Exhibit 10.34 to Biodrain Medical, Inc. Form S-1



Exhibit 10.34 


FORM OF WARRANT


NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. 


BIODRAIN MEDICAL, INC.


WARRANT TO PURCHASE COMMON STOCK


	
 

	
 


	
Warrant No.:
 [__]


	
Date of
Issuance: ___________, 2007 (“Issuance
Date”) 


	
 

	
 


	
Warrant
 Shares:

	
This Warrant shall be exercisable for _____ shares of Common Stock
 with the exact number of shares determined as follows: 


	
 

	
 


	
                               Number
 of Units purchased under the Subscription Agreement dated ___________, 2007
 multiplied by 100%.





          BIODRAIN
MEDICAL, INC., a Minnesota corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [NAME
OF BUYER], the registered holder hereof or its permitted assigns
(the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued
in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the date hereof,
but not after 5:00 p.m., Pacific time, on the Expiration Date (as defined
below), the number of validly issued, fully paid nonassessable shares of Common
Stock (as defined below) determined in accordance with Section 1(a) below (the “Warrant Shares”). Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 15. This Warrant is one of a series of warrants to purchase
Common Stock (the “Warrants”)
issued pursuant to Section 1 of that certain Subscription Agreement, dated as
of ___________, 2007 (the “Subscription Date”),
by and among the Company and the investors (the “Buyers”) referred to therein (the “Subscription
Agreement”). 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



1






                    1.
EXERCISE OF WARRANT. 


                              (a)
Warrant Shares. This Warrant shall be exercisable for the number of
shares of Common Stock of the Company as set forth in the formula on the cover
page of this Warrant (“Warrant Shares”).



                              (b)
Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(g)), this
Warrant may be exercised by the Holder on any day on or after the date hereof,
in whole or in part, by (i) delivery of a written notice, in the form attached
hereto as Exhibit A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant and (ii)
(A) payment to the Company of an amount equal to the Exercise Price multiplied
by the number of Warrant Shares as to which this Warrant is being exercised
(the “Aggregate Exercise Price”)
in cash or wire transfer of immediately available funds or (B) by notifying the
Company that this Warrant is being exercised in a Cashless Exercise pursuant to
and subject to the conditions set forth in Section 1(d); provided, however,
that this Warrant may not be exercised in a Cashless Exercise during the first
year of the Warrant or if the Warrant Shares have been registered under the Act
(as defined below). The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the
Exercise Notice with respect to less than all of the Warrant Shares shall have
the same effect as cancellation of the original Warrant and issuance of a new
Warrant evidencing the right to purchase the remaining number of Warrant
Shares. On or before the first Business Day following the date on which the
Company has received each of the Exercise Notice and the Aggregate Exercise
Price (or notice of a Cashless Exercise) (the “Exercise
Delivery Documents”), the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of the Exercise Delivery Documents to
the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third Business Day
following the date on which the Company has received all of the Exercise
Delivery Documents (the “Share Delivery Date”),
the Company shall issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (ii)(A) above or notification to the Company of a
Cashless Exercise referred to in Section 1(d), the Holder shall be deemed for
all corporate purposes to have become the holder of record of the Warrant
Shares with respect to which this Warrant has been exercised, irrespective of
the date of delivery of the certificates evidencing such Warrant Shares. If
this Warrant is submitted in connection with any exercise pursuant to this
Section 1(b) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with
respect to which this Warrant is exercised. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but rather the number
of shares of Common Stock to be issued shall be rounded up to the nearest whole
number. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant. 


                              (c)
Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.46, subject to adjustment as
provided herein. 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



2






                              (d) Cashless
Exercise. Notwithstanding
anything contained herein to the contrary, if at any time after the one (1)
year anniversary of the Closing Date a registration statement covering the
Warrant Shares that are the subject of an Exercise Notice (the “Unavailable Warrant Shares”) is not
available for the resale of such Unavailable Warrant Shares at the time of
exercise, the Holder may, in its sole discretion, exercise this Warrant in
whole or in part and, in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the “Net Number” of
shares of Common Stock determined according to the following formula (a “Cashless Exercise”): 


	
 

	
 

	
 


	
 

	
Net Number =
 (A x B) - (A x C)

	
 


	
 

	
 

	
 


	
 

	
B

	
 


	
 

	
 

	
 


	
 

	
For purposes
 of the foregoing formula:





               A=
the total number of shares with respect to which this Warrant is then being
exercised. 


               B=
the Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
on the date immediately preceding the date of the Exercise Notice. 


               C=
the Exercise Price then in effect for the applicable Warrant Shares at the time
of such exercise. 


