Exhibit 10.32 to Biodrain Medical, Inc. Form S-1



Exhibit 10.32 


REGISTRATION RIGHTS AGREEMENT


          Registration
Rights Agreement, dated as of _________, 2008 (this “Agreement”), by and among
BioDrain Medical, Inc., a Minnesota corporation (the “Company”), and the
Purchasers (as defined below). 


W I T N E S S E T H


          WHEREAS,
the Company is offering (the “Offering”) an aggregate of up to 4,857,144 units
of its securities, each unit consisting of one share of its Common Stock, par
value $.001 per share (the “Shares”) and one warrant to purchase one share of common
stock at $0.46 per share, (the securities offered in the Offering being
sometimes hereinafter referred to as the “Securities”); 


          WHEREAS,
the Company desires to issue and sell to the persons listed on Schedule A,
attached hereto (each a “Purchaser,” and collectively, the “Purchasers”), the
Securities as set forth in the Subscription Agreement entered into or to be
entered into by and between the Company and the Purchasers (the “Subscription
Agreement”);  


          WHEREAS, it
is a condition precedent to the consummation of the transactions contemplated
by the Subscription Agreement that the Company provide for the rights set forth
in this Agreement; and 


          WHEREAS,
certain terms used in this Agreement that are not defined in context are
defined in Section 3 hereof, or if not defined therein, then as defined in the
Subscription Agreement. 


          NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
and agreements hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, the parties hereto hereby agree as follows: 


1. Registration Rights.  


          1.1
Required Registration. The Company shall file with the SEC a registration
statement on Form SB-2 or successor form or another form selected by the
Company that is available to it under the Securities Act which conforms with
all applicable rules and regulations (the “Required Registration Statement”) with
respect to all the Shares and Warrant Shares issued (“Registrable Securities”)
beneficially owned by the Purchasers to permit the offer and re-sale from time
to time of such Registrable Securities in accordance with the methods of
distribution provided by the Purchasers within 120 days of the Closing (“Filing Date”). The Company shall use
its reasonable best efforts to cause the Required Registration Statement to
become effective as promptly as reasonably practicable thereafter. If the
Required Registration Statement is not filed by the Filing Date or is not
declared effective by the Commission within 180
days of the Closing (any such failure or breach being referred to as an
“Event”, and the date on which such Event occurs being referred to as “Event
Date”), then on the Event Date and on the date of each successive 30 days
period thereof until the Event is cured, the Company shall pay to each investor
an amount in Company’s Common Stock, as liquidated damages and not as a
penalty, equal to 2.0% of the purchase price of such investor’s Units;
provided, however that the liquidated damages may not exceed 16% of such
purchase price. The liquidated damages pursuant to the terms hereof shall apply
on a pro-rata basis for any portion of a month prior to the cure of an Event.
Notwithstanding the preceding provisions of this Section 1.1, if the Company
timely files a Registration Statement, which, as may be relevant, complies with
the provisions of Section 1.1 of this Agreement and the SEC raises issues
relating to the applicability of Rule 415 to the number of shares sought to be
registered under such Registration Statement, the provisions regarding the
liquidated damages shall not apply with respect to the Registrable Securities
which the SEC deems to exceed the number of shares eligible for the
registration under Rule 415 as filed by the Company.  


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          1.2 The
Company shall use its reasonable best efforts to keep such Required
Registration Statement continuously effective (the “Effective Period”) until
the first anniversary of the effective date of the Required Registration
Statement plus whatever period of time as shall equal any period, if any,
during the Effective Period in which the Company was not current with its
reporting requirements under the Exchange Act.  


          1.3
Piggyback Registrations. 


                    (a) Right
to Piggyback. Whenever the Company proposes to register any of its
securities under the Securities Act and the registration form to be used may be
used for the registration of Registrable Securities, whether or not for sale
for its own account, the Company will give prompt written notice (but in no
event less than thirty (30) days before the anticipated filing date) to all
holders of Registrable Securities, and such notice shall describe the proposed
registration and distribution and offer to all holders of Registrable
Securities the opportunity to register the number of Registrable Securities as
each such holder may request. Subject to paragraph (d) of this Section 1.3, the
Company will include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion
therein within five (5) days after the holders’ receipt of the Company’s notice
(a “Piggyback Registration”). 


