Document:

Exhibit 10.31 to Biodrain Medical, Inc. Form S-1

Exhibit 10.31 

SUBSCRIPTION AGREEMENT

          Subscription
Agreement (together with the schedules and exhibits hereto, this “Agreement”),
dated as of _________, 2008, by and between BioDrain Medical, Inc., a Minnesota
corporation (“the Company”), and each of the Persons (as defined below)
who has executed a signature page to this Agreement (each a “Purchaser,”
and together, the “Purchasers”). 

W I T N E S S E T H:

          WHEREAS, the Company desires to
issue and
sell to the Purchasers, and the Purchasers desire to purchase from the Company,
a minimum of $0.8 million and a maximum of $1.7 million of Units (as such term
is defined below) as set forth below. 

          NOW,
THEREFORE, in consideration of the 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. Offer and Sale of Securities. 

          1.1 The
Offering. The Company is offering for sale of a minimum of 2,285,715 and a
maximum of 4,857,144 units of Company securities. Each “unit” shall consist of
one share of Company common stock, par value $0.001 per share (“Share”),
and a warrant to purchase one share of Company common stock at $0.46 per share
(“Warrant”). The Shares, Warrants, and Units offered hereby, and the
underlying shares of Common Stock, are sometimes referred to herein as the “Securities”.
The Purchasers of the Units shall have the benefit of certain registration
rights in respect of the Shares (including Shares underlying the Warrants or “Warrant
Shares”) on the terms and conditions of a Registration Rights Agreement, in
the form of Exhibit B hereto (the “Registration Rights Agreement”).
The Company is offering Units (the “Offering”) for sale only to
individuals, entities or groups, including, without limitation, corporations,
limited liability companies, limited or general partnerships, joint ventures,
associations, joint stock companies, trusts, unincorporated organizations, or
governments or any agencies or political subdivisions thereof (each, a “Person”)
who are “accredited investors” (as defined herein). All subscription proceeds
will be paid upon subscription to the account or accounts of Richardson &
Patel LLP, the escrow agent utilized by the Company for receipt of funds (the “Escrow
Agent”). 

          1.2 Subscription.
Subject to the terms and conditions hereinafter set forth in this Agreement,
each Purchaser hereby offers to purchase, at a price of $0.35 per share, the
number of Units set forth beneath each such Purchaser’s name on the signature
pages of this Agreement, for an aggregate purchase price (the “Purchase Price”)
to be paid by such Purchaser in the amount set forth on the signature page
beneath such Purchaser’s name, to such account or accounts as the Company may
specify by written notice to the Purchaser. 

          1.3 Subscription
Procedures. To submit this Subscription, each Purchaser must deliver (i)
this Agreement, including, without limitation, the annexed Purchaser
Questionnaire, both duly completed and executed and (ii) an executed
Registration Rights Agreement to the following address unless otherwise advised
by the Company: 

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BioDrain
 Medical, Inc.

 699 Minnetonka Highlands Lane

 Orono, Minnesota 55356-9728

 Attention: Kevin Davidson

          Each
Purchaser shall, promptly following the delivery of the subscription documents
as described above, deliver and pay the applicable purchase price in full for
the Units being subscribed for by such Purchaser, in the amount of $0.35 for
each Unit, in U.S. dollars, in immediately available funds, in accordance with
the payment instructions attached hereto as Exhibit C. The Company may
accept or reject subscriptions, in whole or in part in its sole discretion. The
Company shall notify each Purchaser of the portion, if any, of such Purchaser’s
subscription which has been accepted and, if any portion of a Purchaser’s
subscription is rejected, shall cause the Escrow Agent to refund to such
Purchaser the purchase price paid by the Purchaser for the shares of Units with
respect to which such Purchaser’s subscription was rejected. 

2. Closing. 

          Upon
acceptance of subscriptions for Units from a Purchaser, the Company may hold a
closing of the purchase and sale of such Securities at any time after receipt
of an aggregate amount of $800,000 of Units has been sold by the Company (the “Initial
Closing”). The Company may thereafter hold one or more additional closings
(each closing, including the Initial Closing, a “Closing,” and the final
closing, the “Final Closing”) upon the purchase and sale of additional
Securities until an aggregate amount of up to $1,700,000 (the “Maximum
Offering”) of Units has been sold by the Company. The date of the Initial
Closing will be referred to as the “Initial Closing Date” and the date of the
Final Closing is referred to as the “Final Closing Date.” At the Closing with
respect to the subscription by each Purchaser, to the extent the same is accepted
by the Company, the Company will register in the name of each such Purchaser
that number of Securities being purchased by such Purchaser in accordance with
the information on the applicable signature page of this Agreement. 

          2.1 Escrow.
Pending each Closing, all funds paid in respect of this Agreement with regard
to such Closing shall be deposited in an escrow account (the “Escrow Account”)
maintained by the Escrow Agent pursuant to an Escrow Agreement among the
Company, Purchaser and Escrow Agent, set forth as Exhibit D. The Escrow
Account shall not be interest bearing. If the Company accepts subscriptions for
the Securities at or prior to the Initial Closing Date or the Final Closing
Date, as the case may be, then all subscription proceeds received for
subscriptions accepted by the Company prior to such Closing Date shall be paid
over to the Company at each Closing, net of any offering expenses, which shall
be paid to the appropriate parties at each such Closing. If the Company shall
not have received and accepted a Purchaser’s subscription or if the Offering is
terminated and no Closing occurs, then that subscription shall be void and all
funds paid hereunder by such Purchaser, without deduction therefrom or interest
thereon, shall be promptly returned to such Purchaser. If the Offering is
terminated and no Closing occurs, then all subscriptions shall be void and all
funds paid hereunder by Purchasers, without deduction therefrom or interest
thereon, shall be promptly returned to the Purchasers. The Offering shall
automatically terminate, all subscriptions shall be void and all funds shall be
refunded to the Purchasers as provided in this Section 2.1 (which refunds shall
be made on or before March 31, 2008), unless on or before March 31, 2008 all of
the conditions set forth in Section 3 hereof have been satisfied and the
Initial Closing shall have occurred. 

