10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-12465

CELL THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Washington	91-1533912
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

501 Elliott Avenue West, Suite 400 Seattle, Washington	98119
(Address of principal executive offices)	(Zip Code)

(206) 282-7100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at July 30, 2010
Common Stock, no par value	758,475,531

CELL THERAPEUTICS, INC.

TABLE OF CONTENTS

	PAGE
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2010 (unaudited) and December 31, 2009	3
Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2010 and 2009 (unaudited)	4
Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2010 and 2009 (unaudited)	5
Notes to Condensed Consolidated Financial Statements	6
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk	28
ITEM 4: Controls and Procedures	28
Report of Independent Registered Public Accounting Firm	30
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings	31
ITEM 1A: Risk Factors	34
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds	54
ITEM 3: Defaults Upon Senior Securities	54
ITEM 4: (Removed and Reserved)	54
ITEM 5: Other Information	54
ITEM 6: Exhibits	54
Signatures	56

CELL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	June 30, 2010			December 31, 2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	64,534		$	37,811
Prepaid expenses and other current assets		3,409			4,354
Total current assets		67,943			42,165
Property and equipment, net		3,507			3,430
Goodwill		17,064			17,064
Other assets		6,064			6,936
Total assets	$	94,578		$	69,595
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,187		$	7,297
Accrued expenses		9,003			14,807
Current portion of deferred revenue		—			80
Current portion of long-term obligations		785			1,312
7.5% convertible senior notes		10,158			—
4% convertible senior subordinated notes		38,515			40,363
Total current liabilities		64,648			63,859
Deferred revenue, less current portion		—			239
Long-term obligations, less current portion		1,179			1,861
7.5% convertible senior notes		—			10,102
5.75% convertible senior notes		11,880			11,677
Total liabilities		77,707			87,738
Commitments and contingencies
Common stock purchase warrants		12,255			626
Shareholders’ equity:
Common stock, no par value:
Authorized shares - 800,000,000
Issued and outstanding shares - 713,503,133 (unaudited) and 590,282,575 at June 30, 2010 and December 31, 2009, respectively		1,539,510			1,418,931
Accumulated other comprehensive loss		(7,667	)		(8,412	)
Accumulated deficit		(1,526,919	)		(1,429,083	)
Total CTI shareholders’ equity (deficit)		4,924			(18,564	)
Noncontrolling interest		(308	)		(205	)
Total shareholders’ equity (deficit)		4,616			(18,769	)
Total liabilities and shareholders’ equity	$	94,578		$	69,595

See accompanying notes.

3

CELL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenues:
License and contract revenue	$	299		$	20		$	319		$	40
Total revenues		299			20			319			40
Operating expenses, net:
Research and development		6,914			7,320			14,274			15,276
Selling, general and administrative		13,068			10,580			31,485			19,330
Restructuring charges		—			3,820			—			3,944
Gain on sale of investment in joint venture		—			—			—			(10,244	)
Total operating expenses, net		19,982			21,720			45,759			28,306
Loss from operations		(19,683	)		(21,700	)		(45,440	)		(28,266	)
Other income (expense):
Investment and other income, net		1			37			263			71
Interest expense		(776	)		(1,583	)		(1,563	)		(3,200	)
Amortization of debt discount and issuance costs		(219	)		(497	)		(434	)		(5,348	)
Foreign exchange gain (loss)		(825	)		54			(1,300	)		95
Debt conversion expense		(2,031	)		—			(2,031	)		—
Make-whole interest expense		—			—			—			(6,345	)
Gain on derivative liabilities, net		—			1,596			—			7,218
Gain on exchange of convertible notes		—			7,201			—			7,201
Equity loss from investment in joint venture		—			—			—			(1,204	)
Settlement expense, net		—			(3,198	)		—			(3,368	)
Other income (expense), net		(3,850	)		3,610			(5,065	)		(4,880	)
Net loss before noncontrolling interest		(23,533	)		(18,090	)		(50,505	)		(33,146	)
Noncontrolling interest		51			63			103			152
Net loss attributable to CTI		(23,482	)		(18,027	)		(50,402	)		(32,994	)
Gain on restructuring of preferred stock		—			—			—			2,116
Preferred stock dividends		—			(1	)		—			(24	)
Deemed dividends on preferred stock		(30,157	)		(9,398	)		(47,434	)		(9,648	)
Net loss attributable to CTI common shareholders	$	(53,639	)	$	(27,426	)	$	(97,836	)	$	(40,550	)
Basic and diluted net loss per common share	$	(0.08	)	$	(0.06	)	$	(0.15	)	$	(0.11	)
Shares used in calculation of basic and diluted net loss per common share		665,963			446,174			632,658			366,293

See accompanying notes.

4

CELL THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Six Months Ended June 30,
	2010			2009
Operating activities
Net loss	$	(50,402	)	$	(32,994	)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity-based compensation expense		15,346			1,909
Gain on sale of equity investment in joint venture		—			(10,244	)
Non-cash interest expense		434			5,348
Depreciation and amortization		966			948
Debt conversion expense		2,031			—
Non-cash gain on derivative liabilities, net		—			(7,218	)
Gain on exchange of convertible notes		—			(7,201	)
Equity loss from investment in joint venture		—			1,204
Noncontrolling interest		(103	)		(152	)
Other		(180	)		(63	)
Changes in operating assets and liabilities:
Restricted cash		—			6,640
Accounts receivable, net		—			991
Prepaid expenses and other current assets		818			(999	)
Other assets		(150	)		(202	)
Accounts payable		(2,655	)		518
Accrued expenses		(4,377	)		(9,412	)
Long-term obligations		(538	)		400
Other liabilities		(471	)		(178	)
Total adjustments		11,121			(17,711	)
Net cash used in operating activities		(39,281	)		(50,705	)
Investing activities
Purchases of property and equipment		(1,124	)		(275	)
Proceeds from the sales of property and equipment		82			—
Proceeds received from disposition of Zevalin to joint venture, net		—			6,844
Proceeds received from sale of investment in joint venture, net		—			15,075
Cash paid for acquisition of Zevalin		—			600
Net cash provided by (used in) investing activities		(1,042	)		22,244
Financing activities
Proceeds from issuance of Series 1 preferred stock, net of issuance costs		—			18,847
Proceeds from issuance of Series 3 preferred stock, net of issuance costs		27,951			—
Proceeds from issuance of Series 4 preferred stock, net of issuance costs		18,621			—
Proceeds from issuance of Series 5 preferred stock, net of issuance costs		19,861			—
Proceeds from issuance of common stock and warrants, net of issuance costs		—			18,966
Proceeds from exercise of Class A warrants		—			3,765
Cash paid for the exchange of convertible notes, net of transaction costs		—			(7,627	)
Payment of deemed dividends on conversion of preferred stock		—			(3,000	)
Payment of dividends on preferred stock		—			(111	)
Cash paid for repurchase of shares in connection with taxes on restricted stock vesting		(729	)		—
Other		3			(133	)
Net cash provided by financing activities		65,707			30,707
Effect of exchange rate changes on cash and cash equivalents		1,339			(338	)
Net increase in cash and cash equivalents		26,723			1,908
Cash and cash equivalents at beginning of period		37,811			10,072
Cash and cash equivalents at end of period	$	64,534		$	11,980
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	1,596		$	11,293
Cash paid for taxes	$	—		$	—
Supplemental disclosure of noncash financing and investing activities
Conversion of Series 1 preferred stock to common stock	$	—		$	18,537
Conversion of Series 3 preferred stock to common stock	$	27,761		$	—
Conversion of Series 4 preferred stock to common stock	$	18,621		$	—
Conversion of Series 5 preferred stock to common stock	$	19,464		$	—
Exchange of 4% convertible senior subordinated notes for common stock	$	1,848		$	—
Exchange of Series A 3% convertible preferred stock for Series F preferred stock	$	—		$	151
Exchange of Series B 3% convertible preferred stock for Series F preferred stock	$	—		$	1,713
Exchange of Series C 3% convertible preferred stock for Series F preferred stock	$	—		$	3,221
Issuance of Series F preferred stock for Series A, B and C convertible preferred stock	$	—		$	3,931
Conversion of Series B 3% convertible preferred stock to common stock	$	—		$	2,317
Conversion of Series F preferred stock to common stock	$	—		$	3,866
Issuance of common stock in exchange for convertible notes	$	—		$	35,193
Conversion of 10% convertible senior notes due 2011 to common stock	$	—		$	18,000
Conversion of 9% convertible senior notes to common stock	$	—		$	5,250
Issuance of common stock in exchange for Series A 3% convertible preferred stock	$	—		$	688
Issuance of common stock in exchange for Series D 7% convertible preferred stock	$	—		$	1,793

See accompanying notes.

5

CELL THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Cell Therapeutics, Inc., or CTI or the Company, focuses on the development, acquisition and commercialization of drugs for the treatment of cancer. Our principal business strategy is focused on cancer therapeutics, an area with significant market opportunity that we believe is not adequately served by existing therapies. Subsequent to the closure of our Bresso, Italy operations in September 2009, our operations are now primarily conducted in the United States. During 2008, we had one approved drug, Zevalin^® (ibritumomab tiuxetan), or Zevalin, which we acquired in 2007, generating product sales. We contributed Zevalin to a joint venture, RIT Oncology, LLC, or RIT Oncology, upon its formation in December 2008 and in March 2009 we finalized the sale of our 50% interest in RIT Oncology to the other member, Spectrum Pharmaceuticals, Inc., or Spectrum. All of our current product candidates, including pixantrone, OPAXIO and brostallicin, are under development.

We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical products require approval from, and are subject to, ongoing oversight by the Food and Drug Administration, or FDA, in the United States, by the European Agency for Evaluation of Medicinal Products, or EMEA, in Europe and by comparable agencies in other countries. Obtaining approval for a new therapeutic product is never certain, may take many years and involves expenditure of substantial resources.

Basis of Presentation

The accompanying unaudited financial information of CTI as of June 30, 2010 and for the three and six months ended June 30, 2010 and 2009 has been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three and six month periods ended June 30, 2010 are not necessarily indicative of the results that may be expected for the entire year.

Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or SEC. These unaudited financial statements and the related notes should be read in conjunction with our audited annual financial statements for the year ended December 31, 2009 included in our Annual Report on Form 10-K.

The condensed consolidated balance sheet at December 31, 2009 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of CTI and its wholly-owned subsidiaries, which include CTI Corporate Development, Inc., Systems Medicine LLC, or SM, CTI Commercial LLC, and CTI Life Sciences Limited (from the date of formation in March 2009). CTI Life Sciences Limited opened a branch in Italy in December 2009. We also retain ownership of our branch, Cell Therapeutics Inc. – Sede Secondaria, or CTI (Europe); however, we ceased operations related to this branch in September 2009. In addition, CTI Corporate Development, Inc. was liquidated in the fourth quarter of 2009.

6

As of June 30, 2010, we also had a 69% interest in our majority-owned subsidiary, Aequus Biopharma, Inc., or Aequus. In accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 810, Consolidation, the noncontrolling interest in Aequus (previously shown as minority interest) is reported below net loss in noncontrolling interest in the condensed consolidated statement of operations and shown as a component of equity in the condensed consolidated balance sheet.

Additionally, we held a 50% interest in RIT Oncology from the date of its formation in December 2008 to the sale of our interest in March 2009, which we accounted for using the equity method of accounting.

All intercompany transactions and balances are eliminated in consolidation.

Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these financial statements. However, we have incurred losses since inception and expect to generate losses for the next few years primarily due to research and development costs for pixantrone, OPAXIO and brostallicin. Our available cash and cash equivalents are $64.5 million as of June 30, 2010 and subsequent to period end, in July 2010, we (i) made a cash payment of $39.3 million to repay the outstanding balance, including accrued interest, to fully retire our outstanding 4% convertible senior subordinated notes, or 4% Notes, and (ii) raised $4.06 million in gross proceeds from the issuance of 4,060 shares of our Series 6 preferred stock and warrants to purchase up to 5.8 million shares of our common stock (see Note 8, Subsequent Events).

We do not expect that our existing cash and cash equivalents, including the cash received from the issuance of our Series 6 preferred stock and warrants, will be sufficient to fund our presently anticipated operations beyond the fourth quarter of 2010. This raises substantial doubt about our ability to continue as a going concern.

We have commenced cost saving initiatives to reduce operating expenses, including the reduction of employees related to planned commercial pixantrone operations and we continue to seek additional areas for cost reductions. However, we will need to raise additional funds and are currently exploring alternative sources of equity or debt financing. We may seek to raise such capital through public or private equity financings, partnerships, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing.

We have called an annual meeting of shareholders that is scheduled to be held on September 16, 2010 to ask our shareholders to approve proposals, including a proposal to increase our authorized shares of common and preferred stock from 810,000,000 to 1,210,000,000 shares. If our shareholders do not approve this proposal, then we will not be able to issue shares of our common stock or securities convertible for shares of our common stock, and thus, may not be able to raise additional capital. If our shareholders approve this proposal, our Board of Directors would have the option to issue such shares depending on our financial needs and the market opportunities if deemed to be in the best interest of shareholders. However, additional funding may not be available on favorable terms or at all. If additional funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain additional capital when needed, we may be required to delay, scale back, or eliminate some or all of our research and development programs and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

We have applied for the new Qualifying Therapeutic Discovery Project Credit related to life science companies, which may allow us to receive grants in lieu of tax credits for years 2009 and 2010.

7

Value Added Tax Receivable

Our European operations were subject to a value added tax, or VAT, which is usually applied to all goods and services purchased and sold throughout Europe. The VAT receivable is approximately $5.2 million and $6.3 million as of June 30, 2010 and December 31, 2009, respectively, of which $5.1 million and $5.9 million is included in other assets and $0.1 million and $0.4 million is included in prepaid expenses and other current assets as of June 30, 2010 and December 31, 2009, respectively. This receivable balance relates to our Italian operations and typically has a three year collection period. We review our VAT receivable balance for impairment whenever events or changes in circumstances indicate the carrying amount might not be recoverable.

On April 14, 2009 and December 21, 2009, the Italian Tax Authority, or ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003 and 2005, respectively. On June 25, 2010, the ITA issued notices of assessment to CTI (Europe) for the years 2006 and 2007 based on similar findings of the 2003 and 2005 assessments. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, or approximately $0.7 million, $6.7 million, $3.1 million and $1.0 million as of June 30, 2010, respectively. On July 14, 2010, the ITA issued a notice of deposit payment to CTI (Europe) based on the 2005 assessment including interest and collection fees for an amount of €0.9 million, or approximately $1.2 million, payable in the third quarter 2010. We successfully filed a petition with the Italian Tax Court for suspension of the 2005 notice of deposit payment. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We intend to vigorously defend ourselves against the assessments and have requested a court hearing on procedural grounds and merits of the case. The Italian Tax Court has scheduled a hearing on September 28, 2010 regarding the 2005 assessment.

Net Loss Per Share

Basic net loss per common share is calculated based on the net loss attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted net loss per common share assumes the conversion of all dilutive convertible securities, such as convertible debt and convertible preferred stock using the if-converted method, and assumes the exercise or vesting of other dilutive securities, such as options, warrants and share awards using the treasury stock method. As of June 30, 2010 and 2009, options, warrants, unvested share awards and rights, convertible debt and convertible preferred stock aggregating 47.6 million and 33.0 million common share equivalents, respectively, prior to the application of the treasury stock method for options and warrants, are not included in the calculation of diluted net loss per share as they are anti-dilutive.

New Accounting Standards

In February 2010, the FASB issued amended guidance on subsequent events to alleviate potential conflicts between FASB guidance and SEC requirements. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and we adopted these new requirements during the first quarter of 2010. The adoption of this guidance did not have a material impact on our financial statements.

In April 2010, the FASB issued guidance on the milestone method for revenue recognition purposes. Previously, definitive guidance on when the use of the milestone method was appropriate did not exist. This guidance provides a framework of the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. This guidance is effective on a prospective basis for milestones achieved in fiscal years and interim periods within those years, beginning on or after June 15, 2010 with early adoption permitted. We do not anticipate the adoption of this guidance will have a material impact on our financial statements.

Reclassifications

Certain prior year items have been reclassified to conform to current year presentation.

8

2. Comprehensive Loss

Comprehensive loss is comprised of net loss and other comprehensive income or loss. Our other comprehensive income or loss includes unrealized gains and losses on our securities available-for-sale and certain net exchange gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries not recorded in the statement of operations. Total comprehensive loss consisted of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net loss before noncontrolling interest	$	(23,533	)	$	(18,090	)	$	(50,505	)	$	(33,146	)
Foreign currency translation gain (loss)		455			(246	)		745			(454	)
Net unrealized gain on securities available-for-sale		—			—			—			1
Comprehensive loss before noncontrolling interest		(23,078	)		(18,336	)		(49,760	)		(33,599	)
Noncontrolling interest		51			63			103			152
Comprehensive loss attributable to CTI	$	(23,027	)	$	(18,273	)	$	(49,657	)	$	(33,447	)

As of June 30, 2010 and December 31, 2009, cumulative foreign currency translation adjustments accounted entirely for the ending balances of accumulated other comprehensive loss.

3. Convertible Notes

4% Convertible Senior Subordinated Notes

In May 2010, we entered into exchange agreements with certain holders of our 4% Notes pursuant to which we issued approximately 4.3 million shares of common stock, upon conversion of the 4% notes as defined in ASC 470-20, Debt with Conversion and Other Options, in exchange for $1.8 million aggregate outstanding principal amount of our 4% Notes. The transactions were accounted for as induced conversions since, for the purpose of ASC 470-20, the issuance of the common stock effectively resulted in the change to the conversion privileges provided in the terms of our 4% Notes at issuance. We recorded $2.0 million in debt conversion expense for the three and six months ended June 30, 2010.

In May 2010, we delivered a notice of termination of the exchange agreements to each of the holders party to the exchange agreements.

In July 2010, the remaining outstanding amount of our 4% Notes reached maturity and we made a cash payment of $39.3 million to repay the outstanding balance, including accrued interest.

9

4. Restructuring Activities

Italian Operations

In September 2009, we closed our Bresso, Italy operations. These operations were used primarily for pre-clinical research and were underutilized due to our current business model, which is focused on the development of late-stage compounds and their commercialization. We have recorded restructuring charges related to this closure as discussed further below in accordance with ASC 420, Exit or Disposal Cost Obligations.

In May 2009, we entered into a severance agreement with the unions representing the employees of our Bresso, Italy operations. Employee separation costs associated with the reduction in force primarily related to severance payments that were initially scheduled to be made over 42 months, with the majority of these payments to be made through the first 15 months. In June 2010, we made a lump sum payment to satisfy all outstanding obligations under the employee severance agreement.

In addition, we entered into separate severance or termination agreements with all of our Bresso-based scientific directors. All severance payments to our scientific directors have been made as of June 30, 2010. For the three and six months ended June 30, 2010, we did not incur any additional restructuring charges related to the closure of the Bresso operations. While we cannot predict additional amounts, if any, we do not expect to have material adjustments to this expense.

The following table summarizes the changes in the liability for restructuring activities during the six months ended June 30, 2010 (in thousands):

	Employee Termination Costs
Balance at December 31, 2009	$	1,531
Foreign currency adjustments		(183	)
Cash payments		(1,348	)
Balance at June 30, 2010	$	—

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5. Preferred Stock

Issuance of Series 4 Preferred Stock

In March 2010, we entered into a securities purchase agreement for the issuance of 20,000 shares of our Series 4 preferred stock, which was convertible into 40.0 million shares of our common stock, and warrants to purchase up to 20.0 million shares of our common stock for gross proceeds of $20.0 million. Issuance costs related to this transaction were $1.4 million. In April 2010 at the date of closing, all 20,000 shares of our Series 4 preferred stock were converted into 40.0 million shares of our common stock.

Each share of our Series 4 preferred stock was entitled to a liquidation preference equal to the stated value of such share of our Series 4 preferred stock plus any accrued and unpaid dividends. Our Series 4 preferred stock was not entitled to dividends except to share in any dividends actually paid on our common stock or any pari passu or junior securities. It was convertible into our common stock, at the option of the holder, at a conversion price of $0.50 per share, subject to a 4.99% blocker provision. A holder of our Series 4 preferred stock could elect to increase the blocker provision to 9.99% by providing us with 61 days’ prior notice. Our Series 4 preferred stock did not have voting rights except for limited protective provisions and except as is otherwise required by law.

The warrants have an exercise price of $0.6029 per share of our common stock, are exercisable six months and one day after the date of issuance and expire four years and one day after the date of issuance. As the warrants include a redemption feature that may be triggered upon a certain liquidation event that is outside of our control, we classified these warrants as mezzanine equity. We estimated the $5.6 million fair value of the warrants using the Black-Scholes pricing model.

Upon conversion of our Series 4 preferred stock, we recognized $15.5 million in deemed dividends on preferred stock related to the transaction, including $5.6 million resulting from the allocation of net proceeds to the warrants and $9.9 million related to the beneficial conversion feature on the 20,000 shares of our Series 4 preferred stock as the stock was converted immediately.

Issuance of Series 5 Preferred Stock

In May 2010, we entered into a securities purchase agreement for the issuance of 21,000 shares of our Series 5 preferred stock, which was convertible into 52.5 million shares of our common stock, and warrants to purchase up to 26.3 million shares of our common stock for gross proceeds of $21.0 million. Issuance costs related to this transaction were $1.5 million, including $0.2 million related to the placement agent warrants as discussed below. In May 2010 at the date of closing, all 21,000 shares of our Series 5 preferred stock were converted into 52.5 million shares of our common stock.

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Each share of our Series 5 preferred stock was entitled to a liquidation preference equal to the stated value of such share of our Series 5 preferred stock plus any accrued and unpaid dividends. Our Series 5 preferred stock was not entitled to dividends except to share in any dividends actually paid on our common stock or any pari passu or junior securities. It was convertible into our common stock, at the option of the holder, at a conversion price of $0.40 per share, subject to a 4.99% blocker provision. A holder of Series 5 preferred stock could elect to increase the blocker provision to 9.99% by providing us with 61 days’ prior notice. In addition, if 1,000 or less shares of Series 5 preferred stock are outstanding, all outstanding shares of Series 5 preferred stock automatically convert into shares of common stock. Our Series 5 preferred stock did not have voting rights except for limited protective provisions and except as otherwise required by law.

The warrants have an exercise price of $0.50 per share of our common stock and are exercisable six months and one day after the date of issuance and expire four years, six months and one day after the date of issuance, provided that the exercisability of the warrants is subject to, and conditioned upon our receipt of shareholder approval after the date of the prospectus supplement relating to the offering of an amendment to its amended and restated articles of incorporation to increase the authorized shares of common stock available for issuance thereunder by 400 million shares or our notification to holders of the warrants that shares of common stock have become available and are reserved for issuance upon exercise of the warrants. As the warrants include a redemption feature that may be triggered upon a certain liquidation event that is outside of our control, we classified these warrants as mezzanine equity. We estimated the $6.0 million fair value of the warrants using the Black-Scholes pricing model.

Upon conversion of our Series 5 preferred stock, we recognized $14.6 million in deemed dividends on preferred stock related to the transaction, including $6.0 million resulting from the allocation of net proceeds to the warrants and $8.6 million related to the beneficial conversion feature on the 21,000 shares of our Series 5 preferred stock as the stock was converted immediately.

In connection with the offering of our Series 5 preferred stock, we also issued warrants to purchase 1.1 million shares of our common stock to the placement agent which are classified in mezzanine equity due to the same redemption feature described above. The warrants were estimated to have a fair value of $0.2 million using the Black-Scholes pricing model. These warrants have an exercise price of $0.50 per share and are exercisable after six months and one day after the date of issuance and expire five years after the date of issuance, provided that the exercisability of the warrants is subject to, and conditioned upon, our receipt of the shareholder approval or notification described above.

6. Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense for the three and six months ended June 30, 2010 and 2009, which was allocated as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Research and development	$	1,142	$	157	$	2,154	$	342
Selling, general and administrative		6,453		1,192		13,192		1,567
Stock-based compensation expense included in operating expenses	$	7,595	$	1,349	$	15,346	$	1,909

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For the three and six months ended June 30, 2010, we incurred stock-based compensation expense due to the following types of awards (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
December 2009 performance awards	$	6,777	$	—	$	13,954	$	—
Restricted stock		783		1,247		1,321		1,719
Options		35		102		71		190
Total stock-based compensation expense	$	7,595	$	1,349	$	15,346	$	1,909

7. Legal Proceedings

On January 22, 2007, we filed a complaint in King County Washington Superior Court against The Lash Group, Inc. (“Lash”) and Documedics Acquisition Co., Inc., our former third-party reimbursement expert for TRISENOX, seeking recovery of damages, including losses incurred by us in connection with our investigation, defense and settlement of claims by the United States concerning Medicare reimbursement for TRISENOX and other claims. On February 28, 2007, Lash removed the case to U.S. District Court in the Western District of Washington. On June 19, 2008, the trial judge dismissed our claims and we filed a timely notice of appeal in the Ninth Circuit Court of Appeals. An appeal hearing was held on August 31, 2009, and on November 18, 2009, the Ninth Circuit reversed the trial court and held that the False Claims Act (“FCA”) did not preclude us from seeking recovery and bringing claims against Lash for indemnification under our Service Agreement based upon its acts that gave rise to the Government’s FCA and other claims. On December 1, 2009, Lash filed a petition for rehearing with the Ninth Circuit Court of Appeals, which was formally denied on January 6, 2010. The case has been remanded for trial in the District Court. On April 30, 2010, the District Court denied a motion by Lash to strike our supplemental damages disclosure, and granted our motion for leave to amend our complaint to more fully address our claims for supplemental and independent damages. On May 21, 2010, the Court issued a minute order setting trial and related dates. On May 24, 2010, Lash filed its answer to the amended complaint and asserted counterclaims for contractual indemnification, common law indemnification and contribution, and declaratory relief. On June 3, 2010, Lash filed a motion to bifurcate the trial to address in the first phase only its assertion that our claims are barred due to FCA liability. We opposed the motion, and on June 10, 2010, we filed our own motion to strike Lash’s affirmative defense based on its FCA liability claim. The case is currently scheduled for trial on September 6, 2011. There is no guarantee that we will prevail at trial.

On December 23, 2008, CONSOB sent a notice (record no. 9071933) to us requesting that we issue (i) immediately, a press release providing, among other things, information about our debt restructuring plan, the current state of compliance with the relevant covenants regulating our debt and the equity line of credit agreement we entered into with Midsummer Investment Ltd. on July 29, 2008, and (ii) by the end of each month and starting from the month of December 2008, a press release providing certain information relating to our management and financial situation, updated to the previous month, or the Monthly CONSOB Press Release. On July 31, 2009, CONSOB sent us a notice asserting three violations of the provisions of Section 114, paragraph 5 of the Italian Legislative Decree no. 58/98, namely: (a) the non-disclosure without delay of the press release mentioned under previous point (i) and the subsequent incomplete disclosure of the relevant information through the press releases dated January 9 and 13, 2009; (b) the non-disclosure of the Monthly CONSOB Press Release in December 2008; and (c) the incomplete disclosure of the Monthly CONSOB Press Release in January 2009. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/1998 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, applicable to each one of the three asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on August 28, 2009 (within 30 days of July 31, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On May 5, 2010, CONSOB (x) notified us that it has begun the preliminary investigation for its decision on these administrative proceedings and (y) provided us with a preliminary investigation report in reply to our defenses submitted on August 28, 2009. On June 4, 2010 (within 30 days of May 5, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules), we submitted further defenses that CONSOB will have to evaluate before imposing any possible administrative sanctions.

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Separately, on December 10, 2009, CONSOB sent us a notice (record no. RM9102185) claiming two violations of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information then reported, at CONSOB’s request, in the press release disseminated on December 19, 2008 and March 23, 2009. Such information concerned, respectively: (i) the conversion by BAM of 9.66% notes into shares of common stock that occurred between October 24 and November 19, 2008; and (ii) the contents of the opinion expressed, with respect to our 2008 financial statements, by the auditor Stonefield Josephson, Inc. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58.1998 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, applicable to each one of the two asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on January 8, 2010 (within 30 days of December 10, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On July 12, 2010, CONSOB (a) notified us that it has begun the preliminary investigation for its decision on these administrative proceedings and (b) provided us with a preliminary investigation report in reply to our defenses submitted on January 8, 2010. We are planning to submit (within 30 days of July 12, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules) further defenses that CONSOB will have to evaluate before imposing any possible administrative sanctions.

On April 14, 2009 and December 21, 2009, the Italian Tax Authority, or ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003 and 2005, respectively. On June 25, 2010, the ITA issued notices of assessment to CTI (Europe) for the years 2006 and 2007 based on similar findings of the 2003 and 2005 assessments. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, or approximately $0.7 million, $6.7 million, $3.1 million and $1.0 million as of June 30, 2010, respectively. On July 14, 2010, the ITA issued a notice of deposit payment to CTI (Europe) based on the 2005 assessment including interest and collection fees for an amount of €0.9 million, or approximately $1.2 million, payable in the third quarter 2010. We successfully filed a petition with the Italian Tax Court for suspension of the 2005 notice of deposit payment. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We intend to vigorously defend ourselves against the assessments and have requested a court hearing on procedural grounds and merits of the case. The Italian Tax Court has scheduled a hearing on September 28, 2010 regarding the 2005 assessment.

On August 3, 2009, Sicor Italia, or Sicor, filed a lawsuit in the Court of Milan to compel us to source pixantrone from Sicor according to the terms of a supply agreement executed between Sicor and NovusPharma on October 4, 2002. A hearing was held on January 21, 2010 to discuss preliminary matters and set a schedule for future filings and hearings. The parties filed the authorized pleadings and submitted to the Court their requests for evidence. The next hearing date regarding admissions of evidence and testimony is scheduled for November 11, 2010. Sicor alleges that the agreement was not terminated according to its terms. We assert that the supply agreement in question was properly terminated and that we have no further obligation to comply with its terms. No estimate of a loss, if any, can be made at this time in the event that we do not prevail.

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On March 12, 2010, a purported securities class action complaint was filed in the United States District Court for the Western District of Washington against us and certain of our officers and directors, styled Cyril Sabbagh, individually and on behalf of all others similarly situated v. Cell Therapeutics, Inc., Dr. James A. Bianco, M.D., and Dr. Jack W. Singer (Case No. 2:10-sv-00414), or the Sabbagh action. On March 19, 2010, a substantially similar class action complaint was filed in the same court, styled Michael Laquidari, individually and on behalf of all others similarly situated v. Cell Therapeutics, Inc., Dr. James A. Bianco, M.D., and Dr. Jack W. Singer (Case No. 2:10-cv-00480), or the Laquidari action. On March 31, 2010, a third substantially similar class action complaint was filed in the same court, styled William Snyder, individually and on behalf of all others similarly situated v. Cell Therapeutics, Inc., James A. Bianco, Phillip M. Nudelman, Louis A. Bianco, John H. Bauer, Richard L. Love, Mary O. Mundinger, Jack W. Singer, Frederick W. Telling and Rodman & Renshaw, LLC (Case No. 2:10-cv-00559), or the Snyder action. The securities actions are pending before Judge Marsha Pechman in the Western District of Washington. The securities complaints allege that the defendants violated the federal securities laws by making certain alleged false and misleading statements. The plaintiffs in the Sabbagh and Laquidari actions seek unspecified damages on behalf of a putative class of purchasers of our securities from May 5, 2009 through February 8, 2010. The plaintiffs in the Snyder action seek unspecified damages on behalf of a putative class of purchasers of our securities from May 5, 2009 through March 19, 2010, including purchasers of securities issued pursuant to or traceable to our July 22, 2009 public offering. On May 11, 2010, motions were filed to consolidate the securities actions and to appoint lead plaintiff and lead plaintiffs’ counsel. The motions are currently pending. We believe that the securities actions are without merit and intends to defend them vigorously.

On April 1, 2010, a shareholder derivative complaint was filed in the United States District Court for the Western District of Washington, derivatively on behalf of us against the members of its Board of Directors, styled Shackleton v. John A. Bauer, James A. Bianco, Vartan Gregorian, Richard L. Love, Mary O’Neil Mundinger, Phillip M. Nudelman, Jack W. Singer, and Frederick W. Telling (Case No. 2:10-cv-564). On April 5, 2010, and April 13, 2010, substantially similar derivative actions were filed in the same court, styled, respectively, Marbury v. James A. Bianco, et al. (Case No. 2:10-cv-00578) and Cyrek v. John H. Bauer, et al. (Case No. 2:10-cv-00625). The derivative actions are also pending before Judge Marsha Pechman. The derivative complaints allege that the defendants breached their fiduciary duties to the Company under Washington law by making or failing to prevent the disclosure of certain alleged false and misleading statements. The allegations in the derivative actions are substantially similar to those in the securities actions. On May 10, 2010, pursuant to the parties’ stipulation, the Court consolidated these three shareholder derivative actions and appointed the law firms Robbins Umeda LLP and Federman & Sherwood as co-lead counsel for derivative plaintiffs.

On June 1, 2010, a fourth related shareholder derivative action was filed in the Western District of Washington, styled Souda v. John H. Bauer et. al. (Case No 2:10-cv-00905). It was subsequently transferred to Judge Pechman and consolidated with the consolidated derivative actions. Plaintiff Souda has filed a motion to reconsider the portion of the Court’s Order dated May 10, 2010, appointing Robbins Umeda and Federman & Sherwood as co-lead derivative counsel. Souda’s motion is currently pending.

On July 27, 2010, a fifth related shareholder derivative action, styled Bohland v. John H. Bauer et al. (Case No. 2:10-cv-1213), was filed in the Western District of Washington and assigned to Judge John C. Coughenour. Plaintiff Bohland has filed a motion to consolidate the Bohland action with the consolidated derivative actions and to reconsider the portion of the Court’s Order dated May 10, 2010, appointing Robbins Umeda and Federman & Sherwood as co-lead derivative counsel. Bohland’s motion is currently pending.

For the shareholder derivative complaints, no estimate of a loss, if any, can be made at this time in the event that we do not prevail.

On July 28, 2010, the former General Manager of our Italian Branch office, CTI (Europe), initiated a Court proceeding against the Company to challenge the former General Manager’s dismissal which occurred in 2009. The former General Manager’s claims are based on the alleged unlawfulness and lack of justifications of his dismissal. The former General Manager alleges that he has suffered and requests compensation for damages ranging up to approximately €0.7 million, plus the costs of the proceedings. The first hearing is scheduled for December 9, 2010. CTI is entitled to file a brief regarding its defenses any time prior to 10 days before the hearing. Management believes that the allegations in the claim are without merit and intend to defend the claim vigorously. At this time, we are not able to make a determination whether the likelihood of an unfavorable outcome is probable or remote.

In addition to the litigation discussed above, we are from time to time subject to legal proceedings and claims arising in the ordinary course of business, some of which may be covered in whole or in part by insurance.

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8. Subsequent Events

Series 6 Preferred Stock

In July 2010, we entered into a securities purchase agreement, pursuant to which we agreed to issue in a private offering an aggregate of 4,060 shares of our Series 6 preferred stock, initially convertible into 11.6 million shares of our common stock and warrants to purchase up to 5.8 million shares of our common stock for gross proceeds of $4.06 million. The warrants have an exercise price of $0.42 per share of our common stock. The warrants are exercisable at any time on or after the six month and one day anniversary of the date of initial issuance and on or before the four year, six month and one day anniversary of the date of the initial issuance, provided that the warrants will not be exercisable unless and until (i) we amend our amended and restated articles of incorporation to increase the authorized shares of common stock available for issuance thereunder by 400 million shares after receiving shareholder approval of such amendment or (ii) we notify the holders of the warrants that shares of common stock have otherwise become available and are reserved for issuance upon exercise of the warrants. In the event that shares of common stock otherwise become available for reservation following the initial issuance of the warrants, we will reserve all or a portion of such shares for issuance upon exercise of the warrants, provided that (a) the foregoing obligation does not apply to shares of common stock reserved pursuant to our equity incentive plans, (b) if shares of common stock must be reserved pursuant to the terms of any outstanding warrants to purchase common stock issued on or about the closing date of our Series 5 preferred stock financing, shares must be reserved for issuance upon the exercise of those warrants in priority to the reservation of shares for issuance upon the exercise of the warrants issued pursuant to the Series 6 preferred stock financing and (c) any such shares that become available shall be reserved pro rata among all warrants originally issued on or about the closing date of our Series 6 preferred stock financing (or in exchange or substitution thereof) and any other warrants that otherwise have a substantially similar reservation provision.

All 4,060 shares of the Series 6 preferred stock were converted into 11.6 million shares of our common stock upon closing of the transaction in July 2010.

Each share of Series 6 preferred stock is entitled to a liquidation preference equal to the stated value plus any accrued and unpaid dividends before the holders of our common stock or any other junior securities receive any payments upon such liquidation. The Series 6 preferred stock is not entitled to dividends except to share in any dividends actually paid on our common stock or any pari passu or junior securities. The Series 6 preferred stock is convertible into common stock, at the option of the holder, at an initial conversion price of $0.35 per share, subject to a 4.99% blocker provision. A holder of Series 6 preferred stock may elect to increase the blocker provision to 9.99% by providing 61 days’ prior notice. The Series 6 preferred stock will vote with the common stock on an as-converted basis.

