<PAGE>
 
                       TECHNOLOGY DEVELOPMENT AGREEMENT

     THIS TECHNOLOGY DEVELOPMENT AGREEMENT (this "Agreement") dated as of
December 6, 1996 by and among VAXCEL, INC., a Delaware corporation ("Vaxcel"),
and ZYNAXIS VACCINE TECHNOLOGIES, INC., a Pennsylvania corporation ("Zynaxis").

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

     WHEREAS, pursuant to that certain License Agreement dated July 1, 1987 by
and between Southern Research Institute ("Southern") and Molecular Engineering
Associates, Ltd., as amended, supplemented, restated, or otherwise modified from
time to time (the "Original License Agreement"), Zynaxis has an exclusive right
and license to certain oral vaccine microencapsulation technology (the "PLG
Technology");

     WHEREAS, Zynaxis also owns certain oral vaccine delivery technology related
to compounds which bind to mucosal tissues (the "Mucoadhesive Technology"); and

     WHEREAS, Vaxcel and Zynaxis plan to enter into a business combination
transaction that will take several months to consummate, and Vaxcel wishes to
develop the PLG Technology and the Mucoadhesive Technology (collectively
referred to herein as the "Technology") during the time period between execution
of this Agreement and the consummation of the planned business combination
transaction;

     NOW, THEREFORE, in consideration of the foregoing and the other mutual
promises, covenants and agreements set forth in the other agreements being
executed by Vaxcel and Zynaxis on the date of this Agreement, the parties
hereto, intending to be legally bound, agree as follows;

                                   ARTICLE I
                              CONDITION PRECEDENT

     The parties acknowledge and agree this Agreement shall not take effect
unless and until, and only in conjunction with, the execution of that certain
Agreement and Plan of Merger and Contribution by and among Cytrx Corporation,
Vaxcel Merger Subsidiary, Inc., Zynaxis, Inc., and Vaxcel (the "Merger
Agreement").

                                  ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF ZYNAXIS

     2.1  License to Technology, etc.  Zynaxis represents and warrants that,
          --------------------------                                       
pursuant to the Original License Agreement, Zynaxis has an exclusive right and
license to make, have made for it, use and sell throughout the world the PLG
Technology, to grant sublicenses to make, have made for it, use and sell
throughout the world the PLG 
<PAGE>
 
Technology, and to sell, transfer, or assign any or all of its rights and
obligations under the Original License Agreement with the written consent of
SRI, which consent shall not be unreasonably withheld. Zynaxis further
represents and warrants that it is the owner of all rights in the Mucoadhesive
Technology and possesses full right and authority to grant to Vaxcel the rights
set forth in this Agreement. In addition, Zynaxis represents and warrants that
it has the right to enter into and fully perform this Agreement, and Zynaxis'
performance of this Agreement will in no way infringe upon or violate any
applicable law, rule or regulation, any contract with any third party or any
rights of any third person, including, without limitation, rights of patent,
trade secret, trademark or copyright.

     2.2  Relevant Information.  Zynaxis represents and warrants that it will
          --------------------                                               
make available to Vaxcel on or prior to the Effective Date of this Agreement, or
as soon thereafter as practicable, all documents available to Zynaxis which are
relevant to the Technology.  Zynaxis further represents and warrants that it
will continue to make available to Vaxcel during the term of this Agreement all
documents and information available to it which are relevant to the Technology.

     2.3  No Other Undertakings.  Zynaxis represents and warrants that the
          ---------------------                                          
Technology is not subject to any agreement, joint venture, undertaking,
commitment or understanding of any kind or nature between Zynaxis and any other
person, firm, corporation, joint venture, partnership or other entity with
respect to or relating in any way to the contemplated activities of Vaxcel which
would materially interfere with the contemplated activities of Vaxcel, except
for this Agreement and except for that certain Development and License Agreement
by and between Zynaxis, Inc. and ALK A/S dated September 21, 1995 (the
"Development and License Agreement").

     2.4  Further Assurances.  Zynaxis represents and warrants that it will
          ------------------                                               
promptly execute and deliver to Vaxcel such further documents and take such
further action as may be reasonably requested by Vaxcel in order to more
effectively carry out the intent and purpose of this Agreement.

     2.5  Corporate Existence and Approvals.  Zynaxis represents and warrants
          ---------------------------------                                 
that it is a corporation validly existing under the laws of the Commonwealth of
Pennsylvania, that no authorization, consent, approval, or license is or will be
necessary to the taking by Zynaxis of any action contemplated by this Agreement,
and that this Agreement, when executed, constitutes a legal, valid, binding
obligation of Zynaxis.