          2.2. Return
of Funds. Each Purchaser hereby authorizes and directs the Escrow Agent to
return or direct the return of any funds from the Escrow Account, without
deduction therefrom or interest thereon, to the same account from which the
funds were originally drawn, to the extent that such Purchaser’s subscription
is not accepted prior to the termination of the Offering. 

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3. Conditions to the Obligations of each
Purchaser at Closing. 

          The
obligation of each Purchaser to purchase the Securities subscribed for by such
Purchaser at the Closing is subject to the satisfaction on or prior to the
Closing Date of the following conditions, each of which may be waived by the
applicable Purchaser: 

          3.1 Representations
and Warranties. The representations and warranties of the Company contained
in this Agreement which are qualified as to materiality must be true and correct
in all respects and the representations and warranties of the Company contained
in this Agreement which are not qualified as to materiality must be true and
correct in all material respects as of the Closing Date except to the extent
that the representations and warranties relate to an earlier date in which case
the representations and warranties must be true and correct as written or true
and correct in all material respects, as the case may be, as of the earlier
date. 

          3.2 Performance
of Covenants. The Company shall have performed or complied in all material
respects with all covenants and agreements required to be performed by it on or
prior to the Closing pursuant to this Agreement. 

          3.3 No
Injunctions; etc. No court or governmental injunction, order or decree
prohibiting the purchase and sale of the Units will be in effect. There will
not be in effect any law, rule or regulation prohibiting or restricting the
sale or requiring any consent or approval of any Person that has not been
obtained to issue and sell the Units to the Purchasers. 

          3.4 Closing
Documents. At each Closing, the Company shall have delivered to the Escrow
Agent the following: 

	
 

	
 

	
 

	
 

	
(a) a
 certificate evidencing the Units purchased by such Purchaser; 

	
 

	
 

	
 

	
 

	
(b) an Escrow
 Agreement duly executed by the Company; and 

	
 

	
 

	
 

	
 

	
(c) a
 Registration Rights Agreement duly executed by the Company. 

          3.5 Waivers
and Consents. The Company will have obtained all consents and waivers
necessary to (i) execute and deliver this Agreement and all related documents
and agreements, and (ii) to issue and deliver the Units, and all such consents
and waivers will be in full force and effect. 

4. Conditions to the Obligations of the
Company at Closing. 

          The obligation
of the Company to issue and sell the Units to any Purchaser is subject to the
satisfaction on or prior to each Closing Date of the following conditions, each
of which may be waived by the Company: 

          4.1 Receipt
of Purchase Price. The Escrow Agent shall have received payment in full in
immediately available funds in U.S. dollars of the Purchase Price for the Units
with respect to which the Company has accepted the Subscription made by such
Purchaser by means of this Agreement. 

          4.2 Representations
and Warranties. The representations and warranties of the Purchaser
contained in this Agreement which are qualified as to materiality must be true
and correct in all respects and the representations and warranties of the
Purchaser contained in this Agreement which are not qualified as to materiality
must be true and correct in all material respects as of the applicable Closing
Date. 

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          4.3 Performance
of Covenants. The Purchaser will have performed or complied in all material
respects with all covenants and agreements required to be performed by the
Purchasers on or prior to the Closing pursuant to this Agreement. 

          4.4 Purchaser
Questionnaire. All of the information furnished by such Purchaser in the
confidential purchaser questionnaire accompanying this Agreement (the
“Purchaser Questionnaire”) shall have been accurate and complete in all
material respects. 

          4.5 No
Injunctions. No court or governmental injunction, order or decree
prohibiting the purchase or sale of the Units will be in effect. 

          4.6 Closing
Document. The Purchasers will have delivered to the Company the
Registration Rights Agreement duly executed by the Purchasers. 

5. Representations and Warranties of each
Purchaser. 

          Each Purchaser,
in order to induce the Company to perform this Agreement, hereby represents and
warrants, severally and not jointly, as follows: 

          5.1 Due
Authorization. Each Purchaser represents for such Purchaser to the Company
that such Purchaser has full power and authority and has taken all action
necessary to authorize such Purchaser to execute, deliver and perform such
Purchaser’s obligations under this Agreement. This Agreement is the legal,
valid and binding obligation of such Purchaser in accordance with its terms. 

          5.2 Accredited
Investor. Each Purchaser represents that such Purchaser is an Accredited
Investor as that term is defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the “Securities Act”). 

          5.3 No
Investment Advice. The Company has not made any other representations or
warranties to such Purchaser other than as set forth herein or incorporated
herein by reference with respect to the Company or rendered any investment
advice. 

          5.4 Investment
Experience. Each Purchaser represents that such Purchaser has not
authorized any Person to act as a Purchaser Representative (as that term is
defined in Regulation D of the General Rules and Regulations under the
Securities Act) in connection with this transaction. Such Purchaser has such
knowledge and experience in financial, investment and business matters that
such Purchaser is capable of evaluating the merits and risks of the prospective
investment in the securities of the Company. Such Purchaser has consulted with
such independent legal counsel or other advisers as such Purchaser has deemed
appropriate to assist such Purchaser in evaluating the proposed investment in
the Company. 

          5.5 Adequate
Means. Each Purchaser represents as to such Purchaser that such Purchaser
(i) has adequate means of providing for such Purchaser’s current financial
needs and possible contingencies; and (ii) can afford (a) to hold unregistered
securities for an indefinite period of time as required; and (b) sustain a
complete loss of the entire amount of the subscription. 

          5.6 Access
to Information. Each Purchaser represents that such Purchaser has been
afforded the opportunity to ask questions of, and receive answers from the
officers and/or directors of the Company acting on its behalf concerning the
terms and conditions of this transaction and to obtain any additional
information, to the extent that the Company possesses such information or can
acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information furnished; and 

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has had such opportunity to the extent such Purchaser considers it
appropriate in order to permit such Purchaser to evaluate the merits and risks
of an investment in the Company. It is understood that all documents, records
and books pertaining to this investment have been made available for
inspection, and that the books and records of the Company will be available
upon reasonable notice for inspection by investors during reasonable business
hours at its principal place of business. The foregoing shall in no way be
deemed to limit the ability of each Purchaser to rely on the representations
and warranties set forth herein or incorporated herein by reference. 

          5.7 No
Endorsement. Each Purchaser further acknowledges that the offer and sale of
the Securities has not been passed upon or the merits thereof endorsed or
approved by any state or federal authorities. 

          5.8 Non-Registered
Securities. Each Purchaser acknowledges that the offer and sale of the
Securities have not been registered under the Securities Act or any state
securities laws and the Securities and the underlying shares of Common Stock
may be resold only if registered pursuant to the provisions thereunder or if an
exemption from registration is available. Each Purchaser understands that the
offer and sale of the Securities is intended to be exempt from registration
under the Securities Act, based, in part, upon the representations, warranties
and agreements of such Purchaser contained in this Agreement. 

          5.9 No
Resale. Each Purchaser represents that the Units being subscribed for, and
the securities underlying the subscription, are being acquired solely for the
account of such Purchaser for such Purchaser’s investment and not with a view
to, or for resale in connection with, any distribution in any jurisdiction
where such sale or distribution would be precluded. By such representation,
such Purchaser means that no other Person has a beneficial interest in the
Units or the Common Stock underlying such Units, and that no other Person has
furnished or will furnish directly or indirectly, any part of or guarantee the
payment of any part of the consideration to be paid by such Purchaser to the
Company in connection therewith. Such Purchaser does not intend to dispose of
all or any part of the Units or the Common Stock underlying such Units except
in compliance with the provisions of the Securities Act and applicable state
securities laws, and understands that the Units and the Common Stock underlying
the Units are being offered pursuant to a specific exemption under the
provisions of the Securities Act, which exemption(s) depends, among other
things, upon the compliance with the provisions of the Securities Act. 

          5.10 ERISA-based
Investment. If Purchaser is acquiring the Units through a qualified
pension, profit-sharing, stock bonus, Keogh or 401(k) plan or other pension or
retirement plan qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the “Code”), (such plans are referred to collectively as
“Qualified Plans”) then Purchaser represents that the Qualified Plan (i)
provides for a segregated account for the investor-beneficiary and (ii) gives
the investor-beneficiary the power to direct each plan investment to the extent
of the investor’s voluntary contributions plus the investor’s share of vested
employer contributions. In addition, Purchaser represents that (a) the
Purchaser is aware of certain federal income tax considerations applicable to
Qualified Plans and IRAs, and (b) the Purchaser has determined that an
investment in Preferred Shares is not a prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the
Code and has taken into account the requirements of prudence, diversification
and any other applicable responsibilities imputed under ERISA or elsewhere. 

          5.11 Legend.
Each Purchaser hereby acknowledges and agrees that the Company may insert the
following or similar legend on the face of the certificates evidencing the
Securities purchased by such Purchaser and the Warrant Shares issued upon the
exercise thereof, as the case may be, if required in compliance with the
Securities Act or state securities laws: 

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“These
 securities have not been registered under the Securities Act of 1933, as
 amended (the “Securities Act”), or any state securities laws and may not be
 sold or otherwise transferred or disposed of except pursuant to an effective
 registration statement under the Securities Act and any applicable state
 securities laws, or an opinion of counsel satisfactory to counsel to the
 issuer that an exemption from registration under the Securities Act and any
 applicable state securities laws is available.” 

          5.12 Broker’s
or Finder’s Commissions. No finder, broker, agent, financial person or
other intermediary has acted on behalf of any Purchaser in connection with the
sale of the Units by the Company or the consummation of this Agreement or any
of the transactions contemplated hereby. 

          Each
Purchaser certifies that each of the foregoing representations and warranties
by such Purchaser set forth in this Section 5 is true as of the date hereof and
shall survive such date. 

6. Representations and Warranties of the
Company. 

          The Company
represents and warrants to the Purchasers as follows as of the Closing, each
such representation and warranty being made subject to such disclosures as are
made pursuant to this Agreement or any schedule or exhibit delivered in
connection herewith at the Closing: 

          6.1 Organization,
Good Standing and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota.
The Company has full corporate power and authority to own and hold its
properties and to conduct its business. The Company is duly licensed or
qualified to do business, and in good standing, in each jurisdiction in which
the nature of its business requires licensing, qualification or good standing,
except for any failure to be so licensed or qualified or in good standing that
would not have a material adverse effect on the Company or its results of
operations, assets and financial condition, taken as a whole, or on its ability
to perform its obligations under this Agreement or to issue the Units (a “Material
Adverse Effect”). 

