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                                                                   EXHIBIT 10.96

                                    DEBENTURE

         NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
         HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
         EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
         AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
         PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE
         HARBOR THEREFROM.

                                                                   US $4,500,000

NETGATEWAY, INC.

8% CONVERTIBLE DEBENTURE DUE JULY 31, 2003

     FOR VALUE RECEIVED, NETGATEWAY, INC., a Delaware corporation (the
"Company") promises to pay to King William, LLC, a Cayman Islands limited
liability company, the registered holder hereof (the "Holder"), the principal
sum of Four Million Five Hundred Thousand Dollars and 00/100 Dollars (US
$4,500,000) on July 31, 2003 (the "Maturity Date") and to pay interest on the
principal sum outstanding from time to time in arrears (i) prior to the Maturity
Date, quarterly, on the last day of March, June, September and December of each
year, (ii) upon conversion as provided herein or (iii) on the Maturity Date, at
the rate of eight percent (8%) per annum accruing from July 31, 2000, the date
of the issuance of this Debenture. Accrual of interest shall commence on the
first such business day to occur after the date hereof and shall continue to
accrue on a daily basis until payment in full of the principal sum has been made
or duly provided for.

     This Debenture is subject to the following additional provisions:

     1.   The Debentures are issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.

     2.   The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.

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     3.   This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.

     4.   A. The Holder of this Debenture is entitled, at its option, subject to
the following provisions of this Section 4, to convert all or a portion of this
Debenture into shares of Common Stock of the Company, $0.001 par value per share
("Common Stock") of the Company at any time until the Maturity Date, at a
conversion price for each share of Common Stock (the "Conversion Rate") equal to
the lower of (x) $1.79 or (y) the Current Market Price (as defined below)
multiplied by eighty percent (80%); provided that the principal amount being
converted is the lower of (x) at least $10,000 (unless if at the time of such
election to convert the aggregate principal amount of all Debentures registered
to the Holder is less than Ten Thousand Dollars $10,000, then the whole amount
thereof) or (y) the maximum amount which the Holder can then convert pursuant to
the terms of Section 4.E. hereof .

          B.   For purposes of this Debenture, the following terms have the
meanings indicated below:

          (i)  "Current Market Price" means the average of the Market Price
of the Common Stock for any three (3) non-consecutive trading days of the Common
Stock (which may include some consecutive days) during the twenty day trading
period ending on the trading day immediately before the relevant Conversion Date
(as defined below). On the relevant Conversion Date, Holder may select, in its
sole discretion, either of the formulas contained in (A) and (B) in the
immediately preceding sentence.

          C.   The Holder of this Debenture is entitled, at its option, to
convert this Debenture at any time which is after the earlier of (x) the
thirtieth (30th) day after the Initial Closing Date or (y) the Effective Date of
the Registrable Securities applicable to the Initial Debentures (as those terms
are defined in the Securities Purchase Agreement dated of even date herewith
(the "Securities Purchase Agreement").

          D.   Conversion shall be effectuated by surrendering the Debentures to
be converted to the Company's transfer agent, Colonial Stock Transfer Co., Inc.,
accompanied by or

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preceded by facsimile or other delivery to the Company of the form of conversion
notice attached hereto as Exhibit A, executed by the Holder of the Debenture
evidencing such Holder's intention to convert this Debenture or a specified
portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. Subject to the provisions of Section 4.E hereof,
interest accrued or accruing from the date of issuance to the date of conversion
shall, at the option of the Company, be paid in cash or Common Stock upon
conversion at the Conversion Rate applicable to such conversion. No fractional
shares of Common Stock or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which notice of conversion is given (the "Conversion
Date") shall be deemed to be the date on which the Holder faxes or otherwise
delivers the conversion notice ("Notice of Conversion"), substantially in the
form annexed hereto as Exhibit A, duly executed, to the Company, provided that
the Holder shall deliver to the Company's transfer agent or the Company the
original Debentures being converted within three (3) business days thereafter
(and if not so delivered within such time, the Conversion Date shall be the date
on which the later of the Notice of Conversion and the original Debentures being
converted is received by the Company). Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (562)308-0021;
ATTN: CHIEF FINANCIAL OFFICER. Certificates representing Common Stock upon
conversion will be delivered as soon as practicable after Notice of Conversion
is delivered to the Company as contemplated in the first sentence of this
paragraph C or the original Debenture is delivered to the Company's transfer
agent or the Company.

          E.   Notwithstanding any other provision hereof, of the Warrants or of
any of the other Transaction Agreements (as those terms are defined in the
Securities Purchase Agreement), in no event (except (i) with respect to an
automatic conversion, if any, of a Debenture as provided in the Debentures, (ii)
as specifically provided in this Debenture as an exception to this provision, or
(iii) while there is outstanding a tender offer for any or all of the shares of
the Company's Common Stock) shall the Holder be entitled to convert any
Debenture or shall the Company have the obligation, to convert all or any
portion of this Debenture (and the Company shall not have the right to pay
interest on this Debenture) to the extent that, after such conversion, the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures), and (2) the number of shares of Common Stock issuable upon the
conversion of the Debentures or exercise of the Warrants with respect to which
the determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such conversion or exercise). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
Any issuance by the Company to the Buyer in excess of the limit contained in
this Section 4.E. shall be null and void, AB INITIO, and upon notice of such

