Exhibit 10.6 to Biodrain Medical, Inc. Form S-1




Exhibit 10.6 

OPTION
AGREEMENT


          THIS
OPTION AGREEMENT (the “Option Agreement”) is made and entered
into effective as of June 5, 2008, by and between BioDrain Medical, Inc., a
Minnesota corporation (“the Company”) and Kevin R. Davidson (“Davidson”), an
individual residing in the state of Minnesota.


          W I T N E S S E T
H


          WHEREAS,
the Company and Davidson are parties to an Employment Agreement dated October 4, 2006 (the
“Agreement”); and


          WHEREAS,
under the Agreement, the Company may be required to issue shares of common
stock of the Company to Davidson; and


          WHEREAS,
the parties desire to modify the Agreement to provide that the Company will
issue options to acquire common stock of the Company in place of common stock
of the Company.


          NOW,
THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Davidson an option to purchase
common stock of the Company upon the terms and conditions set forth herein to
which the Company and Davidson hereby agree:


          1.)
Grant of Option. The Company hereby grants to Davidson an Option (the
“Option”) effective as of the date hereof (the “Date of Grant”) to purchase an
aggregate of 543,292 shares of common stock of the Company (the “Options
Shares”) upon the terms and conditions set forth herein and subject to any
adjustments pursuant to the provisions of Section 7. Such Option is a
“non-qualified” stock option under the Internal Revenue Code.


          2.)
Option Price. Subject to any adjustments pursuant to the provisions of
Section 7, the exercise price of the Option Shares (“the Option Price”) is one
cent ($.01) per Option Share. The Option Price, if and when paid, shall be
deemed to be a capital contribution to the Company by Davidson.


          3.)
Vesting; Term of Option. Except as otherwise provided in this Agreement,
the Option shall be fully vested immediately and shall be exercisable by
Davidson until June 5, 2018.


          4.)
Manner of Exercise. Subject to the terms and conditions of this
Agreement, Davidson may exercise the Option by providing written notice to the
Company which:


	
 

	
 


	
 

	
(a) States that the Option is being exercised and
 sets forth the number of Option Shares with respect to which the Option is
 being exercised (the Option may be exercised in increments of 10,000 shares
 or, if fewer, all remaining Shares); and


	
 

	
 


	
 

	
(b) Represents that it is being exercised by
 Davidson for his own account; and












	
 

	
 


	
 

	
(c) Is signed by Davidson; and


	
 

	
 


	
 

	
(d) Is accompanied by payment of the exercise price.





Notice which is deficient in any particular manner
shall not constitute an exercise of the Option.


          5.)
Status as Shareholder: Delivery of Certificate. Upon close of business
on the date of exercise, Davidson shall be a shareholder of the Company without
regard to whether a certificate representing the Option Shares shall have
issued. Within fifteen (15) business days after exercise, the Company shall
deliver a certificate evidencing the Option Shares to Davidson.


          6.)
Payment of Exercise Price. Upon exercise, and as a condition to
exercise, Davidson shall pay the Option Price for the Option Shares being
purchased by delivery of cash, check, bank draft, or money order made payable
to the Company in an amount equal to the aggregate exercise price or in any
other manner acceptable to the Company.


          7.)
Adjustments for Changes in Shares. The number of Option Shares issuable
upon the exercise of all or a portion of the Option shall be subject to
adjustment from time to time upon the happening of the following events:


	
 

	
 


	
 

	
(a) In case the Company shall subdivide its
 outstanding shares into a greater number of shares or declare a dividend or
 distribution payable in shares, the number of shares issuable hereunder shall
 be proportionately increased and the Option Price shall be proportionately
 decreased. Conversely, in case the outstanding shares shall be combined into
 a smaller number of shares, the number of shares issuable hereunder shall be
 proportionately decreased and the Option Price shall be proportionately
 increased. Upon occurrence of each such event, the Chief Financial Officer or
 President of the Company shall prepare a certificate of calculation of such adjustment
 and deliver a copy of such calculation to Davidson.


	
 

	
 


	
 

	
(b) If any capital reorganization or
 reclassification of the shares of the Company or consolidation or merger of
 the Company with another corporation or a limited liability company shall be
 effected in such a way that holders of shares shall become entitled to
 receive stock, securities, or other assets with respect to or in exchange for
 such shares, then the Optionee shall have the right to purchase and receive
 upon the terms and conditions specified in the Option, and in lieu of the
 shares immediately theretofore purchasable and receivable upon the exercise
 of this Option, such substituted property as would have been issued or
 delivered to the Optionee with respect to or in exchange for the Option
 Shares as would have been issued or delivered to the Optionee if he had
 exercised the Option and had received, upon exercise of the Option, the
 Option Shares immediately prior to such reorganization, reclassification,
 consolidation, merger, or sale.





