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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(a)
INTERWORLD CORPORATION
----------------------
(Name of Issuer)
Common Stock, $.01 Par Value
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(Title of Class of Securities)
46114Q108
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(CUSIP Number)
Michael J. Donahue
395 Hudson Street, 6th Floor
New York, New York 10014-3669
(212) 301-2500
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 12, 2000
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f), or 13d-1(g), check the following
box |_|.
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Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 5 Pages)
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CUSIP No. 46114Q108 SCHEDULE 13D Page 2 of 22 Pages
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--- --------------------------------------------------------------------------
NAME OF REPORTING PERSONS
Michael J. Donahue
1 S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
--- --------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
2 (b) |X|
--- --------------------------------------------------------------------------
3 SEC USE ONLY
--- --------------------------------------------------------------------------
SOURCE OF FUNDS*
4 N/A (See Item 4)
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
5 2(d) OR 2(e) |_|
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 United States
------------- --- ------------------------------------------------------------
SOLE VOTING POWER
7 4,295,406
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SHARED VOTING POWER
NUMBER OF 8 none
SHARES --- ------------------------------------------------------------
BENEFICIALLY SOLE DISPOSITIVE POWER
OWNED BY 9 4,295,406
EACH --- ------------------------------------------------------------
REPORTING SHARED DISPOSITIVE POWER
PERSON WITH 10 none
--- --------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 4,295,406
--- --------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_|
--- --------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 14.64%
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TYPE OF REPORTING PERSON*
14 IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP No. 46114Q108 SCHEDULE 13D Page 3 of 22 Pages
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Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, par value $.01 per share
(the "Common Stock"), of InterWorld Corporation (the "Issuer"). The Issuer is a
Delaware corporation with its principal executive offices located at 395 Hudson
Street, 6th Floor, New York, New York 10014-3669.
Item 2. Identity and Background.
The name of the person filing this statement is Michael J. Donahue, 395
Hudson Street, 6th Floor, New York, New York 10014-3669. Mr. Donahue, a United
States citizen, is the Chairman of the Board of InterWorld. The principal
business of InterWorld is to provide Internet commerce software solutions that
enable businesses to sell goods and services over the Internet to other
businesses and consumers. Its address is 395 Hudson Street, 6th Floor, New York,
New York 10014-3669.
During the last five years, Mr. Donahue has not been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) and
has not been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
This Schedule 13D relates to the participation by Mr. Donahue in a
transaction, as described in Item 4 below, with Jackpot Enterprises, Inc.
whereby Jackpot could acquire Mr. Donahue's shares with the effect of changing
or influencing the control of the issuer. This Schedule 13D does not relate to
the acquisition of shares by Mr. Donahue.
Item 4. Purpose of Transaction.
On October 12, 2000, Mr. Donahue entered into a Loan and Forbearance
Agreement with Jackpot Enterprises, Inc. ("Jackpot") pursuant to which Jackpot
agreed to purchase from Salomon Smith Barney ("SSB") a loan from SSB to Mr.
Donahue. The loan is secured by 4,270,406 shares of Common Stock. Pursuant to a
Call/Participation Agreement, Mr. Donahue agreed that Jackpot would share in the
profit on a portion of the stock securing the loan once certain conditions,
including the repayment of the loan, were met. Mr. Donahue has sole power to
vote and dispose of such shares. However, Mr. Donahue has agreed that for so
long as the loan is outstanding, given the highly leveraged nature of the loan,
he would, prior to any vote of the stockholders of Issuer, consult with Jackpot
and obtain Jackpot's view with respect to such vote. He also agreed that in the
event the Board of Directors of Issuer approves a merger of Jackpot with
InterWorld Corporation on or before April 10, 2001, Mr. Donahue will execute an
appropriate voting agreement pursuant to which he will agree to vote his stock
in favor of such merger.
Item 5. Interest in Securities of the Issuer.
(a) Mr. Donahue beneficially owns 4,295,406 shares of InterWorld
Common Stock, which represents approximately 14.64% of the total
class of common stock.
(b) Sole power to vote: 4,295,406 shares
Shared power to vote: 0 shares
(c) Following the decline in the value of the shares held as
collateral for the loan from SSB (which loan is described in Item
4), SSB disposed of 509,000 shares of InterWorld Common Stock
owned by Mr. Donahue in open market transactions during September
and October 2000, resulting in total proceeds to SSB of
$1,938,543.15, which were applied to the paydown of such loan.