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invalid issuance, the Company shall correct its books and cause its transfer
agent's books to be corrected forthwith to reflect that the Buyer's ownership of
Common Stock is within the limit set forth herein. Holder shall immediately
deliver any certificates for invalidly issued Common Stock to the Company's
transfer agent. The Company further agrees to (i) immediately reissue
certificates for Common Stock to the extent that a portion of the Common Stock
represented by said certificates have been validly issued and (ii) immediately
reissue all or a portion of those shares which were deemed invalidly issued (at
the Conversion Price set forth in the original conversion notice(s) applicable
to such shares) upon notice from Holder that the reissuance of such shares would
not cause such Holder to have a beneficial ownership interest in excess of
4.99%. Notwithstanding the foregoing, Holder may elect, by providing the Company
written notice at any time prior to the reissuance of shares, to cancel that
portion of a prior conversion applicable to shares of Common Stock surrendered
by it pursuant to this Section 4.E. The Company hereby indemnifies and holds
Holder free and harmless in connection with any and all liabilities, losses,
costs and expenses, including, without limitation, attorneys' fees and costs
arising from or relating to claims made by any third parties alleging that any
Holder has violated Sections 13(d) and/or 16, to the extent such violation is
premised on the fact that, notwithstanding this Section 4.E., the Holder is the
beneficial owner of all of the shares of Common Stock which would be issuable,
from time to time, if Holder converted the entire principal and interest balance
of the Debenture. The Holder, by its acceptance of this Debenture, further
agrees that if the Holder transfers or assigns any of the Debentures to a party
who or which would not be considered such an affiliate, such assignment shall be
made subject to the transferee's or assignee's specific agreement to be bound by
the provisions of this Section 4(E) as if such transferee or assignee were the
original Holder hereof.

          F.   Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to 87.5% of the
Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4.F., and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with clause (y) of Section 6 hereof.

          G.   If the average price closing bid price as reported on Bloomberg
of the Common Stock for a five (5) consecutive trading day period ("Triggering
Period") is less than $1.00 per share, the Holder agrees to suspend conversions
of the Debenture into Common Stock for a period of twenty (20) consecutive
trading days, commencing on the first trading day immediately after the end of
the FIRST such Triggering Period. If the average closing bid price as reported
by Bloomberg for the Common Stock for any five (5) consecutive days after the
FIRST such Triggering Period is less than $1.00 the Holder shall have no further
obligation to suspend conversions of the Debenture.

     5.   On the condition that the Company is not then in default hereunder,
any portion of the principal balance and accrued interest of the Debentures not
previously converted as of the Maturity Date, shall be deemed to be
automatically converted, without further action of any kind

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(except the delivery of unrestricted Common Stock in connection with such
conversion) by the Company or any of its agents, employees or representatives,
as of the Maturity Date at the Conversion Rate applicable on the Maturity Date
("Mandatory Conversion"), and the Company shall have no further obligation to
repay the Debentures. If the Company is in default hereunder, (i) there shall be
no Mandatory Conversion, (ii) Holder shall retain all of its rights set forth in
Section 15 below, and (iii) Holder may, in addition to its other rights,
unilaterally extend the Maturity Date by one (1) year by providing written
notice to the Company on or before the Maturity Date.

     6.   The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (i) reason of its authorized shares, or
(ii) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the "Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:

          (x)  require the Company to issue shares of Common Stock in
     accordance with such Holder's Notice of Conversion relating to
     the Unconverted Debenture at a conversion purchase price equal to
     the average of the closing bid price per share of Common Stock
     for any five (5) consecutive trading days (subject to the
     equitable adjustments for certain events occurring during such
     period as provided in this Debenture) during the sixty (60)
     trading days immediately preceding the date of the Notice of
     Conversion; or

          (y)  require the Company to redeem each Unconverted
     Debenture for an amount (the "Cap Redemption Amount"), payable in
     cash, equal to:

                     V                     x                 M
                 ---------
                    CP

     where:

          "V" means the outstanding principal plus accrued interest
     through the Cap Redemption Date (as defined below) of an
     Unconverted Debenture;

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          "CP" means the Conversion Rate in effect on the date of
     redemption (the "Cap Redemption Date") specified in the notice
     from the Holder electing this remedy; and

          "M" means the average closing ask price during the period
     beginning on the Cap Redemption Date and ending on the date of
     payment of the Cap Redemption Amount.

The holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.

     7.   Subject to the terms of the Securities Purchase Agreement, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.

     8.   If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person and
the holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5 hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.

     9.   If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the

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record date (the "Record Date") for determining the amount and number of Spin
Off Securities to be issued to security holders of the Company (the "Outstanding
Debentures") been converted as of the close of business on the trading day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the conversion of all or any of the Outstanding
Debentures, such amount of the Reserved Spin Off Shares equal to (x) the
Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the principal amount of the Outstanding Debentures then being
converted, and (II) the denominator is the principal amount of the Outstanding
Debentures.

