EXHIBIT 10.20
 
ALLIQUA, INC.

NONQUALIFIED STOCK OPTION AGREEMENT

1. Grant of Option.  Pursuant to this nonqualified stock option agreement (this
“Agreement”), Alliqua, Inc., a Florida corporation (the “Company”), hereby
grants to

               David Stefansky          
 (the “Optionee”)

an option (the “Stock Option”) to purchase a total of five hundred thousand
(500,000) full shares (the “Optioned Shares”) of common stock of the Company,
par value $0.0001 per share (the “Common Stock”), at an exercise price equal to
$0.20 per share (being greater than the fair market value per share of the
Common Stock on the Date of Grant).  The “Date of Grant” of this Stock Option is
May 31, 2012.  The “Option Period” shall commence on the Date of Grant and shall
expire on the tenth (10th) anniversary of the Date of Grant, unless terminated
earlier in accordance with Section 4 below.  The Stock Option is a nonqualified
stock option.  This Stock Option is intended to comply with the provisions
governing nonqualified stock options under the final Treasury Regulations issued
on April 17, 2007, in order to exempt this Stock Option from application of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

2. Vesting; Time of Exercise.  Except as specifically provided in this
Agreement, the Optioned Shares shall be vested and the Stock Option shall be
exercisable as follows:

a. One-third (1/3rd) of the total Optioned Shares (rounded down) shall vest and
that portion of the Stock Option shall become exercisable on first anniversary
of the Date of Grant, provided the Optionee is providing services (as an
employee, outside director, or contractor) to the Company or a subsidiary on
that date.

b. An additional one-third (1/3rd) of the total Optioned Shares (rounded down)
shall vest and that portion of the Stock Option shall become exercisable on
second anniversary of the Date of Grant, provided the Optionee is providing
services (as an employee, outside director, or contractor) to the Company or a
subsidiary on that date.

c. The remaining one-third (1/3rd) of the total Optioned Shares shall vest and
that portion of the Stock Option shall become exercisable on third anniversary
of the Date of Grant, provided the Optionee is providing services (as an
employee, outside director, or contractor) to the Company or a subsidiary on
that date.

Notwithstanding the foregoing, upon (i) the occurrence of a Change in Control
(as defined below), or (ii) the Optionee’s termination of service by the Company
without Cause (as defined below), then immediately prior to the effective date
of such Change in Control or the date of such termination of service, as
applicable, the total Optioned Shares not previously vested shall thereupon
immediately become vested and this Stock Option shall become fully exercisable,
if not previously so exercisable.

3. Term; Forfeiture; Definitions.

a. Except as otherwise provided in this Agreement, to the extent the unexercised
portion of the Stock Option relates to Optioned Shares which are not vested on
the date of the Optionee’s termination of service (as an employee, outside
director, or contractor) with the Company for any reason (other than a
termination by the Company without Cause), the Stock Option will be terminated
on that date.  The unexercised portion of the Stock Option that relates to
Optioned Shares which are vested will terminate at the first of the following to
occur:

i. 5 p.m. on the date the Option Period terminates;

ii. 5 p.m. on the date which is twelve (12) months following the date of the
Optionee’s termination of service due to death or Total and Permanent Disability
(as defined below);

iii. immediately upon the Optionee’s termination of service by the Company for
Cause (as defined below);

iv. immediately upon the Optionee’s violation of any non-compete or
non-solicitation agreement entered into between the Company and the Optionee
(including, without limitation, the Employment Agreement (as defined below));

v. 5 p.m. on the date which is ninety (90) days following the date of the
Optionee’s termination of service for any reason not otherwise specified in this
Section 3.a.; and

vi. 5 p.m. on the date the Company causes any portion of the Stock Option to be
forfeited pursuant to Section 6 hereof.
 
 
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b. For purposes of this Agreement, the following terms shall have the meanings
set forth below:

i. “Cause” shall have the meaning set forth in the Executive Employment
Agreement, by and between the Optionee and the Company, dated May 31, 2012 (the
“Employment Agreement”).

