<PAGE>

                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT


         This Employment  Agreement (this  "Agreement") is made and entered into
as of September 17, 2003 (the "Effective  Date") by and between Araios,  Inc., a
Delaware   corporation   ("Employer"),   and  Mark  A.  Tepper,   an  individual
("Employee").

         WHEREAS,  Employer  desires to engage  Employee as its  President,  and
Employee is willing to be so engaged by Employer, on the terms set forth in this
Agreement.

         NOW,  THEREFORE,  upon the above premises,  and in consideration of the
mutual covenants and agreements hereinafter contained,  the parties hereto agree
as follows.

         1.  Engagement.  Effective as of the Effective  Date,  Employer  hereby
engages  Employee as  Employer's  President  and  Employee  hereby  accepts such
employment.

         2. Duties;  Place of Employment.  Employee shall perform such duties as
are customarily  performed by the President of a company such as Employer as are
delegated to him from time to time by Employer's Chief Executive  Officer or, in
the absence of a Chief Executive  Officer,  the Chief Executive Officer of CytRx
Corporation,  the parent corporation of Employer ("CytRx"), and Employer's Board
of Directors,  which shall include, without limitation,  the duties described on
Schedule  1  to  this  Agreement.  Employee  shall  perform  such  duties  in  a
professional business-like manner and to the best of his ability. Employee shall
report to  Employer's  Chief  Executive  Officer  or, in the  absence of a Chief
Executive Officer, to the Chief Executive Officer of CytRx. Employee understands
and agrees that his duties and authority hereunder will be modified in the event
Employer  engages a Chief  Executive  Officer,  so that  Employee's  duties  and
authority  are not  inconsistent  with  those of such Chief  Executive  Officer.
Employee's   services  hereunder  shall  be  rendered  primarily  at  Employer's
principal executive offices in Worcester, Massachusetts, or its environs, and to
a lesser  extent,  at  Parent's  principal  executive  offices  in Los  Angeles,
California.  Except for travel to and from Los Angeles, and otherwise,  when and
as required in the performance of Employee's  duties  hereunder,  Employer shall
have no right to  require  Employee  to serve  the  Employer  at any  office  or
location other than as set forth above.

         3. Time and Efforts.  Employee  shall devote all of his business  time,
efforts,  attention and energies to Employer's business and the discharge of his
duties hereunder.  Employee's services shall be exclusive to Employer during the
term of  this  Agreement.  Notwithstanding  the  foregoing,  Employee  shall  be
entitled to serve  without  compensation  on the board of  directors of not more
than three profit or non-profit  entities  which do not compete with the Company
or CytRx in the field of  treatment,  prevention  or  diagnosis  of any  disease
indication  for which the  Company  or CytRx is  seeking  to  develop  or market
products (the "Field"), provided that such service does not entail a substantial
time  commitment  on  Employee's  part and subject to having first  obtained the
consent of Employer, which consent shall not unreasonably be withheld.


<PAGE>

         4. Term. The term (the "Term") of Employee's employment hereunder shall
commence  on the  Effective  Date and  shall  expire on the  second  anniversary
thereof,  unless (a) either Employer or Employee  notifies the other at least 30
days prior to the first  anniversary of the date of this Agreement of its or his
intention  that this  Agreement  expire on the first  anniversary of the date of
this Agreement, which shall then be the expiration date or (b) sooner terminated
in accordance  with Section 6. Neither party shall have any obligation to extend
or renew this Agreement.

         5.  Compensation.  As the total  consideration for Employee's  services
rendered  hereunder,  Employer  shall  pay or  provide  Employee  the  following
compensation and benefits:

              5.1.  Salary.  Employer shall pay Employee an annual salary of Two
Hundred Thousand Dollars ($200,000),  in equal semi-monthly  installments on the
15th day and the last day of each calendar month during the Term, with the first
such  installment and final salary payment at the end of the Term to be adjusted
pro rata in the event the Term does not  commence on the first day of a calendar
month.