Warrant Exchange

In July 2010, we entered into a privately negotiated exchange agreement with a certain investor to exchange existing warrants to purchase 4.32 million shares of common stock at an exercise price of $1.18 per share for warrants to purchase the same number of shares of common stock at an exercise price of $0.42 per share. The terms of the warrants issued upon exchange are substantially similar to the warrants issued in the Series 6 preferred stock transaction.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including the following discussion contains forward-looking statements, which involve risks and uncertainties and should be read in conjunction with the Condensed Consolidated Financial Statements and the related Notes included in Part I, Item I of this Quarterly Report on Form 10-Q. When used in this Quarterly Report on Form 10-Q, terms such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of those terms or other comparable terms are intended to identify such forward-looking statements. Such statements, which include statements concerning product sales, research and development expenses, selling, general and administrative expenses, additional financings and additional losses, are subject to known and unknown risks and uncertainties, including, but not limited to, those discussed below and elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, particularly in “Factors Affecting Our Operating Results and Financial Condition,” that could cause actual results, levels of activity, performance or achievement to differ significantly from those projected. Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We will not update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or changes in our expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

OVERVIEW

We develop, acquire and commercialize novel treatments for cancer. Our goal is to build a leading biopharmaceutical company with a diversified portfolio of proprietary oncology drugs. Our research, development, acquisition and in-licensing activities concentrate on identifying and developing new, less toxic and more effective ways to treat cancer.

We are currently focusing our efforts on pixantrone, OPAXIO™, brostallicin and novel bisplatinum analogues. As of June 30, 2010, we had incurred aggregate net losses of approximately $1.5 billion since inception. Unless we execute a partnership agreement for pixantrone with terms adequate to cover our operating expenses, we expect to generate losses from operations for the next few years.

Pixantrone

We are developing pixantrone, a novel aza-anthracenedione, for the treatment of non-Hodgkin’s lymphoma, or NHL, and various other hematologic malignancies, and solid tumors. Pixantrone was studied in our EXTEND, or PIX301, clinical trial, which was a phase III single-agent trial of pixantrone for patients with relapsed, refractory aggressive NHL who received two or more prior therapies and who were sensitive to treatment with anthracyclines. In November 2008, we announced that this trial achieved the primary efficacy endpoint. Based on the outcome of the EXTEND trial and on the basis of pre-New Drug Application, or NDA, communication we received from the Food and Drug Administration, or FDA, relating to this phase III trial, we began a rolling NDA submission to the FDA in April 2009. We completed the submission in June 2009.

The FDA completed its inspection of the facility at NerPharMa, S.r.l. (a pharmaceutical manufacturing company belonging to Nerviano Medical Sciences S.r.l., in Nerviano, Italy), or NerPharMa, which has agreed to manufacture our drug, pixantrone, and found the site in compliance and acceptable for continued manufacturing of the drug product in early March 2010.

On March 22, 2010, the FDA’s Oncologic Drugs Advisory Committee, or ODAC, panel voted unanimously that the clinical trial data was not adequate to support approval of pixantrone for this patient population. In early April 2010, we received a Complete Response Letter from the FDA regarding our NDA for pixantrone and recommending that we design and conduct an additional trial to demonstrate the safety and effectiveness of pixantrone. Based on the FDA’s March 22, 2010 ODAC presentation, which provided ODAC and us with alternative options to consider to make investigational drugs available to patients if drugs need to be studied further prior to approval, we will evaluate the establishment of an expanded access program for pixantrone. On August 3, 2010, we filed for a Special Protocol Assessment, or SPA, with the FDA for the design of our additional clinical study of pixantrone. We have scheduled a meeting with the FDA in August 2010 to review the Complete Response Letter and the proposed additional clinical study of pixantrone.

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The results of the EXTEND trial showed that patients randomized to treatment with pixantrone achieved a significantly higher rate of confirmed and unconfirmed complete remissions compared to patients treated with standard chemotherapy, had a significantly increased overall response rate and experienced a statistically significant improvement in median progression free survival. Pixantrone was safely administered at the proposed dose and schedule in the EXTEND clinical trial in heavily pre-treated patients. The most common (incidence greater than or equal to 10%) grade  ³/4 adverse events reported for pixantrone-treated subjects across studies were neutropenia and leukopenia. Use of growth factor support was minimal. Other common adverse events (any grade) included infection, anemia, leukopenia, thrombocytopenia, asthenia, pyrexia and cough. Overall, the incidence of grade 3 or greater cardiac adverse events was 7% (5 patients) on the pixantrone arm and 2% (1 patient) on the comparator arm. There were an equal number of deaths due to an adverse event in both the pixantrone and comparator arm.

We also conducted the RAPID, or PIX203, phase II clinical trial study (CHOP-R vs. CPOP-R) in which pixantrone is substituted for doxorubicin in the CHOP-R regimen compared to the standard CHOP-R regimen in patients with aggressive NHL. An interim analysis of the RAPID trial, reported in July 2007, showed that to date, a majority of patients on both arms of the study achieved a major objective anti-tumor response (complete response or partial response). Patients on the pixantrone arm of the study had clinically significant less left ventricular ejection fraction (LVEF) drops, infections, and thrombocytopenia (a reduction in platelets in the blood), as well as significant reduction in febrile neutropenia. In early 2008, we closed enrollment on the RAPID trial because we had adequate sample size to demonstrate differences in cardiac events and other clinically relevant side effects between pixantrone and doxorubicin. The preliminary analysis of LVEF by Multigated Acquisition Scan, or MUGA, suggests that the patients in the pixantrone regimen (CPOP-R) experienced a lower incidence of >20% LVEF decline (2% vs. 13%) than patients in the doxorubicin control arm (CHOP-R). In addition, the preliminary analysis also suggests that grade  ³/4 reductions in LVEF or symptomatic Congestive Heart Failure, or CHF, were lower in the pixantrone arm (CPOP-R) with no patients (0%) developing CHF in the pixantrone arm (CPOP-R) compared to 5% of the patients in the control arm (CHOP-R). Further the preliminary analysis suggests that grade  ³/4 reductions in LVEF were also more frequent in the doxorubicin containing control arm (CHOP-R) at 10% compared to 2% in the pixantrone (CPOP-R) regimen. We expect to report results from the RAPID trial in the second half of 2010.

In July 2009, we were notified by the European Agency for Evaluation of Medicinal Products, or the EMEA, that pixantrone is eligible to be submitted for a Marketing Authorization Application, or MAA, through the EMEA’s centralized procedure. The centralized review process provides for a single coordinated review for approval of pharmaceutical products that is conducted by the EMEA on behalf of all European Union, or EU, member states. The EMEA also designated pixantrone as a New Active Substance, or NAS; if approved, compounds designated as an NAS receive a 10-year market exclusivity period in EU member states. In September 2009, we applied to the EMEA for orphan drug designation for pixantrone, which was granted in December 2009. In September 2009, we also submitted a Pediatric Investigation Plan, or PIP, to the EMEA as part of the required filing process for approval of pixantrone for treating relapsed, refractory aggressive NHL in Europe. In April 2010, the EMEA recommended that we submit an updated PIP for pixantrone following discussions with us about the preclinical and clinical pixantrone data, including EXTEND, and the desire to explore the potential benefits pixantrone may offer to children with hematologic cancer. We submitted an expanded PIP to the EMEA in July 2010. We anticipate the formal MAA filing for pixantrone for the treatment of relapsed or refractory aggressive NHL in the second half of 2010.

In June 2010, the Italian Medicines Agency, the national authority responsible for drug regulation in Italy, approved the facility at NerPharMa for the production of pixantrone. In July 2010, we signed a manufacturing agreement with NerPharMa for pixantrone. The five-year contract provides for both the commercial and clinical supply of pixantrone.

In the second quarter of 2010, the North Central Cancer Treatment Group, or NCCTG, opened for enrollment a phase II study of pixantrone in patients with HER2-negative metastatic breast cancer who have tumor progression after at least two, but not more than three, prior chemotherapy regimens.

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OPAXIO

We are currently focusing our development of OPAXIO (paclitaxel poliglumex), which we have previously referred to as XYOTAX, as a potential maintenance therapy for women with advanced stage ovarian cancer who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. This study, the GOG0212 trial, is under the control of the Gynecologic Oncology Group, or GOG, and is expected to enroll 1,100 patients with more than 700 patients enrolled to date. The GOG Data Monitoring Committee plans to conduct an interim analysis of overall survival and based on current enrollment and study duration, the interim analysis could be conducted as early as 2011. If successful, we could utilize those results to form the basis of a New Drug Application for OPAXIO.

In March 2008, we submitted an MAA to the EMEA for first-line treatment of patients with advanced non-small cell lung cancer, or NSCLC, who are poor performance status, or PS2, based on a non-inferior survival and improved side effect profile which we believe was demonstrated in our previous clinical trials. The application was based on a positive opinion we received from the EMEA’s Scientific Advice Working Party, or SAWP; the EMEA agreed that switching the primary endpoint from superiority to non-inferiority is feasible if the retrospective justification provided in the marketing application is adequate. In September 2009, we notified the EMEA of our decision to withdraw the MAA and we refocused our resources on the approval of OPAXIO for its potential superiority indication in maintenance therapy for ovarian cancer and as a radiation sensitizer in the treatment of esophageal cancer.

In June 2009, we announced that, in a study released from Brown University at the 2009 American Society for Clinical Oncology Annual Meeting, patients with cancer of the lower esophagus had evidence of a high pathological complete response rate when given OPAXIO in addition to cisplatin and full-course radiotherapy. In this phase II clinical trial study, data suggests that OPAXIO may provide enhanced radiation sensitization as compared to standard therapy. We plan to meet with the FDA following completion of the clinical study report to explore a potential phase III registration study utilizing OPAXIO as a radiation sensitizer in the treatment of esophageal cancer.

We continue to monitor the use of OPAXIO in women with premenopausal levels of estrogen, regardless of age, who have advanced NSCLC with normal or poor performance status. We believe the lack of safe and effective treatment for women with advanced first-line NSCLC, who have premenopausal estrogen levels, represents an unmet medical need. Based on a pooled analysis of the STELLAR 3 and 4 phase III trials for treatment of first-line NSCLC PS2 patients, we believe that there is a demonstrated statistically significant survival advantage among women receiving OPAXIO when compared to women or men receiving standard chemotherapy. A survival advantage for women over men also was demonstrated in a first-line phase II clinical trial of OPAXIO and carboplatin, known as the PGT202 trial, supporting the potential benefit observed in the STELLAR 3 and 4 trials. In September 2007, we initiated our PGT307 trial which focuses exclusively on NSCLC in women with premenopausal estrogen levels, the subset of patients where OPAXIO demonstrated the greatest potential survival advantage in the STELLAR trials. Due to limited resources, we have discontinued enrollment in the PGT307 trial.

Brostallicin

We are developing brostallicin through our wholly-owned subsidiary, Systems Medicine LLC, or SM, which holds worldwide rights to use, develop, import and export brostallicin. Brostallicin is a synthetic DNA minor groove binding agent that has demonstrated anti-tumor activity and a favorable safety profile in clinical trials in which more than 230 patients have been treated to date. We use a genomic-based platform to guide the development of brostallicin. We expect to use that platform to guide the development of our licensed oncology products in the future. We also have a strategic affiliation with the Translational Genomics Research Institute, or TGen, and have the ability to use TGen’s extensive genomic platform and high throughput capabilities to target a cancer drug’s context-of-vulnerability, which is intended to guide clinical trials toward patient populations where the highest likelihood of success should be observed, thereby potentially lowering risk and shortening time to market.

In the second quarter of 2010, the NCCTG opened for enrollment a phase II study of brostallicin in combination with cisplatin in patients with metastatic triple-negative breast cancer, or mTNBC. mTNBC is defined by tumors lacking expression of estrogen, progesterone receptors and without over-expression of HER2. Women with mTNBC have very limited effective treatments and based on the novel mechanism of action of brostallicin and the recognized activity of cisplatin in this disease, the combination of the two agents will be explored by the NCCTG. In addition to standard clinical efficacy measures, biological endpoints will also be evaluated to assist in understanding the specific activity of brostallicin in this disease.

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A phase II study of brostallicin in relapsed, refractory soft tissue sarcoma met its predefined activity and safety hurdles and resulted in a first-line phase II clinical trial study that was conducted by the European Organization for Research and Treatment of Cancer, or EORTC. Planned enrollment for this study was completed in August 2008 and the EORTC conducted final data analysis in 2009. The data was reported at the American Society of Clinical Oncology Annual Meeting in June 2010. The EORTC trial demonstrated, in this hard to treat patient group, a modest level of clinical activity with an acceptable level of toxicity. No further development is planned in this indication. A multi-arm phase I combination study with brostallicin and other agents, including Avastin (bevacizumab), was completed in the first quarter of 2009. Brostallicin also has demonstrated synergy with new targeted agents as well as established treatments in preclinical trials.

Research and Preclinical Development

Platinates constitute an important class of cornerstone chemotherapy agents used to treat a wide variety of cancers. There are three currently commercially available platinates (cisplatin, carboplatin, and oxaliplatin) which are first-line agents in ovarian cancer, lung cancer, testicular cancer, and colorectal cancer and are also used in a broad variety of other diseases. We are developing new analogues of the dinuclear-platinum complex CT-3610 that is more potent than any of the commercially available platinates. These bisplatinates have a different mechanism of action than the commercially available platinum compounds and are substantially more active on many preclinical models including those with resistance to monoplatinates. We have initiated Investigational New Drug application enabling activities for bisplatinates.

Critical Accounting Estimates

Management makes certain judgments and uses certain estimates and assumptions when applying accounting principles generally accepted in the United States in the preparation of our condensed consolidated financial statements. We evaluate our estimates and judgments on an on-going basis and base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. As described in Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2009, we consider our policies for license and contract revenue, impairment of long-lived assets, valuation of goodwill, derivatives embedded in certain debt or equity securities, restructuring charges and stock-based compensation expense to be the most critical in the preparation of the condensed consolidated financial statements because they involve the most difficult, subjective, or complex judgments about the effect of matters that are inherently uncertain. There have been no material changes to our application of critical accounting policies and significant judgments and estimates since December 31, 2009.

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RESULTS OF OPERATIONS

Three months ended June 30, 2010 and 2009

License and contract revenue. License and contract revenue for the three months ended June 30, 2010 and 2009 represents recognition of deferred revenue from the sale of Lisofylline material to DiaKine.

Research and development expenses. Our research and development expenses for compounds under development and discovery research are as follows (in thousands):

	Three Months Ended June 30,
	2010		2009
Compounds under development:
Pixantrone	$	1,736	$	2,345
OPAXIO		647		937
Brostallicin		96		443
Zevalin		—		49
Operating expenses		4,169		3,466
Discovery research		266		80
Total research and development expenses	$	6,914	$	7,320

Costs for compounds under development include external direct expenses such as principal investigator fees, clinical research organization charges and contract manufacturing fees incurred for preclinical, clinical, manufacturing and regulatory activities associated with preparing the compounds for submissions of NDAs or similar regulatory filings to the FDA, EMEA or other regulatory agencies outside the United States and Europe. Operating costs include our personnel and occupancy expenses associated with developing these compounds. Discovery research costs include primarily personnel, occupancy and laboratory expenses associated with the discovery and identification of new drug targets and lead compounds. We do not allocate operating costs to the individual compounds under development as our accounting system does not track these costs by individual compound. As a result, we are not able to capture the total cost of each compound. Direct external costs incurred to date for pixantrone, OPAXIO and brostallicin are approximately $59.0 million, $222.0 million and $9.3 million, respectively. Costs for pixantrone prior to our merger with Novuspharma S.p.A, a public pharmaceutical company located in Italy, or CTI (Europe), in January 2004 are excluded from this amount. Costs for brostallicin prior to our acquisition of SM in July 2007 are also excluded from this amount.

Research and development expenses decreased to approximately $6.9 million for the three months ended June 30, 2010 from approximately $7.3 million for the three months ended June 30, 2009. Pixantrone costs decreased primarily due to a decrease in regulatory costs and manufacturing activity. Regulatory costs decreased due to the non-recurring expense associated with the filing fee for the NDA submission to the FDA, which was incurred in the second quarter of 2009. Manufacturing activity decreased due to the delay in pixantrone approval. These decreases were partially offset by an increase in clinical development activity associated with the RAPID and EXTEND trials as those trials continue to incur costs as they wind down. Costs for our OPAXIO program decreased primarily due to decreases in regulatory costs, investigator-sponsored trials and quality activities. Costs for brostallicin decreased primarily due to a decrease in clinical development activities related to phase I and phase II studies. Zevalin costs decreased due to the contribution of the product to RIT Oncology, the joint venture we formed with Spectrum on December 15, 2008 which assumed all related Zevalin expenses subsequent to that date. Our operating expenses increased primarily due to an increase in non-cash stock-based compensation associated with performance awards granted in December 2009, partially offset by a reduction in personnel. Discovery research expense relates to the costs incurred in preclinical activities.

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Our lead drug candidates pixantrone, OPAXIO and brostallicin are currently in clinical trials. Many drugs in human clinical trials fail to demonstrate the desired safety and efficacy characteristics. Even if our drugs progress successfully through initial human testing, they may fail in later stages of development. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. Regulatory agencies, including the FDA and EMEA, regulate many aspects of a product candidate’s life cycle, including research and development and preclinical and clinical testing. We or regulatory authorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks. Completion of clinical trials depends on, among other things, the number of patients available for enrollment in a particular trial, which is a function of many factors, including the availability and proximity of patients with the relevant condition. We rely on third parties to conduct clinical trials, which may result in delays or failure to complete trials if the third parties fail to perform or meet applicable standards. We have drug candidates that are still in research and preclinical development, which means that they have not yet been tested on humans. We will need to commit significant time and resources to develop these and additional product candidates.

Our products will be successful and we will be able to generate revenues only if:

• our product candidates are developed to a stage that will enable us to commercialize, sell, or license related marketing rights to third parties; and

• our product candidates, if developed, are approved.

Failure to generate such revenues may preclude us from continuing our research, development and commercial activities for these and other product candidates. We also enter into collaboration agreements for the development and commercialization of our product candidates. We cannot control the amount and timing of resources our collaborators devote to product candidates, which may also result in delays in the development or marketing of products. Because of these risks and uncertainties, we cannot accurately predict when or whether we will successfully complete the development of our product candidates or the ultimate product development cost.

Selling, general and administrative expenses. Selling, general and administrative expenses increased to approximately $13.1 million for the three months ended June 30, 2010 from approximately $10.6 million for the three months ended June 30, 2009. This is primarily due to a $5.3 million increase in non-cash stock-based compensation expense mainly related to performance awards granted in December 2009. This increase is primarily offset by decreases in discretionary bonus accrual and professional services charges.

Restructuring charges. Restructuring charges of $3.8 million for the three months ended June 30, 2009 relate to activities associated with the closure of our Bresso, Italy operations, including approximately $2.4 million in employee termination benefits and approximately $1.4 million in contract termination and clean-up charges related to the Bresso facilities.

Interest expense. Interest expense decreased to approximately $0.8 million for the three months ended June 30, 2010 from approximately $1.6 million for the three months ended June 30, 2009. This decrease is primarily due to the exchanges of $42.3 million principal balance of our 5.75%, 6.75% and 7.5% convertible senior notes and $14.8 million of our 4% Notes in 2009. In addition, we exchanged $1.8 million of our 4% Notes in 2010.

Amortization of debt discount and issuance costs. Amortization of debt discount and issuance costs decreased to approximately $0.2 million for the three months ended June 30, 2010 from approximately $0.5 million for the three months ended June 30, 2009 due to exchanges for a portion of our outstanding convertible notes in 2009.

Foreign exchange gain (loss). The foreign exchange loss for the three months ended June 30, 2010 and the foreign exchange gain for the three months ended June 30, 2009 is due to fluctuations in foreign currency exchange rates, primarily related to payables and receivables in our European branch denominated in foreign currencies.

Debt conversion expense. Debt conversion expense of $2.0 million for the three months ended June 30, 2010 is related to the exchange of $1.8 million principal balance of our 4% convertible senior subordinated notes in May 2010 for approximately 4.3 million shares of our common stock.

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Gain on derivative liabilities, net. The gain on derivative liabilities of $1.6 million for the three months ended June 30, 2009 is primarily related to the change in the estimated fair value of the derivative liability related to the Series B Unit Warrant that was issued in connection with the issuance of our 13.5% convertible senior notes and Series E preferred stock financing in April 2008. The Series B Unit Warrant expired in the second quarter of 2009.

Gain on exchange of convertible notes. The $7.2 million gain on exchange of convertible notes for the three months ended June 30, 2009 is due to the exchange of $52.9 million principal amount of our convertible notes for $7.1 million in cash and approximately 24.2 million shares of common stock, net of related transaction costs.

Settlement expense. Settlement expense of $3.2 million for the three months ended June 30, 2009 relates to the settlement of the final installment payment related to our sale of our 50% interest in RIT Oncology based on the outcome of arbitration proceedings. This amount includes the $3.5 million escrow amount released to Spectrum, our $0.8 million payment to Spectrum based on arbitration proceedings and $0.9 million in receivables recognized in prior periods and owed to us by RIT Oncology. The settlement amount is also net of $2.0 million in payables assumed by Spectrum on our behalf.

Six months ended June 30, 2010 and 2009

License and contract revenue. License and contract revenue for the six months ended June 30, 2010 and 2009 represents recognition of deferred revenue from the sale of Lisofylline material to DiaKine.

Research and development expenses. Our research and development expenses for compounds under development and discovery research are as follows (in thousands):

	Six Months Ended June 30,
	2010		2009
Compounds under development:
Pixantrone	$	3,908	$	3,285
OPAXIO		1,381		2,244
Brostallicin		164		794
Zevalin		—		987
Operating expenses		8,289		7,655
Discovery research		532		311
Total research and development expenses	$	14,274	$	15,276

Research and development expenses decreased to approximately $14.3 million for the six months ended June 30, 2010 from approximately $15.3 million for the six months ended June 30, 2009. Pixantrone costs increased primarily due to an increase in clinical development activity mainly related to costs associated with our RAPID trial as we continued to incur costs during the study wind-down. In addition, there was an increase in activities associated with investigator-sponsored trials and advisory board meetings. These increases were partially offset by decreases in regulatory costs and manufacturing activity. Regulatory costs decreased due to the non-recurring expense associated with the filing fee for the NDA submission to the FDA, which was incurred in the second quarter of 2009. Manufacturing activity decreased due to the delay in pixantrone approval. Costs for our OPAXIO program decreased primarily due to a decrease in regulatory and clinical development activities. Costs for brostallicin decreased primarily due to a decrease in clinical development activities related to phase I and phase II studies. Zevalin costs decreased due to the contribution of the product to RIT Oncology, the joint venture we formed with Spectrum on December 15, 2008 which assumed all related Zevalin expenses subsequent to that date. Our operating expenses increased primarily due to an increase in non-cash stock-based compensation associated with performance awards granted in December 2009. This increase was partially offset by a reduction in personnel and overhead costs associated with the closure of our Bresso, Italy operations. Discovery research expense relates to costs incurred in preclinical activities.

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Selling, general and administrative expenses. Selling, general and administrative expenses increased to approximately $31.5 million for the six months ended June 30, 2010 from approximately $19.3 million for the six months ended June 30, 2009. This is primarily due to an $11.6 million increase in non-cash stock-based compensation expense mainly related to performance awards granted in December 2009 and an increase in sales personnel for the expected pixantrone launch.

Restructuring charges. Restructuring charges of $3.9 million for the six months ended June 30, 2009 primarily relate to activities associated with the closure of our Bresso, Italy operations, including approximately $2.4 million in employee termination benefits and approximately $1.4 million in contract termination and clean-up charges related to the Bresso facilities. We also incurred approximately $0.1 million in restructuring charges related to employee separation costs associated with the termination of Zevalin-related employees in connection with the sale of our 50% interest in RIT Oncology to Spectrum.

Gain on sale of investment in joint venture. During the six months ended June 30, 2009, we recorded a $10.2 million one-time gain on the sale of our 50% interest in RIT Oncology in March 2009. This amount was based on the difference between $16.5 million in gross proceeds and the approximately $4.6 million book value of our investment in RIT Oncology at the time of sale, net of approximately $1.6 million in transaction costs.

Interest expense. Interest expense decreased to approximately $1.6 million for the six months ended June 30, 2010 from approximately $3.2 million for the six months ended June 30, 2009. This decrease is primarily due to the exchanges of $42.3 million principal balance of our 5.75%, 6.75% and 7.5% convertible senior notes and $14.8 million of our 4% convertible senior subordinated notes, or 4% notes, in 2009. In addition, we exchanged $1.8 million of our 4% notes in 2010.

Amortization of debt discount and issuance costs. Amortization of debt discount and issuance costs decreased to approximately $0.4 million for the six months ended June 30, 2010 from approximately $5.3 million for the six months ended June 30, 2009. During the six months ended June 30, 2009, conversions of our 9% and 10% convertible senior notes resulted in accelerated amortization of debt discount and issuance costs of $4.4 million. Also, amortization of debt discount and issuance costs decreased by $0.5 million due to accelerated amortization of debt discount and amortization costs on our 5.75%, 6.75% and 7.5% convertible senior notes and 4% convertible senior subordinated notes as a result of exchanges and conversions in 2009 reducing the remaining cost basis and discount amount to be amortized over the remaining term of the respective convertible notes.

Foreign exchange gain (loss). The foreign exchange loss for the six months ended June 30, 2010 and foreign exchange gain for the six months ended June 30, 2009 are due to fluctuations in foreign currency exchange rates, primarily related to payables and receivables in our European branch denominated in foreign currencies.

Debt conversion expense. Debt conversion expense of $2.0 million for the six months ended June 30, 2010 is related to the exchange of $1.8 million principal balance of our 4% convertible senior subordinated notes in May 2010 for approximately 4.3 million shares of our common stock.

Make-whole interest expense. Make-whole interest expense of $6.3 million for the six months ended June 30, 2009 is related to $5.4 million in payments made upon the conversion of $18.0 million of our 10% convertible senior notes and $0.9 million in payments made upon the conversion of $5.3 million of our 9% convertible senior notes.

Gain on derivative liabilities, net. The gain on derivative liabilities of $7.2 million for the six months ended June 30, 2009 is primarily due to a gain of $4.4 million resulting from the change in the estimated fair value of the derivative liability related to the embedded conversion option on our 10% convertible senior notes as well as a gain of $2.8 million due to the change in the estimated fair value of the derivative liability related to the Series B Unit Warrant.

Gain on exchange of convertible notes. The $7.2 million gain on exchange of convertible notes for the six months ended June 30, 2009 is due to the exchange of $52.9 million principal amount of our convertible notes for $7.1 million in cash and approximately 24.2 million shares of common stock, net of related transaction costs.

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Equity loss from investment in joint venture. The loss of $1.2 million for the six months ended June 30, 2009 relates to our 50% interest in RIT Oncology, prior to the sale of this interest in March 2009, which we accounted for using the equity method of accounting.

Settlement expense. Settlement expense of $3.4 million for the six months ended June 30, 2009 is primarily due to $3.2 million related to amounts paid to Spectrum for the settlement of the final installment payment related to our sale of our 50% interest in RIT Oncology based on the outcome of arbitration proceedings. This amount includes the $3.5 million escrow amount released to Spectrum, our $0.8 million payment to Spectrum based on arbitration proceedings and approximately $0.9 million in receivables recognized in prior periods and owed to us by RIT Oncology. The settlement amount is also net of approximately $2.0 million in payables assumed by Spectrum on our behalf. We also incurred $0.2 million in settlement expense related to payments made to RHP Master Fund, Ltd, or RHP, for the release of all claims against us in connection with our alleged breach of contract related to RHP’s Series A preferred stock.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2010, we had approximately $64.5 million in cash and cash equivalents.

Net cash used in operating activities decreased to approximately $39.3 million during the six months ended June 30, 2010 compared to approximately $50.7 million for the same period during 2009 primarily due to a reduction in interest payments on convertible notes as well as a decrease in research and development expense, excluding the allocation of non-cash stock-based compensation expense. The decrease is also attributable to cash payments made in connection with settlement of legal matters during the six months ended June 30, 2009. We did not make any similar payments during the six months ended June 30, 2010.

Net cash used in investing activities of approximately $1.0 million for the six months ended June 30, 2010 was primarily due to purchases of property and equipment. Net cash provided by investing activities of approximately $22.2 million for the six months ended June 30, 2009 was primarily due to $6.8 million in net proceeds received from Spectrum in January 2009 related to the initial formation of RIT Oncology in December 2008 and $15.1 million in net proceeds received from Spectrum related to the sale of our 50% interest in RIT Oncology in 2009.

Net cash provided by financing activities of approximately $65.7 million for the six months ended June 30, 2010 was primarily due to the issuances of our Series 3, 4 and 5 preferred stock. We received $28.0 million in net proceeds from the issuance of 30,000 shares of our Series 3 preferred stock and warrants to purchase approximately 8.6 million shares of our common stock in January 2010. We also received $18.6 million in net proceeds from the issuance of 20,000 shares of our Series 4 preferred stock and warrants to purchase 20.0 million shares of our common stock in April 2010. In addition, we received $19.9 million in net proceeds from the issuance of 21,000 shares of Series 5 preferred stock and warrants to purchase approximately 26.3 million contingently issuable shares of our common stock in May 2010. These proceeds were offset by $0.7 million cash paid for the repurchase of shares in connection with satisfying tax withholding obligations on the vesting of restricted stock awards to employees. Net cash provided by financing activities of approximately $30.7 million for the six months ended June 30, 2009 was primarily due to $19.0 million in net proceeds from the issuance of 16.0 million shares of our common stock and warrants to purchase 4.8 million shares of our common stock in May 2009. We also received $18.8 million in net proceeds from the issuance of 20,000 shares of our Series 1 preferred stock and related Class A and Class B warrants in April 2009 as well as $3.8 million upon the exercise of the Class A warrants in May 2009. These proceeds were offset by $7.6 million in cash paid, net of transaction costs and in addition to 24.2 million shares of our common stock, for the exchange of $52.9 million principal amount of our convertible notes. We further made a $3.0 million deemed dividend payment in connection with our settlement with Tang Capital Partners LP for full release of all claims against us in connection with our alleged breach of contract related to Tang’s Series B preferred stock. This amount was accrued as of December 31, 2008 and paid in January 2009.

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We have prepared our financial statements assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred net losses since inception and expect to generate losses from operations for the next few years primarily due to research and development costs for pixantrone, OPAXIO and brostallicin. Subsequent to period end, in July 2010, we (i) made a cash payment of $39.3 million to repay the outstanding balance, including accrued interest, to fully retire our outstanding 4% Notes and (ii) raised $4.06 million in gross proceeds from the issuance of 4,060 shares of our Series 6 preferred stock and warrants to purchase up to 5.8 million shares of our common stock.

We do not expect that our existing cash and cash equivalents, including the cash received from the issuance of our Series 6 preferred stock and warrants, will be sufficient to fund our presently anticipated operations beyond the fourth quarter of 2010. This raises substantial doubt about our ability to continue as a going concern.

We have commenced cost saving initiatives to reduce operating expenses, including the reduction of employees related to planned commercial pixantrone operations and we continue to seek additional areas for cost reductions. We project our net cash operating expenses for 2010 to be $60 million. We will need to raise additional funds and are currently exploring alternative sources of financing. We may seek to raise such capital through public or private equity financings, partnerships, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources.

We have applied for the new Qualifying Therapeutic Discovery Project Credit related to life science companies, which may allow us to receive grants in lieu of tax credits for years 2009 and 2010.

We have called an annual meeting of shareholders that is scheduled to be held on September 16, 2010 to ask shareholders to approve proposals, including a proposal to increase our authorized shares of common and preferred stock from 810,000,000 to 1,210,000,000 shares. If our shareholders do not approve this proposal, then we will not be able to issue common stock or securities convertible or exercisable for common stock, and thus, will not be able to raise additional capital. If our shareholders approve this proposal, our Board of Directors would have the option to issue such shares depending on our financial needs and the market opportunities, if deemed to be in the best interest of the shareholders. Our future capital requirements will depend on many factors, including:

• results of our clinical trials;

• regulatory approval of our products;

• success in acquiring or divesting products, technologies or businesses;

• progress in and scope of our research and development activities;

• finding appropriate partners for the development and commercialization of our products if they are approved for marketing; and

• competitive market developments.

Future capital requirements will also depend on the extent to which we acquire or invest in businesses, products and technologies or sell or license our products to others. We will require additional financing and such financing may not be available when needed or, if available, we may not be able to obtain it on terms favorable to us or to our shareholders. If additional funds are raised by issuing equity securities, substantial dilution to existing shareholders may result. If we fail to obtain capital when required, we may be required to delay, scale back, or eliminate some or all of our research and development programs or may adversely affect our ability to operate as a going concern and we may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection.

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The following table includes information relating to our contractual obligations as of June 30, 2010 (in thousands):

Contractual Obligations	Payments Due by Period
	Total		1 Year		2-3 Years		4-5 Years		After 5    Years
7.5% Convertible senior notes (1)	$	10,250	$	10,250	$	—	$	—	$	—
5.75% Convertible senior notes (2)		10,913		—		10,913		—		—
4.0% Convertible senior subordinated notes (3)		38,515		38,515		—		—		—
Interest on convertible notes		1,561		1,272		289		—		—
Operating leases:
Facilities		9,447		4,390		4,903		154		—
Long-term obligations (4)		1,261		429		821		11		—
	$	71,947	$	54,856	$	16,926	$	165	$	—

(1) The 7.5% convertible senior notes are convertible into shares of our common stock at a conversion rate of 11.96298 shares of our common stock per $1,000 principal amount of the notes, which is equivalent to a conversion price of approximately $83.59 per share.

(2) The 5.75% convertible senior notes are convertible into shares of our common stock at a conversion rate of 33.33333 shares of our common stock per $1,000 principal amount of the notes, which is equivalent to a conversion price of approximately $30.00 per share.

(3) The 4.0% convertible senior subordinated notes are convertible into shares of our common stock at a conversion rate of 1.85185 shares of our common stock per $1,000 principal amount of the notes, which is equivalent to a conversion price of approximately $540.00 per share.

(4) Long-term obligations do not include $0.7 million related to excess facilities charges.

Manufacturing Supply Agreement

In July 2010, we entered into a Drug Product Manufacturing Supply Agreement with NerPharMa. Pursuant to the terms of the agreement, NerPharMa has agreed to manufacture and supply to us, the bulk unlabeled vials of drug product for our drug candidate pixantrone, which is BBR 2778 (pixantrone dimaleate) from the effective date of the agreement through the fifth anniversary of the date that the first government or regulatory approval has been obtained for pixantrone in the United States or Europe, whichever is earlier, unless earlier terminated. We have agreed to purchase supply of pixantrone from NerPharMa on the basis of a rolling commercial forecast.

Additional Milestone Activities

We have an amended agreement with PG-TXL Company L.P., or PG-TXL, which grants us an exclusive worldwide license for the rights to OPAXIO and to all potential uses of PG-TXL’s polymer technology. We may be required to pay up to $14.4 million in additional milestone payments under this agreement. The timing of the remaining milestone payments under the amended agreement is based on trial commencements and completions, as well as regulatory and marketing approval with the FDA, EMEA or equivalent in another major market country.

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We have an agreement with the Gynecologic Oncology Group, or GOG, related to the GOG0212 trial which the GOG is conducting. We recorded a $1.6 million payment due to the GOG based on the 650 patient enrollment milestone achieved in the first quarter of 2010. As of June 30, 2010, this amount is included in accounts payable. Under this agreement we are required to pay up to $3.5 million in additional milestone payments related to the trial of which $1.7 million may become due in the first quarter of 2011 based on current planned patient enrollment.

Under a license agreement entered into for brostallicin, we may be required to pay up to $80.0 million in milestone payments based on the achievement of certain product development results. Due to the early stage of development that brostallicin is in, we are not able to determine whether the clinical trials will be successful and therefore cannot make a determination that the milestone payments are reasonably likely to occur at this time.

Pursuant to an acquisition agreement entered into with Cephalon, Inc., or Cephalon, in June 2005, we may receive up to $100.0 million in payments upon achievement by Cephalon of specified sales and development milestones related to TRISENOX. However, the achievement of any such milestones is uncertain at this time.

Under our agreement with Novartis Pharmaceutical Company Ltd., or Novartis, if Novartis elects to participate in the development and commercialization of OPAXIO or if Novartis exercises its option to develop and commercialize pixantrone and we are able to negotiate a definitive agreement with Novartis, we may receive up to $374.0 million in registration and sales related milestone payments. Novartis is under no obligation to make such election or exercise such right and may never do so. Additionally, even if Novartis exercises such rights, any milestone payments we may be eligible to receive from Novartis are subject to the receipt of the necessary regulatory approvals, which we may never receive.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Market Risk

We are exposed to risks associated with foreign currency transactions insofar as we use U.S. dollars to make contract payments denominated in euros or vice versa. As the net positions of our unhedged foreign currency transactions fluctuate, our earnings might be negatively affected. As of June 30, 2010, our foreign currency transactions are minimal and changes to the exchange rate between the U.S. dollar and foreign currencies would have an immaterial affect on our earnings. In addition, the reported carrying value of our euro-denominated assets and liabilities will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. As of June 30, 2010, we had a net asset balance excluding intercompany payables and receivables in our European branches denominated in euros. As of June 30, 2010, if the euro were to weaken 20% against the dollar, our net asset balance would decrease by approximately $0.9 million as of this date.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, under the supervision and with the participation of our Chief Executive Officer and Executive Vice President, Finance and Administration, or EVP of Finance, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and EVP of Finance have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.