                              (e)
Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 12. 


                              (f)
Limitations on Exercises; Beneficial Ownership. The Company shall not
effect the exercise of this Warrant, and the Holder shall not have the right to
exercise this Warrant, to the extent that after giving effect to such exercise,
such Person (together with such Person’s affiliates) would beneficially own in
excess of 4.99% of the shares of Common Stock outstanding immediately after
giving effect to such exercise. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this
Warrant beneficially owned by such Person and its affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
of this Warrant, in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock
as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Current
Report on Form 8-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent setting
forth the number of shares of Common Stock outstanding. For any reason at 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



3






any time, upon
the written or oral request of the Holder, the Company shall within two
Business Days confirm orally and in writing to the Holder the number of shares
of Common Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the Securities issued under
the Subscription Agreement and the Warrants, by the Holder and its affiliates
since the date as of which such number of outstanding shares of Common Stock
was reported. By written notice to the Company, the Holder may from time to
time increase or decrease the Maximum Percentage to any other percentage not in
excess of 9.99% specified in such notice; provided that (i) any such increase
will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company, and (ii) any such increase or decrease will
apply only to the Holder and not to any other holder of Warrants. 


                              (g)
Insufficient Authorized Shares. If at any time while any of the Warrants
remain outstanding the Company does not have a sufficient number of authorized
and unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon exercise of the Warrants at least a number of shares of Common
Stock equal to 100% (the “Required Reserve
Amount”) of the number of shares of Common Stock as shall from time
to time be necessary to effect the exercise of all of the Warrants then
outstanding (an “Authorized Share Failure”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow
the Company to reserve the Required Reserve Amount for the Warrants then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than sixty (60) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit
its stockholders’ approval of such increase in authorized shares of Common
Stock and to cause its board of directors to recommend to the stockholders that
they approve such proposal. 


                    2.
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows: 


                              (a) Weighted
Average Adjustment of
Exercise Price upon Issuance of Common Stock. If the Company issues any
shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued or sold by the Company in connection
with any Excluded Securities) for a consideration per share (the “New Issuance Price”) less than the
Exercise Price in effect immediately prior to such issue or sale (the foregoing
a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to a price determined by multiplying such
Exercise Price by a fraction, the numerator of which shall be a sum equal to
the number of shares of Common Stock outstanding and deemed issued pursuant to
Section 2(b) immediately prior to such issuance, plus the number of shares of
Common Stock that the aggregate consideration received by this Company for such
issuance would purchase at such Exercise Price; and the denominator of which
shall be the number of shares of Common Stock outstanding and deemed issued
pursuant to Section 2(b) immediately prior to such issuance plus the number of
shares of such Additional Stock. 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



4






                              (b) Provisions
Applicable to Exercise
Price Adjustments. For purposes of determining the adjusted Exercise Price
under Section 2(a) above, the following provisions shall apply: 


                                        (1) Issuance
of Options. If the
Company in any manner grants or sells any Options (other than any Excluded
Securities) and the lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon conversion or exchange
or exercise of any Convertible Securities issuable upon exercise of such Option
is less than the Exercise Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 2(b)(1), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Option or upon
conversion or exchange or exercise of any Convertible Securities issuable upon
exercise of such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to
any one share of Common Stock upon granting or sale of the Option, upon
exercise of the Option and upon conversion or exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
share of Common Stock or of such Convertible Securities upon the exercise of
such Options or upon the actual issuance of such Common Stock upon conversion
or exchange or exercise of such Convertible Securities. 


                                        (2) Issuance
of Convertible
Securities. If the Company in any manner issues or sells any Convertible
Securities (other than Excluded Securities) and the lowest price per share for
which one share of Common Stock is issuable upon such conversion or exchange or
exercise thereof is less than the Exercise Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance of sale of such Convertible Securities for
such price per share. For the purposes of this Section 2(b)(2), the “price per
share for which one share of Common Stock is issuable upon such conversion or
exchange or exercise” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to
any one share of Common Stock upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Exercise Price shall be made upon the
actual issuance of such share of Common Stock upon conversion or exchange or
exercise of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of the Exercise Price had been or are to be made pursuant to other
provisions of this Section 2(b), no further adjustment of the Exercise Price
shall be made by reason of such issue or sale. 