          6.2 Capitalization.
As of the Initial Closing, the authorized capital stock of the Company will
consist of 20,000,000 shares of Common Stock, a par value of $0.001 per share.
Immediately prior to the Initial Closing, approximately 1,096,829 shares of
Common Stock will be issued and outstanding. As of the Initial Closing, all the
outstanding shares of Common Stock will have been duly authorized and validly
issued and will be fully paid and nonassessable and free of preemptive rights
created by or through the Company, and will have been issued in compliance with
all federal and state securities laws, and will not have been issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Other than as described in the Company’s Offering
Memorandum dated on or about January 31, 2008 (the “Memorandum”), there are no
options, warrants or other rights, convertible debt, agreements, arrangements
or commitments of any character obligating the Company to issue or sell any
shares of capital stock of or other equity interests in the Company. The
Company is not obligated to retire, redeem, repurchase or otherwise reacquire
any of its capital stock or other securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party. Except as disclosed in or
pursuant to this Agreement, the Company does not directly or indirectly own or
have any investment in any of the capital stock of, or any other proprietary
interest in, any Person. The Company has not adopted a stockholders rights
plan, poison pill or similar arrangement. 

          6.3 Corporate
Power, Authorization; Enforceability. The Company has full corporate power
and authority to execute, deliver and enter into this Agreement, the Charter
Amendment, the Escrow Agreement and the Registration Rights Agreement (collectively,
the “Transaction Documents”) and to 

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consummate the transactions contemplated hereby and thereby. Except as
contemplated by this Agreement, including the next two succeeding sentences,
all action on the part of the Company, its directors or stockholders necessary
for the authorization, execution, delivery and performance of the Transaction
Documents by the Company, the authorization, sale, issuance and delivery of the
Units contemplated hereby and the performance of the Company’s obligations
hereunder and thereunder has been taken. The Units to be purchased on the
Closing Date and the shares of Common Stock issuable upon the exercise of the
Warrants have been duly authorized and, when issued in accordance with this
Agreement, will be validly issued, fully paid and nonassessable and will be
free and clear of any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (collectively, “Liens”) imposed by or through the
Company other than restrictions imposed by this Agreement and the Registration
Rights Agreement, as the case may be, and applicable securities laws. No
preemptive or other rights to subscribe for or purchase equity securities of
the Company exists with respect to the issuance and sale of the Units or the
shares of Common Stock issuable upon exercise of the Warrants. The Transaction
Documents have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity). 

          6.4 No
Conflict; Governmental Consents. 

          (a) The
execution and delivery by the Company of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby will not (i)
result in the violation of any provision of the Articles of Incorporation or
By-laws or other organizational documents of the Company, (ii) result in any
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or Governmental Authority to or by which the
Company is bound, or (iii) conflict with, or result in a breach or violation
of, any of the terms or provisions of, or constitute (with due notice or lapse
of time or both) a default under, any bond, debenture, note or other evidence
of indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which it or its property is bound, nor result in
the creation or imposition of any Lien upon any of the properties or assets of
the Company, except for, in the case of clauses (ii) and (iii) of this
subsection 6.4(a), any violation, conflict, breach or default which would not
reasonably be expected to have a Material Adverse Effect. 

          (b) No
material consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other Governmental Authority or Person, and no lapse of any
waiting period under any Requirements of Law, remains to be obtained (or
lapsed) or is otherwise required to be obtained by the Company in connection
with the authorization, execution and delivery of the Transaction Documents or
the consummation of the transactions contemplated hereby or thereby, including,
without limitation the issue and sale of the Units and the shares of Common
Stock underlying such Units, except for any registration, notice or filing with
(i) the Securities and Exchange Commission, (ii) the National Association of
Securities Dealers, Inc. (“NASD”), or (iii) state blue sky or other
securities regulatory authorities. For purposes of this Agreement, “Requirements
of Law” means, as to any Person, any law, statute, treaty, rule,
regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing (each, a “Governmental Authority”), in each case
applicable or binding upon such 

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Person or any of its property or to which such Person or any of its
property is subject or pertaining to any or all of the transactions
contemplated or referred to herein. 

          6.5 Litigation.
Except as disclosed in or pursuant to this Agreement, there are no claims,
actions, suits, investigations or proceedings pending or, to the Company’s
knowledge, threatened proceedings against the Company or its assets, at law or
in equity, by or before any Governmental Authority, or by or on behalf of any
third party, except for any claim, action, suit, investigation or proceeding
which would not reasonably be expected to have a Material Adverse Effect. There
are no claims, actions, suits, investigations or proceedings pending or, to the
Company’s knowledge, threatened proceedings against the Company contesting the
right of the Company to use, sell, import, license, or make available to any
Person any of the Company’s products or services currently or previously sold,
offered, licensed or made available to any Person or used by the Company or
opposing or attempting to cancel any of the Company’s Intellectual Property (as
defined below) rights, except for any claim, action, suit, investigation or
proceeding which would not reasonably be expected to have a Material Adverse
Effect. 

          6.6 Compliance
with Laws; No Default or Violation; Contracts. Except as disclosed in or
pursuant to this Agreement, the Company is in compliance in all material
respects with all Requirements of Law and all orders issued by any court or
Governmental Authority against the Company. The Company has all material
licenses, permits and approvals of any Governmental Authority (collectively,
“Permits”) that are necessary for the conduct of the business of the Company as
currently conducted; (ii) such Permits are in full force and effect; and (iii)
no violations are or have been recorded in respect of any Permit. 

          6.7 Insurance.
The Company maintains and will continue to maintain insurance of the types and
in the amounts that the Company reasonably believes is adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in full force and
effect. 

          6.8 Environmental
Matters. The Company is in compliance, in all material respects, with all
applicable Environmental Laws. For purposes of the foregoing, “Environmental
Laws” means federal, state, local and foreign laws, principles of common
laws, civil laws, regulations, and codes, as well as orders, decrees, judgments
or injunctions, issued, promulgated, approved or entered thereunder relating to
pollution, protection of the environment or public health and safety. 

          6.9 Taxes.
No Tax assessment against the Company has been heretofore proposed or, to the
Company’s knowledge, threatened by any Governmental Authority for which
provision has not been made on its balance sheet. 

          No tax
audit is currently in progress and there is no unassessed deficiency proposed
or, to the Company’s knowledge, threatened against the Company. The Company has
no knowledge of any change in the rates or basis of assessment of any Tax
(other than federal or state income tax), of the Company which would reasonably
be expected to have a Material Adverse Effect. The Company has not agreed to or
is required to make any adjustments under section 481 of the Code by reason of
a change of accounting method or otherwise. None of the assets of the Company
is required to be treated as being owned by any Person, other than the Company
or any of its subsidiaries, pursuant to the “safe harbor” leasing provisions of
Section 168(f)(8) of the Code. The Company is not a “United States real
property holding corporation” (a “USRPHC”) as that term is defined in
Section 897(c)(2) of the Code and the regulations promulgated thereunder. 

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          For purposes
of this Agreement, “Code” means the Internal Revenue Code of 1986, as
amended, and “Taxes” means any federal, state, provincial, county, local,
foreign and other taxes (including, without limitation, income, profits,
windfall profits, alternative minimum, accumulated earnings, personal holding
company, capital stock, premium, estimated, excise, sales, use, occupancy,
gross receipts, franchise, ad valorem, severance, capital levy, production,
transfer, withholding, employment, unemployment compensation, payroll and
property taxes, import duties and other governmental charges and assessments),
whether or not measured in whole or in part by net income, and including
deficiencies, interest, additions to tax or interest, and penalties with
respect thereto, and including expenses associated with contesting any proposed
adjustments related to any of the foregoing. 

          6.10 Intellectual
Property. 

          (a)
“Intellectual Property” shall mean all of the following as they are necessary
in connection with the business of the Company as presently conducted and as
they exist in all jurisdictions throughout the world, in each case, to the
extent owned by or licensed to the Company: (i) patents, patent applications
and inventions, designs and improvements described and claimed therein,
patentable inventions and other patent rights (including any divisions,
continuations, continuations-in-part, reissues, reexaminations, or
interferences thereof, whether or not patents are issued on any such
applications and whether or not any such applications are modified, withdrawn,
or resubmitted) (“Patents”); (ii) trademarks, service marks, trade dress, trade
names, brand names, designs, logos, or corporate names, whether registered or
unregistered, and all registrations and applications for registration thereof
(“Trademarks”); (iii) copyrights and mask works, including all renewals and
extensions thereof, copyright registrations and applications for registration
thereof, and non-registered copyrights (“Copyrights”); (iv) trade secrets,
inventions, know-how, process technology, databases, confidential business
information, customer lists, technical data and other proprietary information
and rights (“Trade Secrets”); (v) computer software programs, including,
without limitation, all source code, object code, and documentation related
thereto (“Software”); (vi) Internet addresses, domain names, web sites, web
pages and similar rights and items (“Internet Assets”); and (vii) all licenses,
sublicenses and other agreements or permissions including the right to receive
royalties, or any other consideration related to the property described in
(i)-(vi). The Intellectual Property contains all of the intellectual property
necessary to operate the business of the Company as currently conducted. 

          (b) The
Company owns (or otherwise has the right to use the Intellectual Property
pursuant to a valid license, sublicense or other agreement), free and clear of
all Liens, and has the unrestricted right (subject to any such license terms,
if applicable) to use, sell, license, or sublicense all Intellectual Property. 

          (c) To the
Company’s knowledge, all the Company’s Intellectual Property rights are valid
and enforceable. The Company has taken reasonable actions to maintain and protect
each item of Intellectual Property owned by the Company. 

          6.11 Employee
Benefit Plans. 

          (a) Neither
the Company nor any entity which is or was under common control with the
Company within the meaning of Section 414(b), (c), (m) or (o) of the Code
maintains or contributes to, or has within the preceding six years maintained
or contributed to, or may have any liability with respect to any employee
benefit plan subject to Title IV of Employee Retirement Income Security Act of
1974, as amended (“ERISA”), or Section 412 of the Code or any “multiple
employer plan” within the meaning of the Code or ERISA. Each employee benefit
plan, arrangement, policy, program, agreement or commitment which the Company
maintains, contributes to or may have any liability in respect to (each, a
“Plan”) has been established and administered in all material respects in
accordance with its terms, and 

- 9 -

complies in form and in operation with the applicable requirements of
ERISA, the Code and other applicable Requirements of Law. No claim with respect
to the administration or the investment of the assets of any Plan (other than
routine claims for benefits) is pending. No event has occurred in connection
with which the Company or any Plan, directly or indirectly, could be subject to
any material liability under ERISA, the Code or any other law, regulation or
governmental order applicable to any Plan, or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under which the Company has
agreed to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirement of, any such statute,
regulation or order. The Company has no material liability, whether absolute or
contingent, including any obligations under any Plan, with respect to any
misclassification of any person as an independent contractor rather than as an
employee. 

          (b) The
Company does not have any obligations to provide or any direct or indirect
liability, whether contingent or otherwise, with respect to the provision of
health or death benefits to or in respect of any former employee, except as may
be required pursuant to Section 4980B of the Code and the corresponding
provisions of ERISA and the cost of which are fully paid by such former
employees. 

          6.12 Investment
Company. The Company is not an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for an investment company,
within the meaning of the Investment Company Act of 1940, as amended. 

          6.13 Private
Offerings. Assuming the truth of each Purchaser’s representations and
acknowledgments contained in Section 5 hereof, neither the Company nor any
Person acting on its behalf (other than the Purchasers, as to whom the Company
makes no representations) has offered or sold the Units by means of any general
solicitation or general advertising within the meaning of Rule 502(c) under the
Securities Act. The Company has not sold Units to anyone other than the
Purchasers. 

          6.14 Broker’s
or Finder’s Commissions. Except as set forth in the Memorandum, no finder,
broker, agent, financial person or other intermediary has acted on behalf of
the Company in connection with the sale of the Units by the Company or the consummation
of this Agreement or any of the transactions contemplated hereby. The Company
has not had any direct or indirect contact with any other investment banking
firm (or similar firm) with respect to the offer of the Units by the Company to
the Purchasers or the Purchasers’ subscriptions for the Units. 

          6.15 Disclosure.
The Transaction Documents do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which they
were made, not misleading. The Company does not have any knowledge of any fact
that has specific application to the Company (other than general economic or
industry conditions) and that would reasonably be expected to have a Material
Adverse Effect that has not been disclosed in or pursuant to the Transaction
Documents. 

          The Company
certifies that each of the foregoing representations and warranties by the
Company set forth in this Section 6 are true as of the date hereof and shall
survive such date as contemplated in Section 7.1. 

7. Indemnification. 

          7.1 The
Company agrees to indemnify and hold harmless the Purchasers, their affiliates
and each of their respective directors, officers, general and limited partners,
principals, agents and attorneys (individually, a “Purchaser Indemnified
Party” and collectively, the “Purchaser Indemnified Parties”) from
and against any and all losses, claims, damages, Liabilities, costs (including
reasonable attorneys’ fees) and expenses (collectively, “Losses”) to
which any Purchaser Indemnified Party may become 

- 10 -

subject, insofar as such Losses arise out of or result from (i) any
breach of any representation or warranty made by the Company contained in or
made pursuant to this Agreement, or (ii) the failure of the Company to fulfill
any agreement or covenant contained in or made pursuant to this Agreement. All
of the representations and warranties of the Company made herein shall survive the
execution and delivery of this Agreement until the date that is one year after
the Closing Date, except for (a) Sections 6.1 (Organization, Good Standing and
Qualification), 6.2 (Capitalization), and 6.3 (Corporate Power, Authorization;
Enforceability), which representations and warranties shall survive
indefinitely (or if indefinite survival is not permitted by law, then for the
maximum period permitted by applicable law), (b) Section 6.9 (Taxes), which
representation and warranty shall survive until the later to occur of (i) the
lapse of the statute of limitations with respect to the assessment of any tax
to which such representation and warranty relates (including any extensions or
waivers thereof) and (ii) sixty (60) days after the final administrative or
judicial determination of the Taxes to which such representation and warranty
relates, and no claim with respect to Section 6.9 may be asserted thereafter
with the exception of claims arising out of any fact, circumstance, action or
proceeding to which the party asserting such claim shall have given notice to
the other parties to this Agreement prior to the termination of such period of
reasonable belief that a tax liability will subsequently arise therefrom, and
(c) Section 6.8 (Environmental Matters), which representation and warranty
shall survive until the lapse of the applicable statute of limitations. Except
as set forth herein, all of the covenants, agreements and obligations of the
Company shall survive the Closing indefinitely (or if indefinite survival is
not permitted by law, then for the maximum period permitted by applicable law).

          7.2 Each
Purchaser agrees, severally and not jointly, to indemnify and hold harmless the
Company, its affiliates and each of their respective directors, officers,
general and limited partners, principals, agents and attorneys (individually, a
“Company Indemnified Party” and collectively, the “Company
Indemnified Parties”) from and against any and all Losses to which any
Company Indemnified Party may become subject, insofar as such Losses arise out
of or result from (i) any breach of any representation or warranty made by such
Purchaser contained in or made pursuant to this Agreement, or (ii) the failure
of such Purchaser to fulfill any agreement or covenant contained in or made
pursuant to this Agreement. All of the representations and warranties of each
Purchaser made herein shall survive the execution and delivery of this
Agreement until the date that is two years after the Closing Date. Except as
set forth herein, all of the covenants, agreements and obligations of the
Purchasers shall survive the Closing indefinitely (or if indefinite survival is
not permitted by law, then for the maximum period permitted by applicable law).

          7.3
Promptly after receipt by a Purchaser Indemnified Party or Company Indemnified
Party (each an “Indemnified Party”)under Section 7.1 or 7.2 of notice of
any claim as to which indemnity may be sought, including, without limitation,
the commencement of any action or proceeding, the Indemnified Party will, if a
claim in respect thereof may be made against the Company or the applicable
Purchaser (as applicable, the “Indemnifying Party”) under this Section
7, promptly notify the Indemnifying Party in writing of the commencement
thereof; provided that the failure of the Indemnified Party to so notify the
Indemnifying Party will not relieve the Indemnifying Party from its obligations
under this Section 7 unless, and only to the extent that, such omission results
in the Indemnifying Party’s forfeiture of substantive rights or defenses or
being materially prejudiced by the Indemnified Party’s failure to give such
notice. In case any action or proceeding is brought against any Indemnified
Party, and it notifies the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to assume the defense thereof at its own
expense, with counsel satisfactory to such Indemnified Party in its reasonable
approval (which approval will not be withheld or delayed unreasonably);
provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense at its own expense. After
notice from the Indemnifying Party to the Indemnified Party of its election to
so assume the defense thereof, the Indemnifying Party will not be Liable to the
Indemnified Party under this Section 7 for any legal or any other expenses
subsequently incurred by the Indemnified Party in 