              5.2.  Bonus  Compensation.  Employer shall pay Employee a bonus at
the completion of each year of the Term,  provided that Employee  remains in the
continuous  employ of Employer through such respective  dates. The amount of the
bonus will be  determined  by  Employer's  Chief  Executive  Officer  or, in the
absence of a Chief Executive  Officer,  by the Chief Executive Officer of CytRx,
and approved by Employer's Board of Directors (based on the personal performance
of Employee and the overall  performance of Employer for the applicable period),
with a target  bonus for each year of $50,000  upon  successful  performance  by
Employer  and  Employee  of the  milestones  set  forth  on  Schedule  2 to this
Agreement.

              5.3. Stock Options. CytRx shall grant Employee as of the Effective
Date a  nonqualified  stock  option (the  "Option")  to  purchase  approximately
140,000 shares of CytRx's  common stock under CytRx's 2000  Long-Term  Incentive
Plan (the "Plan") and upon CytRx shareholder approval of an increase in the size
of the Plan (which is  anticipated  to occur during the fourth quarter of 2003),
an additional nonqualified stock option under the Plan (the "Additional Option")
to purchase a number of shares of CytRx  common  stock  equal to the  difference
between  400,000 shares and the number of shares covered by the Option.  Subject
to Section 6, the shares covered by the Option and the  Additional  Option shall
vest and become exercisable as to 1/3rd of the shares covered thereby on each of
the  first,  second  and  third  annual  anniversaries  of the  Effective  Date,
respectively,  provided,  in each case, that Employee  remains in the continuous
employ of Employer  through such date. The exercise price of the Option shall be
equal to the closing  price of CytRx's  common  stock on the  Effective  Date as
reported by Nasdaq,  and the exercise  price of the  Additional  Option shall be
equal to the closing  price of CytRx's  common stock on the date of its grant as
reported by Nasdaq,  but not less than the exercise price of the Option.  In the
event the exercise  price of the  Additional  Option is higher than the exercise
price of the Option,  CytRx will, if permitted by the Plan,  issue an additional
nonqualified  stock  option,  stock  appreciation  right or  other  compensatory
security,  or some  combination  of the foregoing,  under the Plan,  that


                                       2
<PAGE>

to the maximum  extent  feasible,  puts  Employee in the same  economic  and tax
position as if the Additional  Option had the same exercise price as the Option.
The Option and  Additional  Option  each shall have a term of ten years from the
Effective  Date and such other terms as shall be  determined by CytRx's Board of
Directors (or the  Compensation  Committee of CytRx's Board of Directors) in its
sole  discretion  and set forth in the stock option  agreements  evidencing  the
Option and Additional Option.

              5.4. Expense Reimbursement.  Employer shall reimburse Employee for
reasonable and necessary  business expenses incurred by Employee  (excluding any
car  allowance or commuting  expenses) in  connection  with the  performance  of
Employee's  duties in accordance with Employer's usual practices and policies in
effect from time to time.

              5.5.  Vacation.  Employee  shall be  entitled  to three  (3) weeks
vacation  during  the Term,  without  loss of salary  or bonus  hereunder,  plus
holidays,  sick  leave  and  personal  days as  determined  in  accordance  with
Employer's  usual  practices and policies in effect from time to time during the
Term.

              5.6. Insurance Benefits. Employee shall be eligible to participate
in any medical,  dental,  life and disability  insurance and other benefits made
available by Employer to all of its senior  executive  employees under its group
plans or  otherwise  in effect  during  the Term.  However,  until  such time as
Employer  provides a group plan life insurance  coverage for Employee,  Employer
shall  reimburse  Employee for up to $150 per month for any term life  insurance
policy maintained by Employee.  Employee  acknowledges and agrees that, although
Employer  plans to obtain such  insurance and maintain such other  benefits,  no
such plans are currently in effect,  and that any such plans put into effect may
be modified or terminated by Employer at any time in its discretion.

              5.7. Tax Withholding. Employer shall have the right to deduct from
the  compensation  and  benefits  due to  Employee  hereunder  any and all  sums
required for social  security and  withholding  taxes and for any other federal,
state,  or local tax or charge  which may be in effect or  hereafter  enacted or
required as a charge on the compensation or benefits of Employee.

         6. Expiration and Termination.  This Agreement may be terminated as set
forth in this Section 6.

              6.1.  Termination  by Employer for Cause.  Employer may  terminate
Employee's employment hereunder for "Cause" upon notice to Employee. "Cause" for
this purpose shall mean any of the following:

              (a)  Employee's  breach of any  material  term of this  Agreement;
provided that the first occasion of any  particular  breach shall not constitute
such Cause unless  Employee shall have previously  received  written notice from
Employer  stating the nature of such breach and affording  Employee at least ten
days to correct such breach;

              (b) Employee's conviction of, or plea of guilty or nolo contendere
to, any misdemeanor, felony or other crime of moral turpitude;




                                       3
<PAGE>

              (c) Employee's act of fraud or dishonesty injurious to Employer or
its reputation;

              (d)  Employee's  continual  failure  or  refusal  to  perform  his
material  duties as required  under this  Agreement  after  written  notice from
Employer stating the nature of such failure or refusal and affording Employee at
least ten days to correct the same;

              (e)   Employee's   act  or  omission   that,  in  the   reasonable
determination of Employer's Board of Directors,  indicates alcohol or drug abuse
by Employee; or

              (f)  Employee's  act or personal  conduct that, in the judgment of
Employer's  Board of  Directors,  gives rise to a material  risk of liability of
Employee or Employer under federal or applicable  state law for  discrimination,
or  sexual  or  other  forms of  harassment,  or other  similar  liabilities  to
subordinate employees.

         Upon  termination of Employee's  employment by Employer for Cause,  all
compensation  and benefits to Employee  hereunder shall cease and Employee shall
be  entitled  only to  payment,  not later  than  three  days  after the date of
termination, of any accrued but unpaid salary and unused vacation as provided in
Sections 5.1 and 5.5 as of the date of such termination.

              6.2.  Termination  by Employer  without  Cause.  Employer may also
terminate  Employee's  employment  without  Cause upon notice to Employee.  Upon
termination of Employee's employment by Employer without Cause, all compensation
and benefits to Employee hereunder shall cease and Employee shall be entitled to
(a) payment of (1) any accrued but unpaid salary and unused vacation as provided
in Sections 5.1 and 5.5 as of the date of such  termination,  which shall be due
and payable  upon the  effective  date of such  termination,  and (2) an amount,
which shall be due and payable  within ten days  following the effective date of
such  termination,  equal to the  salary  that  would  otherwise  be  payable as
provided in Section 5.1 for the period (the  "Severance  Period")  commencing on
the date of  termination  of Employee's  employment  and ending on the six-month
anniversary of such date, and (b) continued  participation,  at Employer's  cost
and expense, during the Severance Period in any Employer-sponsored group benefit
plans  in  which  Employee  was  participating  as of the  date of  termination.
Notwithstanding  anything to the contrary set forth in Section 5.3, in the event
Employee's  employment is terminated by Employer  without Cause,  the Option and
Additional Option shall thereupon vest and become immediately  exercisable as to
1/6th of the shares covered  thereby which have not already vested in accordance
with the  respective  terms of the Option  and the  Additional  Option.  If, for
example,  Employer were to terminate Employee's  employment without Cause at any
time prior to the first annual  anniversary of the date of this  Agreement,  the
Option would thereupon  become vested and  immediately  exercisable as to 23,333
shares of CytRx common stock covered thereby (assuming the Option is for 140,000
shares  originally) and the Additional  Option would thereupon become vested and
immediately  exercisable  as to 43,334  shares  of CytRx  common  stock  covered
therby. In the event Employer substantially modifies Employee's responsibilities


                                       4
<PAGE>

or reduces  Employee's  compensation in breach of this  Agreement,  or otherwise
breaches this  Agreement,  Employee may, unless such breach is cured by Employer
within ten days after written  notice from Employee,  terminate this  Agreement,
which  shall be  deemed  to be a  termination  without  Cause.  In this  regard,
however,  Employee  acknowledges  and agrees that, in the event Employer hires a
Chief Executive  Officer,  Employee's  obligations  hereunder will be changed as
contemplated  in  Section  2 and that  such  change  shall not be deemed to be a
breach of this Agreement.