     10.  If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Conversion Price shall be equitably adjusted to reflect such
action. By way of illustration, and not in limitation, of the foregoing (i) if
the Company effectuates a 2:1 split of its Common Stock, thereafter, with
respect to any conversion for which the Company issues the shares after the
record date of such split, the Base Price shall be deemed to be one-half of what
it had been calculated to be immediately prior to such split; (ii) if the
Company effectuates a 1:10 reverse split of its Common Stock, thereafter, with
respect to any conversion for which the Company issues the shares after the
record date of such reverse split; and (iii) if the Company declares a stock
dividend of one share of Common Stock for every 10 shares outstanding,
thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such dividend, the Base Price shall be deemed to
be the amount of such Base Price calculated immediately prior to such record
date multiplied by a fraction, of which the numerator is the number of shares
(10) for which a dividend share will be issued and the denominator is such
number of shares plus the dividend share(s) issuable or issued thereon (11).

     11.  All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate,
by notice to the Company, a different delivery address for any one or more
specific payments or deliveries.

     12.  The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.

     13.  This Debenture and all agreements entered into in connection herewith
shall be governed by and interpreted in accordance with the laws of the State of
California for contracts

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to be wholly performed in such state and without giving effect to the principles
thereof regarding the conflict of laws. Any litigation based thereon, or arising
out of, under, or in connection with, this agreement or any course of conduct,
course of dealing, statements (whether oral or written) or actions of the
Company or Holder shall be brought and maintained exclusively in the state or
Federal courts of the State of California, sitting in the City of Los Angeles.
The Company hereby expressly and irrevocably submits to the jurisdiction of the
state and federal Courts of the State of California for the purpose of any such
litigation as set forth above and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with such litigation. The Company
further irrevocably consents to the service of process by registered mail,
postage prepaid, or by personal service within or without the State of
California. The Company hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such court referred
to above and any claim that any such litigation has been brought in any
inconvenient forum. To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, the Company
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement and the related agreements entered into in connection herewith.

     14.  In the event that any action is taken by the Company or Holder in
connection with this Debenture, or any related document or matter, the losing
party in such legal action, in addition to such other damages as he or it may be
required to pay, shall pay reasonable attorneys' fees to the prevailing party.

     15.  The following shall constitute an "Event of Default":

          a.   The Company shall default in the payment of principal or interest
               on this Debenture and same shall continue for a period of three
               (3) days after its receipt of written notice thereof; or

          b.   Any of the representations or warranties made by the Company
               herein, in the Securities Purchase Agreement, the Registration
               Rights Agreement or in any certificate or financial or other
               written statements heretofore or hereafter furnished by the
               Company in connection with the execution and delivery of this
               Debenture or the Securities Purchase Agreement shall be false or
               misleading in any material respect at the time made; or

          c.   The Company fails to issue shares of Common Stock to the Holder
               or to cause its Transfer Agent to issue shares of Common Stock
               upon exercise by the Holder of the conversion rights of the
               Holder in accordance with the terms of this Debenture, fails to
               transfer or to cause its Transfer Agent to transfer any
               certificate for shares of Common Stock issued to the Holder upon
               conversion of this Debenture and when required by this Debenture
               or

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               the Registration Rights Agreement, and such transfer is otherwise
               lawful, or fails to remove any restrictive legend or to cause its
               Transfer Agent to transfer on any certificate or any shares of
               Common Stock issued to the Holder upon conversion of this
               Debenture as and when required by this Debenture, the Agreement
               or the Registration Rights Agreement and such legend removal is
               otherwise lawful, and any such failure shall continue uncured for
               five (5) business days; or

          d.   The Company shall fail to perform or observe, in any material
               respect, any other covenant, term, provision, condition,
               agreement or obligation of this Debenture and such failure shall
               continue uncured for a period of twenty (20) days after written
               notice from the Holder of such failure; or

          e.   The Company shall fail to perform or observe, in any material
               respect, any covenant, term, provision, condition, agreement or
               obligation of the Company under the Securities Purchase
               Agreement, the Registration Rights Agreement, the Warrant and
               such failure shall continue uncured for a period of twenty (20)
               days after written notice from the Holder of such failure (other
               than a failure to cause the Registration Statement to become
               effective no later than the Required Effective Date, as defined
               and provided in the Registration Rights Agreement, as to which no
               such cure period shall apply); or

          f.   The Company shall (1) admit in writing its inability to pay its
               debts generally as they mature; (2) make an assignment for the
               benefit of creditors or commence proceedings for its dissolution;
               or (3) apply for or consent to the appointment of a trustee,
               liquidator or receiver for its or for a substantial part of its
               property or business; or

          g.   A trustee, liquidator or receiver shall be appointed for the
               Company or for a substantial part of its property or business
               without its consent and shall not be discharged within sixty (60)
               days after such appointment; or

          h.   Any governmental agency or any court of competent jurisdiction at
               the instance of any governmental agency shall assume custody or
               control of the whole or any substantial portion of the properties
               or assets of the Company and shall not be dismissed within sixty
               (60) days thereafter; or

          i.   Any money judgment, writ or warrant of attachment, or similar
               process in excess of Two Hundred Thousand ($200,000) Dollars in
               the aggregate shall be entered or filed against the Company or
               any of its properties or other assets and shall remain unpaid,
               unvacated, unbonded or unstayed for

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               a period of sixty (60) days or in any event later than five (5)
               days prior to the date of any proposed sale thereunder; or

          j.   Bankruptcy, reorganization, insolvency or liquidation proceedings
               or other proceedings for relief under any bankruptcy law or any
               law for the relief of debtors shall be instituted by or against
               the Company and, if instituted against the Company, shall not be
               dismissed within sixty (60) days after such institution or the
               Company shall by any action or answer approve of, consent to, or
               acquiesce in any such proceedings or admit the material
               allegations of, or default in answering a petition filed in any
               such proceeding; or

          k.   The Company shall have its Common Stock suspended or delisted
               from an exchange or The Nasdaq National Market System from
               trading for in excess of five (5) trading days.

          l.   An Event of Default has occurred under the terms of any other
               Debenture (in this series) issued pursuant to the Securities
               Purchase Agreement.

Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may, at its option,
consider this Debenture immediately due and payable in cash (and not by
conversion into Common Stock), without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding, and the
Holder may immediately enforce any and all of the Holder's rights and remedies
provided herein, or any other rights or remedies afforded by law.

     16.  Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.

     17.  In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then IPSO FACTO the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully

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collectible as interest, then such amount (to the extent of such excess not
returned to the Company) shall, without further agreement or notice between or
by the Company or the Holder, be deemed applied to the payment of principal, if
any, hereunder immediately upon receipt of such excess funds by the Holder, with
the same force and effect as though the Company had specifically designated such
sums to be so applied to principal and the Holder had agreed to accept such sums
as an interest-free prepayment of this Debenture. If any part of such excess
remains after the principal has been paid in full, whether by the provisions of
the preceding sentences of this Section 17 or otherwise, such excess shall be
deemed to be an interest-free loan from the Company to the Holder, which loan
shall be payable immediately upon demand by the Company. The provisions of this
Section 17 shall control every other provision of this Debenture.

     18.  Time is of the essence as to the performance of each and every
obligation of the Company and Holder pursuant to this Debenture.

     19.  A. On the conditions that the Company (i) is not in default under this
Debenture (and no event has occurred that would ripen into a default with the
passage of time), and (ii) has previously honored all prior Redemption Notices,
the Company may, at its option, repay, in whole or in part, the then outstanding
principal and interest balance of this Debenture on the date of the Redemption
Notice (after deducting the principal and interest subject to outstanding
Conversion Notices) at the Redemption Price (as defined below). This Debenture
is redeemable, in whole or in part, by the Company by providing written notice
(the "REDEMPTION NOTICE") to the Holder via facsimile at its address set forth
herein (the Business Day between the hours of 6:30 a.m. and 3:00 p.m. Pacific
Time the Redemption Notice is received by the Holder via facsimile is defined to
be the "REDEMPTION NOTICE DATE"). Within seven (7) Trading Days after the
Redemption Notice Date the Company shall make payment of the Redemption Price
(as defined below) in immediately available funds to the Holder (such date of
payment referred to as the "REDEMPTION DATE"). Partial redemptions shall be in
an aggregate principal amount of at least $400,000.

     B.   In the event the Company serves a Redemption Notice, the Redemption
Price shall be equal to the greater of (i) 125% of the outstanding principal and
interest balance of the Debenture, or (ii) the "Economic Benefit" of the
principal and interest of the Debenture which are the subject of such Redemption
Notice. "ECONOMIC BENEFIT" shall mean the dollar value derived if the principal
(and interest) which was the subject of the Redemption Notice was converted on
the Redemption Notice Date and sold on the Redemption Notice Date at the Closing
Bid Price of the Common Stock on the Redemption Notice Date.

     C.   The Notice of Redemption shall set forth (i) the Redemption Date and
the place fixed for redemption, (ii) the Redemption Price, (iii) a statement of
or reference to the conversion right set forth herein, and (iv) confirmation
that the Company has the full Redemption Price reserved as set forth in F.
below. The notice shall specify the principal and interest balance hereof to be
redeemed. Within seven (7) Trading Days of the Redemption Notice Date, the
Company shall wire transfer the

                                       11
<PAGE>

appropriate amount of funds to the Holder. If the Company fails to comply with
the redemption provisions set forth herein by the seventh Trading Day after the
Redemption Notice Date (or in the case of a public offering as contemplated in
F. below, by the seventh Trading Day after the Redemption Notice Date) relating
to the Redemption Notice, the redemption will be declared null and void and the
Company shall not be permitted to serve another Redemption Notice. For the first
five Trading Days after the Redemption Notice Date, the Holder will retain its
conversion rights with respect to a maximum of twenty percent (20%) of the
principal and interest amount subject to the redemption. If the Holder elects to
so convert the said principal and interest after the receipt of the Redemption
Notice, the Company must receive notice of such election within two (2) business
days from the time the Redemption Notice was received by the Holder. In the
event the Company has not complied with the redemption provisions set forth
herein the Company must comply with the delivery requirements of any then
outstanding Conversion Notice as set forth herein. If the entire balance of
interest and principal of this Debenture is redeemed hereunder, the Holder shall
deliver to the Company the original of this Debenture within three (3) Business
Days after it has received good funds for the Redemption Price.

     D.   The Redemption Price shall be adjusted proportionally upon any
          adjustment of the Conversion Price as provided herein and in the event
          of any stock dividend, stock split, combination of shares or similar
          event.

