of Holder: EXCALIBUR CAPITAL MANAGEMENT Address: c/o H&H Securities Limited 205 Vest Drive Toronto, Ontario MSP3A1 Canada -11- 12 NOTICE OF CONVERSION (To Be Signed Only Upon Conversion of Debenture) TO CYTRX CORPORATION The undersigned, the holder of the foregoing Debenture, hereby surrenders such Debenture for conversion into shares of Common Stock of CYTRX CORPORATION, to the extent of $_________ unpaid principal amount of such Debenture, and requests that the certificates for such shares be issued in the name of, and delivered to, _________________ whose address is ____________________. Dated: ------------------------- ------------------------------ (Signature must conform in all respects to name of holder as specified on the face of the Debenture) ------------------------------ (Address) -12- EX-3.3 9 DEBENTURE IN FAVOR OF PINE STREET 1 EXHIBIT 3.3 NEITHER THIS DEBENTURE, NOR THE SHARES OF COMMON STOCK FOR WHICH IT MAY BE CONVERTED, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS DEBENTURE HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(b)(8) OF THE DELAWARE SECURITIES ACT. THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION 6% CONVERTIBLE DEBENTURE $50,000 Atlanta, Georgia October 22, 1997 CYTRX CORPORATION, a Delaware corporation (the "Company"), the principal office of which is located at 154 Technology Parkway Technology Park/Atlanta, Norcross, Georgia 30092, for value received hereby promises to pay to Pine Street Asset Management, or its registered assigns, the sum of Fifty Thousand Dollars ($50,000), or such lesser amount as shall then equal the outstanding principal amount hereof and any unpaid accrued interest hereon, as set forth below, shall be due and payable on October ____, 2001, (the "Maturity Date") (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date). Payment for all amounts due hereunder shall be made by mail to the registered address of the Holder. This Debenture is issued in connection with the transactions described in Section ___ of that certain Subscription Agreement between the Company and the Holder, dated as of October 22, 1997, as the same may from time to time be amended, modified or supplemented (the "Purchase Agreement"). The Holder is subject to certain restrictions set forth in the Purchase Agreement and shall be entitled to certain rights and privileges set forth in the Purchase Agreement. This Debenture is the Debenture referred to in the Purchase Agreement. The following is a statement of the rights of the Holder of this Debenture and conditions to which this Debenture is subject, and to which the Holder hereof, by the acceptance of this Debenture, agrees: 2 1. Definitions. As used in this Debenture, the following terms, unless the context otherwise requires, have the following meanings: (i) "Average Closing Bid Price" means the average of the daily last bid price for the shares of Common Stock for the ten (10) consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on the Nasdaq National Market (as reported by Bloomberg Business News or, if not reported thereby, any other authoritative source selected by the Company) ending at the close of trading on the trading day immediately preceding an identified measurement date. (ii) "Black-Out Period" means the number of days, if any, that the Company suspends the rights of the Holder to make sales pursuant to the Shelf Registration in accordance with Section 2(h) of the Registration Rights Agreement. (iii) "Closing Date" shall have the meaning given that term in the Purchase Agreement. (iv) "Company" includes any corporation which shall succeed to or assume the obligations of the Company under this Debenture. (v) "Common Stock" shall mean the $.001 par value common stock of the Company. (vi) "Conversion Price" shall mean the lessor of (A) $5.68 for each share of Common Stock, or (B) eighty-five percent of the Average Closing Bid Price calculated using the date of conversion as the measurement date; provided, however, but if the Holder delivered a Forbearance Request to the Company in accordance with Section 5(ii) within twenty-four (24) hours before it delivered a conversion notice to the Company in accordance with Section 4.3.1, then the Average Closing Bid Price for the portion of the Debenture that the Holder identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. (vii) "Holder," when the context refers to a holder of this Debenture, shall mean any person who shall at the time be the registered holder of this Debenture. (viii)"Redemption Payment Date" shall mean the day on which the Company is obligated to make the redemption payment to the Holder in accordance with Section 5.3. - 2- 3 (ix) "Registration Rights Agreement" shall mean the Registration Rights Agreement dated as of October 22, 1997, between the Company, the Holder and the other holders of Company securities that are signatories thereto. (x) "Securities Act" shall mean the Securities Act of 1933, as amended. (xi) "Surrender Date" shall mean the day on which the Company receives the Debenture in accordance with either Section 4.4 or 5.3. 2. Interest. (i) Commencing on December 31, 1997, and on each June 30 and December 31 thereafter until the Maturity Date (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date, the Company shall pay interest (computed on the basis of a 365-day year) at rate of six percent (6%) per annum on the principal of this Debenture outstanding during the period beginning on the date of issuance of this Debenture and ending on the date that the principal amount of this Debenture becomes due and payable. (ii) The Company, at its option, may make any payment of interest due hereunder in whole or in part by issuing to the Holder shares of Common Stock (the "Interest Shares"). The Interest Shares shall be valued at the Average Closing Price, calculated using the date on which the interest payment is due as the measurement date. The Company shall not be obligated to issue any fractional shares. The Company may place such legends, if any, on the certificates for the Interest Shares as are required by applicable state and federal securities laws in the opinion of counsel to the Company. Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. 3. Events of Default. If any of the events specified in this Section 3 shall occur (herein individually referred to as an "Event of Default"), the Holders of more than fifty percent (50%) of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement may, so long as such condition exists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company: (i) Default in the payment of the principal and unpaid accrued interest of this Debenture when due and payable if such default is not cured by the Company within ten (10) days after the Holder has given the Company written notice of such default; or - 3 - 4 (ii) The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action; or (iii) If, within sixty (60) days after the commencement of an action against the Company (and service of process in connection therewith on the Company) seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated. 4. Conversion. 4.1 Voluntary Conversion. At any time more than sixty (60) days after the date of this Debenture, the Holder of this Debenture has the right, at the Holder's option, to convert this Debenture, in accordance with the provisions of Section 4.3 hereof, in whole or in part, into fully paid and nonassessable shares of Common Stock; provided, however, that the Holder's right to convert this Debenture pursuant to this Section 4.1 shall be subject to the Company's right to redeem this Debenture pursuant to Section 5. The number of shares of Common Stock into which this Debenture may be converted ("Conversion Shares") shall be determined by dividing the aggregate principal amount together with all accrued interest to the date of conversion by the Conversion Price in effect at the time of such conversion. 4.2 Automatic Conversion. The entire principal amount of this Debenture shall be automatically converted into shares of Common Stock at the Conversion Price at the time in effect immediately prior to any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization or any transaction or series of related transactions by the Company in which in excess of fifty percent (50%) of the Company's voting power is transferred, or a sale of all or substantially all of the assets of the Company (as presently constituted, subject to proportionate adjustment in the event of any stock split, stock dividend, reverse stock split, combination, consolidation, reclassification or similar event). - 4 - 5 4.3 Conversion Procedure. 4.3.1 Notice of Conversion Pursuant to Section 4.1. Before the Holder shall be entitled to convert this Debenture into shares of Common Stock, it shall give written notice in accordance with Section 11 to the Company at its principal corporate office of the election to convert the same pursuant to Section 4.1, and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date that such notice is actually received; provided, however, that such notice shall not be effective with respect to, and the Holder shall not have the right to convert, any portion of this Debenture to be redeemed unless such notice is actually received by the Company before the close of business on the day immediately preceding the day on which the Company mails notice of redemption to the Holder. 4.3.2 Notice of Conversion Pursuant to Section 4.2. If this Debenture is automatically converted, written notice shall be delivered to the Holder of this Debenture at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the conversion to be effected, specifying the Conversion Price, the principal amount of the Debenture to be converted, the amount of accrued interest to be converted, the date on which such conversion will occur and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the Debenture. 4.4 Surrender of the Debenture. As promptly as practicable after conversion of the Debenture (but in no case later than two (2) business days thereafter), the Holder at its expense shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The person or persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock immediately prior to the close of business on the Surrender Date. 4.5 Delivery of Stock Certificates. As promptly as practicable after the conversion of this Debenture (but in no case later than three (3) business days thereafter), the Company at its expense will issue and deliver to an express courier service for delivery to the Holder of this Debenture a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion. If the Company fails to delivery to an express courier service for delivery such certificates to the courier service within ten (10) days after the conversion of the Debenture, then the Company shall pay to the Holder, as liquidated damages for such failure, an amount equal to two hundred and fifty dollars ($250) per day for each twenty-five thousand dollars ($25,000) of principal of the Debenture that was converted until such certificates are so delivered. Notwithstanding anything to the contrary set forth herein, the Company shall not be obligated to issue or deliver any certificates, or to pay any liquidated damages for its failure to deliver such certificates, unless and until one (1) business day after the Surrender Date. 4.6 Mechanics and Effect of Conversion. No fractional shares of Common Stock shall be issued upon conversion of this Debenture. In lieu of the Company issuing any fractional - 5 - 6 shares to the Holder upon the conversion of this Debenture, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the form as provided below. The stock certificates issued by the Company may bear such legends, if any, as are required by the Purchase Agreement and applicable state and federal securities laws in the opinion of counsel to the Company). Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. Upon conversion of this Debenture, the Company shall be forever released from all its obligations and liabilities under this Debenture, except that the Company shall be obligated to pay the Holder, within ten (10) days after the date of such conversion, any interest accrued and unpaid or unconverted to and including the date of such conversion, and no more. 5. Redemption. 5.1 Redemption at the Option of the Company. At any time more than two hundred seventy (270) days after the date of this Debenture, the Company may redeem the Debenture, in whole or in part, immediately upon mailing written notice to the Holder at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest; provided, however, that the Company may not redeem the Debenture unless and until the shares of Common Stock issuable upon conversion of the Debenture have been registered under the Securities Act in accordance with the Registration Rights Agreement for at least two hundred ten (210) days plus any Black-Out Period that occurs during the two hundred ten (210) days. 5.2 Redemption in Lien of Conversion. 5.2.1 Redemption Right. If the Holder shall give the Company notice of the Holder's election to convert all or any part of this Debenture in accordance with Section 4.1, and the applicable Conversion Price is less than $4.00, then the Company may redeem this Debenture at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest. 5.2.2 Forebearance Request. The Holder may at any time (but not more than once each calendar week) give the Company written notice of the Holder's desire to convert this Debenture (which notice shall state the portion of this Debenture to be converted) and request that the Company declare its intention to redeem the Debenture if a notice of conversion is given to the Company (a "Forbearance Request"). The Company shall respond to the Holder's Forbearance Request before the close of business on the first business day after the business day on which the Company actually receives the request. If the Company states in its response that it will not redeem the Debentures, then the Company may not redeem the Debenture as a result of the Holder's request to convert the Debenture to the extent identified in the Holder's Forbearance Request, provided that the Company receives the conversion notice before the close of business on the first business day after the business day on which the Holder actually receives the Company's response to the Holder's Forbearance Request. - 6 - 7 5.3 Mechanics and Effect of Redemption. As promptly as practicable after receiving notice of the Company's election to redeem the Debentures (but in no case later than three (3) business days thereafter), the Holder, at its expense, shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The Company shall make the redemption payment within fifteen (15) days after (a) the Company gives the Holder notice of redemption, in the case of a redemption pursuant to Section 5.1, or (b) the Company actually receives the notice of Holder's election to convert, in the case of a redemption pursuant to Section 5.2; provided, however, the Company shall not be obligated to make any redemption payment unless and until one (1) business day after the Surrender Date. Interest shall continue to accrue on the Debenture until the Redemption Payment Date. If the Debenture is to be redeemed in part, then upon surrender of the Debenture, the Company shall deliver to the Holder a new Debenture in the aggregate principal amount equal to the unredeemed portion thereof. 6. Conversion Price Adjustments. 6.1 Adjustments for Stock Splits and Subdivisions. In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of this Debenture shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Debenture shall be. increased in proportion to such increase of outstanding shares. 6.2 Adjustments for Reverse Stock Splits. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for this Debenture shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in out standing shares. - 7 - 8 6.3. Notices of Record Date, etc. In the event of: (i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (ii) Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets of the Company to any other person or any consolidation or merger involving the Company; or (iii) Any voluntary or involuntary dissolution, liquidation or winding up of the Company. The Company will mail to the holder of this Debenture at least ten (10) days prior to the earliest date specified therein, a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or windingup is expected to become effective and the record date for determining stockholders entitled to vote thereon. 6.4 Reservation of Stock lssuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the Debenture such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this Debenture, in addition to such other remedies as shall be available to the holder of this Debenture, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock (and shares of its Common Stock for issuance on conversion of such Common Stock) to such number of shares as shall be sufficient for such purposes. 7. Assignment. Subject to the restrictions on transfer described in Section 9 below, the rights and obligations of the Company and the Holder of this Debenture shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 8. Waiver and Amendment. Any provision of this Debenture may be amended, waived or modified upon the written consent of the Company and holders of at least fifty percent of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement. - 8 - 9 9. Transfer of this Debenture or Securities Issuable on Conversion Hereof. With respect to any offer, sale or other disposition of this Debenture or securities into which such Debenture may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Debenture or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for the Holder is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly after such determination has been made. Each Debenture thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel for the Company such legend is not required. in order to ensure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 10. Treatment of Debenture. To the extent permitted by generally accepted accounting principles, the Company will treat, account and report the Debenture as debt and not equity for accounting purposes and with respect to any returns filed with federal, state or local tax authorities. 11. Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if made by hand delivery, by an express courier company recognized nationally in the United States or Canada or by registered or certified mail, postage prepaid, at the respective addresses of the parties as set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given as of the date so delivered when personally delivered, one (1) business day (three (3) business days in the case of international deliveries) after dispatch if sent for overnight delivery by an express courier service nationally recognized in the United States or Canada and five (5) calendar days (seven (7) calendar days in the case of international deliveries) after mailing if sent by registered or certified mail in the manner set forth above. A notice of conversion given pursuant to Section 4.1 and a Forbearance Request given pursuant to Section 5(ii) may be given to the Company by facsimile transmission at 770/448-3357 and a simultaneous phone call to the Company at 770/453-0121 (or such other number as the Company shall designate), and shall be deemed to have been given and received when a legible copy has been actually received. A notice of redemption given pursuant to Section 4.3.1 and the Company's response to the Holder's Forebearance Request given pursuant to Section 5.2.2 may be given to the Holder by facsimile transmission at (___) ___________ and a simultaneous phone call to the Holder at (___) _______________ (or such other number as the Holder shall designate) and shall be deemed to have been given and received when a legible copy has been actually received. - 9 - 10 12. No Stockholder Rights. Nothing contained in this Debenture shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Debenture or the interest represented hereby or the Conversion Shares obtainable hereunder until, and only to the extent that, this Debenture shall have been converted. 13. Governing Law; Interpretation. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware, USA excluding that body of law relating to conflict of laws. All references to dollars are to U.S. dollars. 14. Arbitration. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 15. Heading; References. All headings used herein are used for convenience only and shall not be used to construe or interpret this Debenture. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. [Signatures Appear on the Following Page] - 10 - 11 IN WITNESS WHEREOF, the Company has caused this Debenture to be issued this 22 day of October, 1997. CYTRX CORPORATION By: -------------------------- Jack J. Luchese Its: Chief Executive Officer and President Name of Holder: PINE STREET ASSET MANAGEMENT Address: c/o Shipley Raidy Capital Partners, LP One Tower Bridge, Suite 1370 West Conshohocken, PA 19428 United States of America - 11 - 12 NOTICE OF CONVERSION (To Be Signed Only Upon Conversion of Debenture) TO CYTRX CORPORATION The undersigned, the holder of the foregoing Debenture, hereby surrenders such Debenture for conversion into shares of Common Stock of CYTRX CORPORATION, to the extent of $_________ unpaid principal amount of such Debenture, and requests that the certificates for such shares be issued in the name of, and delivered to, _________________ whose address is ____________________. Dated:_____________________ ------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Debenture) ------------------------- (Address) - 12 - EX-3.4 10 DEBENTURE IN FAVOR OF CHARLES ECKERT 1 EXHIBIT 3.4 NEITHER THIS DEBENTURE, NOR THE SHARES OF COMMON STOCK FOR WHICH IT MAY BE CONVERTED, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS DEBENTURE HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION 6% CONVERTIBLE DEBENTURE $25,000 Atlanta, Georgia October 22, 1997 CYTRX CORPORATION, a Delaware corporation (the "Company"), the principal office of which is located at 154 Technology Parkway Technology Park/Atlanta, Norcross, Georgia 30092, for value received hereby promises to pay to Charles N. Eckert, or his registered assigns, the sum of Twenty-Five Thousand Dollars ($25,000), or such lesser amount as shall then equal the outstanding principal amount hereof and any unpaid accrued interest hereon, as set forth below, shall be due and payable on October ____, 2001, (the "Maturity Date") (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date). Payment for all amounts due hereunder shall be made by mail to the registered address of the Holder. This Debenture is issued in connection with the transactions described in Section ___ of that certain Subscription Agreement between the Company and the Holder, dated as of October 22, 1997, as the same may from time to time be amended, modified or supplemented (the "Purchase Agreement"). The Holder is subject to certain restrictions set forth in the Purchase Agreement and shall be entitled to certain rights and privileges set forth in the Purchase Agreement. This Debenture is the Debenture referred to in the Purchase Agreement. The following is a statement of the rights of the Holder of this Debenture and conditions to which this Debenture is subject, and to which the Holder hereof, by the acceptance of this Debenture, agrees: 2 1. DEFINITIONS. As used in this Debenture, the following terms, unless the context otherwise requires, have the following meanings: (i) "Average Closing Bid Price" means the average of the daily last bid price for the shares of Common Stock for the ten (10) consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on the Nasdaq National Market (as reported by Bloomberg Business News or, if not reported thereby, any other authoritative source selected by the Company) ending at the close of trading on the trading day immediately preceding an identified measurement date. (ii) "Black-Out Period" means the number of days, if any, that the Company suspends the rights of the Holder to make sales pursuant to the Shelf Registration in accordance with Section 2(h) of the Registration Rights Agreement. (iii) "Closing Date" shall have the meaning given that term in the Purchase Agreement. (iv) "Company" includes any corporation which shall succeed to or assume the obligations of the Company under this Debenture. (v) "Common Stock" shall mean the $.001 par value common stock of the Company. (vi) "Conversion Price" shall mean the lessor of (A) $5.68 for each share of Common Stock, or (B) eighty-five percent of the Average Closing Bid Price calculated using the date of conversion as the measurement date; provided, however, but if the Holder delivered a Forbearance Request to the Company in accordance with Section 5(ii) within twenty-four (24) hours before it delivered a conversion notice to the Company in accordance with Section 4.3.1, then the Average Closing Bid Price for the portion of the Debenture that the Holder identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. (vii) "Holder," when the context refers to a holder of this Debenture, shall mean any person who shall at the time be the registered holder of this Debenture. (viii) "Redemption Payment Date" shall mean the day on which the Company is obligated to make the redemption payment to the Holder in accordance with Section 5.3. - 2 - 3 (ix) "Registration Rights Agreement" shall mean the Registration Rights Agreement dated as of October 22, 1997, between the Company, the Holder and the other holders of Company securities that are signatories thereto. (x) "Securities Act" shall mean the Securities Act of 1933, as amended. (xi) "Surrender Date" shall mean the day on which the Company receives the Debenture in accordance with either Section 4.4 or 5.3. 2. INTEREST. (i) Commencing on December 31, 1997, and on each June 30 and December 31 thereafter until the Maturity Date (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date, the Company shall pay interest (computed on the basis of a 365-day year) at rate of six percent (6%) per annum on the principal of this Debenture outstanding during the period beginning on the date of issuance of this Debenture and ending on the date that the principal amount of this Debenture becomes due and payable. (ii) The Company, at its option, may make any payment of interest due hereunder in whole or in part by issuing to the Holder shares of Common Stock (the "Interest Shares"). The Interest Shares shall be valued at the Average Closing Price, calculated using the date on which the interest payment is due as the measurement date. The Company shall not be obligated to issue any fractional shares. The Company may place such legends, if any, on the certificates for the Interest Shares as are required by applicable state and federal securities laws in the opinion of counsel to the Company. Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. 3. EVENTS OF DEFAULT. If any of the events specified in this Section 3 shall occur (herein individually referred to as an "Event of Default"), the Holders of more than fifty percent (50%) of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement may, so long as such condition exists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company: (i) Default in the payment of the principal and unpaid accrued interest of this Debenture when due and payable if such default is not cured by the Company within ten (10) days after the Holder has given the Company written notice of such default; or - 3 - 4 (ii) The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action; or (iii) If, within sixty (60) days after the commencement of an action against the Company (and service of process in connection therewith on the Company) seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated. 4. CONVERSION. 4.1 VOLUNTARY CONVERSION. At any time more than sixty (60) days after the date of this Debenture, the Holder of this Debenture has the right, at the Holder's option, to convert this Debenture, in accordance with the provisions of Section 4.3 hereof, in whole or in part, into fully paid and nonassessable shares of Common Stock; provided, however, that the Holder's right to convert this Debenture pursuant to this Section 4.1 shall be subject to the Company's right to redeem this Debenture pursuant to Section 5. The number of shares of Common Stock into which this Debenture may be converted ("Conversion Shares") shall be determined by dividing the aggregate principal amount together with all accrued interest to the date of conversion by the Conversion Price in effect at the time of such conversion. 4.2 AUTOMATIC CONVERSION. The entire principal amount of this Debenture shall be automatically converted into shares of Common Stock at the Conversion Price at the time in effect immediately prior to any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization or any transaction or series of related transactions by the Company in which in excess of fifty percent (50%) of the Company's voting power is transferred, or a sale of all or substantially all of the assets of the Company (as presently constituted, subject to proportionate adjustment in the event of any stock split, stock dividend, reverse stock split, combination, consolidation, reclassification or similar event). - 4 - 5 4.3 CONVERSION PROCEDURE. 4.3.1 NOTICE OF CONVERSION PURSUANT TO SECTION 4.1. Before the Holder shall be entitled to convert this Debenture into shares of Common Stock, it shall give written notice in accordance with Section 11 to the Company at its principal corporate office of the election to convert the same pursuant to Section 4.1, and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date that such notice is actually received; provided, however, that such notice shall not be effective with respect to, and the Holder shall not have the right to convert, any portion of this Debenture to be redeemed unless such notice is actually received by the Company before the close of business on the day immediately preceding the day on which the Company mails notice of redemption to the Holder. 4.3.2 NOTICE OF CONVERSION PURSUANT TO SECTION 4.2. If this Debenture is automatically converted, written notice shall be delivered to the Holder of this Debenture at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the conversion to be effected, specifying the Conversion Price, the principal amount of the Debenture to be converted, the amount of accrued interest to be converted, the date on which such conversion will occur and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the Debenture. 4.4 SURRENDER OF THE DEBENTURE. As promptly as practicable after conversion of the Debenture (but in no case later than two (2) business days thereafter), the Holder at its expense shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The person or persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock immediately prior to the close of business on the Surrender Date. 4.5 DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after the conversion of this Debenture (but in no case later than three (3) business days thereafter), the Company at its expense will issue and deliver to an express courier service for delivery to the Holder of this Debenture a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion. If the Company fails to delivery to an express courier service for delivery such certificates to the courier service within ten (10) days after the conversion of the Debenture, then the Company shall pay to the Holder, as liquidated damages for such failure, an amount equal to two hundred and fifty dollars ($250) per day for each twenty-five thousand dollars ($25,000) of principal of the Debenture that was converted until such certificates are so delivered. Notwithstanding anything to the contrary set forth herein, the Company shall not be obligated to issue or deliver any certificates, or to pay any liquidated damages for its failure to deliver such certificates, unless and until one (1) business day after the Surrender Date. 4.6 MECHANICS AND EFFECT OF CONVERSION. No fractional shares of Common Stock shall be issued upon conversion of this Debenture. In lieu of the Company issuing any fractional - 5 - 6 shares to the Holder upon the conversion of this Debenture, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the form as provided below. The stock certificates issued by the Company may bear such legends, if any, as are required by the Purchase Agreement and applicable state and federal securities laws in the opinion of counsel to the Company). Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. Upon conversion of this Debenture, the Company shall be forever released from all its obligations and liabilities under this Debenture, except that the Company shall be obligated to pay the Holder, within ten (10) days after the date of such conversion, any interest accrued and unpaid or unconverted to and including the date of such conversion, and no more. 5. REDEMPTION. 5.1 REDEMPTION AT THE OPTION OF THE COMPANY. At any time more than two hundred seventy (270) days after the date of this Debenture, the Company may redeem the Debenture, in whole or in part, immediately upon mailing written notice to the Holder at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest; provided, however, that the Company may not redeem the Debenture unless and until the shares of Common Stock issuable upon conversion of the Debenture have been registered under the Securities Act in accordance with the Registration Rights Agreement for at least two hundred ten (210) days plus any Black-Out Period that occurs during the two hundred ten (210) days. 5.2 REDEMPTION IN LIEN OF CONVERSION. 5.2.1 REDEMPTION RIGHT. If the Holder shall give the Company notice of the Holder's election to convert all or any part of this Debenture in accordance with Section 4.1, and the applicable Conversion Price is less than $4.00, then the Company may redeem this Debenture at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest. 5.2.2 FOREBEARANCE REQUEST. The Holder may at any time (but not more than once each calendar week) give the Company written notice of the Holder's desire to convert this Debenture (which notice shall state the portion of this Debenture to be converted) and request that the Company declare its intention to redeem the Debenture if a notice of conversion is given to the Company (a "Forbearance Request"). The Company shall respond to the Holder's Forbearance Request before the close of business on the first business day after the business day on which the Company actually receives the request. If the Company states in its response that it will not redeem the Debentures, then the Company may not redeem the Debenture as a result of the Holder's request to convert the Debenture to the extent identified in the Holder's Forbearance Request, provided that the Company receives the conversion notice before the close of business on the first business day after the business day on which the Holder actually receives the Company's response to the Holder's Forbearance Request. - 6 - 7 5.3 MECHANICS AND EFFECT OF REDEMPTION. As promptly as practicable after receiving notice of the Company's election to redeem the Debentures (but in no case later than three (3) business days thereafter), the Holder, at its expense, shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The Company shall make the redemption payment within fifteen (15) days after (a) the Company gives the Holder notice of redemption, in the case of a redemption pursuant to Section 5.1, or (b) the Company actually receives the notice of Holder's election to convert, in the case of a redemption pursuant to Section 5.2; provided, however, the Company shall not be obligated to make any redemption payment unless and until one (1) business day after the Surrender Date. Interest shall continue to accrue on the Debenture until the Redemption Payment Date. If the Debenture is to be redeemed in part, then upon surrender of the Debenture, the Company shall deliver to the Holder a new Debenture in the aggregate principal amount equal to the unredeemed portion thereof. 6. CONVERSION PRICE ADJUSTMENTS. 6.1 ADJUSTMENTS FOR STOCK SPLITS AND SUBDIVISIONS. In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of this Debenture shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Debenture shall be. increased in proportion to such increase of outstanding shares. 6.2 ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for this Debenture shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in out standing shares. - 7 - 8 6.3. NOTICES OF RECORD DATE, ETC. In the event of: (i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (ii) Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets of the Company to any other person or any consolidation or merger involving the Company; or (iii) Any voluntary or involuntary dissolution, liquidation or winding up of the Company. The Company will mail to the holder of this Debenture at least ten (10) days prior to the earliest date specified therein, a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or windingup is expected to become effective and the record date for determining stockholders entitled to vote thereon. 6.4 RESERVATION OF STOCK LSSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the Debenture such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this Debenture, in addition to such other remedies as shall be available to the holder of this Debenture, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock (and shares of its Common Stock for issuance on conversion of such Common Stock) to such number of shares as shall be sufficient for such purposes. 7. ASSIGNMENT. Subject to the restrictions on transfer described in Section 9 below, the rights and obligations of the Company and the Holder of this Debenture shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 8. WAIVER AND AMENDMENT. Any provision of this Debenture may be amended, waived or modified upon the written consent of the Company and holders of at least fifty percent of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement. - 8 - 9 9. TRANSFER OF THIS DEBENTURE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. With respect to any offer, sale or other disposition of this Debenture or securities into which such Debenture may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Debenture or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for the Holder is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly after such determination has been made. Each Debenture thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel for the Company such legend is not required. in order to ensure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 10. TREATMENT OF DEBENTURE. To the extent permitted by generally accepted accounting principles, the Company will treat, account and report the Debenture as debt and not equity for accounting purposes and with respect to any returns filed with federal, state or local tax authorities. 11. NOTICES. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if made by hand delivery, by an express courier company recognized nationally in the United States or Canada or by registered or certified mail, postage prepaid, at the respective addresses of the parties as set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given as of the date so delivered when personally delivered, one (1) business day (three (3) business days in the case of international deliveries) after dispatch if sent for overnight delivery by an express courier service nationally recognized in the United States or Canada and five (5) calendar days (seven (7) calendar days in the case of international deliveries) after mailing if sent by registered or certified mail in the manner set forth above. A notice of conversion given pursuant to Section 4.1 and a Forbearance Request given pursuant to Section 5(ii) may be given to the Company by facsimile transmission at 770/448-3357 and a simultaneous phone call to the Company at 770/453-0121 (or such other number as the Company shall designate), and shall be deemed to have been given and received when a legible copy has been actually received. A notice of redemption given pursuant to Section 4.3.1 and the Company's response to the Holder's Forebearance Request given pursuant to Section 5.2.2 may be given to the Holder by facsimile transmission at (___) ___________ and a simultaneous phone call to the Holder at (___) _______________ (or such other number as the Holder shall designate) and shall be deemed to have been given and received when a legible copy has been actually received. - 9 - 10 12. NO STOCKHOLDER RIGHTS. Nothing contained in this Debenture shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Debenture or the interest represented hereby or the Conversion Shares obtainable hereunder until, and only to the extent that, this Debenture shall have been converted. 13. GOVERNING LAW; INTERPRETATION. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware, USA excluding that body of law relating to conflict of laws. All references to dollars are to U.S. dollars. 14. ARBITRATION. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 15. HEADING; REFERENCES. All headings used herein are used for convenience only and shall not be used to construe or interpret this Debenture. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. [Signatures Appear on the Following Page] - 10 - 11 IN WITNESS WHEREOF, the Company has caused this Debenture to be issued this 22 day of October, 1997. CYTRX CORPORATION By: -------------------------- Jack J. Luchese Its: Chief Executive Officer and President Name of Holder: CHARLES N. ECKERT Address: c/o Shipley Raidy Capital Partners, LP One Tower Bridge, Suite 1370 West Conshohocken, PA 19428 United States of America - 11 - 12 NOTICE OF CONVERSION (To Be Signed Only Upon Conversion of Debenture) TO CYTRX CORPORATION The undersigned, the holder of the foregoing Debenture, hereby surrenders such Debenture for conversion into shares of Common Stock of CYTRX CORPORATION, to the extent of $_________ unpaid principal amount of such Debenture, and requests that the certificates for such shares be issued in the name of, and delivered to, _________________ whose address is ____________________. Dated: --------------------- ------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Debenture) ------------------------- (Address) - 12 - EX-3.5 11 DEBENTURE IN FAVOR OF DAVID KOSLOFF 1 EXHIBIT 3.5 NEITHER THIS DEBENTURE, NOR THE SHARES OF COMMON STOCK FOR WHICH IT MAY BE CONVERTED, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS DEBENTURE HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION 6% CONVERTIBLE DEBENTURE $25,000 Atlanta, Georgia October 22, 1997 CYTRX CORPORATION, a Delaware corporation (the "Company"), the principal office of which is located at 154 Technology Parkway Technology Park/Atlanta, Norcross, Georgia 30092, for value received hereby promises to pay to David Kosloff, or his registered assigns, the sum of Twenty-Five Thousand Dollars ($25,000), or such lesser amount as shall then equal the outstanding principal amount hereof and any unpaid accrued interest hereon, as set forth below, shall be due and payable on October ____, 2001, (the "Maturity Date") (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date). Payment for all amounts due hereunder shall be made by mail to the registered address of the Holder. This Debenture is issued in connection with the transactions described in Section ___ of that certain Subscription Agreement between the Company and the Holder, dated as of October 22, 1997, as the same may from time to time be amended, modified or supplemented (the "Purchase Agreement"). The Holder is subject to certain restrictions set forth in the Purchase Agreement and shall be entitled to certain rights and privileges set forth in the Purchase Agreement. This Debenture is the Debenture referred to in the Purchase Agreement. The following is a statement of the rights of the Holder of this Debenture and conditions to which this Debenture is subject, and to which the Holder hereof, by the acceptance of this Debenture, agrees: 2 1. DEFINITIONS. As used in this Debenture, the following terms, unless the context otherwise requires, have the following meanings: (i) "Average Closing Bid Price" means the average of the daily last bid price for the shares of Common Stock for the ten (10) consecutive trading days on which such shares are actually traded as over-the-counter securities and quoted on the Nasdaq National Market (as reported by Bloomberg Business News or, if not reported thereby, any other authoritative source selected by the Company) ending at the close of trading on the trading day immediately preceding an identified measurement date. (ii) "Black-Out Period" means the number of days, if any, that the Company suspends the rights of the Holder to make sales pursuant to the Shelf Registration in accordance with Section 2(h) of the Registration Rights Agreement. (iii) "Closing Date" shall have the meaning given that term in the Purchase Agreement. (iv) "Company" includes any corporation which shall succeed to or assume the obligations of the Company under this Debenture. (v) "Common Stock" shall mean the $.001 par value common stock of the Company. (vi) "Conversion Price" shall mean the lessor of (A) $5.68 for each share of Common Stock, or (B) eighty-five percent of the Average Closing Bid Price calculated using the date of conversion as the measurement date; provided, however, but if the Holder delivered a Forbearance Request to the Company in accordance with Section 5(ii) within twenty-four (24) hours before it delivered a conversion notice to the Company in accordance with Section 4.3.1, then the Average Closing Bid Price for the portion of the Debenture that the Holder identified in the Forbearance Request shall be calculated using either the date of conversion or the date the Company actually received such Forbearance Request as the measurement date, whichever results in a lower Conversion Price. (vii) "Holder," when the context refers to a holder of this Debenture, shall mean any person who shall at the time be the registered holder of this Debenture. (viii) "Redemption Payment Date" shall mean the day on which the Company is obligated to make the redemption payment to the Holder in accordance with Section 5.3. - 2 - 3 (ix) "Registration Rights Agreement" shall mean the Registration Rights Agreement dated as of October 22, 1997, between the Company, the Holder and the other holders of Company securities that are signatories thereto. (x) "Securities Act" shall mean the Securities Act of 1933, as amended. (xi) "Surrender Date" shall mean the day on which the Company receives the Debenture in accordance with either Section 4.4 or 5.3. 