8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 1, 2012 (July 30, 2012)

CELL THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Washington	001-12465	91-1533912
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

3101 Western Avenue West, Suite 600

Seattle, Washington 98121

(Address of principal executive offices)

Registrant’s telephone number, including area code: (206) 282-7100

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On July 30, 2012, Cell Therapeutics, Inc. (the “Company”) issued 15,000 shares of Series 15 Convertible Preferred Stock (the “Series 15-2 Preferred Stock”) convertible into 25,212,203 shares of common stock with a conversion price of $0.59495 and warrants to purchase up to an aggregate of 16,808,135 shares of common stock with an exercise price per share of $0.61344 (the “Second Closing”) for gross proceeds of $15 million. The shares were issued pursuant to the terms of a Securities Purchase Agreement dated May 28, 2012 (the “Purchase Agreement”) between the Company and an institutional accredited investor (the “Initial Purchaser”). A copy of the form of the Purchase Agreement was attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on May 31, 2012, and is incorporated herein by reference. As of July 30, 2012, all 15,000 shares of the Series 15-2 Preferred Stock have been converted and the Initial Purchaser has received 25,212,203 shares of common stock issuable upon conversion. The conversion price of the Series 15-2 Preferred Stock was calculated using the closing bid price of the Company’s common stock on July 27, 2012, plus a premium of $0.08375 per share. As previously announced, on May 29, 2012, the Company completed the first closing of $20 million of the Company’s Series 15-1 Convertible Preferred Stock.

The Company plans to use the net proceeds from the Second Closing to prepare for the commercial launch of Pixuvri™ in the European Union and for general corporate purposes, which may include, among other things, funding research and development, preclinical and clinical trials, the preparation and filing of new drug applications, the acquisition of complementary businesses, technologies or products and general working capital.

The Company is subject to restrictions on the sale of securities through 60 days after the date of the Second Closing, subject to certain exceptions. If the Initial Purchaser is unable to purchase the remaining $5 million of Series 15 Convertible Preferred Stock pursuant to the Purchase Agreement within 30 days from the Second Closing, the Company will not be subject to any restriction on the issuance of additional securities upon the expiration of such 30-day period. Because of limitations on further issuance under NASDAQ rules without shareholder approval and because the Company does not expect to receive shareholder approval prior to the expiration of the 30-day period, the Company does not expect the Initial Purchaser to be able to purchase additional shares of the Series 15 Convertible Preferred Stock under the terms of the Purchase Agreement.

All of the warrants issued in the Second Closing (the “July 2012 Warrants”) are exercisable beginning on or after the date of issuance and expire five years after the date of issuance. If the stock price is less than the exercise price, the July 2012 Warrants may also be exchanged for shares based on a specified Black-Scholes value formula subject to certain limitations. The Company may instead elect to pay all or some of such value in cash. If the Company elects not to pay in cash, is unable to issue sufficient shares without shareholder approval and has not obtained shareholder approval within 90 days after an exchange notice is received, the Company will issue a note for the unpaid portion of the value payable one year thereafter.

After completion of the Second Closing, if the Company’s common stock trades at a price greater than 20% above the exercise price of the July 2012 Warrants (as adjusted for stock splits, stock combinations and the like occurring from and after the issuance date of the July 2012 Warrants) for 20 consecutive trading days and with an average daily trading volume (on all markets on which the common stock is listed) during such 20 consecutive trading days of at least $2,000,000, then, subject to certain exceptions, the Company has the right to require the holders of the July 2012 Warrants to exercise all, but not less than all, of the July 2012 Warrants for cash in accordance with the terms of the July 2012 Warrants.

Pursuant to a letter agreement (the “Engagement Letter”) with Halcyon Cabot Partners, Ltd., as placement agent (the “Placement Agent”), the Company paid the Placement Agent a placement agent fee of 5% of the gross proceeds received in the Second Closing. A copy of the Engagement Letter was attached as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 31, 2012, and is incorporated herein by reference.

A copy of the form of the Series 15-2 Preferred Stock Certificate was attached as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 31, 2012, and is incorporated herein by reference. A copy of the form of the July 2012 Warrants is attached hereto as Exhibit 4.1 and incorporated herein by reference.

All shares of Series 15-2 Preferred Stock (and the shares of common stock issuable upon conversion of the Series 15-2 Preferred Stock) and the July 2012 Warrants (and the shares of common stock issuable upon exercise or exchange of the July 2012 Warrants, as the case may be) were offered and sold by the Company under its registration statements on Form S-3 (File Nos. 333-161442 and 333-177506), as supplemented by the prospectus supplement dated May 29, 2012 and filed with the Securities and Exchange Commission on May 30, 2012.

The above descriptions of the Engagement Letter, the Purchase Agreement and the Series 15-2 Preferred Stock, are qualified in their entirety by reference to Exhibits 1.1, 10.1, and 4.2 attached to the Company’s Current Report on Form 8-K filed on May 31, 2012, respectively. The above description of the July 2012 Warrants is qualified in its entirety by reference to Exhibit 4.1 attached hereto.

A copy of the opinion of Karr Tuttle Campbell related to the legality of the Series 15-2 Preferred Stock (and the shares of common stock issuable upon conversion of the Series 15-2 Preferred Stock) and July 2012 Warrants (and the shares of common stock issuable upon exercise or exchange of the July 2012 Warrants, as the case may be), is attached hereto as Exhibit 5.1.

Item 3.03 Material Modification to Rights of Security Holders.

On July 30, 2012, the Company filed Articles of Amendment (the “Articles of Amendment”) to its Amended and Restated Articles of Incorporation (the “Amended Articles”) with the Secretary of State of the State of Washington, establishing the Series 15-2 Preferred Stock. Each share of Series 15-2 Preferred Stock is entitled to a liquidation preference equal to the initial stated value of $1,000 per share of Series 15-2 Preferred Stock plus any accrued and unpaid dividends before any distribution of assets may be made to holders of capital stock ranking junior to the Series 15-2 Preferred Stock. The Series 15-2 Preferred Stock is not entitled to dividends except to share in any dividends actually paid on the common stock or any pari passu or junior securities. The Series 15-2 Preferred Stock has no voting rights except as otherwise expressly provided in the Amended Articles or as otherwise required by law. However, so long as at least 20% of the aggregate originally issued shares of Series 15-2 Preferred Stock are outstanding, the Company cannot amend its Amended Articles, Second Amended and Restated Bylaws or other charter documents so as to materially, specifically and adversely affect the rights of the Series 15-2 Preferred Stock, repay, repurchase or offer to repay or repurchase or otherwise acquire any shares of common stock or junior securities, except in limited circumstances, or authorize or create any class of senior preferred stock, in each case without the affirmative written consent of holders of a majority of the outstanding shares of Series 15-2 Preferred Stock.

As of July 30, 2012, all 15,000 shares of the Series 15-2 Preferred Stock were converted and the Initial Purchaser received 25,212,203 shares of common stock issuable upon conversion.

A copy of the Articles of Amendment is attached hereto as Exhibit 3.1 and incorporated herein by reference. The above description of the Articles of Amendment is qualified in its entirety by reference to Exhibit 3.1 attached hereto.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Changes in Fiscal Year.

On July 30, 2012, the Company filed the Articles of Amendment, a copy of which is attached hereto as Exhibit 3.1 and incorporated herein by reference. The Articles of Amendment, which were effective as of July 30, 2012, establish and designate the Series 15-2 Preferred Stock and the rights, preferences and privileges thereof.

The description of the Articles of Amendment contained in Item 3.03 is incorporated herein by reference.

Item 7.01 Regulation FD Disclosure.

A copy of the Company’s press release, dated July 31, 2012, entitled “Cell Therapeutics Announces Institutional Investor Purchased Additional $15 Million of Convertible Preferred Stock and Warrants to Purchase Common Stock” is furnished and not filed pursuant to Item 7.01 as Exhibit 99.1 hereto. Such information shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.

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Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description	Location
1.1	Letter Agreement, dated May 28, 2012, by and between Cell Therapeutics, Inc. and Halcyon Cabot Partners, Ltd.	Incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed on May 31, 2012.
3.1	Articles of Amendment to Amended and Restated Articles of Incorporation of Cell Therapeutics, Inc. (Series 15-2 Preferred Stock).	Filed herewith.
4.1	Form of Warrant to Purchase Common Stock.	Filed herewith.
4.2	Form of Series 15-2 Preferred Stock Certificate.	Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on May 31, 2012.
5.1	Opinion of Karr Tuttle Campbell.	Filed herewith.
10.1	Form of Securities Purchase Agreement.	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on May 31, 2012.
99.1	Press Release, dated July 31, 2012, entitled “Cell Therapeutics Announces Institutional Investor Purchased Additional $15 Million of Convertible Preferred Stock and Warrants to Purchase Common Stock.”	Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CELL THERAPEUTICS, INC.
Date: August 1, 2012	By:	/s/ James A. Bianco
		James A. Bianco, M.D.
		Chief Executive Officer

EXHIBIT INDEX

Exhibit Number	Description	Location
1.1	Letter Agreement, dated May 28, 2012, by and between Cell Therapeutics, Inc. and Halcyon Cabot Partners, Ltd.	Incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed on May 31, 2012.
3.1	Articles of Amendment to Amended and Restated Articles of Incorporation of Cell Therapeutics, Inc. (Series 15-2 Preferred Stock).	Filed herewith.
4.1	Form of Warrant to Purchase Common Stock.	Filed herewith.
4.2	Form of Series 15-2 Preferred Stock Certificate.	Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on May 31, 2012.
5.1	Opinion of Karr Tuttle Campbell.	Filed herewith.
10.1	Form of Securities Purchase Agreement.	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on May 31, 2012.
99.1	Press Release, dated July 31, 2012, entitled “Cell Therapeutics Announces Institutional Investor Purchased Additional $15 Million of Convertible Preferred Stock and Warrants to Purchase Common Stock.”	Filed herewith.

