Severance Agreement, by and between CTI BioPharma Corp. and James K. Fong, dated as of January 6, 2015

Exhibit 10.2

SEVERANCE AGREEMENT

THIS SEVERANCE AGREEMENT (this “Agreement”) is made and entered into this 6th day of January 2015 (the “Effective Date”), by and between CTI BioPharma Corp., a Washington corporation (the “Company”), and James Fong (the “Employee”).

RECITALS

THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings and intentions:

A.    The Employee is currently employed with the Company, and the Company desires to provide severance benefits to the Employee in the event the Employee’s employment with the Company terminates under certain circumstances, on the terms and conditions set forth in this Agreement.

B.    This Agreement shall be effective immediately and shall supersede and negate all previous agreements and understandings with respect to the subject matter hereof (including, without limitation, the Severance Agreement by and between the Company and the Employee dated January 15, 2008, as amended (the “Prior Severance Agreement”)) except as expressly noted herein.

AGREEMENT

NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows:

(a)    The Company shall pay the Employee (or, in the event of his death, the Employee’s estate) any Accrued Obligations (as such term is defined in Section 2);

(b)    If the Employee’s employment with the Company terminates as a result of an Involuntary Termination (as such term is defined in Section 2), the Company shall pay the Employee (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an amount equal to one and one-half

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(1.5) times the Employee’s base salary at the annualized rate in effect on the Severance Date. Such amount is referred to hereinafter as the “Severance Benefit.” Subject to Section 17(b), the Company shall pay the Severance Benefit to the Employee in substantially equal installments in accordance with the Company’s standard payroll practices over a period of eighteen (18) consecutive months, with the first such installment payable on (or within ten (10) days following) the sixtieth (60th) day following the Employee’s Separation from Service (as such term is defined in Section 2).

(c)    Notwithstanding the foregoing provisions of this Section 1.1, if the Employee breaches any of his obligations under his Employee Invention and Proprietary Information Agreement (or any similar or successor agreement) with the Company (the “Proprietary Information Agreement”) or the Release (defined below) at any time, from and after the date of such breach and not in any way in limitation of any right or remedy otherwise available to the Company, the Employee will no longer be entitled to, and the Company will no longer be obligated to pay, any remaining unpaid portion of the Severance Benefit; provided that, if the Employee provides the Release, in no event shall the Employee be entitled to benefits pursuant to Section 1.1(b) of less than $5,000 (or the amount of such benefits, if less than $5,000), which amount the parties agree is good and adequate consideration, in and of itself, for the Release.

(d)    The foregoing provisions of this Section 1.1 shall not affect: (i) the Employee’s receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Company welfare benefit plan; (ii) the Employee’s rights under COBRA; or (iii) the Employee’s receipt of benefits otherwise due in accordance with the terms of the Company’s 401(k) plan (if any).

(a)    This Section 1.2 shall apply notwithstanding anything else contained in this Agreement or any stock option or other equity-based award agreement to the contrary. As a condition precedent to any Company obligation to the Employee pursuant to Section 1.1(b) or any other obligation to accelerate vesting of any equity-based award in connection with the termination of the Employee’s employment, the Employee shall provide the Company with a valid, executed general release agreement in a form acceptable to the Company (the “Release”), and such Release shall have not been revoked by the Employee pursuant to any revocation rights afforded by applicable law. The Company shall provide the final form of Release to the Employee not later than seven (7) days following the Severance Date, and the Employee shall be required to execute and return the Release to the Company within twenty-one (21) days (or forty-five (45) days if such longer period of time is required to make the Release maximally enforceable under applicable law) after the Company provides the form of Release to the Employee.

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(b)    The Employee agrees that the payments and benefits contemplated by Section 1.1 shall constitute the exclusive and sole remedy for any termination of his employment and the Employee covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. The Company and the Employee acknowledge and agree that there is no duty of the Employee to mitigate damages under this Agreement. All amounts paid to the Employee pursuant to Section 1.1 shall be paid without regard to whether the Employee has taken or takes actions to mitigate damages. The Employee hereby irrevocably resigns, on the Severance Date, from the Company and any affiliate of the Company, as an officer and director of the Company and any affiliate, and as a fiduciary of any benefit plan of the Company or any affiliate of the Company (in each case, to the extent the Employee then has any such position), and from each and every other position that the Employee may then otherwise hold with the Company or any of its affiliates. The Employee agrees to promptly execute and provide to the Company any further documentation, as requested by the Company (whether before or after the Severance Date), to confirm such resignations.

(a)    “Accrued Obligations” means (i) any of the Employee’s base salary from the Company that had accrued but had not been paid (including accrued and unpaid vacation time, subject to the Company’s vacation policies in effect from time to time) on or before the Severance Date; and (ii) any reimbursement due to the Employee for expenses reasonably incurred by the Employee on or before the Severance Date and documented and pre-approved, to the extent applicable, in accordance with the Company’s expense reimbursement policies in effect at the applicable time.

(b)    “Cause” means any of the following: (i) gross negligence or willful misconduct in the performance of the Employee’s duties to the Company after written notice to the Employee and the failure to cure same within ten (10) days after receipt of written notice; (ii) the Employee’s refusal or failure to act in accordance with any lawful specific direction or order of the Board or any executive of the Company to which the Employee reports after written notice to the Employee of such refusal or failure and failure to cure the same within ten (10) days after receipt of written notice; (iii) the Employee’s commission of any act of fraud with respect to the Company; (iv) the Employee’s material breach of any written agreement or material policy of the Company after written notice to the Employee of such breach and failure to cure, if curable, the same within ten (10) days after receipt of written notice; (v) the Employee’s conviction of, or plea of nolo contendre to, a crime which adversely affects the Company’s business or reputation, in each case as determined by the Board; and (vi) the Employee’s substantial failure to perform a material duty to the Company or engaging in conduct unbecoming a professional.