                                        (3) Change
in Option Price or Rate of
Conversion. If the purchase price provided for in any Options (other than
Excluded Securities), the additional consideration, if any, payable upon the
issue, conversion, exchange or exercise of any Convertible Securities, or the
rate at which any Convertible Securities (other than Excluded Securities) are
convertible into or exchangeable or exercisable for Common Stock is changed,
the Exercise Price in effect at the time of such change shall be adjusted to
the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section 2(b)(3),
if the terms of any Option or Convertible Security that was outstanding as of
the Closing Date are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Common
Stock deemed issuable upon exercise, conversion or exchange 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



5






thereof shall
be deemed to have been issued as of the date of such change. No adjustment
shall be made if such adjustment would result in an increase of the Exercise
Price then in effect. 


                                        (4) Definition
of Excluded Securities.
For purposes of this Agreement, “Excluded
Securities” shall mean: 


                                                  (A) shares
of Common Stock issued
pursuant to a transaction described in Section 2(c) hereof; 


                                                  (B) shares
of Common Stock issued or
deemed issued to employees, consultants, attorneys, officers or directors (if
in transactions with primarily non-financing purposes) of this Company directly
or pursuant to an Approved Stock Plan (as defined in the Subscription
Agreement); 


                                                  (C) shares
of Common Stock issued or
issuable (1) in a bona fide, underwritten public offering under the Act
resulting in aggregate gross proceeds of at least $10,000,000, or (2) upon
exercise of warrants or rights granted to underwriters in connection with such
a public offering; 


                                                  (D) shares
of Common Stock issued
pursuant to the conversion or exercise of convertible or exercisable securities
outstanding as of the date hereof including the Warrants and the Placement
Agent Warrants (as defined in the Subscription Agreement) or subsequently
issued, provided such securities are not amended after the date hereof to
increase the number of shares of Common Stock issuable thereunder or to lower
the exercise price thereof; 


                                                  (E) shares
of Common Stock issued or
issuable in connection with a bona fide business acquisition of or by this
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, each as approved by the Board of Directors of this Company,
however, excluding shares issued or issuable in connection with a transaction
between the Company and an Affiliate; or 


                                                  (F) shares
of Common Stock issued or
issuable in connection with any transaction where such securities so issued are
deemed included in the definition of “Excluded Securities” by the affirmative
vote or written consent of the Required Holders. 


                                        (5) Record
Date. If the Company
takes a record of the holders of Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date will be deemed
to be the date of the issue or sale of the Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be. 


                                        (6) Dividends.
In case the
Company shall declare a dividend or make any other distribution upon any stock
of the Company (other than the Common Stock) payable in Common Stock, Options
or Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



6






have been
issued or sold without consideration; provided, that if any adjustment is made
to the Exercise Price as a result of a declaration of a dividend and such
dividend is rescinded, the Exercise Price shall be appropriately readjusted to
the Exercise Price in effect had such dividend not been declared; 


                                        (7) Calculation
of Consideration.
In case any shares of Common Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor, after deduction therefrom
of any expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair value of such
consideration as determined in good faith by the Board, after deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any Options shall be
issued in connection with the issuance and sale of other securities of the
Company, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for such consideration as determined in
good faith by the Board of Directors of the Company. If Common Stock, Options
or Convertible Securities shall be issued or sold by the Company and, in
connection therewith, other Options or Convertible Securities (the “Additional
Rights”) are issued, then the consideration received or deemed to be received
by the Company shall be reduced by the fair market value of the Additional
Rights (as determined using the Black-Scholes option pricing model or another
method mutually agreed to by the Company and the Holder). The Board shall
respond promptly, in writing, to an inquiry by the Holder as to the fair market
value of the Additional Rights. 


                              (c) If
the Company, at any time while
this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (B) subdivides outstanding shares of
Common Stock into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number
of shares, or (D) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be adjusted by multiplying the Exercise Price by a fraction, of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event, and the number of shares issuable upon exercise
of this Warrant shall be proportionately adjusted to result in the same
Aggregate Exercise Price as existed immediately prior to such event. Any
adjustment made pursuant to this Section 2(c) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution or shall become effective immediately
after the effective date of such subdivision, combination or re classification,
as applicable. 


                              (d) Organic
Change. If, at any time
while this Warrant is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series
of related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



7






compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (each “Organic Change”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been issuable upon
such exercise immediately prior to the occurrence of such Organic Change, the
number of shares of Common Stock of the successor or acquiring corporation or
of the Company, if it is the surviving corporation, and/or any additional
consideration (the “Alternate Consideration”) receivable as a result of such
merger, consolidation or disposition of assets by a Holder of the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such event. For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Organic Change (if applicable), and the Company shall
apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Organic Change, then the
Holder shall be given the same choice (no later than the time of the Organic
Change) as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Organic Change. To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity in
such Organic Change shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which an Organic
Change is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(e) and
insuring that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to an Organic Change. 