                    (b)
Reasonable Efforts. The Company shall use all reasonable efforts to
cause the managing underwriter or underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggyback Registration to be included on the same terms and conditions as any
similar securities of the Company or any other security holder included therein
and to permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. 


                    (c)
Withdrawal. Any holder of Registrable Securities electing to participate
in a Piggyback Registration (a “Designated Holder”) shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 1.3 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggyback
Registration at any time. 


                    (d)
Priority in Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company or a secondary
registration on behalf of a security holder exercising demand registration
rights (the “Initiating Holder”), and the managing underwriters advise the
Company in writing (with a copy to each party hereto requesting registration of
Registrable Securities) that in their opinion the number of Registrable
Securities requested to be included in such registration exceeds the number
which can be sold in such offering without materially and adversely affecting
the marketability of such primary or secondary offering (the “Offering
Quantity”), then the Company will include in such registration securities in
the following priority: 


                              i.
First, the Company will include the securities the Company proposes to sell
and, if applicable, the securities the Initiating Holder proposes to sell. 


                              ii.
Second, the Company will include all Registrable Securities requested to be included
by any Designated Holder, and if the number of such Designated Holders’
securities requested to be included exceeds the Offering Quantity, then the
Company shall include only each such requesting Designated Holders’ pro rata
share of the shares available for registration by the Purchaser, based on the
amount of securities held by such Designated Holder. 


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          1.4
Holdback Agreements. 


                    (a)
To the extent not inconsistent with applicable law, in the case of an
underwritten public offering, the underwriters managing such underwritten
offering of the Company’s securities, each holder of Registrable Securities
will not effect any public sale or distribution (other than those included in
the registration) of any securities of the Company, or any securities, options
or rights convertible into or exchangeable or exercisable for such securities
during the seven days prior to and the 60-day period beginning on the effective
date of the Registration Statement relating to such offering, unless (in the
case of an underwritten public offering) the managing underwriters otherwise
agree to a shorter period of time. Notwithstanding the foregoing, no Designated
Holder shall be required to enter into any such “lock up” agreement unless and
until all of the Company’s executive officers and directors execute identical
“lock up” agreements and the Company uses commercially reasonable efforts to
cause each holder of more than 10% of its outstanding capital stock to execute
identical “lock up” agreements. Neither the Company nor the underwriter shall
amend, terminate or waive a “lock up” agreement unless each “lock up” agreement
with a Designated Holder is also amended or waived in a similar manner or
terminated, as the case may be. 


                    (b)
The Company shall have the right at any time to require that the Designated
Holders of Registrable Securities suspend further open market offers and sales
of Registrable Securities pursuant to a Registration Statement filed hereunder
whenever in the reasonable judgment of the Company after consultation with
counsel there is or may be in existence a Changing Event (as defined herein).
The Company will give the Designated Holders notice of any such suspension and
will use all reasonable best efforts to minimize the length of such suspension.



          1.5 Registration
Procedures. Whenever any Registrable Securities are required to be
registered pursuant to this Agreement, the Company will use reasonable best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended methods of disposition thereof, and pursuant
thereto the Company will as expeditiously as possible: 