              6.3. Death or  Disability.  Employee's  employment  will terminate
automatically  in the event of Employee's  death or upon notice from Employer in
event of his permanent disability.  Employee's "permanent disability" shall mean
his inability to fully  perform his duties  hereunder for any period of at least
75 consecutive days or for a total of 90 days, whether or not consecutive.  Upon
termination of Employee's employment as aforesaid, all compensation and benefits
to Employee hereunder shall cease and Employer shall pay to the Employee's heirs
or  personal  representatives,  not  later  than  ten  days  after  the  date of
termination,  any accrued but unpaid  salary and unused  vacation as provided in
Sections 5.1 and 5.5 as of the date of such termination.

         7. Inventions. Employee shall promptly disclose to Employer, and hereby
assigns and agrees to assign to Employer (or as otherwise directed by Employer),
his full  right,  title and  interest  to all  Inventions  (as  defined  below).
Employee agrees to cooperate fully with Employer,  its attorneys and agents,  in
the  preparation and filing of all papers and other documents as may be required
to perfect  Employer's rights in and to any of such Inventions,  including,  but
not limited to,  execution of any and all  applications for domestic and foreign
patents,  copyrights or other  proprietary  rights and the  performance  of such
other acts (including,  among others,  the execution and delivery of instruments
of further  assurance  or  confirmation)  requested  by  Employer  to assign the
Inventions  to Employer and to permit  Employer to file,  obtain and enforce any
patents,  copyrights  or other  proprietary  rights  in the  Inventions,  all at
Employer's expense. Employee hereby designates Employer as his agent, and grants
to Employer a power of attorney with full power of substitution,  which power of
attorney shall be deemed coupled with an interest,  for the purpose of effecting
any such  assignment  hereunder  from Employee to Employer.  "Inventions"  shall
mean, for purposes of this Section 7, ideas, discoveries, creations, manuscripts
and properties, innovations,  improvements, know-how, inventions, trade secrets,
apparatus, developments,  techniques, methods, biological processes, cell lines,
laboratory notebooks and formulas (whether or not patentable or copyrightable or
constituting trade secrets)  conceived,  made or discovered by Employee (whether
alone or with  others)  during  the Term  and/or  as a  result  of  confidential
information  (as  referred to in Section 8 hereof)  received  from  Employer (as
defined  therein).  Employee  agrees to not use or  incorporate  any third party
proprietary  information  into any Inventions or to disclose such information to
Employer.  Upon  termination of this  Agreement  with  Employer,  Employee shall
provide to Employer in writing a full,  signed  statement of all  Inventions  in
which Employee participated prior to termination of this Agreement.



                                       5
<PAGE>

         8. Confidentiality;  Non-Compete. While this Agreement is in effect and
for a period of five years  thereafter,  Employee shall hold and keep secret and
confidential  all "trade  secrets"  (within the meaning of  applicable  law) and
other  confidential  or  proprietary  information of Employer and shall use such
information  only in the  course  of  performing  Employee's  duties  hereunder;
provided,  however, that with respect to trade secrets,  Employee shall hold and
keep secret and confidential such trade secrets for so long as they remain trade
secrets under  applicable  law.  Employee shall maintain in trust all such trade
secrets  or  other  confidential  or  proprietary  information,   as  Employer's
property,  including,  but not limited to, all documents  concerning  Employer's
business,  including  Employee's work papers,  telephone  directories,  customer
information and notes,  and any and all copies thereof in Employee's  possession
or under  Employee's  control.  Upon the  expiration or earlier  termination  of
Employee's employment with Employer, or upon request by Employer, Employee shall
deliver to Employer all such documents belonging to Employer,  including any and
all copies in Employee's possession or under Employee's control. For purposes of
Sections  7, 8 and 9, the term  "Employer"  shall  also  include  CytRx  and its
affiliates.  During  the  Term  and for a  one-year  period  thereafter  (unless
Employer  terminates  this  Agreement  without  Cause),  Employee  shall  not be
employed with or serve as a consultant to or be a 5% or greater  shareholder  of
any entity that is  competing,  directly  or  indirectly,  with  Employer in the
Field,  and Employee  shall not solicit any employee of Employer for  employment
with any other entity.