                    3.
NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, and will at all times in good faith carry out all
the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
Warrants, 100% of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the Warrants then outstanding
(without regard to any limitations on exercise). 


                    4. WARRANT
HOLDER NOT DEEMED A
STOCKHOLDER. Except as otherwise specifically provided herein, the Holder,
solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, solely in such Person’s capacity as the
Holder of this Warrant, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



8






of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 4, the Company shall provide the Holder with
copies of the same notices and other information given to the stockholders of
the Company generally, contemporaneously with the giving thereof to the
stockholders. 


                    5.
REISSUANCE OF WARRANTS. 


                              (a) Transfer
of Warrant. If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 5(d)), registered as
the Holder may request, representing the right to purchase the number of
Warrant Shares being transferred by the Holder and, if less then the total
number of Warrant Shares then underlying this Warrant is being transferred, a new
Warrant (in accordance with Section 5(d)) to the Holder representing the right
to purchase the number of Warrant Shares not being transferred. Applicable
transfer taxes, if any, shall be paid by the Holder. 


                              (b) Lost,
Stolen or Mutilated Warrant.
Upon receipt by the Company of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and, in the case
of loss, theft or destruction, of any indemnification undertaking by the Holder
to the Company in customary form and, in the case of mutilation, upon surrender
and cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 5(d)) representing the right
to purchase the Warrant Shares then underlying this Warrant. 


                              (c) Exchangeable
for Multiple
Warrants. This Warrant is exchangeable, upon the surrender hereof by the
Holder at the principal office of the Company, for a new Warrant or Warrants
(in accordance with Section 5(d)) representing in the aggregate the right to
purchase the number of Warrant Shares then underlying this Warrant, and each
such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional shares of Common Stock shall
be given. 


                              (d) Issuance
of New Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms
of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right
to purchase the Warrant Shares then underlying this Warrant (or in the case of
a new Warrant being issued pursuant to Section 5(a) or Section 5(c), the
Warrant Shares designated by the Holder which, when added to the number of
shares of Common Stock underlying the other new Warrants issued in connection
with such issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), and (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date. 


                    6. NOTICES. Whenever notice is
required to be given under this Warrant, unless otherwise provided herein, such
notice shall be given in accordance with the notice provision 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



9






requirements
of the Subscription Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason therefore.
Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the shares of Common Stock, (B) with respect to any grants,
issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of shares of Common
Stock or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with such
notice being provided to the Holder. 


                    7. AMENDMENT
AND WAIVER. Except
as otherwise provided herein, the provisions of this Warrant may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the Required Holders; provided that no such action may (i)
increase the exercise price of any Warrants issued under the Subscription
Agreement or decrease the number of shares or change the class of stock
obtainable upon exercise of any Warrants issued under the Subscription
Agreement, (ii) modify Section 1(d) or 1(g) of this Warrant or (iii)
disproportionately affect the Holder in a materially and adversely manner (except
as a result of holding a greater percentage of Warrant Shares) without the
written consent of the Holder. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Warrants then
outstanding. 


                    8. GOVERNING
LAW. This Agreement
shall be governed by, and construed in accordance with, the internal laws of
the State of Minnesota without regard to the choice of law principles thereof. 


                    9.
CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Holders and shall not be construed against
any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the interpretation
of, this Warrant. 


                    10. DISPUTE
RESOLUTION. In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two (2)
Business Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to the Holder. If the Holder and the Company are unable to
agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three (3) Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within two (2) Business Days submit via facsimile (a) the disputed determination
of the Exercise Price to an independent, reputable investment bank selected by
the Company and approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company’s independent, outside
accountant. The Company shall cause at its expense the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than ten (10)
Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error. 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



10






                    11. TRANSFER.
This Warrant may be
offered for sale, sold, transferred or assigned without the consent of the
Company, except as may otherwise be required by the Subscription Agreement. 


                    12. CERTAIN
DEFINITIONS. For
purposes of this Warrant, the following terms shall have the following
meanings: 


                              (a) “Bloomberg”
means Bloomberg Financial Markets. 


                              (b) “Business
Day” means any day other than Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required by law to
remain closed. 


                              (c) “Closing
Bid Price” and “Closing Sale
Price” means, for any security as of any date, the last closing bid
price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the closing bid
price or the closing trade price, as the case may be, then the last bid price
or last trade price, respectively, of such security prior to 4:00 p.m., New
York Time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
closing bid price or last trade price, respectively, of such security on the
principal securities exchange or trading market where such security is listed
or traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the
bid prices, or the ask prices, respectively, of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case
may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 10. All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period. 