                    (a)
prepare and file with the SEC on any form, if not so otherwise provided for,
for which the Company qualifies, as soon as practicable after the end of the
period within which requests for registration may be given to the Company, a
Registration Statement with respect to the offer and sale of such Registrable
Securities and thereafter use reasonable best efforts to cause such
Registration Statement to become effective and remain effective until the
completion of the distribution contemplated thereby or the required time period
under this Agreement, whichever is shorter (and before filing such Registration
Statement, the Company will furnish to the counsel selected by the holders of a
majority of the Registrable Securities initiating such Registration Statement
copies of all such documents proposed to be filed); provided, however,
that the Company may postpone for not more than ninety (90) calendar days the
filing or effectiveness of the Required Registration Statement if the Board of
Directors, in its good faith judgment, determines that such registration could
reasonably be expected to have a material adverse effect on the Company and its
stockholders including, but not limited to, any proposal or plan by the Company
to engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction
then under consideration by delivering written notice to the holders of
Registrable Securities of its determination to postpone such Registration
Statement; provided, further, that (i) the Company shall
not disclose any information that could be deemed material non-public
information to any holder of Registrable Securities included in a Registration
Statement that is subject to such postponement, (ii) in no event may the
Company postpone a filing requested hereunder more than twice; provided,
that such postponements must be at least three (3) months apart; provided,
further, that the Company may delay the effectiveness of the
Required Registration Statement if the SEC rules and regulations prohibit the
Required Registration Statement from being declared effective because its
financial statements are stale at a time when its fiscal year has ended or it 


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has made an acquisition reportable under the applicable item under Form
8-K or any other similar situation until the earliest time in which the SEC
would allow the Required Registration Statement to be declared effective
(provided that the Company shall use its reasonable best efforts to cure any
such situation as soon as possible so that the Registration Statement can be
declared effective at the earliest possible time); 


                    (b)
prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective for a period
provided for in the applicable Section above or, if such Registration Statement
relates to an underwritten offering, such period as in the opinion of counsel
for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered
by such Registration Statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such Registration Statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until such time as all of
such securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such Registration
Statement; 


                    (c)
furnish to each seller of Registrable Securities, prior to filing a
Registration Statement, such number of copies of such Registration Statement,
each amendment and supplement thereto, the prospectus included in such
Registration Statement (including each preliminary prospectus) and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller; 


                    (d)
register or qualify such Registrable Securities under such state securities or
blue sky laws of such jurisdictions as any seller reasonably requests and do
any and all other acts and things which may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such seller and to keep each such
registration or qualification (or exemption therefrom) effective during the
period which the Registration Statement is required to be kept effective (provided,
that the Company will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction); 


                    (e)
notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event (a “Changing Event”) as a result of which,
the prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and, at the request of any such seller, the Company will as soon as
possible prepare and furnish to such seller (a “Correction Event”) a reasonable
number of copies of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; 


                    (f)
cause all such Registrable Securities to be listed on each securities exchange
on which similar securities issued by the Company are then listed and, if not
so listed, to be listed on a national stock exchange, The Nasdaq Stock Market
or the Nasdaq SmallCap trading system; 


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                    (g)
provide a transfer agent and registrar for all such Registrable Securities not
later than the effective date of such Registration Statement; 


                    (h)
before filing a Registration Statement or prospectus or any amendments or
supplements thereto, the Company shall provide counsel selected by the
Designated Holders holding a majority of the Registrable Securities being
registered in such registration (“Holders’ Counsel”) and any other Inspector
(as defined below) with an adequate and appropriate opportunity to review and
comment on such Registration Statement and each prospectus included therein
(and each amendment or supplement thereto) to be filed with the SEC, subject to
such documents being under the Company’s control, and the Company shall notify
the Holders’ Counsel and each seller of Registrable Securities of any stop
order issued or threatened by the SEC; 


                    (i)
otherwise comply with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company’s first full calendar quarter after the effective
date of the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; 


                    (j)
in the event of the issuance of any stop order suspending the effectiveness of
a Registration Statement, or of any order suspending or preventing the use of
any related prospectus or suspending the qualification of any securities
included in such Registration Statement for sale in any jurisdiction, the
Company will use its reasonable best efforts promptly to obtain the withdrawal
of such order; 


                    (k)
subject to execution and delivery of mutually satisfactory confidentiality
agreements, make available at reasonable times for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition of such Registrable Securities pursuant to a Registration
Statement, Holders’ Counsel and any attorney, accountant or other agent
retained by any managing underwriter (each, an “Inspector” and collectively,
the “Inspectors”), all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively, the
“Records”) as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company’s and its subsidiaries’
officers, directors and employees, and the independent public accountants of
the Company, to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement; 


