Document:

Exhibit 10.32

 

BIODRAIN MEDICAL, INC.

2915 Commers Drive, Suite 900

Eagan, MN 55121

 

August 15, 2012

 

Dr. Samuel Herschkowitz

122 Willow Street

Brooklyn, NY 11201

 

SOK Partners, LLC

c/o Dr. Samuel Herschkowitz

122 Willow Street

Brooklyn, NY 11201

 

		Re:	Terms of Forbearance

 

Dear Dr. Herschkowitz:

 

I am writing to set forth the terms of the
forbearance by you and your affiliate, Atlantic Partners Alliance, LLC (“APA”) from exercising certain default
rights against BioDrain Medical, Inc. (the “Company”) and its affiliates as of the date of this letter (the
“Effective Date”). In exchange for your agreement to such forbearance as described in this letter agreement
and your other agreements herein, you will be entitled to the compensation as set forth below in Section 6. Unless otherwise stated,
all capitalized terms used but not defined herein shall have the meaning(s) ascribed to them in the Note Purchase Agreement, as
defined below.

 

In consideration of the compensation set
forth in Section 6 and other promises and covenants made in this letter agreement, the sufficiency of which consideration is acknowledged
by both parties hereto, you and the Company agree as follows:

 

1.          Background.
You and the Company entered into that certain Note Purchase Agreement dated as of December 20, 2011 and subsequently amended and
restated effective as of the same date (as amended, the “Herschkowitz Note Purchase Agreement”) pursuant to
which the Company issued and sold to you a Convertible Promissory Note dated as of December 21, 2011, in the original principal
amount of $225,000 (as amended concurrently with the Herschkowitz Note Purchase Agreement, the “Herschkowitz Note”).
Capitalized terms that are not defined herein shall have the meanings set forth in the Herschkowitz Note Purchase Agreement. As
security for the Herschkowitz Note, you hold a first security interest in substantially all of the assets of the Company. Further,
SOK Partners, LLC, (“SOK”) which is also an affiliate of APA, entered into that certain Note Purchase Agreement
dated as of March 28, 2012 (the “SOK Note Purchase Agreement”) pursuant to which the Company issued and sold
to SOK a Convertible Promissory Grid Note dated as of March 28, 2011, in the principal amount of up to $600,000 (the “SOK
Note”).

 

    	 

    	 

    

 

2.          Protection
Against Dilution. The Company and APA are also parties to a letter agreement dated March 14, 2012 (the “Anti-Dilution
Letter”), providing APA and its affiliates (including you and SOK) with certain rights to avoid dilution relating to
additional issuances of equity securities by the Company, evidencing the parties’ intent that APA would be provided with
significant protection against dilution. This protection was in recognition of APA’s investments in the Company involving
a high degree of risk and the Company’s contemplated need for restructuring its indebtedness, which would result in significant
dilution. The parties acknowledge that you and SOK would not have made their historical cash investments in the Company to the
same degree had the dilution protection not been provided, and the investments by APA have enabled the Company to avoid insolvency.
Since the respective dates of the Herschkowitz Note Purchase Agreement and the SOK Note Purchase Agreement, the Company has issued
in excess of 16,000,000 shares of common stock to parties other than APA and its affiliates, resulting in significant dilution.

 

3.          Default
Notice. Pursuant to a letter dated April 20, 2012, you advised the Company of the occurrence of certain events of default under
the terms of the Herschkowitz Note and the Herschkowitz Note Purchase Agreement. As a result of such events of default, you asserted
significant rights as a secured creditor of the Company.

 

4.          Existing
Defaults. You and the Company acknowledge that the Company is in default under the following provisions of the Herschkowitz
Note Purchase Agreement and/or the Herschkowitz Note, as applicable (the “Existing Defaults”), and such Existing
Defaults constitute “Events of Default” as set forth in Section 11 of the Herschkowitz Note and under the Default Notice.
You further acknowledge and represent that the below-listed events are the only Events of Default as of the Effective Date:

 

a.           Herschkowitz
Note, Section 11(d): The Company has failed to pay past due amounts aggregating to $332,000 under the terms of three convertible
debenture notes issued by the Company to Dean and Carol Ruwe, plus unpaid interest.

 

b.           Herschkowitz
Note Purchase Agreement, Section 1.04: The Company has failed to register, and cause to be declared effective such registration
under the Securities Act, the 1,546,666 shares of the Company’s Common Stock that were issued in connection with the Equity
Bonus and in payment of the Board Meeting Fees.

 

c.           Herschkowitz
Note Purchase Agreement, Section 4.01: The Company has failed on two occasions to invite the Board Advisors to meetings of the
Company’s Board of Directors.

 

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d.           Herschkowitz
Note Purchase Agreement, Section 4.02: The Company has failed to (i) register the Penalty Shares under the Securities Act and (ii)
obtain and deliver to you a legal opinion from legal counsel confirming that: (A) the Penalty Shares are registered under the Securities
Act and may be sold upon compliance with the prospectus delivery requirements of the Securities Act and (B) any legends upon the
stock certificates evidencing the Penalty Shares may be removed upon a sale in compliance with such prospectus delivery requirements.

 

e.           Herschkowitz
Note Purchase Agreement, Section 4.04: The Company has failed to deliver to you the Budget not less than five (5) Business Days
prior to the first day of certain months following the date of the Herschkowitz Note Purchase Agreement.

 

5.          Forbearance.
As of the Effective Date, in consideration of the mutual agreements of the parties herein, you and each of your affiliates, successors,
assigns, beneficiaries, insurers, indemnitors, trustees, agents and representatives, hereby forbear from exercising any of your
rights arising under the Herschkowitz Note or the Herschkowitz Note Purchase Agreement with respect to the Existing Defaults against
the Company, and each of its respective officers, directors, shareholders, affiliates, predecessors, successors, assigns, insurers,
indemnitors, attorneys, employees, agents and representatives; provided, however, that the foregoing shall be subject to
the limitations set forth in this letter agreement and shall not release or waive any breach of this letter agreement. You further
agree to forbear from exercising any rights with respect to events of default, security interests in the Collateral and other similar
remedies against the Company or its interests under the Herschkowitz Note or the Herschkowitz Note Purchase Agreement until the
occurrence of an Event of Default (as defined in the Herschkowitz Note): (a) that does not constitute an Existing Default and (b)
occurs and accrues after the Effective Date of this Agreement (the “Forbearance Termination Conditions”). The
Company acknowledges that, subject to the forbearance as described herein and the other provisions of this letter agreement, you
retain all of your rights and remedies under the Herschkowitz Note and the Herschkowitz Note Purchase Agreement, which rights and
remedies remain in full force and effect until otherwise terminated.

 

6.          Penalty
Shares. You and the Company acknowledge that 7,500,000 shares of the Company’s Common Stock, constituting the “Penalty
Shares” under Section 4.02 of the Herschkowitz Note Purchase Agreement, have been delivered to you prior to the Effective
Date as provided in the Herschkowitz Note Purchase Agreement upon an Event of Default.

 

7.          Additional
Agreements by You and SOK. You and SOK also agree to the following:

 

a.           The
second paragraph of the Herschkowitz Note is hereby amended and restated as follows:

 

“This promissory note
(the “Note”) is issued by the Borrower pursuant to that certain Note Purchase Agreement dated as of the
date hereof (the “Purchase Agreement” ), entered into between the Borrower and the Lender, and is subject
to, and Borrower and Lender shall be bound by, all the terms, conditions and provisions of the Purchase Agreement. This Note shall
become due and payable on December 31, 2012 (the “ Maturity Date ”). Capitalized terms used herein but
not defined herein shall have the meanings ascribed to them in the Purchase Agreement.”

 

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b.           The
second full paragraph of the SOK Note is hereby amended and restated as follows:

 

“This promissory note
(the “Note”) is issued by the Borrower pursuant to that certain Note Purchase Agreement dated as of the
date hereof (the “Purchase Agreement” ), entered into between the Borrower and the Lender, and is subject
to, and Borrower and Lender shall be bound by, all the terms, conditions and provisions of the Purchase Agreement. This Note shall
become due and payable on December 31, 2012 (the “Maturity Date”). Capitalized terms used herein but
not defined herein shall have the meanings ascribed to them in the Purchase Agreement.”

