WAIVER AGREEMENT
Waiver Agreement (this "Agreement") dated as of May 9, 2001 by and
between Netgateway, Inc., a Delaware corporation ("Netgateway") and King
William, LLC, a Cayman Islands Limited Liability Company ("King William").
Whereas the parties entered into (i) a Securities Purchase Agreement
(the "Purchase Agreement") dated July 31, 2000 pursuant to which Netgateway
issued to King William its 8% Convertible Debenture Due July 31, 2003 with an
original principal amount of up to $4.5 million and an actual principal amount
of $2.5 million (the "Debenture") and warrants (the "King William Warrants")
pursuant to a Common Stock Purchase Warrant (the "King William Warrant
Agreement") dated as of July 31, 2000 to acquire a total of 231,000 shares of
the common stock, par value $.001 per share of Netgateway (the "Common Stock")
and (ii) a Registration Rights Agreement dated July 31, 2000 (the "Debenture
Registration Rights Agreement");
Whereas the parties have entered into a Restructuring and Amendment
Agreement (the "Restructuring Agreement") dated January 25, 2001. Terms used
herein with initial capital letters and not defined herein shall have the
meaning assigned to them in the Restructuring Agreement;
Whereas, King William wishes to convert a portion of the Debenture into
Common Stock; and
Whereas, the parties wish to amend certain of the terms of the
Restructuring Agreement and King William wishes to waive certain defaults
thereunder.
Now therefore, in consideration of the foregoing premises and of the
mutual covenants and agreements contained herein and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
agree as follows.
1. Conversion. On or about May 3, 2001, King William and Netgateway agreed that
King William may convert $200,000 of the principal amount of the Debenture (the
"Conversion Amount") into Common Stock of the Company. King William agreed to
receive fewer shares pursuant to its conversion under the debenture and, as a
result, King William received 800,000 shares of stock for its conversion of
$200,000 of principal.
2. Payment Extension. The Conversion Amount shall be credited toward the payment
of $250,000 due on February 28, 2001 and the balance of $50,000 plus interest
accrued thereon to the date of payment shall be paid on April 10, 2002.
The payment of $247,278.99 originally scheduled to be made on April 10,
2001 is rescheduled to, and shall be due on, January 10, 2002, in the amount of
$244,557.98 plus interest accrued thereon to the date of payment.
The payment of $247,278.99 originally scheduled to be made on May 10,
2001 is rescheduled to, and shall be due on, February 10, 2002, in such amount
plus interest accrued thereon to the date of payment.
3. Waiver of Defaults. King William by agreeing to the rescheduling of
the February, April and May 2001 payments, which were due pursuant
to the restructuring agreement, hereby waives its right to make
further conversions (other than the conversion provided for herein)
based upon the Special Defaults occurring as a result of
Netgateway's failure to make said timely payments. In addition, King
William hereby agrees that said Special Defaults for failure to make
said payments referred to in the previous sentence shall not result
in the reinstatement of late filing penalties pursuant to section 5
of the Restructuring Agreement.
4. Affirmation of Agreement. Except as expressly set forth in this Amendment,
the Restructuring Agreement remains unchanged and in full force and effect, and
is ratified and affirmed in its entirety.
5. Release. Netgateway hereby releases King William and all of its direct and
indirect partners, officers, directors, employees, affiliates(both persons and
entities, agents, representatives, servants, trustees, beneficiaries,
predecessors in interest, successors in interest, assigns, nominees and insurers
from any and all claims it may have against King William arising out of the
conduct of King William through the date of this Agreement with respect to the
Purchase Agreement, the Equity Agreement and the transactions completed pursuant
thereto. Netgateway, Inc. acknowledges that it is familiar with Section 1542 of
the Civil Code of the State of California which provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
Netgateway hereby waives any and all rights and benefits that it now has or in
the future may have under Section 1542 of the Civil Code (and under the
comparable provisions of any other applicable law) and agrees and acknowledges
that this Agreement contains a full and final release applying to unknown and
unanticipated claims, injuries or damages arising out of the subject matter
hereof, as well as to those now known or disclosed. Netgateway represents,
warrants and covenants that it has not, and at the time this release becomes
effective will not have, sold, assigned, transferred or otherwise conveyed to
any other person or entity all or any portion of its rights, claims, demands,
actions or causes of action herein released.
6. Miscellaneous. King William represents and warrants that it holds all right,
title and interest in and to the entire principal amount of the Debenture and
all of the King William Warrants. This Agreement shall be binding on all future
holders of the Debenture and of the King William Warrants and a new debenture
reflecting the terms of this Agreement shall be provided to King William in
exchange for the current Debenture held by it. This Agreement shall be governed
by and construed in accordance with the laws of the state of California.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
Netgateway, Inc. King William, L.L.C.
By: _____________________________ By: _____________________________
Name: Name:
Title: Title: