Docstoc

Warrant To Purchase Common Stock - BIOLARGO, INC. - 6-24-2003

Document Sample
Warrant To Purchase Common Stock - BIOLARGO, INC. - 6-24-2003 Powered By Docstoc
					Exhibit 10.2 THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES ACT OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS COVERING THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACTS. NUWAY MEDICAL, INC. WARRANT TO PURCHASE COMMON STOCK June 10, 2003 WARRANT NO. AG-1 THIS CERTIFIES THAT, for value received, AUGUSTINE II, LLC, a limited liability company formed under the laws of the State of Delaware (the "Holder"), is entitled to subscribe for and purchase from NUWAY MEDICAL, INC., a corporation organized under the laws of the state of Delaware (the "Company"), commencing at the time periods prescribed herein and ending at 5:00 p.m. Chicago, Illinois time on the fifth (5th) calendar anniversary of the date hereof, 6,158,381 shares (the "Shares") of common stock, par value, $0.00067, of the Company (the "Common Stock"). The exercise price for each Share subject to this Warrant (the "Warrant Price") is equal to $0.16. The number of Shares and the Warrant Price are subject to adjustment from time to time as provided in Section 5 of this Warrant, however the number of shares that are issued or potentially issued to the Holder shall never be equal to or exceed 20% of the issued and outstanding common shares as of the date of this agreement, which is equal to 30,791,911. This Warrant is issued in connection with and as consideration for the funds received by the Company set forth on the face of the Term Note dated the date hereof and issued by the Company in favor of the Holder, which Term Note has been issued pursuant to that certain Term Loan Agreement dated the date hereof between the Company and the Holder. Three million six hundred sixty-five thousand seven hundred three (3,665,703) warrants are exercisable upon funding by Holder of the first installment pursuant to the Term Loan Agreement. One million four hundred sixty-six thousand two hundred eighty-one (1,466,281) shall not be exercisable unless and until the Holder funds the second installment of $100,000 pursuant to the Term Loan Agreement (it being understood that in event that the Holder fails to fund the installment required by the Term Loan Agreement within ten (10) days following the funding date prescribed therein, the right to exercise this warrant in relation to such shares is cancelled). The balance of the warrants (one million twenty-six thousand three hundred ninety-seven (1,026,397)) shall not be exercisable until the Holder funds the final installment pursuant to the Term Loan Agreement (it being understood that in event that the Holder fails to fund the installment required by the Term Loan Agreement within ten (10) days following the funding date prescribed therein, the right to exercise this warrant in relation to such shares is cancelled). 1. Method of Exercise; Payment; Issuance of New Warrant. The purchase right represented by this Warrant may be exercised by the Holder, in whole or in part, subject to the limitation set forth below, and from time to time, by (i) the surrender of this Warrant (with a notice of exercise in the form attached hereto as Exhibit A, duly executed) at the principal office of the Company and

(ii) the payment to the Company, by check or wire transfer of funds to an account specified in writing by the Company, of an amount equal to the aggregate Warrant Price (provided, however, this clause (ii) shall not be applicable if the Holder is making a cashless exercise pursuant to Section 2 of this Warrant). The Shares so purchased, representing the aggregate number of shares specified in the executed Exhibit A, shall be delivered to the Holder within a reasonable time, not exceeding five (5) business days, after this Warrant shall have been so exercised. Upon receipt by the Company of this Warrant at the office of the Company, in proper form for exercise and, unless a cashless exercise is being made in accordance with Section 2 of this Warrant, accompanied by the amount equal to the aggregate Warrant Price, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Shares shall not then be actually delivered to the Holder. Notwithstanding anything else herein to the contrary, the Holder shall not have the right, and the Company shall not have the obligation, to exercise all or any portion of the Warrants if and to the extent that the issuance to the Holder of shares of Common Stock upon such exercise of the Warrants would result in the Holder being deemed the "beneficial owner" of 5% or more of the then outstanding shares of Common Stock of the Company within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of such Shares, deliver to the Holder a new Warrant evidencing the right to purchase the remaining Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of Holder, appropriate notation may be made on this Warrant which shall then be returned to Holder. 2. Exercise. The Holder shall pay the Warrant Price to the Company for each Warrant that it exercises if as of the Term Loan Maturity Date (a) the registration statement to be filed by the Company with the Securities and Exchange Commission (the "SEC") to register the Holder's re-sale of the Common Stock underlying the Warrant has been declared effective by the SEC; (b) the closing bid price of the Common Stock of the Company as published in Bloomberg for each trading day within the thirty calendar days prior to the Term Loan Maturity Date has equaled or exceeded $0.60 per share; and (c) the volume of trading of the Common Stock of the Company as published in Bloomberg for each trading day within the thirty calendar days prior to the Term Loan Maturity Date has equaled or exceeded 100,000 shares. If all of such conditions are not fully satisfied by the Term Loan Maturity Date, then in lieu of exercising this Warrant by payment in cash or check, the Holder may elect to pay the Warrant Price by reducing the number of Shares issuable upon exercise of this Warrant in accordance with the following formula: X = Y(A-B) A
Where: X Y = = the number of Shares to be issued to the Holder. the number of Shares Warrant. requested to be exercised under this

A

=

the Fair Market Value of one (1) Share of Common Stock as of the date such Warrant is exercised. the Warrant Price.

B

=

-2-

"Fair Market Value" of the Company's Common Stock means the average of the closing bid prices of the Common Stock as published in Bloomberg for the ten trading days prior to the date of determination of fair market value. 3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, and free from all preemptive rights, taxes, liens and charges with respect to the issue thereof; provided, however, that the Company shall not be required to pay any transfer taxes with respect to the issue of shares in any name other than that of the registered holder hereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. The Company shall at all times take all such action and obtain all such permits or orders as may be necessary to enable the Company lawfully to issue such Common Stock as duly and validly issued, fully paid and nonassessable shares upon exercise in full of this Warrant. 4. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Fair Market Value of such Shares. 5. Adjustment. This Warrant shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the date hereof effect a subdivision of the outstanding Common Stock, the Warrant Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall at any time or from time to time after the date hereof combine the outstanding Common Stock, the Warrant Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective. (b) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time after the date hereof shall make or issue a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Warrant Price shall be decreased as of the time of such issuance, by multiplying the Warrant Price by a fraction: (x) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance; and (y) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable in payment of such dividend or distribution. (c) Adjustment of Number of Shares. Upon each adjustment of the Warrant Price pursuant to either Section 5(a) or 5(b) of this Warrant, the number of shares of Common Stock purchasable upon exercise of this Warrant shall be adjusted to the number of shares of Common Stock, calculated to the nearest one hundredth of a share, obtained by multiplying the number of shares of Common Stock purchasable immediately prior to such adjustment upon the exercise of the Warrant by the Warrant Price in effect prior to such adjustment and dividing the product so obtained by the new Warrant Price. -3-