          8.)
Postponement of Exercise. Notwithstanding anything herein to the
contrary, the Company shall have the right to delay any exercise for a period
of up to one hundred eighty (180) days for the purpose of ensuring the
availability of an exemption under applicable securities law for the issuance
of the Option Shares to the Optionee in light of other transactions by the


2.






Company in its securities. If the Company elects to
delay any such exercise, the Company shall inform the Optionee, in writing, of
such delay and the term of such delay. Any such delay shall not lead to any
change in the Option Price or the terms of the Option and shall not extend the
term of any Option unless such delay would extend past the expiration date of
such Option. In such case, the expiration date shall be extended to thirty (30)
days after the end of such delay.


          9.)
Securities Laws. The Optionee has been advised that the Option, and the
Option Shares to be purchased pursuant to the Option, are not being registered
under the Securities Act of 1933, as amended (the “Act”), or any state
securities laws pursuant to exemptions from the Act, and that the Company’s
ability and obligation to issue the Option Shares is dependent upon the
availability of exemptions from registration pursuant to the Act and applicable
state securities laws. The Company has no obligation to register this Option or
the Option Shares under federal or state securities laws. In the event that the
Company cannot find an exemption from registration under the Act and applicable
state securities laws for issuance of the Option Shares, the Company may delay
exercise and shall issue the Option Shares at the first opportunity an
exemption is available.


          10.)
Representations. The Optionee acknowledges and agrees as follows:


	
 

	
 


	
 

	
(a) The Option and any Option Shares acquired
 pursuant to exercise of the Option are being acquired for the Optionee’s own
 account and for investment and not with a view to, or for resale in
 connection with, any distribution or public offering of the Option Shares
 within the meaning of the Act or any applicable state securities laws.


	
 

	
 


	
 

	
(b) The Company has no obligation to register the
 Option or the Option Shares under either federal or state securities laws;


	
 

	
 


	
 

	
(c) The Option and the Option Shares may not be
 transferred or resold without registration under the Act and any applicable
 state securities acts or the existence of an exemption from those
 registration requirements;


	
 

	
 


	
 

	
(d) The records of the Company will be marked to
 prevent any proposed transfer of the Option or the Option Shares until there
 is compliance with the registration requirements of the Act and any
 applicable state securities laws, or until the Company is satisfied that an
 exemption from such registration requirements is applicable to any proposed
 transfer (the obligation to determine the availability of any sale exemption
 shall be that of the Optionee and is subject to the Company’s counsel being
 satisfied as to the availability of such exemption);


	
 

	
 


	
 

	
(e) The Company has no obligation to perfect any
 exemption under the Act or applicable state securities laws for the resale of
 the Option Shares;


	
 

	
 


	
 

	
(f) The Optionee agrees that he will not exercise
 the Option unless, and by exercising the Option, the Optionee will represent
 that, by reason of the Optionee’s knowledge and experience in financial and
 business matters in general, and investments in particular, the





3.






	
 

	
 


	
 

	
Optionee is capable of evaluating the merits and
 risks of an investment in the Option Shares;


	
 

	
 


	
 

	
(g) The Option Shares shall bear a legend
 restricting the transferability thereof, such legend to be substantially in
 following form:








	
 

	
 

	
 


	
 

	
“The securities represented by this Certificate have
 not been registered under the Securities Act of 1933, as amended, or
 applicable state securities laws. Such securities may not be sold, pledged or
 otherwise transferred except pursuant to an effective registration statement
 or an opinion of counsel, satisfactory to the issuer, as to the availability
 of an exemption from registration under the foregoing laws. This legend
 represents a restriction on transferability of the securities represented by
 this Certificate.”

	
 








	
 

	
 


	
 

	
(h) The Optionee agrees that he will not exercise
 the Option unless, and by exercising the Option, the Optionee will represent
 that, the Optionee realizes that the acquisition of the Option Shares upon
 exercise of the Option would be a long-term investment, and the Optionee must
 bear the economic risk of such investment for an indefinite period of time;


	
 

	
 


	
 

	
(i) The Optionee agrees that he will not exercise
 the Option unless, and by exercising the Option, the Optionee will represent
 that, the Optionee believes he has the knowledge and experience in financial
 and business matters such that he is capable of evaluating the merits and
 risks of the potential investment in the Option Shares;


	
 

	
 


	
 

	
(j) The Optionee agrees that he will not exercise
 the Option unless, and by exercising the Option, the Optionee will represent
 that, the Optionee has obtained, to the extent the Optionee deems necessary,
 personal and professional advice with respect to the risks inherent in the
 investment in the Option Shares in light of the Optionee’s financial
 condition and investment needs;