 

c.           The
following is added as Section 4.03(d) of the Herschkowitz Note Purchase Agreement:

 

“(d) Within five (5)
business days after the earlier of the (i) full (100%) conversion into shares of Common Stock or (ii) full payment of, all of the
outstanding principal amount and accrued interest due and payable under all promissory notes of the Company outstanding on the
date of this Agreement (excluding the SOK Note), the Lender shall forever discharge, release and terminate any and all security
interests in the Collateral (“Security Release”). For purposes of clarity, Lender shall not be required to consummate
any Security Release in the event of partial conversion and/or partial payment under the immediately preceding items (i) and (ii),
respectively.”

 

d.           Notwithstanding
Section 11 of the Herschkowitz Note which provides for an increased rate of interest on any outstanding amounts under the Herschkowitz
Note (the “Balance”) triggered by certain Events of Default (as defined in the Herschkowitz Note), you understand
and acknowledge that the rate of interest accruing on the Balance shall remain at 20% calculated based on a 365-day year and compounded
annually (the “Standard Interest Rate”) until the Maturity Date or such other date as may be mutually
agreed upon by you and the Company or until a subsequent Event of Default. You and the Company acknowledge that the Balance has
not at any time or under any circumstances been subject to any other rate of interest other than the Standard Interest Rate.

 

e.           Section
11 of the Herschkowitz Note is amended to delete subparagraph (g) and to insert the following subparagraphs following subparagraph
(f):

 

(g) any money judgment or
judgments (other than a money judgment covered by insurance as to which the insurance company has not disclaimed or reserved the
right to disclaim coverage), writ or writs or warrant or warrants of attachment, or any similar process or processes, shall be
entered or filed against the Borrower, or against any of the Collateral (as defined in the Purchase Agreement), in an aggregate
amount in excess of $25,000, and which remains undischarged, unvacated, unbonded or unstayed for a period of 30 days;

 

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(h) any person shall commence
legal proceedings to foreclose on the lien or security interest of such person in any Collateral;

 

(i) any creditor of the Borrower
shall take action to take possession of, or sell or otherwise realize upon, or to exercise any other rights or remedies with respect
to, any Collateral, including any sale or other disposition of any Collateral by the Borrower with the consent of, or at the direction
of, any of its creditors; or

 

(j) any person shall take
action to take control or possession of, or exercise of any right of setoff with respect to, any Collateral.

 

f.            The
Company and you, individually and acting as an authorized signatory for APA and its affiliates and individual members agree to
terminate the Anti-Dilution Letter. In consideration of the compensation provided in this Agreement, you agree that the Anti-Dilution
Letter is no longer operative, valid or binding on you, APA or the Company and each and all of its terms, including without limitation
the grant of anti-dilution rights to APA contained therein, is/are void and inoperative.

 

8.          Compensation
and Terms of Forbearance. In consideration of the forbearance and your other agreements herein, you agree to and accept the
following conditions of forbearance and/or compensation, as applicable:

 

a.           On
the date of this Agreement, the Company is issuing to you 13,250,000 shares of authorized but unissued shares of its Common Stock.
As of the date of issuance, such shares shall be fully paid and non-assessable shares. The Company will use its best efforts to
register such shares on the S-1 to the same extent that it registers the Equity Bonus on the S-1; provided, that any delay in the
registration of such shares by the Company shall not constitute a Forbearance Termination Condition.

 

b.           On
the date of this Agreement, the Company is issuing to SOK Partners, LLC (“SOK”) an additional 13,250,000 shares
of authorized but unissued shares of its Common Stock. As of the date of issuance, such shares shall be fully paid and non-assessable
shares. The Company will use its best efforts to register such shares on the S-1 to the same extent that it registers the Equity
Bonus on the S-1; provided, that any delay in the registration of such shares by the Company shall not constitute a Forbearance
Termination Condition.