(d) Adjustment for Reclassification, Exchange and Substitution. If the Common Stock issuable upon the exercise of this Warrant are changed into the same or different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination provided for in Section 5 (a) above, a dividend or distribution provided for in Section 5(b) above, or a reorganization, merger, consolidation or sale of assets, provided for in Section 5(e) below), then and in any such event the Holder shall have the right thereafter to exercise this Warrant into the kind and amount of stock and other securities receivable upon such recapitalization, reclassification or other change, by holders of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such recapitalization, reclassification or change. (e) Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time there is a capital reorganization of the Common Stock (other than a subdivision or combination provided for in Section 5(a) above, a dividend or distribution provided for in Section 5(b) above, or a reclassification or exchange of shares provided for in Section 5(d) above) or a merger or consolidation of the Company with or into another entity, or a sale of all or substantially all of the Company's properties and assets to any other person or entity, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant the number of shares of stock or other securities, money or property of the Company, or of the successor entity resulting from such merger or consolidation or sale, to which a holder of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. The Company shall not effect any reorganization, merger, consolidation or sale unless prior to the consummation thereof each entity or person (other than the Company) that may be required to deliver any cash, securities or other property upon the exercise of this Warrant shall assume, by written instrument delivered to the Holder, the obligation to deliver to the Holder such cash, securities or other property as in accordance with the foregoing provisions the Holder may be entitled to receive. The foregoing provisions of this Section 5(e) shall similarly apply to successive reorganizations, mergers, consolidations and sales. (f) Adjustment of Warrant Price for Matching Purposes. (i) In the event that the Company shall issue Common Stock or rights, warrants, options or convertible or exchangeable securities entitling the holder thereof to subscribe for or purchase, convert into or exchange for Common Stock, in any such case at a price per share less than $0.16, then the Warrant Price in effect immediately prior to such earliest date shall be adjusted so that the Warrant Price shall equal the price determined by multiplying the Warrant Price in effect immediately prior to such earliest date by the fraction: (x) whose numerator shall be the number of shares of Common Stock outstanding on such date plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at the then applicable Warrant Price (such amount, with respect to any such rights, warrants, options or convertible or exchangeable securities, determined by multiplying the total number of shares subject thereto by the exercise price of such rights, warrants, options or convertible or exchangeable securities and dividing the product so obtained by the then applicable Warrant Price), and (y) whose denominator shall be the number of shares of Common Stock outstanding on such date plus the number of additional shares of Common Stock to be issued or distributed or receivable upon exercise of any such right, warrant, option or convertible or exchangeable security. Such adjustment shall be made successively whenever any such Common Stock, rights, warrants, options or convertible or exchangeable securities are issued or distributed. In determining whether any rights, warrants or options entitle the holders to subscribe for or purchase shares of Common Stock at less than -4-

$0.16, and in determining the aggregate offering price of shares of Common Stock so issued or distributed, there shall be taken into account any consideration received by the Company for such Common Stock, rights, warrants, options, or convertible or exchangeable securities. If any right, warrant, option or convertible or exchangeable security to purchase or acquire Common Stock, the issuance of which resulted in an adjustment in the Warrant Price pursuant to this subsection (i) shall expire and shall not have been exercised, the Warrant Price shall immediately upon such expiration be recomputed to the Warrant Price which would have been in effect had the adjustment of the Warrant Price made upon the issuance of such right, warrant, option or convertible or exchangeable security been made on the basis of offering for subscription, purchase or issuance, as the case may be, only of that number of shares of Common Stock actually purchased or issued upon the actual exercise of such right, warrant, option or convertible or exchangeable securities. (ii) No adjustment in the Warrant Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Warrant Price then in effect; provided, however, that any adjustments that by reason of this Section 5(f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5(f) shall be made to the nearest cent or nearest 1/100th of a share. (iii) Notwithstanding anything to the contrary set forth in this Section 5(f), no adjustment shall be made to the Warrant Price upon (A) the issuance of shares of Common Stock pursuant to any compensation or incentive plan for officers, directors, employees or consultants of the Company, or (B) the issuance of Common Stock upon the conversion or exercise of the options, warrants or rights of the Company outstanding as of the date hereof. (g) No Impairment. The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder against dilution or other impairment. Without limiting the generality of the foregoing, the Company will not issue any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon the voluntary or involuntary dissolution, liquidation or winding up of the Company. (h) Notice of Adjustments. Whenever this Warrant shall be adjusted pursuant to this Section 5, the Company shall make a certificate signed by an officer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the new Warrant Price and the type or the number of Shares purchasable after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the Holder. 6. The Company's Obligation to Make Payments. (a) Dividends and Distributions. In the event the Company at any time or from time to time after the date hereof shall make or issue a dividend or other distribution, whether payable in cash, securities or other property of the Company, with respect to any of its capital stock for which an adjustment is not made pursuant to Section 5 of this Warrant, then and in each such event, the Company shall concurrently make a cash payment to the Holder equal to the product of (i) the quotient obtained by dividing (x) the amount of cash plus the fair value of any property or securities distributed by (y) the number of shares of Common Stock outstanding on the record date for such dividend or distribution and (ii) the number of Shares on such record date. -5-

(b) Redemption of Capital Stock. In the event the Company at any time or from time to time after the date hereof shall repurchase or redeem any of its capital stock or any rights, including without limitation, options, warrants or other convertible or exchangeable securities, to acquire such capital stock, then and in each such event, the Company shall concurrently make a cash payment to the Holder equal to the product of (i) the quotient obtained by dividing (x) the aggregate amount of cash and the aggregate fair value of any property paid out by the Company in connection with any such repurchase or redemption by (y) the number of shares of Common Stock outstanding on a fully diluted basis immediately after such repurchase or redemption and (2) the number of Shares. 7. Notice of Record Date. In the event: (1) that the Company declares a dividend (or any other distribution) on any of its capital stock (including without limitation, its Common Stock); (2) that the Company repurchases or redeems any of its capital stock (including without limitation, its Common Stock) or any rights to acquire such capital stock; (3) that the Company subdivides or combines its outstanding shares of Common Stock; (4) of any reclassification of the Common Stock, or of any consolidation, merger or share exchange of the Company into or with another entity, or of the sale of all or substantially all of the assets of the Company; (5) of the involuntary or voluntary dissolution, liquidation or winding up of the Company; or (6) of any offer of its Common Stock or any rights to acquire such Common Stock for consideration paid per share of Common Stock less than the Warrant Price then in effect. then the Company shall notify the Holder at least 30 days prior to the date specified in (A), (B) or (C) below, in writing stating: (A) the record date of such dividend, distribution, repurchase, redemption, subdivision or combination, or, if a record is not to be taken, the date as to which the holders of Common Stock of record to be entitled to such dividend, distribution, repurchase, redemption, subdivision or combination are to be determined; (B) the date on which such reclassification, consolidation, merger, share exchange, sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up; or (C) the date on which such offering of its Common Stock or any rights to acquire such Common Stock for consideration paid per share of Common Stock less than the Warrant Price is expected to become consummated. -6-