ii. “Change in Control” means any of the following, except as otherwise provided
herein: (A) any consolidation, merger or share exchange of the Company in which
the Company is not the continuing or surviving corporation or pursuant to which
shares of the Company’s Common Stock would be converted into cash, securities or
other property, other than a consolidation, merger or share exchange of the
Company in which the holders of the Company’s Common Stock immediately prior to
such transaction have the same proportionate ownership of Common Stock of the
surviving corporation immediately after such transaction; (B) any sale, lease,
exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; (C) the shareholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company; (D) the cessation of control (by virtue of their not constituting a
majority of directors) of the Board of Directors of the Company by the
individuals (the “Continuing Directors”) who (x) at the date of this Agreement
were directors or (y) become directors after the date of this Agreement and
whose election or nomination for election by the Company’s shareholders was
approved by a vote of at least two-thirds (2/3rds) of the directors then in
office who were directors at the date of this Agreement or whose election or
nomination for election was previously so approved; (E) the acquisition of
beneficial ownership (within the meaning of Rule 13d-3 under the United States
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of an
aggregate of fifty percent (50%) or more of the voting power of the Company’s
outstanding voting securities by any person or group (as such term is used in
Rule 13d-5 under the Exchange Act) who beneficially owned less than fifty
percent (50%) of the voting power of the Company’s outstanding voting securities
on the date of this Agreement; provided, however, that notwithstanding the
foregoing, an acquisition shall not constitute a Change in Control hereunder if
the acquirer is (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company and acting in such capacity, (y) a
subsidiary of the Company or a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of voting securities of the Company or (z) any other person whose
acquisition of shares of voting securities is approved in advance by a majority
of the Continuing Directors; or (F) in a Title 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of a case involving the Company to a
case under Chapter 7.

iii. “Total and Permanent Disability” shall mean the Optionee is qualified for
long-term disability benefits under the Company’s or a subsidiary’s disability
plan or insurance policy; or, if no such plan or policy is then in existence or
if the Optionee is not eligible to participate in such plan or policy, that the
Optionee, because of a physical or mental condition resulting from bodily
injury, disease, or mental disorder, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Company, based upon medical reports or other evidence satisfactory
to the Company.

4. Who May Exercise.  Subject to the terms and conditions set forth in Sections
2 and 3 above, during the lifetime of the Optionee, the Stock Option may be
exercised only by the Optionee, or by the Optionee’s guardian or personal or
legal representative.  If the Optionee’s termination of service is due to his
death prior to the dates specified in Section 3.a. hereof, and the Optionee has
not exercised the Stock Option as to the maximum number of vested Optioned
Shares as set forth in Section 2 hereof as of the date of death, the following
persons may exercise the exercisable portion of the Stock Option on behalf of
the Optionee at any time prior to the earliest of the dates specified in
Section 3.a. hereof: the personal representative of his estate, or the person
who acquired the right to exercise the Stock Option by bequest or inheritance or
by reason of the death of the Optionee; provided that the Stock Option shall
remain subject to the other terms of this Agreement, and applicable laws, rules,
and regulations.

 
 
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5. No Fractional Shares.  The Stock Option may be exercised only with respect to
full shares, and no fractional share of stock shall be issued.

6. Manner of Exercise.  Subject to such administrative regulations as the
Company may from time to time adopt, the Stock Option may be exercised by the
delivery of written notice to the Company setting forth the number of shares of
Common Stock with respect to which the Stock Option is to be exercised, the date
of exercise thereof (the “Exercise Date”) which shall be at least three (3) days
after giving such notice unless an earlier time shall have been mutually agreed
upon.  On the Exercise Date, the Optionee shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be
purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) if the Company, in its sole discretion,
so consents in writing, Common Stock (including restricted stock) owned by the
Optionee on the Exercise Date, valued at its fair market value on the Exercise
Date, and which the Optionee has not acquired from the Company within six (6)
months prior to the Exercise Date, (c) if the Company, in its sole discretion,
so consents in writing, by delivery (including by FAX) to the Company or its
designated agent of an executed irrevocable option exercise form together with
irrevocable instructions from the Optionee to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the shares of Common Stock
purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form
of valid consideration that is acceptable to the Company in its sole
discretion.  In the event that shares of restricted stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock Option equal to the number of shares
of restricted stock used as consideration therefor shall be subject to the same
restrictions and provisions as the restricted stock so tendered.

Upon payment of all amounts due from the Optionee, the Company shall either
cause certificates for the Common Stock then being purchased to be delivered to
the Optionee (or the person exercising the Optionee’s Stock Option in the event
of his death) or cause the Common Stock then being purchased to be
electronically registered in the Optionee’s name (or the name of the person
exercising the Optionee’s Stock Option in the event of his death), promptly
after the Exercise Date.  The obligation of the Company to deliver or register
such shares of Common Stock shall, however, be subject to the condition that, if
at any time the Company shall determine in its discretion that the listing,
registration, or qualification of the Stock Option or the Common Stock upon any
securities exchange or inter-dealer quotation system or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary as a condition of, or in connection with, the Stock Option or the
issuance or purchase of shares of Common Stock thereunder, then the Stock Option
may not be exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not reasonably acceptable to the Company.

If the Optionee fails to pay for any of the Optioned Shares specified in such
notice or fails to accept delivery thereof, then that portion of the Optionee’s
Stock Option and right to purchase such Optioned Shares may be forfeited by the
Optionee.

7. Nonassignability.  The Stock Option is not assignable or transferable by the
Optionee except by will or by the laws of descent and distribution.