	
 

	
 


	
 

	
(k) The Optionee agrees that he will not exercise
 the Option unless, and by exercising the Option, the Optionee will represent
 that, the Optionee has been and will have been given access to full and
 complete information regarding the Company and has utilized and will have utilized
 such access to his satisfaction for the purpose of obtaining information.
 Specifically, the Optionee will have attended or will have been given
 reasonable opportunity to attend a meeting with representatives of the
 Company for the purpose of asking questions of, and receiving answers from,
 such representatives concerning the Company and the Option Shares and to
 obtain any additional information, to the extent reasonably available; and


	
 

	
 


	
 

	
(1) Prior to exercise and as a condition of
 exercise, at the Company’s election, the Optionee shall reconfirm the
 accuracy and currency of the foregoing representations.


	
 

	
 


	
 

	
(m) Notwithstanding any of the other provisions of
 this Agreement, the Optionee shall not exercise the Option, and the Company
 will not be obligated to issue the Option Shares





4.






	
 

	
 


	
 

	
to the Optionee hereunder, if the exercise of the
 Option or the issuance of the Option Shares will constitute a violation by
 the Optionee or the Company of any provisions of any law or regulation of any
 governmental authority.





          11.)
Nontransferability of Option. The Option granted under this Agreement is
not transferable by the Optionee, either voluntarily or involuntarily, except
by will or the laws of descent and distribution. Any attempt to do so will void
the Option. The Option is exercisable only by the Optionee or the Optionee’s
legal representative, or, upon transfer by will or the laws of descent and
distribution, by the transferee.


          12.)
No Obligation to Exercise; No Rights as a Shareholder. The granting of
this Option shall impose no obligation upon the Optionee to exercise such
Option. No rights as a shareholder of the Company will inure to the Optionee
with respect to any of the Option Shares until this Option is duly exercised as
to such shares and the Optionee has become a holder of record of such shares.
No adjustments will be made for cash dividends or other distributions or other
rights as to which there is a record date preceding the date the Optionee
becomes the holder of record of such Option Shares.


          13.)
Additional Information. The Optionee agrees to supply such additional
information and documentation relating to the Optionee as may be requested by
the Company in order to ensure compliance by the Company with all applicable
laws.


          14.)
Withholding Taxes. The Optionee acknowledges that under the law in
effect as of the date of this Agreement, he will generally realize income for
federal and state income tax purposes at the time of exercise of the Option,
and further, that such income may constitute compensation subject to
withholding of income taxes. At the time of any exercise of the Option, the
Optionee will make arrangements with the Company to satisfy any withholding tax
obligations resulting from the exercise of the Option.


          15.)
Notice. Any notice required to be given by this Agreement shall be in
writing and shall, except as otherwise provided herein, be deemed delivered
when delivered personally or sent by registered or certified mail, return receipt
requested, to the respective party at the following address or such address as
the receiving party may designate by prior written notice under this section:


	
 

	
 


	
As to the Company:

	
BioDrain Medical, Inc.


	
 

	
699 Minnetonka Highlands Lane
 Orono, Minnesota
 55356-9728


	
 

	
 


	
As to the Optionee:

	
Kevin R. Davidson


	
 

	
 


	
 

	 


	
 


	
 

	
 


	
 

	 





          16.)
Binding Effect. This Agreement shall be binding upon and inure to the
benefit of all the parties hereto and their successors and permitted assigns.


5.






          17.)
Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Minnesota, without giving
effect to the choice of law provisions of such state.


          18.)
Multiple Counterparts. This Agreement may be executed in several
counterparts, each of which shall, for all purposes, be deemed an original, and
all of such counterparts, taken together, shall constitute one and the same
agreement, even though all of the parties hereto may not have executed the same
counterpart of this Agreement.


          IN
WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.


	
 

	
 

	
 

	
 

	
 


	
 

	
COMPANY:


	
 

	
BIODRAIN MEDICAL, INC.


	
 

	
 


	
Dated:

	
By:

	
/s/ Kevin R. Davidson


	
 

	
 

	 


	
 

	
 

	
Kevin R. Davidson


	
 

	
 

	
Its: President


	
 

	
 

	
 


	
 

	
Attest:

	
/s/ Gerald D. Rice


	
 

	
 

	 


	
 

	
 

	
 

	
Gerald D. Rice


	
 

	
 

	
 

	
Its:

	
 


	
 

	
 

	
 

	
 

	 


	
 

	
 

	
 


	
 

	
OPTIONEE:


	
 

	
/s/ Kevin R. Davidson


	
 

	 


	
 

	
Kevin R. Davidson





6.