EX-3.1

Exhibit 3.1

ARTICLES OF AMENDMENT TO

AMENDED AND RESTATED ARTICLES OF

CELL THERAPEUTICS, INC.

DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES 15-2 PREFERRED STOCK

Pursuant to the Washington Business Corporation Act, Chapter 23B.10, the undersigned officer of Cell Therapeutics, Inc., a Washington corporation (the “Corporation”), does hereby submit for filing these Articles of Amendment:

FIRST: The name of the Corporation is Cell Therapeutics, Inc.

SECOND: This amendment to the Corporation’s Amended and Restated Articles of Incorporation, as amended to date (the “Restated Articles”), was adopted by the Board of Directors of the Corporation (the “Board”) on May 28, 2012. Shareholder action was not required on this amendment pursuant to Article II.2 of the Restated Articles.

THIRD: A new Section 2(w) of Article II is added to the Restated Articles to add the designations, rights and preferences of a new series of preferred stock as follows, such Section to be effective as of July 30, 2012:

“(w) Series 15-2 Preferred Stock

TERMS OF PREFERRED STOCK

Section 1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

“Affiliate” means any person or entity controlling, controlled by or under common control with a Holder.

“Alternate Consideration” has the meaning set forth in Section 7(d).

“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.

“Change of Control Transaction” means the occurrence after the date hereof 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 Corporation, by contract or otherwise) of in excess of 33% of the voting securities of the Corporation (other than by means of conversion of shares of Series 15-2 Preferred Stock), or (ii) the Corporation merges into or consolidates with any other person, or any person merges into or consolidates with the Corporation and, after giving effect to such transaction, the shareholders of the Corporation immediately before such transaction own less than 66% of the aggregate voting power of the Corporation or the successor entity of such transaction, or (iii) the Corporation 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

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(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 Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) herein.

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

“Common Stock Equivalents” means any securities which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any 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; provided, however, that Common Stock Equivalents shall not include any debt securities of the Corporation.

“Conversion Amount” means the sum of the Stated Value at issue.

“Conversion Date” has the meaning set forth in Section 6(a).

“Conversion Price” has the meaning set forth in Section 6(c).

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series 15-2 Preferred Stock in accordance with the terms hereof.

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

“Fundamental Transaction” means, at any time while the Series 15-2 Preferred Stock is outstanding, (i) the Corporation effects any merger or consolidation of the Corporation with or into another person in which the Corporation is not the surviving person, (ii) the Corporation 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 Corporation or another person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange a material portion of the Corporation’s shares for other securities, cash or property, or (iv) the Corporation 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; provided, however, that for the purposes of clause (ii) above, a “Fundamental Transaction” shall not include the Corporation entering into a license or other agreement that licenses any intellectual property to an unaffiliated and unrelated person so long as the Corporation and its subsidiaries continue to have bona fide, substantial and continuing business operations and activities after such license or other agreement is entered into; provided, further, however, that a “Fundamental Transaction” shall not include a reverse stock split with respect to the Common Stock.

“Holder” means a holder of shares of Series 15-2 Preferred Stock.

“Junior Securities” means (i) the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior to or pari passu with the Series 15-2 Preferred Stock as to dividend rights or liquidation preference and (ii) the Series ZZ Junior Participating Cumulative Preferred Stock of the Corporation.

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“Liquidation” has the meaning set forth in Section 5.

“Notice of Conversion” has the meaning set forth in Section 6(a).

“Non-Senior Securities” means (i) the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior to the Series 15-2 Preferred Stock as to dividend rights or liquidation preference and (ii) the Series ZZ Junior Participating Cumulative Preferred Stock of the Corporation.

“Original Issue Date” means the date of the first issuance of any shares of Series 15-2 Preferred Stock regardless of the number of transfers of any particular shares of Series 15-2 Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series 15-2 Preferred Stock.

“Series 15-2 Preferred Stock” has the meaning set forth in Section 2.

“Stated Value” has the meaning set forth in Section 2, as the same may be increased pursuant to Section 3(a).

“Trading Day” means a day on which the New York Stock Exchange is open for business.

“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).

“Transfer” has the meaning set forth in Section 10.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or quoted on a national securities exchange, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the national securities exchange on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (ii) if the Common Stock is then listed or traded 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; (iii) if the Common Stock is not then quoted for trading on a national securities exchange or 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 (iv) 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 a majority in interest of the Holders and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.

Section 2. Designation, Amount, Par Value and Rank. The series of preferred stock shall be designated as the Corporation’s Series 15-2 Preferred Stock (the “Series 15-2 Preferred Stock”) and the number of shares so designated shall be 15,000. Each share of Series 15-2 Preferred Stock shall have no par value per share and a stated value equal to $1,000, subject to increase as set forth in Section 3(a) below (the “Stated Value”).

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Section 3. Dividends.

(a) Dividends. Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series 15-2 Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock or other Non-Senior Securities when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock or other Non-Senior Securities. Other than as set forth in the previous sentence, no other dividends shall be paid on shares of Series 15-2 Preferred Stock; and the Corporation shall pay no dividends (other than dividends in the form of Common Stock) on shares of the Common Stock or other Non-Senior Securities unless it simultaneously complies with the previous sentence. All declared but unpaid dividends on shares of Series 15-2 Preferred Stock shall increase the Stated Value of such shares, but when such dividends are actually paid any such increase in the Stated Value shall be rescinded.

(b) So long as any shares of Series 15-2 Preferred Stock remain outstanding, neither the Corporation nor any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any material amount of Non-Senior Securities except as expressly permitted by Section 9(b).

Section 4. Voting Rights. Except as otherwise expressly provided herein or as otherwise required by law, Holders of shares of Series 15-2 Preferred Stock shall have no voting rights.

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value for each outstanding share of Series 15-2 Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders and the holders of all securities which are pari passu with the Series 15-2 Preferred Stock as to liquidation in accordance with the respective amounts that would be payable on all such securities if all amounts payable thereon were paid in full. A Fundamental Transaction or Change of Control Transaction shall not be deemed a Liquidation unless the Corporation expressly declares that such Fundamental Transaction or Change of Control Transaction shall be treated as if it were a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 25 days before the payment date stated therein, to each Holder.

Section 6. Conversion and Exchange Rights.

(a) Conversions at Option of Holder. Each share of Series 15-2 Preferred Stock shall be convertible at any time and from time to time from and after the Original Issue Date, at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d)) determined by dividing the Stated Value of such share of Series 15-2 Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”), which may be delivered before the date of conversion. Each Notice of Conversion shall specify the number of shares of Series 15-2 Preferred Stock to be converted, the number of shares of Series 15-2 Preferred Stock owned before the conversion at issue, the number of shares of Series 15-2 Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date must be on or after the Original Issue Date and may not be before the date the applicable Holder delivers such Notice of Conversion to the Corporation in accordance with Section 11(a) (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder (or the first date thereafter that

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conversion is permitted pursuant to this Section 6(a)). The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Series 15-2 Preferred Stock, a Holder shall be required to (and by delivering a Notice of Conversion shall thereby be deemed to agree to) forthwith surrender the certificate(s) representing such shares of Series 15-2 Preferred Stock to the Corporation. Notwithstanding anything to the contrary set forth herein, upon conversion of shares of Series 15-2 Preferred Stock in accordance with the terms hereof, no Holder thereof shall be required to physically surrender the certificate representing such Holder’s shares of Series 15-2 Preferred Stock to the Corporation unless (A) the full or remaining number of shares of Series 15-2 Preferred Stock represented by such certificate are being converted or (B) such Holder has provided the Corporation with prior written notice (which notice may be included in a Notice of Conversion) requesting reissuance of a certificate representing the remaining shares of Series 15-2 Preferred Stock upon physical surrender of any certificate representing the shares of Series 15-2 Preferred Stock being converted. Each Holder and the Corporation shall maintain records showing the number of shares of Series 15-2 Preferred Stock so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Corporation, so as not to require physical surrender of the certificate representing the shares of Series 15-2 Preferred Stock upon each such conversion. In the event of any dispute or discrepancy, such records of the Corporation establishing the number of shares of Series 15-2 Preferred Stock to which the record holder is entitled shall be controlling and determinative in the absence of manifest error.

(b) Automatic Conversion. Each outstanding share of Series 15-2 Preferred Stock shall automatically convert into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d)) determined by dividing the Stated Value of such share of Series 15-2 Preferred Stock by the Conversion Price (A) on the one month anniversary of the Original Issue Date, (B) on the date on which 5,000 or less shares of Series 15-2 Preferred Stock remain outstanding, or (C) immediately upon the adoption by the Board of a resolution that it intends to adopt an amendment to the Restated Articles without shareholder approval to effect a reverse stock split of the outstanding Common Stock and the number of authorized shares of Common Stock in the same proportions in order to achieve compliance with the listing rules of The NASDAQ Capital Market or for other good-faith business reasons. In the case of an automatic conversion pursuant to this Section 6(b), the “Conversion Date” shall be the first to occur of the dates set forth in clauses (A) through (C) above, and a Holder shall be required to forthwith surrender the certificate(s) representing such shares of Series 15-2 Preferred Stock to the Corporation within two Trading Days of the date established for such conversion and set forth in a written notice from the Corporation; provided, however, that the failure by a Holder to surrender the certificate(s) representing such converted shares of Series 15-2 Preferred Stock shall not prevent the Corporation from delivering the shares of Common Stock issuable upon automatic conversion thereof and, upon receipt of such consideration by such Holder, such shares of Series 15-2 Preferred Stock shall be converted for all purposes hereunder.