- 11 -

connection with the defense thereof (other than reasonable costs of
investigation) unless incurred at the written request of the Indemnifying
Party. Notwithstanding the above, the Indemnified Party will have the right to
employ counsel of its own choice in any action or proceeding (and be reimbursed
by the Indemnifying Party for the reasonable fees and expenses of the counsel
and other reasonable costs of the defense) if, in the written opinion of such
Indemnified Party’s counsel, representation of the Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests or conflicts between the Indemnified Party and
any other party represented by the counsel in the action; provided, however,
that the Indemnifying Party will not in connection with any one action or
proceeding or separate but substantially similar actions or proceedings arising
out of the same general allegations, be Liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all
Indemnified Parties, except to the extent that local counsel, in addition to
regular counsel, is required in order to effectively defend against the action
or proceeding. An Indemnifying Party will not be Liable to any Indemnified
Party for any settlement or entry of judgment concerning any action or
proceeding effected without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. The Indemnifying Party agrees that
it will not, without the prior written consent of the Indemnified Party,
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising or
that may arise out of such claim. The rights accorded to an Indemnified Party
hereunder shall be in addition to any rights that any Indemnified Party may
have at common law, by separate agreement or otherwise; provided, however,
that notwithstanding the foregoing or anything to the contrary contained in
this Agreement, (a) nothing in this Section 7 shall restrict or limit any rights
that any Indemnified Party may have to seek equitable relief and (b) this
Section 7 shall be the sole and exclusive remedy for any breach of the
Company’s or any Purchaser’s representations and warranties contained in
Section 5 or 6 except with respect to claims arising out of fraud or willful
misconduct. 

8. Covenants. 

          8.1 Use
of Proceeds. The Company shall use the proceeds from this Offering for
product development, market expansion, regulatory affairs as referenced in the
Offering Summary. The remainder of the proceeds shall be used for working
capital and general corporate purposes. 

          8.2 Conduct
of the Company’s Business. Except as contemplated by this Agreement, during
the period from the date hereof to the Closing Date, the Company will conduct
its business and operations solely in the ordinary course of business
consistent with past practice and use reasonable commercial efforts to keep
available the services of its officers and employees and preserve its current
relationships with customers, suppliers, licensors, creditors and others having
business dealings with it. 

          8.3 Reasonable
Best Efforts. Subject to the terms and conditions of this Agreement, each
of the parties hereto will use its reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement at the earliest practicable date. 

9. FOR RESIDENTS OF ALL STATES

          NEITHER THE
SECURITIES OFFERED HEREBY OR THE SECURITIES INTO WHICH SUCH SECURITIES MAY BE
CONVERTED HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE
SECURITIES ARE 

- 12 -

SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. 

10. No Waiver. 

          Notwithstanding
any of the representations, warranties, acknowledgments or agreements made
herein by the Purchasers, the Purchasers do not thereby or in any manner waive
any rights granted to the Purchasers under federal or state securities laws. 

11. Miscellaneous. 

          11.1 Notices.
Any notice or other communication given hereunder by any party hereto to any
other party hereto shall be in writing and delivered personally or by facsimile
transmission or sent by registered or certified mail or by any express mail or
overnight courier service, postage or fees prepaid: 

	
 

	
If to the
 Company, to: 

	
 

	
 

	
 

	
BioDrain
 Medical, Inc.

 699 Minnetonka Highlands Lane

 Orono, Minnesota 55356-9728

 Attention: Kevin Davidson

 Facsimile No.: (952) 476-2361

          If to the
Purchasers, to each Purchaser at such Purchaser’s name, address and facsimile
number set forth on the signature page to this Agreement 

          Any notice
that is delivered personally or by facsimile transmission in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party or its agent. Any notice that is
addressed and mailed or sent by courier in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is addressed
at the close of business, local time of the recipient, on the fourth business
day after the day it is so placed in the mail or, if earlier, the time of
actual receipt. 

          11.2 Successors
and Assigns. This Agreement will be binding upon and inure to the benefit
of the parties hereto and to their respective heirs, legal representatives,
successors and assigns; provided, that no party may assign this Agreement or
its rights hereunder without the prior written consent of the Company, in the
case of an assignment by any Purchaser, or the Purchasers in the case of an
assignment by the Company, such consent not to be unreasonably withheld or
delayed (however, the Company shall under no circumstances be obligated to
consent to an assignment by a Purchaser to a purchaser of Securities);
provided, further, that a Purchaser may assign this Agreement to its affiliates
without consent; provided that any transfer of Securities or shares of Common
Stock underlying such Securities must be in compliance with the Transaction
Documents and all applicable law. 

          11.3 Entire
Agreement. This Agreement sets forth the entire agreement and understanding
among 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; provided, that any confidentiality agreement between the Company and any
Purchaser shall remain in effect. This Agreement may be 

- 13 -

amended only by mutual written agreement of the Company and a majority
in interest of the Purchasers, and the Company may take any action herein
prohibited or omit to take any action herein required to be performed by it,
and any breach of any covenant, agreement, warranty or representation may be
waived, only if the Company has obtained the written consent or waiver of the
Purchasers purchasing a majority of the Units offered hereby. 

          11.4 Governing
Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota with respect to contracts made and to be
fully performed therein, without regard to the conflicts of laws principles
thereof. The parties hereto hereby agree that any suit or proceeding arising
under this Agreement, or in connection with the consummation of the
transactions contemplated hereby, shall be brought solely in a federal or state
court located in the State of Minnesota. By its execution hereof, both the
Company and the Purchasers hereby consent and irrevocably submit to the in
personam jurisdiction of the federal and state courts located in the State of
Minnesota and agree that any process in any suit or proceeding commenced in
such courts under this Agreement may be served upon it personally or by
certified or registered mail, return receipt requested, or by Federal Express
or other courier service, with the same force and effect as if personally
served upon the applicable party in Minnesota and in the city or county in
which such other court is located. The parties hereto each waive any claim that
any such jurisdiction is not a convenient forum for any such suit or proceeding
and any defense of lack of in personam jurisdiction with respect thereto. 