8. Compliance with Securities Act; Disposition of Warrant or Common Stock. (a) Compliance with Securities Act. The Holder, by acceptance hereof, agrees that this Warrant and the Shares to be issued upon exercise hereof are being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Warrant or any Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"). All Shares issued upon exercise of this Warrant (unless registered under the Act or sold or transferred pursuant to Rule 144 promulgated under the Act) shall be stamped or imprinted with a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES ACTS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS COVERING THIS SECURITY OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACTS." (b) Disposition of Warrant or Shares. Subject to the terms and conditions of this Warrant and applicable securities laws, this Warrant and the rights represented by this Warrant may be transferred, assigned or pledged, in whole or in part with prior written notice to the Company. Any transfer shall be accompanied by the Notice of Transfer form attached hereto as Exhibit B. 9. Rights as Shareholders. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 10. Representations and Warranties. The Company represents and warrants to the Holder as follows: (a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms; (b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; (c) The rights, preferences, privileges and restrictions granted to or imposed upon the Shares and the holders thereof are as set forth in the Company's Articles of Incorporation; (d) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Articles of Incorporation or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and, except for consents that have already been obtained by the Company, do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any federal, state or local government authority or agency or other person; and (e) Capitalization. As of the date of this Warrant the capitalization of the Company is as follows: -7-

(i) Common Stock. A total of 100,000,000 authorized shares of Common Stock, of which 30,791,911 shares were issued and outstanding. All of such outstanding shares are validly issued, fully paid and non-assessable. No shares of the Common Stock are held in the Company's treasury. (ii) Preferred Stock. A total of 25,000,000 authorized shares of Preferred Stock, of which 559,322 shares were issued and outstanding. (iii) Options, Warrants, Reserved Shares. Except as disclosed in the Form 10-KSB for the period ended December 31, 2002 filed by the Company, or the Form 10-QSB filed by the Company (or provided to the Holder if not filed) for the period ended March 31, 2003, there are no outstanding options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of its capital stock or any securities convertible into or ultimately exchangeable or exercisable for any shares of the Company's capital stock. No shares of the Company's outstanding capital stock, or stock issuable upon exercise, conversion or exchange of any outstanding options, warrants or rights, or other stock issuable by the Company, are subject to any rights of first refusal or other rights to purchase such stock (whether in favor of the Company or any other person), pursuant to any agreement, commitment or other obligation of the Company. 11. Registration Rights. If the Company proposes to file any registration statement under the Act (other than Form S-8), with respect to an offering of any equity securities, then the Company shall give the Holder written notice of such proposed filing as soon as practicable (but in no event less than thirty (30) days before the anticipated initial filing date of such registration statement), and such notice shall offer the Holder the opportunity to register such number of Shares as the Holder shall request (the "Piggyback Shares"). The Company shall bear all costs of registering the Piggyback Shares, except for underwriting discounts or commissions if the registration statement relates to an underwritten offering. Any registration rights granted by this paragraph expire when shares issued pursuant to this Warrant Agreement are eligible for sale under Rule 144(k) of the Securities Act of 1933. 12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 13. Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered to the applicable party at its address specified opposite its signature below, or at such other address as shall be designated by such party in a written notice to the other. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier. 14. Descriptive Headings. The descriptive headings of the several sections of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. 15. Governing Law. THIS WARRANT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS. -8-

16. Binding Effect on Successors. This Warrant shall be binding upon any entity succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets, and all of the obligations of the Company relating to the Common Stock issuable upon the exercise of this Warrant shall survive the exercise, and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder. 17. Severability. In case any one or more of the provisions contained in this Warrant shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 18. Lost Warrants or Stock Certificates. The Company covenants to the Holder that upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. [Signature Page Follows] -9-

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and delivered by its duly authorized officer on the day and year first above written. NUWAY MEDICAL, INC.
By: -----------------------------------------Name: ________________________ Title: ________________________ Address: 23461 South Pointe, Suite 200 Laguna Hills, California 92653 Attention:________________ Facsimile:________________

ACKNOWLEDGED AND ACCEPTED: AUGUSTINE II, LLC By: AUGUSTINE CAPITAL MANAGEMENT, L.L.C., its manager By: Name: John T. Porter Title: President
Address: 141 West Jackson Boulevard, Suite 2182 Chicago, Illinois 60604 Attention: John T. Porter Facsimile: (312) 427-5396

- 10 -

EXHIBIT A NOTICE OF EXERCISE TO: NUWAY MEDICAL, INC. (1) The undersigned hereby elects to purchase __________ shares of Common Stock of NUWAY MEDICAL, INC. pursuant to the terms of the attached Warrant, and, unless such Warrant allows the exercise to be "cashless," tenders herewith payment of the Warrant Price for such shares in full. (2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: (Name) (Name) (3) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below: (Name) (Address) (Signature) (Date)

EXHIBIT B NOTICE OF TRANSFER (To be signed only upon transfer of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ____________________________________________ the right represented by the attached Warrant to purchase __________ shares of the Common Stock of NUWAY MEDICAL, INC., to which the attached Warrant relates, and appoints _____________________ as Attorney to transfer such right on the books of NUWAY MEDICAL, INC., with full power of substitution in the premises. Dated: (Signature must conform in all respects to the name of the Holder as specified on the face of the Warrant)

(Address) Signed in the presence of:

Exhibit 10.3 PLEDGE AGREEMENT Dated as of June 10, 2003 This Pledge Agreement (as modified from time to time, this "Agreement") has been executed by NEW MILLENNIUM CAPITAL PARTNERS, LLC, a Nevada limited liability company, as debtor ("Debtor"), in favor of AUGUSTINE II, LLC, an Delaware limited liability company ("Secured Party"). In consideration of Secured Party making a term loan to NuWay Medical, Inc. ("Borrower") under that certain Term Loan Agreement dated as of even date herewith entered into between Borrower and Secured Party (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement) and under the Term Note executed by Borrower in connection with the Loan Agreement, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor agrees as follows: 1. PLEDGE. Debtor hereby assigns, pledges, hypothecates, delivers, sets over and transfers to Secured Party and grants to Secured Party a continuing security interest in the following, in each case whether certificated or uncertificated, whether now owned or hereafter acquired, wherever located (any or all of such, the "Collateral"): (a) The securities listed on Exhibit A attached hereto. (b) With respect to any Collateral referred to in (a), but without limiting (a): (i) all stock powers, certificates and instruments; and (ii) all replacements, substitutions, interest, cash and stock dividends, distributions, warrants, options, and other rights and amounts paid, accrued, received, receivable, or distributed with respect thereto from time to time. (c) With respect to the foregoing, all products and proceeds thereof, including without limitation insurance proceeds and payments under the Securities Investor Protection Act of 1970, as amended. 2. LIABILITIES. The Collateral shall secure the payment and performance of all obligations and liabilities of Borrower to Secured Party under the Loan Agreement and the Term Note and of Debtor hereunder (the "Liabilities"). 3. REPRESENTATIONS. Debtor hereby represents and warrants to Secured Party that: (a) Debtor's exact legal name is as set forth in the preamble to this Agreement; Debtor's type of organization and jurisdiction of organization are as set forth in the preamble to this Note; Debtor's organizational identification number assigned to it by the secretary of state of the state where Debtor is organized is LLC10358-1999; Debtor's place of business or, if Debtor has more than one place of business, Debtor's chief executive office is located at the address set forth next to its signature line to this Agreement; and Debtor has never been organized in any jurisdiction other than the jurisdiction set forth in the preamble to this Agreement. During the five (5) years and six months