(c)    “Disability” means a physical or mental impairment which, as reasonably determined by the Company’s Board of Directors (the “Board”), renders the Employee unable to perform the essential functions of his employment with the Company, even

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with reasonable accommodation that does not impose an undue hardship on the Company, for more than 90 days in any 180-day period, unless a longer period is required by federal or state law, in which case that longer period would apply.

(d)    “Good Reason” means the occurrence (without the Employee’s consent) of any one or more of the following conditions: (i) a material reduction in the Employee’s responsibilities, authority, titles or offices resulting in material diminution of his position, excluding for this purpose an isolated, insubstantial, inadvertent action not taken in bad faith; (ii) a reduction of more than ten percent (10%) of the Employee’s Base Salary, other than as a part of an across-the-board salary reduction applicable to executive officers of the Company; (iii) relocation of Employee’s primary place of business for the performance of his duties to a location which is more than fifty (50) miles from its prior location; or (iv) a material breach by the Company of this Agreement; provided, however, that any such condition or conditions, as applicable, shall not constitute Good Reason unless both (x) the Employee provides written notice to the Company of the condition claimed to constitute Good Reason within sixty (60) days of the initial existence of such condition(s) (such notice to be delivered in accordance with Section 14), and (y) the Company fails to remedy such condition(s) within thirty (30) days of receiving such written notice thereof; and provided, further, that in all events the termination of the Employee’s employment with the Company shall not constitute a termination for Good Reason unless such termination occurs not more than one hundred and twenty (120) days following the initial existence of the condition claimed to constitute Good Reason.

(e)    “Involuntary Termination” shall mean (i) a termination of the Employee’s employment by the Company without Cause (and other than due to Employee’s death or in connection with a good faith determination by the Board that the Employee has a Disability), or (ii) a resignation by the Employee for Good Reason.

(f)    As used herein, a “Separation from Service” occurs when the Employee dies, retires, or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.

(a)    Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.

(b)    Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement and benefits provided to, or for the benefit of, Employee under any other Company plan or agreement, including, for certainty, the Severance Benefits, (such payments or benefits are collectively referred to as the “Benefits”) would be subject to the excise tax (the “Excise Tax”)

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imposed under Section 4999 of the Code, the Benefits shall be reduced (but not below zero) if and to the extent that a reduction in the Benefits would result in Employee retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if Employee received all of the Benefits (such reduced amount if referred to hereinafter as the “Limited Benefit Amount”). Unless the Employee shall have given prior written notice specifying a different order to the Company to effectuate the Limited Benefit Amount, any such notice consistent with the requirements of Section 409A of the Code to avoid the imputation of any tax, penalty or interest thereunder, the Company shall reduce or eliminate the Benefits by first reducing or eliminating those payments or benefits which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the determination by the Accountants described below. Any notice given by Employee pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing Employee’s rights and entitlements to any benefits or compensation. A determination as to whether the Benefits shall be reduced to the Limited Benefit Amount pursuant to this Agreement and the amount of such Limited Benefit Amount shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon Employee and the Company for all purposes. The Accountants shall provide such determination, together with detailed supporting calculations and documentation to the Company and Employee within ten (10) business days of the date of termination of the Employee’s employment, if applicable, or such other time as requested by the Company or Employee (provided Employee reasonably believes that any of the Benefits may be subject to the Excise Tax), and if the Accountants determine that no Excise Tax is payable by Employee with respect to any Benefits, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Benefits. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on interpretations of the Code for which there is a “substantial authority” tax reporting position. The Company and Employee will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company will bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

(a)    In the event any amount is payable pursuant to this Agreement following the Employee’s death, payment shall be made to the Employee’s estate.

(b)    This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee’s legal representatives.

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(c)    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Without limiting the generality of the preceding sentence, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor or assignee, as applicable, which assumes and agrees to perform this Agreement by operation of law or otherwise.

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if to the Company:

CTI BioPharma Corp.

3101 Western Avenue, Suite 600

Seattle, Washington 98121

Attention: Chief Executive Officer

with a copies to:

CTI BioPharma Corp.

3101 Western Avenue, Suite 600

Seattle, Washington 98121

Attention: Legal Affairs

AND

O’Melveny & Myers LLP

Two Embarcadero Center, 28th Floor

San Francisco, California 94111-3823

Attn: C. Brophy Christensen, Esq.

if to the Employee, to the address most recently on file in the payroll records of the Company.

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(a)    It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) (“Code Section 409A”) so as not to subject the Employee to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Employee.

(b)    If the Employee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-l (i) as of the date of the Employee’s Separation from Service, the Employee shall not be entitled to any payment or benefit pursuant to Section 1.1(b) until the earlier of (i) the date which is six (6) months after his or her Separation from Service for any reason other than death, or (ii) the date of the Employee’s death. The provisions of this Section 17(b) shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A. Any amounts otherwise payable to the Employee upon or in the six (6) month period following the Employee’s Separation from Service that are not so paid by reason of this Section 17(b) shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Employee’s Separation from Service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Employee’s death).

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IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the Effective Date.

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