(c) Conversion Price. The conversion price for the Series 15-2 Preferred Stock shall equal $0.59495, subject to adjustment as provided herein (the “Conversion Price”).

(d) Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained herein, the shares of Series 15-2 Preferred Stock held by a Holder shall not be convertible by such Holder, and the Corporation shall not effect any conversion of any shares of Series 15-2 Preferred Stock held by such Holder, to the extent (but only to the extent) that such Holder or any of its affiliates would beneficially own 9.99% or more (the “Maximum Percentage”) of the Common Stock; provided, however, that the Maximum Percentage shall increase to 19.99% in the event of an automatic conversion pursuant to Section 6(b) without any further action on the part of any Holder. Any such increase or decrease will not be effective until the 61^st day after such notice is delivered to the Corporation. To the extent the above limitation applies, the determination of whether the shares of Series 15-2 Preferred Stock held by such

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Holder shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by such Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Corporation for conversion, exercise or exchange (as the case may be). No prior inability of a Holder to convert shares of Series 15-2 Preferred Stock pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility or issuance (as the case may be). For 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 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 hereof) 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. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Corporation 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 a Holder, the Corporation shall within two Business Days confirm orally and in writing to such 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.

(e) Mechanics of Conversion.

(i) Delivery of Certificate upon Conversion. Not later than three Trading Days after each Conversion Date, whether pursuant to Section 6(a) or (b), the Corporation shall deliver, or cause to be delivered, to the converting Holder a certificate or certificates, which shall be free of restrictive legends and issuer-imposed trading restrictions (provided that a registration statement covering resales of the Conversion Shares is then in effect), representing the number of shares of Common Stock being acquired upon the conversion of shares of Series 15-2 Preferred Stock. The Corporation shall use its best efforts to, if the Holder is not an affiliate of the Corporation, deliver any certificate or certificates required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established clearing corporation performing similar functions (provided that a registration statement covering resales of the Conversion Shares is then in effect). If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the seventh Trading Day after the Conversion Date, then (without limiting the Holder’s other rights and remedies hereunder for the Corporation’s failure to comply with its obligations under the preceding portion of this paragraph) the applicable Holder shall be entitled to elect to rescind such Conversion Notice by written notice to the Corporation at any time on or before its receipt of such certificate or certificates, in which event the Corporation shall promptly return to such Holder any original Series 15-2 Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return any Common Stock certificates representing the shares of Series 15-2 Preferred Stock tendered for conversion to the Corporation.

(ii) Obligation Absolute. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of shares of Series 15-2 Preferred Stock in accordance with the terms hereof is absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might

6

otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Series 15-2 Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or anyone associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Series 15-2 Preferred Stock of such Holder shall have been sought and obtained. In the absence of such an injunction, the Corporation shall issue Conversion Shares upon a properly noticed conversion. Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(iii) Reservation of Shares Issuable upon Conversion. The Corporation covenants that it will at all times use reasonable best efforts to reserve and keep available out of its authorized and unissued shares of Common Stock, for the sole purpose of issuance upon conversion of the Series 15-2 Preferred Stock, as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of the Series 15-2 Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of all outstanding shares of Series 15-2 Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

(iv) Fractional Shares. Upon a conversion of the Series 15-2 Preferred Stock hereunder, the Corporation shall not be required to issue fractions of shares of Common Stock, but shall instead, if otherwise permitted, round the total number of Conversion Shares to be issued to each Holder for such conversion up or down to the nearest whole number of shares of Common Stock.

(v) Transfer Taxes. The issuance of certificates for shares of the Common Stock issued upon conversion of shares of Series 15-2 Preferred Stock shall be made without charge to any Holder for any documentary stamp, issuance or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Series 15-2 Preferred Stock so converted and the Corporation shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

Section 7. Certain Adjustments.

(a) Stock Dividends and Stock Splits. If the Corporation, at any time while the Series 15-2 Preferred Stock is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of the Series 15-2 Preferred Stock); (B) subdivides outstanding

7

shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock 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 any other adjustments to the Holders’ conversion rights necessary to reflect such event shall be made. Any adjustment made pursuant to this Section 7(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 reclassification.

(b) Subsequent Rights Offerings. If the Corporation, at any time while the Series 15-2 Preferred Stock is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not proportionately to the Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date referenced below, then the Conversion 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 the 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 delivery to the Corporation 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.

(c) Pro Rata Distributions. If the Corporation, at any time while the Series 15-2 Preferred Stock is outstanding, distributes (other than as a dividend) to all holders of Common Stock (and not proportionately to the Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (other than Common Stock, which shall be subject to Section 7(b)), then in each such case the Conversion Price shall be adjusted by multiplying such Conversion 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 the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets, evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board in good faith. In either case the adjustments shall be described in a statement delivered to the Holders describing 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 the record date mentioned above. For avoidance of doubt, distributions that are dividends shall be subject to Section 3(a) and not subject to this Section 7(c).

(d) Fundamental Transaction. If, at any time while the Series 15-2 Preferred Stock is outstanding, a Fundamental Transaction occurs, then, upon any subsequent conversion of the Series 15-2 Preferred Stock, the Holders shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately before the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately before such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”); and the Holders shall no longer have the right to receive Conversion Shares per se upon such conversion. For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to

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such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of the Series 15-2 Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall adopt articles of incorporation or an amendment to its articles of incorporation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. Unless the Corporation elects to treat such Fundamental Transaction as a Liquidation, the terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 7(d) and ensuring that the Series 15-2 Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

(e) Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.

(f) Notice to the Holders.

(i) Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(ii) Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of 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 Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series 15-2 Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least 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 deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate

9

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 Corporation or any of its subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder is entitled to convert the Stated Value of its Series 15-2 Preferred Stock during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice.

Section 8. [Reserved.]

Section 9. Negative Covenants. As long as at least 20% of the aggregate number of originally issued shares of Series 15-2 Preferred Stock are outstanding (as appropriately adjusted for share splits and similar transactions), the Corporation shall not, without the Corporation obtaining the affirmative written consent of Holders of a majority of the then outstanding shares of the Series 15-2 Preferred Stock:

(a) amend these articles of incorporation, its bylaws or other charter documents so as to materially, specifically and adversely affect any rights of any Holder with respect to Series 15-2 Preferred Stock;

(b) repay, repurchase or offer to repay, repurchase or otherwise acquire any material amount of its Junior Securities (other than securities described in clause (ii) of the definition of “Junior Securities”); provided, however, that this restriction shall not apply to the repurchase of up to 5,750,000 shares of Common Stock in any 12-month period (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 Original Issue Date) from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements approved by a majority of the Board or under which the Corporation has the option to repurchase such shares at cost or at cost upon the occurrence of certain events, such as termination of employment;

(c) authorize or create any class or series of stock ranking senior to the Series 15-2 Preferred Stock as to dividend rights or liquidation preference; or

(d) enter into any agreement or understanding with respect to any of the foregoing.

Notwithstanding the foregoing, this Section 9 shall not prohibit the issuance of additional series of preferred stock that do not rank senior to the Series 15-2 Preferred Stock as to dividend rights or liquidation preference.

Section 10. Transferability. The Series 15-2 Preferred Stock may only be sold, transferred, assigned, pledged or otherwise disposed of (any of the foregoing, a “Transfer”) in accordance with U.S. state and federal securities laws. The Corporation shall keep at its principal office, or at the offices of the transfer agent, a register of the Series 15-2 Preferred Stock. In connection with any such permitted Transfer, upon the surrender of any certificate representing Series 15-2 Preferred Stock at such place, the Corporation, at the request of the record Holder of such certificate, shall execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate; provided that the Corporation shall not be required to pay any tax that may be payable in respect of any such Transfer involved in the issuance and delivery of any such new certificate in a name other than that of Holder and the Corporation shall not be required to issue or deliver such new certificate or certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. Each such new certificate

10

shall be registered in such name and shall represent such number of shares as is requested by the Holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate.

Section 11. Miscellaneous.

(a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile or by email, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 3101 Western Avenue, Suite 600, Seattle, Washington 98121, facsimile number (206) 272-4302, or email jbianco@ctiseattle.com, Attention: James Bianco, or such other street address, facsimile number or email address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 11(a). Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, by email or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, email address or street address of such Holder appearing on the books of the Corporation, or if no such facsimile number, email address or street address appears on the books of the Corporation, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or email to the facsimile number or email address specified in this Section 11(a) before 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile or email to the facsimile number or email address specified in this Section 11(a) between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of dispatch, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

(b) Lost or Mutilated Series 15-2 Preferred Stock Certificate. If a Holder’s Series 15-2 Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series 15-2 Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof reasonably satisfactory to the Corporation.

(c) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this instrument shall be governed by and construed and enforced in accordance with the internal laws of the State of Washington, without regard to the principles of conflict of laws thereof.