prior to the date of this Agreement Debtor has not been known by any legal name different from the one set forth in the preamble to this Agreement nor has Debtor been the subject of any merger, consolidation, or other organizational reorganization. (b) Debtor is existing and in good standing under the laws of its state of organization, is duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Debtor; the execution, delivery and performance of this Agreement and all related documents and instruments are within Debtor's powers and have been authorized by all necessary limited liability company action. (c) To the best of Debtor's knowledge, the execution, delivery and performance of this Agreement have received any and all necessary governmental approval, and do not and will not contravene or conflict with any provision of law or of the operating agreement or of the articles of organization of Debtor or any agreement affecting Debtor or its property. (d) The Collateral is duly and validly authorized and issued, non-assessable, fully paid and paid for, issued and outstanding, and Debtor is the legal and equitable owner of the Collateral, with the right to pledge, assign and deliver the Collateral to secure the Liabilities and do or cause to be done all other actions provided for or referenced in this Agreement, free and clear of all liens, claims, encumbrances and security interests of any nature except any in favor of Secured Party. (e) Sale of the Collateral by Secured Party is not prohibited or regulated by any federal or state law or regulation or any agreement binding upon Debtor and requires no registration or filing with, or consent or approval of, any governmental body, regulatory authority or securities exchange. (f) No financing statement, notice of judgment, or any similar instrument (unless filed on behalf of Secured Party) covering any of the Collateral is on file in any public office. 4. APPOINTMENT OF SUB-AGENTS; REGISTRATION IN NOMINEE NAME. (a) The Secured Party shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of any certificates or instruments representing or evidencing the Collateral. In addition, Secured Party shall at all times have the right to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations for any purpose consistent with its performance of this Agreement. (b) For the better perfection of Secured Party's rights in and to the Collateral and to facilitate implementation of such rights, Debtor shall, upon written request of Secured Party, cause all the certificates, notes, documents and other instruments evidencing, representing or otherwise comprising the Collateral to be registered or otherwise put into the name of Secured Party or a nominee or nominees of Secured Party subject only to the revocable voting rights specified herein. (c) Debtor hereby consents and agrees that the issuers of, or any depository, registrar, transfer agent or similar party for any of, the Collateral shall be entitled to accept the provisions hereof as conclusive evidence of the right of Secured Party to effect any transfer pursuant hereto, notwithstanding any notice or direction to the contrary heretofore or hereafter given by Debtor or any other person to any such issuer or any such depository, registrar, transfer agent or similar party. 5. VOTING RIGHTS. Upon the occurrence and during the continuance of an Event of Default, any and all voting or similar rights with respect to the Collateral shall be exercisable only by Secured Party. 2

6. COVENANTS OF DEBTOR. Debtor agrees that so long as this Agreement remains in effect, it will: (a) Promptly deliver any cash, securities or other property received with respect to the Collateral, whether as proceeds of the disposition thereof, dividends with respect thereto, or otherwise, to be held by Secured Party or Bailee as Collateral. Notwithstanding the foregoing, until Secured Party notifies Debtor to the contrary or an Event of Default occurs, Debtor may continue to receive regular cash dividends and interest payments on the Collateral. (b) Defend the Collateral against the claims and demands of all persons other than Secured Party and promptly pay all taxes, assessments, and charges upon the Collateral, and not sign (or permit to be signed) any documents creating or perfecting a lien upon or security interest in any of the Collateral except in favor of Secured Party, or otherwise create, suffer, or permit to exist any liens or security interests upon any Collateral other than in favor of Secured Party. (c) Keep at its address for notices set forth under or opposite its signature hereto its records concerning the Collateral, which records shall be of such character as will enable Secured Party to determine at any time the status of the Collateral; furnish to Secured Party such information concerning the Collateral as Secured Party may from time to time reasonably request; and permit Secured Party from time to time to inspect, audit, and make copies of, and extracts from, all records and all other papers in the possession of Debtor pertaining to the Collateral. (d) Make appropriate entries upon its financial statements and its books and records disclosing Secured Party's security interest in the Collateral. (e) Provide to Secured Party from time to time such financial statements of and other information concerning the Collateral and Debtor as Secured Party shall reasonably request. (f) Not sell, transfer, grant an option or similar right with respect to, or otherwise dispose of or agree to dispose of any Collateral or any interest therein. 7. EVENTS OF DEFAULT. The occurrence or continuance of any of the following shall constitute an "Event of Default": (a) failure to pay, when and as due, any principal and interest or other amounts payable hereunder or in connection with any of the Liabilities; or (b) failure to comply with or perform any agreement or covenant of Debtor contained herein; or (c) any default, event of default, or similar event shall occur or continue under the Loan Agreement or the Term Note, and shall continue beyond any applicable notice, grace or cure period set forth in the Loan Agreement or Term Note, respectively; or (d) any representation, warranty, schedule, certificate, financial statement, report, notice, or other writing furnished by or on behalf of Debtor to Secured Party is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or 3

(e) this Agreement shall be repudiated or shall become unenforceable or incapable of performance in accord with its terms; or (f) Debtor shall grant or any Person (other than Secured Party) shall obtain a security interest in any of the Collateral, or shall file any financing statement purportedly covering any Collateral; Debtor or any other Person shall perfect (or attempt to perfect) such a security interest; a court shall determine that Secured Party does not have a first-priority security interest in any of the Collateral or in any other assets constituting security for the Liabilities, enforceable in accord with this Agreement (as to the Collateral) or the related collateral documents (as to such other assets). 8. DEFAULT REMEDIES. (a) Upon the occurrence and during the continuance of any Event of Default, Secured Party may exercise any rights and remedies under this Agreement, the Loan Agreement, the Term Note and any related document or instrument (including without limitation any pertaining to Collateral), and at law or in equity. (b) If any Event of Default shall have occurred and be continuing, then, in addition to having the right to exercise any rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of Illinois or in any state where any Collateral is located, Secured Party may, in its sole discretion: (i) without being required to give any prior notice to Debtor apply the cash (if any) then held by it hereunder, toward the Liabilities in such order as Secured Party shall determine in its sole discretion; and (ii) if there shall be no such cash or the cash so applied shall be insufficient to pay all obligations in full, sell the Collateral, or any part thereof, at any public or private sale, for cash, upon credit or for future delivery, as Secured Party shall deem appropriate. The Secured Party shall be authorized at any such sale (to the extent it deems it advisable to do so, in its sole discretion) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral then being sold for their own account for investment and not with a view to the distribution or resale thereof, and upon consummation of any such sale Secured Party shall have the right to assign, transfer and deliver to the purchaser(s) thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Debtor, and Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. To the extent that notice of sale shall be required to be given by law, Secured Party shall give Debtor at least ten days' written notice of Secured Party's intention to make any such public or private sale or sales. Secured Party shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by Secured Party until the sale price is paid by the purchaser thereof, but Secured Party shall not incur any liability in case any such purchaser shall fail to take up and pay for the Collateral so sold; in the case of any such failure, such Collateral may be sold again upon like 4