                    (l)
subject to execution and delivery of mutually satisfactory confidentiality
agreements, keep Holders’ Counsel advised as to the initiation and progress of
any registration hereunder including, but not limited to, providing Holders’
Counsel with all correspondence with the SEC; 


                    (m)
cooperate with each seller of Registrable Securities and each underwriter participating
in the disposition of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the NASD; and 


                    (n)
take all other steps reasonably necessary to effect the registration of the
Registrable Securities contemplated hereby. 


          1.6 Registration
Expenses. All expenses incident to the Company’s performance of or
compliance with this Agreement including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions, which will be
paid by the sellers of 


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Registrable Securities) and other Persons retained by the Company will
be borne by the Company, and the Company will pay its internal expenses
(including, without limitation, all salaries and expenses of its Employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange or
trading system on which similar securities issued by the Company are then
listed or qualified for trading. The Company shall have no obligation to pay
any underwriting discounts or commissions attributable to the sale of
Registrable Securities and any of the expenses incurred by the Designated
Holders, such costs to be borne by such Designated Holder or Holders. 


          1.7
Indemnification. 


                    (a)
The Company agrees to indemnify and hold harmless, to the fullest extent
permitted by law, each holder of Registrable Securities and its general or
limited partners, officers, directors, members, managers, employees, advisors,
representatives, agents and Affiliates (collectively, the “Representatives”)
from and against any reasonable loss, claim, damage, liability, a single
reasonable attorney’s fees, cost or expense and costs and expenses of
investigating and defending any such claim (collectively, the “Losses”) and any
action in respect thereof to which such holder of Registrable Securities or its
Representatives may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereto) arise out of or are based upon (i) any untrue
or alleged untrue statement of a material fact contained in any Registration
Statement at the time it is declared effective, prospectus or preliminary
prospectus (but only preliminary prospectuses approved for distribution by the
Company) or any amendment or supplement thereto or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Company shall not be liable to any such holder or other indemnitee in
any such case to the extent that any such Loss (or action or proceeding,
whether commenced or threatened, in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission, made in such Registration Statement, any such prospectus or
preliminary prospectus or any amendment or supplement thereto, in reliance
upon, and in conformity with, written information prepared and furnished to the
Company by such holder of Registrable Securities or its Representatives expressly
for use therein or by failure of such holder of Registrable Securities to
deliver a copy of the Registration Statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder of Registrable
Securities with a sufficient number of copies of the same. In connection with
an underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities. 


                    (b)
In connection with any Registration Statement in which the holders of
Registrable Securities are participating pursuant to this Agreement, the
holders of Registrable Securities will furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
such Registration Statement or prospectus and, to the fullest extent permitted
by law, each such holder of Registrable Securities will, severally but not
jointly, indemnify and hold harmless the Company and its Representatives from
and against any Losses and any action in respect thereof to which the Company
and its Representatives may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon (i) the
purchase or sale of Registrable Securities during a suspension as set forth in
herein after written receipt of notice of such suspension, (ii) by failure of
such holder of Registrable Securities to deliver a copy of the Registration
Statement or prospectus or any amendments or supplements thereto after the Company
has furnished such holder of Registrable Securities with a sufficient number of
copies of the same, (iii) any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, prospectus or preliminary
prospectus or any amendment or 


6






supplement thereto, or (iv) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but, with respect to clauses (iii) and (iv) above, only
to the extent that such untrue statement or omission is made in such
Registration Statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto, in reliance upon and in conformity with
written information prepared and furnished to the Company by such holder of
Registrable Securities expressly for use therein; provided, however,
that such holder of Registrable Securities shall not be liable in any such case
to the extent that prior to the filing of any such Registration Statement or
prospectus or amendment or supplement thereto, such holder of Registrable
Securities has furnished in writing to the Company information expressly for
use in such Registration Statement or prospectus or any amendment or supplement
thereto which corrected or made not misleading information previously furnished
to the Company; provided, further, however, that the
obligation to indemnify will be individual to each such holder of Registrable
Securities and will be limited to the net amount of proceeds received by such
holder of Registrable Securities from the sale of Registrable Securities
pursuant to such Registration Statement. In connection with an underwritten
offering, each holder of Registrable Securities participating in such offering
will indemnify such underwriters, their officers and directors and each Person
who controls such underwriters (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification of the
Company. 