(d) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this instrument shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this instrument or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this instrument on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this instrument. Any waiver by the Corporation or a Holder must be in writing.

(e) Severability. If any provision of this Article II.2(v) is invalid, illegal or unenforceable, the balance of this Article II.2(v) shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

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(f) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(g) Headings. The headings contained herein are for convenience only, do not constitute a part of this Article II.2(v) and shall not be deemed to limit or affect any of the provisions hereof.

(h) Status of Converted or Redeemed Series 15-2 Preferred Stock. If any shares of Series 15-2 Preferred Stock are converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series 15-2 Preferred Stock.

(i) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided herein shall be cumulative and in addition to all other remedies available hereunder, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Corporation to comply with the terms hereof. The Corporation covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Corporation (or the performance thereof). The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees that, in the event of any such breach or threatened breach, the Holders shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

[Signature page follows.]

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I certify that I am a duly appointed and incumbent officer of the above named Corporation and that I am authorized to execute these Articles of Amendment on behalf of the Corporation.

EXECUTED, this 30th day of July, 2012.

CELL THERAPEUTICS, INC.,
a Washington corporation
By:	/s/ James A. Bianco, M.D.
	Name: James A. Bianco, M.D.
	Title:    Chief Executive Officer and President

[Signature Page to Articles of Amendment (Series 15-2)]

ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES

OF SERIES 15-2 PREFERRED STOCK)

The undersigned hereby elects to convert the number of shares of Series 15-2 Preferred Stock, no par value per share (the “Preferred Stock”), of Cell Therapeutics, Inc., a Washington corporation (the “Corporation”), indicated below into shares of common stock, no par value per share (the “Common Stock”), of the Corporation, according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be reasonably required by the Corporation. No fee will be charged to the Holders for any conversion of Preferred Stock, except for any such transfer taxes.

Conversion calculations:

Date to Effect Conversion:

Number of shares of Preferred Stock owned before Conversion:

Number of shares of Preferred Stock to be Converted:

Stated Value of shares of Preferred Stock to be Converted:

Number of shares of Common Stock to be Issued:

Applicable Conversion Price:

Number of shares of Preferred Stock subsequent to Conversion:

Address for Delivery:

or

DWAC Instructions:

Broker no:

Account no:

HOLDER:

By:
	Name:
	Title:

EX-4.1

Exhibit 4.1

FORM OF WARRANT

WARRANT TO PURCHASE COMMON STOCK

Warrant No.: WC-10,159

Date of Issuance: July 30, 2012 (“Issuance Date”)

Cell Therapeutics, Inc., a Washington corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, SOCIUS GC II, LTD., the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), 16,808,135 (subject to adjustment as provided herein) fully paid and non-assessable shares of Common Stock (as defined below) (the “Warrant Shares”, which term shall also include, if applicable, shares of Common Stock issuable pursuant to Section 5 hereof). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 17 or, if not defined in this Warrant (including Section 17), such terms shall have the meanings set forth in the Securities Purchase Agreement. This Warrant is issued pursuant to that certain Securities Purchase Agreement, dated as of May 28, 2012, by and among the Company and the investor referred to therein (the “Securities Purchase Agreement”).

1. EXERCISE OF WARRANT.

(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f) and including those in Section 19 and subject to compliance with Section 19), this Warrant may be exercised by the Holder on any day on or after the Issuance Date in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (in respect of such specific exercise, the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in and subject to the terms and conditions of Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1^st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice, in

the form attached hereto as Exhibit C, to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third (3^rd) Trading Day following the date on which the Company has received such Exercise Notice (the “Warrant Share Delivery Date”), provided the Company has received the Aggregate Exercise Price as set forth above, the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and Holder’s (or its designee’s) prime broker has an account with DTC, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the account of Holder’s or its designee’s prime broker with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice and payment of the Aggregate Exercise Price with respect thereto, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise (and receipt of this Warrant) and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 8(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded to the nearest whole number. 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; provided, further, that in such event the Company shall not be required to pay any tax which may be payable in respect of any transfer or involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.61344, subject to adjustment as provided herein.

(c) Compensation for Buy-In on Failure to Timely Deliver Certificates upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant

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Shares in a timely manner (subject to the dispute resolution provisions in this Warrant) pursuant to Section 1(a) of this Warrant, 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 (A) pay in cash to the Holder the amount by which (1) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (2) the amount obtained by multiplying (x) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (y) the price at which the sell order giving rise to such purchase obligation was executed, and (B) 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 (A) 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 the 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.

(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise of this Warrant pursuant to its terms 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 the Holder may, in its sole discretion (and without limiting the Holder’s rights and remedies contained herein or in any of the other Transaction Documents (as defined in the Securities Purchase Agreement)), exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

Net Number =	(A x B) - (A x C)
	B

For purposes of the foregoing formula:

A= the total number of shares with respect to which this Warrant is then being exercised.

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B= as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the last reported Bid Price of the Common Stock as of the time of the Holder’s execution of the applicable Exercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.

C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not in dispute, and the dispute with respect to any remaining shares shall be resolved in accordance with Section 14.

(f) Limitations on Exercises and Exchanges. Notwithstanding anything to the contrary contained in this Warrant, (i) this Warrant shall not be exercisable or exchangeable by the Holder hereof to the extent (but only to the extent) that the Holder or any of its affiliates would beneficially own in excess of 9.9% (the “Maximum Percentage”) of the Company’s then outstanding Common Stock, and (ii) this Warrant shall not be exercisable or exchangeable by the Holder hereof to the extent (but only to the extent) Section 19 hereto applies, except in accordance with Section 19. To the extent either of the above limitations applies, the determination of whether this Warrant shall be exercisable or exchangeable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be exercisable or exchangeable (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation and/or Section 19, 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 or exchange 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 or exchangeability. 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 1934 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 hereof) 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

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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 or exchange of convertible or exercisable or exchangeable securities into Common Stock, including, without limitation, pursuant to this Warrant or securities issued pursuant to the Securities Purchase Agreement.

(g) Insufficient Authorized Shares. The Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock hereunder (without regard to any limitation otherwise contained herein with respect to the number of shares of Common Stock that may be acquirable upon exercise or exchange of this Warrant). If, notwithstanding the foregoing, and not in limitation thereof, at any time while any of the Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise or exchange of the Warrant at least a number of shares of Common Stock equal to the number of shares of Common Stock as shall from time to time be necessary to effect the exercise or exchange of this Warrant in full (the “Required Reserve Amount” and the failure to have the Required Reserve Amount, an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.

(a) Stock Dividends and Splits. Without limiting any provision of Section 4, if the Company, at any time on or after the Effective Date and prior to the Expiration Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such

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event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.

(b) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 2, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).

(c) Other Events. In the event that, after the Issuance Date and prior to the Expiration Date, the Company shall take any action with respect to its Common Stock as a class to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions, then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(c) will increase the aggregate Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2 (or as would have been determined had this Section 2 been strictly applicable), provided further that if the Holder in good faith does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company. For the avoidance of doubt, nothing in this Section 2(c) shall be deemed to guarantee the Holder any specific percentage ownership interest in the Company and nothing in this Section 2(c) shall require an adjustment due to the issuance of additional shares of Common Stock (or securities convertible into additional shares of Common Stock) other than an issuance on a pro rata basis to all holders of Common Stock as a class.

(d) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100^th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock as a class, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, indebtedness, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or

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other similar transaction) for which an adjustment is not made pursuant to Section 2 (a “Distribution”), at any time after the Issuance Date and prior to the Expiration Date, then, in each such case, the Holder shall be entitled to receive upon any exercise or exchange of this Warrant, the assets that the Holder would have received with respect to the Warrant Shares issued upon such exercise or exchange if the Holder had held such Warrant Shares at the time the record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (without regard to the Maximum Percentage or any other limitations on exercise or exchange other than the Company Issuance Limit); provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or the beneficial ownership of any such shares of Common Stock as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a) Purchase Rights. If at any time after the Issuance Date and on or prior to the Expiration Date, the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all record holders of any class of shares of Common Stock for which adjustment is not made pursuant to Section 2 (the “Purchase Rights”), then, in connection with and at the time of the exercise of this Warrant, the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock for which the Warrant is then being exercised (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage or the Company exceeding the Company Issuance Limit, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage or the Company exceeding the Company Issuance Limit).

(b) Fundamental Transactions. If, at any time while this Warrant is outstanding, the Company effects 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 Expiration 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 prior to 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

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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. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor 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 4(b) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to the consummation of the Fundamental Transaction. The provisions of this Section 3(b) shall apply similarly and equally to successive Fundamental Transactions and shall be applied as if this Warrant (and any subsequent or replacement warrants issued pursuant to Section 8 or otherwise) 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 warrants) and subject to the provisions of Section 19).

(c) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and shall be applied as if this Warrant (and any such 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 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)). All rights of the Holder under this Section 4 that apply to any exercise of this Warrant shall apply equally in the event of an exchange rather than an exercise of this Warrant.

5. EXCHANGE RIGHTS. In addition to the rights of the Holder in connection with exercises of this Warrant under Section 1 hereof, this Warrant shall be exchangeable with the Company into shares of Common Stock on the terms and conditions set forth in this Section 5 (each, an “Exchange”).