notice. As an alternative to exercising the power of sale herein conferred upon it, Secured Party may proceed by a suit at law or in equity to foreclose this Agreement and to sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court of competent jurisdiction. The proceeds of sale of Collateral sold pursuant hereto shall be applied by Secured Party in such order as it shall determine. (c) Secured Party may, by written notice to Debtor, at any time and from time to time, waive any Event of Default or Unmatured Event of Default, which shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, Secured Party and Debtor shall be restored to their former position and rights hereunder, and any Event of Default or Unmatured Event of Default so waived shall be deemed to be cured and not continuing; but no such waiver shall extend to or impair any subsequent or other Event of Default or Unmatured Event of Default. No failure to exercise, and no delay in exercising, on the part of the Secured Party of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of Secured Party herein provided are cumulative and not exclusive of any rights or remedies provided by law. 9. POWERS OF SECURED PARTY. Secured Party may, from time to time, at its option (but shall have no duty to): (a) perform any agreement of Debtor hereunder that Debtor shall have failed to perform; (b) take any other action which Secured Party deems necessary or desirable for the preservation of the Collateral or Secured Party's interest therein and the carrying out of this Agreement, including without limiting the generality of the foregoing: (i) any action to collect or realize upon the Collateral; (ii) the discharge of taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral; or (iii) the discharge or keeping current of any obligation of Debtor having effect on the Collateral; or (iv) receiving, endorsing and collecting all checks and other orders for the payment of money made payable to Debtor representing any dividend, interest payment or other distribution payable or distributable in respect of the Collateral or any part thereof, and to give full discharge for the same; (c) file, or cause to be filed, photocopies or carbon copies of any financing statement respecting any right of Secured Party in the Collateral, and any such photocopy or carbon copy of the signature of Debtor on such photocopy or carbon copy shall be deemed an original for purposes of such filing. Debtor hereby authorizes Secured Party to sign financing statements on Debtor's behalf to be filed in all jurisdictions in which such authorization is permitted; and (d) (without limiting any other provision hereof) request that any uncertificated securities or deposits constituting Collateral hereunder be delivered to it in definitive form. Upon receipt of such request from Secured Party, Debtor will immediately take all steps (including, without limitation, the payment by Debtor of all costs and expenses of issuance and transfer) required to cause such uncertificated securities or deposits to be issued and delivered in definitive form to Secured Party, together with any and all documents (executed in blank) required to effect the transfer of definitive securities or deposits in definitive form to Secured Party. The parties expressly agree that such securities or deposits when issued in definitive form shall continue to constitute Collateral for purposes of this Agreement. Debtor hereby appoints Secured Party as Debtor's attorney-in-fact, which appointment is and shall be deemed to be irrevocable and coupled with an interest, for purposes of performing acts and signing and delivering any 5

agreement, document, or instrument, on behalf of Debtor in accordance with this Section. Debtor immediately will reimburse Secured Party for all expenses so incurred by Secured Party, together with interest thereon at the interest rates specified in the Loan Agreement. 10. FURTHER ASSURANCES. Debtor agrees to do (or cause to be done) such further acts and things, and to execute and deliver (or cause to be executed and delivered) such additional conveyances, assignments, agreements, and instruments, as Secured Party may at any time request in connection with the administration or enforcement of this Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto Secured Party its rights, powers and remedies hereunder. 11. OBLIGATIONS UNCONDITIONAL; WAIVER OF DEFENSES. Debtor irrevocably agrees that no fact or circumstance whatsoever which might at law or in equity constitute a discharge or release of, or defense to the obligations of, a guarantor or surety shall limit or affect any obligations of Debtor under this Agreement or any document or instrument executed in connection herewith. Without limiting the generality of the foregoing: (a) Secured Party may at any time and from time to time, without notice to Debtor, take any or all of the following actions without affecting or impairing the liability of Debtor on this Agreement: (i) renew or extend time of payment of the Liabilities; (ii) accept, substitute, release or surrender any security for the Liabilities; and (iii) release any person primarily or secondarily liable on the Liabilities. (b) No delay in enforcing payment of the Liabilities, nor any amendment, waiver, change, or modification of any terms of any instrument which evidences or is given in connection with the Liabilities, shall release Debtor from any obligation hereunder. The obligations of Debtor under this Agreement are and shall be primary, continuing, unconditional and absolute (notwithstanding that at any time or from time to time all of the Liabilities may have been paid in full), irrespective of the value, genuineness, regularity, validity or enforceability of any documents or instruments respecting or evidencing the Liabilities. In order to hold Debtor liable or exercise rights or remedies hereunder, there shall be no obligation on the part of Secured Party, at any time, to resort for payment to any other person or to any other security for the Liabilities. Secured Party shall have the right to enforce this Agreement irrespective of whether or not other proceedings or steps are being taken against any other property securing the Liabilities or any other party primarily or secondarily liable on any of the Liabilities. (c) Debtor irrevocably waives presentment, protest, demand, notice of dishonor or default, notice of acceptance of this Agreement, notice of any loans made, extensions granted or other action taken in reliance hereon, and all demands and notices of any kind in connection with this Agreement or the Liabilities. (d) Debtor waives any claim or other right which Debtor might now have or hereafter acquire against any person primarily or contingently liable on the Liabilities or that arises from the existence or performance of Debtor's obligations under this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim or remedy of Secured Party against any person or any other collateral security for the Liabilities, which Secured Party now has or hereafter acquires, however arising. 6

12. NOTICES. All notices, requests and demands to or upon the respective parties hereto shall be deemed to have been given or made five business days after a record has been deposited in the mail, postage prepaid, or one business day after a record has been deposited with a recognized overnight courier, charges prepaid or to be billed to the sender, or on the day of delivery if delivered manually with receipt acknowledged, in each case addressed or delivered if to Secured Party to its address indicated next to its signature line below and if to Debtor to its address indicated next to its signature line below, or to such other address as may be hereafter designated in writing by the respective parties hereto by a notice in accord with this Section. 13. MISCELLANEOUS. This Agreement and any document or instrument executed in connection herewith shall be governed by and construed in accordance with the internal law of the State of Illinois, and shall be deemed to have been executed in such state. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the others. Captions herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof; references herein to Sections or provisions without reference to the document in which they are contained are references to this Agreement. This Agreement shall bind Debtor, its successors and assigns, and shall inure to the benefit of Secured Party, its successors and assigns, except that Debtor may not transfer or assign any of its rights or interest hereunder without the prior written consent of Secured Party. Debtor agrees to pay upon demand all expenses (including without limitation attorneys' fees, legal costs and expenses, in each case whether in or out of court, in original or appellate proceedings or in bankruptcy) incurred or paid by Secured Party or any holder hereof in connection with the enforcement or preservation of its rights hereunder or under any document or instrument executed in connection herewith. 14. WAIVER OF JURY TRIAL, ETC. DEBTOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO SECURED PARTY'S SOLE AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY SECURED PARTY IN ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [Signature Page Follows] 7