                    (c)
Promptly after receipt by any Person entitled to indemnification pursuant to
Section 1.6(a) or 1.6(b) (an “Indemnified Party”) of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the Person against whom such indemnity may be
sought (an “Indemnifying Party”), promptly notify the Indemnifying Party in
writing of the claim or the commencement of such action; provided, that
the failure to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability which it may have to an Indemnified Party otherwise
than under Section 1.6(a) or 1.6(b) except to the extent of any actual
prejudice resulting therefrom. If any such claim or action shall be brought
against an Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be entitled to participate therein, and,
to the extent that it wishes, jointly with any other similarly notified
Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying Party
to the Indemnified Party of its election to assume the defense of such claim or
action, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, that the Indemnified Party shall have the right
to employ separate counsel to represent the Indemnified Party and its
Representatives who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel
or (ii) in the written opinion of counsel to such Indemnified Party,
representation of both parties by the same counsel would be inappropriate due
to actual or potential conflicts of interest between them, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
claim or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for all
Indemnified Parties. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any claim or pending
or threatened proceeding in respect of which the Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such claim or
proceeding other than the payment of monetary damages by the Indemnifying Party
on behalf of the Indemnified Party. Whether or not the defense of any claim or
action is assumed by the Indemnifying Party, such Indemnifying Party will not
be 


7






subject to any liability for any settlement made without its consent,
which consent will not be unreasonably withheld or delayed. 


          (d) If the
indemnification provided for in this Section 1.5 is unavailable to the
Indemnified Parties in respect of any Losses referred to herein, then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the holders of the Registrable Securities on
the other from the offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company on the one hand and the holders of the Registrable
Securities on the other in connection with the statements or omissions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of each holder of the
Registrable Securities on the other shall be determined by reference to, among
other things, whether any action taken, including any untrue or alleged untrue
statement of a material fact, or the omission or alleged omission to state a
material fact relates to information supplied by such party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. 


          The Company
and the holders of the Registrable Securities agree that it would not be just
and equitable if contribution pursuant to this Section 1.6(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the Losses referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Each holder’s obligations to
contribute pursuant to this Section 1.6 is several in the proportion that the
proceeds of the offering received by such holder of the Registrable Securities
bears to the total proceeds of the offering received by all the holders of the
Registrable Securities and not joint. 


          1.8
Participation in Underwritten Registrations. 


                    (a)
No Person may participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person’s securities on the basis provided
in any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements (including, without limitation, pursuant
to the terms of any over-allotment or “green shoe” option requested by the
managing underwriter(s), provided, that each holder of Registrable
Securities shall not be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements
and this Agreement. 


                    (b)
Each Person that is participating in any registration hereunder agrees that,
upon receipt of any notice from the Company of the happening of any event of
the kind described in Section 1.5(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
Registration Statement until such Person’s receipt of the copies of a supplemented
or amended prospectus as contemplated by such Section 1.5(e). 


          1.9 Current
Public Information. The Company covenants that it will file all reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations adopted by 


8






the SEC thereunder, and will use reasonable best efforts to take such
further action as the Purchaser may reasonably request, all to the extent
required to enable the holders of Registrable Securities to sell Registrable
Securities pursuant to Rule 144 or Rule 144A adopted by the SEC under the
Securities Act or any similar rule or regulation hereafter adopted by the SEC.
The Company shall, upon the request of a Designated Holder, deliver to such
Designated Holder a written statement as to whether it has complied with such
requirements. 