(a) Exchange Right. Subject to the provisions of Section 1(f) (including compliance with Section 19), at any time or times on or prior to the Expiration Date when the Market Price is less than the Exercise Price hereunder, the Holder shall be entitled to exchange with the Company any unexercised portion of this Warrant for a number of fully paid and nonassessable shares of Common Stock, in accordance with Sections 5(b) and 5(c) and within two (2) Business Days after receipt of the applicable Exchange Notice, with such number of shares being equal to the Black-Scholes Exchange Value of such portion of the Warrant of which the Holder has elected to so exchange; provided, however, that in lieu of such Exchange, the Company may instead elect to pay some or all of such Black-Scholes Exchange Value in cash, which election shall be communicated to the Holder by providing written notice within one (1) Business Day after receipt by the Company of the applicable Exchange Notice from the Holder. Notwithstanding any other provision in this Warrant to the contrary, the Holder shall not be entitled to exchange this Warrant pursuant to this Section 5 on or prior to the Second Closing Date if the Holder would be unable to fund at least Ten Million Dollars ($10,000,000) at the

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Second Closing whether as a result of the Company Issuance Limit, the Maximum Percentage or otherwise.

(b) Exchange Number. The number of shares of Common Stock issuable in exchange for any portion of this Warrant pursuant to Section 5(a) shall be determined by dividing (x) such Exchange Amount (as defined below) by (y) the Exchange Price (as defined below) (the “Exchange Number”).

(i) “Exchange Amount” means the Black-Scholes Exchange Value of such portion of the Warrant being exchanged pursuant to Section 5(a), determined as of the applicable Exchange Date (as defined below).

(ii) “Exchange Price” means the Closing Bid Price on the most recently completed Trading Day prior to the Exchange Date.

(c) Mechanics of Exchange.

(i) Optional Exchange. To exchange any Exchange Amount on any date (an “Exchange Date”), the Holder shall transmit by facsimile (or otherwise deliver), for receipt on such date, a copy of an executed notice of exchange in the form attached hereto as Exhibit B (the “Exchange Notice”). The Holder shall not be required to deliver the original of this Warrant in order to effect an exchange hereunder. Execution and delivery of an Exchange Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exchange Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof.

(ii) Exchange for Shares of Common Stock. The Company shall, on or before the first Trading Day following the date on which the Company has received the Exchange Notice, transmit by facsimile an acknowledgment of confirmation of receipt of such Exchange Notice, in the form attached hereto as Exhibit C, to the Holder and the Transfer Agent and stating the number of shares of Common Stock to be issued in such exchange. In such event, then on or before the third (3^rd) Trading Day following the date on which the Company has received such Exchange Notice, the Company shall (X) provided that the Transfer Agent is participating in The DTC Fast Automated Securities Transfer Program and Holder’s (or its designee’s) prime broker has an account with DTC, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exchange to the account of the Holder’s or its designee’s prime broker with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exchange Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exchange Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exchange Notice), for the number of shares of

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Common Stock to which the Holder is entitled pursuant to such Exchange. Upon delivery of an Exchange Notice, the shares issued in such Exchange shall be deemed to have been issued to the Holder for all corporate purposes as of the date of the Exchange Notice, and the Holder shall be deemed to have become the record holder of the shares of Common Stock for which this Warrant is being so exchanged, irrespective of the date such shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such shares (as the case may be). If this Warrant is submitted in connection with any exchange pursuant to Section 5(a) (it being understood and agreed that this Warrant need not be so submitted in connection with such an Exchange) and the number of shares represented by this Warrant submitted for exchange is greater than the number of shares being acquired upon an exchange, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exchange and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 8(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exchange under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exchanged. No fractional shares of Common Stock are to be issued upon the exchange of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded to the nearest whole number. Issuance of certificates for Warrant Shares issued in such exchange 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; provided, further, that in such event the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

(iii) Company Issuance Limit. In the event the Company does not elect to discharge its obligation to pay the Black-Scholes Exchange Value in cash pursuant to Section 5(a) and the Company Issuance Limit would prohibit the issuance of some or all shares of Common Stock that would be due in the Exchange, the Company may notify the Holder that it proposes to seek shareholder approval for the issuance of the shares of Common Stock that would exceed the Company Issuance Limit (the “Shareholder Approval”). In such event, the Company shall (A) issue all shares of Common Stock to the Holder not in excess of the Company Issuance Limit in accordance with, and in the time periods required by, the provisions of Section 5(c) and (B) use its reasonable best efforts to obtain Shareholder Approval by the sixtieth (60^th) calendar day after the date on which the Company received the Exchange Notice or, if later, the one hundred and tenth day (110^th) after the First Closing Date. If the Company does not obtain such Shareholder Approval by the sixtieth (60th) calendar day after the date on which the Company received the Exchange Notice or, if later, the one hundred tenth (110^th) day after the First Closing Date (the “Shareholder Approval Failure Date”), then the Company shall issue to the Holder an unsecured promissory note for the unpaid (whether in shares or cash) Black-Scholes Exchange Value of such portion of the Warrant that the Holder had elected

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to (but as a result of the foregoing was unable to) exchange. Such promissory note shall have a term of twelve (12) months, carry simple interest at a rate of 2%, be payable in full upon the Company’s first financing event that occurs subsequent to the Shareholder Approval Failure Date (other than a funding event under the Securities Purchase Agreement), and have such other terms and conditions that are mutually acceptable to the parties.

(iv) Disputes. Dispute as to the determination of the Exchange Amount, the Exchange Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof, and shares subject to such dispute, shall be handled in the same manner as for disputes under Section 1(e) hereof.

6. NONCIRCUMVENTION. Except and to the extent as waived or consented to by the Holder in writing, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, 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 the Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise or exchange 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 or exchange of this Warrant, including, without limitation, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise or exchange of this Warrant, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise or exchange of this Warrant (without regard to any limitations on exercise or exchange) 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.

7. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, this Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company before the exercise of this Warrant. In addition, other than in Section 18, nothing in this Warrant shall be construed as imposing any obligations on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or any liabilities as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 7, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

8. REISSUANCE OF WARRANTS.

(a) Transfer of Warrant. Subject to Section 16, if this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith

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issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 8(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 8(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 8(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 8(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.

(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 8(a) or Section 8(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

9. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken by the Company pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) promptly upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) no later than the later of (1) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record and (2) the date the Company makes a public announcement (A) with respect to any action subject to Section 2, Section 3 or Section 4 hereof or (B) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information

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shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) no later than the later of (1) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction and (2) the date the Company makes a public announcement of any Fundamental Transaction.

10. AMENDMENT AND WAIVER. The provisions of this Warrant (other than Section 1(f)) may be modified or amended or the provisions of this Warrant waived with the written consent of the Company and the Holder in the case of modification or amendment or the written consent of the waiving party in the case of a waiver.

11. SEVERABILITY. 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.

12. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each of the Company and the Holder 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, 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder or the Company, as the case may be, from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder or the Holder’s obligations to the Company, as applicable, or to enforce a judgment or other court ruling in favor of the Holder or the Company, as applicable. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

13. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

14. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Black-Scholes Exchange Value, the Exercise Price, the Exchange Amount, the Exchange Price, the

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Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value or the arithmetic calculation of the Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder or the Company (as the case may be) learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price, the Exchange Amount, the Exchange Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value or the number of Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed arithmetic calculation of the Warrant Shares, the disputed determination of the Exercise Price, the Exchange Amount, the Exchange Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Company and reasonably acceptable to the Holder or (b) if acceptable to the Holder, the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall use its commercially reasonable efforts to cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error.

15. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. 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. 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. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity.

16. TRANSFER. This Warrant may not be offered for sale, sold, transferred or assigned by the Holder, except to an Affiliate, without the prior written consent of the Company, not to be unreasonably withheld. Any such purported sale, transfer or assignment without such consent shall be void ab initio.

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17. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:

(a) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 14. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(b) “Black Scholes Exchange Value” means the value of the portion of this Warrant being exchanged at the Exchange Date as set forth in the applicable Exchange Notice as determined, calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Bid Price of the Common Stock as of the Trading Day prior to the Issuance Date, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the Warrant as of such Black Scholes Exchange Value Date, (iii) an expected volatility equal to 135% and (iv) the deemed remaining term of the Warrant shall be five years (regardless of the actual remaining term of the Warrant).

(c) “Bloomberg” means Bloomberg, L.P.

(d) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(e) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-

15

counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 14. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(f) “Common Stock” means (i) the Company’s shares of common stock, no par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

(g) “Company Issuance Limit” means an aggregate number of shares of Common Stock issued or issuable to the Holder (including shares of Common Stock issued or issuable upon conversion of Preferred Shares and exercise or exchange of any other warrant issued to the Holder pursuant to the Securities Purchase Agreement) equal to the lesser of: (i) 19.99% of the shares of Common Stock outstanding on the date immediately preceding the date of the Securities Purchase Agreement, and (ii) after aggregation with the shares issued or issuable in connection with an acquisition, 19.99% of the shares of Common Stock outstanding prior to entering into an agreement to consummate an acquisition.

(h) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

(i) “Eligible Market” means The New York Stock Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.