IN WITNESS WHEREOF, Debtor has executed this Agreement as of the date first written above. NEW MILLENNIUM CAPITAL PARTNERS, LLC By: Name: Title:____________________________________ Address: Attention:________________ Facsimile:________________ ACCEPTED: AUGUSTINE II, LLC
By: AUGUSTINE CAPITAL MANAGEMENT, L.L.C., its manager By: ------------------------------------Name: John T. Porter Title: President Address: 141 West Jackson Boulevard, Suite 2182 Chicago, Illinois 60604 Attention: John T. Porter Facsimile: (312) 427-5396

8

EXHIBIT A SECURITIES
Stock ----NuWay Medical, Inc. Certificate No. --------------No. of Shares ------------2,500,000

9

Exhibit 10.4 PLEDGE AGREEMENT Dated as of June 10, 2003 This Pledge Agreement (as modified from time to time, this "Agreement") has been executed by NUWAY MEDICAL, INC., a Nevada corporation, as debtor ("Debtor"), in favor of AUGUSTINE II, LLC, a Delaware limited liability company ("Secured Party"). In consideration of Secured Party making a term loan to Debtor under that certain Term Loan Agreement dated as of even date herewith entered into between Debtor and Secured Party (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement) and under the Term Note executed by Debtor in connection with the Loan Agreement, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor agrees as follows: 1. PLEDGE. Debtor hereby assigns, pledges, hypothecates, delivers, sets over and transfers to Secured Party and grants to Secured Party a continuing security interest in the following, in each case whether certificated or uncertificated, whether now owned or hereafter acquired, wherever located (any or all of such, the "Collateral"): (a) The securities listed on Exhibit A attached hereto. (b) With respect to any Collateral referred to in (a), but without limiting (a): (i) all stock powers, certificates and instruments; and (ii) all replacements, substitutions, interest, cash and stock dividends, distributions, warrants, options, and other rights and amounts paid, accrued, received, receivable, or distributed with respect thereto from time to time. (c) With respect to the foregoing, all products and proceeds thereof, including without limitation insurance proceeds and payments under the Securities Investor Protection Act of 1970, as amended. 2. LIABILITIES. The Collateral shall secure the payment and performance of all obligations and liabilities of Debtor to Secured Party under the Loan Agreement and the Term Note and of Debtor hereunder (the "Liabilities"). 3. REPRESENTATIONS. Debtor hereby represents and warrants to Secured Party that: (a) Debtor's exact legal name is as set forth in the preamble to this Agreement; Debtor's type of organization and jurisdiction of organization are as set forth in the preamble to this Note; Debtor's place of business or, if Debtor has more than one place of business, Debtor's chief executive office is located at the address set forth next to its signature line to this Agreement; and Debtor has never been organized in any jurisdiction other than the jurisdiction 10

set forth in the preamble to this Agreement. During the five (5) years and six months prior to the date of this Agreement Debtor has not been known by any legal name different from the one set forth in the preamble to this Agreement nor has Debtor been the subject of any merger, consolidation, or other organizational reorganization. (b) Debtor is existing and in good standing under the laws of its state of organization, is duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Debtor; the execution, delivery and performance of this Agreement and all related documents and instruments are within Debtor's powers and have been authorized by all necessary limited liability company action. (c) To the best of Debtor's knowledge, the execution, delivery and performance of this Agreement have received any and all necessary governmental approval, and do not and will not contravene or conflict with any provision of law or of the operating agreement or of the articles of organization of Debtor or any agreement affecting Debtor or its property. (d) The Collateral is duly and validly authorized and issued, non-assessable, fully paid and paid for, issued and outstanding, and Debtor is the legal and equitable owner of the Collateral, with the right to pledge, assign and deliver the Collateral to secure the Liabilities and do or cause to be done all other actions provided for or referenced in this Agreement, free and clear of all liens, claims, encumbrances and security interests of any nature except any in favor of Secured Party. (e) Sale of the Collateral by Secured Party is not prohibited or regulated by any federal or state law or regulation or any agreement binding upon Debtor and requires no registration or filing with, or consent or approval of, any governmental body, regulatory authority or securities exchange. (f) No financing statement, notice of judgment, or any similar instrument (unless filed on behalf of Secured Party) covering any of the Collateral is on file in any public office. 4. APPOINTMENT OF SUB-AGENTS; REGISTRATION IN NOMINEE NAME. (a) The Secured Party shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of any certificates or instruments representing or evidencing the Collateral. In addition, Secured Party shall at all times have the right to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations for any purpose consistent with its performance of this Agreement. (b) For the better perfection of Secured Party's rights in and to the Collateral and to facilitate implementation of such rights, Debtor shall, upon written request of Secured Party, cause all the certificates, notes, documents and other instruments evidencing, representing or otherwise comprising the Collateral to be registered or otherwise put into the name of Secured Party or a nominee or nominees of Secured Party subject only to the revocable voting rights specified herein. (c) Debtor hereby consents and agrees that the issuers of, or any depository, registrar, transfer agent or similar party for any of, the Collateral shall be entitled to accept the provisions hereof as conclusive evidence of the right of Secured Party to effect any transfer pursuant hereto, notwithstanding any notice or direction to the contrary heretofore or hereafter given by Debtor or any other person to any such issuer or any such depository, registrar, transfer agent or similar party. 5. VOTING RIGHTS. Upon the occurrence and during the continuance of an Event of Default, any and all voting or similar rights with respect to the Collateral shall be exercisable only by Secured Party. 2

6. COVENANTS OF DEBTOR. Debtor agrees that so long as this Agreement remains in effect, it will: (a) Promptly deliver any cash, securities or other property received with respect to the Collateral, whether as proceeds of the disposition thereof, dividends with respect thereto, or otherwise, to be held by Secured Party or Bailee as Collateral. Notwithstanding the foregoing, until Secured Party notifies Debtor to the contrary or an Event of Default occurs, Debtor may continue to receive regular cash dividends and interest payments on the Collateral. (b) Defend the Collateral against the claims and demands of all persons other than Secured Party and promptly pay all taxes, assessments, and charges upon the Collateral, and not sign (or permit to be signed) any documents creating or perfecting a lien upon or security interest in any of the Collateral except in favor of Secured Party, or otherwise create, suffer, or permit to exist any liens or security interests upon any Collateral other than in favor of Secured Party. (c) Keep at its address for notices set forth under or opposite its signature hereto its records concerning the Collateral, which records shall be of such character as will enable Secured Party to determine at any time the status of the Collateral; furnish to Secured Party such information concerning the Collateral as Secured Party may from time to time reasonably request; and permit Secured Party from time to time to inspect, audit, and make copies of, and extracts from, all records and all other papers in the possession of Debtor pertaining to the Collateral. (d) Make appropriate entries upon its financial statements and its books and records disclosing Secured Party's security interest in the Collateral. (e) Provide to Secured Party from time to time such financial statements of and other information concerning the Collateral and Debtor as Secured Party shall reasonably request. (f) Not sell, transfer, grant an option or similar right with respect to, or otherwise dispose of or agree to dispose of any Collateral or any interest therein. 7. EVENTS OF DEFAULT. The occurrence or continuance of any of the following shall constitute an "Event of Default": (a) failure to pay, when and as due, any principal and interest or other amounts payable hereunder or in connection with any of the Liabilities; or (b) failure to comply with or perform any agreement or covenant of Debtor contained herein; or (c) any default, event of default, or similar event shall occur or continue under the Loan Agreement or the Term Note, and shall continue beyond any applicable notice, grace or cure period set forth in the Loan Agreement or Term Note, respectively; or (d) any representation, warranty, schedule, certificate, financial statement, report, notice, or other writing furnished by or on behalf of Debtor to Secured Party is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; or 3

