STOCK OPTION EXTENSION AGREEMENT

Exhibit 10.20

STOCK OPTION EXTENSION AGREEMENT

This Stock Option Extension Agreement (“Agreement”) is entered into and effective as of June 1, 2006, by and between Cytori Therapeutics, Inc., a Delaware corporation located at 3020 Callan Road, San Diego, CA 92121 (the “Company”), and Charles E. Galetto, an employee of the Company with a residence address of 12445 Figtree Street, San Diego, CA 92131 (the “Optionee”).

WHEREAS, as of May 31, 2006 Optionee shall hold a combined total of 204,997 vested stock options to purchase shares of the Company’s common stock pursuant to the Company’s 1997 Incentive Stock Option Plan (the “1997 Plan”) and the Company’s 2004 Employee Stock Option Plan (the “2004 Plan”) (collectively the “Plans”); and

WHEREAS, subject to certain restrictions and conditions on the sale of shares of the Company’s common stock held by Optionee, the Company agrees to modify the Plan agreements to extend the expiration dates for the exercise of stock options under the Plans; and

NOW, THEREFORE, the Company and the Optionee agree as follows:

(a)  The right of the Optionee to exercise Two Hundred and Four Thousand, Nine Hundred and Ninety Seven (204,997) fully vested Plan stock options (as specified on Exhibit I) is hereby extended to December 31, 2007, irrespective of the date that his services to the Company terminate.

(b)  The exercise extension provided for above is subject to the following conditions and restrictions on Optionee’s right to sell shares of the company stock:

(i) Immediately upon termination of Optionee’s employment by the Company as provided for in the Part-Time Employment Agreement between the Company and Optionee, Optionee shall execute and sign a full release of all claims against the Company in the form attached as Exhibit II, which is that Company’s standard employment related release of claims.

(ii) No shares of common stock of the Company owned by Optionee may be sold by or on behalf of Optionee during the initial 90-day period from May 15, 2006 through August 12, 2006; (b) Optionee may sell up to 51,250 shares of common stock owned by him beginning August 13, 2006; (c) and Optionee may sell an additional 51,249 beginning on November 11th and each ninety days thereafter until 100% of his shares of common stock by Optionee shall be fully tradable on May 9, 2007, provided that the restrictions listed above shall be eliminated once the per-share trading price of the Company’s common stock on the Nasdaq exchange closes at or above $13 per share, or if the 30 day average daily stock volume reaches 50,000 shares.

(c)  Except as specifically set forth herein to the contrary, all other terms and conditions of the Plans and the Plan Agreements shall remain in full force and effect.

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

EXHIBIT I

Participant Statement

As of May 31, 2006

Cytori Therapeutics, Inc.

Charles E. Galetto

Stock Class:  CYTX     |     Currency:  USD ($)

Plan:  1997 Stock Plan

EXHIBIT I

Participant Statement

As of May 31, 2006

Cytori Therapeutics, Inc.

Charles E. Galetto

Stock Class:  CYTX     |     Currency:  USD ($)

Plan:  2004 Equity Incentive Plan

EXHIBIT II

GENERAL RELEASE AGREEMENT

This General Release Agreement (the “Agreement”) is made and entered into by and between CYTORI THERAPEUTICS, INC. (Company) and CHARLES E. GALETTO.

WHEREAS, CHARLES E. GALETTO has been employed by CYTORI THERAPEUTICS, INC. as Senior Vice President, Finance and Administration / Treasurer since April 2000;

WHEREAS, for sound business reasons and in the best interests of CHARLES E. GALETTO and the Company,  the Company and CHARLES E. GALETTO have agreed to end CHARLES E. GALETTO’s employment with the Company effective December 15, 2006.

WHEREAS, CHARLES E. GALETTO and the Company do not anticipate that there will be any disputes between them or legal claims arising out of CHARLES E. GALETTO’s separation from the Company, the parties nevertheless desire to ensure a completely amicable parting and to settle fully and finally any and all differences or claims that might otherwise arise out of CHARLES E. GALETTO’s employment with the Company relative to the termination of his employment;

NOW, THEREFORE, in consideration of the mutual promises contained herein, it is agreed as follows:

1.                                       Separation from Employment Relationship.  The employment relationship shall terminate and cease as of December 15, 2006 (Separation Date).

2.                                       Consideration.     In consideration of CHARLES E. GALETTO entering into this General Release Agreement, CYTORI agreed to the terms of the Stock Option Extension Agreement effective June 1, 2006.

3.                                       Confidentiality.    The parties understand and agree that this Agreement, and the matters discussed in negotiating its terms, are entirely confidential.  It is therefore expressly understood and agreed that CHARLES E. GALETTO will not reveal, discuss, publish or in any way communicate any of the terms, amount or fact of this Agreement to any person, organization or other entity, except as may be required by law and except to Employee’s immediate family members and professional representatives, who shall be informed of and bound by this confidentiality clause. It is also agreed and understood that Company may make any disclosure of the terms of the Agreement as may be required by law.

4.                                       Release of Claims.               CHARLES E. GALETTO, for himself and his heirs, successors and assigns, does hereby agree to waive, release, acquit and forever discharge Company, and Company’s parents, subsidiaries, affiliates, and related entities or companies, and all past and present officers, directors, shareholders, employees, agents, partners, attorneys, heirs, successors, and assigns, (hereinafter “Released Parties”) from any and all claims, actions, charges, complaints and causes of action (hereinafter collectively referred to as “claims”), of whatever nature, whether known or unknown, which exist or may exist on CHARLES E. GALETTO’s behalf against Released Parties as of the date of this Agreement, including but not limited to any and all tort claims, contract claims, wage claims, commission claims, bonus claims, overtime claims, wrongful termination claims, public policy claims, retaliation claims, statutory claims, personal injury claims, emotional distress claims, privacy claims, defamation claims, fraud claims, and any and all claims arising under any federal, state or other governmental statute, law, regulation or ordinance relating to employment, including but not limited to Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the California Labor Code, and the California Fair Employment and Housing Act covering discrimination in employment, including race, color, religious creed, national origin, ancestry, physical or mental disability, medical condition, marital status, military status, family care leave, pregnancy, sex, sexual orientation, age, and harassment or retaliation.