          11.5 Severability.
The holding of any provision of this Agreement to be invalid or unenforceable
by a court of competent jurisdiction will not affect any other provision of
this Agreement, which will remain in full force and effect. If any provision of
this Agreement is declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, the provision will
be interpreted so as to remain enforceable to the maximum extent permissible
consistent with applicable law and the remaining conditions and provisions or
portions thereof will nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provisions will be deemed dependent upon any other covenant or provision unless
so expressed herein. 

          11.6 No
Waiver. A waiver by either party of a breach of any provision of this
Agreement will not operate, or be construed, as a waiver of any subsequent
breach by that same party. 

          11.7 Further
Assurances. The parties agree to execute and deliver all further documents,
agreements and instruments and take further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement. 

          11.8 Counterparts.
This Agreement may be executed in two or more counterparts, each of which will
be deemed an original, but all of which will together constitute the same
instrument. 

          11.9 No
Third Party Beneficiaries. Nothing in this Agreement creates in any Person
not a party to this Agreement any legal or equitable right, remedy or claim
under this Agreement, and this Agreement is for the exclusive benefit of the
parties hereto. The parties expressly recognize that this Agreement is not
intended to create a partnership, joint venture or other similar arrangement
between any of the parties or their respective affiliates. 

          11.10 Headings.
The headings in this Agreement are solely for convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement. 

          11.11 Publicity
Restrictions. Except as may be required by applicable Requirements of Law,
none of the parties hereto shall issue a publicity release or public
announcement or otherwise make any disclosure concerning this Agreement, the
transactions contemplated hereby without prior approval by the 

- 14 -

other party hereto; provided that each Purchaser may disclose on its
worldwide web pages and its offering materials, if any, the name of the
Company, the name of the Chief Executive Officer of the Company, a brief
description of the business of the Company consistent with the Company’s press
releases or other public statements, the Company’s logo and the aggregate
amount of such Purchaser’s investment in the Company. If any announcement is
required by applicable law or the rules of any securities exchange or market on
which shares of Common Stock are traded to be made by any party hereto, prior
to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties reasonable
opportunity to comment thereon. The parties agree to attribute and otherwise
indicate ownership of the other parties’ trademarks and logos. 

          11.12 Certification.
Each Purchaser certifies that such Purchaser has read this entire Agreement and
that every statement on such Purchaser’s part made and set forth herein is true
and complete. 

[Remainder of page intentionally left blank.]

- 15 -

          IN
WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on
the date his or her signature has been subscribed and sworn to below. 

	
 

	
 

	
 

	
 

	
The shares
 of Common Stock

	
 

	
 

	
 

	
and the
 common stock purchase warrants

	
 

	
 

	
 

	
are to be
 issued in:

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
Print Name
 of Purchaser

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Subscription
 price paid herewith:

	
 

	
____
 individual name

	
 

	
$____________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
____ tenants
 in the entirety

	
 

	
_____________shares of Units subscribed for (being $0.35 divided by
 the Subscription Price listed above)

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
____
 corporation (an officer must sign)

	
 

	
Print Name
 of Joint Purchaser

	
 

	
 

	
 

	
(if
 applicable)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
____
 partnership (all general partners must sign)

	
 

	
Signature of
 Purchaser

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
____ trust

	
 

	
Signature of
 Joint Purchaser

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Address of
 Purchaser:

	
 

	
 

	
 

	
 

	
 

	
____ limited
 liability company

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
Federal Tax
 ID:_________________

	
 

	
Facsimile
 No.:______________________

	
 

	
(Social
 Security Number for individuals)

	
 

	
 

	
 

	
 

	
 

	
(with a copy
 to:)

	
 

	
 

	
 

	 

	
 

	
State of
 Residence:______________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Facsimile
 No.:______________________

	
 

Accepted as of the ___ day of __________, 2008 as to ________________
Units at price accepted being $ _______________, being $0.35 x the number of
shares of Units as to which this Subscription is accepted:

	
 

	
 

	
 

	
 

	
BioDrain
 Medical, Inc.

	
 

	
By:

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
Name:  

	
 

	
 

	
 

	
 

	 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	 

	
 

- 16 -

Exhibit A

Checks should be sent to our escrow agent, “Richardson & Patel LLP
– BioDrain Trust Account”, to: 

	
 

	
 

	
 

	
 

	
Mona
 Buchanan, Office Manager

 Richardson & Patel LLP, Escrow Agent 

 10900 Wilshire Boulevard, Suite 500

 Los Angeles, California 90024

	
 

	
 

	
In lieu of a
 check, you may also invest by sending a wire transfer to:

	
 

	
 

	
 

	
COMERICA
 BANK OF CALIFORNIA

 WESTWOOD OFFICE

 10900 WILSHIRE BLVD.

 LOS ANGELES, CALIF. 90024

	
 

	
PHONE
 NUMBER:

	
800-888-3595

	
 

	
ABA NUMBER:

	
121137522

	
 

	
ACCT.
 NUMBER:

	
1891937581

	
 

	
BENEFICIARY:

	
RICHARDSON
 & PATEL LLP

	
 

	
CLIENT TRUST ACCT.

	
 

	
 

	
 

	
 

	
RE: BIODRAIN
 TRUST ACCOUNT

- 17 -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.  

1

          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. 

2

          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 

3

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; 

4

                    (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 

5

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. 

10

          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. 

11

          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

	
 

	
 

13

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