(e) this Agreement shall be repudiated or shall become unenforceable or incapable of performance in accord with its terms; or (f) Debtor shall grant or any Person (other than Secured Party) shall obtain a security interest in any of the Collateral, or shall file any financing statement purportedly covering any Collateral; Debtor or any other Person shall perfect (or attempt to perfect) such a security interest; a court shall determine that Secured Party does not have a first-priority security interest in any of the Collateral or in any other assets constituting security for the Liabilities, enforceable in accord with this Agreement (as to the Collateral) or the related collateral documents (as to such other assets). 8. DEFAULT REMEDIES. (a) Upon the occurrence and during the continuance of any Event of Default, Secured Party may exercise any rights and remedies under this Agreement, the Loan Agreement, the Term Note and any related document or instrument (including without limitation any pertaining to Collateral), and at law or in equity. (b) If any Event of Default shall have occurred and be continuing, the Secured Party shall first take all reasonable steps to liquidate the 2,500,000 shares of common stock of Debtor which have been pledged to the Secured Party by New Millennium Capital Partners, LLC. If, and only if, the proceeds of the sale of such stock does not satisfy the Liabilities, then and only then, in addition to having the right to exercise any rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of Illinois or in any state where any Collateral is located, Secured Party may, in its sole discretion: (i) without being required to give any prior notice to Debtor apply the cash (if any) then held by it hereunder, toward the Liabilities in such order as Secured Party shall determine in its sole discretion; and (ii) if there shall be no such cash or the cash so applied shall be insufficient to pay all obligations in full, sell the Collateral, or any part thereof, at any public or private sale, for cash, upon credit or for future delivery, as Secured Party shall deem appropriate. The Secured Party shall be authorized at any such sale (to the extent it deems it advisable to do so, in its sole discretion) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral then being sold for their own account for investment and not with a view to the distribution or resale thereof, and upon consummation of any such sale Secured Party shall have the right to assign, transfer and deliver to the purchaser(s) thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Debtor, and Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. To the extent that notice of sale shall be required to be given by law, Secured Party shall give Debtor at least ten days' written notice of Secured Party's intention to make any such public or private sale or sales. Secured Party shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given. Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be 4

retained by Secured Party until the sale price is paid by the purchaser thereof, but Secured Party shall not incur any liability in case any such purchaser shall fail to take up and pay for the Collateral so sold; in the case of any such failure, such Collateral may be sold again upon like notice. As an alternative to exercising the power of sale herein conferred upon it, Secured Party may proceed by a suit at law or in equity to foreclose this Agreement and to sell the Collateral, or any portion thereof, pursuant to a judgment or decree of a court of competent jurisdiction. The proceeds of sale of Collateral sold pursuant hereto shall be applied by Secured Party in such order as it shall determine. (c) Secured Party may, by written notice to Debtor, at any time and from time to time, waive any Event of Default or Unmatured Event of Default, which shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, Secured Party and Debtor shall be restored to their former position and rights hereunder, and any Event of Default or Unmatured Event of Default so waived shall be deemed to be cured and not continuing; but no such waiver shall extend to or impair any subsequent or other Event of Default or Unmatured Event of Default. No failure to exercise, and no delay in exercising, on the part of the Secured Party of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of Secured Party herein provided are cumulative and not exclusive of any rights or remedies provided by law. 9. POWERS OF SECURED PARTY. Secured Party may, from time to time, at its option (but shall have no duty to): (a) perform any agreement of Debtor hereunder that Debtor shall have failed to perform; (b) take any other action which Secured Party deems necessary or desirable for the preservation of the Collateral or Secured Party's interest therein and the carrying out of this Agreement, including without limiting the generality of the foregoing: (i) any action to collect or realize upon the Collateral; (ii) the discharge of taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral; or (iii) the discharge or keeping current of any obligation of Debtor having effect on the Collateral; or (iv) receiving, endorsing and collecting all checks and other orders for the payment of money made payable to Debtor representing any dividend, interest payment or other distribution payable or distributable in respect of the Collateral or any part thereof, and to give full discharge for the same; (c) file, or cause to be filed, photocopies or carbon copies of any financing statement respecting any right of Secured Party in the Collateral, and any such photocopy or carbon copy of the signature of Debtor on such photocopy or carbon copy shall be deemed an original for purposes of such filing. Debtor hereby authorizes Secured Party to sign financing statements on Debtor's behalf to be filed in all jurisdictions in which such authorization is permitted; and (d) (without limiting any other provision hereof) request that any uncertificated securities or deposits constituting Collateral hereunder be delivered to it in definitive form. Upon receipt of such request from Secured Party, Debtor will immediately take all steps (including, without limitation, the payment by Debtor of all costs and expenses of issuance and transfer) required to cause such uncertificated securities or deposits to be issued and delivered in definitive form to Secured Party, together with any and all documents (executed in blank) required to effect the transfer of definitive securities or deposits in definitive form to Secured Party. The parties expressly agree that such securities or deposits when issued in definitive form shall continue to constitute Collateral for purposes of this Agreement. 5