         9. Equitable Remedies;  Injunctive Relief. Employee hereby acknowledges
and agrees that monetary damages are inadequate to fully compensate Employer for
the  damages  that  would  result  from a breach  or  threatened  breach of this
Agreement  and,  accordingly,  that  Employer  shall be  entitled  to  equitable
remedies,  including,  without  limitation,   specific  performance,   temporary
restraining orders, and preliminary  injunctions and permanent  injunctions,  to
enforce  such  Section  without  the  necessity  of  proving  actual  damages in
connection  therewith.  This provision shall not, however,  diminish  Employer's
right  to claim  and  recover  damages  or  enforce  any  other of its  legal or
equitable rights or defenses.

         10. Indemnification; Insurance. Employer and Employee acknowledge that,
as the  President  of the  Employer,  Employee  shall be a corporate  officer of
Employer and, as such, Employee shall be entitled to indemnification to the full
extent  provided by Employer to its  officers,  directors  and agents  under the
Employer's  Certificate of Incorporation  and Bylaws as in effect as of the date
of  this  Agreement.  Subject  to his  insurability  thereunder,  effective  the
Effective  Date,  Parent shall add Employee as an  additional  insured under its
current policy of directors and officers liability  insurance and shall continue
to insure Employee thereunder,  or under any replacement policies in effect from
time to time, during the Term.

         11.  Severable  Provisions.   The  provisions  of  this  Agreement  are
severable  and if any one or more  provisions  is  determined  to be  illegal or
otherwise unenforceable,  in whole or in part, the remaining provisions, and any
partially unenforceable provisions to the extent enforceable, shall nevertheless
be binding and enforceable.



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<PAGE>

         12.  Successors and Assigns.  This Agreement shall inure to the benefit
of and shall be binding upon  Employer,  its successors and assigns and Employee
and his heirs and  representatives.  Neither  party may  assign  this  Agreement
without the prior written consent of the other party;  provided,  however,  that
this  Agreement may be assigned by Employer to Parent or any affiliate of Parent
in  connection  with any merger or  acquisition  of  Employer  by Parent or such
affiliate.

         13. Entire Agreement.  This Agreement  contains the entire agreement of
the parties  relating to the subject matter hereof,  and the parties hereto have
made no agreements, representations or warranties relating to the subject matter
of this  Agreement  that are not set  forth  otherwise  herein.  This  Agreement
supersedes  any and all prior or  contemporaneous  agreements,  written or oral,
between  Employee and Employer  relating to the subject matter hereof.  Any such
prior or  contemporaneous  agreements  are hereby  terminated  and of no further
effect,  and Employee,  by the execution  hereof,  agrees that any  compensation
provided for under any such agreements is  specifically  superseded and replaced
by the provisions of this Agreement.

         14. Amendment.  No modification of this Agreement shall be valid unless
made in writing and signed by the parties hereto and unless such writing is made
by an executive  officer of Employer (other than  Employee).  The parties hereto
agree  that  in no  event  shall  an oral  modification  of  this  Agreement  be
enforceable or valid.

         15.  Governing  Law.  This  Agreement  is and  shall  be  governed  and
construed in accordance with the laws of the State of California  without giving
effect to California's choice-of-law rules.