8. Rights as Shareholder.  The Optionee will have no rights as a
shareholder with respect to any of the Optioned Shares until the issuance of a
certificate or certificates to the Optionee or the registration of such shares
in the Optionee’s name for the shares of Common Stock.  The Optioned Shares
shall be subject to the terms and conditions of this Agreement.  Except as
otherwise provided in Section 9 hereof, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.  The Optionee, by his or her execution of this
Agreement, agrees to execute any documents requested by the Company in
connection with the issuance of the shares of Common Stock.

9. Adjustments and Related Matters.  In the event that any dividend or other
distribution (whether in the form of cash, Common Stock, other securities, or
other property), recapitalization, stock split, reverse stock split, rights
offering, reorganization, merger, consolidation, split-up, spin-off, split-off,
combination, subdivision, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the fair value of the Stock Option, then the
Company shall adjust any or all of the following so that the fair value of the
Stock Option immediately after the transaction or event is equal to the fair
value of the Stock Option immediately prior to the transaction or event (i) the
number of shares and type of Common Stock (or other securities or property)
subject to the Stock Option, (ii) the exercise price of the Stock Option;
provided, however, that the number of shares of Common Stock (or other
securities or property) subject to the Stock Option shall always be a whole
number.  The Company shall determine the specific adjustments to be made under
this Section 9, and its determination shall be conclusive.  Notwithstanding
anything herein to the contrary, no such adjustment shall be made or authorized
to the extent that such adjustment would cause the Stock Option or this
Agreement to violate Section 409A of the Code.  Such adjustments shall be made
in accordance with the rules of any securities exchange, stock market, or stock
quotation system to which the Company is subject.  Upon the occurrence of any
such adjustment, the Company shall provide notice to the Optionee of its
computation of such adjustment which shall be conclusive and shall be binding
upon the Optionee.
 
 
 
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10. Nonqualified Stock Option.  The Stock Option shall not be treated as an
“incentive stock option” under Section 422 of the Code.

11. Voting.  The Optionee, as record holder of some or all of the Optioned
Shares following exercise of this Stock Option, has the exclusive right to vote,
or consent with respect to, such Optioned Shares until such time as the Optioned
Shares are transferred in accordance with this Agreement; provided, however,
that this Section shall not create any voting right where the holders of such
Optioned Shares otherwise have no such right.

12. Specific Performance. The parties acknowledge that remedies at law will be
inadequate remedies for breach of this Agreement and consequently agree that
this Agreement shall be enforceable by specific performance.  The remedy of
specific performance shall be cumulative of all of the rights and remedies at
law or in equity of the parties under this Agreement.

13. Optionee’s Representations.  Notwithstanding any of the provisions hereof,
the Optionee hereby agrees that he will not exercise the Stock Option granted
hereby, and that the Company will not be obligated to issue any shares to the
Optionee hereunder, if the exercise thereof or the issuance of such shares shall
constitute a violation by the Optionee or the Company of any provision of any
law or regulation of any governmental authority.  Any determination in this
connection by the Company shall be final, binding, and conclusive.  The
obligations of the Company and the rights of the Optionee are subject to all
applicable laws, rules, and regulations.

14. Investment Representation.  Unless the shares of Common Stock are issued to
the Optionee in a transaction registered under applicable federal and state
securities laws, by his execution hereof, the Optionee represents and warrants
to the Company that all Common Stock which may be purchased hereunder will be
acquired by the Optionee for investment purposes for his own account and not
with any intent for resale or distribution in violation of federal or state
securities laws.  Unless the Common Stock is issued to him in a transaction
registered under the applicable federal and state securities laws, all
certificates issued with respect to the Common Stock shall bear an appropriate
restrictive investment legend and shall be held indefinitely, unless they are
subsequently registered under the applicable federal and state securities laws
or the Optionee obtains an opinion of counsel, in form and substance
satisfactory to the Company and its counsel, that such registration is not
required.

15. Optionee’s Acknowledgments.  The Optionee hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the Company,
upon any questions arising under this Agreement.

16. Law Governing.  This Agreement shall be governed by, construed, and enforced
in accordance with the laws of the State of Florida (excluding any conflict of
laws rule or principle of Florida law that might refer the governance,
construction, or interpretation of this Agreement to the laws of another state).

17. No Right to Continue Service or Employment.  Nothing herein shall be
construed to confer upon the Optionee the right to continue in the employ or to
provide services to the Company or any subsidiary, whether as an employee or as
a contractor or as an outside director, or interfere with or restrict in any way
the right of the Company or any subsidiary to discharge the Optionee at any
time.