                                  ARTICLE III
             REPRESENTATIONS, WARRANTIES, AND COVENANTS OF VAXCEL

     3.1  Activities Consistent with Original License Agreement.  Vaxcel agrees
          -----------------------------------------------------               
that all Development Activities (as defined herein) relating to the PLG
Technology shall be consistent with and subject to any limitations set forth in
the Original License Agreement.

                                      -2-
<PAGE>
 
     3.2  Relevant Information.  Vaxcel represents and warrants that it will
          --------------------                                              
make available to Zynaxis upon termination of this Agreement all material
documents available to Vaxcel which are relevant to the Technology.

     3.3  No Other Undertakings.  Vaxcel represents and warrants that it is not
          ---------------------                                               
subject to any agreement, joint venture, undertaking, commitment or
understanding of any kind or nature with any other person, firm, corporation,
joint venture, partnership or other entity with respect to or relating in any
way to the contemplated activities of Vaxcel which would materially interfere
with the contemplated activities of Vaxcel.

     3.4  Corporate Existence and Approvals.  Vaxcel represents and warrants
          ---------------------------------                                
that it is a corporation validly existing under the laws of the State of
Delaware, that no authorization, consent, approval, or license is or will be
necessary to the taking by Vaxcel of any action contemplated by this Agreement,
and that this Agreement, when executed, constitutes a legal, valid, binding
obligation of Vaxcel.

                                  ARTICLE IV
                      AGREEMENTS AMONG VAXCEL AND ZYNAXIS

     4.1  Vaxcel Right to Develop.  It is the intent of the parties that there
          -----------------------                                            
be no interruption in the development of the Technology during the course of the
planned business combination between Zynaxis and Vaxcel.  In furtherance of this
desire, Vaxcel is hereby granted during the term of this Agreement the exclusive
right to continue to develop the Technology at its own cost and expense, subject
to the rights granted to ALK A/S in the Development and License Agreement (the
"Development Activities").  By way of explanation and not in limitation of the
foregoing, Vaxcel may, at its option and its sole discretion, elect to undertake
the following activities:

     (a)  Perform preclinical experiments using the Technology at Vaxcel
     facilities or with other third parties and potential sublicensees;
     (b)  Negotiate and execute agreements for the Technology, including, but
     not limited to, materials transfer agreements, research agreements, option
     agreements, sublicense agreements, or other similar agreements, subject to
     Zynaxis' right of approval as provided for in Section 4.4;
     (c)  Conduct research activities involving the Technology and receive
     compensation from potential sublicensees regarding such research
     activities;
     (d)  Gain access to data from current Zynaxis sublicensees for the
     Technology;
     (e)  Attend scientific conferences and present information to the
     conferences on the Technology;
     (f)  Handle all patent application matters on behalf of Zynaxis as they
     arise, provided that in the event Vaxcel elects not to handle a patent
     application matter, then Zynaxis shall have the option to handle such
     matter; and
     (g)  Perform other development activities that may arise during the term of
     this Agreement.

Vaxcel shall inform and provide updates to Zynaxis on a regular basis regarding
Development Activities undertaken by Vaxcel.

                                      -3-
<PAGE>
 
     4.2  No Obligation to Develop.  The grant in Section 4.1 does not impose
          ------------------------                                           
any responsibilities on Vaxcel, including any affirmative duty to promote,
produce, sell, develop, or otherwise commercialize the Technology or
improvements.  In addition, nothing in this Agreement shall be deemed to
prohibit Vaxcel from developing, making, using, marketing or otherwise
distributing or promoting products competitive with the Technology, provided
that Vaxcel does not disparage the Technology in doing so.

     4.3  Zynaxis Development Activities.  During the term of this Agreement,
          ------------------------------                                    
Zynaxis shall not undertake any Development Activities nor disclose any
Confidential Information relating to the Technology without the prior written
consent of Vaxcel.  To the extent Zynaxis is made aware of any potential
Development Activities with third parties relating to the Technology, Zynaxis
shall promptly disclose such information to Vaxcel.

     4.4  Zynaxis Approval of Vaxcel Agreements.   Zynaxis shall have the right
          -------------------------------------                                
to approve, prior to execution, any agreement for the Technology negotiated by
Vaxcel pursuant to Section 4.1(b).  Vaxcel will submit to Zynaxis final copies
of all proposed agreements for the Technology.

                                   ARTICLE V
                             TERM AND TERMINATION

     5.1  Term.  This Agreement shall commence on the Effective Date and shall
          ----                                                               
continue in effect until the first to occur of (i) the closing of the
transaction contemplated by the Merger Agreement; or (ii) termination of the
Merger Agreement.