2. INTEREST. (i) Commencing on December 31, 1997, and on each June 30 and December 31 thereafter until the Maturity Date (or in the case of redemption in accordance with Section 5 hereof, until the Redemption Payment Date, the Company shall pay interest (computed on the basis of a 365-day year) at rate of six percent (6%) per annum on the principal of this Debenture outstanding during the period beginning on the date of issuance of this Debenture and ending on the date that the principal amount of this Debenture becomes due and payable. (ii) The Company, at its option, may make any payment of interest due hereunder in whole or in part by issuing to the Holder shares of Common Stock (the "Interest Shares"). The Interest Shares shall be valued at the Average Closing Price, calculated using the date on which the interest payment is due as the measurement date. The Company shall not be obligated to issue any fractional shares. The Company may place such legends, if any, on the certificates for the Interest Shares as are required by applicable state and federal securities laws in the opinion of counsel to the Company. Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. 3. EVENTS OF DEFAULT. If any of the events specified in this Section 3 shall occur (herein individually referred to as an "Event of Default"), the Holders of more than fifty percent (50%) of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement may, so long as such condition exists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company: (i) Default in the payment of the principal and unpaid accrued interest of this Debenture when due and payable if such default is not cured by the Company within ten (10) days after the Holder has given the Company written notice of such default; or - 3 - 4 (ii) The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action; or (iii) If, within sixty (60) days after the commencement of an action against the Company (and service of process in connection therewith on the Company) seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated. 4. CONVERSION. 4.1 VOLUNTARY CONVERSION. At any time more than sixty (60) days after the date of this Debenture, the Holder of this Debenture has the right, at the Holder's option, to convert this Debenture, in accordance with the provisions of Section 4.3 hereof, in whole or in part, into fully paid and nonassessable shares of Common Stock; provided, however, that the Holder's right to convert this Debenture pursuant to this Section 4.1 shall be subject to the Company's right to redeem this Debenture pursuant to Section 5. The number of shares of Common Stock into which this Debenture may be converted ("Conversion Shares") shall be determined by dividing the aggregate principal amount together with all accrued interest to the date of conversion by the Conversion Price in effect at the time of such conversion. 4.2 AUTOMATIC CONVERSION. The entire principal amount of this Debenture shall be automatically converted into shares of Common Stock at the Conversion Price at the time in effect immediately prior to any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization or any transaction or series of related transactions by the Company in which in excess of fifty percent (50%) of the Company's voting power is transferred, or a sale of all or substantially all of the assets of the Company (as presently constituted, subject to proportionate adjustment in the event of any stock split, stock dividend, reverse stock split, combination, consolidation, reclassification or similar event). - 4 - 5 4.3 CONVERSION PROCEDURE. 4.3.1 NOTICE OF CONVERSION PURSUANT TO SECTION 4.1. Before the Holder shall be entitled to convert this Debenture into shares of Common Stock, it shall give written notice in accordance with Section 11 to the Company at its principal corporate office of the election to convert the same pursuant to Section 4.1, and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date that such notice is actually received; provided, however, that such notice shall not be effective with respect to, and the Holder shall not have the right to convert, any portion of this Debenture to be redeemed unless such notice is actually received by the Company before the close of business on the day immediately preceding the day on which the Company mails notice of redemption to the Holder. 4.3.2 NOTICE OF CONVERSION PURSUANT TO SECTION 4.2. If this Debenture is automatically converted, written notice shall be delivered to the Holder of this Debenture at the address last shown on the records of the Company for the Holder or given by the Holder to the Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of the Company is located, notifying the Holder of the conversion to be effected, specifying the Conversion Price, the principal amount of the Debenture to be converted, the amount of accrued interest to be converted, the date on which such conversion will occur and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the Debenture. 4.4 SURRENDER OF THE DEBENTURE. As promptly as practicable after conversion of the Debenture (but in no case later than two (2) business days thereafter), the Holder at its expense shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The person or persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock immediately prior to the close of business on the Surrender Date. 4.5 DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after the conversion of this Debenture (but in no case later than three (3) business days thereafter), the Company at its expense will issue and deliver to an express courier service for delivery to the Holder of this Debenture a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion. If the Company fails to delivery to an express courier service for delivery such certificates to the courier service within ten (10) days after the conversion of the Debenture, then the Company shall pay to the Holder, as liquidated damages for such failure, an amount equal to two hundred and fifty dollars ($250) per day for each twenty-five thousand dollars ($25,000) of principal of the Debenture that was converted until such certificates are so delivered. Notwithstanding anything to the contrary set forth herein, the Company shall not be obligated to issue or deliver any certificates, or to pay any liquidated damages for its failure to deliver such certificates, unless and until one (1) business day after the Surrender Date. 4.6 MECHANICS AND EFFECT OF CONVERSION. No fractional shares of Common Stock shall be issued upon conversion of this Debenture. In lieu of the Company issuing any fractional - 5 - 6 shares to the Holder upon the conversion of this Debenture, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the form as provided below. The stock certificates issued by the Company may bear such legends, if any, as are required by the Purchase Agreement and applicable state and federal securities laws in the opinion of counsel to the Company). Applicable state and federal securities laws will not require any legends on the certificates after the shares have been registered under the Securities Act in accordance with the Registration Rights Agreement. Upon conversion of this Debenture, the Company shall be forever released from all its obligations and liabilities under this Debenture, except that the Company shall be obligated to pay the Holder, within ten (10) days after the date of such conversion, any interest accrued and unpaid or unconverted to and including the date of such conversion, and no more. 5. REDEMPTION. 5.1 REDEMPTION AT THE OPTION OF THE COMPANY. At any time more than two hundred seventy (270) days after the date of this Debenture, the Company may redeem the Debenture, in whole or in part, immediately upon mailing written notice to the Holder at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest; provided, however, that the Company may not redeem the Debenture unless and until the shares of Common Stock issuable upon conversion of the Debenture have been registered under the Securities Act in accordance with the Registration Rights Agreement for at least two hundred ten (210) days plus any Black-Out Period that occurs during the two hundred ten (210) days. 5.2 REDEMPTION IN LIEN OF CONVERSION. 5.2.1 REDEMPTION RIGHT. If the Holder shall give the Company notice of the Holder's election to convert all or any part of this Debenture in accordance with Section 4.1, and the applicable Conversion Price is less than $4.00, then the Company may redeem this Debenture at a redemption price equal to one hundred ten percent (110%) of the principal amount of the Debenture, plus any accrued but unpaid interest. 5.2.2 FOREBEARANCE REQUEST. The Holder may at any time (but not more than once each calendar week) give the Company written notice of the Holder's desire to convert this Debenture (which notice shall state the portion of this Debenture to be converted) and request that the Company declare its intention to redeem the Debenture if a notice of conversion is given to the Company (a "Forbearance Request"). The Company shall respond to the Holder's Forbearance Request before the close of business on the first business day after the business day on which the Company actually receives the request. If the Company states in its response that it will not redeem the Debentures, then the Company may not redeem the Debenture as a result of the Holder's request to convert the Debenture to the extent identified in the Holder's Forbearance Request, provided that the Company receives the conversion notice before the close of business on the first business day after the business day on which the Holder actually receives the Company's response to the Holder's Forbearance Request. - 6 - 7 5.3 MECHANICS AND EFFECT OF REDEMPTION. As promptly as practicable after receiving notice of the Company's election to redeem the Debentures (but in no case later than three (3) business days thereafter), the Holder, at its expense, shall surrender the Debenture to the Company, duly endorsed, at the principal offices of the Company. The Company shall make the redemption payment within fifteen (15) days after (a) the Company gives the Holder notice of redemption, in the case of a redemption pursuant to Section 5.1, or (b) the Company actually receives the notice of Holder's election to convert, in the case of a redemption pursuant to Section 5.2; provided, however, the Company shall not be obligated to make any redemption payment unless and until one (1) business day after the Surrender Date. Interest shall continue to accrue on the Debenture until the Redemption Payment Date. If the Debenture is to be redeemed in part, then upon surrender of the Debenture, the Company shall deliver to the Holder a new Debenture in the aggregate principal amount equal to the unredeemed portion thereof. 6. CONVERSION PRICE ADJUSTMENTS. 6.1 ADJUSTMENTS FOR STOCK SPLITS AND SUBDIVISIONS. In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of this Debenture shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Debenture shall be. increased in proportion to such increase of outstanding shares. 6.2 ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for this Debenture shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in out standing shares. - 7 - 8 6.3. NOTICES OF RECORD DATE, ETC. In the event of: (i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (ii) Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets of the Company to any other person or any consolidation or merger involving the Company; or (iii) Any voluntary or involuntary dissolution, liquidation or winding up of the Company. The Company will mail to the holder of this Debenture at least ten (10) days prior to the earliest date specified therein, a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or windingup is expected to become effective and the record date for determining stockholders entitled to vote thereon. 6.4 RESERVATION OF STOCK LSSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the Debenture such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this Debenture, in addition to such other remedies as shall be available to the holder of this Debenture, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock (and shares of its Common Stock for issuance on conversion of such Common Stock) to such number of shares as shall be sufficient for such purposes. 7. ASSIGNMENT. Subject to the restrictions on transfer described in Section 9 below, the rights and obligations of the Company and the Holder of this Debenture shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 8. WAIVER AND AMENDMENT. Any provision of this Debenture may be amended, waived or modified upon the written consent of the Company and holders of at least fifty percent of the face amount of all then outstanding Debentures issued pursuant to the Purchase Agreement. - 8 - 9 9. TRANSFER OF THIS DEBENTURE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. With respect to any offer, sale or other disposition of this Debenture or securities into which such Debenture may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Debenture or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for the Holder is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly after such determination has been made. Each Debenture thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel for the Company such legend is not required. in order to ensure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 10. TREATMENT OF DEBENTURE. To the extent permitted by generally accepted accounting principles, the Company will treat, account and report the Debenture as debt and not equity for accounting purposes and with respect to any returns filed with federal, state or local tax authorities. 11. NOTICES. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if made by hand delivery, by an express courier company recognized nationally in the United States or Canada or by registered or certified mail, postage prepaid, at the respective addresses of the parties as set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given as of the date so delivered when personally delivered, one (1) business day (three (3) business days in the case of international deliveries) after dispatch if sent for overnight delivery by an express courier service nationally recognized in the United States or Canada and five (5) calendar days (seven (7) calendar days in the case of international deliveries) after mailing if sent by registered or certified mail in the manner set forth above. A notice of conversion given pursuant to Section 4.1 and a Forbearance Request given pursuant to Section 5(ii) may be given to the Company by facsimile transmission at 770/448-3357 and a simultaneous phone call to the Company at 770/453-0121 (or such other number as the Company shall designate), and shall be deemed to have been given and received when a legible copy has been actually received. A notice of redemption given pursuant to Section 4.3.1 and the Company's response to the Holder's Forebearance Request given pursuant to Section 5.2.2 may be given to the Holder by facsimile transmission at (___) ___________ and a simultaneous phone call to the Holder at (___) _______________ (or such other number as the Holder shall designate) and shall be deemed to have been given and received when a legible copy has been actually received. - 9 - 10 12. NO STOCKHOLDER RIGHTS. Nothing contained in this Debenture shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Debenture or the interest represented hereby or the Conversion Shares obtainable hereunder until, and only to the extent that, this Debenture shall have been converted. 13. GOVERNING LAW; INTERPRETATION. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware, USA excluding that body of law relating to conflict of laws. All references to dollars are to U.S. dollars. 14. ARBITRATION. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. 15. HEADING; REFERENCES. All headings used herein are used for convenience only and shall not be used to construe or interpret this Debenture. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. [Signatures Appear on the Following Page] - 10 - 11 IN WITNESS WHEREOF, the Company has caused this Debenture to be issued this 22 day of October, 1997. CYTRX CORPORATION By: ------------------------- Jack J. Luchese Its: Chief Executive Officer and President Name of Holder: DAVID KOSLOFF Address: c/o Shipley Raidy Capital Partners, LP One Tower Bridge, Suite 1370 West Conshohocken, PA 19428 United States of America - 11 - 12 NOTICE OF CONVERSION (To Be Signed Only Upon Conversion of Debenture) TO CYTRX CORPORATION The undersigned, the holder of the foregoing Debenture, hereby surrenders such Debenture for conversion into shares of Common Stock of CYTRX CORPORATION, to the extent of $_________ unpaid principal amount of such Debenture, and requests that the certificates for such shares be issued in the name of, and delivered to, _________________ whose address is ____________________. Dated: --------------------- ------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Debenture) ------------------------- (Address) - 12 - EX-4.1 12 STOCK PURCHASE WARRANT - GUNDYCO 1 EXHIBIT 4.1 NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK FOR WHICH IT IS EXERCISABLE, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION STOCK PURCHASE WARRANT This is to certify that, the Initial Holder (as defined below) or any successor Holder is entitled upon the due exercise hereof to purchase from CytRx Corporation, a Delaware Corporation (the "Company") up to 30,000 of the authorized but unissued shares (subject to adjustment as provided herein) of the $.001 par value Common Stock of the Company at a price per share as specified in Section 2 of this Warrant (subject to adjustment as provided herein) and to exercise the other rights, power and privileges hereinafter provided, all on the terms and subject to the conditions specified herein. SECTION 1. Certain Definitions. Unless the context otherwise requires, the following terms as used in this Warrant shall have the following meanings: "Affiliate" shall mean any partnership or corporation controlled by or under common control with the Initial Holder. "Common Stock" shall mean the Company's $.001 par value per share Common Stock or any stock into which such stock shall have been changed or any stock resulting from reclassification of such stock. "Company" shall mean CytRx Corporation, a Delaware corporation, and its successors and assigns. 