(j) “Equity Conditions” means: (i) the shares of Common Stock to be received by Holder will be properly issued under all applicable securities laws, all rules and regulations of the Eligible Market, and all such shares shall be freely tradeable by Holder, (ii) the Common Stock (including all shares of Common Stock to be received by Holder) shall be listed or designated for quotation (as applicable) on an Eligible Market, nor shall delisting or suspension by an Eligible Market be pending in or threatened other than a pending or threatened delisting or suspension by an Eligible Market due to the average trading price of the Common Stock falling below a listing standard provided the Company is actively taking the necessary steps to effect a reverse stock split to meet the requirements of such Eligible Market or the average trading price has risen such that the pending or threatened delisting or suspension is no longer applicable, and (iii) no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated.

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(k) “Equity Conditions Failure” means that on any applicable date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).

(l) “Expiration Date” means the earlier of (i) the date that is the fifth (5^th) anniversary of the Issuance Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday and (ii) the date on which this Warrant has been exercised or exchanged in full.

(m) “Fundamental Transaction” means, at any time while this Warrant is outstanding, (a) the Company effects any merger or consolidation of the Company into another person whereby the Company is not the surviving entity, (b) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (c) any purchase offer, tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which all holders of Common Stock as a class are permitted to sell, tender or exchange a material portion of the Company’s shares for other securities, cash or property, including any such offer that is accepted by holders of Voting Stock with respect to more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or a party to, or associated or affiliated with the Person or Persons making or a party to, such purchase, tender or exchange offer, or (d) 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; provided, however, that for the purposes of clause (b) above, a “Fundamental Transaction” shall not include the Company entering into a license or other agreement that licenses any intellectual property to an unaffiliated and unrelated Person so long as the Company and its subsidiaries continue to have bona fide, substantial and continuing business operations and activities after such license or other agreement is entered into; provided, further, however, that a “Fundamental Transaction” shall not include a reverse stock split with respect to the Common Stock.

(n) “Market Price” means, as of any date of determination, the Closing Bid Price as of the Trading Day immediately prior thereto.

(o) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

(p) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

(q) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(r) “Principal Market” means the Nasdaq Capital Market.

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(s) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

(t) “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

(u) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

18. MANDATORY EXERCISE. If, at any time after the Issuance Date and after all purchases and sales of Preferred Shares have been consummated or all rights or obligations to consummate any such purchases and sales have terminated in each case under the Securities Purchase Agreement, the Common Stock trades at a price greater than twenty percent (20%) above the Exercise Price (as adjusted for stock splits, stock combinations and the like occurring from and after the Issuance Date) (the “Trigger Price”) for twenty (20) consecutive Trading Days and the average daily volume (in the aggregate among all Trading Markets on which the Common Stock is traded) during such twenty (20) consecutive Trading Days is equal to or exceeds $2,000,000 (such period being the “Trigger Period”), then (provided no Equity Conditions Failure shall have occurred on one or more days during the Trigger Period, whether or not such Equity Conditions Failure is still occurring on the date the Company sends the Mandatory Exercise Notice) the Company shall have the right to require the Holder to exercise all, but not less than all, of this Warrant for all of the then-remaining Warrant Shares for cash as further set forth below. Subject to the other provisions of this Section 18, the Company may exercise its right to require exercise under this Section 18 (the “Mandatory Exercise Right”) on one occasion (or, if the Holder delivers to the Company a Blocker Notice (as defined below) or if such exercise would otherwise violate Section 19, such number of additional occasions as necessary to permit a Mandatory Exercise with respect to the entire amount of Warrant Shares issuable hereunder). The Company shall exercise its Mandatory Exercise Right (to the extent permitted hereby) by delivering within ten (10) Trading Days following the end of the Trigger Period, a written notice thereof by facsimile and overnight courier to the Holder (the “Mandatory Exercise Notice” and the date the Holder receives such notice by facsimile is referred to as the “Mandatory Exercise Notice Date”). The Mandatory Exercise Notice shall be

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irrevocable. The Mandatory Exercise Notice shall (1) state the Trading Day selected for the Mandatory Exercise in accordance with this Section 18, which Trading Day shall be the thirtieth (30th) Trading Day after the Mandatory Exercise Notice Date (the “Mandatory Exercise Date”), (2) state the number of shares of Common Stock to be issued to the Holder on the Mandatory Exercise Date, and (3) contain a certification from the Chief Executive Officer of the Company that there has been no Equity Conditions Failure during the Trigger Period and no Equity Conditions Failure is in effect on the date the Company sends the Mandatory Exercise Notice. Any portion of this Warrant exercised by the Holder after the Mandatory Exercise Notice Date shall reduce the number of Warrant Shares for which this Warrant is required to be exercised on the Mandatory Exercise Date. If the Company has elected a Mandatory Exercise, the mechanics of exercise set forth in Section 1 shall apply, to the extent applicable, as if the Company had received from the Holder on the Mandatory Exercise Date an Exercise Notice for cash with respect to all of the then-remaining Warrant Shares (or the Permitted Exercise Amount (as defined below) of Warrant Shares, as applicable). Notwithstanding anything contained in this Section 18 to the contrary (but subject to the last sentence of this Section 18), if (I) any shares of Common Stock trade for a price less than the Trigger Price on any day during the period commencing on the Mandatory Exercise Notice Date and ending on the Trading Day immediately preceding the Mandatory Exercise Date; or (II) an Equity Conditions Failure occurs on any day since the day on which the Company sent the Mandatory Exercise Notice and prior to the Mandatory Exercise Date, in each case which has not been waived in writing by the Holder, then the Mandatory Exercise Notice delivered to the Holder shall be null and void ab initio and such Mandatory Exercise shall not occur, provided that, in such event, the Company shall have the right (subject to the terms and conditions of this Section 18) to exercise the Mandatory Exercise Right as if the original exercise had not occurred in the event the original conditions to the Mandatory Exercise Right are subsequently achieved. Notwithstanding anything contained in this Section 18 to the contrary, the Company may not exercise its right under this Section 18 to the extent the Holder delivers a written notice to the Company stating that such exercise would result in a violation of Section 1(f) (a “Blocker Notice”) or if such exercise would violate Section 19, then in respect of such mandatory exercise the Company shall have the right to require the Holder to exercise this Warrant for such number of Warrant Shares that may be exercise hereunder without violating Section 1(f) and the Exchange right under Section 5 shall be void and of no further force or effect (the “Permitted Exercise Amount”) and from time to time thereafter the Holder shall exercise this Warrant (so long as on any proposed date for a subsequent mandatory exercise no Equity Conditions Failure is then effect) in such amounts and from time to time until fully exercised, subject to ongoing compliance with Section 1(f) hereof and subject to Holder’s right to exercise its exchange rights hereunder and the other terms and conditions hereof following the Mandatory Exercise Date.

19. NASDAQ Compliance. The Company shall not be obligated to issue any Warrant Shares or pay any amounts under this Warrant, including without limitation pursuant to Section 5(a), if (i) the issuance of such Warrant Shares could result in the Company being deemed to issue (or to have issued) shares in a transaction that is not at or above market under the rules of the Nasdaq Stock Market, (ii) such issuance, together with all prior issues that are deemed to be aggregated under the rules of the Nasdaq Stock Market, in the aggregate to exceed 20% of the shares of the Company outstanding as of the date prior to the execution and delivery of the Securities Purchase Agreement or (iii) such issuance would otherwise violate the Company’s obligations under the rules or regulations of the Principal Market (the “Exchange Cap”), except that such

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limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules of the Nasdaq Stock Market for issuances of shares of Common Stock in excess of such amount. In such event and at the request of the Holder, the Company agrees to undertake reasonable best efforts to obtain stockholder approval of the issuance of such Warrant Shares within the later of (i) sixty (60) calendar days of the date of any properly delivered Exercise Notice or Exchange Notice that would, if honored, violate the Exchange Cap or the Company Issuance Limit or (ii) one hundred ten (110) calendar days from the First Closing Date. Until such approval is obtained, no Holder shall be issued Warrant Shares to the extent such issuance would result in the Company exceeding the Exchange Cap or the Company Issuance Limit. In no event will the Company be required to take any action pursuant to this Warrant, including issuing any securities hereunder or making any payments hereunder, if it would require stockholder approval under the Principal Market or any other trading market on which the Company is then listed and such approval has not been obtained, including, without limitation, in no event shall the Company be required to issue Warrant Shares pursuant to this Warrant to the extent that the issuance would exceed the Company Issuance Limit, except to the extent stockholder approval would permit such issuance and such stockholder approval has been obtained.

[signature page follows]

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

By:

Name:

Title:

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

The undersigned holder hereby exercises the right to purchase                      of the shares of Common Stock (“Warrant Shares”) of Cell Therapeutics, Inc. (the “Company”), evidenced by Warrant to Purchase Common Stock No.              (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:

a “Cash Exercise” with respect to Warrant Shares; and/or

a “Cashless Exercise” with respect to Warrant Shares.

In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that (i) this Exercise Notice was executed by the Holder at              [a.m.][p.m.] on the date set forth below and (ii) if applicable, the Bid Price as of such time of execution of this Exercise Notice was $            .

2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $             to the Company in accordance with the terms of the Warrant.

3. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below,              Warrant Shares in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to the following address:

Date:	,
Name of Registered Holder
By:

Name:

Title:

Account Number:

    (if electronic book entry transfer)

Transaction Code Number:

    (if electronic book entry transfer)

EXHIBIT B

EXCHANGE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXCHANGE THIS

WARRANT TO PURCHASE COMMON A STOCK

The undersigned holder hereby exercises the right to exchange the Warrant to Purchase Common Stock No.             (the “Warrant”), exercisable into shares of Common Stock (“Warrant Shares”) of Cell Therapeutics, Inc., a Washington corporation (the “Company”), in whole or in part, as described below, for $            . Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

Date of Exchange:

Number of Warrant Shares issuable upon exercise of

the portion of the Warrant being exchanged:

Exchange Amount:

Account for Wire Transfer:

Account for Share issuance (if Company is permitted to elect and so elects):

Date:	,
Name of Registered Holder
By:
	Name:
	Title:

EXHIBIT C

ACKNOWLEDGMENT

The Company hereby acknowledges this [Exercise Notice][Exchange Notice] and hereby directs                      to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated                     , 20    , from the Company and acknowledged and agreed to by             .

By:
	Name:
	Title:

EX-5.1

Exhibit 5.1

Law Offices

KARR TUTTLE CAMPBELL

Founded 1904

A Professional Service Corporation

1201 Third Avenue, Suite 2900, Seattle, Washington 98101

Telephone (206) 223-1313, Facsimile (206) 682-7100

July 30, 2012

Socius CG II, Ltd.

Clarendon House

2 Church Street

Hamilton HM 11, Bermuda

RE: Cell Therapeutics, Inc.

Ladies and Gentlemen:

We have acted as Washington State counsel to Cell Therapeutics, Inc., a Washington corporation (the “Company”), in connection with the proposed offer and sale by the Company of (a) 15,000 shares of the Company’s Series 15-2 Convertible Preferred Stock (the “Preferred Stock”) issued pursuant to Articles of Amendment to the Company’s amended and restated articles of incorporation, filed with the Secretary of State of the state of Washington on July 30, 2012 (the “Certificate of Designation”), (b) the shares of the Company’s common stock issuable upon conversion of the Preferred Stock (the “Underlying Shares”), (c) warrants to purchase up to 16,808,135 shares of the Company’s common stock (the “Warrants”), and (d) the shares of the Company’s common stock issuable upon the exercise of the Warrants (the “Warrant Shares” and, together with the Underlying Shares, the Preferred Stock, and the Warrants, the “Securities”) pursuant to that certain Securities Purchase Agreement, dated May 28, 2012 (the “Agreement”), between the Company and Socius CG II, Ltd., as purchaser thereunder (“Purchaser”). This opinion is furnished to the Purchaser pursuant to Section 7(a)(ii) of the Purchase Agreement. Capitalized terms used without definition in this opinion have the meanings given to them in the Purchase Agreement. The Purchaser is sometimes referred to herein as “you”.

1. Documents Reviewed

We have based our opinion upon our review of the following records, documents and instruments and such additional certificates relating to factual matters as we have deemed necessary or appropriate for our opinion:

a. The Amended and Restated Articles of Incorporation of the Company, and amendments thereto, including the Certificate of Designation (the “Articles of Incorporation”),

July 30, 2012

Page 2

certified to us by an officer of the Company as being complete and in full force and effect as of the date of this opinion;

b. The Second Amended and Restated Bylaws of the Company (the “Bylaws”) certified to us by an officer of the Company as being complete and in full force and effect as of the date of this opinion;

c. Records certified to us by an officer of the Company as constituting all records of proceedings and actions of the Board of Directors of the Company and any committees thereof and the shareholders of the Company relating to the transactions contemplated by the Purchase Agreement;

d. A certificate of an officer of the Company as to certain factual matters (the “Officer’s Certificate”);

e. A Certificate of Existence/Authorization issued by the Secretary of the State of Washington with respect to the Company, dated July 30, 2012;

f. The Registration Statement;

g. The Prospectus;

h. The Prospectus Supplement;

i. The Purchase Agreement; and

j. The Warrants.

2. Opinions

Subject to the assumptions, qualifications, exclusions and other limitations that are identified in this letter and in Schedule A attached to this letter, with respect to each legal issue addressed in this letter, it is our opinion that:

a. The Company is a corporation validly existing under the laws of the State of Washington with corporate power and authority to conduct its business as described in the Prospectus Supplement.

b. (i) The Company has all requisite corporate power and authority to execute, deliver and perform the Purchase Agreement and Warrants (collectively, the “Transaction Documents”), and (ii) the Transaction Documents have been duly executed and delivered on behalf of the Company.

July 30, 2012

Page 3

c. No approval, consent, order or authorization of, filing with, notice to, or registration with, any Washington State court, Washington State governmental body or Washington State regulatory agency, is required to be obtained by the Company, (i) to enter into and perform its obligations under the Transaction Documents, or (ii) for the issuance and sale of the Securities contemplated by the Transaction Documents.

d. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or result in a violation of any of the provisions of the Articles of Incorporation or Bylaws of the Company, or (ii) violate in any material respect, or subject the Company to the imposition of a fine, penalty or other similar sanction for violation of, any Washington State statutory law or regulation applicable to the Company.

e. When issued pursuant to the Registration Statement and according to the terms of the Transaction Documents, and assuming that (i) the Registration Statement, and any amendments thereto, will remain effective during the period when the Securities are offered, sold or issued, including upon the conversion of the Preferred Stock and exercise of the Warrants, and (ii) the Warrants will be issued in the form we have reviewed and will have been signed by a duly authorized signatory, (a) the Preferred Stock, when sold and delivered in accordance with the Purchase Agreement and after receipt of payment therefor, will be duly authorized, validly issued, fully paid and non-assessable, (b) the Conversion Shares, when issued upon valid conversion of the Preferred Stock in accordance with the terms of the Transaction Documents and the Certificate of Designation, will be duly authorized, validly issued, fully paid, and non-assessable, and (c) the Warrant Shares, when issued upon valid exercise of the Warrants in accordance the terms of Transaction Documents and after receipt of payment therefor, will be duly authorized, validly issued, fully paid and non-assessable. None of the shares of the Company’s common stock are subject to preemptive rights or similar rights of the stockholders under the Washington Business Corporation Act or pursuant to the Articles of Incorporation or Bylaws.

3. Certain Qualifications

In preparing this letter, we have relied without any independent verification upon the assumptions, qualifications, exclusions and other limitations contained in this letter and in Schedule A to this letter and upon: (i) factual information represented to be true in the Transaction Documents, including the representations and warranties of the Company contained in the Purchase Agreement; (ii) factual information provided to us in support certificates executed by the Company and its officers; and (iii) factual information we have obtained from such other sources as we have deemed reasonable. We have assumed without investigation that there has been no relevant change or development between the dates as of which the information cited in the preceding sentence was given and the date of this letter and that the information upon

July 30, 2012

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which we have relied is accurate and does not omit disclosures necessary to prevent such information from being misleading.

As used in this letter, the terms “knowledge”, “actual knowledge” and “aware” mean the actual current recollection of those attorneys presently in our law firm who have given substantive attention to the Transaction Documents (“Designated Transaction Lawyers”), and do not include constructive knowledge of matters or information. The phrase does not imply that our law firm has undertaken any independent investigation within the firm, with our clients, or with any other person to determine the existence or absence of any facts or circumstances, and no inference should be drawn to the contrary from: (a) any limited inquiry we nonetheless may have undertaken in connection with the preparation of this letter; or (b) from any past and current representation by our law firm of the Company.

The foregoing opinions relate only to matters of the internal law of the State of Washington without reference to conflict of laws, and we do not purport to express any opinion on the federal laws of the United States or of any other jurisdiction. We advise you that issues addressed by this letter may be governed in whole or in part by other laws, but we express no opinion as to whether any relevant difference exists between the laws upon which our opinions are based and any other laws which may actually govern.

Subject to the limitations set forth in the preceding paragraph, each of our opinions represents our opinion as to how the issue addressed in such opinion would be resolved were it to be considered by the highest court of the jurisdiction upon whose law our opinion on that issue is based. The manner in which any particular issue would be treated in any actual court case would depend in part on facts and circumstances particular to the case, and this letter is not intended to guarantee the outcome of any legal dispute that may arise in the future.

This letter speaks as of the time of its delivery on the date it bears. We do not assume any obligation to provide you with any subsequent opinion or advice by reason of any fact about which our Designated Transaction Lawyers did not have actual knowledge at that time, by reason of any change subsequent to that time in any law covered by any of our opinions, or for any other reason. The attached Schedule A is an integral part of this letter, and any term defined in this letter or any schedule has that defined meaning wherever it is used in this letter or in any schedule to this letter.

You may rely upon this letter only for the purposes of, or in connection with, the transactions contemplated by the Purchase Agreement. Without our written consent: (i) subject to the immediately succeeding sentence, no person other than you may rely on this letter for any purpose; (ii) this letter may not be cited or quoted in any financial statement, prospectus, private placement memorandum or other similar document; (iii) this letter may not be cited or quoted in any other document or communication that might encourage reliance upon this letter by any

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person or for any purpose excluded by the restrictions in this paragraph; and (iv) copies of this letter may not be furnished to anyone for purposes of encouraging such reliance.