     5.2  Termination.  If any party materially defaults in the performance of
          -----------                                                       
any of its obligations under this Agreement, which default shall not be
substantially cured within 60 days after notice is given to the defaulting party
specifying the default, then the party not in default may, by giving notice to
the defaulting party, terminate this Agreement as of a date specified in such
notice of termination.  Notwithstanding the foregoing, with respect to material
defaults that cannot reasonably be cured within 60 days, it shall not be a
default under this Section if the defaulting party in good faith proceeds within
60 days to commence curing said default and thereafter prosecutes with due
diligence the curing of such default to conclusion.

     5.3  Termination Obligations.  Upon the expiration or termination of this
          -----------------------                                             
Agreement for any reason each party shall promptly return to the other all
Confidential Information of such party.

     5.4  Survival.  Articles 1, 2, 3, 5.3, 5.4, 6(a), 6(b), 7, 8 and 9 shall
          --------                                                           
survive any termination or expiration of this Agreement.

                                      -4-
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                                  ARTICLE VI
                                   PAYMENTS

     The parties agree that in exchange for the mutual covenants and promises
contained in this Agreement, in the event Vaxcel obtains an agreement for the
Technology as provided for in Section 4.1(b) during the term of this Agreement,
Vaxcel shall retain a maximum of the first Fifty Thousand Dollars ($50,000)
received from all such agreements in consideration of the services performed
hereunder.  Any amounts received in excess of Fifty Thousand Dollars ($50,000)
will be transferred to Zynaxis to be used in satisfaction of Zynaxis'
obligations under the Merger Agreement and the Secured Loan being extended by
Cytrx Corporation in connection with the execution of the Merger Agreement.  In
the event that this Agreement is terminated due to the termination of the Merger
Agreement, then the following payment obligations shall apply:

     (a)  if the Merger Agreement is terminated for a reason described in
     Section 11.2(b) of the Merger Agreement, all payments received following
     termination of this Agreement as a result of agreements for the Technology
     entered into by Vaxcel during the term of this Agreement shall be divided
     such that ninety percent (90%) of all payments are promptly paid to Vaxcel;
     or
     (b)  if the Merger Agreement is terminated for any other reason, all
     payments received following termination of this Agreement as a result of
     agreements for the Technology entered into by  Vaxcel during the term of
     this Agreement shall be paid to Zynaxis.

                                  ARTICLE VII
                                CONFIDENTIALITY

     7.1  Definition.  As used herein, "Confidential Information" means any and
          ----------                                                           
all know-how, developments, data, trade secrets, specifications, procedures,
drawings, and other technical information relating to the Technology with the
exception only of the following:

     (a)  information that as of the date of receipt by any party is in the
     public domain or subsequently enter the public domain without fault of the
     recipient;
     (b)  information that at the time of receipt by any party was known to the
     recipient or any of its affiliates as a result of disclosure from an
     independent third party who was entitled to make such disclosure;
     (c)  information that at any time is received in good faith by any party or
     any of such party's affiliates from a third party which was lawfully in
     possession of the same and had the right to disclose the same;
     (d)  information that the parties mutually agree in writing to release from
     the terms of this Agreement; and
     (e)  information disclosed by any party as required by law or regulation of
     a duly constituted public authority.

                                      -5-
<PAGE>
 
     7.2  Obligation.  Each party agrees that it will exert its best efforts to
          ----------                                                          
ensure that Confidential Information will not be disclosed to any unaffiliated
third person, corporation or entity, except as may be required to grant
sublicenses as provided for in Section 4.1, or as may be required to effect a
product or price registration, or to qualify for the benefits of any health
insurance or similar program.  Furthermore, Vaxcel agrees not to disclose
Southern's microencapsulation processes and fabrication conditions as disclosed
by Zynaxis to Vaxcel to any affiliated person, corporation or entity without the
written consent of Southern.  Each party will advise all of its employees who
may have access to or knowledge of the Confidential Information of the parties'
obligations hereunder and will obtain written confidentiality agreements from
such employees.

                                 ARTICLE VIII
                        TECHNOLOGY DEVELOPED BY VAXCEL

     8.1  During the life of this Agreement, Vaxcel shall promptly disclose to
Zynaxis and Southern, in writing, all inventions or improvements, whether
patentable or not, hereinafter developed, acquired, or controlled by Vaxcel
and/or its sublicensees, if any, relating to the licensed Technology.  Such
inventions or improvements shall be included in this Agreement at no additional
cost, the Agreement then to extend and cover all such inventions or improvements
as though specifically enumerated herein as licensed Technology.

     8.2  Vaxcel acknowledges that pursuant to the Original License Agreement
Southern shall have the option of filing and prosecuting any patent applications
at its own expense upon such inventions or improvements.

     8.3  If Southern elects not to file and prosecute any such patent
applications on such inventions or improvements, then Zynaxis shall have the
option of filing and prosecuting patent applications at its own expense upon
those inventions or improvements.