                              (d) “Common
Stock” means (i) the Company’s shares of Common Stock, par value
$0.001 per share, and (ii) any share capital into which such Common Stock shall
have been changed or any share capital resulting from a reclassification of
such Common Stock. 


                              (e) “Convertible
Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
shares of Common Stock. 


                              (f) “Eligible
Market” means the Principal Market, the American Stock Exchange, The
New York Stock Exchange, Inc., the Nasdaq National Market or The Nasdaq
SmallCap Market. 


                              (g) “Expiration
Date” means the date thirty six (36) months after the Issuance Date
or, if such date falls on a day other than a Business Day or on which trading
does not take 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



11






place on the
Principal Market (a “Holiday”),
the next date that is not a Holiday; provided, that the Expiration Date may be
accelerated pursuant to the provisions of Section 1(h). 


                              (h) “Fundamental
Transaction” means that the Company shall, directly or indirectly,
in one or more related transactions, (i) consolidate or merge with or into
(whether or not the Company is the surviving corporation) another Person, or
(ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company, including
intellectual property, to another Person, or (iii) allow another Person to make
a purchase, tender or exchange offer that is accepted by the holders of more
than fifty percent (50%) of either the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than fifty percent (50%)
of the outstanding shares of Common Stock (not including any shares of Common
Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
purchase agreement or other business combination), (v) reorganize, recapitalize
or reclassify its Common Stock (other than a forward or reverse stock split),
or (vi) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of fifty percent (50%) of the aggregate ordinary voting power
represented by issued and outstanding Common Stock. 


                              (i) “Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities. 


                              (j) “Organic
Change” means a transaction as described in section 2(d). 


                              (k) “Parent
Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction. 


                              (l) “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof. 


                              (m) “Principal
Market” means the OTC Bulletin Board. 


                              (n) “Required
Holders” means the holders of the Warrants representing at least a
majority of shares of Common Stock underlying the Warrants then outstanding. 


                              (o) “Securities”
means the Notes issued pursuant to the Subscription Agreement. 


                              (p) “Successor
Entity” means the Person (or, if so elected by the Required Holders,
the Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the 


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



12






Person (or, if
so elected by the Required Holders, the Parent Entity) with which such
Fundamental Transaction shall have been entered into. 


[Signature
Page Follows]


COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.



13






          IN
WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above. 


	
 

	
 

	
 


	
 

	
BIODRAIN MEDICAL, INC.


	
 

	
 


	
 

	
By:

	
 


	
 

	
 

	 


	
 

	
 

	
Kevin
 Davidson


	
 

	
 

	
Chief
 Executive Officer





COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.







EXHIBIT A


EXERCISE NOTICE


TO BE EXECUTED BY THE REGISTERED HOLDER TO
EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

BIODRAIN MEDICAL, INC.


          The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”)
of BIODRAIN MEDICAL, INC., a Minnesota corporation (the “Company”), evidenced by the attached
Warrant to Purchase Common Stock (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant. 


          1.
Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as: 


	
 

	
 

	
 


	
 

	
__________

	
a “Cash
 Exercise” with respect to _________________ Warrant Shares; and/or


	
 

	
 

	
 


	
 

	
__________

	
a “Cashless
 Exercise” with respect to _______________ Warrant Shares.





          2.
Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum
of $___________________ to the Company in accordance with the terms of the
Warrant. 


          3.
Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant. 


          4.
Acknowledgement. The undersigned holder hereby represents and warrants
that after giving effect to the exercise of the Warrant contemplated by this
Exercise Notice, such holder will not be in violation of the beneficial
ownership limits specified in Section 1(g) of the Warrant, as increased or
decreased pursuant to terms contained therein. 


Date:
_____________ ___, _______


	
 

	
 

	
 


	 

	
 


	
Name of Registered Holder


	
 

	
 

	
 


	
By:

	
 

	
 


	
 

	 

	
 


	
 

	
Name:

	
 


	
 

	
Title:

	
 





COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.







ACKNOWLEDGMENT


          The
Company hereby acknowledges this Exercise Notice and hereby directs [Insert Name of Transfer Agent] to issue
the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated _______________ from the Company and
acknowledged and agreed to by [Insert Name of
Transfer Agent].


	
 

	
 

	
 

	
 


	
 

	
BIODRAIN MEDICAL, INC.


	
 

	
 


	
 

	
 


	
 

	
By:

	
 

	
 


	
 

	
 

	 

	
 


	
 

	
 

	
Kevin
 Davidson

	
 


	
 

	
 

	
Chief
 Executive Officer

	
 





COMMON STOCK WARRANT
– BIODRAIN MEDICAL, INC.