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(b) Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Financial Information

With respect to our unaudited condensed consolidated financial statements for the six-month period ended June 30, 2010, included herein, Stonefield Josephson, Inc., or Stonefield Josephson, reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their report dated August 6, 2010 appearing herein, states that they did not audit and they do not express an opinion on that unaudited financial information. Stonefield Josephson has not carried out any significant or additional audit tests beyond those which would have been necessary if their report had not been included. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. Stonefield Josephson is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended, or the Securities Act, for their report on the unaudited condensed consolidated financial statements because that report is not a “report” or a “part” of a registration statement prepared or certified by Stonefield Josephson within the meaning of Sections 7 and 11 of the Securities Act.

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INTERIM REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Cell Therapeutics, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of Cell Therapeutics, Inc. as of June 30, 2010, and the related condensed consolidated statements of operations and cash flows for the three and six month periods ended June 30, 2010. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the condensed consolidated financial statements, the Company has had losses since inception and expects to generate losses from operations for at least the next year, primarily due to research and development costs. Additionally, the Company has approximately $48.7 million due in the current year and will not have sufficient cash to fund planned operations for the next twelve months, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are described in Note 1. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2009 and the related consolidated statements of operations, shareholders’ deficit, and cash flows for the year then ended (not presented herein); and in our reports dated February 26, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Stonefield Josephson, Inc.

San Francisco, California

August 6, 2010

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Recent Legal Proceedings

On January 22, 2007, we filed a complaint in King County Washington Superior Court against The Lash Group, Inc. (“Lash”) and Documedics Acquisition Co., Inc., our former third-party reimbursement expert for TRISENOX, seeking recovery of damages, including losses incurred by us in connection with our investigation, defense and settlement of claims by the United States concerning Medicare reimbursement for TRISENOX and other claims. On February 28, 2007, Lash removed the case to U.S. District Court in the Western District of Washington. On June 19, 2008, the trial judge dismissed our claims and we filed a timely notice of appeal in the Ninth Circuit Court of Appeals. An appeal hearing was held on August 31, 2009, and on November 18, 2009, the Ninth Circuit reversed the trial court and held that the False Claims Act (“FCA”) did not preclude us from seeking recovery and bringing claims against Lash for indemnification under our Service Agreement based upon its acts that gave rise to the Government’s FCA and other claims. On December 1, 2009, Lash filed a petition for rehearing with the Ninth Circuit Court of Appeals, which was formally denied on January 6, 2010. The case has been remanded for trial in the District Court. On April 30, 2010, the District Court denied a motion by Lash to strike our supplemental damages disclosure, and granted our motion for leave to amend our complaint to more fully address our claims for supplemental and independent damages. On May 21, 2010, the Court issued a minute order setting trial and related dates. On May 24, 2010, Lash filed its answer to the amended complaint and asserted counterclaims for contractual indemnification, common law indemnification and contribution, and declaratory relief. On June 3, 2010, Lash filed a motion to bifurcate the trial to address in the first phase only its assertion that our claims are barred due to FCA liability. We opposed the motion, and on June 10, 2010, we filed our own motion to strike Lash’s affirmative defense based on its FCA liability claim. The case is currently scheduled for trial on September 6, 2011. There is no guarantee that we will prevail at trial.

On December 23, 2008, CONSOB sent a notice (record no. 9071933) to us requesting that we issue (i) immediately, a press release providing, among other things, information about our debt restructuring plan, the current state of compliance with the relevant covenants regulating our debt and the equity line of credit agreement we entered into with Midsummer Investment Ltd. on July 29, 2008, and (ii) by the end of each month and starting from the month of December 2008, a press release providing certain information relating to our management and financial situation, updated to the previous month, or the Monthly CONSOB Press Release. On July 31, 2009, CONSOB sent us a notice asserting three violations of the provisions of Section 114, paragraph 5 of the Italian Legislative Decree no. 58/98, namely: (a) the non-disclosure without delay of the press release mentioned under previous point (i) and the subsequent incomplete disclosure of the relevant information through the press releases dated January 9 and 13, 2009; (b) the non-disclosure of the Monthly CONSOB Press Release in December 2008; and (c) the incomplete disclosure of the Monthly CONSOB Press Release in January 2009. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/1998 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, applicable to each one of the three asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on August 28, 2009 (within 30 days of July 31, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On May 5, 2010, CONSOB (x) notified us that it has begun the preliminary investigation for its decision on these administrative proceedings and (y) provided us with a preliminary investigation report in reply to our defenses submitted on August 28, 2009. On June 4, 2010 (within 30 days of May 5, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules), we submitted further defenses that CONSOB will have to evaluate before imposing any possible administrative sanctions.

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Separately, on December 10, 2009, CONSOB sent us a notice (record no. RM9102185) claiming two violations of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information then reported, at CONSOB’s request, in the press release disseminated on December 19, 2008 and March 23, 2009. Such information concerned, respectively: (i) the conversion by BAM of 9.66% notes into shares of common stock that occurred between October 24 and November 19, 2008; and (ii) the contents of the opinion expressed, with respect to our 2008 financial statements, by the auditor Stonefield Josephson, Inc. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58.1998 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, applicable to each one of the two asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on January 8, 2010 (within 30 days of December 10, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On July 12, 2010, CONSOB (a) notified us that it has begun the preliminary investigation for its decision on these administrative proceedings and (b) provided us with a preliminary investigation report in reply to our defenses submitted on January 8, 2010. We are planning to submit (within 30 days of July 12, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules) further defenses that CONSOB will have to evaluate before imposing any possible administrative sanctions.

On April 14, 2009 and December 21, 2009, the Italian Tax Authority, or ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003 and 2005, respectively. On June 25, 2010, the ITA issued notices of assessment to CTI (Europe) for the years 2006 and 2007 based on similar findings of the 2003 and 2005 assessments. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8 million, or approximately $0.7 million, $6.7 million, $3.1 million and $1.0 million as of June 30, 2010, respectively. On July 14, 2010, the ITA issued a notice of deposit payment to CTI (Europe) based on the 2005 assessment including interest and collection fees for an amount of €0.9 million, or approximately $1.2 million, payable in the third quarter 2010. We successfully filed a petition with the Italian Tax Court for suspension of the 2005 notice of deposit payment. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We intend to vigorously defend ourselves against the assessments and have requested a court hearing on procedural grounds and merits of the case. The Italian Tax Court has scheduled a hearing on September 28, 2010 regarding the 2005 assessment.

On August 3, 2009, Sicor Italia, or Sicor, filed a lawsuit in the Court of Milan to compel us to source pixantrone from Sicor according to the terms of a supply agreement executed between Sicor and NovusPharma on October 4, 2002. A hearing was held on January 21, 2010 to discuss preliminary matters and set a schedule for future filings and hearings. The parties filed the authorized pleadings and submitted to the Court their requests for evidence. The next hearing date regarding admission of evidence and testimony is scheduled for November 11, 2010. Sicor alleges that the agreement was not terminated according to its terms. We assert that the supply agreement in question was properly terminated and that we have no further obligation to comply with its terms. No estimate of a loss, if any, can be made at this time in the event that we do not prevail.

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On March 12, 2010, a purported securities class action complaint was filed in the United States District Court for the Western District of Washington against us and certain of our officers and directors, styled Cyril Sabbagh, individually and on behalf of all others similarly situated v. Cell Therapeutics, Inc., Dr. James A. Bianco, M.D., and Dr. Jack W. Singer (Case No. 2:10-sv-00414), or the Sabbagh action. On March 19, 2010, a substantially similar class action complaint was filed in the same court, styled Michael Laquidari, individually and on behalf of all others similarly situated v. Cell Therapeutics, Inc., Dr. James A. Bianco, M.D., and Dr. Jack W. Singer (Case No. 2:10-cv-00480), or the Laquidari action. On March 31, 2010, a third substantially similar class action complaint was filed in the same court, styled William Snyder, individually and on behalf of all others similarly situated v. Cell Therapeutics, Inc., James A. Bianco, Phillip M. Nudelman, Louis A. Bianco, John H. Bauer, Richard L. Love, Mary O. Mundinger, Jack W. Singer, Frederick W. Telling and Rodman & Renshaw, LLC (Case No. 2:10-cv-00559), or the Snyder action. The securities actions are pending before Judge Marsha Pechman in the Western District of Washington. The securities complaints allege that the defendants violated the federal securities laws by making certain alleged false and misleading statements. The plaintiffs in the Sabbagh and Laquidari actions seek unspecified damages on behalf of a putative class of purchasers of our securities from May 5, 2009 through February 8, 2010. The plaintiffs in the Snyder action seek unspecified damages on behalf of a putative class of purchasers of our securities from May 5, 2009 through March 19, 2010, including purchasers of securities issued pursuant to or traceable to the Company’s July 22, 2009 public offering. On May 11, 2010, motions were filed to consolidate the securities actions and to appoint lead plaintiff and lead plaintiffs’ counsel. The motions are currently pending. We believe that the securities actions are without merit and intend to defend them vigorously.

On April 1, 2010, a shareholder derivative complaint was filed in the United States District Court for the Western District of Washington, derivatively on behalf of us against the members of its Board of Directors, styled Shackleton v. John A. Bauer, James A. Bianco, Vartan Gregorian, Richard L. Love, Mary O’Neil Mundinger, Phillip M. Nudelman, Jack W. Singer, and Frederick W. Telling (Case No. 2:10-cv-564). On April 5, 2010, and April 13, 2010, substantially similar derivative actions were filed in the same court, styled, respectively, Marbury v. James A. Bianco, et al. (Case No. 2:10-cv-00578) and Cyrek v. John H. Bauer, et al. (Case No. 2:10-cv-00625). The derivative actions are also pending before Judge Marsha Pechman. The derivative complaints allege that the defendants breached their fiduciary duties to the Company under Washington law by making or failing to prevent the disclosure of certain alleged false and misleading statements. The allegations in the derivative actions are substantially similar to those in the securities actions. On May 10, 2010, pursuant to the parties’ stipulation, the Court consolidated these three shareholder derivative actions and appointed the law firms Robbins Umeda LLP and Federman & Sherwood as co-lead counsel for derivative plaintiffs.

On June 1, 2010, a fourth related shareholder derivative action was filed in the Western District of Washington, styled Souda v. John H. Bauer et. al. (Case No 2:10-cv-00905). It was subsequently transferred to Judge Pechman and consolidated with the consolidated derivative actions. Plaintiff Souda has filed a motion to reconsider the portion of the Court’s Order dated May 10, 2010, appointing Robbins Umeda and Federman & Sherwood as co-lead derivative counsel. Souda’s motion is currently pending.

On July 27, 2010, a fifth related shareholder derivative action, styled Bohland v. John H. Bauer et al. (Case No. 2:10-cv-1213), was filed in the Western District of Washington and assigned to Judge John C. Coughenour. Plaintiff Bohland has filed a motion to consolidate the Bohland action with the consolidated derivative actions and to reconsider the portion of the Court’s Order dated May 10, 2010, appointing Robbins Umeda and Federman & Sherwood as co-lead derivative counsel. Bohland’s motion is currently pending.

For the shareholder derivative complaints, no estimate of a loss, if any, can be made at this time in the event that we do not prevail.

On July 28, 2010, the former General Manager of our Italian Branch office, CTI (Europe), initiated a Court proceeding against the Company to challenge the former General Manager’s dismissal which occurred in 2009. The former General Manager’s claims are based on the alleged unlawfulness and lack of justifications of his dismissal. The former General Manager alleges that he has suffered and requests compensation for damages ranging up to approximately €0.7 million, plus the costs of the proceedings. The first hearing is scheduled for December 9, 2010. CTI is entitled to file a brief regarding its defenses any time prior to 10 days before the hearing. Management believes that the allegations in the claim are without merit and intend to defend the claim vigorously. At this time, we are not able to make a determination whether the likelihood of an unfavorable outcome is probable or remote.

In addition to the litigation discussed above, we are from time to time subject to legal proceedings and claims arising in the ordinary course of business, some of which may be covered in whole or in part by insurance.

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Item 1A. Risk Factors

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The occurrence of any of the following risks described below and elsewhere in this document, including the risk that our actual results may differ materially from those anticipated in these forward-looking statements, could materially adversely affect our business, financial condition, operating results or prospects and the trading price of our securities. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also impair our business, financial condition, operating results and prospects and the trading price of our securities.

Factors Affecting Our Operating Results and Financial Condition

We need to raise additional funds and expect that we will need to continue to raise funds in the future, and additional funds may not be available on acceptable terms, or at all; failure to raise significant additional funds may cause us to cease development of our products and operations.

We have substantial operating expenses associated with the development of our product candidates, and as of June 30, 2010, we had cash and cash equivalents of $64.5 million. As of June 30, 2010, our total current liabilities were $64.6 million, including $38.5 million related to our 4% convertible senior subordinated notes which were due in July 2010. We repaid the outstanding principal amount and accrued but unpaid interest on our 4% convertible senior subordinated notes in July 2010. The aggregate long-term principal balance of our outstanding 7.5% and 5.75% convertible senior notes as of June 30, 2010 was $21.2 million. We do not expect that our existing cash and cash equivalents, as well as proceeds received from our offerings to date, will provide sufficient working capital to fund our presently anticipated operations beyond the fourth quarter of 2010.

Raising additional capital will likely require that we issue additional shares of our common stock, of which all of our authorized shares are either outstanding or reserved for future issuance. On June 29, 2010, we permanently adjourned our special meeting of shareholders, at which our shareholders were asked to vote on a proposal to amend our amended and restated articles of incorporation to increase the total number of authorized shares of our stock from 810,000,000 shares to 1,210,000,000 shares and to increase the total number of our authorized shares of common stock from 800,000,000 to 1,200,000,000 shares of common stock. We have called our annual meeting of shareholders, at which our shareholders will again be asked to vote on, among other matters, the proposed amendment to our amended and restated articles of incorporation. We may not obtain sufficient votes from our shareholders for this amendment, which will limit our ability to raise additional funds through the issuance of additional shares and our ability to exchange for equity our outstanding notes. To the extent that we raise additional capital through the sale of equity securities, or securities convertible into our equity securities, our shareholders may experience dilution of their proportionate ownership of us. There can be no assurance that we will have sufficient earnings, access to liquidity or cash flow in the future to meet our operating expenses and other obligations, including our debt service obligations.

We may not be able to raise such capital or if we can, it may not be on favorable terms. We may seek to raise additional capital through public or private equity financings, partnerships, joint ventures, dispositions of assets, debt financings or restructurings, bank borrowings or other sources. To obtain additional funding, we may need to enter into arrangements that require us to relinquish rights to certain technologies, drug candidates, products and/or potential markets. In addition, some financing alternatives may require us to meet additional regulatory requirements in Italy and the United States and we may be subject to certain contractual limitations, which may increase our costs and adversely affect our ability to obtain additional funding. If adequate funds are not otherwise available, we will further curtail operations significantly, including the delay, modification or cancellation of operations and plans related to pixantrone, OPAXIO and brostallicin, and may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. A bankruptcy may result in the termination of agreements pursuant to which we license certain intellectual property rights, including the rights to pixantrone, OPAXIO and brostallicin.

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If our shareholders do not approve an increase in our authorized shares, we may not be able to raise additional funds through equity offerings or exchange for equity our outstanding notes.

On June 29, 2010, we permanently adjourned our special meeting of shareholders at which our shareholders were asked to vote on a proposal to amend our amended and restated articles of incorporation to increase the total number of authorized shares of our stock from 810,000,000 shares to 1,210,000,000 shares and to increase the total number of our authorized shares of common stock from 800,000,000 to 1,200,000,000 shares of common stock. We have called our annual meeting of shareholders, at which our shareholders will again be asked to vote on, among other matters, the proposed amendment to our amended and restated articles of incorporation to increase the number of authorized shares of common stock available for issuance thereunder. There is a risk that we may not get shareholder approval to increase the number of authorized shares of common stock. We do not have enough shares authorized and not issued or reserved at present to effect any equity financing, to effect an exchange for equity of our outstanding notes or to allow the holders of warrants issued pursuant to our Series 5 preferred stock financing, Series 6 preferred stock financing or our warrant exchange to exercise those warrants. If we do not receive shareholder approval for the proposed increase in authorized shares, our ability to raise capital through equity financings and our ability to exchange for equity our outstanding notes will be adversely affected and the holders of the warrants issued described above will not be able to exercise those warrants.

We need to implement a reduction in expenses across our operations.

We need substantial additional capital to fund our current operations. If we are unable to secure additional financing on acceptable terms in the near future, we will need to implement additional cost reduction initiatives, such as further reductions in the cost of our workforce and the discontinuation of a number of business initiatives to further reduce our rate of cash utilization and extend our existing cash balances. We believe that these additional cost reduction initiatives, if undertaken, could provide us with additional time to continue our pursuit of additional funding sources and also strategic alternatives. In the event that we are unable to obtain financing on acceptable terms and reduce our expenses, we may be required to limit or cease our operations, pursue a plan to sell our operating assets, seek bankruptcy protection, or otherwise modify our business strategy, which could materially harm our future business prospects.

During 2009, we finalized the closure our Italian operations that we used primarily for pre-clinical research. These operations were underutilized due to our current business model that is focused on the development of late-stage compounds and their commercialization. In connection with this closure, we entered into a severance agreement with the unions representing the employees of our Italian operations related to a reduction in force of our Italian employees. On April 12, 2010, we conducted an immediate reduction in force of 36 employees due to an implementation of a cost reduction plan.

We may continue to incur net losses, and we may never achieve profitability.

We were incorporated in 1991 and have incurred a net operating loss every year since our formation. As of June 30, 2010, we had an accumulated deficit of $1.5 billion. We are pursuing regulatory approval for pixantrone, OPAXIO and brostallicin. We will need to conduct research, development, testing and regulatory compliance activities and undertake manufacturing and drug supply activities the costs of which, together with projected general and administrative expenses, may result in operating losses for the foreseeable future. We may never become profitable, even if we are able to commercialize products currently in development or otherwise.

Our debt and operating expenses exceed our net revenues.

We have a substantial amount of debt outstanding, and our annual interest expense with respect to our debt is significant. Unless we raise substantial additional capital and reduce our operating expenses, we may not be able to pay all of our operating expenses or repay our debt or the interest on our debt, liquidated damages or other payments that may become due with respect to our debt. In the event we are unable to reduce our expenses and/or repay our debt or the interest on our debt, we may be required to limit or cease our operations, pursue a plan to sell our operating assets, seek bankruptcy protection, or otherwise modify our business strategy, which could materially harm our future business prospects. A bankruptcy may result in the termination of agreements pursuant to which we license certain intellectual property rights, including the rights to pixantrone, OPAXIO and brostallicin.

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We may be unable to use our net operating losses.

We have substantial tax loss carryforwards for U.S. federal income tax purposes. As a result of prior changes in the stock ownership of the Company, our ability to use such carryforwards to offset future income or tax liability is limited under section 382 of the Internal Revenue Code of 1986, as amended. Moreover, future changes in the ownership of our stock, including those resulting from the issuance of shares of our common stock upon exercise of outstanding warrants, may further limit our ability to use our net operating losses.

We have received audit reports with a going concern disclosure on our consolidated financial statements.

As we may need to raise additional financing to fund our operations and satisfy obligations as they become due, our independent registered public accounting firm has included an explanatory paragraph in their reports on our December 31, 2009, 2008 and 2007 consolidated financial statements regarding their substantial doubt as to our ability to continue as a going concern. This may have a negative impact on the trading price of our common stock and we may have a more difficult time obtaining necessary financing.

Our common stock is listed on The NASDAQ Capital Market and the Mercato Telematico Azionario stock market in Italy, or the MTA, and we may not be able to maintain those listings or trading on these exchanges may be halted or suspended, which may make it more difficult for investors to sell shares of our common stock.

Effective with the opening of trading on January 8, 2009, the U.S. listing of our common stock was transferred to The NASDAQ Capital Market, subject to meeting a minimum market value of listed securities of $35 million. The NASDAQ Stock Market LLC’s, or NASDAQ, Listing Qualifications Panel, or the Panel, approved this transfer after our market capitalization did not comply with the minimum market capitalization required for companies listed on The NASDAQ Global Market, and we presented a plan to the Panel for regaining compliance with NASDAQ Marketplace Rules. On January 23, 2009, we received an Additional Staff Determination Letter from NASDAQ that stated that NASDAQ staff had concluded that we had violated NASDAQ Marketplace Rule 4350(i)(1)(C) (now NASDAQ Marketplace Rule 5635), which requires shareholder approval in connection with an acquisition if the issuance or potential issuance is greater than 20% of the pre-acquisition shares outstanding, and that we had at times not complied with Marketplace Rule 4310(c)(17) regarding submission of a “Listing of Additional Shares” form. On February 18, 2009, we updated the Panel on our plan for regaining compliance and requested an extension of the deadline to regain compliance with the minimum market capitalization requirement for The NASDAQ Capital Market. On March 6, 2009, we were notified by NASDAQ that the Panel had determined to continue the listing of our common stock on The NASDAQ Capital Market, subject to the condition that, on or before April 6, 2009, we demonstrate compliance with all applicable standards for continued listing on The NASDAQ Capital Market, including the $35 million minimum market capitalization requirement. In addition, the Panel issued a public reprimand for our prior failures to comply with the shareholder approval requirements and late filing of “Listing of Additional Shares” forms. On April 2, 2009, we were notified by NASDAQ that we had complied with the Panel’s decision dated March 6, 2009, and, accordingly, the Panel had determined to continue the listing of our common stock on The NASDAQ Capital Market.

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NASDAQ reinstated the $1.00 minimum bid price requirement on August 3, 2009 and there can be no assurances that our common stock price will be $1.00 or above. On May 3, 2010, we received notice from NASDAQ indicating that for the last 30 consecutive business days the closing bid price of our common stock was below the minimum $1.00 per share requirement for continued listing of our common stock on The NASDAQ Capital Market under NASDAQ Marketplace Rule 5550(a)(2). This notification has no immediate effect on the listing of or the ability to trade our common stock on The NASDAQ Capital Market. In accordance with NASDAQ Marketplace Rule 5810(c)(3)(A), we have been provided a grace period of 180 calendar days, or until November 1, 2010, to regain compliance. We will achieve compliance if the bid price of our common stock closes at $1.00 per share or more for a minimum of ten consecutive trading days before November 1, 2010. If we are unable to attain compliance with the minimum bid price, whether by effecting a reverse stock split of our common stock or otherwise, we may be delisted. In addition, if we fail to maintain the minimum value of listed securities, we may be delisted. The level of trading activity of our common stock may decline if it is no longer listed on The NASDAQ Capital Market. Furthermore, our failure to maintain a listing on The NASDAQ Capital Market may constitute an event of default under certain of our indebtedness which would accelerate the maturity date of such debt. As such, if our common stock ceases to be listed for trading on The NASDAQ Capital Market for any reason, it may harm our stock price, increase the volatility of our stock price and make it more difficult for investors to sell shares of our common stock.

In the event our common stock is delisted from The NASDAQ Capital Market, we currently expect that our common stock would be eligible to be listed on the OTC Bulletin Board or Pink Sheets. We do not know what impact delisting from The NASDAQ Capital Market may have on our listing with the Borsa Italiana.

Although we continue to be listed on The NASDAQ Capital Market, trading in our common stock may be halted or suspended due to market conditions or if NASDAQ, CONSOB or the Borsa Italiana determine that trading in our common stock is inadvisable. Trading in our common stock was halted by the Borsa Italiana on February 10, 2009, and, as a consequence, trading in our common stock was also halted by NASDAQ. After we provided CONSOB with additional information and clarification on our business operations and financial condition, as requested, and published a press release containing such information in Italy, CONSOB and NASDAQ lifted the trading halts on our common stock. In addition, on March 23, 2009, the Borsa Italiana halted trading of our common stock on the MTA and resumed trading prior to opening of the MTA the next day after we filed a press release regarding the explanatory paragraph in our auditor’s reports on our December 31, 2008 and 2007 consolidated financial statements regarding their substantial doubt as to our ability to continue as a going concern. As a consequence, NASDAQ also halted trading in our common stock on March 23, 2009, but re-initiated trading later that day. Although we file press releases with CONSOB at the end of each month regarding our business and financial condition, CONSOB may make additional inquiries about our business and financial conditions at any time, and there can be no guarantee that CONSOB or NASDAQ will not halt trading in our shares again in the future.

If our common stock ceases to be listed for trading on The NASDAQ Capital Market or the MTA, or both, for any reason, or if trading in our stock is halted or suspended on The NASDAQ Capital Market or the MTA or both, such events may harm the trading price of our securities, increase the volatility of the trading price of our securities and make it more difficult for investors to buy or sell shares of our common stock. Moreover, if our common stock ceases to be listed for trading on The NASDAQ Capital Market or if trading in our stock is halted or suspended on The NASDAQ Capital Market, we may become subject to certain obligations. In addition, if we are not listed on The NASDAQ Capital Market and/or if our public float falls below $75 million, we will be limited in our ability to file new shelf registration statements on SEC Form S-3 and/or to fully use one or more registration statements on SEC Form S-3. We have relied significantly on shelf registration statements on SEC Form S-3 for most of our financings in recent years, so any such limitations may have a material adverse effect on our ability to raise the capital we need.

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The global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict, and may further limit our ability to raise additional funds.

The ongoing credit crisis and related turmoil in the global financial system has had and may continue to have an impact on our business and our financial condition. We may face significant challenges if conditions in the financial markets do not improve or continue to worsen. In particular, our ability to access the capital markets and raise funds required for our operations may be severely restricted at a time when we would like, or need, to do so, which could have an adverse effect on our ability to meet our current and future funding requirements and on our flexibility to react to changing economic and business conditions.

We are required to comply with the regulatory structure of Italy because our stock is traded on the MTA, which could result in administrative and other challenges and additional expenses.

Our common stock is traded on the MTA and we are required to also comply with the rules and regulations of CONSOB, which is the public authority responsible for regulating the Italian securities market, and the Borsa Italiana, which ensures the development of the managed market in Italy. Collectively these entities regulate companies listed on Italy’s public markets. Conducting our operations in a manner that complies with all of the applicable laws and rules requires us to devote additional time and resources to regulatory compliance matters. For example, the process of seeking to understand and comply with the laws of each country, including tax, labor and regulatory laws, might require us to incur the expense of engaging additional outside counsel, accountants and other professional advisors and might result in delayed business initiatives as we seek to ensure that each new initiative will comply with all of the applicable regulatory regimes. In addition, the Borsa Italiana and CONSOB have made several requests for information asking us to provide additional clarifications about our business operations and financial condition, and we have complied with such requests and have met with CONSOB on several occasions to answer questions. Compliance with Italian regulatory requirements may delay additional issuances of our common stock; we are currently taking steps to attempt to conform to the requirements of the Italian stock exchange and CONSOB to allow such additional issuances.

In addition, under Italian law, we must publish a listing prospectus that has been approved by CONSOB prior to issuing common stock that exceeds, in any twelve-month period, 10% of the number of shares of our common stock outstanding at the beginning of that period. We have attempted to publish a listing prospectus in Italy to cover our general offerings for the past two years, beginning in April 2007. After working with CONSOB to meet its requirements to publish that listing prospectus for the remainder of 2007, we were finally able to publish a listing prospectus in January 2008; however, that listing prospectus was limited to shares to be issued to Société Générale under the Step-Up Equity Financing Agreement we entered into with Société Générale in 2006, which has since terminated. After meeting with CONSOB in 2008 to further discuss its requirements for a more general listing prospectus, we filed a new listing prospectus on December 31, 2008, which was rejected by CONSOB on January 16, 2009. On January 28, 2009, we filed a registration document (i.e., one of the three documents that, according to European Regulation No. 809/2004 and together with the securities note and the summary, constitute a listing prospectus, which can be separately filed, examined and eventually approved by CONSOB).

On July 2, 2009, after several requests of supplements, clarifications and submissions of new drafts of our registration document, CONSOB informed us that the relevant administrative procedure for CONSOB’s authorization to publish the registration document had expired since CONSOB alleged that we had not amended the text of the registration document to provide certain information CONSOB had requested. On July 23, 2009, we filed a new draft of the registration document and on September 24, 2009, CONSOB approved publication of such registration document. On September 29, 2009, we published the registration document in Italy and we may use it to register our securities on the Italian stock market.

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The registration document will be effective for twelve months from the date of its publication (i.e., twelve months from September 29, 2009). Within such twelve-month period, we will also have to obtain CONSOB’s clearance over the relevant securities note and summary, which together with the registration document, will constitute a listing prospectus. A listing prospectus allows us to issue common stock and have it admitted to listing on the Italian MTA over the aforesaid threshold of 10% of the number of shares of our common stock outstanding at the beginning of any twelve-month period (except for the further exemptions to the publication of a prospectus provided under Section 57 of the CONSOB’s Rules no. 11971/99, as subsequently amended). We have already reached this 10% threshold limit through issuances of shares of our common stock over the past twelve months. Pending CONSOB’s clearance of the securities note and the summary, we are required to raise money using alternative forms of securities. For example, we may need to use convertible preferred stock and convertible debt in lieu of our common stock because convertible preferred stock and convertible debt, subject to the provisions of European Directive No. 71/2003 and according to the interpretations of the Committee of European Securities Regulators, or CESR, are not subject to the 10% limitation imposed by European Union and Italian law.

Moreover, on December 23, 2008, CONSOB sent a notice to us requesting that we issue (i) immediately, a press release providing, among other things, information about our debt restructuring plan, the current state of compliance with the relevant covenants regulating our debt and the equity line of credit agreement we entered into with Midsummer Investment Ltd., or Midsummer, on July 29, 2008, and (ii) by the end of each month and starting from the month of December 2008, a press release providing certain information relating to our management and financial situation, updated to the previous month, or the Monthly CONSOB Press Release. On July 31, 2009, CONSOB sent us a notice asserting three violations of the provisions of Section 114, paragraph 5 of the Italian Legislative Decree no. 58/98. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/1998 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, applicable to each one of the three asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on August 28, 2009 (within 30 days of July 31, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On May 5, 2010, CONSOB (i) notified us that it has begun the preliminary investigation for its decision on these administrative proceedings and (ii) provided us with a preliminary investigation report in reply to our defenses submitted on August 28, 2009. On June 4, 2010 (within 30 days of May 5, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules), wesubmitted further defenses that CONSOB will have to evaluate before imposing any possible administrative sanctions.

On December 10, 2009, CONSOB sent us a notice claiming two violations of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information reported, at CONSOB’s request, in the press release disseminated on December 19, 2008 and March 23, 2009. The sanctions established by Section 193, paragraph 1 of the Italian Legislative Decree no. 58/98 for such violations are pecuniary administrative sanctions amounting to between €5,000 and €500,000, applicable to each one of the two asserted violations. According to the applicable Italian legal provisions, CONSOB may impose such administrative sanctions by means of a decree stating the grounds of its decision only after evaluating our possible defenses that were submitted to CONSOB on January 8, 2010 (within 30 days of December 10, 2009, the notification date of the relevant charges, according to the applicable Italian rules). On July 12, 2010, CONSOB (i) notified us that it has begun the preliminary investigation for its decision on these administrative proceedings and (ii) provided us with a preliminary investigation report in reply to our defenses submitted on January 8, 2010. We are planning to submit (within 30 days of July 12, 2010, the notification date of the beginning of the aforesaid preliminary investigation, according to the applicable Italian rules) further defenses that CONSOB will have to evaluate before imposing any possible administrative sanctions.

Our assets and liabilities that remain in our Italian branches make us subject to increased risk regarding currency exchange rate fluctuations.

We are exposed to risks associated with the translation of euro-denominated financial results and accounts into U.S. dollars. As long as we continue to have assets and liabilities held in our Italian branches the carrying value of these assets and liabilities will be affected by fluctuations in the value of the U.S. dollar as compared to the euro. Changes in the value of the U.S. dollar as compared to the euro might have an adverse effect on our reported results of operations and financial condition.

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We may owe additional amounts for value added taxes related to our operations in Europe.

Our European operations are subject to a value added tax, or VAT, which is usually applied to all goods and services purchased and sold throughout Europe. The VAT receivable is $5.2 million and $6.3 million as of June 30, 2010 and December 31, 2009, respectively. On April 14, 2009 and December 21, 2009, the Italian Tax Authority, or ITA, issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s VAT returns for the years 2003 and 2005, respectively. On June 25, 2010, the ITA issued notices of assessment to CTI (Europe) for the years 2006 and 2007 based on similar findings of the 2003 and 2005 assessments. The ITA audits concluded that CTI (Europe) did not collect and remit VAT on certain invoices issued to non-Italian clients for services performed by CTI (Europe). The assessments, including interest and penalties, for the years 2003, 2005, 2006 and 2007 are €0.5 million, €5.5 million, €2.5 million and €0.8million, or approximately $0.7 million, $6.7 million, $3.1 million and $1.0 million as of June 30, 2010, respectively. On July 14, 2010, the ITA issued a notice of deposit payment to CTI (Europe) based on the 2005 assessment including interest and collection fees for an amount of €0.9 million, or approximately $1.2 million, payable in the third quarter 2010. We successfully filed a petition with the Italian Tax Court for suspension of the 2005 notice of deposit payment. We believe that the services invoiced were non-VAT taxable consultancy services and that the VAT returns are correct as originally filed. We intend to vigorously defend ourselves against the assessments and have requested a court hearing on procedural grounds and merits of the case. The Italian Tax Court has scheduled a hearing on September 28, 2010 regarding the 2005 assessment. However, if we are unable to defend ourselves against the assessments and if we receive an assessment for subsequent years, it may harm our results of operations and financial condition.

Our financial condition may be adversely affected if third parties default in the performance of contractual obligations.

Because we do not currently have any marketed products producing revenue, our business is dependent on the performance by third parties of their responsibilities under contractual relationships and if third parties default on their performance of their contractual obligations, we could suffer significant financial losses and operational problems, which could in turn adversely affect our financial performance, cash flows or results of operations and may jeopardize our ability to maintain our operations.

We may not realize any royalties, milestone payments or other benefits under the License and Co-Development Agreement entered into with Novartis Pharmaceutical Company Ltd.

We have entered into a License and Co-Development agreement related to OPAXIO and pixantrone with Novartis pursuant to which Novartis received an exclusive worldwide license for the development and commercialization of OPAXIO and an option to enter into an exclusive worldwide license to develop and commercialize pixantrone. We will not receive any royalty or milestone payments under this agreement unless Novartis exercises its option related to pixantrone and we are able to reach a definitive agreement or Novartis elects to participate in the development and commercialization of OPAXIO. Novartis is under no obligation to make such election and enter into a definitive license agreement or exercise such right and may never do so. In addition, even if Novartis exercises such rights, any royalties and milestone payments we may be eligible to receive from Novartis are subject to the receipt of the necessary regulatory approvals and the attainment of certain sales levels. In the event Novartis does not elect to participate in the development of OPAXIO or pixantrone, we may not be able to find another suitable partner for the commercialization and development of those products, which may have an adverse effect on our ability to bring those drugs to market. In addition, we would need to obtain a release from Novartis prior to entering into any agreement to develop and commercialize pixantrone or OPAXIO with a third party. As announced on April 9, 2010, we received a Complete Response Letter from the Food and Drug Administration, or FDA, regarding our New Drug Application, or NDA, for pixantrone. The FDA cited as its primary reason for the action its concerns previously raised at the Oncologic Drugs Advisory Committee, or ODAC, meeting on March 22, 2010 and recommended that we conduct an additional trial to demonstrate the safety and effectiveness of pixantrone. We may never receive the necessary regulatory approvals and our products may not reach the necessary sales levels to generate royalty or milestone payments even if Novartis elects to exercise its option with regard to pixantrone and enter into a definitive license agreement or to participate in the development and commercialization of OPAXIO. Novartis has the right under the agreement in its sole discretion to terminate such agreement at any time upon written notice to us.

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We cannot guarantee that we will obtain regulatory approval to manufacture or market any of our drug candidates.

Obtaining regulatory approval to market drugs to treat cancer is expensive, difficult and risky. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval. Negative or inconclusive results or adverse medical events during a clinical trial could delay, limit or prevent regulatory approval.

At the ODAC meeting on March 22, 2010, the ODAC panel did not recommend approval of our NDA for pixantrone. Subsequently, we received a Complete Response Letter from the FDA regarding our NDA for pixantrone. The FDA cited as its primary reason for the action its concerns previously raised at the ODAC meeting on March 22, 2010 and recommended that we conduct an additional clinical trial to demonstrate the safety and effectiveness of pixantrone. We expect that we will need at least an additional clinical trial to obtain FDA approval of our NDA for pixantrone and we do not know what this trial will cost or whether the FDA will accept our SPA for this trial. We may also need more than one additional clinical trial or we may need to take additional steps to obtain regulatory approval of pixantrone. The expense to design and conduct clinical trials are substantial and any additional clinical trials or actions we may need to pursue to obtain approval of our NDA for pixantrone may negatively affect our business, financial condition and results of operations.