     8.4  If Zynaxis elects not to file and prosecute any such patent
applications on such inventions or improvements, then Vaxcel shall have the
option of filing and prosecuting patent applications at its own expense upon
those inventions or improvements.  Title to any such patents shall be in
Southern and the UAB Research Foundation, but such patents shall be exclusively
licensed to Zynaxis under the terms of the Original License Agreement.

                                  ARTICLE IX
                                 MISCELLANEOUS

     9.1  Approvals and Similar Actions.  Where approval, acceptance, consent or
          ----------------------------- 
similar action is required or requested of a party under this Agreement, such
action shall not be unreasonably delayed or withheld.

                                      -6-
<PAGE>
 
     9.2  Binding Nature and Assignment.  This Agreement shall be binding on the
          -----------------------------  
parties and their respective successors and assigns.  However, no party may
assign its rights or delegate its obligations under this Agreement without the
prior written consent of the other parties, and any such attempted assignment
shall be null and void.

     9.3  Entire Agreement.  This Agreement, including any schedules or
          ----------------                                             
amendments attached to this Agreement, each of which is incorporated herein for
all purposes, constitutes the entire agreement between the parties with respect
to the subject matter of this Agreement as of the Effective Date and supersedes
any prior agreements or arrangements between the parties regarding the subject
matter of this Agreement.  This Agreement may be amended, modified or changed
only by a written instrument executed by the parties.

     9.4  Severability.  If any provision of this Agreement is declared or found
          ------------  
to be illegal, unenforceable or void, then the parties shall be relieved of all
obligations arising under such provision, but only to the extent that such
provision is illegal, unenforceable or void, it being the intent and agreement
of the parties that this Agreement shall be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable while
preserving its intent or, if that is not possible, by substituting therefor
another provision that is legal and enforceable and achieves the same objective.

     9.5  Waiver.  No delay or omission by any party to exercise any right or
          ------
power under this Agreement shall impair such right or power or be construed to
be a waiver thereof.  A waiver by any party of any of the covenants to be
performed by the other or any breach shall not be construed to be a waiver of
any succeeding breach or of any other covenant.  All remedies provided for in
this Agreement shall be cumulative and in addition to and not in lieu of any
other remedies available to any party at law, in equity or otherwise.

     9.6  Force Majeure.  Each party shall be excused from performance under
          -------------                                                     
this Agreement for any period and to the extent that it is prevented from
performing any action, in whole or in part, as a result of delays beyond its
reasonable control caused by the other party or by an act of God, war, civil
disturbance, court order, labor dispute, third party nonperformance, or other
cause beyond its reasonable control.  Such nonperformance shall not be a default
or a ground for termination of this Agreement.  Each party shall endeavor to
promptly remedy the cause of any such nonperformance.

     9.7  Governing Law.  This Agreement shall be governed by and construed in
          -------------                                                       
accordance with the laws, other than the choice of law rules, of the State of
Georgia.

     9.8  Notices.  Notices, requests and other communications required or
          -------                                                         
permitted hereunder shall be given in accordance with the applicable terms of
Section 13 of the Security Agreement dated December 6, 1996, between Cytrx
Corporation and Zynaxis.

                                      -7-
<PAGE>
 
     9.9  Counterparts.  This Agreement may be executed in several counterparts,
          ------------
all of which taken together shall constitute a single agreement between the
parties.

     9.10 Headings.  The article and section headings and the table of contents
          --------                                                             
used in this Agreement are for reference and convenience only and shall not
enter into the interpretation of this Agreement.

     9.11 Beneficiaries.  This Agreement is solely for the benefit of the
          -------------                                                  
parties and their successors and permitted assigns, and does not confer any
rights or remedies on any other person or entity.

     9.12 Applicable Laws.  The parties agree to comply with all applicable
          ---------------                                                  
laws, rules, regulations and other provisions enacted or promulgated by any
governmental authority with jurisdiction over the subject matter of this
Agreement relating to the subject matter of this Agreement.

                                      -8-
<PAGE>
 
     9.13 No Joint Venture.  This Agreement shall not create a partnership or
          ----------------                                                   
joint venture between the parties hereto nor give either party the right to act
on behalf of the other party except as explicitly stated herein.


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal as of the day and year first above written.



VAXCEL, INC.                            ZYNAXIS VACCINE                    
                                        TECHNOLOGIES, INC.
 
By: /s/ Paul J. Wilson                  By: /s/ Martyn Greenacre
   --------------------------              --------------------------
Name:   Paul J. Wilson                  Name:   Martyn Greenacre
     ------------------------                ------------------------
Title: President & CEO                  Title:  President
      -----------------------                 -----------------------

                                      -9-