2 "Exercise Date" has the meaning set forth in Section 3 hereof. "Exercise Price" shall mean the price specified in Section 2 hereof, as the same shall be adjusted from time to time pursuant to the provisions of this Warrant. "Fair Market Value" shall mean (i) the last sales price for a share of Common Stock as officially reported on the principal national securities exchange or domestic over-the-counter market on which the Common Stock is at the time listed or traded at the time of determination of such Fair Market Value or (ii) if such Common Stock is not at such time listed on a national securities exchange or quoted in the domestic over-the-counter market, the fair market value as determined by the Board of Directors of the Company in good faith after review of all relevant factors. "Holder" or "Warrant Holder" shall mean the Initial Holder and its successors and registered assigns of this Warrant. "Initial Holder" shall mean GUNDYCO in trust for R.R.S.P. 550-9886-19, its successors and affiliates. "Subscription Agreement" shall mean that certain Private Securities Subscription Agreement dated as of October 22, 1997 relating to the purchase of certain debentures convertible into shares of Common Stock as the same may be amended and modified from time to time, and "Debenture" shall mean any of the debentures issued thereunder. "Warrant" means this Warrant dated as of October 22, 1997 issued to Initial Holder hereby and all warrants issued upon the transfer or division of or in substitution for such Warrant. SECTION 2. Exercise Price. The Exercise Price per share shall be $5.68 per share of the Common Stock. The Exercise Price shall be paid in cash. SECTION 3. Exercise. Prior to the later of the second anniversary of the date hereof (the "Expiration Date"), this Warrant may be exercised by the Holder, as to all or less than all of the shares of Common Stock covered hereby, by surrender of this Warrant at the Company's principal office (for all purposes of this Warrant, 154 Technology Parkway, Norcross, Georgia 30092 or such other address as the Company may advise the registered Holder hereof by notice given by certified or registered mail) with the form of election to subscribe attached hereto as Exhibit A duly executed and upon tender of payment to the Company of the Exercise Price for shares so purchased in cash or by check. Upon the date of such receipt by the Company (herein called the "Exercise Date"), this Warrant shall be deemed to have been exercised and the person exercising the same shall become a holder of record of shares of Common Stock (or of the other securities or property to which he or it is entitled upon such exercise) purchased hereunder for all - 2 - 3 purposes, and certificates for such shares so purchased shall be delivered to the Holder or its transferee within a reasonable time (not exceeding 10 days) after this Warrant shall have been exercised as set forth hereinabove. In the event that this Warrant is exercised in part, the Company will execute and deliver a new Warrant of like tenor exerciseable for the number of shares for which this Warrant may then be exercised. If this Warrant is not exercised on or prior to the Expiration Date, this Warrant shall become void and all rights of the Holder hereunder shall cease. SECTION 4. Taxes. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to the issue or delivery of the shares of Common Stock covered hereby unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock issuable upon exercise of this Warrant in any name other than that of the Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or the charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. SECTION 5. Warrant Register. The Company shall at all times while any portion of this Warrant remains outstanding and exercisable keep and maintain at its principal office a register (the "Warrant Register") in which the registration, transfer and exchange of this Warrant shall be recorded. The Warrant Register shall contain the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. The Company shall not at any time, except upon the dissolution, liquidation or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. If at any time, the Company shall appoint an agent (the "Warrant Agent") to maintain such register, the Company shall promptly give notice by certified or registered mail to the registered Holder hereof of the name of such Warrant Agent and of the place or places at which this Warrant may be presented for transfer, exchange or exercise. The terms of the agreement between the Company and any Warrant Agent at any time in effect will be in conformity with the terms of this Warrant. SECTION 6. Transfer. The Company shall register the transfer of any Warrant upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the form of transfer authorization attached hereto as Exhibit B duly filled in and signed, to the Company at the office specified herein. Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Warrant rights so transferred, shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Warrant rights not so transferred, if any, shall be issued to the then registered Holder thereof. The Holder understands that this Warrant has not been - 3 - 4 and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") and that the Warrant and the shares of Common Stock issuable upon exercise hereof may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of in the absence of an effective registration statement under the Securities Act, relating to such Warrant or shares; provided, however that this Warrant and the shares of Common Stock issuable upon exercise hereof may be sold, assigned, transferred, pledged or otherwise encumbered or disposed of if the holder obtains a written opinion of counsel acceptable to the Company to the effect that the proposed sale, assignment, transfer, pledge or other encumbrance or disposition is exempt from registration under the Securities Act. SECTION 7. Exchange. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal offices of the Company, together with the form of transfer authorization attached hereto duly executed, for new warrants of like tenor and date, in such denominations as the Holder shall designate at the time of surrender for exchange, representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder. SECTION 8. Covenants of the Company. (a) The Company covenants and agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, free from preemptive rights, and free from all taxes, liens, encumbrances and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise in full of the rights represented by this Warrant. (b) As long as the Warrant remains outstanding, the Company shall maintain an office or agency (which may be the principal executive office of the Company) where the Warrant may be presented for exercise, registration of transfer, exchange, division or combination as provided in this Warrant. SECTION 9. Adjustments for Stock Splits and Subdivisions. (a) In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon - 4 - 5 conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Exercise Price of this Warrant shall be appropriately decreased so that the number of shares of Common Stock issuable upon exercise of this Warrant shall be. increased in proportion to such increase of outstanding shares. (b) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Exercise Price for this Warrant shall be appropriately increased so that the number of shares of Common Stock issuable on exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 10. Holder's Rights. This Warrant shall not entitle the Holder to any rights of a stockholder of the Company, except that should the Company, during the period in which this Warrant is exercisable, declare a dividend upon the Common Stock payable other than in cash out of earnings or surplus (computed in accordance with generally accepted accounting principles consistently applied) or other than in Common Stock or securities convertible into Common Stock, then, thereafter, the Warrant Holder, upon exercise of this Warrant, shall receive the number of shares of Common Stock purchasable upon such exercise and, in addition and without further payment, the cash, stock or other securities and/or other property which the Warrant Holder would have received by way of dividends (otherwise than in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or any other distributions in respect of the Common Stock as if, continuously since the date hereof, such Warrant Holder (a) had been the record holder of the number of shares of Common Stock then being purchased, and (b) had retained all such cash, stock and other securities (other than dividends in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or other property payable in respect of such Common Stock or in respect of any stock or securities paid as dividends and originating directly or indirectly from such Common Stock. SECTION 11. Notice of Adjustments. If there shall be any adjustment as provided in Section 9, the Company shall forthwith cause written notice thereof to be sent by facsimile, overnight or registered mail, postage prepaid, to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company. At the request of Holder and upon surrender of this Warrant, the Company shall reissue this Warrant in a form conforming to such adjustments. SECTION 12. Cash in Lieu of Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of this Warrant. If, by reason of any change made pursuant to Section 9 or 10 hereof, the Holder of this Warrant would be entitled, upon the exercise of any rights evidenced hereby, to receive a fractional interest in a share, the Company shall, upon such exercise, purchase such fractional interest for an - 5 - 6 amount in cash equal to the fair market value of such fractional interest, determined as of the Exercise Date. SECTION 13. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant shall be mutilated, lost, stolen or destroyed, upon request by the registered Holder of the Warrant, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, of like tenor and representing the right to purchase the equivalent number of the remaining shares of Common Stock issuable upon exercise hereof, but, in the case of loss, theft or destruction, only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, an indemnification also satisfactory to it (it being understood that the written agreement of the initial Holder shall be sufficient indemnity), provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. SECTION 14. Challenge to Good Faith Determination. Whenever the Board shall be required to make a determination in good faith of the fair value of any item under Section 9, such determination may be challenged in good faith by the Holder, and any dispute shall be resolved by an investment banking firm of recognized national standing in the United States selected by the Company and acceptable to the Holder. SECTION 15. Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Exercise Price to be less than the par value per share of Common Stock. SECTION 16. Amendments. Any term of this Warrant may be amended with the written consent of the Company and the holders of warrants representing more than fifty percent (50%) of the outstanding warrants issued pursuant to the Subscription Agreement, even without the consent of the Holder. Any amendment effected in accordance with this Section 16 shall be binding upon each holder or any the warrants issued pursuant to the Subscription Agreement, each future holder of such warrants, and the Company; provided, however, that no special consideration or inducement may be give to any such holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to all such holders equally and ratably in accordance with the number of shares of Common Stock issuable upon exercise of their warrants. The Company shall promptly give notice to all holders of warrants issued pursuant to the Subscription Agreement of any amendment effected in accordance with this Section 16. No waivers of, or exceptions to, any term, condition, or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition, or provision. SECTION 17. No Impairment. The Company represents and warrants that there are no restrictions in the Company's Certificate of Incorporation or Bylaws which prevent - 6 - 7 it from satisfying its obligation to issue the shares of Common Stock issuable upon exercise of the Warrant. The Company shall not by any action including, without limitation, amending its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. SECTION 18. Applicable Law; Payments. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Delaware. All payments shall be in U.S. Dollars by immediately available funds. SECTION 19. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Holder. SECTION 20. Headings. Headings of the paragraphs in this Warrant are for convenience and reference only and shall not, for any purpose, be deemed a part of this Warrant. SECTION 21. Arbitration. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. - 7 - 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed under seal by its duly authorized officer this 22 day of October, 1997. CYTRX CORPORATION By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- GUNDYCO in trust for R.R.S.P. 550-98866-19 By: ------------------------------- Title: ---------------------------- - 8 - 9 EXHIBIT A FORM OF SUBSCRIPTION The undersigned, registered holder or assignee of such registered holder of the within Warrant, hereby (1) subscribes for _________________ shares (subject to adjustment as provided herein) which the undersigned is entitled to purchase under the terms of the within Warrant, (2) makes the full cash payment called for by the within Warrant, and (3) directs that the shares issuable upon exercise of said Warrant be issued as follows: Name: -------------------------------- By: ----------------------------------- Title: -------------------------------- Date: ----------------------------- - ---------------------------------- NOTICE: The name and signature on this subscription form must correspond with the name as written upon the face of the within Warrant, or upon the assignment form on the reverse thereof, in every particular, without alteration or enlargement and must be guaranteed by a bank or by a firm having membership on a registered national securities exchange in the United States. - 9 - 10 EXHIBIT B FORM OF ASSIGNMENT FOR VALUE RECEIVED __________________________ hereby sells, assigns, and transfers unto __________________, of _________________, the right to purchase ___________ shares (subject to adjustment as provided herein) evidenced by the within Warrant, and hereby irrevocably constitutes and appoints __________________ to transfer such right on the books of the Company, with full power of substitution. Date: _______________, 19___ Name: --------------------------------- By: ----------------------------------- Title: -------------------------------- Date: ----------------------------- - ---------------------------------- NOTICE: The name and signature on this assignment must correspond with the name as written upon the face of the within Warrant, or upon any assignment form duly executed pursuant to the terms of the within Warrant, in every particular, without alteration or enlargement and must be guaranteed by a bank, or by a firm having membership on a registered national securities exchange in the United States. - 10 - EX-4.2 13 STOCK PURCHASE WARRANT - EXCALIBUR 1 EXHIBIT 4.2 NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK FOR WHICH IT IS EXERCISABLE, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION STOCK PURCHASE WARRANT This is to certify that, the Initial Holder (as defined below) or any successor Holder is entitled upon the due exercise hereof to purchase from CytRx Corporation, a Delaware Corporation (the "Company") up to 8,000 of the authorized but unissued shares (subject to adjustment as provided herein) of the $.001 par value Common Stock of the Company at a price per share as specified in Section 2 of this Warrant (subject to adjustment as provided herein) and to exercise the other rights, power and privileges hereinafter provided, all on the terms and subject to the conditions specified herein. SECTION 1. Certain Definitions. Unless the context otherwise requires, the following terms as used in this Warrant shall have the following meanings: "Affiliate" shall mean any partnership or corporation controlled by or under common control with the Initial Holder. "Common Stock" shall mean the Company's $.001 par value per share Common Stock or any stock into which such stock shall have been changed or any stock resulting from reclassification of such stock. "Company" shall mean CytRx Corporation, a Delaware corporation, and its successors and assigns. 2 "Exercise Date" has the meaning set forth in Section 3 hereof. "Exercise Price" shall mean the price specified in Section 2 hereof, as the same shall be adjusted from time to time pursuant to the provisions of this Warrant. "Fair Market Value" shall mean (i) the last sales price for a share of Common Stock as officially reported on the principal national securities exchange or domestic over-the-counter market on which the Common Stock is at the time listed or traded at the time of determination of such Fair Market Value or (ii) if such Common Stock is not at such time listed on a national securities exchange or quoted in the domestic over-the-counter market, the fair market value as determined by the Board of Directors of the Company in good faith after review of all relevant factors. "Holder" or "Warrant Holder" shall mean the Initial Holder and its successors and registered assigns of this Warrant. "Initial Holder" shall mean Excalibur Capital Management, its successors and affiliates. "Subscription Agreement" shall mean that certain Private Securities Subscription Agreement dated as of October 22, 1997 relating to the purchase of certain debentures convertible into shares of Common Stock as the same may be amended and modified from time to time, and "Debenture" shall mean any of the debentures issued thereunder. "Warrant" means this Warrant dated as of October 22, 1997 issued to Initial Holder hereby and all warrants issued upon the transfer or division of or in substitution for such Warrant. SECTION 2. Exercise Price. The Exercise Price per share shall be $5.68 per share of the Common Stock. The Exercise Price shall be paid in cash. SECTION 3. Exercise. Prior to the later of the second anniversary of the date hereof (the "Expiration Date"), this Warrant may be exercised by the Holder, as to all or less than all of the shares of Common Stock covered hereby, by surrender of this Warrant at the Company's principal office (for all purposes of this Warrant, 154 Technology Parkway, Norcross, Georgia 30092 or such other address as the Company may advise the registered Holder hereof by notice given by certified or registered mail) with the form of election to subscribe attached hereto as Exhibit A duly executed and upon tender of payment to the Company of the Exercise Price for shares so purchased in cash or by check. Upon the date of such receipt by the Company (herein called the "Exercise Date"), this Warrant shall be deemed to have been exercised and the person exercising the same shall become a holder of record of shares of Common Stock (or of the other securities or property to which he or it is entitled upon such exercise) purchased hereunder for all - 2 - 3 purposes, and certificates for such shares so purchased shall be delivered to the Holder or its transferee within a reasonable time (not exceeding 10 days) after this Warrant shall have been exercised as set forth hereinabove. In the event that this Warrant is exercised in part, the Company will execute and deliver a new Warrant of like tenor exerciseable for the number of shares for which this Warrant may then be exercised. If this Warrant is not exercised on or prior to the Expiration Date, this Warrant shall become void and all rights of the Holder hereunder shall cease. SECTION 4. Taxes. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to the issue or delivery of the shares of Common Stock covered hereby unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock issuable upon exercise of this Warrant in any name other than that of the Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or the charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. SECTION 5. Warrant Register. The Company shall at all times while any portion of this Warrant remains outstanding and exercisable keep and maintain at its principal office a register (the "Warrant Register") in which the registration, transfer and exchange of this Warrant shall be recorded. The Warrant Register shall contain the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. The Company shall not at any time, except upon the dissolution, liquidation or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. If at any time, the Company shall appoint an agent (the "Warrant Agent") to maintain such register, the Company shall promptly give notice by certified or registered mail to the registered Holder hereof of the name of such Warrant Agent and of the place or places at which this Warrant may be presented for transfer, exchange or exercise. The terms of the agreement between the Company and any Warrant Agent at any time in effect will be in conformity with the terms of this Warrant. SECTION 6. Transfer. The Company shall register the transfer of any Warrant upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the form of transfer authorization attached hereto as Exhibit B duly filled in and signed, to the Company at the office specified herein. Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Warrant rights so transferred, shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Warrant rights not so transferred, if any, shall be issued to the then registered Holder thereof. The Holder understands that this Warrant has not been - 3 - 4 and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") and that the Warrant and the shares of Common Stock issuable upon exercise hereof may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of in the absence of an effective registration statement under the Securities Act, relating to such Warrant or shares; provided, however that this Warrant and the shares of Common Stock issuable upon exercise hereof may be sold, assigned, transferred, pledged or otherwise encumbered or disposed of if the holder obtains a written opinion of counsel acceptable to the Company to the effect that the proposed sale, assignment, transfer, pledge or other encumbrance or disposition is exempt from registration under the Securities Act. SECTION 7. Exchange. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal offices of the Company, together with the form of transfer authorization attached hereto duly executed, for new warrants of like tenor and date, in such denominations as the Holder shall designate at the time of surrender for exchange, representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder. SECTION 8. Covenants of the Company. (a) The Company covenants and agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, free from preemptive rights, and free from all taxes, liens, encumbrances and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise in full of the rights represented by this Warrant. (b) As long as the Warrant remains outstanding, the Company shall maintain an office or agency (which may be the principal executive office of the Company) where the Warrant may be presented for exercise, registration of transfer, exchange, division or combination as provided in this Warrant. SECTION 9. Adjustments for Stock Splits and Subdivisions. (a) In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon - 4 - 5 conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Exercise Price of this Warrant shall be appropriately decreased so that the number of shares of Common Stock issuable upon exercise of this Warrant shall be. increased in proportion to such increase of outstanding shares. (b) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Exercise Price for this Warrant shall be appropriately increased so that the number of shares of Common Stock issuable on exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 10. Holder's Rights. This Warrant shall not entitle the Holder to any rights of a stockholder of the Company, except that should the Company, during the period in which this Warrant is exercisable, declare a dividend upon the Common Stock payable other than in cash out of earnings or surplus (computed in accordance with generally accepted accounting principles consistently applied) or other than in Common Stock or securities convertible into Common Stock, then, thereafter, the Warrant Holder, upon exercise of this Warrant, shall receive the number of shares of Common Stock purchasable upon such exercise and, in addition and without further payment, the cash, stock or other securities and/or other property which the Warrant Holder would have received by way of dividends (otherwise than in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or any other distributions in respect of the Common Stock as if, continuously since the date hereof, such Warrant Holder (a) had been the record holder of the number of shares of Common Stock then being purchased, and (b) had retained all such cash, stock and other securities (other than dividends in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or other property payable in respect of such Common Stock or in respect of any stock or securities paid as dividends and originating directly or indirectly from such Common Stock. SECTION 11. Notice of Adjustments. If there shall be any adjustment as provided in Section 9, the Company shall forthwith cause written notice thereof to be sent by facsimile, overnight or registered mail, postage prepaid, to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company. At the request of Holder and upon surrender of this Warrant, the Company shall reissue this Warrant in a form conforming to such adjustments. SECTION 12. Cash in Lieu of Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of this Warrant. If, by reason of any change made pursuant to Section 9 or 10 hereof, the Holder of this Warrant would be entitled, upon the exercise of any rights evidenced hereby, to receive a fractional interest in a share, the Company shall, upon such exercise, purchase such fractional interest for an - 5 - 6 amount in cash equal to the fair market value of such fractional interest, determined as of the Exercise Date. SECTION 13. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant shall be mutilated, lost, stolen or destroyed, upon request by the registered Holder of the Warrant, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, of like tenor and representing the right to purchase the equivalent number of the remaining shares of Common Stock issuable upon exercise hereof, but, in the case of loss, theft or destruction, only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, an indemnification also satisfactory to it (it being understood that the written agreement of the initial Holder shall be sufficient indemnity), provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. SECTION 14. Challenge to Good Faith Determination. Whenever the Board shall be required to make a determination in good faith of the fair value of any item under Section 9, such determination may be challenged in good faith by the Holder, and any dispute shall be resolved by an investment banking firm of recognized national standing in the United States selected by the Company and acceptable to the Holder. SECTION 15. Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Exercise Price to be less than the par value per share of Common Stock. SECTION 16. Amendments. Any term of this Warrant may be amended with the written consent of the Company and the holders of warrants representing more than fifty percent (50%) of the outstanding warrants issued pursuant to the Subscription Agreement, even without the consent of the Holder. Any amendment effected in accordance with this Section 16 shall be binding upon each holder or any the warrants issued pursuant to the Subscription Agreement, each future holder of such warrants, and the Company; provided, however, that no special consideration or inducement may be give to any such holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to all such holders equally and ratably in accordance with the number of shares of Common Stock issuable upon exercise of their warrants. The Company shall promptly give notice to all holders of warrants issued pursuant to the Subscription Agreement of any amendment effected in accordance with this Section 16. No waivers of, or exceptions to, any term, condition, or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition, or provision. SECTION 17. No Impairment. The Company represents and warrants that there are no restrictions in the Company's Certificate of Incorporation or Bylaws which prevent - 6 - 7 it from satisfying its obligation to issue the shares of Common Stock issuable upon exercise of the Warrant. The Company shall not by any action including, without limitation, amending its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. SECTION 18. Applicable Law; Payments. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Delaware. All payments shall be in U.S. Dollars by immediately available funds. SECTION 19. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Holder. SECTION 20. Headings. Headings of the paragraphs in this Warrant are for convenience and reference only and shall not, for any purpose, be deemed a part of this Warrant. SECTION 21. Arbitration. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. - 7 - 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed under seal by its duly authorized officer this 22 day of October, 1997. CYTRX CORPORATION By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- EXCALIBUR CAPITAL MANAGEMENT By: ------------------------------- Title: ---------------------------- - 8 - 9 EXHIBIT A FORM OF SUBSCRIPTION The undersigned, registered holder or assignee of such registered holder of the within Warrant, hereby (1) subscribes for _________________ shares (subject to adjustment as provided herein) which the undersigned is entitled to purchase under the terms of the within Warrant, (2) makes the full cash payment called for by the within Warrant, and (3) directs that the shares issuable upon exercise of said Warrant be issued as follows: Name: ------------------------------- By: ----------------------------------- Title: -------------------------------- Date: ----------------------------- - ---------------------------------- NOTICE: The name and signature on this subscription form must correspond with the name as written upon the face of the within Warrant, or upon the assignment form on the reverse thereof, in every particular, without alteration or enlargement and must be guaranteed by a bank or by a firm having membership on a registered national securities exchange in the United States. - 9 - 10 EXHIBIT B FORM OF ASSIGNMENT FOR VALUE RECEIVED __________________________ hereby sells, assigns, and transfers unto __________________, of _________________, the right to purchase ___________ shares (subject to adjustment as provided herein) evidenced by the within Warrant, and hereby irrevocably constitutes and appoints __________________ to transfer such right on the books of the Company, with full power of substitution. Date: _______________, 19___ Name: --------------------------------- By: ----------------------------------- Title: -------------------------------- Date: ---------------------------- - ---------------------------------- NOTICE: The name and signature on this assignment must correspond with the name as written upon the face of the within Warrant, or upon any assignment form duly executed pursuant to the terms of the within Warrant, in every particular, without alteration or enlargement and must be guaranteed by a bank, or by a firm having membership on a registered national securities exchange in the United States. - 10 - EX-4.3 14 STOCK PURCHASE WARRANT - PINE STREET 1 EXHIBIT 4.3 NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK FOR WHICH IT IS EXERCISABLE, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION STOCK PURCHASE WARRANT This is to certify that, the Initial Holder (as defined below) or any successor Holder is entitled upon the due exercise hereof to purchase from CytRx Corporation, a Delaware Corporation (the "Company") up to 1,000 of the authorized but unissued shares (subject to adjustment as provided herein) of the $.001 par value Common Stock of the Company at a price per share as specified in Section 2 of this Warrant (subject to adjustment as provided herein) and to exercise the other rights, power and privileges hereinafter provided, all on the terms and subject to the conditions specified herein. SECTION 1. Certain Definitions. Unless the context otherwise requires, the following terms as used in this Warrant shall have the following meanings: "Affiliate" shall mean any partnership or corporation controlled by or under common control with the Initial Holder. "Common Stock" shall mean the Company's $.001 par value per share Common Stock or any stock into which such stock shall have been changed or any stock resulting from reclassification of such stock. "Company" shall mean CytRx Corporation, a Delaware corporation, and its successors and assigns. 2 "Exercise Date" has the meaning set forth in Section 3 hereof. "Exercise Price" shall mean the price specified in Section 2 hereof, as the same shall be adjusted from time to time pursuant to the provisions of this Warrant. "Fair Market Value" shall mean (i) the last sales price for a share of Common Stock as officially reported on the principal national securities exchange or domestic over-the-counter market on which the Common Stock is at the time listed or traded at the time of determination of such Fair Market Value or (ii) if such Common Stock is not at such time listed on a national securities exchange or quoted in the domestic over-the-counter market, the fair market value as determined by the Board of Directors of the Company in good faith after review of all relevant factors. "Holder" or "Warrant Holder" shall mean the Initial Holder and its successors and registered assigns of this Warrant. "Initial Holder" shall mean Pine Street Asset Management, its successors and affiliates. "Subscription Agreement" shall mean that certain Private Securities Subscription Agreement dated as of October 22, 1997 relating to the purchase of certain debentures convertible into shares of Common Stock as the same may be amended and modified from time to time, and "Debenture" shall mean any of the debentures issued thereunder. "Warrant" means this Warrant dated as of October 22, 1997 issued to Initial Holder hereby and all warrants issued upon the transfer or division of or in substitution for such Warrant. SECTION 2. Exercise Price. The Exercise Price per share shall be $5.68 per share of the Common Stock. The Exercise Price shall be paid in cash. SECTION 3. Exercise. Prior to the later of the second anniversary of the date hereof (the "Expiration Date"), this Warrant may be exercised by the Holder, as to all or less than all of the shares of Common Stock covered hereby, by surrender of this Warrant at the Company's principal office (for all purposes of this Warrant, 154 Technology Parkway, Norcross, Georgia 30092 or such other address as the Company may advise the registered Holder hereof by notice given by certified or registered mail) with the form of election to subscribe attached hereto as Exhibit A duly executed and upon tender of payment to the Company of the Exercise Price for shares so purchased in cash or by check. Upon the date of such receipt by the Company (herein called the "Exercise Date"), this Warrant shall be deemed to have been exercised and the person exercising the same shall become a holder of record of shares of Common Stock (or of the other securities or property to which he or it is entitled upon such exercise) purchased hereunder for all -2- 3 purposes, and certificates for such shares so purchased shall be delivered to the Holder or its transferee within a reasonable time (not exceeding 10 days) after this Warrant shall have been exercised as set forth hereinabove. In the event that this Warrant is exercised in part, the Company will execute and deliver a new Warrant of like tenor exerciseable for the number of shares for which this Warrant may then be exercised. If this Warrant is not exercised on or prior to the Expiration Date, this Warrant shall become void and all rights of the Holder hereunder shall cease. SECTION 4. Taxes. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to the issue or delivery of the shares of Common Stock covered hereby unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock issuable upon exercise of this Warrant in any name other than that of the Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or the charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. SECTION 5. Warrant Register. The Company shall at all times while any portion of this Warrant remains outstanding and exercisable keep and maintain at its principal office a register (the "Warrant Register") in which the registration, transfer and exchange of this Warrant shall be recorded. The Warrant Register shall contain the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. The Company shall not at any time, except upon the dissolution, liquidation or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. If at any time, the Company shall appoint an agent (the "Warrant Agent") to maintain such register, the Company shall promptly give notice by certified or registered mail to the registered Holder hereof of the name of such Warrant Agent and of the place or places at which this Warrant may be presented for transfer, exchange or exercise. The terms of the agreement between the Company and any Warrant Agent at any time in effect will be in conformity with the terms of this Warrant. SECTION 6. Transfer. The Company shall register the transfer of any Warrant upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the form of transfer authorization attached hereto as Exhibit B duly filled in and signed, to the Company at the office specified herein. Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Warrant rights so transferred, shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Warrant rights not so transferred, if any, shall be issued to the then registered Holder thereof. The Holder understands that this Warrant has not been -3- 4 and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") and that the Warrant and the shares of Common Stock issuable upon exercise hereof may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of in the absence of an effective registration statement under the Securities Act, relating to such Warrant or shares; provided, however that this Warrant and the shares of Common Stock issuable upon exercise hereof may be sold, assigned, transferred, pledged or otherwise encumbered or disposed of if the holder obtains a written opinion of counsel acceptable to the Company to the effect that the proposed sale, assignment, transfer, pledge or other encumbrance or disposition is exempt from registration under the Securities Act. SECTION 7. Exchange. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal offices of the Company, together with the form of transfer authorization attached hereto duly executed, for new warrants of like tenor and date, in such denominations as the Holder shall designate at the time of surrender for exchange, representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder. SECTION 8. Covenants of the Company. (a) The Company covenants and agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, free from preemptive rights, and free from all taxes, liens, encumbrances and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise in full of the rights represented by this Warrant. (b) As long as the Warrant remains outstanding, the Company shall maintain an office or agency (which may be the principal executive office of the Company) where the Warrant may be presented for exercise, registration of transfer, exchange, division or combination as provided in this Warrant. SECTION 9. Adjustments for Stock Splits and Subdivisions. (a) In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon -4- 5 conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Exercise Price of this Warrant shall be appropriately decreased so that the number of shares of Common Stock issuable upon exercise of this Warrant shall be. increased in proportion to such increase of outstanding shares. (b) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Exercise Price for this Warrant shall be appropriately increased so that the number of shares of Common Stock issuable on exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 10. Holder's Rights. This Warrant shall not entitle the Holder to any rights of a stockholder of the Company, except that should the Company, during the period in which this Warrant is exercisable, declare a dividend upon the Common Stock payable other than in cash out of earnings or surplus (computed in accordance with generally accepted accounting principles consistently applied) or other than in Common Stock or securities convertible into Common Stock, then, thereafter, the Warrant Holder, upon exercise of this Warrant, shall receive the number of shares of Common Stock purchasable upon such exercise and, in addition and without further payment, the cash, stock or other securities and/or other property which the Warrant Holder would have received by way of dividends (otherwise than in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or any other distributions in respect of the Common Stock as if, continuously since the date hereof, such Warrant Holder (a) had been the record holder of the number of shares of Common Stock then being purchased, and (b) had retained all such cash, stock and other securities (other than dividends in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or other property payable in respect of such Common Stock or in respect of any stock or securities paid as dividends and originating directly or indirectly from such Common Stock. SECTION 11. Notice of Adjustments. If there shall be any adjustment as provided in Section 9, the Company shall forthwith cause written notice thereof to be sent by facsimile, overnight or registered mail, postage prepaid, to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company. At the request of Holder and upon surrender of this Warrant, the Company shall reissue this Warrant in a form conforming to such adjustments. SECTION 12. Cash in Lieu of Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of this Warrant. If, by reason of any change made pursuant to Section 9 or 10 hereof, the Holder of this Warrant would be entitled, upon the exercise of any rights evidenced hereby, to receive a fractional interest in a share, the Company shall, upon such exercise, purchase such fractional interest for an -5- 6 amount in cash equal to the fair market value of such fractional interest, determined as of the Exercise Date. SECTION 13. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant shall be mutilated, lost, stolen or destroyed, upon request by the registered Holder of the Warrant, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, of like tenor and representing the right to purchase the equivalent number of the remaining shares of Common Stock issuable upon exercise hereof, but, in the case of loss, theft or destruction, only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, an indemnification also satisfactory to it (it being understood that the written agreement of the initial Holder shall be sufficient indemnity), provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. SECTION 14. Challenge to Good Faith Determination. Whenever the Board shall be required to make a determination in good faith of the fair value of any item under Section 9, such determination may be challenged in good faith by the Holder, and any dispute shall be resolved by an investment banking firm of recognized national standing in the United States selected by the Company and acceptable to the Holder. SECTION 15. Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Exercise Price to be less than the par value per share of Common Stock. SECTION 16. Amendments. Any term of this Warrant may be amended with the written consent of the Company and the holders of warrants representing more than fifty percent (50%) of the outstanding warrants issued pursuant to the Subscription Agreement, even without the consent of the Holder. Any amendment effected in accordance with this Section 16 shall be binding upon each holder or any the warrants issued pursuant to the Subscription Agreement, each future holder of such warrants, and the Company; provided, however, that no special consideration or inducement may be give to any such holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to all such holders equally and ratably in accordance with the number of shares of Common Stock issuable upon exercise of their warrants. The Company shall promptly give notice to all holders of warrants issued pursuant to the Subscription Agreement of any amendment effected in accordance with this Section 16. No waivers of, or exceptions to, any term, condition, or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition, or provision. SECTION 17. No Impairment. The Company represents and warrants that there are no restrictions in the Company's Certificate of Incorporation or Bylaws which prevent -6- 7 it from satisfying its obligation to issue the shares of Common Stock issuable upon exercise of the Warrant. The Company shall not by any action including, without limitation, amending its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. SECTION 18. Applicable Law; Payments. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Delaware. All payments shall be in U.S. Dollars by immediately available funds. SECTION 19. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Holder. SECTION 20. Headings. Headings of the paragraphs in this Warrant are for convenience and reference only and shall not, for any purpose, be deemed a part of this Warrant. SECTION 21. Arbitration. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. -7- 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed under seal by its duly authorized officer this 22 day of October, 1997. CYTRX CORPORATION By: ------------------------------ Name: ---------------------------- Title: --------------------------- PINE STREET ASSET MANAGEMENT By: -------------------------- Title: ----------------------- -8- 9 EXHIBIT A FORM OF SUBSCRIPTION The undersigned, registered holder or assignee of such registered holder of the within Warrant, hereby (1) subscribes for _________________ shares (subject to adjustment as provided herein) which the undersigned is entitled to purchase under the terms of the within Warrant, (2) makes the full cash payment called for by the within Warrant, and (3) directs that the shares issuable upon exercise of said Warrant be issued as follows: Name: ---------------------------- By: ------------------------------ Title: --------------------------- Date: ------------------------- - ------------------------------ NOTICE: The name and signature on this subscription form must correspond with the name as written upon the face of the within Warrant, or upon the assignment form on the reverse thereof, in every particular, without alteration or enlargement and must be guaranteed by a bank or by a firm having membership on a registered national securities exchange in the United States. -9- 10 EXHIBIT B FORM OF ASSIGNMENT FOR VALUE RECEIVED __________________________ hereby sells, assigns, and transfers unto __________________, of _________________, the right to purchase ___________ shares (subject to adjustment as provided herein) evidenced by the within Warrant, and hereby irrevocably constitutes and appoints __________________ to transfer such right on the books of the Company, with full power of substitution. Date: _______________, 19____ Name: ---------------------------- By: ------------------------------ Title: --------------------------- Date: ---------------------------- - --------------------------------- NOTICE: The name and signature on this assignment must correspond with the name as written upon the face of the within Warrant, or upon any assignment form duly executed pursuant to the terms of the within Warrant, in every particular, without alteration or enlargement and must be guaranteed by a bank, or by a firm having membership on a registered national securities exchange in the United States. -10- EX-4.4 15 STOCK PURCHASE WARRANT - CHARLES ECKERT 1 EXHIBIT 4.4 NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK FOR WHICH IT IS EXERCISABLE, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION STOCK PURCHASE WARRANT This is to certify that, the Initial Holder (as defined below) or any successor Holder is entitled upon the due exercise hereof to purchase from CytRx Corporation, a Delaware Corporation (the "Company") up to 500 of the authorized but unissued shares (subject to adjustment as provided herein) of the $.001 par value Common Stock of the Company at a price per share as specified in Section 2 of this Warrant (subject to adjustment as provided herein) and to exercise the other rights, power and privileges hereinafter provided, all on the terms and subject to the conditions specified herein. SECTION 1. Certain Definitions. Unless the context otherwise requires, the following terms as used in this Warrant shall have the following meanings: "Affiliate" shall mean any partnership or corporation controlled by or under common control with the Initial Holder. "Common Stock" shall mean the Company's $.001 par value per share Common Stock or any stock into which such stock shall have been changed or any stock resulting from reclassification of such stock. "Company" shall mean CytRx Corporation, a Delaware corporation, and its successors and assigns. 2 "Exercise Date" has the meaning set forth in Section 3 hereof. "Exercise Price" shall mean the price specified in Section 2 hereof, as the same shall be adjusted from time to time pursuant to the provisions of this Warrant. "Fair Market Value" shall mean (i) the last sales price for a share of Common Stock as officially reported on the principal national securities exchange or domestic over-the-counter market on which the Common Stock is at the time listed or traded at the time of determination of such Fair Market Value or (ii) if such Common Stock is not at such time listed on a national securities exchange or quoted in the domestic over-the-counter market, the fair market value as determined by the Board of Directors of the Company in good faith after review of all relevant factors. "Holder" or "Warrant Holder" shall mean the Initial Holder and his successors and registered assigns of this Warrant. "Initial Holder" shall mean Charles N. Eckert, his successors and affiliates. "Subscription Agreement" shall mean that certain Private Securities Subscription Agreement dated as of October 22, 1997 relating to the purchase of certain debentures convertible into shares of Common Stock as the same may be amended and modified from time to time, and "Debenture" shall mean any of the debentures issued thereunder. "Warrant" means this Warrant dated as of October 22, 1997 issued to Initial Holder hereby and all warrants issued upon the transfer or division of or in substitution for such Warrant. SECTION 2. Exercise Price. The Exercise Price per share shall be $5.68 per share of the Common Stock. The Exercise Price shall be paid in cash. SECTION 3. Exercise. Prior to the later of the second anniversary of the date hereof (the "Expiration Date"), this Warrant may be exercised by the Holder, as to all or less than all of the shares of Common Stock covered hereby, by surrender of this Warrant at the Company's principal office (for all purposes of this Warrant, 154 Technology Parkway, Norcross, Georgia 30092 or such other address as the Company may advise the registered Holder hereof by notice given by certified or registered mail) with the form of election to subscribe attached hereto as Exhibit A duly executed and upon tender of payment to the Company of the Exercise Price for shares so purchased in cash or by check. Upon the date of such receipt by the Company (herein called the "Exercise Date"), this Warrant shall be deemed to have been exercised and the person exercising the same shall become a holder of record of shares of Common Stock (or of the other securities or property to which he or it is entitled upon such exercise) purchased hereunder for all purposes, and certificates for such shares so purchased shall be delivered to the Holder or -2- 3 its transferee within a reasonable time (not exceeding 10 days) after this Warrant shall have been exercised as set forth hereinabove. In the event that this Warrant is exercised in part, the Company will execute and deliver a new Warrant of like tenor exerciseable for the number of shares for which this Warrant may then be exercised. If this Warrant is not exercised on or prior to the Expiration Date, this Warrant shall become void and all rights of the Holder hereunder shall cease. SECTION 4. Taxes. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to the issue or delivery of the shares of Common Stock covered hereby unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock issuable upon exercise of this Warrant in any name other than that of the Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or the charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. SECTION 5. Warrant Register. The Company shall at all times while any portion of this Warrant remains outstanding and exercisable keep and maintain at its principal office a register (the "Warrant Register") in which the registration, transfer and exchange of this Warrant shall be recorded. The Warrant Register shall contain the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. The Company shall not at any time, except upon the dissolution, liquidation or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. If at any time, the Company shall appoint an agent (the "Warrant Agent") to maintain such register, the Company shall promptly give notice by certified or registered mail to the registered Holder hereof of the name of such Warrant Agent and of the place or places at which this Warrant may be presented for transfer, exchange or exercise. The terms of the agreement between the Company and any Warrant Agent at any time in effect will be in conformity with the terms of this Warrant. SECTION 6. Transfer. The Company shall register the transfer of any Warrant upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the form of transfer authorization attached hereto as Exhibit B duly filled in and signed, to the Company at the office specified herein. Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Warrant rights so transferred, shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Warrant rights not so transferred, if any, shall be issued to the then registered Holder thereof. The Holder understands that this Warrant has not been and will not be registered under the Securities Act of 1933, as amended (the "Securities -3- 4 Act") and that the Warrant and the shares of Common Stock issuable upon exercise hereof may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of in the absence of an effective registration statement under the Securities Act, relating to such Warrant or shares; provided, however that this Warrant and the shares of Common Stock issuable upon exercise hereof may be sold, assigned, transferred, pledged or otherwise encumbered or disposed of if the holder obtains a written opinion of counsel acceptable to the Company to the effect that the proposed sale, assignment, transfer, pledge or other encumbrance or disposition is exempt from registration under the Securities Act. SECTION 7. Exchange. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal offices of the Company, together with the form of transfer authorization attached hereto duly executed, for new warrants of like tenor and date, in such denominations as the Holder shall designate at the time of surrender for exchange, representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder. SECTION 8. Covenants of the Company. (a) The Company covenants and agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, free from preemptive rights, and free from all taxes, liens, encumbrances and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise in full of the rights represented by this Warrant. (b) As long as the Warrant remains outstanding, the Company shall maintain an office or agency (which may be the principal executive office of the Company) where the Warrant may be presented for exercise, registration of transfer, exchange, division or combination as provided in this Warrant. SECTION 9. Adjustments for Stock Splits and Subdivisions. (a) In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend -4- 5 distribution, split or subdivision if no record date is fixed), the Exercise Price of this Warrant shall be appropriately decreased so that the number of shares of Common Stock issuable upon exercise of this Warrant shall be. increased in proportion to such increase of outstanding shares. (b) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Exercise Price for this Warrant shall be appropriately increased so that the number of shares of Common Stock issuable on exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 10. Holder's Rights. This Warrant shall not entitle the Holder to any rights of a stockholder of the Company, except that should the Company, during the period in which this Warrant is exercisable, declare a dividend upon the Common Stock payable other than in cash out of earnings or surplus (computed in accordance with generally accepted accounting principles consistently applied) or other than in Common Stock or securities convertible into Common Stock, then, thereafter, the Warrant Holder, upon exercise of this Warrant, shall receive the number of shares of Common Stock purchasable upon such exercise and, in addition and without further payment, the cash, stock or other securities and/or other property which the Warrant Holder would have received by way of dividends (otherwise than in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or any other distributions in respect of the Common Stock as if, continuously since the date hereof, such Warrant Holder (a) had been the record holder of the number of shares of Common Stock then being purchased, and (b) had retained all such cash, stock and other securities (other than dividends in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or other property payable in respect of such Common Stock or in respect of any stock or securities paid as dividends and originating directly or indirectly from such Common Stock. SECTION 11. Notice of Adjustments. If there shall be any adjustment as provided in Section 9, the Company shall forthwith cause written notice thereof to be sent by facsimile, overnight or registered mail, postage prepaid, to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company. At the request of Holder and upon surrender of this Warrant, the Company shall reissue this Warrant in a form conforming to such adjustments. SECTION 12. Cash in Lieu of Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of this Warrant. If, by reason of any change made pursuant to Section 9 or 10 hereof, the Holder of this Warrant would be entitled, upon the exercise of any rights evidenced hereby, to receive a fractional interest in a share, the Company shall, upon such exercise, purchase such fractional interest for an amount in cash equal to the fair market value of such fractional interest, determined as of the Exercise Date. -5- 6 SECTION 13. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant shall be mutilated, lost, stolen or destroyed, upon request by the registered Holder of the Warrant, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, of like tenor and representing the right to purchase the equivalent number of the remaining shares of Common Stock issuable upon exercise hereof, but, in the case of loss, theft or destruction, only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, an indemnification also satisfactory to it (it being understood that the written agreement of the initial Holder shall be sufficient indemnity), provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. SECTION 14. Challenge to Good Faith Determination. Whenever the Board shall be required to make a determination in good faith of the fair value of any item under Section 9, such determination may be challenged in good faith by the Holder, and any dispute shall be resolved by an investment banking firm of recognized national standing in the United States selected by the Company and acceptable to the Holder. SECTION 15. Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Exercise Price to be less than the par value per share of Common Stock. SECTION 16. Amendments. Any term of this Warrant may be amended with the written consent of the Company and the holders of warrants representing more than fifty percent (50%) of the outstanding warrants issued pursuant to the Subscription Agreement, even without the consent of the Holder. Any amendment effected in accordance with this Section 16 shall be binding upon each holder or any the warrants issued pursuant to the Subscription Agreement, each future holder of such warrants, and the Company; provided, however, that no special consideration or inducement may be give to any such holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to all such holders equally and ratably in accordance with the number of shares of Common Stock issuable upon exercise of their warrants. The Company shall promptly give notice to all holders of warrants issued pursuant to the Subscription Agreement of any amendment effected in accordance with this Section 16. No waivers of, or exceptions to, any term, condition, or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition, or provision. SECTION 17. No Impairment. The Company represents and warrants that there are no restrictions in the Company's Certificate of Incorporation or Bylaws which prevent it from satisfying its obligation to issue the shares of Common Stock issuable upon exercise of the Warrant. The Company shall not by any action including, without -6- 7 limitation, amending its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. SECTION 18. Applicable Law; Payments. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Delaware. All payments shall be in U.S. Dollars by immediately available funds. SECTION 19. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Holder. SECTION 20. Headings. Headings of the paragraphs in this Warrant are for convenience and reference only and shall not, for any purpose, be deemed a part of this Warrant. SECTION 21. Arbitration. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. -7- 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed under seal by its duly authorized officer this 22 day of October, 1997. CYTRX CORPORATION By: -------------------------------- Name: ------------------------------ Title: ----------------------------- CHARLES N. ECKERT - ------------------------- -8- 9 EXHIBIT A FORM OF SUBSCRIPTION The undersigned, registered holder or assignee of such registered holder of the within Warrant, hereby (1) subscribes for _________________ shares (subject to adjustment as provided herein) which the undersigned is entitled to purchase under the terms of the within Warrant, (2) makes the full cash payment called for by the within Warrant, and (3) directs that the shares issuable upon exercise of said Warrant be issued as follows: Name: ------------------------------- By: --------------------------------- Title: ------------------------------ Date: ----------------------------- - ---------------------------------- NOTICE: The name and signature on this subscription form must correspond with the name as written upon the face of the within Warrant, or upon the assignment form on the reverse thereof, in every particular, without alteration or enlargement and must be guaranteed by a bank or by a firm having membership on a registered national securities exchange in the United States. -9- 10 EXHIBIT B FORM OF ASSIGNMENT FOR VALUE RECEIVED __________________________ hereby sells, assigns, and transfers unto __________________, of _________________, the right to purchase ___________ shares (subject to adjustment as provided herein) evidenced by the within Warrant, and hereby irrevocably constitutes and appoints __________________ to transfer such right on the books of the Company, with full power of substitution. Date:________________, 19___ Name: ---------------------------------- By: ------------------------------------ Title: --------------------------------- Date: ----------------------------- - ---------------------------------- NOTICE: The name and signature on this assignment must correspond with the name as written upon the face of the within Warrant, or upon any assignment form duly executed pursuant to the terms of the within Warrant, in every particular, without alteration or enlargement and must be guaranteed by a bank, or by a firm having membership on a registered national securities exchange in the United States. -10- EX-4.5 16 STOCK PURCHASE WARRANT - DAVID KOSLOFF 1 EXHIBIT 4.5 NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK FOR WHICH IT IS EXERCISABLE, HAVE BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE SECURITIES LAWS OF THE STATE OF DELAWARE, OR OTHER APPLICABLE SECURITIES LAWS AND THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH LAWS FOR TRANSACTIONS NOT INVOLVING ANY PUBLIC OFFERING INCLUDING, BUT NOT LIMITED TO, SECTION 7309(B)(8) OF THE DELAWARE SECURITIES ACT. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED, PLEDGED OR DISPOSED OF IN ANY MANNER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS COVERING SUCH TRANSACTION OR, IN THE ABSENCE THEREOF, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND ALL CONDITIONS NECESSARY FOR THE AVAILABILITY OF ANY EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS HAVE BEEN SATISFIED. CYTRX CORPORATION STOCK PURCHASE WARRANT This is to certify that, the Initial Holder (as defined below) or any successor Holder is entitled upon the due exercise hereof to purchase from CytRx Corporation, a Delaware Corporation (the "Company") up to 500 of the authorized but unissued shares (subject to adjustment as provided herein) of the $.001 par value Common Stock of the Company at a price per share as specified in Section 2 of this Warrant (subject to adjustment as provided herein) and to exercise the other rights, power and privileges hereinafter provided, all on the terms and subject to the conditions specified herein. SECTION 1. Certain Definitions. Unless the context otherwise requires, the following terms as used in this Warrant shall have the following meanings: "Affiliate" shall mean any partnership or corporation controlled by or under common control with the Initial Holder. "Common Stock" shall mean the Company's $.001 par value per share Common Stock or any stock into which such stock shall have been changed or any stock resulting from reclassification of such stock. "Company" shall mean CytRx Corporation, a Delaware corporation, and its successors and assigns. 