         16. Notice. All notices and other  communications  under this Agreement
shall  be in  writing  and  mailed,  telecopied  or  delivered  by  hand or by a
nationally recognized courier service guaranteeing overnight delivery to a party
at the  following  address  (or to such  other  address  as such  party may have
specified by notice given to the other party pursuant to this provision):

                  If to Employer:

                  Araios, Inc.
                  c/o CytRx Corporation
                  11726 San Vicente Boulevard, Suite 650
                  Los Angeles, California  90049
                  Facsimile:     (310) 826-5529
                  Attention:     CytRx Chief Executive Officer

                  If to Employee:

                  Mark A. Tepper, Ph.D.
                  508 Dudley Road
                  Newton, MA 02459
                  Facsimile:     (617) 244-0518



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<PAGE>

         17.  Arbitration.  The parties agree if any  controversy or claim shall
arise out of this  Agreement  or the breach  hereof  (other  than claims (a) for
equitable relief, including specific performance, injunctive relief or temporary
restraining  orders or (b)  enforcing  this Section 17 or an  arbitration  award
granted in accordance herewith),  and either party shall request that the matter
be settled by arbitration  the matter shall be settled  exclusively by final and
binding  arbitration before JAMS (or its successor pursuant to the United States
Arbitration  Act, 9 U.S.C.  Section 1 et seq.) in accordance with the provisions
of JAMS' Streamlined Arbitration Rules and Procedures in effect at such time, by
a  single  arbitrator,   if  the  parties  shall  agree  upon  one,  or  by  one
arbitrator-appointee by each party and a third arbitrator appointed by the other
arbitrators.  In case of any failure of a party to make an appointment  referred
to above within two weeks after written notice of controversy,  such appointment
shall be made by JAMS. All arbitration  proceedings shall be held in the City of
Los Angeles, and each party agrees to comply in all respects with any award made
in such proceeding and to the entry of a judgment in any  jurisdiction  upon any
award  rendered  in such  proceeding.  All costs  and  expenses  of  arbitration
(including  costs  of  preparation  therefore  and  reasonable  attorneys'  fees
incurred in connection  therewith) of the party  prevailing in such  arbitration
shall be borne by the losing party to such  arbitration or otherwise as directed
by the arbitrator or arbitrators.

         18.  Survival.  Sections 7 through 17 shall  survive the  expiration or
termination of this Agreement.

         19. Counterparts.  This Agreement may be executed in counterparts, each
of which shall be deemed to be an original  and all of which  together  shall be
deemed to be one and the same agreement.

         IN WITNESS  WHEREOF,  this Agreement is executed as of the day and year
first above written.

                                  "EMPLOYER"

                                  Araios, Inc.,
                                  a Delaware corporation


                                  By: /s/ Steven A. Kriegsman
                                      ----------------------------------
                                  Name:    Steven A. Kriegsman
                                  Title:   Chairman of the Board


                                  "EMPLOYEE"


                                  /s/ Mark A. Tepper
                                  --------------------------------------
                                  Mark A. Tepper, Ph.D.


                                       8
<PAGE>

                                   SCHEDULE 1

                              Description of Duties

Corporate

         o        Monitor and support  the timely  delivery of Araios'  near and
                  long  range  strategic  goals,  business  plan and  budget  as
                  approved by the Board of Directors

         o        Facilitate the sponsored  research agreement between CytRx and
                  the laboratory of Dr. Michael P. Czech

         o        Provide   staffing,   laboratory   facilities   and  equipment
                  necessary to execute the business  plan,  including  the Czech
                  SRA

         o        Implement  and oversee an  intellectual  property  strategy to
                  protect any developed or improved technology, including future
                  patent  claims,  proprietary  know-how,  trade  secrets,  etc.
                  related to Araios' overall business strategy

         o        Implement and oversee a regulatory  strategy that promotes the
                  greatest chance of Araios  achieving  regulatory  approval for
                  its products

         o        Promote Araios and its research  activities to thought leaders
                  in the scientific and medical communities

         o        Interface  with  CytRx  management  concerning  the  strategic
                  direction and operations of Araios

         o        Create  and  communicate  a vision for the  organization  that
                  reflects  the  company's  values and  responds to the needs of
                  various "stakeholders" (i.e., employees, customers, CytRx)

<PAGE>

Financial

         o        Prepare and review  monthly,  quarterly  and annual actual vs.
                  budgeted operating results and present copies to CytRx

         o        Monitor cash flow, expenses and allocation of resources

         o        Anticipate  resource  needs,  set  priorities,   and  allocate
                  financial and human resources as appropriate

         o        Create  an  annual  budget  that is  approved  by the Board of
                  Directors

         o        Approve vendor invoices for payment by CytRx

         o        Maintain  local  imprest  bank account in the amount of $5,000
                  and provide detailed substantiation for CytRx reimbursement