2. Transfers of Certain Rights. 


          2.1 Transfer.
The rights granted to the Purchaser under this Agreement may be assigned or
transferred without the prior written consent of the Company to any permitted
transferee of such Purchaser’s Registrable Securities, subject only to the
provisions of Section 2.2 below; provided, however, that any assignee or
transferee shall have the right for inclusion in any effective Registration
Statement as a “selling shareholder” only upon the filing of a post-effective
amendment by the Company which the Company shall file at its discretion. 


          2.2 Transferees.
Any transferee to whom rights under this Agreement are permitted to be
transferred shall, as a condition to such transfer, deliver to the Company a
written instrument by which such transferee agrees to be bound by the
obligations imposed upon the Purchaser under this Agreement to the same extent
as if such transferee were a Purchaser hereunder. 


3. Certain Definitions. The
following capitalized terms shall have the meanings ascribed to them below: 


          “Affiliate”
means any Person that directly or indirectly controls, or is under common
control with, or is controlled by such Person. As used in this definition,
“control” (including with its correlative meanings, “controlled by” and “under
common control with”) shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a Person
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). 


          “Common
Stock” means the common stock of the Company. 


          “Employees”
means any current, former, or retired employee, office consultant, advisor,
independent contractor, agent, officer or director of the Company. 


          “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC promulgated thereunder. 


          “Person”
means any individual, company, partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental body or
other entity. 


          “Registrable
Securities” means, subject to the immediately following sentence, (i) shares of
Common Stock issued or issuable upon the conversion of shares of Common Stock
(including Warrant Shares) acquired from the Company pursuant to the
Subscription Agreement, and (ii) any securities issued or issuable directly or
indirectly with respect to the securities referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares of Common Stock constituting Registrable Securities, such
shares of Common Stock will cease to be Registrable Securities when they (x)
have been effectively registered under the Securities Act and disposed of in
accordance with a Registration Statement covering them, (y) have been sold to
the public pursuant to Rule 144 (or by similar provision under the Securities
Act), or (z) are eligible for resale under Rule 144 (or by similar 


9






provision under the Securities Act) without any limitation on the
amount of securities that may be sold under paragraph (e) thereof. 


          “Registration
Statement” means any registration statement of the Company filed under the
Securities Act which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the prospectus, amendments and
supplements to such registration statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
registration statement. 


          “SEC” means
the United States Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act. 


          “Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder. 


4. Miscellaneous. 


          4.1 Recapitalizations,
Exchanges, etc. The provisions of this Agreement shall apply to the full
extent set forth herein with respect to (i) the Securities, (ii) any and all
securities into which the Securities are converted, exchanged or substituted in
any recapitalization or other capital reorganization by the Company and (iii)
any and all equity securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in conversion of, in exchange for or in
substitution of, the Securities and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations, recapitalizations and
the like occurring after the date hereof. The Company shall cause any
successor, assign or issuer of securities that are Registrable Securities
(whether by merger, consolidation, sale of assets or otherwise) to enter into a
new registration rights agreement with the Designated Holders on terms substantially
the same as this Agreement as a condition of any such transaction. 


          4.2 No
Inconsistent Agreements. The Company has not and shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Purchasers in this Agreement or grant any additional
registration rights to any Person or with respect to any securities which are
not Registrable Securities which are prior in right to or inconsistent with the
rights granted in this Agreement. The granting of demand registration rights or
pari passu piggyback registration rights shall be deemed not to be inconsistent
with the rights granted to Purchasers in this Agreement. 


          4.3 Amendments
and Waivers. The provisions of this Agreement may be amended and the
Company may take action herein prohibited, or omit to perform any act herein
required to be performed by it, if, but only if, the Company has obtained the
written consent of holders of at least a majority of the Registrable Securities
then in existence. 


          4.4 Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. 


          4.5 Counterparts.
This Agreement may be executed in one or more counterparts each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. 