2 "Exercise Date" has the meaning set forth in Section 3 hereof. "Exercise Price" shall mean the price specified in Section 2 hereof, as the same shall be adjusted from time to time pursuant to the provisions of this Warrant. "Fair Market Value" shall mean (i) the last sales price for a share of Common Stock as officially reported on the principal national securities exchange or domestic over-the-counter market on which the Common Stock is at the time listed or traded at the time of determination of such Fair Market Value or (ii) if such Common Stock is not at such time listed on a national securities exchange or quoted in the domestic over-the-counter market, the fair market value as determined by the Board of Directors of the Company in good faith after review of all relevant factors. "Holder" or "Warrant Holder" shall mean the Initial Holder and his successors and registered assigns of this Warrant. "Initial Holder" shall mean David Roskoff, his successors and affiliates. "Subscription Agreement" shall mean that certain Private Securities Subscription Agreement dated as of October 22, 1997 relating to the purchase of certain debentures convertible into shares of Common Stock as the same may be amended and modified from time to time, and "Debenture" shall mean any of the debentures issued thereunder. "Warrant" means this Warrant dated as of October 22, 1997 issued to Initial Holder hereby and all warrants issued upon the transfer or division of or in substitution for such Warrant. SECTION 2. Exercise Price. The Exercise Price per share shall be $5.68 per share of the Common Stock. The Exercise Price shall be paid in cash. SECTION 3. Exercise. Prior to the later of the second anniversary of the date hereof (the "Expiration Date"), this Warrant may be exercised by the Holder, as to all or less than all of the shares of Common Stock covered hereby, by surrender of this Warrant at the Company's principal office (for all purposes of this Warrant, 154 Technology Parkway, Norcross, Georgia 30092 or such other address as the Company may advise the registered Holder hereof by notice given by certified or registered mail) with the form of election to subscribe attached hereto as Exhibit A duly executed and upon tender of payment to the Company of the Exercise Price for shares so purchased in cash or by check. Upon the date of such receipt by the Company (herein called the "Exercise Date"), this Warrant shall be deemed to have been exercised and the person exercising the same shall become a holder of record of shares of Common Stock (or of the other securities or property to which he or it is entitled upon such exercise) purchased hereunder for all purposes, and certificates for such shares so purchased shall be delivered to the Holder or -2- 3 its transferee within a reasonable time (not exceeding 10 days) after this Warrant shall have been exercised as set forth hereinabove. In the event that this Warrant is exercised in part, the Company will execute and deliver a new Warrant of like tenor exerciseable for the number of shares for which this Warrant may then be exercised. If this Warrant is not exercised on or prior to the Expiration Date, this Warrant shall become void and all rights of the Holder hereunder shall cease. SECTION 4. Taxes. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to the issue or delivery of the shares of Common Stock covered hereby unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock issuable upon exercise of this Warrant in any name other than that of the Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or the charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. SECTION 5. Warrant Register. The Company shall at all times while any portion of this Warrant remains outstanding and exercisable keep and maintain at its principal office a register (the "Warrant Register") in which the registration, transfer and exchange of this Warrant shall be recorded. The Warrant Register shall contain the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. The Company shall not at any time, except upon the dissolution, liquidation or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. If at any time, the Company shall appoint an agent (the "Warrant Agent") to maintain such register, the Company shall promptly give notice by certified or registered mail to the registered Holder hereof of the name of such Warrant Agent and of the place or places at which this Warrant may be presented for transfer, exchange or exercise. The terms of the agreement between the Company and any Warrant Agent at any time in effect will be in conformity with the terms of this Warrant. SECTION 6. Transfer. The Company shall register the transfer of any Warrant upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the form of transfer authorization attached hereto as Exhibit B duly filled in and signed, to the Company at the office specified herein. Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Warrant rights so transferred, shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Warrant rights not so transferred, if any, shall be issued to the then registered Holder thereof. The Holder understands that this Warrant has not been and will not be registered under the Securities Act of 1933, as amended (the "Securities -3- 4 Act") and that the Warrant and the shares of Common Stock issuable upon exercise hereof may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of in the absence of an effective registration statement under the Securities Act, relating to such Warrant or shares; provided, however that this Warrant and the shares of Common Stock issuable upon exercise hereof may be sold, assigned, transferred, pledged or otherwise encumbered or disposed of if the holder obtains a written opinion of counsel acceptable to the Company to the effect that the proposed sale, assignment, transfer, pledge or other encumbrance or disposition is exempt from registration under the Securities Act. SECTION 7. Exchange. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal offices of the Company, together with the form of transfer authorization attached hereto duly executed, for new warrants of like tenor and date, in such denominations as the Holder shall designate at the time of surrender for exchange, representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder. SECTION 8. Covenants of the Company. (a) The Company covenants and agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, free from preemptive rights, and free from all taxes, liens, encumbrances and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise in full of the rights represented by this Warrant. (b) As long as the Warrant remains outstanding, the Company shall maintain an office or agency (which may be the principal executive office of the Company) where the Warrant may be presented for exercise, registration of transfer, exchange, division or combination as provided in this Warrant. SECTION 9. Adjustments for Stock Splits and Subdivisions. (a) In the event the Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend -4- 5 distribution, split or subdivision if no record date is fixed), the Exercise Price of this Warrant shall be appropriately decreased so that the number of shares of Common Stock issuable upon exercise of this Warrant shall be. increased in proportion to such increase of outstanding shares. (b) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Exercise Price for this Warrant shall be appropriately increased so that the number of shares of Common Stock issuable on exercise hereof shall be decreased in proportion to such decrease in outstanding shares. SECTION 10. Holder's Rights. This Warrant shall not entitle the Holder to any rights of a stockholder of the Company, except that should the Company, during the period in which this Warrant is exercisable, declare a dividend upon the Common Stock payable other than in cash out of earnings or surplus (computed in accordance with generally accepted accounting principles consistently applied) or other than in Common Stock or securities convertible into Common Stock, then, thereafter, the Warrant Holder, upon exercise of this Warrant, shall receive the number of shares of Common Stock purchasable upon such exercise and, in addition and without further payment, the cash, stock or other securities and/or other property which the Warrant Holder would have received by way of dividends (otherwise than in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or any other distributions in respect of the Common Stock as if, continuously since the date hereof, such Warrant Holder (a) had been the record holder of the number of shares of Common Stock then being purchased, and (b) had retained all such cash, stock and other securities (other than dividends in cash out of earnings or earned surplus or in Common Stock or securities convertible into Common Stock) and/or other property payable in respect of such Common Stock or in respect of any stock or securities paid as dividends and originating directly or indirectly from such Common Stock. SECTION 11. Notice of Adjustments. If there shall be any adjustment as provided in Section 9, the Company shall forthwith cause written notice thereof to be sent by facsimile, overnight or registered mail, postage prepaid, to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company. At the request of Holder and upon surrender of this Warrant, the Company shall reissue this Warrant in a form conforming to such adjustments. SECTION 12. Cash in Lieu of Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of this Warrant. If, by reason of any change made pursuant to Section 9 or 10 hereof, the Holder of this Warrant would be entitled, upon the exercise of any rights evidenced hereby, to receive a fractional interest in a share, the Company shall, upon such exercise, purchase such fractional interest for an amount in cash equal to the fair market value of such fractional interest, determined as of the Exercise Date. -5- 6 SECTION 13. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant shall be mutilated, lost, stolen or destroyed, upon request by the registered Holder of the Warrant, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, of like tenor and representing the right to purchase the equivalent number of the remaining shares of Common Stock issuable upon exercise hereof, but, in the case of loss, theft or destruction, only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, an indemnification also satisfactory to it (it being understood that the written agreement of the initial Holder shall be sufficient indemnity), provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. SECTION 14. Challenge to Good Faith Determination. Whenever the Board shall be required to make a determination in good faith of the fair value of any item under Section 9, such determination may be challenged in good faith by the Holder, and any dispute shall be resolved by an investment banking firm of recognized national standing in the United States selected by the Company and acceptable to the Holder. SECTION 15. Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Exercise Price to be less than the par value per share of Common Stock. SECTION 16. Amendments. Any term of this Warrant may be amended with the written consent of the Company and the holders of warrants representing more than fifty percent (50%) of the outstanding warrants issued pursuant to the Subscription Agreement, even without the consent of the Holder. Any amendment effected in accordance with this Section 16 shall be binding upon each holder or any the warrants issued pursuant to the Subscription Agreement, each future holder of such warrants, and the Company; provided, however, that no special consideration or inducement may be give to any such holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to all such holders equally and ratably in accordance with the number of shares of Common Stock issuable upon exercise of their warrants. The Company shall promptly give notice to all holders of warrants issued pursuant to the Subscription Agreement of any amendment effected in accordance with this Section 16. No waivers of, or exceptions to, any term, condition, or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition, or provision. SECTION 17. No Impairment. The Company represents and warrants that there are no restrictions in the Company's Certificate of Incorporation or Bylaws which prevent it from satisfying its obligation to issue the shares of Common Stock issuable upon exercise of the Warrant. The Company shall not by any action including, without -6- 7 limitation, amending its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. SECTION 18. Applicable Law; Payments. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Delaware. All payments shall be in U.S. Dollars by immediately available funds. SECTION 19. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Holder. SECTION 20. Headings. Headings of the paragraphs in this Warrant are for convenience and reference only and shall not, for any purpose, be deemed a part of this Warrant. SECTION 21. Arbitration. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Holder in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Holder and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Holder in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Holder as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. -7- 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed under seal by its duly authorized officer this 22 day of October, 1997. CYTRX CORPORATION By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- DAVID KOSLOFF - ----------------------- -8- 9 EXHIBIT A FORM OF SUBSCRIPTION The undersigned, registered holder or assignee of such registered holder of the within Warrant, hereby (1) subscribes for _________________ shares (subject to adjustment as provided herein) which the undersigned is entitled to purchase under the terms of the within Warrant, (2) makes the full cash payment called for by the within Warrant, and (3) directs that the shares issuable upon exercise of said Warrant be issued as follows: Name: --------------------------------- By: ----------------------------------- Title: -------------------------------- Date: --------------------------- - -------------------------------- NOTICE: The name and signature on this subscription form must correspond with the name as written upon the face of the within Warrant, or upon the assignment form on the reverse thereof, in every particular, without alteration or enlargement and must be guaranteed by a bank or by a firm having membership on a registered national securities exchange in the United States. -9- 10 EXHIBIT B FORM OF ASSIGNMENT FOR VALUE RECEIVED __________________________ hereby sells, assigns, and transfers unto __________________, of _________________, the right to purchase ___________ shares (subject to adjustment as provided herein) evidenced by the within Warrant, and hereby irrevocably constitutes and appoints __________________ to transfer such right on the books of the Company, with full power of substitution. Date:________________, 19___ Name: --------------------------------- By: ----------------------------------- Title: --------------------------------- Date: ----------------------------- - ---------------------------------- NOTICE: The name and signature on this assignment must correspond with the name as written upon the face of the within Warrant, or upon any assignment form duly executed pursuant to the terms of the within Warrant, in every particular, without alteration or enlargement and must be guaranteed by a bank, or by a firm having membership on a registered national securities exchange in the United States. -10- EX-5.1 17 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 5.1 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of October 22, 1997, by and among CytRx Corporation, a Delaware corporation (the "Company"), and GUNDYCO in trust for R.R.S.P. 550-98866-19, Excalibur Limited Partnership, Pine Street Asset Management, Charles N. Eckert and David Kosloff (each, an "Investor" and collectively, the "Investors"). BACKGROUND A. Pursuant to the terms of a Private Securities Subscription Agreement, dated as of October 22, 1997 (as the same may be amended, the "Subscription Agreement"), by and among the Company and the Investors, the Investors shall purchase the $2,000,000 aggregate principal amount of 6% Convertible Debentures Due _____________ of the Company (together with up to $2,000,000 additional principal amount of such Debentures, if and to the extent the Company exercises its option to issue such additional amounts of such Convertible Debentures, the "Debentures"), which may be converted into shares of the $.001 par value per share common stock of the Company (the "Common Stock"). B. Pursuant to the Subscription Agreement, the Investors shall acquire warrants to purchase up to _________ shares of the Common Stock (the "Warrants"). C. The Company has agreed to issue to Shipley, Raidy Capital Partners, L.P. (the "Placement Agent") 3,000 shares of the Common Stock as a placement fee in accordance with the engagement letter dated September 30, 1997, between the Company and the Placement Agent (the "Engagement Letter"). D. The Company has agreed, as a condition precedent to Investor's obligations under the Subscription Agreement, to grant the Investors certain registration rights. E. The Company and the Investors desire to define such registration rights on the terms and subject to the conditions herein set forth. AGREEMENT In consideration of the foregoing premises and for other good and valuable consideration, the parties hereby agree as follows: 1. DEFINITIONS As used in this Agreement, the following terms have the respective meanings set forth below: 2 Commission: shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act; Effective Date: shall mean the Closing Date, as defined by the Subscription Agreement; Exchange Act: shall mean the Securities Exchange Act of 1934, as amended; Holder: shall mean any holder of Registrable Securities; Initiating Holder: shall mean any Holder or Holders who in the aggregate are Holders of more than 50% of the then outstanding Registrable Securities; Person: shall mean an individual, partnership, joint stock company, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof; register, registered and registration: shall mean a registration effected by preparing and filing a registration statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement; Registrable Securities: shall mean (A) the shares of Common Stock into which the Debentures are convertible, or for which the Warrants are exercisable, (B) any securities of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares of Common Stock referred to in clause (A), and (C) the shares of Common Stock issued to the Placement Agent pursuant to the Engagement Letter; provided, that Registrable Securities shall not include (i) securities with respect to which a registration statement with respect to the sale of such securities has become effective under the Securities Act and all such securities have been disposed of in accordance with such registration statement, (ii) such securities as may be sold pursuant to Rule 144 (or any successor provision thereto) under the Securities Act ("Rule 144"), (iii) such securities as are acquired by the Company or any of its subsidiaries or (iv) Common Stock into which Debentures are convertible or for which Warrants are exercisable, if such Debentures have not been converted or such Warrants exercised, and such Debentures or Warrants cease to be outstanding; Registration Expenses: shall mean all expenses incurred by the Company in compliance with Sections 3(a), (b) and (c) hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, fees and expenses of one counsel for all the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company); Security, Securities: shall have the meaning set forth in Section 2(1) of the Securities Act; Securities Act: shall mean the Securities Act of 1933, as amended; and -2- 3 Selling Expenses: shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for each of the Holders other than fees and expenses of one counsel for all the Holders. 