 

c.           Section
6 of the Herschkowitz Note is hereby amended and restated as follows:

 

“6. Right to Convert.
Subject to and upon compliance with the provisions of Section 7, the Purchaser shall have the right, at its option, at any time
and from time to time, so long as any amount remains payable under this Note, to convert all or any part of the outstanding principal
amount or accrued interest hereunder (the “ Outstanding Amount ”) into shares of Common Stock at a conversion
price per share equal to $0.014 per share, as such amount may be adjusted pursuant to Section 9 below (the “ Conversion
Price ”).”

 

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d.           Section
6 of the SOK Note is hereby amended and restated as follows:

 

“6. Right to Convert.
Subject to and upon compliance with the provisions of Section 7, the Purchaser shall have the right, at its option, at any time
and from time to time, so long as any amount remains payable under this Note, to convert all or any part of the outstanding Principal
Amount or accrued interest hereunder (the “ Outstanding Amount ”) into shares of Common Stock at a conversion
price per share equal to $0.014 per share, as such amount may be adjusted pursuant to Section 9 below (the “ Conversion
Price ”).”

 

e.           In
the event that the Company consummates, in substantially similar form, the following series of transactions on or prior to June
30, 2013: (i) a merger or similar transaction with a public shell company (the “Shell Merger”), (ii) raising
between $2,000,000 and $4,000,000 through an offering of the securities of the public shell company concurrent with or subsequent
to the Shell Merger (the “Qualifying Round”) and (iii) listing the Company’s shares on NASDAQ pursuant
to an underwritten offering of the Company’s securities resulting in gross proceeds of between $5,000,000 and $30,000,000
(the “NASDAQ Underwriting” and collectively with the Shell Merger and Qualifying Round, the “Shell
Transactions”), then the Company shall deliver to you the following compensation: (A) $75,000 upon consummating the Shell
Merger, (B) $150,000 upon consummating the Qualifying Round and (C) 3% of the gross proceeds of the NASDAQ Underwriting, which
payment shall under no circumstances be less than $200,000 or greater than $1,000,000. The Company shall reimburse you at your
actual out-of-pocket cost for reasonable expenses incurred in connection with the Shell Transactions but in no event in an amount
greater than $10,000 (the “Transaction Fees”).

 

9.          Governing
Law. This Agreement shall be governed by the laws of the State of New York, without regard to its conflicts-of-law provisions.

 

10.         Counterparts.
This Agreement may be executed by the parties in counterparts, all of which, when taken together, shall constitute a fully executed
version of this Agreement. This Agreement, or a counterpart, thereof, may be executed and delivered by telecopier, facsimile or
any other electronic transmission, including, without limitation, a scanned version in .pdf format, and the telecopier, facsimile
or any other electronic transmission of a signature to another party or parties (or to their respective legal representatives)
shall be of the same force and effect as the delivery of an original signature.

 

Signature Page
Follows

 

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IN WITNESS WHEREOF, the undersigned have
executed this Agreement to be effective as of the Effective Date.

 

	BIODRAIN MEDICAL, INC.	 
	 	 
	/s/
    Bob Myers	 
	By: Bob Myers	 
	Its: Chief Financial
    Officer	 
	 	 
	/s/
    Samuel Herschkowitz	 
	By: Samuel Herschkowitz,
    M.D., individually and on behalf of Atlantic Partners Alliance, LLC 	 
	 	 
	SOK PARTNERS, LLC	 
	 	 
	/s/
    Samuel Herschkowitz	 
	By: Samuel Herschkowitz,
    M.D.	 
	Its: Managing Partner	 

 

    	7Exhibit 10.34

 

BIODRAIN MEDICAL, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

 

This STOCK OPTION AGREEMENT
(the “Agreement”) is made and entered into effective as of the _____ day of __________, 20___, between BioDrain Medical,
Inc., a Minnesota corporation (the “Company”) and ________________ (“Employee”).