     E.   Intentionally Deleted.

     F.   The Company shall not be entitled to send any Redemption Notice and
          begin the redemption procedure hereunder unless it has:

          (a)  the full amount of the Redemption Price in cash, available in a
               demand or other immediately available account in a bank or
               similar financial institution, specifically allotted for such
               redemption;

          (b)  immediately available credit facilities, in the full amount of
               the Redemption Price with a bank or similar financial institution
               specifically allotted for such redemption; or

          (c)  a combination of the items set forth in (i) and (ii) above,
               aggregating the full amount of the Redemption Price.

Notwithstanding the foregoing, in the event the redemption is expected to be
made contemporaneously with the closing of a public offering of the Company's
securities for an amount in excess of the Redemption Price, the Company shall
not be required to have the full amount of the Redemption Price available to it
as set forth above.

     G.   Upon its receipt of a Conversion Notice, the Company may, at its
option, repay that

                                       12
<PAGE>

portion of the accrued interest of this Debenture which is subject to such
outstanding Conversion Notice, at the Redemption Price, provided that the
Company delivers to Holder a Redemption Notice with respect thereto within two
(2) business days after the date of the subject Conversion Notice. On the
Redemption Date, the Company shall make payment of the Redemption Price in
immediately available funds to the Holder.

                                       13
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

Dated: as of July 31, 2000

                                        NETGATEWAY, INC., a Delaware corporation

                                        By: /s/ DONALD M. CORLISS, JR.
                                        ---------------------------------------

                                         Donald M. Corliss, Jr.
                                        ---------------------------------------
                                       (Print Name)

                                        President and Chief Operating Officer
                                        ---------------------------------------
                                        (Title)

                                       14
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Debenture)

     The undersigned hereby irrevocably elects to convert $ ________________ of
the principal amount (and $________________ of accrued interest thereon) of the
above Debenture No. ___ into Shares of Common Stock of NETGATEWAY, INC., a
Delaware corporation (the "Company") according to the conditions hereof, as of
the date written below.

Conversion Date*
-------------------------------------------------------------------

Applicable Conversion Price
-----------------------------------------------------------

Signature
----------------------------------------------------------------------------
                     [Name]

Address:
----------------------------------------------------------------------------

----------------------------------------------------------------------------

* This original Debenture must be received by the Company or its transfer agent
by the third business day following the Conversion Date.<PAGE>

                                    ANNEX IV
                        TO SECURITIES PURCHASE AGREEMENT

                          REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 31, 2000 (this
"Agreement"), is made by and between NETGATEWAY, INC., a Delaware corporation
(the "Company"), and the entity named on the signature page hereto (the "Initial
Investor").

                              W I T N E S S E T H:

     WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of July 31, 2000, between the Initial Investor and
the Company (the "Securities Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor a 8% Convertible Debenture, in the principal amount of
$4,500,000 (the "Debenture") which term, as used herein shall have the meaning
ascribed to it in the Securities Purchase Agreement); and

     WHEREAS, the Company has agreed to issue the Warrants to the Initial
Investor in connection with the issuance of the Debenture; and

     WHEREAS, the Debenture is convertible into shares of Common Stock (the
"Conversion Shares") upon the terms and subject to the conditions set forth
therein; and

     WHEREAS, the Warrants to be issued to the Initial Investor may be exercised
for the purchase of shares of Common Stock (the "Warrant Shares") upon the terms
and conditions of the Warrants; and

     WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:

                                       1
<PAGE>

     1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:

     (a) "Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.

     (b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.

     (c) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange SEC (the
"SEC").

     (d) "Registrable Securities" means the Conversion Shares and the Warrant
Shares.

     (e) "Registration Statement" means a registration statement of the Company
under the Securities Act.

     2. REGISTRATION.

     (a) MANDATORY REGISTRATION. The Company shall prepare and file with the
SEC, as soon as possible after the Closing Date, but no later than thirty (30)
days following the Closing Date, a Registration Statement on Form S-1, or other
available form, registering for resale by the Investor all of the Registrable
Securities, but in no event less than two hundred percent (200%) of the
aggregate number of shares into (i) which the Debentures would be convertible at
the time of filing of the Registration Statement (assuming for such purposes
that the entire principal and interest balance of all Debentures had been
eligible to be converted, and had been converted, into Conversion Shares in
accordance with their terms, whether or not such eligibility or conversion had
in fact occurred as of such date), and (ii) which would be issued upon exercise
of all of the Warrants at the time of filing of the Registration Statement
(assuming