We may be delayed, limited or precluded from obtaining regulatory approval of OPAXIO as a maintenance therapy for advanced stage ovarian cancer.

Our future financial success depends in part on obtaining regulatory approval of OPAXIO. We are currently focusing our development of OPAXIO as a potential maintenance therapy for women with advanced stage ovarian cancer who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. This study, the GOG0212 trial, is under the control of the GOG and is expected to enroll 1,100 patients with more than 700 patients enrolled to date. The GOG Data Monitoring Committee plans to conduct an interim analysis of overall survival and based on current enrollment and study duration, the interim analysis could be conducted as early as 2011. If successful, we could utilize those results to form the basis of a New Drug Application, NDA, for OPAXIO. However, prior clinical trials for OPAXIO have not been successful. In March 2005, we announced the results of STELLAR 3, and in May 2005, we announced the results of STELLAR 2 and 4, our phase III clinical trials of OPAXIO in NSCLC. All three trials failed to achieve their primary endpoints of superior overall survival compared to current marketed agents for treating NSCLC. Accordingly, there can be no assurances that the GOG0212 will provide compelling evidence or any positive results, which would preclude our planned submission of an NDA to the FDA. In addition, we cannot predict the outcome of the GOG0212 study and that study may not demonstrate or be adequate to support regulatory approval of OPAXIO by the FDA.

In March 2008, we submitted an MAA to the EMEA for first-line treatment of patients with advanced non-small cell lung cancer, or NSCLC, who are poor performance status, or PS2, based on a non-inferior survival and improved side effect profile which we believe was demonstrated in our previous clinical trials. The application was based on a positive opinion we received from the EMEA’s Scientific Advice Working Party, or SAWP; the EMEA agreed that switching the primary endpoint from superiority to non-inferiority is feasible if the retrospective justification provided in the marketing application is adequate. In September 2009, we notified the EMEA of our decision to withdraw the MAA and we refocused our resources on the approval of OPAXIO for its potential superiority indication in maintenance therapy for ovarian cancer and as a radiation sensitizer in the treatment of esophageal cancer.

We are subject to extensive government regulation.

We are subject to rigorous and extensive regulation by the FDA in the United States and by comparable agencies in other states and countries. Failure to comply with regulatory requirements could result in various adverse consequences, including possible delay in approval or refusal to approve a product, withdrawal of approved products from the market, product seizures, injunctions, regulatory restrictions on our business and sales activities, monetary penalties, or criminal prosecution.

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Our products may not be marketed in the United States until they have been approved by the FDA and may not be marketed in other countries until they have received approval from the appropriate agencies. None of our current product candidates have received approval for marketing in any country. On April 13, 2009, we began submission of a rolling NDA to the FDA for pixantrone to treat relapsed aggressive NHL. We completed the submission in June 2009 and as announced on April 9, 2010, we received a Complete Response Letter from the FDA regarding our NDA for pixantrone. The FDA cited as its primary reason for the action its concerns previously raised at the Oncologic Drugs Advisory Committee, or ODAC, meeting on March 22, 2010 and recommended that we conduct an additional trial to demonstrate the safety and effectiveness of pixantrone. Based on the FDA’s ODAC presentation, which provided ODAC and us with alternative options to consider to make investigational drugs available to patients if drugs need to be studied further prior to approval, we will evaluate the establishment of an expanded access program for pixantrone while we conduct an additional study in aggressive NHL.

Obtaining regulatory approval requires substantial time, effort and financial resources, and we may not be able to obtain approval of any of our products on a timely basis, or at all. In addition, data obtained from preclinical and clinical trials are susceptible to varying interpretations, and government regulators and our collaborators may not agree with our interpretation of our clinical trial results. If our products are not approved quickly enough to provide net revenues to defray our debt and operating expenses, our business, financial condition and results of operations will be adversely affected.

In the event that we receive marketing approval for any of our product candidates, we will be subject to numerous regulations and statutes regulating the manner of selling and obtaining reimbursement for those products. For example, federal statutes generally prohibit providing certain discounts and payments to physicians to encourage them to prescribe our product. Violations of such regulations or statutes may result in treble damages, criminal or civil penalties, fines or exclusion of us or our employees from participation in federal and state health care programs. Although we have policies prohibiting violations of relevant regulations and statutes, unauthorized actions of our employees or consultants, or unfavorable interpretations of such regulations or statutes may result in third parties or regulatory agencies bringing legal proceedings or enforcement actions against us. Because we will likely need to develop a new sales force for any future marketed products, we may have a greater risk of such violations from lack of adequate training or experience. The expense to retain and pay legal counsel and consultants to defend against any such proceedings would be substantial, and together with the diversion of management’s time and attention to assist in any such defense, may negatively affect our business, financial condition and results of operations.

In addition, both before and after approval, our contract manufacturers and our products are subject to numerous regulatory requirements covering, among other things, manufacturing, quality control, labeling, advertising, promotion, distribution and export. Manufacturing processes must conform to current Good Manufacturing Practice, or cGMPs. The FDA and other regulatory authorities periodically inspect manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort to maintain compliance. Failure to comply with FDA, EMEA or other applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory compliance.

The marketing and promotion of pharmaceuticals is also heavily regulated, particularly with regard to prohibitions on the promotion of products for off-label uses. In April 2007, we paid a civil penalty of $10.6 million and entered into a settlement agreement with the United States Attorney’s Office for the Western District of Washington arising out of their investigation into certain of our prior marketing practices relating to TRISENOX, which was divested to Cephalon Inc. in July 2005. As part of that settlement agreement and in connection with the acquisition of Zevalin, we also entered into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services, which required us to establish a compliance committee and compliance program and adopt a formal code of conduct.

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We face direct and intense competition from our competitors in the biotechnology and pharmaceutical industries, and we may not compete successfully against them.

Competition in the oncology market is intense and is accentuated by the rapid pace of technological development. We anticipate that we will face increased competition in the future as new companies enter the market. Our competitors in the United States and elsewhere are numerous and include, among others, major multinational pharmaceutical companies, specialized biotechnology companies and universities and other research institutions. Specifically:

• Because pixantrone is intended to provide less toxic treatments to patients who have failed standard chemotherapy treatment, if we are successful in bringing pixantrone to market, it is not expected to compete directly with many existing chemotherapies. However, pixantrone will face competition from currently marketed anthracyclines, such as mitoxantrone (Novantrone^®), and new anti-cancer drugs with reduced toxicity that may be developed and marketed.

• If we are successful in bringing OPAXIO to market, we will face direct competition from oncology-focused multinational corporations. OPAXIO will compete with other taxanes. Many oncology-focused multinational corporations currently market or are developing taxanes, epothilones, and other cytotoxic agents, which inhibit cancer cells by a mechanism similar to taxanes, or similar products. Such corporations include, among others, Bristol-Myers Squibb Co. and others, which market paclitaxel and generic forms of paclitaxel; Sanofi-Aventis, which markets docetaxel; Genentech, Roche and OSI Pharmaceuticals, which market Tarceva™; Genentech and Roche, which market Avastin™; Eli Lilly, which markets Alimta^®; and Abraxis, which markets Abraxane™. In addition, other companies such as NeoPharm Inc. and Telik, Inc. are also developing products, which could compete with OPAXIO.

• If we are successful in bringing brostallicin to market, we will face direct competition from other minor groove binding agents including Yondelis^®, which is currently developed by PharmaMar and has received Authorization of Commercialization from the European Commission for soft tissue sarcoma.

Many of our competitors, particularly the multinational pharmaceutical companies, either alone or together with their collaborators, have substantially greater financial resources and substantially larger development and marketing teams than us. In addition, many of our competitors, either alone or together with their collaborators, have significantly greater experience than we do in developing, manufacturing and marketing products. As a result, these companies’ products might come to market sooner or might prove to be more effective, less expensive, have fewer side effects or be easier to administer than ours. In any such case, sales of our current or future products would likely suffer and we might never recoup the significant investments we are making to develop these product candidates.

Uncertainty regarding third-party reimbursement and healthcare cost containment initiatives may limit our returns.

The ongoing efforts of governmental and third-party payors to contain or reduce the cost of healthcare may affect our ability to commercialize our products successfully. Governmental and other third-party payers continue to attempt to contain healthcare costs by:

• challenging the prices charged for health care products and services;

• limiting both coverage and the amount of reimbursement for new therapeutic products;

• denying or limiting coverage for products that are approved by the FDA but are considered experimental or investigational by third-party payors;

• refusing in some cases to provide coverage when an approved product is used for disease indications in a way that has not received FDA marketing approval; and

• denying coverage altogether.

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The continuing efforts of government and insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability, and the future revenues and profitability of our potential customers, suppliers and collaborative partners and the availability of capital. In the United States, given the comprehensive health care reform legislation that the President signed into law on March 23, 2010, under the Patient Protection and Affordable Care Act (HR 3590), or the PPACA, the U.S. Congress and state legislatures will likely continue to focus on health care reform, the cost of healthcare services and products and on the reform of the Medicare and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement or adoption of these proposals could significantly influence the purchase of healthcare services and products, resulting in lower prices and reducing demand for our products. In addition, in almost all European markets, pricing and choice of prescription pharmaceuticals are subject to governmental control. Therefore, the price of our products and their reimbursement in Europe will be determined by national regulatory authorities.

Even if we succeed in bringing any of our proposed products to the market, they may not be considered cost-effective and third-party reimbursement might not be available or sufficient. If adequate third-party coverage is not available, we may not be able to maintain price levels sufficient to realize an appropriate return on our investment in research and product development. In addition, legislation and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after any of our proposed products are approved for marketing.

If users of our products are unable to obtain adequate reimbursement from third-party payers, or if new restrictive legislation is adopted, market acceptance of our products may be limited and we may not achieve anticipated revenues.

Our ability to commercialize our products will depend in part on the extent to which appropriate reimbursement levels for the cost of our products and related treatment are obtained by governmental authorities, private health insurers and other organizations, such as health maintenance organizations (“HMOs”). Third-party payers are increasingly challenging the prices charged for medical care. Also, the trend toward managed health care in the United States and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and products, as well as legislative proposals to further reform health care or reduce government insurance programs, may all result in lower prices for our products. The cost containment measures that health care payers and providers are instituting and the effect of any health care reform could materially harm our ability to operate profitably.

Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market.

The successful development of pharmaceutical products is highly uncertain and obtaining regulatory approval to market drugs to treat cancer is expensive, difficult and risky. Products that appear promising in research and development may be delayed or fail to reach later stages of development or the market for several reasons, including:

• clinical trial results may show the product to be less effective than desired or to have harmful or problematic side effects;

• preclinical tests may show the product to be toxic or lack efficacy in animal models;

• failure to receive the necessary U.S. and international regulatory approvals or a delay in receiving such approvals;

• difficulties in formulating the product, scaling the manufacturing process or getting approval for manufacturing;

• manufacturing costs, pricing, reimbursement issues or other factors may make the product uneconomical to commercialize;

• other companies or people have or may have proprietary rights to a product candidate, such as patent rights, and will not let the product candidate be sold on reasonable terms, or at all; or

• the product candidate is not cost effective in light of existing therapeutics.

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Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results or adverse medical events during a clinical trial could delay, limit or prevent regulatory approval. In addition, any significant problem in the production of our products, such as the inability of a supplier to provide raw materials or supplies used to manufacture our products, equipment obsolescence, malfunctions or failures, product quality or contamination problems, or changes in regulatory requirements or standards that require modifications to our manufacturing process could delay, limit or prevent regulatory approval which could have a material adverse effect on our business, financial condition and results or the trading price of our securities. There can be no assurance as to whether or when we will receive regulatory approvals for our products.

If any of our license agreements for intellectual property underlying pixantrone, OPAXIO, brostallicin, or any other products are terminated, we may lose the right to develop or market that product.

We have licensed intellectual property, including patent applications relating to intellectual property for pixantrone and brostallicin. We have also in-licensed the intellectual property for our drug delivery technology relating to OPAXIO which uses polymers that are linked to drugs, known as polymer-drug conjugates. Some of our product development programs depend on our ability to maintain rights under these licenses. Each licensor has the power to terminate its agreement with us if we fail to meet our obligations under these licenses. We may not be able to meet our obligations under these licenses. If we default under any license agreement, we may lose our right to market and sell any products based on the licensed technology.

If there is an adverse outcome in the securities class actions and shareholder derivative litigation that have been filed against us, our business may be harmed.

We and certain of our officers and directors are named as defendants in purported securities class action and shareholder derivative lawsuits filed in the U.S. District Court for the Western District of Washington. The securities class action lawsuits are brought on behalf of a putative class of purchasers of our securities from May 5, 2009 through March 19, 2010, and seek unspecified damages. As is typical in this type of litigation, additional purported securities class action and shareholder derivative lawsuits containing substantially similar allegations could be filed in the near future. We expect that all of the purported securities class actions will be consolidated into one consolidated securities class action and all of the purported shareholder derivative lawsuits will be consolidated into one consolidated derivative action. As with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation. Furthermore, we may have to incur substantial expenses in connection with these lawsuits. In the event of an adverse outcome, our business could be materially harmed.

If we fail to adequately protect our intellectual property, our competitive position could be harmed.

Development and protection of our intellectual property are critical to our business. If we do not adequately protect our intellectual property, competitors may be able to practice our technologies. Our success depends in part on our ability to:

• obtain patent protection for our products or processes both in the United States and other countries;

• protect trade secrets; and

• prevent others from infringing on our proprietary rights.

When polymers are linked, or conjugated, to drugs, the results are referred to as polymer-drug conjugates. We are developing drug delivery technology that links chemotherapy to biodegradable polymers. For example, OPAXIO is paclitaxel, the active ingredient in Taxol^®, one of the world’s best selling cancer drugs, linked to polyglutamate. We may not receive a patent for all of our polymer-drug conjugates and we may be challenged by the holder of a patent covering the underlying drug and/or methods for its use or manufacture.

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The patent position of biopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the United States and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. Patent applications in which we have rights may never issue as patents and the claims of any issued patents may not afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors may be challenged and subsequently narrowed, invalidated or circumvented. Litigation, interference proceedings or other governmental proceedings that we may become involved in with respect to our proprietary technologies or the proprietary technology of others could result in substantial cost to us. Patent litigation is widespread in the biotechnology industry, and any patent litigation could harm our business. Costly litigation might be necessary to protect a patent position or to determine the scope and validity of third-party proprietary rights, and we may not have the required resources to pursue any such litigation or to protect our patent rights. Any adverse outcome in litigation with respect to the infringement or validity of any patents owned by third parties could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using a product or technology.

We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive. Third parties may independently develop such know-how or otherwise obtain access to our technology. While we require our employees, consultants and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored.

Our products could infringe upon the intellectual property rights of others, which may cause us to engage in costly litigation and, if unsuccessful, could cause us to pay substantial damages and prohibit us from selling our products.

We attempt to monitor patent filings for patents that may be relevant to our products and product candidates in an effort to guide the design and development of our products to avoid infringement, but have not conducted an exhaustive search. We may not be able to successfully challenge the validity of these patents and could be required to pay substantial damages, possibly including treble damages, for past infringement and attorneys’ fees if it is ultimately determined that our products infringe a third-party’s patents. Further, we may be prohibited from selling our products before we obtain a license, which, if available at all, may require us to pay substantial royalties. Moreover, third parties may challenge the patents that have been issued or licensed to us. Even if infringement claims against us are without merit, or if we challenge the validity of issued patents, lawsuits take significant time, may be expensive and may divert management attention from other business concerns.

We may be unable to obtain a quorum for meetings of our shareholders or obtain necessary shareholder approvals and therefore be unable to take certain corporate actions.

Our amended and restated articles of incorporation require that a quorum, consisting of one-third of the outstanding shares of voting stock, be represented in person or by proxy in order to transact business at a meeting of our shareholders. In addition, amendments to our amended and restated articles of incorporation, such as an amendment to increase our authorized capital stock, require the approval of a majority of our outstanding shares. A substantial majority of our common shares are held by Italian institutions and, under Italian laws and regulations, it is difficult to communicate with the beneficial holders of those shares to obtain votes. In 2006, when a quorum required a majority of the outstanding shares of our voting stock be represented in person or by proxy, we scheduled two annual meetings of shareholders, but were unable to obtain quorum at either meeting. Following that failure to obtain quorum, we contacted certain depository banks in Italy where significant numbers of shares of our common stock were held and asked them to cooperate by making a book-entry transfer of their share positions at Monte Titoli to their U.S. correspondent bank, who would then transfer the shares to an account of the Italian bank at a U.S. broker-dealer that is an affiliate of that bank. Certain of the banks contacted agreed to make the share transfer pursuant to these arrangements as of the record date of the meeting, subject to the relevant beneficial owner being informed before such record date and taking no action to direct the voting of such shares. Under Rule 452 of the New York Stock Exchange, the U.S. broker-dealer may vote shares absent direction from the beneficial owner on certain matters, such as the uncontested election of directors, an amendment to our amended and restated articles of incorporation to increase authorized shares that are to be used for general corporate purposes, and the ratification of our auditors. We were able to obtain a quorum to hold special meetings of the shareholders in April 2007, January 2008 and March 2009 and annual meetings of the shareholders in September 2007, June 2008 and October 2009. At the meeting in June 2008, our shareholders approved a proposal to reduce our quorum requirement from a majority

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of outstanding voting shares to one-third of outstanding voting shares. However, obtaining a quorum at future meetings even at the lower threshold and obtaining necessary shareholder approvals will depend in part upon the willingness of the Italian depository banks to continue participating in the custody transfer arrangements, and we cannot be assured that those banks that have participated in the past will continue to participate in custody transfer arrangements in the future. We are continuing to explore other alternatives to achieve quorum for and shareholder representation at our meetings; however, we cannot be certain that we will find an alternate method if we are unable to continue to use the custody transfer arrangements. As a result, we may be unable to obtain a quorum at future annual or special meetings of shareholders or obtain shareholder approval of proposals when needed.

If we are unable to obtain a quorum at our shareholder meetings and thus fail to get shareholder approval of corporate actions, such failure could have a materially adverse effect on us. Even if we obtain quorum, we may not obtain enough votes to approve matters to be resolved upon at the shareholders’ meeting. In addition, brokers may only vote on those matters for which broker discretionary voting is allowed under Rule 452 of the New York Stock Exchange, and we may not be able to obtain the required number of votes to approve certain proposals (i.e., such as a proposal to increase the number of authorized shares) that require a majority of all outstanding shares to approve the proposal due to our reliance on broker discretionary voting. Therefore it is possible that even if we are able to obtain a quorum for our meetings of the shareholders we still may not receive enough votes to approve proxy proposals presented at such meeting and, depending on the proposal in question, including the proposal submitted to our shareholders to be determined at our annual meeting of shareholders to increase the number of authorized shares of our common stock, such failure could have a material adverse effect on us. For example, a proposal to approve a reverse stock split failed to receive sufficient votes to pass at the March 2009 shareholders meeting.

We could fail in financing efforts or be delisted from NASDAQ if we fail to receive shareholder approval when needed.

We are required under the NASDAQ Marketplace Rules to obtain shareholder approval for any issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding before the issuance of such securities sold at a discount to the greater of book or market value in an offering that is not deemed to be a “public offering” by NASDAQ. Funding of our operations in the future may require issuance of additional equity securities that would comprise more than 20% of the total shares of our common stock outstanding, but we might not be successful in obtaining the required shareholder approval for such an issuance, particularly in light of the difficulties we have experienced in obtaining a quorum and holding shareholder meetings as outlined above. If we are unable to obtain financing due to shareholder approval difficulties, such failure may have a material adverse effect on our ability to continue operations.

We may be unable to obtain the raw materials necessary to produce our OPAXIO product candidate in sufficient quantity to meet demand when and if such product is approved.

We may not be able to continue to purchase the materials necessary to produce OPAXIO, including paclitaxel, in adequate volume and quality. Paclitaxel is derived from certain varieties of yew trees and the supply of paclitaxel is controlled by a limited number of companies. We purchase the raw materials paclitaxel and polyglutamic acid from single sources. Should the paclitaxel or polyglutamic acid purchased from our sources prove to be insufficient in quantity or quality, should a supplier fail to deliver in a timely fashion or at all, or should these relationships terminate, we may not be able to qualify and obtain a sufficient supply from alternate sources on acceptable terms, or at all.

Our dependence on third-party manufacturers means that we do not always have direct control over the manufacture, testing or distribution of our products.

We do not currently have internal analytical laboratory or manufacturing facilities to allow the testing or production and distribution of drug products in compliance with cGMPs. Because we do not directly control our suppliers, these vendors may not be able to provide us with finished product when we need it.

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We will be dependent upon these third parties to supply us in a timely manner with products manufactured in compliance with cGMPs or similar manufacturing standards imposed by United States and/or foreign regulatory authorities where our products will be tested and/or marketed. While the FDA and other regulatory authorities maintain oversight for cGMP compliance of drug manufacturers, contract manufacturers and contract service providers may at times violate cGMPs. The FDA and other regulatory authorities may take action against a contract manufacturer who violates cGMPs. Failure to comply with FDA, EMEA or other applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory compliance.

In addition, one of our other products under development, OPAXIO, has a complex manufacturing process and supply chain, which may prevent us from obtaining a sufficient supply of drug product for the clinical trials and commercial activities currently planned or underway on a timely basis, if at all. The active pharmaceutical ingredients and drug products for pixantrone and brostallicin are both manufactured by a single vendor. Finished product manufacture and distribution for both pixantrone and brostallicin are to be manufactured and distributed by different single vendors. We are currently disputing our right to cancel the exclusive manufacturing contract between us and the former manufacturer of pixantrone. We assert multiple grounds for terminating this exclusive manufacturing agreement, which the former manufacturer disputes. The former manufacturer has asserted that we do not have the right to terminate the manufacturing contracts and has filed a lawsuit in the Court of Milan to compel us to source pixantrone from that manufacturer. A hearing was held on January 21, 2010 to discuss preliminary matters and set a schedule for future filings and hearings. The next hearing date is scheduled for November 11, 2010.

If we do not successfully develop our product candidates into marketable products, we may be unable to generate significant revenue or become profitable.

We divested our commercial product, TRISENOX, in July 2005 and fully divested our commercial product, Zevalin, in March 2009. Currently, we do not have a marketed product, and unless we are able to develop one of our product candidates, such as pixantrone, into an approved commercial product, we will not generate any significant revenues from product sales, royalty payments, license fees or otherwise. Pixantrone, OPAXIO and brostallicin are currently in clinical trials; these clinical trials may not be successful and, even if they are, we may not be successful in developing any of them into a commercial product. For example, our STELLAR phase III clinical trials for OPAXIO for the treatment of non-small cell lung cancer failed to meet their primary endpoints. In addition, a number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after reporting promising results in earlier trials. We will need to commit significant time and resources to develop these and any additional product candidates. Even if our trials are viewed as successful, we may not get regulatory approval. Our product candidates will be successful only if:

• our product candidates are developed to a stage that will enable us to commercialize them or sell related marketing rights to pharmaceutical companies;

• we are able to commercialize product candidates in clinical development or sell the marketing rights to third parties; and

• our product candidates, if developed, are approved by the regulatory authorities.

We are dependent on the successful completion of these goals in order to generate revenues. The failure to generate such revenues may preclude us from continuing our research and development of these and other product candidates.

If we are unable to enter into new in-licensing arrangements, our future product portfolio and potential profitability could be harmed.

One component of our business strategy is in-licensing drug compounds developed by other pharmaceutical and biotechnology companies or academic research laboratories. All of our product candidates in clinical development are in-licensed from a third-party, including pixantrone, OPAXIO and brostallicin.

Competition for new promising compounds and commercial products can be intense. If we are not able to identify future in-licensing opportunities and enter into future licensing arrangements on acceptable terms, our future product portfolio and potential profitability could be harmed.

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We may take longer to complete our clinical trials than we expect, or we may not be able to complete them at all.

Before regulatory approval for any potential product can be obtained, we must undertake extensive clinical testing on humans to demonstrate the safety and efficacy of the product. Although for planning purposes we forecast the commencement and completion of clinical trials, the actual timing of these events can vary dramatically due to a number of factors. For example:

• we may not obtain authorization to permit product candidates that are already in the preclinical development phase to enter the human clinical testing phase;

• authorized preclinical or clinical testing may require significantly more time, resources or expertise than originally expected to be necessary;

• clinical testing may not show potential products to be safe and efficacious and, as with many drugs, may fail to demonstrate the desired safety and efficacy characteristics in human clinical trials;

• clinical testing may show that potential products are not appropriate for the specific indication for which they are being tested;

• the results from preclinical studies and early clinical trials may not be indicative of the results that will be obtained in later-stage clinical trials;

• we or regulatory authorities may suspend clinical trials at any time on the basis that the participants are being exposed to unacceptable health risks or for other reasons; and

• completion of clinical trials depends on, among other things, the number of patients available for enrollment in a particular trial, which is a function of many factors, including the number of patients with the relevant conditions, the nature of the clinical testing, the proximity of patients to clinical testing centers, the eligibility criteria for tests as well as competition with other clinical testing programs involving the same patient profile but different treatments.

We have limited experience in conducting clinical trials. We expect to continue to rely on third parties, such as contract research organizations, academic institutions and/or cooperative groups, to conduct, oversee and monitor clinical trials as well as to process the clinical results and manage test requests, which may result in delays or failure to complete trials if the third parties fail to perform or to meet the applicable standards.

If we fail to commence, complete, experience delays in any of our present or planned clinical trials or need to perform more or larger clinical trials than planned, our development costs may increase and/or our ability to commercialize our product candidates may be adversely affected. If delays or costs are significant, our financial results and our ability to commercialize our product candidates may be adversely affected.

If we fail to establish and maintain collaborations or if our partners do not perform, we may be unable to develop and commercialize our product candidates.

We have entered into collaborative arrangements with third-parties to develop and/or commercialize product candidates and are currently seeking additional collaborations. For example, we entered into an agreement with the Gynecologic Oncology Group to perform a phase III trial of OPAXIO in patients with ovarian cancer. Additional collaborations might be necessary in order for us to fund our research and development activities and third-party manufacturing arrangements, seek and obtain regulatory approvals and successfully commercialize our existing and future product candidates. If we fail to enter into additional collaborative arrangements or fail to maintain our existing collaborative arrangements, the number of product candidates from which we could receive future revenues would decline. For example, in 2005 we sold our product TRISENOX to Cephalon and, pursuant to the terms of the purchase agreement under which TRISENOX was sold, we are entitled to receive milestone payments upon the approval by the FDA of new labeled uses for TRISENOX; however, Cephalon may decide not to submit any additional information to the FDA to apply for label expansion of TRISENOX, in which case we would not receive a milestone payment under the agreement.

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Our dependence on collaborative arrangements with third parties will subject us to a number of risks that could harm our ability to develop and commercialize products, including that:

• collaborative arrangements may not be on terms favorable to us;

• disagreements with partners may result in delays in the development and marketing of products, termination of our collaboration agreements or time consuming and expensive legal action;

• we cannot control the amount and timing of resources partners devote to product candidates or their prioritization of product candidates and partners may not allocate sufficient funds or resources to the development, promotion or marketing of our products, or may not perform their obligations as expected;

• partners may choose to develop, independently or with other companies, alternative products or treatments, including products or treatments which compete with ours;

• agreements with partners may expire or be terminated without renewal, or partners may breach collaboration agreements with us;

• business combinations or significant changes in a partner’s business strategy might adversely affect that partner’s willingness or ability to complete its obligations to us; and

• the terms and conditions of the relevant agreements may no longer be suitable.

The occurrence of any of these events could adversely affect the development or commercialization of our products.

Because we base several of our drug candidates on unproven technologies, we may never develop them into commercial products.

We base several of our product candidates upon novel technologies that we are using to develop drugs for the treatment of cancer. These technologies have not been proven. Furthermore, preclinical results in animal studies may not predict outcomes in human clinical trials. Our product candidates may not be proven safe or effective. If these technologies do not work, our drug candidates will not develop into commercial products.

Because there is a risk of product liability associated with our products, we face potential difficulties in obtaining insurance.

Our business exposes us to potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceutical products, and we may not be able to avoid significant product liability exposure. While we have insurance covering the product use in our clinical trials for our product candidates, it is possible that we will not be able to maintain such insurance on acceptable terms or that any insurance obtained will not provide adequate coverage against potential liabilities. Our inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or limit the commercialization of any products we develop. A successful product liability claim in excess of our insurance coverage could exceed our net worth.

Since we use hazardous materials in our business, we may be subject to claims relating to improper handling, storage or disposal of these materials.

Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. We are subject to international, federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by the regulations, the risk of accidental contamination or injury from these materials cannot be eliminated completely. In the event of such an accident, we could be held liable for any damages that result and any such liability not covered by insurance could exceed our resources. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or production efforts.

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We may not be able to conduct animal testing in the future, which could harm our research and development activities.

Certain of our research and development activities involve animal testing. Such activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting activities through protests and other means. To the extent the activities of these groups are successful, our business could be materially harmed by delaying or interrupting our research and development activities.

The unfavorable outcome of litigation and other claims against us could have a material adverse impact on our financial condition and results of operations.

We are subject to a variety of claims and lawsuits from time to time, some of which arise in the ordinary course of our business. Adverse outcomes in some or all of such pending cases may result in significant monetary damages or injunctive relief against us. While we currently believe that resolution of these matters, individually or in the aggregate, will not have a material adverse impact on our financial position, results of operations or trading price of our securities, the ultimate outcome of litigation and other claims is subject to inherent uncertainties, and our view of these matters may change in the future. It is possible that our financial condition and results of operations could be materially adversely affected in any period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable.

Our financial condition and results of operations could be adversely affected by public health issues, wars and other military action, as well as terrorist attacks and threats and government responses thereto, especially if any such actions were directed at us or our facilities or customers.

Public health issues, terrorist attacks in the United States and elsewhere, government responses thereto, and military actions in Iraq, Afghanistan and elsewhere, may disrupt our operations or those of our customers and suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers. In June 2009, the World Health Organization declared an H1N1 influenza, or swine flu, pandemic, and such pandemic could cause damage or disruption to international commerce by creating economic and political uncertainties that may have a strong negative impact on the global economy, us, and our customers or suppliers. Should the severity of the H1N1 influenza pandemic increase or other public health issues arise, we could be negatively impacted by the need for more stringent employee travel restrictions, additional limitations in the availability of freight services, governmental actions limiting the movement of products between various regions and disruptions in the operations of our customers or suppliers. The long-term effects of the H1N1 pandemic, the terrorist attacks, and the ongoing war on terrorism on our business and on the global economy remain unknown. In addition, any of these events could increase volatility in the United States and world financial markets which may depress the price of our common stock and may limit the capital resources available to us or our customers or suppliers, which could result in decreased orders from customers, less favorable financing terms from suppliers, and scarcity or increased costs of materials and components of our products. Additionally, terrorist attacks directly upon us may significantly disrupt our ability to conduct our business. Any of these occurrences could have a significant impact on our operating results, revenues and costs and may result in increased volatility of the trading price of our securities.

Higher health care costs could adversely affect our business.

We will be impacted by the recent passage of the PPACA. Under the PPACA, we may be required to amend our health care plans to, among other things, provide affordable coverage, as defined in the PPACA, to all employees, or otherwise be subject to a payment per employee based on the affordability criteria in the Act: cover adult children of our employees to age 26; delete lifetime limits; and delete pre-existing condition limitations. Many of these requirements will be phased in over a period of time. Additionally, some states and localities have passed state and local laws mandating the provision of certain levels of health benefits by some employers. Increased health care costs could have a material adverse effect on our business, financial condition and results of operations.

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Risks Related To the Securities Markets

The market price of our common stock is extremely volatile, which may affect our ability to raise capital in the future and may subject the value of your investment in our securities to sudden decreases.

The market price for securities of biopharmaceutical and biotechnology companies, including ours, historically has been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are unrelated to the operating performance of such companies. For example, during the twelve month period ended July 30, 2010, our stock price has ranged from a low of $0.12 to a high of $1.83. Fluctuations in the trading price or liquidity of our common stock may adversely affect the value of your investment in our common stock.

Factors that may have a significant impact on the market price and marketability of our securities include:

• announcements by us or others of results of preclinical testing and clinical trials and regulatory actions;

• announcements of technological innovations or new commercial therapeutic products by us, our collaborative partners or our present or potential competitors;

• our issuance of additional debt, equity or other securities, which we need to pursue in 2010 to generate additional funds to cover our current debt and operating expenses;

• our quarterly operating results;

• developments or disputes concerning patent or other proprietary rights;

• developments in our relationships with collaborative partners;

• acquisitions or divestitures;

• litigation and government proceedings;

• adverse legislation, including changes in governmental regulation;

• third-party reimbursement policies;

• changes in securities analysts’ recommendations;

• short selling;

• changes in health care policies and practices;

• halting or suspension of trading in our common stock by NASDAQ, CONSOB or the Borsa Italiana;

• economic and other external factors; and

• general market conditions.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. For example, in the case of our company, we and certain of our officers and directors are named as defendants in purported securities class action and shareholder derivative lawsuits brought on behalf of a putative class of purchasers of our securities from May 5, 2009 through March 19, 2010. These lawsuits seek unspecified damages and, as with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation. Furthermore, we may have to incur substantial expenses in connection with these lawsuits and our management’s attention and resources could be diverted from operating our business as we respond to the litigation. We maintain significant insurance to cover these risks for us and our directors and officers, but our insurance is subject to high deductibles to reduce premium expense, and there is no guarantee that the insurance will cover any specific claim that we currently face or may face in the future, or that it will be adequate to cover all potential liabilities and damages.

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The market price of our common stock may be adversely affected by market conditions affecting the stock markets in general, including price and trading fluctuations on The NASDAQ Capital Market.

The market price of our common stock may be adversely affected by market conditions affecting the stock markets in general, including price and trading fluctuations on The NASDAQ Capital Market. These conditions may result in (i) volatility in the level of, and fluctuations in, the market prices of stocks generally and, in turn, our shares of common stock, and (ii) sales of substantial amounts of our common stock in the market, in each case that could be unrelated or disproportionate to changes in our operating performance.

There may be future sales or other dilution of our equity, which may adversely affect the market price of shares of our common stock.

We are not restricted from issuing additional shares of common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, shares of common stock or preferred stock or any substantially similar securities. The market price of our shares of common stock or preferred stock could decline as a result of sales of a large number of shares of our common stock or preferred stock or similar securities in the market, or the perception that such sales could occur in the future. In addition, we are asking our shareholders to approve an amendment to our amended and restated articles of incorporation to increase the total number of authorized shares of our stock from 810,000,000 shares to 1,210,000,000 shares and to increase the total number of our authorized shares of common stock from 800,000,000 to 1,200,000,000 shares of common stock at our annual meeting of shareholders. If our shareholders approve the amendment, we would have a substantial number of additional shares of our common stock that could be issued.

Anti-takeover provisions in our charter documents, in our shareholder rights plan, or rights plan, and under Washington law could make removal of incumbent management or an acquisition of us, which may be beneficial to our shareholders, more difficult.

Provisions of our amended and restated articles of incorporation and amended and restated bylaws may have the effect of deterring or delaying attempts by our shareholders to remove or replace management, to commence proxy contests, or to effect changes in control. These provisions include:

• a classified board so that only approximately one third of the board of directors is elected each year;

• elimination of cumulative voting in the election of directors;

• procedures for advance notification of shareholder nominations and proposals;

• the ability of our board of directors to amend our bylaws without shareholder approval; and

• the ability of our board of directors to issue shares of preferred stock without shareholder approval upon the terms and conditions and with the rights, privileges and preferences as the board of directors may determine.

Pursuant to our rights plan, an acquisition of 20% or more of our common stock could result in the exercisability of the preferred stock purchase right accompanying each share of our common stock (except those held by a 20% shareholder, which become null and void), thereby entitling the holder to receive upon exercise, in lieu of a number of units of preferred stock, that number of shares of our common stock having a market value of two times the exercise price of the right. The existence of our rights plan could have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that some, or a majority, of our stockholders might believe to be in their best interest or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for their shares.

In addition, as a Washington corporation, we are subject to Washington law which imposes restrictions on some transactions between a corporation and certain significant shareholders. These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

Not applicable.

Item 6. Exhibits

(a) Exhibits

3.1	Registrant’s Amended and Restated Articles of Incorporation (incorporated by reference to the exhibits to the Registrant’s Registration Statement on Form S-3 (File No. 333-153358), filed on September 5, 2008).
3.2	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on February 9, 2009).
3.3	Registrant’s Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on March 27, 2009).
3.4	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on April 13, 2009).
3.5	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K, filed on August 21, 2009).
3.6	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K, filed on December 28, 2009).
3.7	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K, filed on January 19, 2010).
3.8	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K, filed on April 5, 2010).
3.9	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K, filed on May 27, 2010).
3.10	Registrant’s Articles of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K, filed on July 27, 2010).
3.11	Registrant’s Second Amended and Restated Bylaws (incorporated by reference to exhibits to the Registrant’s Current Report on Form 8-K, filed on February 22, 2010).
4.1	Form of Series 4 Preferred Stock Certificate (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on April 5, 2010).
4.2	Form of Common Stock Purchase Warrant, dated April 6, 2010 (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on April 5, 2010).
4.3	Form of Series 5 Preferred Stock Certificate (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on May 27, 2010).