18. Legal Construction.  In the event that any one or more of the terms,
provisions, or agreements that are contained in this Agreement shall be held by
a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect for any reason, the invalid, illegal, or unenforceable term,
provision, or agreement shall not affect any other term, provision, or agreement
that is contained in this Agreement and this Agreement shall be construed in all
respects as if the invalid, illegal, or unenforceable term, provision, or
agreement had never been contained herein.

19. Covenants and Agreements as Independent Agreements. Each of the covenants
and agreements that is set forth in this Agreement shall be construed as a
covenant and agreement independent of any other provision of this
Agreement.  The existence of any claim or cause of action of the Optionee
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants and
agreements that are set forth in this Agreement.

20. Entire Agreement.  This Agreement supersedes any and all other prior
understandings and agreements, either oral or in writing, between the parties
with respect to the subject matter hereof and constitutes the sole and only
agreements between the parties with respect to the said subject matter.  All
prior negotiations and agreements between the parties with respect to the
subject matter hereof are merged into this Agreement.  Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone acting
on behalf of any party, which are not embodied in this Agreement and that any
agreement, statement or promise that is not contained in this Agreement shall
not be valid or binding or of any force or effect.
 
 
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21. Parties Bound.  The terms, provisions, and agreements that are contained in
this Agreement shall apply to, be binding upon, and inure to the benefit of the
parties and their respective heirs, executors, administrators, legal
representatives, and permitted successors and assigns, subject to the limitation
on assignment expressly set forth herein.

22. Modification.  No change or modification of this Agreement shall be valid or
binding upon the parties unless the change or modification is in writing and
signed by the parties; provided, however, that the Company may change or modify
this Agreement without the Optionee’s consent or signature if the Company
determines, in its sole discretion, that such change or modification is
necessary for purposes of compliance with or exemption from the requirements of
Section 409A of the Code or any regulations or other guidance issued thereunder.

23. Headings.  The headings that are used in this Agreement are used for
reference and convenience purposes only and do not constitute substantive
matters to be considered in construing the terms and provisions of this
Agreement.

24. Gender and Number.  Words of any gender used in this Agreement shall be held
and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise.

25. Notice.  Any notice required or permitted to be delivered hereunder shall be
deemed to be delivered only when actually received by the Company or by the
Optionee, as the case may be, at the addresses set forth below, or at such other
addresses as they have theretofore specified by written notice delivered in
accordance herewith:

a.           Notice to the Company shall be addressed and delivered as follows:

Alliqua, Inc.
850 Third Avenue, Suite 1801
New York, NY 10022
Attn: President
Facsimile: (646) 218-1401
 
b.           Notice to the Optionee shall be addressed and delivered as set
forth on the signature page.

26. Tax Requirements.  The Optionee is hereby advised to consult immediately
with his or her own tax advisor regarding the tax consequences of this
Agreement.  The Company or, if applicable, any subsidiary (for purposes of this
Section 26, the term “Company” shall be deemed to include any applicable
subsidiary), shall have the right to deduct from all amounts paid in cash or
other form, any Federal, state, local, or other taxes required by law to be
withheld in connection with this Agreement.  The Company may, in its sole
discretion, also require the Optionee receiving shares of Common Stock to pay
the Company the amount of any taxes that the Company is required to withhold in
connection with the Optionee’s income arising with respect to the Stock
Option.  Such payments shall be required to be made when requested by the
Company and may be required to be made prior to the delivery of any certificate
representing shares of Common Stock.  Such payment may be made (i) by the
delivery of cash to the Company in an amount that equals or exceeds (to avoid
the issuance of fractional shares under (iii) below) the required tax
withholding obligations of the Company; (ii) if the Company, in its sole
discretion, so consents in writing, the actual delivery by the exercising
Optionee to the Company of shares of Common Stock that the Optionee has not
acquired from the Company within six (6) months prior to the date of exercise,
which shares so delivered have an aggregate fair market value that equals or
exceeds (to avoid the issuance of fractional shares under (iii) below) the
required tax withholding payment; (iii) if the Company, in its sole discretion,
so consents in writing, the Company’s withholding of a number of shares to be
delivered upon the exercise of the Stock Option, which shares so withheld have
an aggregate fair market value that equals (but does not exceed) the required
tax withholding payment; or (iv) any combination of (i), (ii), or (iii).  The
Company may, in its sole discretion, withhold any such taxes from any other cash
remuneration otherwise paid by the Company to the Optionee.

* * * * * * * *

[Remainder of Page Intentionally Left Blank
Signature Page Follows.]
 
 
 
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Optionee, to evidence his consent and approval
of all the terms hereof, has duly executed this Agreement, as of the date
specified in Section 1 hereof.
 
 

  COMPANY:          
ALLIQUA, INC.
              By: /s/ Richard Rosenblum    Name:  Richard Rosenblum    Title:
President              
OPTIONEE:
              /s/ David Stefansky   Signature       Name: David Stefansky  
Address:              

 
 
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