Very truly yours,

/S/ KARR TUTTLE CAMPBELL

A Professional Service Corporation

Schedule A

This opinion is to be interpreted in accordance with customary practice as to matters addressed (including customary assumptions, qualifications and exclusions that need not be explicitly stated), the meaning of the language used, and the scope and nature of the work we have performed. In addition to the qualifications and assumptions set forth in the body of this opinion letter, the opinions set forth in this letter are subject to the following assumptions and qualifications:

a. We have assumed without investigation that each public authority document reviewed by us for the purpose of rendering this letter is accurate, complete and authentic, and all official public records (including their proper indexing and filing) are accurate and complete.

b. We have assumed without investigation that all statutes, judicial and administrative decisions, and rules and regulations of governmental agencies, constituting the law examined by us, are generally available (i.e., in terms of access and distribution following publication or other release) to lawyers practicing in such jurisdiction, and are in a format that makes legal research reasonably feasible, and we have assumed that the constitutionality or validity of a relevant statute, rule, regulation or agency action is not in issue unless a reported decision in the state has specifically addressed but not resolved, or has established, its unconstitutionality or invalidity.

c. We have assumed without investigation the genuineness of all signatures, the authenticity of documents, certificates and records submitted to us as originals, the conformity to the originals of all documents, certificates and records submitted to us as certified or reproduction copies, the legal capacity of all natural persons executing documents, certificates and records, and the completeness and accuracy, as of the date of this letter, of the information contained in such documents, certificates and records.

d. We have assumed without investigation that any certificate, opinion from another attorney, representation, telegram or other document on which we have relied that was given or dated earlier than the date of this letter continued to remain accurate, insofar as relevant to such opinions, from such earlier date through and including the date of this letter.

e. In rendering the opinions expressed in opinion paragraph 2.e, we have assumed without investigation that, with respect to each offer, issuance, sale, and delivery by the Company of Securities pursuant to Transaction Documents and each acquisition of the Securities by the purchaser thereof, (a) except for the Washington Business Corporation Act (but not the ‘blue-sky’ laws, securities laws or take-over laws) of the State of Washington as applicable to the Company, at the time thereof and at all times subsequent thereto, such offer, issuance, sale, delivery, and purchase, the execution, delivery, and performance of the Transaction Documents, the performance of the oral agreements relating thereto, and the consummation of the transactions contemplated by any thereof, as to the Company or any other party thereto, did not violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree, in each case whether then or subsequently in effect; (b) at the time thereof and at all

A - 1

times subsequent thereto, the persons authorizing each such offer, issuance, sale, delivery, purchase, execution, performance, or transaction for the Company or for any such other party did not violate any fiduciary or other duty owed by them; (c) no event has taken place subsequent to any such offer, issuance, sale, delivery, purchase, execution, performance, or transaction or will take place which would cause any such offer, issuance, sale, delivery, purchase, execution, performance, or transaction not to comply with any such law, rule, regulation, order, judgment, decree, or duty, or which would permit the Company or any such other party at any time thereafter to cancel, rescind, or otherwise avoid any such offer, issuance, sale, delivery, purchase, execution, performance, transaction, document, or oral agreement; (d) there was no misrepresentation, omission, or deceit by the Company, any such other party, or any other person or entity in connection with any such offer, issuance, sale, delivery, purchase, execution, performance, or transaction; (e) each such offer, issuance, sale, delivery, purchase, execution, performance, and transaction is governed by the laws of the State of Washington, without giving effect to conflict of laws; (f) each other party to the Transaction Documents or to such offer, issuance, sale, delivery, purchase, execution, performance, or transaction (i) had the power, authority, and capacity to consummate such purchase, to execute, deliver, and perform such party’s obligations under the Transaction Documents and each such other document, to perform each such oral agreement, and to consummate each such transaction, (ii) duly authorized such purchase, duly authorized, executed, and delivered the Transaction Documents and each such other document, and duly authorized each such oral agreement and each such transaction, and the Transaction Documents, all such other documents, and all such oral agreements constitute the legal, valid, and binding obligations of such other party and are enforceable as to such other party in accordance with their terms, (iii) has duly and validly taken all necessary corporate or other proceedings of the directors (or a committee of directors), stockholders, and all other bodies to authorize the purchase of shares pursuant to the Transaction Documents, the execution, delivery, and performance of the Transaction Documents and of each such other document, the performance of each such oral agreement, and the consummation of each such transaction, and (iv) will not and does not violate or result in a breach of any term of its certificate of incorporation, bylaws, or other governing document by any such purchase, execution, delivery, or performance; (g) at the time thereof and at all times subsequent thereto, each such offer, issuance, sale, and delivery by the Company, each such purchase by the other party thereto, and the execution, delivery, and performance of the Transaction Documents and each such other document, the performance of each such oral agreement, and the consummation of each such transaction, by the Company and the other party thereto, did not, does not now, and will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any term of any contract, agreement, instrument, lease, license, arrangement, or understanding to which the Company or any such other party is or becomes a party or to which any of them or any of their respective properties, assets, or security holders are or will be subject; (h) each such other document was duly executed, delivered, and performed by the Company; (i) each such oral agreement was duly performed by the Company and each other party thereto, constituted the legal, valid, and binding obligation of the Company, and was enforceable as to the Company in accordance with its terms; and (j) none of such purchasers and none of such other parties is subject to any impediment to

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which investors or contracting parties generally are not subject which would affect the opinions expressed in opinion paragraph 2.e.

f. In giving the opinions set forth in clause (ii) of opinion paragraph 2.d, we mean that the execution and delivery by the Company of, and performance by the Company of its agreements in, the Transaction Documents neither is prohibited by, nor subjects the Company to a fine, penalty or other similar sanction under, any statute or regulation of the State of Washington that a lawyer in the State of Washington exercising customary professional diligence would reasonably recognize as being directly applicable to the Company, the transactions contemplated in the Transaction Documents, or both.

g. This letter deals only with the legal issues expressly addressed. It does not include any implied opinions.

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EX-99.1

Exhibit 99.1

www.CellTherapeutics.com

Cell Therapeutics Announces Institutional

Investor Purchased Additional $15 Million of

Convertible Preferred Stock and Warrants to

Purchase Common Stock

SEATTLE, WA, July 31, 2012—Cell Therapeutics, Inc. (“CTI”) (Nasdaq and MTA: CTIC) today announced that on July 30, 2012, it completed a registered offering to an institutional accredited investor (the “Initial Purchaser”) of an additional 15,000 shares of Series 15 Convertible Preferred Stock (the “Series 15-2 Preferred Stock”) convertible into 25,212,203 shares of its common stock with a conversion price of $0.59495 and warrants to purchase up to an aggregate of 16,808,135 shares of common stock with an exercise price of $0.61344 for gross proceeds of $15 million (the “Second Closing”) pursuant to the terms of a stock purchase agreement (the “Agreement”) that CTI entered into on May 28, 2012. The conversion price of the Series 15-2 Preferred Stock was calculated using the closing bid price of CTI’s common stock on July 27, 2012, plus a premium of $0.08375 per share. As previously announced, CTI completed the first closing of $20 million of Series 15 Convertible Preferred Stock on May 29, 2012.

CTI plans to use the net proceeds from the Second Closing to prepare for the commercial launch of Pixuvri™ in the European Union and for general corporate purposes, which may include, among other things, funding research and development, preclinical and clinical trials, the preparation and filing of new drug applications, the acquisition of complementary businesses, technologies or products and general working capital.

As of July 31, 2012, all 15,000 shares of the Series 15-2 Preferred Stock have been converted and the Initial Purchaser has received 25,212,203 shares of common stock issuable upon conversion. All of the warrants issued in the Second Closing are exercisable beginning on or after the date of issuance and expire five years after the date of issuance. If the stock price is less than the exercise price, the warrants may also be exchanged for shares based on a specified Black-Scholes value formula subject to certain limitations. CTI may instead elect to pay all or some of such value in cash. If CTI elects not to pay in cash, is unable to issue sufficient shares without shareholder approval and has not obtained shareholder approval within 90 days after an exchange notice is received, CTI will issue a note for the unpaid portion of the value payable one

year thereafter.

CTI paid Halcyon Cabot Partners, Ltd. a placement agent fee of 5% of the gross proceeds received in the Second Closing.

About Cell Therapeutics, Inc.

Headquartered in Seattle, CTI is a biopharmaceutical company committed to developing an integrated portfolio of oncology products aimed at making cancer more treatable. For additional information, please visit www.CellTherapeutics.com.

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to a number of risks and uncertainties, the outcome of which could materially and/or adversely affect actual future results and the trading price of CTI’s securities. Risks that contribute to the uncertain nature of the forward-looking statements include, among others, risks associated with market conditions, that CTI may not use the net proceeds of the Second Closing as expected, as well as risks related to developments in the biopharmaceutical industry, the outcome of preclinical and clinical studies, risks related to regulatory approvals, delays in commencement of preclinical and clinical studies, costs of developing, producing and selling CTI’s drug candidates, that CTI may not be able to successfully implement its plans, strategies and objectives related to the development of the acquired compounds, the risk that CTI may not be able to sustain its current cost controls, and the risk that CTI may not be able to continue to raise capital as needed to fund its operations, competitive factors, technological developments, costs of developing, producing and selling its drug candidates. Further risks and uncertainties include CTI’s operating expenses continue to exceed its net revenues, that CTI may not be able to further reduce its operating expenses, that CTI will continue to need to raise capital to fund its operating expenses and may not be able to raise sufficient amounts to fund its continued operation as well as other risks listed or described from time to time in CTI’s most recent filings with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K. Except as required by law, CTI does not intend to update any of the statements in this press release upon further developments.

* * *

Media Contact:

Dan Eramian

T: 206.272.4343

C: 206.854.1200

E: media@ctiseattle.com

www.CellTherapeutics.com/press_room

Investors Contact:

Ed Bell

T: 206.272.4345

F: 206.272.4434

E: invest@ctiseattle.com

www.CellTherapeutics.com/investors