                                       2
<PAGE>

for such purposes that all such Warrants had been eligible to be exercised and
had been exercised in accordance with their terms, whether or not such
eligibility or exercise had in fact occurred as of such date). The Registration
Statement shall also state that, in accordance with Rule 416 and 457 under the
Securities Act, it also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Debentures and the
exercise of the Warrants (and the Existing Warrants) to prevent dilution
resulting from stock splits, or stock dividends. The Company will use its best
efforts to cause the Registration Statement to be declared effective no later
than ninety (90) days after the Closing Date. If at any time the number of
shares of Common Stock into which the Debentures may be converted and which
would be issued upon exercise of the Warrants equals more than seventy five
percent (75%) of the aggregate number of shares of Common Stock then registered,
the Company shall, within ten (10) business days after receipt of a written
notice from any Investor, either (i) further amend the Registration Statement
filed by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time, to register
200% of the aggregate of all shares of Common Stock into which the Debentures
may then or in the future be converted and which would be issued currently or in
the future upon exercise of the Warrants (including, without limitation, the
Warrants to be issued upon the Second Closing Date), or (ii) if such
Registration Statement has been declared effective by the SEC at that time, file
with the SEC an additional Registration Statement on Form S-1, or other
available forum as may be appropriate, to register (A) 200% of the aggregate
shares of Common Stock into which the Debentures may then or in the future be
converted and which would be issued currently or in the future upon exercise of
the unexercised Warrants, less (B) the aggregate number of shares of Common
Stock already registered which have not been issued upon conversions of the
Debentures or the exercise of Warrants. THE REGISTRATION STATEMENT SHALL NOT
INCLUDE ANY SHARES OTHER THAN THE REGISTRABLE SECURITIES, AND CERTAIN OTHER
SHARES THAT THE COMPANY IS OBLIGATED TO REGISTER AS SET FORTH IN SCHEDULE 5(b),
WITHOUT THE CONSENT OF THE INVESTOR.

     (B) PAYMENTS BY THE COMPANY.

     (i) If the Registration Statement covering the Registrable Securities is
not filed with the SEC on or before thirty (30) days after the Closing Date (the
"Required Filing Date"), then the Company shall pay Investor a late filing
penalty (collectively "Late Filing Penalties"), (i) on the first day after the
Required Filing Date, an amount equal to two percent (2%) of the original
purchase price paid pursuant to the Securities Purchase Agreement (the "Purchase
Price") for the Debentures, and (ii) on each subsequent monthly anniversary of
the Required Filing Date, if the Registration Statement has not been filed in
proper form on or before such date, an amount equal to three percent (3%) of the
Purchase Price for the Debenture.

     (ii) If the Registration Statement covering the Registrable Securities is
not effective within the earlier of (a) five (5) business days after notice by
the SEC that it may be declared effective (including the issuance by the SEC of
a "no review letter"), or (b) ninety (90) days following the Closing Date (the
"Required Effective Date"), then the Company shall pay Investor a late effective
date penalty (collectively "Late Effective Date Penalties")(sometimes

                                       3
<PAGE>

Late Filing Penalties and Late Effective Penalties are collectively referred to
as "Late Penalties"), (i) on the first day after the Required Effective Date, an
amount equal to two percent (2%) of the Purchase Price for the Debentures and
(ii) on each subsequent monthly anniversary of the Required Effective Date, if
the Registration Statement has not been declared effective on or before such
date, an amount equal to three percent (3%) of the Purchase Price for the
Debenture.

     (iii) By way of illustration and not in limitation of the foregoing,
assuming a Closing Date of February 3, 2000 (X) if the Registration Statement is
timely filed but is not declared effective until July 15, 2000 (assuming for the
purpose of this example that the SEC has not previously provided notice that it
may be declared effective), the aggregate Late Effective Date Penalty will equal
8% percent of the Purchase Price (2% on May 3, the 90th day after the Closing
Date, plus 3% each on June 2, and July 2) or (Y) if the Registration Statement
is filed on April 9 and is not declared effective until June 15, 2000 (assuming
for the purpose of this example that the SEC has not previously provided notice
that it may be declared effective), the aggregate Late Filing Penalty will equal
5% of the Purchase Price (2% on March 4, the 30th day after the Closing Date,
plus 3% on April 3) and the aggregate Late Effective Date Penalty will equal 5%
percent of the Purchase Price (2% on May 3, the 90th day after the Closing Date,
plus 3% on June 2). Notwithstanding anything to the contrary herein, the penalty
shall only apply to the portion of the Purchase Price paid by the Investor on
the Closing Date (and not the Second Closing Date, as defined in the Debenture).

     (iv) In addition to and not in lieu of the payment of penalties hereunder,
if the Registration Statement is not filed within sixty (60) days after the
Closing Date, or the Registration Statement is not declared effective within one
hundred eighty (180) days after the Closing Date, Investor may, at its option,
require the Company, to redeem the Debentures in full (within three (3) days
after its delivery of a redemption notice to the Company), in cash, which
redemption amount shall be calculated as set forth in Section 6 of the
Debenture.

     (v) Late Penalties will be payable to the Investor by the Company in cash
or other immediately available funds on the date such Late Penalty is incurred.

     (vi) The parties acknowledge that the damages which may be incurred by the
Investor if the Registration Statement is not filed by the Required Filing Date
or if the Registration Statement has not been declared effective by the Required
Registration Date may be difficult to ascertain. The parties agree that the Late
Penalties represent a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of such damages. The payment of the Late
Penalties to the Investor shall not limit the Investor's other rights and
remedies hereunder or under any other document entered into in connection
herewith.

     (vii) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the

                                       4
<PAGE>

effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Investor or its counsel if the Company
timely forwards to counsel any required documents or in the event all of the
Registrable Securities may be sold pursuant to Rule 144 or another available
exemption under the Act.

     3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall do each of the following.