Human Resources

         o        Recruit and retain the most  qualified,  talented  personnel -
                  "A" Team

         o        Ensure  that  employees  are  aware  of  mission,  objectives,
                  individual  responsibilities,  and  competencies  critical  to
                  successful job performance

         o        Set and communicate  high standards of  performance,  evaluate
                  performance objectives, and provide timely, candid feedback

         o        Establish  and  maintain  an  environment  where new ideas and
                  solutions   to  problems   are   solicited,   evaluated,   and
                  implemented

         o        Foster  internal  company  image  as  an  innovative,   highly
                  competent  biopharmaceutical  company developing opportunities
                  for the personal and professional growth of its employees

         o        Compliance  with federal and state  employment laws applicable
                  to Araios employees

Personal

         o        Exercises   sound  judgment  in   decision-making   and  takes
                  intelligent business risks

         o        Inspires  trust by  demonstrating  high ethical  standards and
                  personal integrity

         o        Makes  effective and persuasive  presentations,  both oral and
                  written, formal and informal



                                       8
<PAGE>

         o        Identifies   the  right   issues  to  be   communicated,   the
                  appropriate audience, vehicle, and time

         o        Skilled in negotiation and conflict resolution



<PAGE>


                                   SCHEDULE 2

                                Bonus Milestones

                Tepper Employment Milestones and Key Deliverables

                              Through year end 2004


         General Milestones

         o        Obtain  approval of business plan,  long range  strategic plan
                  and annual budget by Board of Directors

         o        Recruitment of scientific  staff: 3 chemists,  2 screeners,  2
                  protein  expression  scientists and  additional  staff in 2004
                  within the budget set forth in the business plan

         o        Maintain consistent  internal  communication with the Board of
                  Directors

         o        Establish  controls  and  procedures  in  accordance  with the
                  Sarbanes-Oxley Act

         o        Submission of 1 grant to support Araios research  (SBIR,  ATP,
                  DARPA, NIH, etc.) by mid 2004

         o        Generate  a  substantial   number  of  newsworthy  events,  in
                  addition  to the  formation  of  Araios,  that  warrant  press
                  release activity positively influencing the value of CytRx

         o        Establish  meaningful  relationships  with  pharmaceutical and
                  biotech   companies   for  potential   partnering,   strategic
                  alliances and/or licensing transactions

         o        A minimum of one scientific  publication and one  presentation
                  at a scientific or financial  conference to further  awareness
                  of CytRx as permitted by appropriate intellectual property and
                  trade secret protection

         o        Assist in  aligning  Araios'  strategy  with  CytRx's  overall
                  corporate strategy

         o        Maintain  a  positive  and  proactive  relationship  with  the
                  University of Massachusetts (UMass), its executives and Office
                  of Technology Management

         o        Work with Dr.  Czech  and/or the UMass to assign,  allocate or
                  generate  NIH monies from new or existing  programs in type II
                  Diabetes and Obesity



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         o        Keep  apprised  of new  developments  in the  field of type II
                  Diabetes and Obesity for  possible  mergers,  acquisitions  or
                  strategic alliances

         o        Maintain  continued  membership of Kahn, Rosett and Spiegelman
                  on Scientific Advisory Board

         Scientific Milestones

         o        First Target Pathway Screen Initiated by Q1 `04

         o        3 drug  targets/pathways  screened  in the  area  of  type  II
                  Diabetes/Obesity

         o        Initiate  Hit to Lead  chemistry  program  on at least 1 novel
                  type II Diabetes/Obesity target

         o        1 structure-based chemical library generated around targets in
                  the area of fatty acid metabolism

         o        1  pharmacophore-based  compound library  generated focused on
                  type II Diabetes/Obesity drug target

         o        Select at least 1 new novel  target from  Michael  Czech's SRA
                  for screening in Araios.