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          4.6 Notices.
All notices, requests and other communications to any party hereunder shall be
in writing (including telecopy, telex or similar writing) and shall be deemed
given or made as of the date delivered, if delivered personally or by telecopy
(provided that delivery by telecopy shall be followed by delivery of an additional
copy personally, by mail or overnight courier), one day after being delivered
by overnight courier or three days after being mailed by registered or
certified mail (postage prepaid, return receipt requested), to the parties at
the following addresses (or to such other address or telex or telecopy number
as a party may have specified by notice given to the other party pursuant to
this provision): 


	
 

	
 


	
 

	
If to the
 Company, to:


	
 

	
 


	
 

	
BioDrain
 Medical, Inc.


	
 

	
699
 Minnetonka Highlands Lane


	
 

	
Orono,
 Minnesota 55356-9728


	
 

	
Facsimile:
 (952) 476-2361


	
 

	
Attention:
 Kevin Davidson


	
 

	
 


	
 

	
With a copy
 to:


	
 

	
 


	
 

	
Richardson
 & Patel LLP


	
 

	
10900
 Wilshire Blvd., Suite 500


	
 

	
Los Angeles,
 California 90024


	
 

	
Facsimile:
 (310) 208-1154


	
 

	
Attention:
 Ryan S. Hong, Esq.


	
 

	
 


	
 

	
If to the
 Purchaser, to:


	
 

	
 


	
 

	
The address
 or facsimile number of each Purchaser as recorded in the stockholders records
 of the Company.





          4.7 Governing
Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, without regard to the conflicts of laws
rules or provisions. 


          4.8 Forum;
Service of Process. Any legal suit, action or proceeding brought by any
party or any of its affiliates arising out of or based upon this Agreement
shall be instituted in any federal or state court in Minneapolis or St. Paul,
Minnesota and each party waives any objection which it may now or hereafter
have to the laying of venue or any such proceeding, and irrevocably submits to
the jurisdiction of such courts in any such suit, action or proceeding. 


          4.9 Captions.
The captions, headings and arrangements used in this Agreement are for
convenience only and do not in any way limit or amplify the terms and
provisions hereof. 


          4.10 No
Prejudice. The terms of this Agreement shall not be construed in favor of
or against any party on account of its participation in the preparation hereof.



          4.11 Words
in Singular and Plural Form. Words used in the singular form in this
Agreement shall be deemed to import the plural, and vice versa, as the sense
may require. 


          4.12 Successors
and Assigns; Third Party Beneficiaries. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, permitted assigns, executors,
administrators and heirs. 


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          4.13 Entire
Agreement. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them. 


[Remainder of page intentionally left blank.]


12






          IN WITNESS
WHEREOF, the parties hereto have caused this Registration Rights Agreement to
be duly executed as of the date and year first written above. 


	
 

	
 

	
 

	
 


	
 

	
Biodrain
 Medical, Inc.

	
 


	
 

	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 

	
 


	
 

	
 

	
Name: Kevin
 Davidson

	
 


	
 

	
 

	
Title: Chief
 Executive Officer

	
 


	
 

	
 

	
 


	
 

	
PURCHASER:

	
 


	
 

	
 

	
 


	
 

	
 

	
 


	
 

	 

	
 


	
 

	
Print Name
 of Purchaser

	
 


	
Purchaser is
 a(n):

	
 

	
 


	
 

	
 

	
 


	
 

	 

	
 


	
_____
 individual

	
Print Name
 of Joint Purchaser

	
 


	
 

	
(if
 applicable)

	
 


	
_____
 tenants in the entirety

	
 

	
 


	
 

	
 

	
 


	
 

	 

	
 


	
 


	
Signature of
 Purchaser

	
 


	
_____
 corporation (an officer must sign)

	
 

	
 


	
 

	
 

	
 


	
 

	
Signature of
 Joint Purchaser (if applicable)

	
 

	
 


	
_____ partnership (all general partners must sign)

	 

	
 


	
 

	
_____ trust

	
 


	
 

	
_____
 limited liability company

	
 

	
 




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