     (a) Prepare promptly, and file with the SEC by the Required Filing Date,
the Registration Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and thereafter use its
reasonable best efforts to cause each Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two (2) years after the Closing
Date, (ii) the date when the Investor may sell all Registrable Securities under
Rule 144 of the Securities Act ("Rule 44") or (iii) the date the Investor no
longer owns any of the Registrable Securities, which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;

     (b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;

     (c) The Company shall permit counsel designated by the Investor to review
the Registration Statement and all amendments and supplements thereto a
reasonable period of time (but not less than three (3) business days) prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects.

     (d) Notify the Investor and managing underwriters, if any, immediately
(and, in the case of (i)(A) below, not less than five (5) days prior to such
filing) and (if requested by any such Person) confirm such notice in writing no
later than one (1) business day following the day (i)(A) when a prospectus or
any prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (B) whenever the SEC notifies the Company
whether there will be a "review" of such Registration Statement; (C) whenever
the Company receives (or representatives of the Company receive on its behalf)
any oral or written comments from the SEC in respect of a Registration Statement
(copies or, in the case of oral comments,

                                       5
<PAGE>

summaries of such comments shall be promptly furnished by the Company to the
Investor); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) Business Day in advance of the
filing of such responses with the SEC so that the Investor shall have the
opportunity to comment thereon.

     (e) Furnish to Investor (i) promptly after the same is prepared and
publicly distributed, filed with the SEC, or received by the Company, one (1)
copy of the Registration Statement, each preliminary prospectus and prospectus,
and each amendment or supplement thereto, and (ii) such number of copies of a
prospectus, and all amendments and supplements thereto and such other documents,
as Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by Investor;

     (f) As promptly as practicable after becoming aware of such event, notify
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to Investor as it may reasonably request;

     (g) As promptly as practicable after becoming aware of such event, notify
Investor (or, in the event of an underwritten offering, the managing
underwriters) of the issuance

                                       6
<PAGE>

by the SEC of a Notice of Effectiveness or any notice of effectiveness or any
stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;

     (h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investor in writing of the existence of a Potential Material Event,
the Investor shall not offer or sell any Registrable Securities, or engage in
any other transaction involving or relating to the Registrable Securities, from
the time of the giving of notice with respect to a Potential Material Event
until Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; PROVIDED, HOWEVER, that the Company may not so
suspend the right to such holders of Registrable Securities for more than two
twenty (20) day periods in the aggregate during any 12-month period ("Suspension
Period") with at least a ten (10) business day interval between such periods,
during the periods the Registration Statement is required to be in effect;

     (i) Use its reasonable efforts to secure or maintain, as applicable, Nasdaq
National Market System authorization and quotation for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities;

     (j) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;

     (k) Cooperate with the Investor who holds Registrable Securities (or,
subject to receipt by the Company of appropriate notice and documentation, as
may be required by the Securities Purchase Agreement, the Debentures, the
Warrants or this Agreement, securities convertible into Registrable Securities)
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts as the case may be, as the Investor may reasonably
request, and, within five (5) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the transfer agent for the Registrable Securities (with copies to the
Investor whose Registrable Securities or securities convertible into Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; provided, however, that nothing in this
subparagraph (j) shall be deemed to waive any of the provisions regarding the
conditions or method of conversion of the Debentures or exercise of Warrants
into Registrable Securities; and

     (l) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.

                                       7
<PAGE>

     4. OBLIGATIONS OF THE INVESTOR. In connection with the registration of the
Registrable Securities, Investor shall have the following obligations:

     (a) As a condition precedent to the obligations of the Company to complete
the registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor, Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of the Registrable Securities held by it, as
shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least five (5) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
Investor of the information the Company requires from Investor (the "Requested
Information") if Investor elects to have any of its Registrable Securities
included in the Registration Statement. If at least two (2) business days prior
to the filing date the Company has not received the Requested Information from
an Investor (a "Non-Responsive Investor"), then the Company may file the
Registration Statement without including Registrable Securities of such
Non-Responsive Investor;

     (b) To cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder, unless Investor has notified the Company in writing of its election
to exclude all of its Registrable Securities from the Registration Statement;
and

     (c) Upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e) or 3(f), above, Investor shall
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until Investor's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3(e) or 3(f) and, if so directed by the Company, Investor shall deliver
to the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in Investor's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.

     5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other than
underwriting discounts and commissions of Investor) incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing, and qualifications fees, printers
and accounting fees, the fees and disbursements of counsel for the Company, and
a reasonable fee for Investor's legal counsel not exceeding $5,000, shall be
borne by the Company.

     (b) Except as and to the extent specifically set forth in Schedule 5(b)
attached hereto, neither the Company nor any of its subsidiaries has, as of the
date hereof, nor shall the Company nor any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Investor herein or otherwise
conflicts with the provisions hereof. Except as and to the extent specifically

                                       8
<PAGE>

set forth in Schedule 5(b) attached hereto, neither the Company nor any of its
subsidiaries has previously entered into any agreement granting any registration
rights with respect to any of its securities to any person or entity. Without
limiting the generality of the foregoing, without the written consent of the
Investor, the Company shall not grant to any person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Investor set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.

     6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:

     (a) To the extent permitted by law, the Company will indemnify and hold
harmless Investor, its directors, officers, managers, representatives, agents
and "controlling persons" within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (each, an
"Indemnified Person" or "Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to clause (b) of this Section 6, the Company shall reimburse the Investor,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by it in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company; or (III) apply to amounts paid in settlement of any Claim if such
settlement is effected without the

                                       9
<PAGE>

prior written consent of the Company, which consent shall not be unreasonably
withheld. Investor will indemnify the Company and its officers, directors and
agents against any claims arising out of or based upon a Violation which occurs
in reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of Investor, expressly for use in connection with the
preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investor pursuant to
Section 9.