2. SHELF REGISTRATION (a) Within 15 days after the Effective Date, the Company shall file a "shelf" registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration") with respect to the Registrable Securities to be issued under the Subscription Agreement. The Shelf Registrations shall be on Form S-3 under the Securities Act or such other appropriate form selected by the Company which allows resales of Registrable Securities. The Company shall, subject to Section 2(h) hereof, use its reasonable best efforts to cause the Shelf Registration to become effective as soon as practicable after the filing thereof, and shall use its reasonable best efforts to keep the Shelf Registration continuously effective from the date such Shelf Registration is effective until the earlier to occur of (i) the second anniversary of the Effective Date, or (ii) the date on which all Registrable Securities may be sold pursuant to Rule 144(k), in order to permit the prospectus forming a part thereof to be usable by Holders during such period. The Shelf Registration may include securities of the Company other than Registrable Securities. If the Shelf Registration is not declared effective by the Commission on or before the 90th day after the Effective Date, then the Company shall accrue to each Investor, as liquidated damages, an amount equal to one percent (1%) of the principal amount of the Debentures then held by such Investor for each thirty (30) days thereafter until the Shelf Registration is declared effective by the Commission. The Company shall pay the liquidated damages on the first day after they accrue (i.e., the ninety-first (91st) day and the thirty-first (31st) day thereafter). (b) Subject to Section 2(i) hereof, the Company shall supplement or amend the Shelf Registration, (i) as required by the registration form utilized by the Company or by the instructions applicable to such registration form or by the Securities Act or the rules and regulations promulgated thereunder, (ii) to include in such Shelf Registration any additional securities that become Registrable Securities by operation of the definition thereof, and (iii) following the written request of an Initiating Holder pursuant to Section 2(c) below, to cover offers and sales of all or a part of the Registrable Securities by means of an underwriting including the incorporation of any information required pursuant to Section 2(e)(ix) below. The Company shall furnish to the Holders of the Registrable Securities to which the Shelf Registration relates copies of any such supplement or amendment sufficiently in advance (but in no event less than five business days in advance) of its use and/or filing with the Commission to allow the Holders a meaningful opportunity to comment thereon. (c) The Holders may, at their election and upon written notice by the Initiating Holders to the Company, effect offers and sales under the Shelf Registration by means of one or more underwritten offerings. If the Holders intend to distribute the Registrable Securities by means of an underwriting, they shall so advise the Company. An underwritten registration under this Section 2(c) may include other Securities of the Company held by Persons who, by virtue of agreements with the Company, are entitled to include their Securities in any such registration -3- 4 ("Other Stockholders"). If Other Stockholders request inclusion in any such registration, the Holders shall offer to include the Securities of such Other Stockholders in the underwriting and may condition such offer on their acceptance of the further applicable provisions of this Section 2. The Holders whose shares are to be included in such registration and the Company shall (together with all Other Stockholders proposing to distribute their securities through such underwriting) enter into underwriting and related agreements in customary form with the representative of the underwriter or underwriters selected for such underwriting by the Company and reasonably acceptable to the Initiating Holders. Such underwriting agreement will contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnities and contribution to the effect and to the extent provided in Section 2(f) hereof and the provision of opinions of counsel and accountants' letters to the effect and to the extent provided in Section 2(e) hereof, and the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of the Holders. The Company shall cooperate fully with the Holders and the underwriters in connection with any underwritten offering. Notwithstanding any other provision of this Section 2(c), if the representative advises the Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, the Securities of the Company held by Other Stockholders shall be excluded from such registration to the extend so required by such limitation. If, after the exclusion of such shares, still further reductions are required, the number of shares included in the registration by each Holder shall be reduced on a pro rata basis (based on the number of shares held by such Holder), by such minimum number of shares as is necessary to comply with such request. No Registrable Securities or any other securities excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. If any Other Stockholder who has requested inclusion in such registration as provided above disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the underwriter and the Initiating Holders. The securities so withdrawn shall also be withdrawn from registration. If the underwriter has not limited the number of Registrable Securities or other securities to be underwritten, the Company and officers and directors of the Company may include its or their securities for its or their own account in such registration if the representative so agrees and if the number of Registrable Securities and other securities which would otherwise have been included in such registration and underwriting will not thereby be limited. (d) Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Section 2 shall be borne by the Company, and all Selling Expenses shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered. (e) Registration Procedures. In the case of each registration effected by the Company pursuant to this Section 2, the Company will keep the Holders, as applicable, advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will: -4- 5 (i) furnish to each Holder, and to any underwriter before filing with the Commission, copies of any registration statement (including all exhibits) and any prospectus forming a part thereof and any amendments and supplements thereto (including all documents incorporated or deemed incorporated by reference therein prior to the effectiveness of such registration statement and including each preliminary prospectus, any summary prospectus or any term sheet (as such term is used in Rule 434 under the Securities Act)) and any other prospectus filed under Rule 424 under the Securities Act, which documents, other than documents incorporated or deemed incorporated by reference, will be subject to the review of the Holders and any such underwriter for a period of at least five business days, and the Company shall not file any such registration statement or such prospectus or any amendment or supplement to such registration statement or prospectus to which any Holder or any such underwriter shall reasonably object within five business days after the receipt thereof; a Holder or such underwriters, if any, shall be deemed to have reasonably objected to such filing only if the registration statement, amendment, prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (ii) furnish to each Holder and to any underwriter, such number of conformed copies of the applicable registration statement and of each amendment and supplement thereto (in each case including all exhibits) and such number of copies of the prospectus forming a part of such registration statement (including each preliminary prospectus, any summary prospectus or any term sheet (as such term is used in Rule 434 under the Securities Act)) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, including without limitation documents incorporated or deemed to be incorporated by reference prior to the effectiveness of such registration, as each of the Holders or any such underwriter, from time to time may reasonably request; (iii) to the extent practicable, promptly prior to the filing of any document that is to be incorporated by reference into any registration statement or prospectus forming a part thereof subsequent to the effectiveness thereof, and in any event no later than the date such document is filed with the Commission, provide copies of such document to the Holders, if requested, and to any underwriter, and make representatives of the Company available for discussion of such document and other customary due diligence matters, and include in such document prior to the filing thereof such information as any Holder or any such underwriter reasonably may request; (iv) make available at reasonable times for inspection by the Holders, any underwriter participating in any disposition pursuant to such registration and any attorney or accountant retained by the Holders or any such underwriter, all financial and other records, pertinent corporate documents and properties of the Company and cause the officers, directors and employees of the Company to supply all information reasonably requested by the Holders and any such underwriters, attorneys or accountants in connection with such registration subsequent to the filing of the applicable registration statement and prior to the effectiveness of the applicable registration statement; -5- 6 (v) use its reasonable best efforts (x) to register or qualify all Registrable Securities and other securities covered by such registration under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as the sellers of Registrable Securities covered by such registration shall reasonably request, (y) to keep such registration or qualification in effect for so long as the applicable registration statement remains in effect, and (z) to take any other action which may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder; (vi) use its reasonable best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the Holders of Registrable Securities to enable the Holders thereof to consummate the disposition of such Registrable Securities; (vii) subject to Section 2(h) hereof, promptly notify each Holder of Registrable Securities covered by a registration statement (A) upon discovery that, or upon the happening of any event as a result of which, the prospectus forming a part of such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (B) of the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or the initiation of proceedings for that purpose, (C) of any request by the Commission for (1) amendments to such registration statement or any document incorporated or deemed to be incorporated by reference in any such registration statement, (2) supplements to the prospectus forming a part of such registration statement or (3) additional information, or (D) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, and at the request of any such Holder promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (viii) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any such registration, or the lifting of any suspension of the -6- 7 qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction; (ix) if requested by the Initiating Holders, or any underwriter, promptly incorporate in such registration statement or prospectus, pursuant to a supplement or post effective amendment if necessary, such information as the Initiating Holders and any underwriter may reasonably request to have included therein, including, without limitation, information relating to the "plan of distribution" of the Registrable Securities, information with respect to the principal amount or number of shares of Registrable Securities being sold to such underwriter, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering and make all required filings of any such prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such prospectus supplement or post effective amendment; (x) furnish to the Holders, addressed to them, an opinion of counsel for the Company, dated the date of the closing under the underwriting agreement, if any, or the date of effectiveness of the registration statement if such registration is not an underwritten offering, and use its reasonable best efforts to furnish to the Holders, addressed to them, a "cold comfort" letter signed by the independent certified public accountants who have certified the Company's financial statements included in such registration, covering substantially the same matters with respect to such registration (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities and such other matters as the Holders may reasonably request; (xi) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder; (xii) provide promptly to the Holders upon request any document filed by the Company with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act; and (xiii) use its reasonable best efforts to cause all Registrable Securities included in any registration pursuant hereto to be listed on each securities exchange on which securities of the same class are then listed, or, if not then listed on any securities exchange, to be eligible for trading in any over-the-counter market or trading system in which securities of the same class are then traded. -7- 8 (f) Indemnification. (i) The Company will indemnify each of the Holders, as applicable, each of its officers, directors, members and partners, and each person controlling each of the Holders, with respect to each registration which has been effected pursuant to this Section 2, and each underwriter, if any, and each person who controls any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or the Exchange Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each of the Holders, each of its officers, directors, members and partners, and each person controlling each of the Holders, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by the Holders or underwriter and stated to be specifically for use therein. (ii) Each of the Holders will, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and each underwriter, if any, of the Company's securities covered by such a registration statement and each person who controls the Company or such underwriter, each Other Stockholder and each of their officers, directors, members and partners, and each person controlling such Other Stockholder against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document made by such Holder, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such Holder therein not misleading, and will reimburse the Company and such Other Stockholders, directors, officers, partners, members, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein; provided, however, that the obligations of each of the Holders hereunder and under clause (vi) below shall be limited to an amount equal to the net proceeds to such Holder of securities sold as contemplated herein. -8- 9 (iii) Each party entitled to indemnification under this Section 2(f) (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at such party's expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of one such counsel for all Indemnified Parties shall be at the expense of the Indemnifying Party), and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2 unless the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. (iv) If the indemnification provided for in this Section 2(f) is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (v) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with any underwritten public offering contemplated by this Agreement are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall be controlling. (vi) The foregoing indemnity agreement of the Company and Holders is subject to the condition that, insofar as they relate to any loss, claim, liability or damage made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the -9- 10 Commission at the time the registration statement in question becomes effective or the amended prospectus filed with the Commission pursuant to Commission Rule 424(b) (the "Final Prospectus"), such indemnity or contribution agreement shall not inure to the benefit of any underwriter or Holder (but only if such Holder was required to deliver such Final Prospectus) if a copy of the Final Prospectus was furnished to the underwriter and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. (g) Information by the Holders. Each of the Holders holding securities included in any registration shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section 2. (h) Holdback Agreement; Postponement. Notwithstanding the provisions of Sections 3(a), (b) and (c), if the Board of Directors of the Company determines in good faith that it is in the best interests of the Company (A) not to disclose the existence of facts surrounding any proposed or pending acquisition, disposition, strategic alliance or financing transaction involving the Company or (B) to avoid a material mistatement or omission in the Shelf Registration, to suspend the registration rights set forth herein, the Company may, by notice to the Holders in accordance with Section 5(a), suspend the rights of the Holders to make sales pursuant to the Shelf Registration; provided that (x) such periods of suspension may not exceed sixty (60) days in the aggregate during any period of 12 consecutive months and (y) the Company may not impose such a suspension or a postponement following the printing and distribution of a preliminary prospectus in any underwritten public offering of Registrable Securities pursuant to Section 2(c) (except such suspension, not to exceed ten days, which results from an event that is not within the reasonable control of the Company). The Company shall use reasonable commerical efforts to minimize the period of any suspension of sales under this Section 2(h). (i) Assignment. The registration rights set forth in Section 2 hereof may be assigned, in whole or in part, to any transferee of Registrable Securities (who shall be considered thereafter to be a Holder (provided that any transferee who is not an affiliate of Investor shall be a Holder only with respect to such Registrable Securities so acquired and any stock of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, such Registrable Securities) and shall be bound by all obligations and limitations of this Agreement). 3. RULE 144 REPORTING With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of restricted securities to the public without registration, the Company agrees to: (i) make and keep public information available (as those terms are understood and defined in Rule 144) at all times; -10- 11 (ii) use its reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iii) so long as there are outstanding any Registrable Securities, furnish to each Holder, upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration. 4. INTERPRETATION OF THIS AGREEMENT (a) Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. (c) Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. (d) Arbitration. All disputes arising under this Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by the Company and the Investor in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in New York, New York, as may be specified by the arbitrator (or any place agreed to by the Company, the Investor and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this Agreement; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either the Company or the Investor in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be home equally by the Company as one party and the Investor as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. -11- 12 5. MISCELLANEOUS (a) Notices. (i) All communications under this Agreement shall be in writing and shall be delivered by facsimile or by hand or mailed by overnight courier or by registered or certified mail, postage prepaid: . (A) if to the Company, to CytRx Corporation, 154 Technology Parkway, Technology Park/Atlanta, Norcross, Georgia 30092 (770) 368-9500, Attention: Chief Executive Officer, or at such other address as it may have furnished in writing to the Investors; (B) if to the Investors, at the addresses listed on Schedule I hereto, or at such other addresses as may have been furnished the Company in writing. (ii) Any notice so addressed shall be deemed to be given: if delivered by hand, on the date of such delivery; if mailed by courier, on the first business day following the date of such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing. (b) Reproduction of Documents. This Agreement and all documents relating thereto, including, without limitation, any consents, waivers and modifications which may hereafter be executed may be reproduced by the Investor by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and the Investors may destroy any original document so reproduced. The parties hereto agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by the Investors in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. (c) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. (d) Entire Agreement; Amendment and Waiver. This Agreement constitutes the entire understanding of the parties hereto and supersedes all prior understanding among such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Company and the Holders of a majority of the then outstanding Registrable Securities. (e) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. -12- 13 (f) No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement. (g) Remedies. Each Holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended and understood that all of the rights and privileges of each of the Holders shall be enforceable to the fullest extent permitted by law. -13- 14 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. CYTRX CORPORATION By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- INVESTORS: GUNDYCO, in trust for R.R.S.P. 550-98866-19 By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- EXCALIBUR LIMITED PARTNERSHIP By: ----------------------------------------- Excalibur Capital Management Inc. By: ----------------------------------------- Name: William S. Hechter ------------------------------------ Title: President ----------------------------------- PINE STREET ASSET MANAGEMENT By: ----------------------------------------- Its: ------------------------------------- -------------------------------------------- Name: Charles N. Eckert -------------------------------------------- Name: David Kosloff -14- EX-5.2 18 PRESS RELEASE 1 EXHIBIT 5.2 CytRx Announces Private Placement of $2 Million in Convertible Debentures ATLANTA, Oct. 22 /PRNewswire/ -- CytRx Corporation (Nasdaq: CYTR) announced the private placement of $2.0 million of convertible notes. The debentures, which will not be convertible into CytRx common stock for 60 days from the closing date, may at the option of the shareholder thereafter be converted at the lesser of 85% of the average closing bid price for the 10 days preceding the conversion, or $5.68 per share. The debentures will be sold at par and bear interest at a rate of 6% per annum. The investors will also be issued two year warrants to purchase 40,000 shares of CytRx common stock with a strike price equal to $5.68. CytRx has certain rights to redeem the notes at 110% of par including if the conversion price is below $4. CytRx also has an option to sell another $2 million of debentures to the same investors subject to certain conditions. CytRx has agreed to file a registration statement for the resale of the shares associated with this placement. CytRx was advised by Shipley Raidy Capital Partners, L.P. in this transaction. "While allowing us to proceed at full speed with our Phase III program for FLOCOR(TM) this offering will mitigate the cash demands this trial will have on the other CytRx operations," reported Jack Luchese, President and Chief Executive Officer. CytRx's business strategy is to build shareholder value through the development and commercialization of high value human therapeutic products and the successful development and rollout of its promising subsidiary companies. CytRx's FLOCOR(TM) is being developed to treat acute sickle call crisis and other vascular diseases. Protox is being developed to treat bacterial and viral infections. Vaxcel, Inc. is developing Optivax(R) to improve the effectiveness of vaccines. VetLife, Inc. markets and distributes products to enhance food animal growth. Proceutics, Inc. provides high quality preclinical development services to the pharmaceutical industry. This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those discussed herein, due to, among other things, the research, development and market risks which could adversely affect the Company's time line for clinical trials, regulatory approval, marketing and licensing. SOURCE CytRx Corporation -0- 10/22/97 /CONTACT: Joe Medlin, CytRx Corporation, 770-368-9500/ (CYTR) 454 Technology Parkway *Technology Park /Atlanta *Norcross, Georgia 30092 Telephone: (404) 368-9500 * FAX: (404) 368-0622 -----END PRIVACY-ENHANCED MESSAGE-----