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4.4	Form of Common Stock Purchase Warrant, dated May 27, 2010 (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on May 27, 2010).
4.5	Form of Series 6 Preferred Stock Certificate.
4.6	Form of Common Stock Purchase Warrant, dated July 27, 2010.
10.1	Form of Securities Purchase Agreement (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on April 5, 2010).
10.2	Form of Securities Purchase Agreement (incorporated by reference to the exhibits to the Registrant’s Current Report on Form 8-K, filed on May 27, 2010).
10.3	Form of Securities Purchase Agreement, dated July 25, 2010.
10.4	Form of Warrant Exchange Agreement, dated July 25, 2010.
10.5	Letter Agreement, dated July 25, 2010, by and between the Registrant and Rodman & Renshaw, LLC.
10.6	Drug Product Manufacturing Supply Agreement, dated July 13, 2010, by and between NerPharMa, S.r.l. and the Registrant.*
15	Letter regarding Unaudited Interim Financial Information.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Labels
101.PRE	XBRL Taxonomy Extension Presentation

* Confidential treatment has been requested with respect to certain portions of this exhibit. A complete copy of the agreement, including the redacted portions, has been filed separately with the Commission.

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SIGNATURES

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 thereunto duly authorized:

	CELL THERAPEUTICS, INC.
	(Registrant)
Dated: August 6, 2010	By:	/s/ James A. Bianco, M.D.
		James A. Bianco, M.D.
		Chief Executive Officer
Dated: August 6, 2010	By:	/s/ Louis A. Bianco
		Louis A. Bianco
		Executive Vice President, Finance and Administration

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EX-4.5

Exhibit 4.5

Number P6-	CELL THERAPEUTICS, INC.	*                    * Shares
	A Washington Corporation	Series 6 Preferred Stock

THIS CERTIFIES THAT *                                                                                      * is the record holder of *                                         (                )* shares of Series 6 Preferred Stock of Cell Therapeutics, Inc. (the “Corporation”) transferable only on the share register of the Corporation by the holder, in person or by such holder’s duly authorized attorney, upon surrender of this certificate properly endorsed or assigned.

This certificate and the shares represented hereby shall be held subject to all of the provisions of the Amended and Restated Articles of Incorporation and the Second Amended and Restated Bylaws of the Corporation and any amendments thereto, a copy of each of which is on file at the office of the Corporation and made a part hereof as fully as though the provisions of said Amended and Restated Articles of Incorporation and Second Amended and Restated Bylaws were imprinted in full on this Certificate, to all of which the holder of this Certificate, by acceptance hereof, assents and agrees to be bound.

The shares represented by this Certificate are convertible into shares of Common Stock as set forth in the Amended and Restated Articles of Incorporation of the Corporation.

The Corporation will furnish without charge to each shareholder who so requests, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its duly authorized officers this              day of July, 2010.

Craig Philips, President Louis A. Bianco, Executive Vice President, Finance and Administration

This certificate and the shares represented by it may not be assigned, sold, hypothecated, mortgaged, pledged, conveyed, or otherwise transferred or an interest granted in or over this certificate or the shares represented by it until after 12:01 a.m. Seattle, Washington time on July 28, 2010.

FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO                                                               SHARES REPRESENTED BY THE WITHIN CERTIFICATE AND DOES HEREBY IRREVOCABLY CONSTITUTE AND APPOINT                      ATTORNEY TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.

DATED

(Signature)

NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

EX-4.6

Exhibit 4.6

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR HYPOTHECATED ABSENT REGISTRATION OF SUCH TRANSACTION PURSUANT TO THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM.

COMMON STOCK PURCHASE WARRANT

To Purchase [—] Shares of Common Stock of

CELL THERAPEUTICS, INC.

Initial Issuance Date: July 27, 2010 Warrant No. WC-[—]

THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that, for value received, [—] (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the six (6) month and one (1) day anniversary of the Initial Issuance Date (the “Initial Exercise Date”) and on or before the close of business on the four (4) year, six (6) month, and one (1) day anniversary of the Initial Issuance Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Cell Therapeutics, Inc., a Washington corporation (the “Company”), up to [—] shares (the “Warrant Shares”) of common stock, no par value per share (the “Common Stock”) of the Company; provided, however, that in no event shall Holder be entitled to subscribe for and purchase from the Company the Warrant Shares (or any portion thereof) unless and until (i) the shareholders of the Company approve, after the Initial Issuance Date, an amendment to the Company’s amended and restated articles of incorporation to increase the authorized shares of Common Stock available for issuance thereunder by 400,000,000 shares as required by applicable law (the “Shareholder Approval”) and such amendment (the “Amendment”) has been become effective or (ii) the Company notifies the Holder that the Warrant Shares (or any portion thereof) are otherwise reserved for issuance in accordance with Section 6(e) of this Warrant, in which case the Holder will be entitled to exercise this Warrant for the number of Warrant Shares set forth in such notice from the Company; provided, further, that in no event shall this Warrant be exercisable before the Initial Exercise Date. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price (as defined in Section 2(b) of this Warrant). This Warrant is issued pursuant to the [—] dated [—] by and among the Company and certain other parties named therein (the “Agreement”).

Section 1. Reserved.

Section 2. Exercise.

(a) Exercise of Warrant. Subject to the receipt of the Shareholder Approval and the effectiveness of the Amendment or to the extent of notification by the Company pursuant to Section 6(e) of this Warrant and the reservation of the shares contemplated

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thereby, the exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by (1) delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of a Notice of Exercise in the form attached to this Warrant (the “Notice of Exercise”); provided, however, within five (5) Trading Days (as defined below) of the date said Notice of Exercise is delivered to the Company, if this Warrant is exercised in full, the Holder shall have surrendered this Warrant to the Company, and (2) payment to the Company of the aggregate Exercise Price (as defined in Section 2(b) of this Warrant) of the shares thereby purchased (as well as all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) of this Warrant) by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and this Warrant has been exercised in full. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day (as defined below) of receipt of such notice. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face of this Warrant.

“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

(b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $0.42, subject to adjustment hereunder (the “Exercise Price”).

(c) Cashless Exercise. If at the time of exercise of this Warrant there is no effective registration statement registering (or the prospectus contained therein is not available for) the issuance of the Warrant Shares to the Holder and also at such time of exercise all of the Warrant Shares are not then registered for resale by the Holder into the market at market prices from time to time on an effective registration statement for use on a continuous basis (or the prospectus contained therein is not available for use), then this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the VWAP (as defined below) on the Trading Day immediately preceding the date of such election;

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(B)	=	the Exercise Price of this Warrant, as adjusted; and
(X)	=	the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market (as defined below), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (“Bloomberg”) (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b) if the Common Stock is then listed or quoted on the OTC Bulletin Board and the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Amex; The NASDAQ Capital Market; The NASDAQ Global Market; The NASDAQ Global Select Market; the New York Stock Exchange; or the Borsa Italiana S.p.A. (MTA International).

In addition, if at the time this Warrant is exercisable the Company has not obtained the Shareholder Approval at the Shareholder Meeting or any adjournment thereof and a sufficient number of authorized shares of the Company have otherwise become available for reservation following the Initial Issuance Date as provided in the third sentence of Section 6(e), the foregoing “cashless exercise” shall be available to the Holder to the extent of such otherwise reserved shares underlying this Warrant. Upon receipt of Shareholder Approval and the Company’s amendment of its articles of incorporation to increase its authorized share capital in accordance with the Shareholder Approval, this right shall terminate.

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(d) Holder’s Restrictions. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable by the Holder to the extent (but only to the extent) that the Holder or any of its affiliates would beneficially own 4.99% or more (the “Maximum Percentage”) of the Common Stock; provided, however, that the Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Maximum Percentage set forth in this Section 2(d), provided that the Maximum Percentage in no event exceeds 9.99% of the Common Stock and the provisions of this Section 2(d) shall continue to apply. Any such increase or decrease will not be effective until the 61^st day after such notice is delivered to the Company. To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder) and of which warrants shall be exercisable (as among all warrants owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion of this Warrant) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Warrant.

(e) Mechanics of Exercise.

(i) Authorization of Warrant Shares. If and when the Company obtains the Shareholder Approval and the Amendment becomes effective or to the extent of notification by the Company pursuant to Section 6(e) of this Warrant and the reservation of the shares contemplated thereby, the Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment of the Exercise Price therefor, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

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(ii) Delivery of Certificates Upon Exercise. Certificates representing Warrant Shares shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to, or resale of the Warrant Shares by, the Holder, or (B) this Warrant is being exercised, after the six month anniversary of the Initial Issuance Date, via cashless exercise, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within three (3) Business Days from the delivery to the Company of the Notice of Exercise, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (including, by cashless exercise, if permitted) (“Warrant Share Delivery Date”). If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Warrant Shares or if the legend is not required under applicable securities laws, such Warrant Shares shall be issued free of all legends on or before the Warrant Share Delivery Date. This Warrant shall be deemed to have been exercised on the first date on which the Notice of Exercise has been properly delivered to the Company, the Company has received the Exercise Price (or documentation of cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) of this Warrant before the issuance of such shares have been paid. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, on the first date on which the Notice of Exercise has been properly delivered to the Company, the Company has received the Exercise Price (or documentation of cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) of this Warrant before the issuance of such shares have been paid.

(iii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(iv) Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(e) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

(v) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, but only after the Company obtains the Shareholder Approval and the Amendment becomes effective or to the extent of notification by the Company pursuant to Section 6(e)

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of this Warrant and the reservation of the shares contemplated thereby, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date pursuant to this Section 2(e), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of this Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms of this Warrant.

(vi) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

(vii) Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

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(viii) Closing of Books. After the Company obtains the Shareholder Approval and the Amendment becomes effective or to the extent of notification by the Company pursuant to Section 6(e) of this Warrant and the reservation of the shares contemplated thereby, the Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms of this Warrant.

Section 3. Certain Adjustments.

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock-split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b) Subsequent Rights Offerings. If the Company, at any time while this Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP at the record date for the determination of shareholders entitled to receive such rights, options or warrants, then, the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights, options or warrants.

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(c) Pro Rata Distributions. If the Company, at any time before the Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(b) of this Warrant), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately before the record date fixed for determination of shareholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of such record date, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors of the Company (the “Board”) in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after such record date.

(d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another person, (ii) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange a material portion of the Company’s shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then the Company shall make appropriate provision to ensure that the Holder will thereafter receive upon an exercise of this Warrant at any time after the consummation of a Fundamental Transaction but before the Termination Date, in lieu of the Warrant Shares (or other stock, securities, cash, assets or other property whatsoever) issuable upon the exercise of this Warrant immediately before such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Warrant been exercised immediately before such Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). If any holder of Common Stock is given any choice as to the stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to what it receives upon any exercise of this Warrant following such Fundamental Transaction. [Notwithstanding anything in this Section 3(d) to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction where the Company is not the Successor Entity (as

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defined below), (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act where the Company is not the Successor Entity, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, including, but not limited to, The Nasdaq Global Select Market, The Nasdaq Global Market, or The Nasdaq Capital Market where the Company is not the Successor Entity, such Successor Entity shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction, provided that the foregoing right shall not be exercisable by the Holder with respect to a Fundamental Transaction under clause (ii) above in this paragraph that results from the Company entering into a license or other agreement that licenses pixantrone (BBR 2778) to an unaffiliated and unrelated person or entity so long as the Company together with its Subsidiaries continues to have bona fide, substantial and continuing business operations and activities after such license or other agreement is entered into (it being understood and agreed that (A) the foregoing right shall become immediately exercisable by the Holder with respect to such Fundamental Transaction for a period of 30 days commencing on the date that the Company together with its Subsidiaries ceases to have bona fide, substantial and continuing business operations and activities at any time after such license or other agreement is entered into, (B) the Company shall provide the Holder with prompt written notice of such cessation, and (C) Black Scholes Value with respect to such Fundamental Transaction shall always be determined as of the day of consummation of such Fundamental Transaction but (I) the remaining option time shall be equal to (W) the time between the date of the public announcement of such Fundamental Transaction and the Termination Date if such cessation occurs on or prior to the one (1) year anniversary of the consummation of such Fundamental Transaction, or (X) the time between the date of such cessation and the Termination Date if such cessation occurs after the one (1) year anniversary of the consummation of such Fundamental Transaction (as applicable), and (II) the risk-free interest rate shall be equal to (Y) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of such Fundamental Transaction and the Termination Date if such cessation occurs on or prior to the one (1) year anniversary of the consummation of such Fundamental Transaction, or (Z) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of such cessation and the Termination Date if such cessation occurs after the one (1) year anniversary of the consummation of such Fundamental Transaction (as applicable)). “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (ii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the “HVT” function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (iii) the underlying price per

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share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction, and (iv) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date.]¹ The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to the Fundamental Transaction. The provisions of this paragraph shall apply similarly and equally to successive Fundamental Transactions and shall be applied as if this Warrant (and any subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the Exchange Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).

(e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

(f) Notice to Holder.

(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or

¹ Note: The bracketed language will not be included in Warrants issued to Holders in exchange for their existing Series 3 Warrants or any prior series of existing warrants that does not have this bracketed language.

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winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register (as defined below) of the Company, at least twenty (20) calendar days before the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its subsidiaries, the Company shall forthwith file such notice with the Commission pursuant to a Current Report on Form 8-K. If and to the extent that this Warrant has become exercisable, the Holder is entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice.

Section 4. Transfer of Warrant.

(a) Transferability. Subject to Section 4(b) of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.

(b) Restrictions on Transfer. This Warrant was originally issued in a transaction exempt from registration under the Securities Act, and this Warrant and the Warrant Shares may not be offered, sold or otherwise transferred in the absence of such registration or an applicable exemption therefrom. Holder shall notify the Company of such sale, transfer, assignment, hypothecation or other disposition in such detail as is reasonably requested by the Company and shall provide the Company with evidence satisfactory to the Company, including, at the Company’s discretion, an opinion of counsel satisfactory to the Company, that such sale, transfer, assignment, hypothecation or other disposition will be exempt from the registration and prospectus delivery

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requirements of applicable federal and state securities laws and regulations. Holder hereby consents to the Company making a notation in its records or giving any transfer agent of this Warrant or the Warrant Shares an order to implement such restriction on transferability.

(c) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation of this Warrant at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a) and Section 4(b) of this Warrant, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date set forth on the first page of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

(d) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner of this Warrant for the purpose of any exercise of this Warrant or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

Section 5. Representations and Warranties of the Holder.

(a) Holder Status. At the time Holder was offered this Warrant and the Warrant Shares, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants for cash it will be, an institutional “accredited investor” as defined under Regulation D under the Securities Act (“Regulation D”) and/or meets the definition of “qualified institutional buyer” as defined in Rule 144A(a)(1) under the Securities Act, and is not an entity formed for the sole purpose of acquiring this Warrant and the Warrant Shares. The Holder is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

(b) Experience of Holder. Holder has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in this Warrant and the Warrant Shares, and has so evaluated the merits and risks of such investment. The Holder has had access to such information as it deemed necessary in order to conduct any due diligence it has determined it wants to do in connection with the purchase of this Warrant or any Warrant Shares. The Holder is able to bear the economic risk of an investment in this Warrant and the Warrant Shares and, at the present time, is able to afford a complete loss of such investment. Holder understands that nothing in this Warrant, the Agreement any other materials presented to Holder in connection with the purchase and sale of this Warrant and the Warrant Shares constitutes legal, tax or investment advice. Holder acknowledges that it must rely on legal, tax and investment advisors of its own choosing in connection with its purchase of this Warrant and the Warrant Shares.

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(c) Purchase for Own Account; No General Solicitation or General Advertising. Holder is acquiring this Warrant and the Warrant Shares for its own account, in the ordinary course of its business and not with a view toward, or for resale in connection with, the public sale or distribution thereof in a manner that would violate the Securities Act. Holder is not acquiring this Warrant or the Warrant Shares as a result of any “general solicitation” or “general advertising,” as such terms are used in Regulation D under the Securities Act, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

(d) Rule 144; Restricted Nature of Warrants and Warrant Shares. Holder has read and understands Rule 144 of the Securities Act and further understands that until such time as the same are no longer required under applicable requirements of the Securities Act or applicable state securities laws, this Warrant and the Warrant Shares shall be restricted securities within the meaning of the federal securities laws and this Warrant and any certificates representing the Warrant Shares, and all certificates or other instruments issued in exchange therefor or in substitution thereof, shall bear a customary restrictive legend substantially in the form set forth below, and that the Company will make a notation on its records and give instructions to its transfer agent in order to implement the restrictions on transfer set forth and described therein:

“The Securities represented hereby have not been registered with the Securities and Exchange Commission or the securities commission of any state in reliance upon an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered, sold, pledged or hypothecated absent registration of such transaction pursuant to the Securities Act or pursuant to an available exemption therefrom.”

Section 6. Miscellaneous.

(a) Title to Warrant. Before the Termination Date and subject to compliance with applicable laws and Section 4 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.

(b) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company before the exercise of this Warrant.

(c) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of

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the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which shall not include the posting of any bond), and upon surrender and cancellation of such Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of such Warrant.

(d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

(e) Authorized Shares. The Company shall use its reasonable best efforts to obtain the Shareholder Approval at the Company’s annual meeting of shareholders on or about September 16, 2010 (the “Shareholder Meeting”); provided, however, that no good faith adjournment or cancellation of the Shareholder Meeting shall constitute a failure on the part of the Company to use its reasonable best efforts to obtain the Shareholder Approval; provided, further, that the foregoing requirement to use reasonable best efforts to obtain Shareholder Approval shall terminate upon a Change of Control Transaction (as defined below) if the Company or the successor in such Change of Control Transaction has a sufficient number of shares of Common Stock authorized and reserved for the exercise in full of this Warrant. In the event the Company does not obtain the Shareholder Approval at the Shareholder Meeting or any adjournment thereof, the Company further agrees to use its reasonable best efforts to obtain the Shareholder Approval at subsequent meetings of shareholders to be called at least every one hundred thirty-five (135) days after the adjournment or completion of any meeting of shareholders until the Shareholder Approval is obtained. For the avoidance of doubt, (i) promptly upon receipt of the Shareholder Approval, the Company shall amend its articles of incorporation to increase its authorized share capital and a portion of the additional authorized shares of Common Stock shall be reserved for issuance upon exercise of this Warrant to the extent necessary so that 100% of the shares issuable upon exercise of this Warrant are reserved for issuance, or, (ii) in the event that any authorized shares of the Company otherwise become available for reservation following the Initial Issuance Date, the Company shall reserve all such shares for issuance upon exercise of this Warrant until 100% of the shares issuable upon exercise of this Warrant are reserved for issuance; provided, however, that (i) the foregoing obligation shall not require the Company to eliminate or use any reserve for its equity incentive plans regardless of whether the shares of Common Stock issuable pursuant to such equity incentive plans have been granted or otherwise allocated, (ii) if shares of Common Stock must be reserved pursuant to the terms of any outstanding warrants to purchase Common Stock issued on or about May 27, 2010, such shares shall be reserved in priority to the requirement to reserve shares for issuance upon exercise of this Warrant and (iii) any such shares that become available shall be reserved pro rata among this Warrant and all other warrants originally issued on or about the date hereof (or in exchange or substitution therefor) or that otherwise have a provision substantially similar to this provision. The Company shall provide the Holder with written notice of any shares of Common Stock that become reserved for issuance upon exercise of this Warrant after the Initial Issuance Date pursuant to the preceding sentence. Also for the avoidance of doubt, the Company shall not be required to reserve for issuance upon exercise of this Warrant more shares of Common Stock than the number of shares then required for exercise in full of this Warrant.

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After this Warrant has become exercisable, (a) the Company covenants that during the period this Warrant is outstanding it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant to the extent exercisable, (b) the Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant, and (c) the Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder and subject to the receipt of the Shareholder Approval and the effectiveness of the Amendment or notification by the Company pursuant to Section 6(e) and the reservation of the shares contemplated thereby, the Company shall not by any action, including, without limitation, amending its certificate of incorporation 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, but 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 Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing and subject to the receipt of the Shareholder Approval and the effectiveness of the Amendment or notification by the Company pursuant to Section 6(e) and the reservation of the shares contemplated thereby, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately before such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

“Change of Control Transaction” means the occurrence after the Initial Issuance Date of any of (i) an acquisition by an individual, legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or

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otherwise) of in excess of 33% of the voting securities of the Company, (ii) the Company merges into or consolidates with any other person, or any person merges into or consolidates with the Company and, after giving effect to such transaction, the shareholders of the Company immediately before such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction, (iii) the Company sells or transfers all or substantially all of its assets to another person and the shareholders of the Corporation immediately before such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a one-year period of more than one-half of the members of the Board which is not approved by a majority of those individuals who are members of the Board on the date hereof (or by those individuals who are serving as members of the Board on any date whose nomination to the Board was approved by a majority of the members of the Board who are members on the date hereof), or (v) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) above.

(f) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Agreement.

(g) Restrictions. The Holder acknowledges that Warrant Shares acquired upon the exercise of this Warrant, if not issued to the Holder pursuant to an effective registration statement and the Holder’s exercise is not via a “cashless exercise” effected more than six months after the issuance of this Warrant, will have the restrictions upon resale imposed by state and federal securities laws, as further described in Section 4.

(h) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant which results in any material damages to the Holder, other than a failure to obtain the Shareholder Approval, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

(i) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company, or vice versa, shall be delivered in accordance with the notice provisions of the Agreement.

(j) Limitation of Liability. No provision of this Warrant, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

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(k) Remedies. After the Company obtains the Shareholder Approval and the Amendment becomes effective or to the extent of the notification by the Company pursuant to Section 6(e) and the reservation of the shares contemplated thereby, the Holder, 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 Warrant. Subject to the receipt of the Shareholder Approval and the effectiveness of the Amendment or notification by the Company pursuant to Section 6(e) and the reservation of the shares contemplated thereby, 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 Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(l) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all holders from time to time of this Warrant and shall be enforceable by any such holder or holder of Warrant Shares.

(m) Amendment. This Warrant may be modified or amended or the provisions of this Warrant waived with the written consent of the Company and the Holder.

(n) Severability. Subject to the receipt of the Shareholder Approval and the effectiveness of the Amendment or notification by the Company pursuant to Section 6(e) and the reservation of the shares contemplated thereby, wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(o) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

[Remainder of this Page Intentionally Left Blank.]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: July 27, 2010

CELL THERAPEUTICS, INC.

Louis A. Bianco

Executive Vice President,

Finance and Administration

[Signature page to Warrant]

NOTICE OF EXERCISE

TO: Cell Therapeutics, Inc.

(1) The undersigned hereby elects to purchase                  Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) Payment shall take the form of (check applicable box):

[    ] in lawful money of the United States; or

[    ] if so allowed, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

                                                                                                                        whose address is

.                                                                 

                                                                                                                           Dated:                     ,             

Holder’s Signature:

Holder’s Address:

Signature Guaranteed:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-10.3

Exhibit 10.3

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of July 25, 2010, among Cell Therapeutics, Inc., a Washington corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an exemption from the registration requirements of Section 5 of the Securities Act (as defined below) contained in Section 4(2) thereof and/or Regulation D thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, (i) shares of Preferred Stock (as defined below), and (ii) Warrants (as defined below) pursuant to an exemption from the registration requirements of Section 5 of the Securities Act (as defined below) contained in Section 4(2) thereof and/or Regulation D thereunder, in each case as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designation (as defined herein) and (b) the following terms have the meanings set forth in this Section 1.1:

“Action” shall have the meaning ascribed to such term in Section 3.1(j) of this Agreement.

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person (as such terms are used in and construed under Rule 405 of the Securities Act). With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

“Articles of Incorporation” means the Company’s Amended and Restated Articles of Incorporation, as amended from time to time.

“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

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“Certificate of Designation” means the Articles of Amendment to the Articles of Incorporation filed by the Company with the Secretary of State of the State of Washington on or prior to the Closing Date, in the form of Exhibit A attached hereto.

“Closing” means the closing of the purchase and sale of the Securities on the Closing Date pursuant to Section 2.1 of this Agreement.

“Closing Date” means July 27, 2010.

“Commission” means the U.S. Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, no par value per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof, pursuant to the terms of such securities, to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Company Counsel” means O’Melveny & Myers LLP.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Form S-3” shall have the meaning ascribed to such term in Section 3.1(f) of this Agreement.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h) of this Agreement.

“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $250,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (c) the present value of any lease payments in excess of $250,000 due under leases required to be capitalized in accordance with GAAP.

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o) of this Agreement.

“Investment Company Act” means the Investment Company Act of 1940, as amended.

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“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction (other than, in the case of the Securities, restrictions provided in the Transaction Documents or as otherwise agreed or imposed by a Purchaser).

“Losses” shall have the meaning assigned to such term in Section 4.7.

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b) of this Agreement.

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m) of this Agreement.

“Per Share Purchase Price” equals $1,000, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement and prior to Closing.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Preferred Stock” means 4,060 shares of the Company’s Series 6 Preferred Stock issued hereunder and having the rights, preferences and privileges set forth in the Certificate of Designation.

“Proceeding” means any action, claim, suit, investigation or proceeding whether commenced or threatened.

“Prospectus” means the final prospectus filed for the Registration Statement, including the documents incorporated by reference in the Registration Statement, including the documents incorporated by reference in such final prospectus.

“Prospectus Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with the Commission pursuant to Section 4.14 of this Agreement, including the documents incorporated by reference therein.

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.7 of this Agreement.

“Registration Statement” means the automatically effective registration statement on Form S-3 (Commission File No. 333-161442) filed by the Company with the Commission pursuant to the Securities Act for the registration of the Preferred Stock and the Underlying Shares, as such Registration Statement may be amended and supplemented from time to time (including pursuant to Rule 462(b) of the Securities Act),

3

including all documents filed as part thereof or incorporated by reference therein, and including all information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430B of the Securities Act.

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e) of this Agreement.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h) of this Agreement.

“Securities” means the Preferred Stock, the Underlying Shares, the Warrants and the Warrant Shares.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Shareholder Approval” means the approval of the Company’s shareholders as required by applicable law, after the Initial Issuance Date (as defined in the Warrants), of an amendment to the Articles of Incorporation to increase the authorized number of shares of Common Stock available for issuance thereunder by 400,000,000 shares.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO of the Exchange Act (but shall be deemed to not include the location and/or reservation of borrowable shares of Common Stock).

“Stated Value” means $1,000 per share of Preferred Stock, subject to increase as set forth in Section 3(a) of the Certificate of Designation.

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for the Preferred Stock purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

“Subsidiary” shall have the meaning ascribed to such term in Section 3.1(a) of this Agreement.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

“Trading Market” means the following markets or exchanges on which (and if) the Common Stock is listed or quoted for trading on the date in question: the NYSE Amex; The NASDAQ Capital Market; The NASDAQ Global Market; The NASDAQ Global Select Market; the New York Stock Exchange; or the Borsa Italiana S.p.A. (MTA International).

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“Transaction Documents” means this Agreement, the Certificate of Designation, the Warrants and any other documents or agreements executed and delivered to the Purchasers in connection with the transactions contemplated hereunder.

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion of the Preferred Stock in accordance with the terms of the Certificate of Designation.

“Washington Counsel” means K&L Gates LLP.

“Warrants” means the Common Stock purchase warrants delivered to the Purchasers at the Closing on the Closing Date in accordance with Section 2.2(a) of this Agreement, which warrants shall be exercisable as set forth therein, and have a term of exercise beginning six months and one day after the Initial Issuance Date and expire four years, six months and one day after the Initial Issuance Date, in the form of Exhibit D attached hereto; provided, however, that the exercisability of the Warrants shall be subject to, and conditioned upon, receipt of the Shareholder Approval.

“Warrant Shares” means the shares of Common Stock to be issuable upon exercise of the Warrants, subject to, and conditioned upon, receipt of the Shareholder Approval.

“WS” means Weinstein Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002.

ARTICLE II.

PURCHASE AND SALE

2.1 Closing At the Closing, upon the terms set forth herein, the Company shall sell, and the Purchasers shall purchase, in the aggregate, severally and not jointly, $4,060,000 of Preferred Stock, with each Purchaser purchasing Preferred Stock with an aggregate Stated Value equal to such Purchaser’s Subscription Amount, and Warrants as determined pursuant to Section 2.2(a) of this Agreement at the Per Share Purchase Price. The aggregate number of shares of Preferred Stock sold hereunder shall be 4,060. The Preferred Stock and the Warrants are being issued and sold pursuant to an exemption from Section 5 of the Securities Act contained in Section 4(2) thereof and/or Regulation D thereunder. Each Purchaser shall deliver to the Company via wire transfer or certified check immediately available funds equal to its Subscription Amount and the Company shall deliver to each Purchaser its respective shares of Preferred Stock and Warrants as determined pursuant to Section 2.2(a) of this Agreement and the other items set forth in Section 2.2 of this Agreement deliverable at the Closing on the Closing Date. The Closing shall occur at 7:00 a.m., Los Angeles time, at the offices of O’Melveny & Myers, LLP, 1999 Avenue of the Stars, Suite 700, Los Angeles, California 90067 or such other time and location as the parties shall mutually agree, immediately after the closing of the transactions contemplated by the Warrant Exchange Agreement.

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2.2 Deliveries; Closing Conditions.

(a) At the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following:

(i) a legal opinion of Company Counsel, substantially in the form of Exhibit B attached hereto;

(ii) a legal opinion of Washington Counsel, substantially in the form of Exhibit C attached hereto;

(iii) a certificate evidencing a number of shares of Preferred Stock equal to such Purchaser’s Subscription Amount divided by the Stated Value, registered in the name of such Purchaser; and

(iv) a Warrant registered in the name of such Purchaser to purchase up to 1,428.5714 shares of Common Stock for each share of Preferred Stock purchased by such Purchaser, with an exercise price equal to $0.42 per share, subject to adjustment therein, in the form of Exhibit D attached hereto.

(b) At the Closing, each Purchaser shall deliver or cause to be delivered to the Company such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company.

(c) The respective obligations of the Company, on the one hand, and the Purchasers, on the other hand, hereunder in connection with the Closing are subject to the following conditions being met:

(i) the accuracy in all material respects on the Closing Date of the representations and warranties contained herein (unless made as of a specified date therein) of the Company (with respect to the obligations of the Purchasers) and the Purchasers (with respect to the obligations of the Company);

(ii) all obligations, covenants and agreements of the Company (with respect to the obligations of the Purchasers) and the Purchasers (with respect to the obligations of the Company) required to be performed at or prior to the Closing Date shall have been performed in all material respects;

(iii) the delivery by the Company (with respect to the obligations of the Purchasers) and the Purchasers (with respect to the obligations of the Company) of the items set forth in Section 2.2(a) and (b) of this Agreement;

(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

(v) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended on the Company’s principal U.S. Trading Market (and the Underlying Shares shall be listed for trading thereon) and, at any

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time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, on any U.S. Trading Market.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth in the SEC Reports, which shall qualify any representation or warranty otherwise made herein to the extent of such disclosure, the Company hereby makes the following representations and warranties set forth below to each Purchaser as of the date hereof and as of the Closing Date:

(a) Subsidiaries. All of the direct and indirect subsidiaries (each, a “Subsidiary”) of the Company are set forth on the Company’s most recently filed Annual Report on Form 10-K. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification except where the revocation, limitation or curtailment could not have or reasonably be expected to result in a Material Adverse Effect.

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the

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Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its board of directors or its shareholders in connection therewith other than in connection with the Required Approvals and the Shareholder Approval. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Securities and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not, subject to receipt of the Shareholder Approval, (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected, except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. Other than the Shareholder Approval and related matters, the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person or other entity of any kind, including, without limitation, any Trading Market or Commissione Nazionale per le Societa e la Borsa (“CONSOB”) in connection with the execution, delivery and performance by the Company of the Transaction Documents, except for any filings required to be made under applicable federal and state securities laws and the listing applications with respect to the listing of the Underlying Shares required pursuant to Section 4.9 (collectively, the “Required Approvals”), and except where the failure to obtain any such consent, waiver, authorization or order, give any such notice, or make any such filing or registration could not have or reasonably be expected to result in a Material Adverse Effect.

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(f) Issuance of the Securities. The Preferred Stock and the Warrants are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Underlying Shares are duly authorized and, when issued in accordance with the terms of the Preferred Stock, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. Subject to the receipt of the Shareholder Approval and the effectiveness of the Amendment (as defined in the Warrants) or notification by the Company pursuant to Section 6(e) of the Warrants and the reservation of the shares contemplated thereby, the Warrant Shares will be duly authorized and, when issued in accordance with the terms of the Warrants following satisfaction of the foregoing, the Warrant Shares will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company (i) as of the Closing, will have reserved from its duly authorized capital stock the shares of Common Stock issuable upon conversion of the Preferred Stock, and (ii) following receipt of the Shareholder Approval or upon other availability (as provided in the Warrant) for reservation of a sufficient number of authorized shares of the Company after the date hereof, will reserve from its duly authorized capital stock the shares of Common Stock issuable upon exercise of the Warrants. The Preferred Stock and the Underlying Shares are being issued pursuant to an exemption from Section 5 of the Securities Act contained in Section 4(2) thereof and/or Regulation D thereunder and, assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby). The Company has prepared and filed with the Commission in accordance with the provisions of the Securities Act the Registration Statement. The Registration Statement was automatically effective upon filing with the Commission on August 19, 2009. The Registration Statement is effective pursuant to the Securities Act and available for the resale of the Preferred Stock and the Underlying Shares thereunder and the Company has not received any written notice that the Commission has issued or intends to issue a stop-order or other order with respect to the Registration Statement or the Prospectus or that the Commission otherwise has (i) suspended or withdrawn the effectiveness of the Registration Statement, or (ii) issued any order preventing or suspending the use of the Prospectus, in either case, either temporarily or permanently or intends or has threatened in writing to do so. Upon receipt of the Preferred Stock and the Underlying Shares upon conversion thereof, the Purchasers will have good and marketable title to such securities and, following the filing of the Prospectus Supplement pursuant to Section 4.14, the Preferred Stock and the Underlying Shares will be immediately freely tradable on each Trading Market (subject to Section 4.19 and assuming compliance by the Purchasers with Section 4.14 with respect the Selling Purchaser Information). At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at each deemed effective date thereof pursuant to Rule 430B(f)(2) of the Securities Act, the Registration Statement and any amendments thereto complied and will comply in all material respects with the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements thereto, at the time

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the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, complied and will comply in all material respects with the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company meets all of the requirements for the use of a registration statement on Form S-3 (“Form S-3”) pursuant to the Securities Act for the resale of the Preferred Stock and the Underlying Shares, and the Commission has not notified the Company of any objection to the use of the form of the Registration Statement pursuant to Rule 401(g)(1) of the Securities Act. The Registration Statement, as of its effective date, meets the requirements set forth in Rule 415(a)(1)(x) pursuant to the Securities Act. The Company (i) has not distributed any offering material in connection with the offering and sale of any of the Securities, and (ii) until no Purchaser holds any of the Securities, shall not distribute any offering material in connection with the offering and sale of any of the Securities to, or by, the Purchasers, in each case, other than the Registration Statement, the Prospectus, the Prospectus Supplement or any amendment or supplement thereto required pursuant to applicable law or Section 4 and the Transaction Documents. The Company is a “well-known seasoned issuer” as defined in Rule 405 as promulgated under the Securities Act.

(g) Capitalization. Except as disclosed in the SEC Reports, the Company has not issued any capital stock since its most recently filed periodic report pursuant to the Exchange Act, other than pursuant to the Exchange Agreements entered into with certain holders of the Company’s outstanding 4% Convertible Senior Subordinated Notes on May 16, 2010 (the “Exchange Agreements”), pursuant to the Securities Purchase Agreement entered into with certain purchasers on May 23, 2010 for the issuance and sale of shares of Series 5 Preferred Stock and warrants exercisable to purchase shares of Common Stock, the exercise of employee stock options pursuant to the Company’s stock option plans, the issuance of shares of Common Stock to employees, directors and consultants pursuant to the Company’s equity incentive plans, and pursuant to the conversion or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report pursuant to the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities and for various outstanding series of convertible debt, options and warrants described in the SEC Reports, and except as contemplated by the Exchange Agreement entered into with certain holders of outstanding warrants on the date hereof (the “Warrant Exchange Agreement”) and for the warrants issued thereunder, and except for the Rodman Warrants (as defined below), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers, and other than pursuant to warrants (the “Rodman Warrants”) to be issued to

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Rodman & Renshaw, LLC (“Rodman”) in connection with the transactions contemplated by this Agreement, if any), and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities, other than pursuant to the Warrant Exchange Agreement. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Other than the Shareholder Approval and related matters, no further approval or authorization of any shareholder, the Board of Directors of the Company or others is required for the issuance and sale of the Securities. Except as disclosed in the SEC Reports or as contemplated by this Agreement or as otherwise agreed by a Purchaser, there are no shareholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s shareholders.