 

BACKGROUND

 

A.           Employee
has either been hired to serve as an employee to the Company or the Company desires to induce Employee to continue to serve the
Company as an employee.

 

B.           The
Company has adopted the 2012 Stock Incentive Plan (the “Plan”), pursuant to which shares of common stock of the Company
have been reserved for issuance under the Plan.

 

NOW, THEREFORE, the
parties hereto agree as follows:

 

1.          Grant
of Option; Purchase Price. Subject to the terms and conditions herein set forth, the Company hereby irrevocably grants from
the Plan to Employee the right and option, hereinafter called the “Option”, to purchase all or any part of an aggregate
of the number of shares of common stock, $0.01 par value, of the Company (the “Shares”) set forth at the end of this
Agreement after “Number of Shares” at the price per Share set forth at the end of this Agreement after “Purchase
Price.”

 

2.          Exercise
and Vesting of Option. The Option shall be exercisable only to the extent that all, or any portion thereof, has vested in Employee.
The Option shall vest immediately with respect to _______ shares and shall be exercisable to that extent for the entire term of
the Option, unless the Option terminates earlier as provided herein. The remaining portion of the Option, with respect to ________
shares, will vest as follows: ___.

 

3.          Termination
of Employment. Except as provided in Section 5(a) below, in the event that Employee ceases to be employed by the Company, for
any reason or no reason, with or without cause, prior to any Vesting Date, that part of the Option scheduled to vest on such Vesting
Date, and all parts of the Option scheduled to vest in the future, shall not vest and all of Employee's rights to and under such
non-vested parts of the Option shall terminate.

 

4.          Term
of Option. To the extent vested, and except as otherwise provided in this Agreement, the Option shall be exercisable for ten
(10) years from the date of this Agreement; provided, however, that, except as provided in Section 5(a) below, in the event Employee
ceases to be employed by the Company, for any reason or no reason, Employee or his/her legal representative shall have three (3)
months from the date of such termination of his/her position as an employee to exercise any part of the Option vested pursuant
to Section 3 of this Agreement. Upon the expiration of such three (3) month period, except as provided in Section 5, or, if earlier,
upon the expiration date of the Option as set forth above, the Option shall terminate and become null and void.

 

    	1

    	 

    

 

5.          Death
of Employee. In the event of Employee's death, the person designated in Employee’s will, or in the absence of such designation,
Employee's legal representative may, in like manner, exercise the Option to the extent of the number of Shares which were vested
at the time of his/her death, but such right shall expire unless exercised by such designated person or legal representative within
the earlier of (i) six (6) months after the death of Employee, or (ii) the expiration of the Option.

 

6.           Change
in Control. “Change in Control” has the meaning provided in the Plan. Notwithstanding anything to the
contrary contained herein, in the event of a Change in Control of the Company, the Option shall become fully vested upon the
effective date of such event, and shall remain exercisable for the remainder of the term of the Option.

 

7.          Method
of Exercising Option. Subject to the terms and conditions of this Agreement and the Plan, the Option may be exercised by written
notice to the Company. Such notice shall state the election to exercise the Option, the number of Shares in respect of which it
is being exercised, the method of exercise, and shall be signed by the person or persons exercising the Option. The Employee may
exercise the Option by (i) paying to the Company in cash the full exercise price; (ii) arranging for a broker to sell Shares and
immediately thereafter pay to the Company the full exercise price; or (iii) delivering Shares previously owned by Employee, the
total market value of which equals the full exercise. Applicable tax withholding may be paid by any method permitted under the
Plan. Upon proper exercise, the Company shall deliver a certificate or certificates representing such Shares as soon as practicable
after the notice shall be received. All Shares that shall be purchased upon the exercise of the Option as provided herein shall
be fully paid and non-assessable.

 

8.          Rights
of Option Holder. Employee, as holder of the Option, shall not have any of the rights of a shareholder with respect to the
Shares covered by the Option except to the extent that one or more certificates for such Shares shall be delivered to him or her
upon the due exercise of all or any part of the Option.