Debtor hereby appoints Secured Party as Debtor's attorney-in-fact, which appointment is and shall be deemed to be irrevocable and coupled with an interest, for purposes of performing acts and signing and delivering any agreement, document, or instrument, on behalf of Debtor in accordance with this Section. Debtor immediately will reimburse Secured Party for all expenses so incurred by Secured Party, together with interest thereon at the interest rates specified in the Loan Agreement. 10. FURTHER ASSURANCES. Debtor agrees to do (or cause to be done) such further acts and things, and to execute and deliver (or cause to be executed and delivered) such additional conveyances, assignments, agreements, and instruments, as Secured Party may at any time request in connection with the administration or enforcement of this Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto Secured Party its rights, powers and remedies hereunder. 11. OBLIGATIONS UNCONDITIONAL; WAIVER OF DEFENSES. Debtor irrevocably agrees that no fact or circumstance whatsoever which might at law or in equity constitute a discharge or release of, or defense to the obligations of, a guarantor or surety shall limit or affect any obligations of Debtor under this Agreement or any document or instrument executed in connection herewith. Without limiting the generality of the foregoing: (a) Secured Party may at any time and from time to time, without notice to Debtor, take any or all of the following actions without affecting or impairing the liability of Debtor on this Agreement: (i) renew or extend time of payment of the Liabilities; (ii) accept, substitute, release or surrender any security for the Liabilities; and (iii) release any person primarily or secondarily liable on the Liabilities. (b) No delay in enforcing payment of the Liabilities, nor any amendment, waiver, change, or modification of any terms of any instrument which evidences or is given in connection with the Liabilities, shall release Debtor from any obligation hereunder. The obligations of Debtor under this Agreement are and shall be primary, continuing, unconditional and absolute (notwithstanding that at any time or from time to time all of the Liabilities may have been paid in full), irrespective of the value, genuineness, regularity, validity or enforceability of any documents or instruments respecting or evidencing the Liabilities. In order to hold Debtor liable or exercise rights or remedies hereunder, there shall be no obligation on the part of Secured Party, at any time, to resort for payment to any other person or to any other security for the Liabilities. Secured Party shall have the right to enforce this Agreement irrespective of whether or not other proceedings or steps are being taken against any other property securing the Liabilities or any other party primarily or secondarily liable on any of the Liabilities. (c) Debtor irrevocably waives presentment, protest, demand, notice of dishonor or default, notice of acceptance of this Agreement, notice of any loans made, extensions granted or other action taken in reliance hereon, and all demands and notices of any kind in connection with this Agreement or the Liabilities. (d) Debtor waives any claim or other right which Debtor might now have or hereafter acquire against any person primarily or contingently liable on the Liabilities or that arises from the existence or performance of Debtor's obligations under this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim or remedy of Secured Party 6

against any person or any other collateral security for the Liabilities, which Secured Party now has or hereafter acquires, however arising. 12. NOTICES. All notices, requests and demands to or upon the respective parties hereto shall be deemed to have been given or made five business days after a record has been deposited in the mail, postage prepaid, or one business day after a record has been deposited with a recognized overnight courier, charges prepaid or to be billed to the sender, or on the day of delivery if delivered manually with receipt acknowledged, in each case addressed or delivered if to Secured Party to its address indicated next to its signature line below and if to Debtor to its address indicated next to its signature line below, or to such other address as may be hereafter designated in writing by the respective parties hereto by a notice in accord with this Section. 13. MISCELLANEOUS. This Agreement and any document or instrument executed in connection herewith shall be governed by and construed in accordance with the internal law of the State of Illinois, and shall be deemed to have been executed in such state. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa, and the use of one gender shall also denote the others. Captions herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof; references herein to Sections or provisions without reference to the document in which they are contained are references to this Agreement. This Agreement shall bind Debtor, its successors and assigns, and shall inure to the benefit of Secured Party, its successors and assigns, except that Debtor may not transfer or assign any of its rights or interest hereunder without the prior written consent of Secured Party. Debtor agrees to pay upon demand all expenses (including without limitation attorneys' fees, legal costs and expenses, in each case whether in or out of court, in original or appellate proceedings or in bankruptcy) incurred or paid by Secured Party or any holder hereof in connection with the enforcement or preservation of its rights hereunder or under any document or instrument executed in connection herewith. 14. WAIVER OF JURY TRIAL, ETC. DEBTOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO SECURED PARTY'S SOLE AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY SECURED PARTY IN ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [Signature Page Follows] 7

IN WITNESS WHEREOF, Debtor has executed this Agreement as of the date first written above. NUWAY MEDICAL, INC. By: Name: Title: Address: Attention:________________ Facsimile:________________ ACCEPTED: AUGUSTINE II, LLC
By: AUGUSTINE CAPITAL MANAGEMENT, L.L.C., its manager By: ------------------------------------Name: John T. Porter Title: President Address: 141 West Jackson Boulevard, Suite 2182 Chicago, Illinois 60604 Attention: John T. Porter Facsimile: (312) 427-5396

8

EXHIBIT A SECURITIES
Membership Interests -------------------NuWay Sports, LLC Amount -----100% of NuWay Medical, Inc.'s membership interests in NuWay Sports, LLC, which represents 51% of the issued and outstanding membership interests in NuWay Sports, LLC.

9

Exhibit 10.5 EXHIBIT A TERM NOTE
$ 420,000 Chicago, Illinois June 10, 2003 NUWAY MEDICAL, INC., a corporation organized under

FOR VALUE RECEIVED,

the laws of the state of Delaware ("Borrower"), promises to pay to the order of AUGUSTINE II, LLC, a limited liability company formed under the laws of the State of Delaware (hereafter, together with any subsequent holder hereof, called "Lender"), at its office 141 West Jackson Blvd., Suite 2182, Chicago, Illinois 60604, or at such other place as Lender may direct, the principal sum of FOUR HUNDRED TWENTY THOUSAND United States Dollars ($420,000) (the "Loan"), payable in full on February 29, 2004 or at an earlier date as provided in Section 3.2 of the Term Loan Agreement (as defined hereinafter). Borrower agrees to pay interest on the unpaid principal amount from time to time outstanding hereunder on the dates and at the rate or rates as set forth in the Term Loan Agreement. Payments of both principal and interest are to be made in immediately available funds in lawful money of the United States of America, or in Common Stock of the Borrower as set forth in the Term Loan Agreement. This Note evidences indebtedness incurred under a Term Loan Agreement dated as of the date hereof executed by and between Borrower and Lender (and, if amended, restated or replaced, all amendments, restatements and replacements thereto or therefor, if any) (the "Term Loan Agreement"), to which Term Loan Agreement reference is hereby made for a statement of its terms and provisions, including without limitation those under which this Note may be paid prior to its due date or have its due date accelerated. This Note and any document or instrument executed in connection herewith shall be governed by and construed in accordance with the internal law of the State of Illinois, and shall be deemed to have been executed in the State of Illinois. Unless the context requires otherwise, wherever used herein the singular shall include the plural and vice versa. This Note shall bind Borrower successors and assigns, and shall inure to the benefit of Lender, its successors and assigns, except that Borrower may not transfer or assign any of its rights or interest hereunder without the prior written consent of Lender. Borrower agrees to pay upon demand all expenses (including without limitation reasonable attorneys' fees, legal costs and expenses, and time charges of attorneys who may be employees of Lender, in each case whether in or out of court, in original or appellate proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof in connection with the enforcement or preservation of its rights

hereunder or under any document or instrument executed in connection herewith. Borrower expressly and irrevocably waives presentment, protest, demand and notice of any kind in connection herewith. IN WITNESS WHEREOF, the parties have caused this Term Note to be duly executed as of the day and year first above written. NUWAY MEDICAL, INC. By: Title: 2

EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of NuWay Medical, Inc. (the "Company") on Form 10-QSB for the three months ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. A signed original of this written statement required by Section 906 has been provided to NuWay Medical, Inc. and will be retained by NuWay Medical, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.