(h) SEC Reports; Financial Statements. The Company has complied in all material respects with requirements to file all reports, schedules, forms, statements and other documents required to be filed by it pursuant to the Securities Act and the Exchange Act, including, without limitation, pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to it, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports, together with the related notes and schedules thereto, comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission and all other applicable rules and regulations with respect thereto as in effect at the time of filing. Such financial statements, together with the related notes and schedules, have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Except as disclosed in the SEC Reports and except for the deposit of $39.3 million in cash with the trustee for the Company’s 4% convertible senior subordinated notes for the repayment in full of the outstanding amount due on such notes on July 1, 2010 and except for the VAT Disclosure (as defined below), since the date of the latest audited financial statements included within the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, and (iv) the Company has not issued any equity securities to any officer, director or Affiliate except pursuant to existing Company equity incentive plans. Except for the issuance of the Securities contemplated by this Agreement, the transactions contemplated by the Warrant Exchange Agreement or as set forth in the SEC Reports and the Prospectus, or as otherwise disclosed to the Purchasers, no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made that has not been publicly disclosed at least one Business Day prior to the date that this representation is made.

(j) Litigation. Except as disclosed in the SEC Reports, except that on July 12, 2010, CONSOB (1) notified the Company that CONSOB began its preliminary investigation for its decision on the administrative proceedings regarding the two claimed violations by the Company of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information reported, at CONSOB’s request, in the press release disseminated on December 19, 2008 and March 23, 2009 (as such claimed violations are further described in the Company’s Form 10-Q for the fiscal quarter ended March 31, 2010) and (2) provided the Company with a preliminary investigation report in reply to the Company’s defenses to such allegations submitted on January 8, 2010 and except that on (1) June 25, 2010, the Italian Tax Authority (or ITA) issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s Value Added Tax (or VAT) returns for the years 2006 and 2007 based on similar findings of the 2003 and 2005 assessments (which 2003 and 2005 assessments were further described in the Company’s Form 10-Q for the fiscal quarter ended March 31, 2010) and the assessments, including interest and penalties, for the years 2006 and 2007 are €2.5 million (or approximately $3.1 million) and €.8 million (or approximately $1.1 million), respectively and (2) July 14, 2010, the ITA issued a notice of deposit payment to CTI (Europe) based on the 2005 assessment, including interest and collection fees, for an amount of €0.9 million (or approximately $1.1 million) as of June 30, 2010 payable in the third quarter of 2010 (such disclosure regarding VAT shall be referred to herein as the “VAT Disclosure”), there is no Proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign)

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(collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities, or (ii) could, if there were an unfavorable decision, reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the SEC Reports and except for a shareholder derivative action, Souda v. John H. Bauer et. al. (Case No 2:10-cv-00905) filed on June 1, 2010 and related to the three prior shareholder derivative actions described in the Company’s Form 10-Q for the fiscal quarter ended March 31, 2010, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Except as disclosed in the SEC Reports, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary pursuant to the Exchange Act or the Securities Act.

(k) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. The Company and its Subsidiaries believe that their relationships with their employees are good. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(l) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except as disclosed herein and except in each case as could not reasonably be expected to have a Material Adverse Effect.

(m) Regulatory Permits. Except as disclosed in the SEC Reports, (i) the Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to

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conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and (ii) neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

(n) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens which do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

(o) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other similar intellectual property rights currently employed by them in connection with the business currently operated by them that are necessary for use in the conduct of their respective businesses as described in the SEC Reports, except where the failure to so have could not reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received any written notice that any of the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person, except for such as could not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights of others.

(p) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. To the best knowledge of the Company, such insurance contracts are accurate and complete. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(q) Transactions With Affiliates and Employees. None of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or

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by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including restricted stock programs and stock option agreements under any stock option plan of the Company.

(r) Sarbanes-Oxley. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it as of the date hereof.

(s) Certain Fees. Other than to Rodman, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents, other than as specifically set forth in the Prospectus Supplement. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(s) that may be due in connection with the transactions contemplated by the Transaction Documents.

(t) Investment Company. The Company is not, and immediately after receipt of payment for the Securities will not be, an “investment company” within the meaning of the Investment Company Act.

(u) Registration Rights. No Person has any right to cause the Company to effect the registration pursuant to the Securities Act of any securities of the Company, which rights will interfere with the transactions contemplated hereunder.

(v) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock pursuant to the Exchange Act nor has the Company received any notification that the Commission is currently contemplating terminating such registration. Except as disclosed in the SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. Except as disclosed in the SEC Reports, the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

(w) Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (other than with respect to that certain Shareholder Rights Agreement dated as of December 28, 2009, between the

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Company and Computershare Trust Company, N.A., a federally chartered trust company as Rights Agent) (including any distribution under a rights agreement), or other similar anti-takeover provision pursuant to the Articles of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights pursuant to the Transaction Documents, including without limitation, as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

(x) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Prospectus Supplement. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 of this Agreement.

(y) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2 of this Agreement, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company in a manner that would require shareholder approval pursuant to the rules of any Trading Market on which any of the securities of the Company are listed or designated. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of any Trading Market.

(z) Indebtedness. The SEC Reports set forth as of the dates thereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness disclosed to the Purchasers except for any such default that could not have or reasonably be expected to result in a Material Adverse Effect.

(aa) Tax Status. Except for matters that could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect and except as disclosed in the SEC Reports and except for the VAT Disclosure, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

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(bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(cc) Accountants. Stonefield Josephson, Inc. (i) to the knowledge of the Company, is an independent public accountant as required by the Exchange Act and is an independent registered public accounting firm within the meaning of the Sarbanes-Oxley Act of 2002, as amended, as required by the rules of the Public Company Accounting Oversight Board, and (ii) expressed its opinion with respect to the audited financial statements and related schedules included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

(dd) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

(ee) Acknowledgement Regarding Purchasers’ Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f), 3.2(g) and 4.19 of this Agreement which shall control), it is understood and acknowledged by the Company (i) that none of the Purchasers have been asked to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) that past or future open market or other transactions by any Purchaser, including Short Sales, and specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) that any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly,

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presently may have a “short” position in the Common Stock, and (iv) that each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (A) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, and (B) such hedging activities (if any) could reduce the value of the existing shareholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

(ff) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

(gg) Shell Company Status. The Company is not, and has never been, an issuer identified in Rule 144(i)(1) of the Securities Act.

(hh) Regulation D Compliance. Neither the Company, nor any person acting on its behalf and at its direction, (i) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer and sale of the Preferred Stock and Warrants and issuance of the Warrant Shares, (ii) has made, directly or indirectly, any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offer and sale of the Preferred Stock and Warrants and issuance of the Warrant Shares to be integrated with prior offerings by the Company for purposes of the Securities Act in a manner that would require registration of such offer and sale under the Securities Act, or (iii) will take any action or steps referred to in clause (ii) above that would cause the offer and sale of the Preferred Stock and Warrants and the issuance of the Warrants Shares to be integrated with future offerings by the Company in a manner that requires registration of such offer and sale under the Securities Act.

(ii) Rule 144 Holding Period. In the absence of an order or directive from a governmental authority to the contrary, the Company will not take a position that the holding period for the Warrants or the Warrant Shares did not commence on the Closing Date.

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3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the execution and delivery of this Agreement on the date first above written in this Agreement to the Company as follows:

(a) Organization; Authority. Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b) No Intent to Take Over. Such Purchaser has no present actual intent to seek to effect, or to assist others in effecting, a hostile acquisition of the Company.

(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants for cash it will be an institutional “accredited investor” as defined under Regulation D under the Securities Act and/or meets the definition of “qualified institutional buyer” as defined in Rule 144A(a)(1) under the Securities Act, and is not an entity formed for the sole purpose of acquiring the Securities. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser has had access to such information as it deemed necessary in order to conduct any due diligence it has determined it wants to do in connection with the purchase and sale of the Securities and its decision to participate in such purchase and sale. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. Such Purchaser understands that nothing in the Agreement or any other materials presented to the Purchaser in connection with the purchase and sale of the Securities constitutes legal, tax or investment advice. Such Purchaser acknowledges that it must rely on legal, tax and investment advisors of its own choosing in connection with its purchase of the Securities.

(e) Purchase for Own Account; No General Solicitation or General Advertising. Such Purchaser is acquiring the Securities for its own account, in the ordinary course of its business and not with a view toward, or for resale in connection with, the public sale or distribution thereof in a manner that would violate the Securities Act. Such Purchaser is not acquiring the Securities as a result of any “general

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solicitation” or “general advertising,” as such terms are used in Regulation D under the Securities Act, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

(f) Rule 144; Restricted Nature of Securities. Such Purchaser has read and understands Rule 144 and further understands that until such time as the same are no longer required under applicable requirements of the Securities Act or applicable state securities laws, the Securities shall be restricted securities within the meaning of the federal securities laws and the Securities and any certificates representing the Securities, and all certificates or other instruments issued in exchange therefor or in substitution thereof, may bear a customary restrictive legend in the form set forth below, and that the Company will make a notation on its records and give instructions to its transfer agent in order to implement the restrictions on transfer set forth and described therein:

“The Securities represented hereby have not been registered with the Securities and Exchange Commission or the securities commission of any state in reliance upon an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered, sold, pledged or hypothecated absent registration of such transaction pursuant to the Securities Act or pursuant to an available exemption therefrom.”

Subject to Section 4.19, the Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Subject to Section 4.19, such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

(g) Short Sales and Confidentiality Prior to the Date Hereof. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first learned of the specific purchase and sale transaction being effected pursuant to this Agreement and ending immediately prior to the execution and delivery hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed

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investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement and to its counsel, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with the transaction expressly contemplated by this Agreement (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

(h) No Government Review. Such Purchaser understands that no U.S. federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities purchased hereunder.

(i) Beneficial Ownership. Immediately following such Purchaser’s purchase of Securities hereunder, such Purchaser, together with its Affiliates, will not beneficially own more than 4.99% of the Common Stock. For purposes hereof beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Removal of Legends. Certificates evidencing the Underlying Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 3.2(f) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Underlying Shares or Warrant Shares pursuant to Rule 144, (iii) if such Underlying Shares or Warrant Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares or Warrant Shares and without volume or manner-of-sale restrictions or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the transfer agent for its Common Stock (the “Transfer Agent”) promptly after the filing of the Prospectus Supplement if required by the Transfer Agent to effect the Company’s compliance with the preceding sentence. The Company agrees that following the filing of the Prospectus Supplement or at such time as such legend is no longer required under this Section 4.1, it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares or Warrant Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may

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not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares and Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.

4.2 Furnishing of Information. Until the earlier of the time that (i) no Purchaser owns Preferred Stock or Underlying Shares or (ii) the Warrants have expired, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports pursuant to the Exchange Act even if the Exchange Act or the rules and regulations thereunder would no longer require or otherwise permit such termination other than in connection with a Fundamental Transaction (as defined in the Warrants) in which the Company is not the surviving entity or in which all of the capital stock of the Company is acquired by an unaffiliated and unrelated Person. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act other than in connection with a Fundamental Transaction in which the Company is not the surviving entity or in which all of the capital stock of the Company is acquired by an unaffiliated and unrelated Person, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c)(1) of the Securities Act such information as is required for the Purchasers to sell the Securities under Rule 144 of the Securities Act. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration pursuant to the Securities Act within the requirements of the exemption provided by Rule 144 of the Securities Act. The Company represents and warrants that it is in material compliance with all of the requirements (including, without limitation, the reporting, submission and posting requirements) of Rule 144(c)(1) of the Securities Act and Rule 405 of Regulation S-T, each as in effect and amended as of the date hereof.

4.3 Integration. After this transaction, the Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities such that the rules of the Trading Market would require shareholder approval of this transaction prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

4.4 Securities Laws Disclosure; Publicity. The Company shall (a) issue a press release disclosing the material terms of the transactions contemplated hereby simultaneously with the execution and delivery hereof (the “Press Release”), and (b) by 8:30 a.m. (New York City time) on the fourth (4th) Trading Day following the date hereof, file a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and including the Transaction Documents as exhibits thereto. From and after the issuance of the Press Release, no Purchaser shall be in possession of any material, non-public information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents, that is not disclosed in the Press Release. The Company and each Purchaser shall consult

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with each other in issuing any other press releases with respect to the transactions contemplated hereby, and, except as may be required by law, neither the Company nor any Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or any Trading Market, without the prior written consent of such Purchaser, except (i) as required by federal securities law in connection with any registration statement contemplated by Section 4.14 or filing of final Transaction Documents (including signature pages thereto) with the Commission and (ii) to the extent such disclosure is required by law or any Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this subclause (ii).

4.5 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. Notwithstanding the foregoing (but subject to the terms of any such written agreement), to the extent the Company delivers any material, non-public information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality with respect to, or a duty not to trade on the basis of, such material, non-public information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

4.6 Use of Proceeds. The Company will use the proceeds from the offering for general corporate purposes.

4.7 Indemnification of Purchasers. Subject to the provisions of this Section 4.7, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling Persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, (b) any action instituted against a Purchaser, or any of them or their respective Affiliates, by any shareholder of the Company who

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is not an Affiliate of such Purchaser or any governmental or regulatory agency, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a material breach of such Purchaser’s representations, warranties or covenants of the Transaction Documents or any agreements or understandings such Purchaser may have with any such shareholder or any material violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance) or (c) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus that covers resales of the Preferred Stock and Underlying Shares, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in light of the circumstances under which they were made) not misleading (except to the extent, but only to the extent, that such untrue statements or alleged untrue statements or omissions or alleged omissions are based solely upon information regarding a Purchaser furnished in writing to the Company by a Purchaser expressly for use therein). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

4.8 Reservation and Registration of Common Stock. As of the Closing, the Company will have reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue all of the Underlying Shares.

4.9 Listing of Common Stock. The Company hereby agrees to use commercially reasonable efforts to maintain the listing of the Common Stock on a Trading Market, and the Company shall list all of the Underlying Shares on each of The NASDAQ Capital Market and the Borsa Italiana S.p.A. (MTA International) no later than the Closing Date. The Company further agrees that if the Company applies to have the Common Stock traded on any other Trading Market, it will include in such application all of the Underlying Shares and will take such other action as is necessary to cause all of the Underlying Shares to be listed on such other Trading Market as promptly as possible. The Company will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market, other than in

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connection with a Fundamental Transaction (as defined in the Warrants) in which the Company is not the surviving entity or in which all of the capital stock of the Company is acquired by an unaffiliated and unrelated Person, and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such Trading Market.

4.10 Equal Treatment of Purchasers. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of the Securities or otherwise.

4.11 Certain Transactions and Confidentiality After The Date Hereof. Notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release to be issued simultaneously with the execution and delivery hereof as described in Section 4.4 of this Agreement, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to such initial press release as described in Section 4.4 of this Agreement and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of such press initial release as described in Section 4.4 of this Agreement. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

4.12 [Reserved.]

4.13 Additional Issuance of Securities. The Company agrees that for the period commencing on the date hereof and ending on the thirtieth (30th) day after the date hereof, neither the Company nor any of its Subsidiaries shall, without the prior consent of the Purchasers, (i) directly or indirectly, issue, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the Act (other than a Registration Statement on Form S-8) with respect to any of the foregoing, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The

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provisions of this Section 4.13 shall not apply to (A) the Securities to be issued and sold hereunder or issuable upon conversion or exercise of the Securities, (B) issuances of shares of Common Stock upon the exercise of the warrants issued to Rodman in connection with the transactions contemplated by this Agreement, if any, (C) issuances of shares of Common Stock issuable upon conversion of currently outstanding convertible notes, (D) issuances of shares of Common Stock upon the exercise of currently outstanding warrants or amendments to the warrant agreements related thereto, (E) granting options or other securities under the Company’s incentive compensation plans existing on the date hereof or issuances of shares of Common Stock issuable in connection with outstanding awards thereunder as of the date hereof, (F) issuances of shares of Common Stock issuable pursuant to agreements in effect as of the date hereof or amendments related thereto, (G) issuances of shares of Common Stock in connection with strategic acquisitions, (H) issuances of shares of Common Stock subject to shareholder approval or (I) the transactions contemplated by the Warrant Exchange Agreement; provided, however, that in the case of clauses (C) and (D) above, no shares of Common Stock shall be issued as a result of an amendment to such securities after the date hereof and prior to the expiration of the restricted period. In addition, the provisions of this Section 4.13 shall not apply to issuances of shares of Common Stock issuable upon exchange of currently outstanding convertible notes.

4.14 Registration Statement. As soon as practicable (and in any event within three (3) Business Days of the date of this Agreement), the Company shall file a Prospectus Supplement providing for the resale by the Purchasers of the Preferred Stock and Underlying Shares (provided that no Preferred Stock or Underlying Shares of any Purchaser need be covered by such Prospectus Supplement if such Purchaser has not provided the information (including the duly completed Purchaser Questionnaire required under Section 4.20) with respect to such Purchaser necessary for such Prospectus Supplement to comply with the Securities Act and the rules and regulations of the Commission promulgated thereunder (such information, the “Selling Purchaser Information”)). The Company shall use commercially reasonable efforts to keep the Registration Statement effective at all times until no Purchaser owns any Preferred Stock or Underlying Shares. The Company shall ensure that the Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any 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 case of prospectuses, in the light of the circumstances in which they were made) not misleading (provided that each Purchaser has complied with its obligations hereunder with respect to Selling Purchaser Information). After the date hereof and during any period in which a Prospectus or Prospectus Supplement relating to any of the Preferred Stock and the Underlying Shares is required to be delivered by any Purchaser pursuant to the Securities Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Securities Act), (i) the Company will notify the Purchasers promptly of the time when any subsequent amendment to the Registration Statement, other than documents incorporated by reference, has been filed with the Commission and/or has become effective or any subsequent supplement to the Prospectus that relates to the Preferred Stock and the Underlying Shares or any of the Purchasers or any subsequent amendment to the Prospectus or any supplement or amendment to the Prospectus Supplement has been filed with the Commission and of any comment letter from the Commission or any request by the Commission for any amendment or supplement to the Registration Statement, any amendment to the Prospectus, any supplement to the Prospectus that relates to the Preferred Stock and the

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Underlying Shares or any of the Purchasers or any amendment or supplement to the Prospectus Supplement or for additional information, (ii) the Company will prepare and file with the Commission, promptly upon a Purchaser’s request, any amendments or supplements to the Registration Statement, Prospectus or Prospectus Supplement that, in such Purchaser’s reasonable opinion, may be necessary or advisable in connection with any distribution (if any) of the Preferred Stock and the Underlying Shares by such Purchaser (provided, however, that the failure of such Purchaser to make such request shall not relieve the Company of any obligation or liability hereunder, or affect such Purchaser’s right to rely on the representations and warranties made by the Company in this Agreement), (iii) the Company will not file any amendment or supplement to the Registration Statement, Prospectus or Prospectus Supplement, other than documents incorporated by reference, relating to the Preferred Stock and the Underlying Shares unless a copy thereof has been submitted to each Purchaser within a reasonable period of time before the filing and no Purchaser has reasonably objected in writing thereto (provided, however, that (A) the failure of any Purchaser to make such objection shall not relieve the Company of any obligation or liability hereunder, or affect any Purchaser’s right to rely on the representations and warranties made by the Company in this Agreement, and (B) the Company has no obligation to provide a Purchaser any advance copy of such filing or to provide such Purchaser an opportunity to object to such filing if such filing does not name such Purchaser or specifically discuss the Preferred Stock and the Underlying Shares as contemplated hereby) and the Company will furnish to each Purchaser at the time of filing thereof a copy of any document that upon filing is deemed to be incorporated by reference into the Registration Statement, Prospectus or Prospectus Supplement, except for those documents available via EDGAR, and (iv) the Company will cause each amendment or supplement to the Prospectus or the Prospectus Supplement, other than documents incorporated by reference, to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act (without reliance on Rule 424(b)(8) of the Securities Act). Each Purchaser, as to itself only, represents, warrants, and covenants to the Company that such Purchaser’s Selling Purchaser Information shall not contain any 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 case of prospectuses, in the light of the circumstances in which they were made) not misleading, that such Purchaser shall indemnify and hold harmless the Company, from and against all Losses, as incurred, to the extent arising out of or based upon any breach thereof, and that notwithstanding anything to the contrary contained herein, in no event shall the liability of any Purchaser under this Section 4.14 be greater in amount than the dollar amount of the net proceeds received by such Purchaser upon the sale of the securities giving rise to the indemnification obligation hereunder. Furthermore, each Purchaser, as to itself only, covenants to promptly notify the Company in writing of any inaccuracies or changes in the Purchaser’s Selling Purchaser Information subsequent to the date such Purchaser delivered the Purchaser Questionnaire required under Section 4.20 at any time while the Registration Statement remains effective. Until the earliest of (a) the date a Purchaser no longer holds any of the Preferred Stock acquired hereunder or any of the Underlying Shares obtained upon conversion thereof, (b) the date such Purchaser is able to sell all of such Preferred and Underlying Shares without volume limitations pursuant to Rule 144(b)(1) and without the requirement for the Company to be in compliance with Rule 144(c)(1) and (c) the second anniversary of the filing of the Prospectus Supplement, in the event that (i) the Company fails to file the Prospectus Supplement within three (3) Trading Days of the date hereof or (ii) following the filing of the Prospectus Supplement, the Company

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fails to keep the Registration Statement (or a replacement registration statement) effective so as to permit resales of the Preferred Stock and Underlying Shares by each Purchaser that has provided its Selling Purchaser Information in accordance with this Agreement (and, if applicable, after the 6-month anniversary of the date hereof and prior to the one year anniversary of the date hereof, the Company also fails to meet the current information requirements under Rule 144(c)(1) such that the Purchaser cannot sell all of its Preferred and Underlying Shares without volume limitations pursuant to Rule 144(b)(1)) for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure being referred to as an “Event”, and the date on which any such three (3) Trading Day period or ten (10) or fifteen (15) calendar day period, as applicable, is exceeded under clauses (i) or (ii), as applicable, being referred to as an “Event Date”), then, in addition to any other rights such Purchaser may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each affected Purchaser an amount in cash, as partial liquidated damages and not as a penalty, equal to 2.0% of the pro rata portion of such Purchaser’s Subscription Amount that relates to the unsold Preferred Stock or Underlying Shares that such Purchaser cannot sell under the Registration Statement as a result of such failure. The Company and each Purchaser agree that the maximum aggregate liquidated damages payable to an affected Purchaser under this Agreement shall be 10% of the aggregate Subscription Amount that relates to the unsold Preferred Stock or Underlying Shares that such Purchaser cannot sell under the Registration Statement as a result of such failure. If the Company fails to pay any partial liquidated damages pursuant to this Section 4.14 in full within ten (10) business days after the date payable, the Company will pay interest thereon at a rate of 15% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Purchaser, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.

4.15 Notice of Commission Stop Orders. Promptly after it receives notice or obtains knowledge thereof, the Company will advise each Purchaser of the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any other order preventing or suspending the use of the Prospectus or the Prospectus Supplement, of the suspension of the qualification of the Preferred Stock and the Underlying Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any such purpose or any examination pursuant to Section 8(e) of the Securities Act, or if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the offering of the Preferred Stock and the Underlying Shares; and it will promptly use its commercially reasonable efforts to prevent the issuance of any stop or other order or to obtain its withdrawal if such a stop or other order should be issued.

4.16 Delivery of Prospectus; Subsequent Changes. During any period in which a Prospectus or the Prospectus Supplement relating to the Preferred Stock and the Underlying Shares is required to be delivered by any Purchaser pursuant to the Securities Act with respect to a pending sale of the Preferred Stock and the Underlying Shares (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Securities Act), the Company will comply in all material respects with the requirements imposed upon it by the Securities Act, as from time to time in force, and shall use commercially reasonable best efforts

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to file on or before their respective due dates all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of the Exchange Act. If during such period any event occurs as a result of which the Prospectus or the Prospectus Supplement as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statement, the Prospectus or the Prospectus Supplement to comply with the Securities Act, the Company will promptly notify the Purchasers to suspend the offering of the Preferred Stock and the Underlying Shares during such period and the Company will promptly amend or supplement, or file a free writing prospectus applicable to, the Registration Statement, the Prospectus or the Prospectus Supplement (at the expense of the Company) so as to correct such statement or omission or effect such compliance (provided, however, that the obligations contained in this sentence shall only apply with respect to Selling Purchaser Information if the applicable Purchaser has notified the Company in writing of the event requiring the Company to correct such statement or omission or effect such compliance).

4.17 Delivery of Registration Statement and Prospectus. The Company will furnish to each Purchaser and its counsel (at the expense of the Company) copies of the Registration Statement, the Prospectus, the Prospectus Supplement (including all documents incorporated by reference therein) and all amendments and supplements to the Registration Statement, the Prospectus or the Prospectus Supplement that are filed with the Commission during any period in which a Prospectus or Prospectus Supplement relating to the Preferred Stock and the Underlying Shares is required to be delivered pursuant to the Securities Act (including all documents filed with the Commission during such period that are deemed to be incorporated by reference therein), in each case as soon as reasonably practicable and in such quantities as such Purchaser may from time to time reasonably request and, at such Purchaser’s request, will also furnish copies of the Prospectus and the Prospectus Supplement to each exchange or market on which sales of the Preferred Stock and the Underlying Shares may be made; provided, however, that the Company shall not be required to furnish any document to a Purchaser to the extent such document is available to such Purchaser or the public on EDGAR.

4.18 Federal and State Securities Law Compliance. The Company covenants that it will take prior to (or by virtue of) the filing of the Prospectus Supplement pursuant to Section 4.14 all such action as is necessary in order to obtain an exemption for, or to qualify the Preferred Stock and the Underlying Shares for sale to, and resale by, the Purchasers under all applicable securities laws (including, without limitation, all federal securities laws and “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification)), and the Company shall provide evidence of any such action so taken to the Purchasers promptly thereafter. The Company shall make all filings and reports relating to the offer and sale of the Preferred Stock and the Underlying Shares required under all applicable securities laws (including, without limitation, all federal securities laws and “Blue Sky” laws of the states of the United States) following the Closing, and the Company shall comply with all applicable federal, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Preferred Stock and the Underlying Shares to, and by, the Purchasers.

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4.19 Prohibition on Transfers Prior to Record Date. Notwithstanding anything contained in this Agreement or otherwise to the contrary, each Purchaser agrees that it will not assign, sell, hypothecate, mortgage, pledge, convey, grant any interest in or over, or otherwise transfer any of its Securities until after 12:01 a.m., Seattle time on July 28, 2010. The obligations of each Purchaser under this Section 4.19 are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under this Section 4.19 and no Purchaser shall have any right to pursue any action against any other Purchaser under this Section 4.19. This obligations hereunder are separate as to each Purchaser and between the Company and each Purchaser only and not by and between any of the Purchasers.

4.20 Purchaser Questionnaire. No later than 5:00 p.m., Los Angeles time on the Business Day following the date hereof, each Purchaser shall complete, execute and deliver to the Company a Purchaser Questionnaire in the form of Exhibit E hereto so as to enable the Company to include such Purchaser’s Preferred Stock and Underlying Shares in the Prospectus Supplement to be filed pursuant to Section 4.14.

ARTICLE V.

MISCELLANEOUS

5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated before 11:59 p.m., Seattle time on July 27, 2010 through no fault of such Purchaser; provided, however, that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such subject matter, which the parties acknowledge have been merged into such documents, exhibits and schedules; provided that the foregoing shall not have any effect on any agreements that a Purchaser has entered into with the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Purchaser in the Company.

5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of

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transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2^nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the holders of at least 67% of the Preferred Stock or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities; provided such Purchaser provides prior written notice to the Company and such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7 of this Agreement.

5.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is

31

improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

5.10 Survival. The representations, warranties and covenants contained herein shall survive the Closing and the delivery of the Preferred Stock and Warrants and for a period of one year thereafter.

5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence

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reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance pursuant to the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

5.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through WS. WS does not represent any of the Purchasers and only represents Rodman & Renshaw, LLC. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.

5.17 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing pursuant to the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

5.18 Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

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5.19 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

(Signature Pages Follow)

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

CELL THERAPEUTICS, INC.	Address for Notice:
	501 Elliott Avenue West, Suite 400
James A. Bianco, M.D. Chief Executive Officer	Seattle, Washington 98119 Facsimile: (206) 272-4302 Attention: Louis A. Bianco
	With a copy to (which shall not constitute notice):
	O’Melveny & Myers, LLP Two Embarcadero Center 28th Floor San Francisco, California 94111 Facsimile: (415) 984-8701 Attn: C. Brophy Christensen, Esq.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;

PURCHASER SIGNATURE PAGES FOLLOW]

[Signature page to Securities Purchase Agreement]

[PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser:

Signature of Authorized Signatory of Purchaser:

Name of Authorized Signatory:

Title of Authorized Signatory:

Email Address of Purchaser:

Fax Number of Purchaser:

Address for Notice of Purchaser:

Telephone:

Facsimile:

Attention:

With a copy to (which shall not constitute notice):

Telephone:

Facsimile:

Attention:

Address for Delivery of Securities for Purchaser (if not same as address for notice):

[Signature page to Securities Purchase Agreement]

Subscription Amount:

Shares of Preferred Stock:

Warrant Shares:

EIN Number:

[Signature page to Securities Purchase Agreement]

EXHIBIT A

CERTIFICATE OF DESIGNATION

(See attached).

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EXHIBIT B

FORM OF OPINION OF COMPANY COUNSEL

(See attached).

39

EXHIBIT C

OPINION OF WASHINGTON COUNSEL

(See attached).

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EXHIBIT D

FORM OF WARRANT

(See attached)

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EXHIBIT E

PURCHASER QUESTIONNAIRRE

Cell Therapeutics, Inc. (the “Company”) intends to file with the Securities and Exchange Commission (the “Commission”) a prospectus supplement (“Prospectus Supplement”) to the base prospectus in the registration statement on Form S-3 (Commission File No. 333-161442) (the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”) of the Company’s Series 6 Preferred Stock and the Company’s Common Stock underlying the Series 6 Preferred Stock (the “Registrable Securities”), in connection with that certain Securities Purchase Agreement for the Series 6 Preferred Stock, dated July 25, 2010 entered into by and among the Company, and the Purchasers identified on the signature pages thereto (the “Purchase Agreement”). All capitalized terms used and not otherwise defined herein shall have the meanings given them in the Purchase Agreement.

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Shelf Registration Statement, each holder of Registrable Securities (i.e., each Purchaser under the Purchase Agreement) will be required to be named as a selling securityholder in the related Prospectus Supplement and deliver a base prospectus and the Prospectus Supplement to each purchaser of the Registrable Securities.

If you wish to include the Registrable Securities beneficially owned by you in the Shelf Registration Statement and Prospectus Supplement, you must complete, sign and deliver this Purchaser Questionnaire (“Questionnaire”) to the Company at the address set forth herein. If you fail to do so, you will not be named as a selling securityholder in the Prospectus Supplement and may not be able to use the Shelf Registration Statement and the Prospectus forming a part thereof to resell the Registrable Securities that you hold.

Please be aware that various legal consequences arise from being named as a selling securityholder in the Prospectus Supplement. We strongly advise you to consult your own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Prospectus Supplement.

ELECTION

The undersigned holder (the “Selling Securityholder”) of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (2). By signing and returning this Questionnaire, the undersigned agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Questionnaire and the Purchase Agreement.

The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

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QUESTIONNAIRE

1.	(a)	Full legal name of Selling Securityholder:
	(b)	Full legal name of registered holder (if not the same as in (a) above) of Registrable Securities listed in Item (2) below:
2.	Beneficial ownership of Securities:
	Except as set forth below in this Item (2), the undersigned Selling Securityholder does not beneficially own any securities.
	(a)	Number (and type) of Registrable Securities beneficially owned:
	(b)	Number (and type) of securities of the Company other than Registrable Securities beneficially owned:
	(c)	Number (and type) of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement:1
3.	Beneficial ownership of other securities of the Company:
	Except as set forth below in this Item (3), the undersigned Selling Securityholder is not the beneficial or registered owner of any Registrable Securities or any other securities of the Company, other than the securities listed above in Item (2).
	State any exceptions here:
4.	Broker-Dealer Status:
	Is the Selling Securityholder a registered broker dealer?  Yes  ¨  No  ¨
	Note that in general we will be required to identify any registered broker-dealer as an underwriter in the Prospectus Supplement.

1 These would be the number of shares of Series 6 preferred stock and the number of shares of common stock underlying the Series 6 preferred stock held by the Selling Securityholder.

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5.	Affiliation with Broker-Dealers:
	Is the Selling Securityholder an affiliate2 of a registered broker-dealer?
	Yes  ¨  No  ¨
	If so, please answer the remaining questions in this section.
	(a)	Please describe the affiliation between the Selling Securityholder and any registered broker-dealers:
	(b)	If the Registrable Securities were purchased by the Selling Securityholder other than in the ordinary course of business, please describe the circumstances:
	(c)	If the Selling Securityholder, at the time of its receipt of Registrable Securities, has had any agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities, please describe such agreements or understandings:
	Note that if the Selling Securityholder is an affiliate of a broker-dealer and did not purchase its Registrable Securities in the ordinary course of business or at the time of the purchase had any agreements or understandings, directly or indirectly, to distribute the securities, we must identify the Selling Securityholder as an underwriter in the Prospectus Supplement.
6.	Beneficial Ownership by Natural Persons:
	If the Selling Securityholder is an entity, does any natural person have voting or investment power over the Registrable Securities held by the Selling Securityholder?3
	Yes  ¨  No  ¨
	If so, please state that person’s or persons’ name(s):

2 An “affiliate” of a specified person or entity means a person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person or entity specified.

3 Please answer “Yes” if any natural person, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (a) voting power which includes the power to vote, or to direct the voting of, such security; and/or (b) investment power which includes the power to dispose, or to direct the disposition of, the Registrable Securities held by the Selling Securityholder.

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7.	Relationships with the Company:
	Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or their respective predecessors or affiliates) during the past three years.
	State any exceptions here:
8.	Plan of distribution:
	Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (2) only as follows (if at all):
	Following the issuance of the Series 6 Preferred Stock to the Selling Securityholder, the Selling Securityholder may offer, sell, transfer or otherwise dispose of, Registrable Securities from time to time on any stock exchange on which the Registrable Securities are listed, in the over-the-counter market, in privately negotiated transactions or otherwise. The Selling Securityholder may offer, sell, transfer, or otherwise dispose of these shares at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at prices otherwise negotiated. The Selling Securityholder will act independently of the Company in making decisions with respect to the timing, manner and size of each sale, and the Company cannot assure you that any Selling Securityholder will sell all or any portion of the shares offered by such Selling Securityholder. The Company will not receive any proceeds from the sales by the Selling Securityholder of Registrable Securities.
	The Selling Securityholder may offer and sell Registrable Securities by one or more of the following methods at various times:
	•       block trades in which a broker or dealer will be engaged to attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
	•       purchases by a broker or dealer as principal and resale by the broker or dealer for its own account pursuant to the Prospectus Supplement;
	•       ordinary brokerage transactions and transactions in which the broker solicits purchases;
	•       “at the market” transactions to or through market makers or into an existing market for our common stock;
	•       privately negotiated transactions;
	•       short sales;
	•       options, swaps or other derivative transactions that may or may not be listed on an exchange;
	•       distributions to their respective partners, members, managers, directors, employees, consultants or affiliates; or
	•       any combination of the above methods or by any other legally available means
	The Selling Securityholder may engage brokers and dealers, and any brokers or dealers may arrange for other brokers or dealers to participate in effecting sales of the shares. These brokers or dealers may act as principals, or as agents of the Selling Securityholder. Broker-dealers may agree with the Selling Securityholder to sell a specified number of Registrable Securities at a stipulated price per share. If a broker-dealer is unable to sell Registrable Securities acting as agent for the Selling Securityholder, it may purchase as principal any unsold Registrable Securities at the stipulated price. Broker-dealers who acquire Registrable Securities as principals may thereafter resell the Registrable Securities from time to time in transactions on any stock exchange on which the Registrable Securities are then listed, at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through brokerdealers, including transactions of the nature described above.

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Any underwriters, dealers, brokers or agents participating in the distribution of Registrable Securities may receive compensation in the form of discounts, concessions, commissions or fees from the Selling Securityholder and/or purchasers of the Selling Securityholder’s shares, for which they may act, which compensation as to a particular broker-dealer might be in excess of customary commissions.

Any brokers, dealers or agents that participate in the distribution of shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any discounts, concessions, commissions or fees received by them and any profit on the resale of shares sold by them may be deemed to be underwriting discounts and commissions.

The Company will make copies of the Prospectus Supplement available to the Selling Securityholders for purposes of satisfying the prospectus delivery requirements of the Securities Act, if applicable.

The Selling Securityholder may enter into hedging transactions with broker-dealers and the broker-dealers may engage in short sales of common shares in the course of hedging the positions they assume with the Selling Securityholder, including, without limitation, in connection with distributions of shares by those broker-dealers. The Selling Securityholder may enter into option or other transactions with broker-dealers that involve the delivery of shares to the broker-dealers, who may then resell or otherwise transfer those securities.

The Selling Securityholder and other persons participating in the sale or distribution of Registrable Securities will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including Regulation M; and the Company has advised the Selling Securityholder that Regulation M may apply. This regulation may limit the timing of purchases and sales of any shares by the Selling Securityholder and any other person. The anti-manipulation rules under the Exchange Act may apply to sales of shares in the market and to the activities of the Selling Securityholders and its respective affiliates. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of shares to engage in market-making activities with respect to the particular shares being distributed for a period of up to five business days before the distribution. These restrictions may affect the marketability of the shares and the ability of any person or entity to engage in market-making activities with respect to the securities.