 

9.          Limitations
on Transferability. The Option shall not be transferred, pledged or assigned except, in
the event Employee's death, by will or the laws of descent and distribution to the limited extent provided in the Plan, or pursuant
to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended (the “Code”) or
Title I of the Employee Retirement Income Security Act, or the rules there under, and the Company shall not be required to recognize
any attempted assignment of such rights. Notwithstanding the preceding sentence, the Option may be transferred by Employee to Employee's
spouse, children, grandchildren or parents (collectively, the “Family Members”), to trusts for the benefit of Family
Members, to partnerships or limited liability companies in which Family Members are the only partners or shareholders, or to entities
exempt from federal income taxation pursuant to Section 501(c)(3) of the Code. During Employee's lifetime, the Option may be exercised
only by him or her, by his/her guardian or legal representative or by the transferees permitted by the preceding sentence.

 

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10.         No
Continued Employment or Right to Corporate Assets. Nothing contained in this Agreement shall be deemed to grant Employee any
right to continue in the employ of the Company for any period of time or to any right to continue his/her present or any other
rate of compensation, nor shall this Agreement be construed as giving Employee, Employee’s beneficiaries or any other person
any equity or interests of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of
any kind between the Company and any such person.

 

11.         Securities
Law Matters. Employee acknowledges that the Shares to be received by him or her upon exercise of the Option may not have been
registered under the Securities Act of 1933 or the Blue Sky laws of any state (collectively, the “Acts”). If such Shares
have not been so registered, Employee acknowledges and understands that the Company is under no obligation to register, under the
Acts, the Shares received by him or her or to assist him or her in complying with any exemption from such registration if he or
she should at a later date wish to dispose of the Shares. Employee acknowledges that if not then registered under the Acts, the
Shares shall bear a legend restricting the transferability thereof, such legend to be substantially in the following form:

 

“The shares represented by
this certificate have not been registered or qualified under federal or state securities laws. The shares may not be offered for
sale, sold, pledged or otherwise disposed of unless so registered or qualified, unless an exemption exists or unless such disposition
is not subject to the federal or state securities laws, and the Company may require that the availability or any exemption or the
inapplicability of such securities laws be established by an opinion of counsel, which opinion of counsel shall be reasonably satisfactory
to the Company.”

 

12.         Employee
Representations. Employee hereby represents and warrants that Employee has reviewed with his/her own tax advisors the federal,
state, and local tax consequences of the transactions contemplated by this Agreement. Employee is relying solely on such advisors
and not on any statements or representation of the Company or any of its agents. Employee understands that he or she will be solely
responsible for any tax liability that may result to him or her as a result of the transactions contemplated by this Agreement.
The Option, if exercised, will be exercised for investment and not with a view to the sale or distribution of the Shares to be
received upon exercise thereof.

 

13.         General.

 

(a)          The
Option is granted pursuant to the Plan and is governed by the terms thereof. In the event of any conflict between the terms of
this Agreement and the terms of the Plan, the terms of the Plan shall control. The Company shall at all times during the term of
the Option reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of this Agreement.

 

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(b)          Nothing
herein expressed or implied is intended or shall be construed as conferring upon or giving to any person, firm, or corporation
other than the parties hereto, any rights or benefits under or by reason of this Agreement.

 

(c)          Each
party hereto agrees to execute such further documents as may be necessary or desirable to effect the purposes of this Agreement.

 

(d)          This
Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute
one and the same agreement.

 

(e)          This
Agreement, in its interpretation and effect, shall be governed by the laws of the State of Minnesota applicable to contracts executed
and to be performed therein.

 

[Signature page follows]

 

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[Signature page to Non-Qualified Stock
Option Agreement]

 

IN WITNESS WHEREOF,
the undersigned have executed this Agreement as of the date first written above.

 

	NUMBER OF SHARES:	 	BIODRAIN MEDICAL, INC.
	 	 	 
	x,xxx	 	By	 
	 	 	Its 	 
	 	 	 
	PURCHASE PRICE:	 	EMPLOYEE:
	 	 	 
	$xx.xx/per share	 	 
	 	 	 
	 	 	DATE:	 

 

    	5

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