FORM OF STRATEGIC MANAGEMENT TEAM SEVERANCE AGREEMENT

Exhibit 10.5

FORM OF STRATEGIC MANAGEMENT TEAM

SEVERANCE AGREEMENT

This SEVERANCE AGREEMENT (the “Agreement”) is entered into by and between Cell Therapeutics, Inc., a Washington corporation (“CTI” or the “Company”), and _____________ (the “Executive”).

WHEREAS, CTI recognizes the Executive’s expertise in connection with Executive’s employment by CTI;

WHEREAS, CTI desires to provide certain severance pay to Executive upon the terms and conditions below, if the Executive’s employment is terminated for the reasons set forth herein; and

NOW, THEREFORE, in consideration of the following promises, mutual agreements and covenants and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree as follows:

Definition of Terms.

For purposes of this Agreement “Cause” is defined as (i) an act of material dishonesty made by Executive in connection with Executive’s responsibilities as an employee, (ii) Executive’s conviction of, or pleas of nolo contendere to, a felony, (iii) Executive’s gross misconduct, or (iv) Executive’s continued substantial violations of his employment duties after Executive has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that the Executive has not substantially performed his duties and provides Executive thirty (30) days to cure any such violation(s).

“Change in Control” shall mean the acquisition, directly or indirectly, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1933 (the “Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities representing fifty point one percent (50.1%) or more of either (a) the then outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation which does not substantially change the proportional ownership in the Outstanding Company Common Stock and Outstanding Company Voting Securities prior to the reorganization.

Resignation for “Good Reason” shall mean the resignation of the Executive after the following: (A) notice in writing is given to Executive of Executive’s relocation, without the Executive’s consent, to a place of business outside the Greater Puget Sound area, (B) a substantial diminution of the Executive’s responsibilities and benefits in effect on the date hereof, (C) knowledge of an

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act or intent to commit an act in violation of the Sarbanes-Oxley Act of 2002, the federal securities laws and any other law applicable to the conduct of the Company’s business; provided, however, that “Good Reason” shall not exist if Executive knowingly participated in such act or was aware of its commission or intended commission and did not take reasonable steps to prevent or report it, or (D) the occurrence of a Change in Control. A change in title and any alterations in Executive’s responsibilities which CTI imposes in response to any unsatisfactory or unacceptable work performance by Executive after Executive has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that the Executive has not substantially performed his duties and provides Executive thirty (30) days to cure any such violation(s) shall not constitute a basis for “resignation for Good Reason” under this Agreement.

“Severance Date” shall mean the date specified in a written notice of termination from CTI to the Executive or the date which is the later of CTI’s actual receipt of Executive’s written notice of resignation or the effective date of resignation.

“Severance End Date” shall mean a date eighteen (18) months from the Executive’s Severance Date.

“Severance Pay” shall only mean the Executive’s base salary at the Severance Rate.

“Severance Rate” shall mean only the Executive’s base salary in effect immediately prior to the Severance Date and shall not include any commissions (unless already determined and awarded prior to the Severance Date), vacation pay, sick leave, or the like whatsoever.

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For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), each payment that is paid under the preceding paragraph (other than payments referenced in Section 1(b)(iii) above and COBRA reimbursements) is hereby designated as a separate payment. Notwithstanding anything stated herein, if the Company (for this purpose, “employer” as defined in Treasury Regulation Section 1.409A-1(h)(3)) is publicly traded on an established securities market or otherwise at the time of Executive’s Separation and, at the time of Executive’s Separation Executive is a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i), then any severance that Executive would otherwise be entitled to pursuant to 1(b) during the six (6) month period following his Separation (for purposes of clarity, this does not include amounts referenced in Section 1(b)(iii) above or COBRA reimbursements) shall not be paid during such six (6) month period and shall instead be paid on the first business day following the expiration of such six (6) month period or, if earlier, the date of Executive’s death, and any remaining payments shall continue to be paid in accordance with this Section 1(b).

The Executive shall have no right under this Agreement or otherwise to receive any bonus, stock options, or other compensation awarded or benefits provided, determined or paid subsequent to the Severance Date to other employees of CTI, pro rata or otherwise. However, if Executive is terminated by CTI without Cause or the Executive resigns from Executive’s employment for Good Reason, all

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unvested stock based compensation to which the Executive may have rights on the Severance Date shall accelerate and immediately vest and all options shall remain exercisable as provided for in the parties’ corresponding Stock Option Agreement(s). Notwithstanding the foregoing, if and only if, CTI is a privately held company on the Executive’s Severance Date, CTI shall recommend to the Board of Directors to extend the exercise period from three (3) months to two (2) years after the Severance Date for stock options other than any incentive stock options in which the Executive may have rights on the Severance Date; provided however, should CTI stock become publicly traded during any extended stock option exercise period granted hereunder, Executive may only exercise stock options in which Executive may have rights during the three (3) month period following the date a corresponding S-8 registration statement is declared effective; or ii) the last day of the extended stock option exercise period. The decision to accept CTI’s recommendation to extend the exercise period shall be within the sole discretion of the Board of Directors. If CTI Common Stock is publicly traded on the Severance Date, any exercise period will remain as provided for in the parties’ corresponding Stock Option Agreement(s).

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IN WITNESS WHEREOF, this Agreement has been executed by a duly authorized officer of CTI and by the Executive in Executive’s individual capacity as of the date(s) set forth below.

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