The Selling Securityholder may also sell shares in accordance with Rule 144 under the Securities Act rather than pursuant to the Prospectus Supplement, regardless of whether the shares are covered by the Prospectus Supplement.

State any exceptions here:

The Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Securities Act and the Securities Exchange Act of 1934 and the rules and regulations thereunder, particularly Regulation M (or any successor rules and regulations).

In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (2) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Questionnaire.

By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (8) above and the inclusion of such information in the Prospectus Supplement. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Prospectus Supplement.

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In accordance with the Selling Securityholder’s obligation under the Purchase Agreement to provide such information as may be required by law for inclusion in the Prospectus Supplement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains effective. All notices hereunder shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery to the address below.

Once this Questionnaire is executed by the Selling Securityholder and received by the Company, the terms of this Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (2) above). This Agreement shall be governed in all respects by the laws of the State of New York applicable to agreements made and to be performed in such State.

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Questionnaire to be executed and delivered either in person or by its duly authorized agent.

Dated:

Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable Securities)
By:
	Name:
	Title:

PLEASE RETURN THE COMPLETED AND EXECUTED

QUESTIONNAIRE TO THE COMPANY AT:

Cell Therapeutics, Inc.

501 Elliott Avenue West, Suite 400

Seattle, Washington 98119

Attention: Louis A. Bianco

Facsimile No.: (206) 272-4317

Email: jbianco@ctiseattle.com

with a copy to:

O’Melveny & Myers, LLP

Two Embarcadero Center, 28^th Floor

San Francisco, California 94111

Facsimile: (415) 984-8701

Attention: C. Brophy Christensen, Esq.

Email: bchristensen@omm.com

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EX-10.4

Exhibit 10.4

EXCHANGE AGREEMENT

This EXCHANGE AGREEMENT (this “Agreement”) is made and entered into as of this 25th day of July, 2010, by and among Cell Therapeutics, Inc., a Washington corporation (the “Company”), and the parties listed on the signature pages hereto (each, a “Holder” and collectively, the “Holders”).

THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis of the following facts, understandings and intentions:

A. Prior to the date hereof, each Holder purchased from the Company, and the Company issued and sold to such Holder, warrants exercisable to purchase shares of the Company’s common stock, no par value (the “Common Stock”).

B. Pursuant to this Agreement, each Holder desires to exchange (the “Exchange”) the outstanding warrants exercisable to purchase that number of shares of Common Stock held by such Holder and represented by the warrant numbers listed opposite such Holder’s name on Schedule A attached hereto (the “Old Warrants”) for new warrants exercisable to purchase a corresponding number of shares of Common Stock substantially in the form of Exhibit A attached hereto (the “New Warrants”), on the terms and subject to the conditions set forth in this Agreement.

C. Pursuant to this Agreement, the Company desires to issue to each Holder the applicable New Warrants in exchange for the applicable Old Warrants.

NOW, THEREFORE, in consideration of the premises and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Exchange. On the terms and subject to the conditions of this Agreement, at the Closing (as defined below), the Exchange shall take place, each Holder shall deliver to the Company all of its original Old Warrants duly endorsed for transfer to the Company (or in lieu thereof shall deliver an affidavit and indemnity acceptable to the Company in the event of a lost Old Warrant), and the Company shall issue to such Holder the applicable New Warrants being issued in exchange therefor. Notwithstanding the foregoing (i) effective as of the Closing all of the Old Warrants shall be and shall be deemed to be automatically terminated and canceled without any further action, and each Holder shall thereafter only have a right to receive its applicable New Warrant and (ii) if an Old Warrant cannot be delivered because it is in the custody of its prime broker, a Holder may deliver a cancelled Old Warrant within ten (10) Business Days of Closing.

2. Closing of the Exchange. The closing (the “Closing”) of the Exchange contemplated by this Agreement shall occur at the offices of O’Melveny & Myers LLP, 1999 Avenue of the Stars, Suite 700, Los Angeles, California 90067 at 7:00 a.m. (California time) automatically, immediately prior to the Series 6 Closing, or at such other location, date and time as the parties may mutually agree in writing (such time and date, the “Closing Date”). For purposes hereof, the “Series 6 Closing” means the closing of the purchase and sale of shares of the Company’s Series 6 Preferred Stock and certain warrants to purchase shares of the Company’s Common Stock pursuant to the Securities Purchase Agreement of even date herewith by and among the Company and the purchasers of such securities.

3. Representations and Warranties of the Holders. Each Holder represents and warrants that, as of the date hereof and as of the Closing Date:

(a) Such Holder is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Such Holder has all requisite corporate or other similar power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. All corporate acts and other proceedings required to be taken by such Holder to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and properly taken. This Agreement is a duly authorized, valid and binding agreement, enforceable against such Holder in accordance with its terms. This Agreement has been duly executed and delivered by such Holder.

(b) Such Holder owns the Old Warrants represented by the warrant numbers listed opposite such Holder’s name on Schedule A attached hereto, free and clear of any liens, security interests, options, charges, pledges, claims, or other encumbrances or restrictions of any kind other than restrictions under applicable securities laws (“Encumbrances”) and has full power and authority to deliver such Old Warrants to the Company in the Exchange. Upon delivery to the Company of such Old Warrants and upon such Holder’s receipt of the applicable New Warrants, good and valid title to such Old Warrants will pass to the Company, free and clear of any Encumbrances, other than those arising from acts of the Company.

(c) Such Holder is an institutional “accredited investor” as defined under Regulation D under the Securities Act (“Regulation D”) and/or meets the definition of “qualified institutional buyer” as defined in Rule 144A(a)(1) under the Securities Act, and is not an entity formed for the sole purpose of acquiring the New Warrants and the shares of Common Stock issuable upon exercise thereof. Such Holder is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended.

(d) Such Holder has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the New Warrants and the shares of Common Stock issuable upon exercise thereof, and has so evaluated the merits and risks of such investment. Such Holder has had access to such information as it has deemed necessary in order to conduct any due diligence it has determined it wants to do in connection with the Exchange and its decision to participate in the Exchange. Such Holder is able to bear the economic risk of an investment in the New Warrants and the shares of Common Stock issuable upon exercise thereof and is able to afford a complete loss of such investment. Such Holder understands that nothing in this Agreement, the New Warrants or any other materials presented to such Holder in connection with the purchase and sale of the New Warrants and the shares of Common Stock issuable upon exercise thereof constitutes legal, tax or investment advice. Such Holder acknowledges that it must rely on legal, tax and investment advisors of its own choosing in connection with its acquisition of the New Warrants and the shares of Common Stock issuable upon exercise thereof.

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(e) Such Holder is acquiring the New Warrants and the shares of Common Stock issuable upon exercise thereof for its own account, in the ordinary course of its business and not with a view toward, or for resale in connection with, the public sale or distribution thereof in a manner that would violate the Securities Act. Such Holder is not acquiring the New Warrants or the shares of Common Stock issuable upon exercise thereof as a result of any “general solicitation” or “general advertising,” as such terms are used in Regulation D, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

(f) Such Holder has read and understands Rule 144 promulgated under the Securities Act and further understands that until such time as the same are no longer required under applicable requirements of the Securities Act or applicable state securities laws, the New Warrants and the shares of Common Stock issuable upon exercise thereof shall be restricted securities within the meaning of the federal securities laws and the New Warrants and any certificates representing the shares of Common Stock issuable upon exercise thereof, and all certificates or other instruments issued in exchange therefor or in substitution thereof, shall bear a customary restrictive legend substantially in the form set forth below, and that the Company will make a notation on its records and give instructions to its transfer agent in order to implement the restrictions on transfer set forth and described therein:

“The Securities represented hereby have not been registered with the Securities and Exchange Commission or the securities commission of any state in reliance upon an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered, sold, pledged or hypothecated absent registration of such transaction pursuant to the Securities Act or pursuant to an available exemption therefrom.”

(g) If such Holder is an individual, then such Holder resides at the address of such Holder set forth on Schedule A. If such Holder is a partnership, corporation, limited liability company or other entity, then the office or offices of such Holder in which its principal place of business where its investment decision was made with respect to the transactions contemplated by this Agreement is located at the address of such Holder set forth on Schedule A.

4. Representations and Warranties of the Company. The Company represents and warrants that, as of the date hereof and as of the Closing Date:

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington. The Company has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. All corporate acts and other proceedings required to be taken by the Company to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and properly taken. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

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(b) Neither the Company, nor any person acting on its behalf and at its direction, (i) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer and sale of the New Warrants or the issuance of the shares of Common Stock issuable upon exercise of the New Warrants, (ii) has made, directly or indirectly, any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offer and sale of the New Warrants hereunder or the issuance of the shares of Common Stock issuable upon exercise of the New Warrants to be integrated with prior offerings by the Company for purposes of the Securities Act in a manner that would require registration of such offer and sale under the Securities Act, or (iii) will take any action or steps referred to in clause (ii) above that would cause the offer and sale of the New Warrants hereunder or the issuance of the shares of Common Stock issuable upon exercise of the New Warrants to be integrated with future offerings by the Company in a manner that requires registration of such offer and sale under the Securities Act.

(c) Assuming the accuracy of the representations and warranties of the Holders contained herein, the issuance of the New Warrants and the shares of Common Stock issuable upon exercise thereof is exempt from the registration requirements of Section 5 of the Securities Act.

5. Further Agreements.

(a) At least two business days prior to the Closing Date, each Holder will provide the Company with written instructions regarding the name and denominations in which the applicable New Warrants shall be issued. Upon reasonable request of the Company, each Holder will execute and deliver such additional documents and take such further actions as are necessary or desirable to effect the Exchange. No Holder will take any action to sell, assign, transfer, pledge, hypothecate or otherwise dispose of or subject to any Encumbrance any of such Holder’s Old Warrants prior to their delivery to Company.

(b) The Company shall take such action as it shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Exchange under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification). The Company shall make all filings and reports relating to the Exchange required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.

(c) Each party agrees that no other party nor any representative thereof has made any representation or warranty, express or implied, of any nature whatsoever, relating to the transactions contemplated by this Agreement, except only for the representations and warranties expressly included in this Agreement.

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6. Miscellaneous.

(a) All notices and other communications under this Agreement shall be in writing and shall be deemed given (i) when delivered personally, (ii) one business day after being delivered to a nationally recognized overnight courier or (iii) when sent by facsimile (with confirmation of transmission received by the sender) to the parties at the addresses set forth below (or at such other address as shall be specified by like notice):

If to the Company:

Cell Therapeutics, Inc.

501 Elliott Avenue West, Suite 400

Seattle, Washington 98119

Attention: Louis A. Bianco

Facsimile No.: (206) 272-4317

If to a Holder:

Such Holder’s address set forth on Schedule A attached hereto.

(b) Neither this Agreement nor any of the terms hereof may be amended, supplemented, waived or modified with respect to a Holder except by an instrument in writing signed by the Company and such Holder.

(c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Any legal action or proceeding with respect to this Agreement or the Exchange shall be brought in the courts of the State of New York or of the United States located in New York County, New York. By executing and delivering this Agreement, the Company and each Holder irrevocably agrees to the jurisdiction of those courts and waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which the Company or such Holder may now or hereafter have to the bringing of any action or proceeding in such courts in respect of this Agreement or the Exchange. IN ANY ACTION, SUIT OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

(d) This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

(e) This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. The parties acknowledge that there have been no prior agreements with respect to the solicitation of any Old Warrants or the exchange thereof, or the issuance of any of the New Warrants in exchange therefor.

(f) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by the Company or the Holders without the prior written consent of the other parties.

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(g) All costs and expenses incurred in connection with the preparation and execution of this Agreement shall be paid by the party incurring such costs and expenses.

(h) If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforced in accordance with its terms to the maximum extent permitted by law.

(i) The parties acknowledge that any applicable law that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of this Agreement, no presumption or burden of proof or persuasion will be implied because this Agreement was prepared by or at the request of any party or its counsel.

[Signature page follows.]

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This Agreement is hereby confirmed and accepted by the parties hereto as of the date first written above.

CELL THERAPEUTICS, INC.
By:
	James A. Bianco, M.D. Chief Executive Officer

[Signature page to Exchange Agreement.]

This Agreement is hereby confirmed and accepted by the parties hereto as of the date first written above.

HOLDER

Name of Holder:

Signature of Authorized Signatory of Holder:

Name of Authorized Signatory:

Title of Authorized Signatory:

[Signature page to Exchange Agreement.]

SCHEDULE A

(see attached)

Schedule A-1

EXHIBIT A

NEW WARRANT

(see attached)

Exhibit A-1

EX-10.5

EXHIBIT 10.5

July 25, 2010

CONFIDENTIAL

James A. Bianco, M.D.

Chief Executive Officer

Cell Therapeutics, Inc.

501 Elliot Ave. West #400

Seattle, WA 98119

Dear Dr. Bianco:

This letter (the “Agreement”) constitutes the agreement among Rodman & Renshaw, LLC, (the “Placement Agent”) and Cell Therapeutics, Inc. (the “Company”), that the Placement Agent shall serve as the exclusive placement agent for the Company, on a “reasonable best efforts” basis, in connection with the proposed private placement (the “Placement”) to potential investors pursuant to an exemption from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities Act”) contained in Section 4(2) thereof and/or Regulation D thereunder of (i) shares of preferred stock of the Company (the “Preferred Stock”) and, if convertible, the shares of the Company’s common stock (the “Common Stock”) issuable upon conversion thereof (the “Underlying Shares”), (ii) warrants to purchase shares of Common Stock (the “Warrants” and, together with the Preferred Stock, the Underlying Shares and the Notes, the “Securities”). The terms of such Placement and the Securities shall be mutually agreed upon by the Company and the purchasers (each, a “Purchaser” and collectively, the “Purchasers”) and nothing herein constitutes that the Placement Agent would have the power or authority to bind the Company or any Purchaser or an obligation for the Company to issue any Securities or complete the Placement. This Agreement and the documents executed and delivered by the Company and the Purchasers in connection with the Placement shall be collectively referred to herein as the “Transaction Documents.” The date of the closing of the Placement shall be referred to herein as the “Closing Date.” The Company expressly acknowledges and agrees that the Placement Agent’s obligations hereunder are on a reasonable best efforts basis only and that the execution of this Agreement does not constitute a commitment by the Placement Agent to purchase the Securities and does not ensure the successful placement of the Securities or any portion thereof or the success of the Placement Agent with respect to securing any other financing on behalf of the Company.

SECTION 1. Compensation and other Fees.

As compensation for the services provided by the Placement Agent hereunder, the Company agrees to pay to the Placement Agent:

(A) A cash fee payable immediately upon the closing equal to 5% of the aggregate gross proceeds raised in the Placement.

(B) Such number of warrants (the “Rodman Warrants”) to Rodman or its designees at the Closing to purchase shares of Common Stock equal to 3% of the aggregate number of shares of Common Stock underlying the Preferred Stock sold in the Placement. The Rodman

1251 Avenue of the Americas, 20^th Floor, New York, NY 10020 ^¡ Tel: 212 356 0500 Fax: 212 581 5690

www.rodm.com ^¡ Member: FINRA, SIPC

Cell Therapeutics, Inc.

Warrants shall have the same terms as the warrants (if any) issued to the Purchasers in the Placement; provided, however, that the exercisability of the Rodman Warrants shall be subject to, and conditioned upon, satisfaction of the Conditions (as defined in the warrants issued to the Purchasers in the Placement).

(B) The Company also agrees to reimburse the Placement Agent’s reasonable out-of-pocket expenses (with supporting invoices/receipts) incurred in connection with Rodman’s engagement hereunder equal to the lesser of (i) $50,000 or (ii) 1.6% of aggregate gross proceeds (provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement). Such reimbursement shall be payable immediately upon (but only in the event of) the closing of the Placement.

SECTION 2. [INTENTIONALLY DELETED]

SECTION 3. REPRESENTATIONS AND WARRANTIES. Except as set forth in the SEC Reports (as defined below), which will qualify any representation or warranty otherwise made herein to the extent of such disclosure, the Company hereby makes the following representations and warranties set forth below to the Placement Agent as of the date hereof and as of the Closing Date.

(A) Organization and Qualification. All of the direct and indirect subsidiaries (each, a “Subsidiary”) of the Company which would constitute a “significant subsidiary” under Regulation S-X are disclosed in the SEC Reports. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any “Liens” (which for purposes of this Agreement shall mean a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, other than, in the case of the Securities, restrictions provided in the Transaction Documents or as otherwise agreed or imposed by a Purchaser), and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no “Proceeding” (which for purposes of this Agreement shall mean any action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened) has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification, except where the revocation, limitation or curtailment could not reasonably be expected to result in a Material Adverse Effect.

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Cell Therapeutics, Inc.

(B) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its board of directors or its stockholders in connection therewith other than in connection with the “Required Approvals” (as defined in subsection 3(D) below) and the Shareholder Approval. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(C) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Securities and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not, subject to the receipt of the Shareholder Approval, (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, as amended and restated from time to time , bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not reasonably be expected to result in a Material Adverse Effect.

(D) Filings, Consents and Approvals. Other than the Shareholder Approval and related matters, the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other “Person” (defined as an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind, including, without limitation, any “Trading Market” (which, for purposes of this Agreement shall mean the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: The Nasdaq Capital Market or The Nasdaq Global Market) or Commissione Nazionale per le Società e la Borsa (“CONSOB”) in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than such as already have been made (or will be made) by the Company’s counsel with The Nasdaq Stock Market, LLC and Borsa Italiana S.p.A. (MTA International) and by placement agent counsel with the Financial Industry Regulatory Authority, Inc. (“FINRA”) and other than any filings as are required to be made under applicable Federal and state securities laws (collectively, the “Required Approvals”), and except where the failure to obtain any such consent, waiver, authorization or order, give any such notice, or make any such filing or a registration could not reasonably be expected to result in a Material Adverse Effect.

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(E) Issuance of the Securities; Registration. The Preferred Stock and the Warrants are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. Prior to the consummation of the closing of the purchase and sale of the Preferred Stock and subject to the satisfaction of the Conditions, the Company will have reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable upon conversion of the Preferred Stock. Upon receipt of the Preferred Stock and the Underlying Shares, the Purchasers will have good and marketable title to such securities.

(F) Capitalization. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the issuance and sale of the Securities pursuant to the Transaction Documents. Except as disclosed in the SEC Reports and except pursuant to Exchange Agreements entered into with certain holders of the Company’s outstanding 4% Convertible Senior Subordinated Notes on May 16, 2010, the Company has not issued any capital stock since its most recently filed periodic report pursuant to the Exchange Act of 1934, as amended (the “Exchange Act”), other than pursuant to the Securities Purchase Agreement entered into with certain purchasers on May 23, 2010 for the issuance and sale of shares of Series 5 Preferred Stock and warrants exercisable to purchase shares of Common Stock, the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees, directors and consultants pursuant to the Company’s equity incentive plans, pursuant to the conversion or exercise of securities exercisable, exchangeable or convertible into Common Stock (“Common Stock Equivalents”) outstanding as of the date of the most recently filed periodic report pursuant to the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities and for the various outstanding series of the Company’s convertible debt, options and warrants described in the SEC Reports, and except as contemplated by the Exchange Agreement entered into with certain holders of outstanding warrants on the date hereof (the “Warrant Exchange Agreement”) and for the warrants issued thereunder and for the Rodman Warrants, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than to the Purchasers and the Rodman Warrants to the Placement Agent) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities, other than pursuant to the Warrant Exchange Agreement. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Other than the Shareholder Approval and related matters, no further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Securities. Except as disclosed in the SEC Reports, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

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(G) SEC Reports; Financial Statements. The Company has complied in all material respects with requirements to file all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

(H) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as otherwise contemplated by this Agreement or as specifically disclosed in the SEC Reports and except for the deposit of $39.3 million in cash with the trustee for the Company’s 4% convertible senior subordinated notes for the repayment in full of the outstanding amount due on such notes on July 1, 2010 and except for the VAT Disclosure (as defined below), (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting and (iv) the Company has not issued any equity securities to any officer, director or “Affiliate” (defined as any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 of the Securities Act), except pursuant to existing Company equity incentive plans. Except for the issuance of the Securities contemplated by this Agreement, the transactions contemplated by the Warrant Exchange Agreement or as set forth in the SEC Reports, or as otherwise disclosed to the Purchasers, no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made that has not been publicly disclosed one Trading Day prior to the date that this representation is made.

(I) Litigation. Except as disclosed in the SEC Reports and except that on July 12, 2010, CONSOB (1) notified the Company that CONSOB began its preliminary investigation for its

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decision on the administrative proceedings regarding the two claimed violations by the Company of the provisions of Section 114, paragraph 1 of the Italian Legislative Decree no. 58/98 due to the asserted late disclosure of certain information reported, at CONSOB’s request, in the press release disseminated on December 19, 2008 and March 23, 2009 (as such claimed violations are further described in the Company’s Form 10-Q for the fiscal quarter ended March 31, 2010) and (2) provided the Company with a preliminary investigation report in reply to the Company’s defenses to such allegations submitted on January 8, 2010 and except that on (1) June 25, 2010, the Italian Tax Authority (or ITA) issued notices of assessment to CTI (Europe) based on the ITA’s audit of CTI (Europe)’s Value Added Tax (or VAT) returns for the years 2006 and 2007 based on similar findings of the 2003 and 2005 assessments (which 2003 and 2005 assessments were further described in the Company’s Form 10-Q for the fiscal quarter ended March 31, 2010) and the assessments, including interest and penalties, for the years 2006 and 2007 are €2.5 million (or approximately $3.1 million) and €.8 million (or approximately $1.1 million), respectively and (2) July 14, 2010, the ITA issued a notice of deposit payment to CTI (Europe) based on the 2005 assessment, including interest and collection fees, for an amount of €0.9 million (or approximately $1.1 million) as of June 30, 2010 payable in the third quarter 2010 (such disclosure regarding VAT shall be referred to herein as the “VAT Disclosure”), there is no Proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities, or (ii) could, if there were an unfavorable decision, reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the SEC Reports and except for a shareholder derivative action, Souda v. John H. Bauer et. al. (Case No 2:10-cv-00905) filed on June 1, 2010 and related to the three prior shareholder derivative actions described in the Company’s Form 10-Q for the fiscal quarter ended March 31, 2010, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Except as disclosed in the SEC Reports, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary pursuant to the Exchange Act or the Securities Act.

(ii) No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

(J) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.

(K) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived),

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(ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except as disclosed herein and except in each case as could not reasonably be expected to have a Material Adverse Effect.

(L) Regulatory Permits. Except as disclosed in the SEC Reports, the Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

(M) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance.

(N) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other similar intellectual property rights currently employed by them in connection with the business currently operated by them, that are necessary for use in the conduct of their respective businesses as described in the SEC Reports except where the failure to so have could not reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received any written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person, except for such as could not reasonably be expected to have a Material Adverse Effect.

(O) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. To the best knowledge of the Company, such insurance contracts and policies are accurate and complete. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(P) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for

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rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including restricted stock programs, stock option agreements under any stock option plan of the Company.

(Q) Sarbanes-Oxley. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the date hereof and of the Closing Date of the Placement.

(R) Certain Fees. Except as otherwise provided in this Agreement, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.

(S) Trading Market Rules. The issuance and sale of the Securities hereunder does not contravene in any material respects the rules and regulations of the Trading Market.

(T) Investment Company. The Company is not, and immediately after receipt of payment for the Securities, will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(U) Registration Rights. No Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company, which rights are currently not satisfied.

(V) Listing and Maintenance Requirements. The Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as disclosed in the SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.

(W) Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill, other than with respect to that certain Shareholder Rights Agreement dated as of December 28, 2009 between the Company and Computershare Trust Company, N.A., a federally chartered trust company as Rights Agent thereunder (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s amended and restated articles of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and, subject to the Shareholder Approval the Purchasers’ ownership of the Securities.

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(X) Tax Status. Except for matters that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect and except as disclosed in the SEC Reports and except for the VAT Disclosure, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

(Y) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(Z) Accountants. To the knowledge of the Company, Stonefield Josephson, who the Company expects will express their opinion with respect to the financial statements to be included in the Company’s next Annual Report on Form 10-K, are a registered public accounting firm as required by the Securities Act.

(AA) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities (other than for the placement agent’s placement of the Securities), or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii) of this Section 3(BB), compensation paid to the Placement Agent in connection with the Placement .

(BB) Approvals. The issuance and listing on the Nasdaq Market of the Securities requires no further approvals, including but not limited to, the approval of shareholders.

(CC) Regulation D Compliance. Neither the Company, nor any person acting on its behalf and at its direction, (i) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer and sale of the Securities, (ii) has made, directly or indirectly, any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offer and sale of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act in a manner that would require registration of such offer and sale under the Securities Act, or (iii) will take any action or steps referred to in clause (ii) above that would cause the offer and sale of the Securities to be integrated with future offerings by the Company in a manner that requires registration of the Securities under the Securities Act.

(DD) “Well-Known Seasoned Issuer” The Company is a “well-known seasoned issuer” as defined in Rule 405 as promulgated under the Securities Act.

SECTION 4. INDEMNIFICATION. To the extent permitted by law, the Company will indemnify the Placement Agent and its affiliates, stockholders, directors, officers, employees and

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controlling persons (within the meaning of Section 15 of the Securities Act, or Section 20 of the Exchange Act) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including the reasonable fees and expenses of counsel), relating to or arising out of its activities hereunder, except to the extent that any losses, claims, damages, expenses or liabilities (or actions in respect thereof) are found in a final judgment (not subject to appeal) by a court of law to have resulted primarily and directly from any indemnified party’s willful misconduct or gross negligence.

(A) Promptly after receipt by the Placement Agent of notice of any claim or the commencement of any action or proceeding with respect to which the Placement Agent is entitled to indemnity hereunder, the Placement Agent will notify the Company in writing of such claim or of the commencement of such action or proceeding; provided, however that failure to so notify the Company shall not relieve the Company from any obligation it may have hereunder, except and only to the extent such failure results in the forfeiture by the Company of substantial rights and defense, and, if the Company so elects or is requested by such Placement Agent, the Company will assume the defense of such action or proceeding and will employ counsel reasonably satisfactory to the Placement Agent and will pay the fees and expenses of such counsel. Notwithstanding the preceding sentence, the Placement Agent will be entitled to employ counsel separate from counsel for the Company and from any other party in such action if counsel for the Placement Agent reasonably determines in writing that it would be inappropriate under the applicable rules of professional responsibility for the same counsel to represent both the Company and the Placement Agent. In such event, the reasonable fees and disbursements of no more than one such separate counsel will be paid by the Company, in addition to one local counsel. The Company will have the exclusive right to settle the claim or proceeding provided that the Company will not settle any such claim, action or proceeding without the prior written consent of the Placement Agent, which will not be unreasonably withheld.

(B) The Company agrees to notify the Placement Agent promptly of the assertion against it or any other person of any claim or the commencement of any action or proceeding relating to a transaction contemplated by this Agreement.

(C) If for any reason the foregoing indemnity is unavailable to the Placement Agent or insufficient to hold the Placement Agent harmless, then the Company shall contribute to the amount paid or payable by the Placement Agent as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and the Placement Agent on the other, but also the relative fault of the Company on the one hand and the Placement Agent on the other that resulted in such losses, claims, damages or liabilities, as well as any relevant equitable considerations. The amounts paid or payable by a party in respect of losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees and expenses incurred in defending any litigation, proceeding or other action or claim. Notwithstanding the provisions hereof, the Placement Agent’s share of the liability hereunder shall not be in excess of the amount of fees actually received, or to be received, by the Placement Agent under the Agreement (excluding any amounts received as reimbursement of expenses incurred by the Placement Agent).

(D) These Indemnification Provisions shall remain in full force and effect whether or not the transaction contemplated by this Agreement is completed and shall survive the termination of this Agreement, and shall be in addition to any liability that the Company might otherwise have to any indemnified party under this Agreement or otherwise.

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SECTION 5. PLACEMENT AGENT REPRESENTATIONS. Neither the Placement Agent, nor any person acting on its behalf and at its direction, (i) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer and sale of the Securities, (ii) has made, directly or indirectly, any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offer and sale of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act in a manner that would require registration of such offer and sale under the Securities Act, or (iii) will take any action or steps referred to in clause (ii) above that would cause the offer and sale of the Securities to be integrated with future offerings by the Company in a manner that requires registration of the Securities under the Securities Act.

SECTION 6. ENGAGEMENT TERM. The Placement Agent’s engagement hereunder will be for a period of thirty days. The engagement may be terminated by either the Company or the Placement Agent at any time upon twenty days’ prior written notice. Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality, indemnification, contribution and the Company’s obligations to pay fees actually earned to the date of termination and reimburse expenses actually incurred and payable by the Company at the date of termination contained herein and the Company’s obligations contained in the Indemnification Provisions will survive any expiration or termination of this Agreement. The Placement Agent agrees not to use any confidential information concerning the Company provided by the Company for any purposes other than those contemplated under this Agreement.

SECTION 7. PLACEMENT AGENT’S INFORMATION. The Company agrees that any information or advice rendered by the Placement Agent in connection with this engagement is for the confidential use of the Company only in their evaluation of the Placement and, except as otherwise required by law, the Company will not disclose or otherwise refer to the advice or information in any manner without the Placement Agent’s prior written consent.

SECTION 8. NO FIDUCIARY RELATIONSHIP. This Agreement does not create, and shall not be construed as creating rights enforceable by any person or entity not a party hereto, except those entitled hereto by virtue of the Indemnification Provisions hereof. The Company acknowledges and agrees that the Placement Agent is not, and shall not be construed as, a fiduciary of the Company and shall have no duties or liabilities to the equity holders or the creditors of the Company or any other person by virtue of this Agreement or the retention of the Placement Agent, hereunder, all of which are hereby expressly waived.

SECTION 9. CLOSING. The obligations of the Placement Agent, and the closing of the sale of the Securities hereunder are subject to the accuracy in all material respects, when made and on the Closing Date, of the representations and warranties on the part of the Company contained herein, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions:

(A) No proceedings for that purpose shall have been initiated or threatened by the Commission, and any request for additional information on the part of the Commission shall have been complied with to the reasonable satisfaction of the Placement Agent. Any filings required to be made by the Company shall have been timely filed with the Commission.

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(B) The Placement Agent shall not have discovered and disclosed to the Company on or prior to the Closing Date that the SEC Reports contain an untrue statement of a fact which, in the opinion of counsel for the Placement Agent, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading.

(C) Subject to the Shareholder Approval and related matters, all corporate proceedings and other legal matters incident to the authorization, form, execution, delivery and validity of each of this Agreement and the Securities and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Placement Agent, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

(D) The Placement Agent shall have received from outside counsel to the Company such counsel’s written opinion, addressed to the Placement Agent (and to the extent required by any agreement with the Purchasers, the Purchasers) dated as of the Closing Date, in form and substance the same as the opinion provided to the Purchasers.

(E) Except as disclosed in the SEC Reports, neither the Company nor any of its Subsidiaries shall have sustained since the date of the latest audited financial statements included the SEC Reports, any loss or interference with its business from fire, explosion, flood, terrorist act or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in or contemplated by the SEC Reports and (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its Subsidiaries or any change, or any development involving a prospective change, in or affecting the business, general affairs, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its Subsidiaries, otherwise than as set forth in or contemplated by the SEC Reports, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Placement Agent, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by the SEC Reports.

(F) The Common Stock is registered under the Exchange Act and, as of the Closing Date, the Common Stock shall be listed and admitted and authorized for trading on The Nasdaq Capital Market, and satisfactory evidence of such actions shall have been provided to the Placement Agent. The Company shall have taken no action designed to, or likely to have the effect of terminating the registration of the Common Stock under the Exchange Act or delisting or suspending from trading the Common Stock from The Nasdaq Capital Market, nor has the Company received any information suggesting that the Commission or The Nasdaq Capital Market is contemplating terminating such registration or listing, except as disclosed in the SEC Reports.

(G) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, The Nasdaq Capital Market or the NYSE Alternext US or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum or maximum prices or maximum ranges for prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii)

12

Cell Therapeutics, Inc.

a banking moratorium shall have been declared by federal or state authorities or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, (iii) the United States shall have become engaged in hostilities in which it is not currently engaged, the subject of an act of terrorism, there shall have been an escalation in hostilities involving the United States, or there shall have been a declaration of a national emergency or war by the United States, or (iv) there shall have occurred any other calamity or crisis or any change in general economic, political or financial conditions in the United States or elsewhere, if the effect of any such event in clause (iii) or (iv) makes it, in the sole judgment of the Placement Agent, impracticable or inadvisable to proceed with the sale or delivery of the Securities.

(H) Subject to the Shareholder Approval, no action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities or materially and adversely affect or potentially materially and adversely affect the business or operations of the Company; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities or materially and adversely affect or potentially materially and adversely affect the business or operations of the Company.

(I) The Company shall have prepared and filed with the Commission a Current Report on Form 8-K with respect to the Placement, including as an exhibit thereto this Agreement.

(J) The Company shall have entered into a securities purchase agreement or subscription agreement with each of the Purchasers and such agreements shall be in full force and effect and shall contain representations and warranties of the Company as agreed between the Company and the Purchasers.

(K) If required, in the reasonable judgment of the Placement Agent, the Company shall make or authorize Placement Agent’s counsel to make on the Company’s behalf, an Issuer Filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110 and pay all filing fees required in connection therewith, and the Closing shall be deferred until the receipt of a “no objections” letter from the Corporate Financing Department.

(L) Prior to the Closing Date, the Company shall have furnished to the Placement Agent such further information, certificates and documents as the Placement Agent may reasonably request in connection with the performance of its services hereunder.

All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agent.

SECTION 10. Governing Law. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely in such State. This Agreement may not be assigned by either party without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. Any right to trial by jury with respect to any dispute arising under this Agreement or any transaction or conduct in connection herewith is waived.

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Cell Therapeutics, Inc.

Any dispute arising under this Agreement may be brought into the courts of the State of New York or into the Federal Court located in New York, New York and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of aforesaid courts. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by delivering a copy thereof via overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

SECTION 11. Entire Agreement/Misc. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings, relating to the subject matter hereof, with the exception of the prior letter agreements between the Company and the Placement Agent relating to prior offerings, including but not limited to those letter agreements dated November 29, 2007, December 20, 2007, April 29, 2008, September 15, 2008, October 21, 2008, November 26, 2008 (as amended), December 5, 2008, April 8, 2009, May 11, 2009, July 22, 2009, August 19, 2009, January 13, 2010, March 30, 2010 and May 23, 2010 each of which shall continue in accordance with their terms. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by both the Placement Agent and the Company. The representations, warranties, agreements and covenants contained herein shall survive the closing of the Placement and delivery and/or exercise of the Securities, as applicable. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a .pdf format file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or .pdf signature page were an original thereof.

SECTION 12. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number on the signature pages attached hereto on a day that is not a business day or later than 6:30 p.m. (New York City time) on any business day, (c) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages hereto.

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Cell Therapeutics, Inc.

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to the Placement Agent the enclosed copy of this Agreement.

Very truly yours,

RODMAN & RENSHAW, LLC
By:	/s/ David Horin
Name:	David Horin
Title:	CFO
Address for notice:
1251 Avenue of the Americas, 20th Floor New York, NY, 10020
Attention: General Counsel
Facsimile: (646) 841-1640

15

Cell Therapeutics, Inc.

Accepted and Agreed to as of

the date first written above:

CELL THERAPEUTICS, INC.

By:	/s/ James A. Bianco, M.D.
	Name: James A. Bianco, M.D.
	Title: Chief Executive Officer

Address for notice:

501 Elliot Ave. W #400

Seattle, WA 98119

Attention: James A. Bianco, M.D.

Facsimile: (206) 284-6114

16

EX-10.6

Exhibit 10.6

DRUG PRODUCT MANUFACTURING SUPPLY AGREEMENT

THIS DRUG PRODUCT MANUFACTURING SUPPLY AGREEMENT (“Agreement”) is made effective as of July 9, 2010 (the “Effective Date”) by and between NerPharMa, S.r.l. (“NPM”) Viale Pasteur, 10-20014 Nerviano (MI), Italy, and Cell Therapeutics, Inc. (“CTI”), having an office at 501 Elliott Avenue West, Suite 400, Seattle, WA 98119.

WHEREAS, NPM has the experience and capability to manufacture and supply Product (as defined below); and

WHEREAS, NPM agrees to be the non-exclusive manufacturer and supplier of Product; and

WHEREAS, CTI desires to have available for clinical trials use and, upon regulatory approval, for commercial use, on a coordinated continuing basis, a supply of Product that shall match the Specifications as defined herein;

NOW, THEREFORE, in consideration of the premises and mutual covenants and conditions contained herein, the Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following words and phrases shall have the following meanings:

1.1 “Affiliate” shall mean, with respect to any party hereto, any person, organization or entity directly or indirectly controlling, controlled by or under common control with, such party. For purposes of this definition only, “control” of another person, organization or entity shall mean (i) ownership or direct control of fifty percent (50%) or more of the outstanding voting stock or other ownership interest of the other organization or entity, or (ii) possession of, or the power to elect or appoint fifty percent (50%) or more of the members of the governing body of the organization or other entity.