     (b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be. In case any
such action is brought against any Indemnified Person or Indemnified Party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such Indemnified Person or Indemnified Party under this Section 6 for
any reasonable legal or other reasonable out-of-pocket expenses subsequently
incurred by such Indemnified Person or Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action of its final conclusion. The
Indemnified Person or Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Person or Indemnified Party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.

     7. CONTRIBUTION. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6

                                       10
<PAGE>

to the fullest extent permitted by law; PROVIDED, HOWEVER, that (a) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

     8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investor the benefits of Rule 144, the Company agrees to:

     (a) make and keep public information available, as those terms are
understood and defined in Rule 144;

     (b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and

     (c) furnish to Investor so long as Investor owns Registrable Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.

     9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by an Investor to any transferee of the Registrable
Securities (or all or any portion of the Debenture of the Company which is
convertible into such securities) permitted or allowable by the terms of the
Securities Purchase Agreement only if: (a) Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with or in favor of the Company to be bound by all of the provisions
contained herein, a copy of which shall be provided to the Company. The copies
referred to in clauses (a) and (d) of the immediately preceding sentence may be
redacted to delete certain financial and other details of the transaction
between the Investor and its transferee if the same is included in the document
to be provided to the Company. In the event of any delay in filing or
effectiveness of the

                                       11
<PAGE>

Registration Statement as a result of such assignment, the Company shall not be
liable for any damages arising from such delay, or the payments set forth in
Section 2(c) hereof.

     10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of each such Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investor. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon Investor and the Company.

     11. MISCELLANEOUS.

     (a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.

     (b) Any notice or communication required or permitted by this Agreement
shall be given in writing addressed as follows:

         If to Company:             Netgateway, Inc.
                                    300 Oceangate, 5th Floor
                                    Long Beach, CA 90802
                                    ATTN: CEO
                                    Telephone No.: (562) 308-0010
                                    Telecopier No.: (562) 308-0021

         with a copy to:

                                    Nida & Maloney, LLP
                                    800 Anacapa St.
                                    Santa Barbara, CA 93101
                                    Attention: C. Thomas Hopkins, Esq.
                                    Telephone: (805) 568-1151
                                    Facsimile: (805) 568-1955

If to Investor:                     King William, LLC
                                    c/o Navigator Management
                                    P.O. Box 972
                                    Road Town
                                    Tortola, British Virgin Islands
                                    Telephone: (284) 494-4770
                                    Facsimile: (284) 494-4771

                                       12
<PAGE>

All notices shall be served personally by telecopy, by telex, by overnight
express mail service or other overnight courier, or by first class registered or
certified mail, postage prepaid, return receipt requested. If served personally,
or by telecopy, notice shall be deemed delivered upon receipt (provided that if
served by telecopy, sender has written confirmation of delivery); if served by
overnight express mail or overnight courier, notice shall be deemed delivered
forty-eight (48) hours after deposit; and if served by first class mail, notice
shall be deemed delivered seventy-two (72) hours after mailing. Any party may
give written notification to the other parties of any change of address for the
sending of notices, pursuant to any method provided for herein.

     (c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

     (d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of California for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Any litigation based thereon, or arising out of, under, or in
connection with, this agreement or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Company or Purchaser
shall be brought and maintained exclusively in the state or Federal courts of
the State of California, sitting in the City of Los Angeles. The Company hereby
expressly and irrevocably submits to the jurisdiction of the state and federal
Courts of the State of California for the purpose of any such litigation as set
forth above and irrevocably agrees to be bound by any final judgment rendered
thereby in connection with such litigation. The Company further irrevocably
consents to the service of process by registered mail, postage prepaid, or by
personal service within or without the State of California. The Company hereby
expressly and irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter may have to the laying of venue of any
such litigation brought in any such court referred to above and any claim that
any such litigation has been brought in any inconvenient forum. To the extent
that the Company has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution or otherwise) with
respect to itself or its property, the Company hereby irrevocably waives such
immunity in respect of its obligations under this Agreement and the related
agreements entered into in connection herewith.

     (e) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

                                       13
<PAGE>

     (f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.

     (g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

     (h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.

     (i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.

     (j) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.

     (k) This Agreement, the Securities Purchase Agreement and the other
documents referenced therein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.

     (l) Any default by an individual Investor hereunder or any related
agreement, including, without limitation, the Securities Purchase Agreement,
shall not be deemed a default by any other Investor and shall not excuse the
Company's performance hereunder or thereunder with respect to the non-defaulting
Investors.

     (m) In the event of any action for breach of or to enforce or declare
rights under any provision of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs, to be paid by the losing
party.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       14
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

                               NETGATEWAY, INC., a Delaware corporation

                               By: /s/ DONALD M. CORLISS, JR.
                                  --------------------------------
                               Name:  Donald M. Corliss, Jr.
                               Title: President and Chief Operating Officer

                               KING WILLIAM, LLC, a Cayman Islands limited
                               liability company

                               By:
                                  ---------------------------------
                                     Manager

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