1.2 “Attachment” shall mean the Attachments attached hereto and made part of this Agreement titled respectively Attachment A, Attachment B, etc. Such Attachments are hereby incorporated by this reference and made a part of this Agreement and shall be subject to the terms and conditions in this Agreement. The Attachments may be amended upon mutual written agreement of the Parties to reflect new requirements, demands or market conditions. Unless otherwise specifically provided to the contrary in any Attachment to this Agreement, in the event of a conflict between the main body of this Agreement and the Attachments hereto, the terms of the main body of this Agreement shall control.

1.3 “Binding Forecast” shall have the meaning set forth in Section 2.16.

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

Page 1 of 26

1.4 “Brightstock” shall mean finished unlabeled vials imprinted with information required by cGMP and other applicable current laws, at minimum lot number. “Drug Product” and “finished unlabeled vials” shall mean drug product that has been formulated, sterile filtered, aseptically filled into vials, lyophilized, and hermetically sealed, tested and bulk packaged.

1.5 “cGMP” shall mean the regulatory requirements for current good manufacturing practices as the same are or shall from time to time be established by the applicable governmental or regulatory authority, including without limitation the United States current good manufacturing practices pursuant to the U.S. Federal Food, Drug, and Cosmetic Act, as amended (21 U.S.C. Sect. 301 et seq.) and the relevant regulations found in Title 21 of the U.S. Code of Federal Regulations (including Parts 210, 211, 600 and 611), and the European Union’s current good manufacturing practices pursuant to the European Commission in Directive 91/356/EEC, as amended by 2003/94/EC, and the Guide to Good Manufacturing Practice (Volume 4 of “The rules governing medicinal products in the European Union”).

1.6 “Confidential Information” shall have the meaning set forth in Section 6.1.

1.7 “Cost Reduction Measures” shall have the meaning set forth in Section 3.3.

1.8 “Firm Order” shall have the meaning set forth in Section 2.17.

1.9 “Government Approvals” shall mean any approvals, licenses, permits, registrations or authorizations, howsoever called, of any United States, Italian, European Union or foreign regulatory agency, department, bureau or other government entity necessary for the manufacture, test, use, storage, transport, export or sale of the Product.

1.10 “Initial Term” shall have the meaning set forth in Section 7.1. “Quality Agreement” shall mean a written document, mutually agreed to by the Parties, describing the obligations of the Parties with regards to regulatory compliance, quality systems, and testing and release of Product. The Quality Agreement will be attached as Attachment E to this Agreement.

1.11 “NMS Group” means NMS and any and all Affiliates of NMS.

1.12 “Parties” shall mean NPM and CTI together and “Party” means either of them, as the context requires.

1.13 “Pre-commercialization Period” shall mean the time period before the Product has been granted approval for commercial distribution by the applicable regulatory authority; including, but not limited to the Food and Drug Administration (FDA), and the European Medicines Agency (EMEA).

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

Page 2 of 26

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

1.14 “Post-commercialization Period” shall mean the time period after the Product has been granted approval for commercial distribution by the applicable regulatory authority; including, but not limited to the Food and Drug Administration (FDA), and the European Medicines Agency (EMEA).

1.15 “Pricing Schedule” shall have the meaning set forth in Attachment B.

1.16 “Process” shall mean the series of processes, methods, tests and techniques provided by CTI by which the Product is manufactured, as described in detail in a manufacturing process description document which shall be written in English and agreed by the Parties, and as further defined in the manufacturing records. The Process may be changed from time to time by agreement of the parties and in accordance with the Quality Agreement. NPM shall not change the Process except at the written request of or with written permission from CTI.

1.17 “Product” shall mean BBR 2778 (pixantrone dimaleate) for Injection (BBR 2778 DP), which is described in Attachment A attached hereto, and, as the context requires, the Drug Product manufactured under this Agreement, including without limitation all in-process intermediates, samples, derivatives, and improvements thereof.

1.18 “Shipper” shall mean a standard shipper with separation for each vial which is IATA shipping compliant or as otherwise agreed in writing by the Parties.

1.19 “Specifications” shall mean the qualitative, quantitative, functional and analytical specifications (including in-process specifications) of and the analytical tests, methods and acceptance criteria for the finished Product, raw and ancillary materials for the Product provided by NPM, intermediates of the Product, and packaging materials for the Product. The current Product Specifications are set out in Attachment C attached hereto. During the Pre-commercialization Period, it is understood that these Specifications may be amended as deemed necessary by CTI to accommodate regulatory requests or changes during the development process. During the Post-commercialization Period, these Specifications may be amended from time to time to accommodate requests from the applicable regulatory authority. Changes to Specification incurring extra costs in processing or analysis of Product will be borne by CTI and reflected in Pricing Schedule B. Non-regulatory changes to the Specifications will proceed as needed by mutual written agreement of the Parties.

1.20 “Term” shall have the meaning set forth in Section 7.1.

Page 3 of 26

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ARTICLE 2

SUPPLY

2.1 During the Term, NPM shall allocate capacity to and shall manufacture and sell to CTI no less than the amounts of Product ordered by CTI with the issuance of a Binding Forecast PO pursuant to Section 2.16.

All batches of Product shall be produced utilizing the Process and in accordance with the Specifications, cGMP, Government Approvals, and the terms of this Agreement.

2.2 Binding Forecast PO’s, as defined below, will be placed on CTI’s standard purchase orders then in effect with a minimum lead time of **. All terms and conditions of this Agreement shall govern the transactions between the Parties and any terms or conditions of said purchase order which conflict with this Agreement shall be null and void. NPM shall promptly manufacture and deliver all Firm Orders, as defined below, of Product in accordance with the related schedule and in compliance with the Specifications, cGMP and other applicable laws and regulations. **

2.3 All Product supplied by NPM shall be delivered to CTI’s designated carrier per ** from NPM’s facility, as specified in the related Firm Order. **

2.4 NPM shall ship the Product in accordance with applicable laws and regulations and in a commercially reasonable manner in accordance with the instructions set forth on Attachment D hereto.

2.5 CTI or its designee may, at CTI’s option, analyze each batch and samples from each batch of Product. **

2.6 **

2.7 Subject to Sections 2.5 and 2.6, **

2.8 NPM warrants that all applicable environmental and safety requirements are being and will be followed at its facilities. Additionally, the manufacture of the Product shall be in accordance with cGMP. For the purpose of quality assurance auditing and to evaluate compliance with applicable cGMPs, environmental and occupational health and safety laws and regulations, CTI shall have the right to audit and inspect per the Quality Agreement. **

2.9 NPM shall notify CTI **of significant incidents relating to production of the Product **.

2.10 At CTI’s request, NPM shall, within five (5) business days, provide copies of all relevant environmental licenses and permits in their original language pertaining to its operation and shall notify CTI of any material change in status.

Page 4 of 26

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

2.11 At CTI’s request, NPM will, within five (5) business days, provide the requirements set forth in Attachment F (the “Record Keeping and Accounting Schedule”).

2.12 At CTI’s request, NPM will, within five (5) business days, provide CTI with copies of all applicable insurance certificates in their original language. Insurance requirements of the Parties shall be listed in Attachment G (the “Insurance Requirements”).

2.13 During the Post-commercialization period **.

2.14 NPM agrees that it will conduct all necessary testing of the Product as required by the Specifications. All testing is to be performed during and at the completion of the manufacture of the Product. **

2.15 NPM will ** provide to CTI copies of all correspondence, inspection reports and other reports issued by the FDA or other regulatory agencies with respect to those affecting the Product produced for CTI in NPM’ facilities.

2.16 During the Post-commercialization Period CTI shall submit to NPM ** a rolling commercial forecast, as follows: **. For clarification, these forecast and estimate requirements shall only be required to be provided for periods occurring during the actual Term of the Agreement. **

CTI agrees to purchase, and NPM agrees to produce, ** subject to Section 2.17 below. For clarity purposes, CTI shall be credited with the previous Binding Forecast PO’s in calculating the purchase requirement in this paragraph.

2.17 Each Binding Forecast PO shall identify and reference the quantity of Product ordered, the price to be paid for such Product, packaging requirements, delivery schedule, delivery locations, invoice information and other applicable instructions. If the amounts in the Binding Forecast PO are in compliance with Section 2.16, and Attachment B to this Agreement, the Binding Forecast PO shall be deemed accepted by NPM upon its receipt thereof and become a “Firm Order”. ** Use of e-mail is in this case is permitted, and e-mails shall be sent to the respective e-mail addresses indicated by the Parties. Subject to the cancellation and termination rights in this Agreement, Firm Orders shall be considered firm and non-cancelable, except as provided in Section 2.16 and 2.17 with respect to certain changes, if any, in any Binding Forecast PO.

2.18 During the Pre-commercialization Period CTI may submit NPM Binding Forecast PO with a minimum lead time of **. NPM shall then ** confirm to CTI its acceptance or non acceptance of the Binding Forecast PO, indicating the delivery date and the quantity of Product to be supplied. **

Page 5 of 26

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

2.19 In the event NPM fails to deliver any Product due under a Firm Order by the scheduled delivery date, the Price of such Product will be reduced as follows:

i) **

ii) **

iii) **

2.20 NPM shall not manufacture or sell the Product to any party other than CTI, or its designated affiliates or designated subsidiaries, without CTI’s prior written consent.

2.21 NPM shall not use any materials (including drug substance) provided by CTI hereunder for any purpose other than performing NPM’ obligations under this Agreement and/or the Quality Agreement.

ARTICLE 3

PRICING

3.1 The purchase price to be paid by CTI for NPM’ manufacture and supply of the Product during the Term of this Agreement is set forth in Attachment B (the “Pricing Schedule”).

3.2 NPM shall invoice CTI via email at ** for each conforming batch Product at the delivery of the batch to CTI, or CTI’s designated carrier per **. CTI shall make payments to NPM in Euros for the purchase price of the Product (as set forth in the Pricing Schedule) within thirty (30) days after date of invoice. ** Use of e-mail is in this case shall be sent to an e-mail address previously designated by the Parties.

3.3 In the event that either of the Parties identify mutually acceptable means of reducing the direct cost of manufacturing the Product (“Cost Reduction Measures”) and such Cost Reduction Measures are mutually agreed to in writing and subsequently implemented by NPM, each Party shall be entitled to fifty percent (50%) of any savings resulting from any such Cost Reduction Measure (net of any costs associated with implementing such Cost Reduction Measure). NPM shall not implement any cost reduction measures related to the manufacturing of the Product without the prior written agreement of CTI. Such savings will be passed to CTI by a proportionate decrease in the prices set forth in this Agreement to be reflected in a written amendment to the Pricing Schedule. The resulting price decrease to CTI shall be effective from the date of the first Firm Order submitted by CTI following the implementation of the Cost Reduction Measure and shall remain in effect until any subsequent Cost Reduction Measure or other pricing amendment, or the termination or expiration of this Agreement,

Page 6 of 26

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

whichever is earlier. In the event of unpredictable direct or indirect cost increases of more than ten percent (10%) each, the Parties may in good faith renegotiate the Pricing Schedule set forth in Attachment B.

3.4 During the Term of this Agreement any changes in price (other than changes pursuant to Section 3.3, and changes caused by changes to Specification as outlined in Section 2.2) must be agreed by the Parties in writing.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1 Each Party hereby represents each on behalf of itself, that it has the corporate power and authority and the legal right to enter into this Agreement and that it has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement; and that this Agreement has been duly executed and delivered on behalf of itself, and constitutes a legal, valid, binding obligation, enforceable against itself in accordance with its terms.

4.2 Each Party represents and warrants that, to the best of its knowledge as of the Effective Date of this Agreement, no patents, patent applications if issued, or any other intellectual property rights of any third party would be infringed by the performance of each Party’s obligations with respect to the manufacture of the Product under this Agreement. Except as provided in the preceding sentence, neither Party makes any warranty or representation that the performance of its obligations will not infringe the rights of third parties. It is understood neither Party will perform any patent infringement or freedom to operate searches as a part of its services hereunder.

4.3 NPM warrants that all Product supplied by NPM pursuant to Article 2(a) shall be manufactured in accordance with the Process, the Specifications, and the applicable batch records, and in compliance with all applicable material laws and regulations, including cGMP and related Government Approvals, and processed in compliance with the Quality Agreement, (b) shall conform to applicable regulatory requirements, (c) shall have all mutually agreed Government Approvals, (d) shall conform to cGMP and the terms of this Agreement, (e) will be transferred free and clear of any liens or encumbrances of any kind arising through NPM or its affiliates or their respective agents or subcontractors and (f) shall meet the Specifications at the time of delivery. At CTI’s request, NPM shall certify in writing that it is in compliance with all applicable environmental and occupational health and safety laws and regulations. NPM further warrants it will perform the services under this Agreement, including but not limited to the manufacture and supply of the Product, in accordance with this Agreement and the Quality Agreement.

Page 7 of 26

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

4.4 EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PARTIES DISCLAIM ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR AGAINST ANY INFRINGEMENT OF PRODUCTS OR OTHERWISE. EXCEPT FOR A PARTY’S INDEMNIFICATION OBLIGATIONS HEREUNDER, AND EXCEPT IN THE EVENT OF A BREACH OF ARTICLE 6 (CONFIDENTIALITY), THE PARTIES SHALL NOT IN ANY EVENT BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY KIND, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE INCLUDING, WITHOUT LIMITATION, LIABILITY FOR LOSS OF USE, LOSS OF WORK IN PROGRESS, DOWN TIME, LOSS OF REVENUE OR PROFITS, FAILURE TO REALIZE SAVINGS, LOSS OF PRODUCTS OF CTI OR ITS CUSTOMER TO A THIRD PARTY ON ACCOUNT OF SUCH LOSS, OR FOR ANY LABOR OR ANY OTHER EXPENSE, DAMAGE OR LOSS OCCASIONED BY SUCH PRODUCT INCLUDING PERSONAL INJURY OR PROPERTY DAMAGE UNLESS SUCH PERSONAL INJURY OR PROPERTY DAMAGE IS CAUSED BY SUCH PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

4.5 Subject to and except to the extent of the indemnity provided under Section 4.6, NPM shall indemnify, defend and hold harmless CTI, and it affiliates and subsidiaries, from all actions, losses, claims, demands, damages, costs and liabilities (including reasonable attorney’s fees) to which CTI is or may become subject insofar as they arise out of (i) any breach by NPM of any of its obligations or warranties made under this Agreement by NPM, or (ii) any negligent or willful act or omission by NPM or any of its employees, agents or subcontractors.

4.6 Subject to and except to the extent of the indemnity provided under Section 4.5, CTI shall indemnify, defend and hold harmless NPM from all actions, losses, claims, demands, costs and liabilities (including reasonable attorney’s fees) to which NPM is or may become subject insofar as they arise out of (i) any breach by CTI of any of its obligations under this Agreement or warranties of CTI, (ii) any negligent or willful act or omission by CTI or any of its employees, agents or subcontractors, (iii) personal injury, death or property damage sustained by any third party under the direction of CTI, or (iv) any labeling, advertising or promotional materials used by CTI.

4.7 A Party entitled to indemnification hereunder agrees to give prompt written notice to the indemnifying Party after the receipt by such Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such Party will claim indemnification pursuant to this Agreement and cooperate fully with the indemnifying Party in conducting such defense. Unless, in the reasonable judgment of the indemnified Party, a

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

conflict of interest may exist between the indemnified Party and the indemnifying Party with respect to a claim, the indemnifying Party may assume the defense of such claim with counsel reasonably satisfactory to the indemnified Party. If the indemnifying Party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel with respect to such claim. The indemnifying Party will not be subject to any liability for any settlement made without its consent, which shall not be unreasonably withheld.

4.8 EXCEPT WITH RESPECT TO (I) A PARTY’S INDEMNIFICATION OBLIGATIONS HEREUNDER, (II) A PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, (III) A BREACH OF ARTICLE 6 (CONFIDENTIALITY), AND (IV) NPM’S REPLACEMENT AND REFUND OBLIGATIONS UNDER ARTICLE 2 HEREUNDER, EACH PARTY’S TOTAL RESPECTIVE LIABILITY, HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, IN CONNECTION WITH THIS AGREEMENT, SHALL NOT EXCEED AN AMOUNT EQUAL TO THE SUM OF THE PURCHASE PRICE PAID BY CTI HEREUNDER IN THE TWELVE (12) MONTHS PRECEDING THE INCIDENT GIVING RISE TO THE CLAIM.

4.9 The provisions and obligations of this Article 4 shall survive any expiration or termination of this Agreement.

ARTICLE 5

RECALLS AND RETURNS

5.1 In the event a recall involving any CTI finished dosage form of the Product containing the Product supplied hereunder is required by a governmental agency or authority of competent jurisdiction or if recall is reasonably deemed advisable by CTI, such recall shall be promptly implemented and administered by CTI in a manner which is appropriate and reasonable under the circumstances and shall conform with accepted trade practices, at CTI’s sole cost and expense. However, subject to Section 4.8, in the event that a recall is required solely as a result of NPM’ breach of its obligations hereunder, as determined by ** Quality Assurance department, a government agency, or authority of competent jurisdiction, all costs and expenses incurred in connection therewith shall be borne by NPM.

5.2 The provisions and obligations of this Article 5 shall survive any expiration or termination of this Agreement.

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ARTICLE 6

CONFIDENTIALITY

6.1 During the Term of this Agreement each Party may disclose information to the other Party that is of a confidential or proprietary nature. Information which is designated in writing to be confidential or, if disclosed orally, reduced to writing and designated as confidential within thirty (30) days of such disclosure (“Confidential Information”) shall be maintained in confidence by the receiving Party and not disclosed to third parties except upon the disclosing Party’s prior written consent.

“CTI Confidential Information” means all technical and other information, whether patented or unpatented, contained in or relating to the CTI materials, Inventions, manufacturing documentation, the Process, the Product, and/or in or to CTI processes, formulas, formulations, methods, operations, technologies, forecasts, business, research or development information, and (a) that is disclosed or supplied to NPM or a NPM Affiliate or Subcontractor by or on behalf of CTI pursuant to this Agreement, in writing, orally, or by inspection or observation of tangible items, or (b) which NPM or a NPM Affiliate or Subcontractor obtains or develops under this Agreement, and which is contained in or relates to the CTI materials, manufacturing documentation, the Process, the Product, and/or in or to CTI processes, formulas, formulations, methods, operations, technologies, forecasts, business, research or development information, or (c) of which NPM may become aware of through the presence of its employees or agents at CTI offices or facilities or at other facilities that are involved in the manufacture of the Product, and all of the foregoing includes, without limitation, proprietary information, industrial information, trade secrets, know-how, research, experimental methods and results, product plans, products, services, customer lists, development plans, inventions, processes, concepts, formulas, formulations, technology, ideas, designs, drawings, marketing, finances, and other business and scientific plans and information and facility layout and schematics. CTI Confidential Information includes without limitation the drug master file for the Product.

It shall be understood, however, that Confidential Information shall not include, and the obligations of confidentiality and nondisclosure shall not apply to, disclosed information that:

i) is or becomes publicly available through no fault of the receiving Party;

ii) is disclosed without restriction to the receiving Party by a third party entitled to disclose it;

iii) is already known to the receiving Party at the time of disclosure by the disclosing Party as shown by its prior written records;

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

iv) is developed independently by an employee or consultant of the receiving Party who had no knowledge of disclosures made under this Agreement as shown by its written records; or

6.2 Nothing in this Agreement shall prohibit the receiving Party from disclosing the disclosing Party’s Confidential Information if legally required to do so by law or governmental regulation (including any securities filing requirements) or by judicial or administrative process, provided that the receiving Party shall (i) give the disclosing Party prompt notice prior to such disclosure as reasonably practical (including email), and (ii) cooperate with the disclosing Party, at the disclosing Party’s expense, in the event it elects to contest such disclosure or seek a protective order with respect thereto. Notwithstanding the foregoing, Section 6.2(ii) shall not apply to disclosures required by the United States Securities Exchange Commission or foreign equivalent.

6.3 NPM shall not use CTI’s Confidential Information for any purpose other than performing its obligations under this Agreement or the Quality Agreement, without first obtaining CTI’s prior written consent to each such other utilization.

6.4 No right or license, either expressed or implied, under any patent or other intellectual property right is granted hereunder. All right, title and interest in and to Inventions, and the right to file for patents thereon worldwide, shall be exclusively owned by CTI. “Inventions” means all intellectual property rights that are developed in whole or in part by or on behalf of the NPM under this Agreement or otherwise derived from the Confidential Information, including without limitation any inventions, improvements discoveries and trade secrets related to the Product.

6.5 The obligations of confidentiality and non-disclosure and non-use shall remain in effect and survive for a period of five (5) years from the expiration or termination of this Agreement, except for NPM’s obligations of confidentiality and non-disclosure with respect to CTI’s Confidential Information, which shall survive in perpetuity.

ARTICLE 7

TERM AND TERMINATION

7.1 The term of this Agreement shall commence on the Effective Date and expire as of midnight of the fifth anniversary of the date the first Government Approval has been obtained either in the United States or in Europe, whichever is earlier (the “Initial Term”), unless terminated earlier as provided in this Article 7. Prior to expiration of the Initial Term, this Agreement may be renewed for a two (2) year period upon mutual written agreement of the Parties. Prior to the end of such renewal period, this Agreement may be renewed for one successive two (2) year period upon mutual written agreement of the Parties. The totality of all such terms, if any, is the “Term”

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

7.2 If either Party defaults in the performance or observation of any of its material obligations under this Agreement, the non-defaulting Party may terminate this Agreement if such default is not cured within sixty (60) days after written notice thereof, which notice shall contain a specific identification of the circumstances giving rise to the default. Failure to terminate this Agreement for any default or breach shall not constitute a waiver by the aggrieved Party of its right to sue for damages or its right to terminate this Agreement for any other default or breach. Notwithstanding the foregoing, CTI may terminate this Agreement upon thirty (30) days prior written notice in the event of failure of three (3) or more of seven (7) consecutive lots of Product.

7.3 Either Party may terminate this Agreement upon written notice in the event that the other Party files for bankruptcy, liquidation, dissolution, or takes similar action seeking protection against creditors under insolvency laws, or has entered against it involuntarily a decree in bankruptcy or similar decree which remains in effect for sixty (60) days.

7.4 This Agreement may be terminated at any time upon the mutual written agreement of the Parties.

7.5 CTI may terminate this Agreement upon thirty (30) days prior written notice in the event that NPM, or a substantial portion of NPM’s assets to which this Agreement relates, is acquired by another company or entity other than a company or entity which was included in the NMS Group prior to the effective date of such acquisition (and which was not formed in part to effect such acquisition).

7.6 Upon termination of this Agreement for any reason other than NPM default, CTI shall purchase the Product from NPM for Firm Orders issued prior to the date on which notice of such termination is given, or expiration, as applicable, including safety stock from CTI (if so requested by NPM). Upon notice of termination, NPM shall use reasonable efforts to mitigate and cancel, to the extent possible, all obligations that would incur expense, and NPM shall not, without CTI”s approval, perform any other additional services applicable to this Agreement, incur any other expenses, or enter into any other obligations related to the services applicable to this Agreement. Upon expiration or termination of this Agreement, unless otherwise directed by CTI, NPM shall promptly return, or at CTI’s election destroy, at CTI’s expense, all CTI Confidential Information, Product, and materials owned by CTI that is being held by NPM, with any such destruction to be certified in writing to CTI by an authorized NPM officer. In addition, if requested by CTI, NPM shall transfer any equipment or materials purchased by NPM on behalf of CTI that is in NPM’s possession.

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

7.7 Upon request of CTI, NPM shall use commercially reasonable efforts to effect a transfer of the manufacture of Bulk Product requirements from NPM and its subcontractors (if any) to a CTI designated facility pursuant to the transfer plan. If this transfer activity is requested by CTI, CTI agrees to pay NPM’s actual cost – which shall be agreed upon in writing in advance between the parties ** to execute the activities identified in the transfer plan. The transfer plan will be agreed to by both parties in writing in advance. If the transfer of the manufacture of Bulk Product requirements from NPM and its subcontractors to a CTI designated facility is due to the uncured breach of this Agreement by NPM, any notice of termination delivered by CTI may contain CTI’s election to commence transfer of manufacturing pursuant to this Section 7.7, and NPM shall transfer such information within thirty (30) days of such request. If CTI’s notice of termination includes such an election, the effective date of termination shall not be until the completion of activities under this Section 7.7 or such earlier date as may be specified in CTI’s notice of termination.

7.8 In the event that CTI determines that NPM is unable to manufacture Product that meets the Specifications and warranties, or to meet Binding Purchase Orders per Section 2.17, or annual minimum requirements per Section 2.1 using commercially reasonable efforts, NPM shall promptly provide CTI with technology transfer services at NPM’s expense in the form of documentation and technical expertise for a period not to exceed ** sufficient to enable a alternate manufacturer to produce Product to Specification.

ARTICLE 8

TRADEMARKS AND TRADE NAMES

8.1 CTI and NPM hereby acknowledge that neither Party now has and shall not hereunder acquire any interest in any of the other Party’s trademarks, trade names, service marks or logos appearing on the labels or packaging materials containing the Product. No Party shall, without the prior written consent of the affected Party, use in advertising, publicity or otherwise, the name, trademark, logo, symbol or other image of the other Party.

8.2 Neither Party will issue or disseminate any press release or statement, nor initiate any communication of information regarding the existence of the terms of this Agreement, written or oral, to the communications media or a third party without the prior written consent of the other Party.

8.3 The obligations of this Article 8 shall remain in effect and survive the expiration or termination of this Agreement.

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ARTICLE 9

ASSIGNMENT AND AMENDMENT

9.1 This Agreement may not be assigned by either Party without the prior written consent of the other, such consent will not be unreasonably withheld, except that CTI may assign this Agreement to any corporation with which it may merge or consolidate, or to which it may transfer all or substantially all of its assets to which this Agreement relates without obtaining the consent of NPM, provided the assignee agrees to be bound, in written notice sent to NPM, by the terms and conditions of this Agreement. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and assigns. Notwithstanding the foregoing, in the event CTI’s assignee does not agree to be bound by the terms of the Agreement, such assignee may terminate this Agreement upon three hundred sixty (360) days prior written notice.

9.2 Except as otherwise provided herein, this Agreement may not be amended, supplemented or otherwise modified except by an instrument in writing signed by both Parties.

9.3 NPM shall obtain CTI’s prior written approval to use a subcontractor and/or affiliate of NPM to perform any of the services under this Agreement, such approval not to be unreasonably withheld by CTI. Any and all such subcontractors and/or affiliates (other than NPM) shall be bound to contracts with NPM on substantially similar terms as this Agreement. Furthermore, NPM shall be legally responsible for the acts of any such subcontractors and affiliates, provided CTI may look to NPM for legal recourse and remedy in addition to such subcontractors and/or affiliates.

ARTICLE 10

NOTICES

Any notice provided for under this Agreement shall be in writing and in English, shall be deemed to have been sufficiently provided and effectively made as of the delivery date if hand-delivered, or as of the date received if sent by courier service or mailed by registered or certified mail, postage prepaid, and addressed to the receiving Party at its respective address as follows:

If to CTI:	Cell Therapeutics, Inc.
	501 Elliott Avenue West, Suite 400
	Seattle, Washington 98119
	Attn: Legal Affairs
	Facsimile: **

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

With a copy to:	Cell Therapeutics, Inc.
	501 Elliott Avenue, West Suite 400
	Seattle, Washington 98119
	Attn: **
	Phone: **
	Facsimile: **
If to NPM:	NerPharMa, S.r.l.
	Viale Pasteur, 10
	20014 Nerviano (MI)
	Italy
	Attn: **
	Phone: **
	Fax: **

ARTICLE 11

INDEPENDENT CONTRACTOR

The relationship of the Parties under this Agreement is that of independent contractors and not as agents of each other or joint venturers, and neither Party shall have the power to bind the other in any way with respect to any obligation to any third party unless a specific power of attorney is provided for such purpose. Each Party shall be solely responsible for its own employees and operations.

ARTICLE 12

FORCE MAJEURE

Neither Party shall be liable to the other for failure to perform its obligations under this Agreement where such failure is caused by strikes, fires, embargoes, any governmental act or regulation, acts of God, acts of war, insurrection, riot, strike, or civil disturbance, or any other cause not under the reasonable control of the defaulting Party. If any event of force majeure should occur, the affected Party shall promptly give notice thereof to the other Party, and the affected Party shall use its commercially reasonable efforts to cure or correct any such event of force majeure. Notwithstanding the foregoing, CTI may terminate this Agreement in the event such event of force majeure exceeds sixty (60) days.

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ARTICLE 13

MISCELLANEOUS

13.1 Should one of the provisions of this Agreement become or prove to be null and void, the validity of this Agreement as a whole is not affected. Both Parties will, however, endeavor to replace the void provision by a valid one that in its economic effect is most consistent with the void provision. Both Parties must agree to any such replacement provision in writing.

13.2 This Agreement contains the entire agreement of the parties and supersedes and cancels all other agreements, discussions, representations or understandings between the parties with respect to the subject matter hereof. Notwithstanding the foregoing, the Service Agreement dated October 24, 2007 (the “2007 Agreement”) will continue in place except to the extent that the terms of the 2007 Agreement conflict with this Agreement, in which case the terms of this Agreement shall control. No amendments hereto, or waivers or releases of obligations hereunder, shall be effective unless agreed to in writing by the parties hereto. This Agreement may be signed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. The Parties hereby agree that this Agreement shall govern any commercial manufacture and supply of the Product.

13.3 Each Party hereto agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

13.4 The waiver by either Party of a breach of any provision contained herein shall be in writing and shall in no way be construed as a waiver of any succeeding breach of such provision or the waiver of the provision itself.

13.5 The controlling language of this Agreement and all related documents, correspondence and notices is English. This Agreement is governed by and construed in accordance with, and this Agreement and the obligations of the parties will be determined in accordance with, the internal substantive laws of London, England without regard to any conflicts of laws principles to the contrary. This Agreement shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods, the application of which is expressly disclaimed. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled exclusively by arbitration administered by the international division of the American Arbitration Association, the International Centre for Dispute Resolution, in accordance with its International Arbitration Rules. Judgment on the award rendered by the arbitrators shall be binding and may be entered in any court having jurisdiction thereof. Such arbitration shall be filed and conducted in London, England. The arbitration shall be conducted in English by a Board of Arbitration consisting of three members who shall be appointed by the parties to the dispute jointly, one

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

arbitrator being appointed by each party to the dispute, and an additional arbitrator appointed by the mutual consent of all such arbitrators. Each party shall bear its own attorneys’ fees and associated costs and expenses. Any award rendered by the arbitrators shall be in writing, shall be the final binding disposition on the merits, and shall not be appealable to any court in any jurisdiction. Judgment on an award rendered may be entered in any court of competent jurisdiction, or application may be made to any such court for a judicial acceptance of the award and an order of enforcement, as appropriate. Any award may be recognized and enforced in accordance with the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Parties waive any right they may enjoy under the law of any nation to apply to the courts of such nation for relief from the provisions of this Section 13.5 or from any decision of the arbitrators. In the event a court of competent jurisdiction determines that this Agreement is invalid or unenforceable for any reason, this provision shall not be affected thereby and shall be given full effect without regard to the invalidity or unenforceability of the remainder of this Agreement. Notwithstanding anything herein seemingly to the contrary, any party may seek injunctive relief from a court of competent jurisdiction to prevent or limit damage to that Party’s intellectual property.

[SIGNATURE PAGE FOLLOWS]

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** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

IN WITNESS WHEREOF, the duly authorized representatives of the Parties hereto have caused this Agreement to be executed in duplicate originals.

CELL THERAPEUTICS, INC.		NerPharMa S.r.l.
By:	/s/ JAMES BIANCO	By:	/s/ CORRADO CASTELLUCCI
Name:	James Bianco	Name:	Corrado Castellucci
Title:	Chief Executive Officer	Title:	Chief Executive Officer
Date:	July 13, 2010	Date:	July 13, 2010

Page 18 of 26

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ATTACHMENT “A”

DEFINITION OF PRODUCT

****

Table 3.2.P.1–1. Composition of BBR 2778 Drug Product

**

Container/Closure System of BBR 2778 Drug Product

**

Table 3.2.P.1-2. Container Closure System Components

**

Page 19 of 26

ATTACHMENT “B”

PRICING SCHEDULE

This Pricing Schedule has been prepared pursuant to the Agreement, the terms and conditions thereof shall govern this Pricing Schedule.

This Pricing Schedule covers production of Product (as defined in the Agreement) according to the current Process, which was validated in the previous production campaign dated December 2008.

Deliverables:

**

Pricing

**

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ATTACHMENT “C”

BBR 2778 DP SPECIFICATIONS**

****

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ATTACHMENT “D”

SHIPPING INSTRUCTIONS

NerPharMa (NPM) S.r.l. shall ship Product per the following requirements.

1. Provide a Commercial Invoice containing the following:

**

2. Provide a copy of the Material Safety Data Sheet with each shipment

3. Provide all shipments with **

4. Provide two (2) **

5. Provide USDA Product Declaration Letter

6. Provide shipment tracking numbers for each package shipped

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ATTACHMENT “E”

QUALITY AGREEMENT

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ATTACHMENT “F”

RECORD KEEPING AND ACCOUNTING

NPM shall provide CTI with a data feed **. The data required is detailed in Section 1.5 below. This count shall be done **.

1.1 **.

1.2 CTI requires the following minimum data information listed below in electronic format sent to **. NPM and CTI may add additional data fields or modify the layout of the data fields upon written agreement between the parties.

Commercial data information for producing Drug Product:

**

1.3 **

1.4 If required by CTI, **.

1.5 **.

1.6 All invoices shall be sent electronically to **.

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

ATTACHMENT “G”

INSURANCE REQUIREMENTS

NPM Insurance Requirements:

During the Term of this Agreement, and through delivery of any Binding Purchase PO’s, NPM shall obtain and maintain the following insurance with limits not less than those specified below. **

1.1 Products and Completed Operations Liability Insurance

**

1.2 Workers Compensation and Employers Liability Insurance

**

1.3 Commercial General Liability Insurance

**

1.4 Evidence of Insurance

NPM shall supply to CTI copies of certificates of insurance which fully comply with all terms and conditions previously stated in the above referenced sections. NPM will provide annual certificates of insurance **.

In the event that any of the required policies of insurance are written on a claims made basis, than such policies shall be maintained during the entire Term of this Agreement.

CTI Insurance Requirements

During the Term of this Agreement, CTI shall obtain and maintain the following insurance with limits not less than those specified below

1.5 Product Liability Insurance

**

1.6 Workers Compensation and Employers Liability Insurance

**

1.7 Commercial General Liability Insurance

**

1.8 Property Insurance

**

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

1.9 Evidence of Insurance

CTI shall supply to NPM copies of certificates of insurance which fully comply with all terms and conditions previously stated in the above referenced sections. **

In the event that any of the required policies of insurance are written on a claims made basis, than such policies shall be maintained during the entire Term of this Agreement.

** Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

**** Indicates that the amount of information omitted was a page or more in length, and such information was filed separately with the Securities and Exchange Commission. Confidential treatment has been request with respect to the omitted portions.

EX-15

Exhibit No. 15

August 6, 2010

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Commissioners:

We are aware that our report dated August 6, 2010 on our review of interim financial information of Cell Therapeutics, Inc. for the six month period ended June 30, 2010 included in the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2010 is incorporated by reference in the Registration Statements of Cell Therapeutics, Inc. on Forms S-3 (File Nos. 333-130411, 333-131533, 333-130004, 333-36038, 333-41300, 333-67906, 333-36603, 333-38431, 333-108926, 333-112681, 333-138170, 333-134126, 333-14352, 333-149980, 333-149981, 333-149982, 333-152170, 333-152171, 333-152172, 333-160969, 333-158272, 333-157376, and 333-153358) and on Form S-8 (File No. 333-65200, 333-58957, 333-35919, 333-97015, 333-106568, 333-106571, 333-112791, 333-118016, 333-146624, 333-152168, 333-158260 and 333-162955).

Yours very truly,

/s/ Stonefield Josephson, Inc.

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Bianco, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cell Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 6, 2010	By:	/s/ James A. Bianco, M.D.
		James A. Bianco, M.D.
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Louis A. Bianco, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cell Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 6, 2010	By:	/s/ Louis A. Bianco
		Louis A. Bianco
		Executive Vice President, Finance and Administration

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Bianco, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of Cell Therapeutics, Inc., that, to my knowledge, the Quarterly Report of Cell Therapeutics, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Cell Therapeutics, Inc.

A signed original of this written statement required by Section 906 has been provided to Cell Therapeutics, Inc. and will be retained by Cell Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: August 6, 2010	By:	/s/ James A. Bianco, M.D
		James A. Bianco, M.D.
		Chief Executive Officer

I, Louis A. Bianco, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as an officer of Cell Therapeutics, Inc., that, to my knowledge, the Quarterly Report of Cell Therapeutics, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Cell Therapeutics, Inc.

A signed original of this written statement required by Section 906 has been provided to Cell Therapeutics, Inc. and will be retained by Cell Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: August 6, 2010	By:	/s/ Louis A. Bianco
		Louis A. Bianco
		Executive Vice President, Finance and Administration