(d) The loan from SSB (described in Item 4) is secured by
4,270,406 shares of Common Stock. Pursuant to a
Call/Participation Agreement, Mr. Donahue agreed that Jackpot
would share in the
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CUSIP No. 46114Q108 SCHEDULE 13D Page 4 of 22 Pages
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profit on a portion of the stock securing the loan once certain
conditions, including the repayment of the loan, were met.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as otherwise noted, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) between Mr. Donahue and any
other person with respect to any securities of the Issuer, including but not
limited to transfer or voting of any securities, finder's fees, joint ventures,
loan or option arrangements, put or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
Item 7. Material to Be Filed as Exhibits
Exhibit 99.1 - Loan Assumption and Forbearance Agreement dated
October 12, 2000 and related documents
Exhibit 99.2 - Call/Profit Participation Agreement, dated
October 12, 2000
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 25, 2000
/s/ Michael J. Donahue
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Name: Michael J. Donahue
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CUSIP No. 46114Q108 SCHEDULE 13D Page 5 of 22 Pages
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EXHIBIT 99.1
LOAN ASSUMPTION AND FORBEARANCE AGREEMENT
THIS LOAN ASSUMPTION AND FORBEARANCE AGREEMENT (this "Agreement") is made
and entered into as of October 12, 2000 by and between MICHAEL DONAHUE, an
individual having an address at 395 Hudson Street, 6th Floor, New York, New York
10014 ("Borrower") and JACKPOT ENTERPRISES, INC., a Nevada corporation (the
"Lender").
WITNESSETH:
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WHEREAS, Borrower is a party to a Loan Agreement, dated October 13, 1999
(the "Loan Agreement), between Salomon Smith Barney Inc. ("SSB") and Borrower,
pursuant to which SSB agreed to loan (the "Loan") Donahue, on a demand basis, up
to U.S.$14 million.
WHEREAS, as of the date hereof $12,445,500, remains outstanding under the
Loan.
WHEREAS, the Loan is presently secured by 4,270,406 shares of common stock
of InterWorld Corporation (the "Stock Collateral") owned of record and
beneficially by the Borrower, which security interest has been perfected by SSB
by virtue of SSB's physical possession.
WHEREAS, subject to the terms and conditions hereof, the Lender has agreed
to assume the Loan from SSB and to not call a demand under the Loan ;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, the sufficiency of which is hereby
acknowledged, the parties hereto represent and agree as follows:
1. Definitions.
For purposes of this Agreement the following capitalized terms shall have
the meanings set forth below:
1.1 "Additional Collateral" shall have the meaning set forth in
Section 3.2 of this Agreement.
1.2 "Business Day" shall mean any day on which commercial banks are
not authorized
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CUSIP No. 46114Q108 SCHEDULE 13D Page 6 of 22 Pages
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or required to close in New York, New York.
1.3 "Collateral" shall mean the Stock Collateral and the Additional
Collateral.
1.4 "Contractual Obligation" of any Person shall mean, any indenture,
note, security, deed of trust, mortgage, security agreement, lease,
guaranty, instrument, contract, agreement or other form of obligation
or undertaking to which such Person is a party or by which such Person
or any of its property is bound.
1.5 "Default" shall mean any event or circumstance not yet
constituting an Event of Default but which, with the giving of any
notice or the lapse of any period of time or both, would become an
Event of Default.
1.6 "Event of Default" shall have the meaning set forth in Section 7.1
of this Agreement.
1.7 "Governmental Authority" shall mean any domestic or foreign
national, state or local government, any political subdivision
thereof, any department, agency, authority or bureau of any of the
foregoing, or any other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
1.8 "Governmental Rule" shall mean any law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive,
guidelines, policy or similar form of decision of any Governmental
Authority.
1.9 "Indebtedness" of any Person shall mean and include the aggregate
amount of, without duplication (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services
(other than accounts payable incurred in the ordinary course of
business determined in accordance with generally accepted accounting
principles), (d) all obligations under capital leases of such Person,
(e) all obligations or liabilities of others secured by alien on any
asset of such Person, whether or not such obligation or liability is
assumed, (f) all guaranties of such Person of the obligations of
another Person;(g) all obligations created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement upon an event of default are
limited to repossession or sale of such property), (h) net exposure
under any interest rate swap, currency swap, forward, cap, floor or
other similar contract that is not entered to in connection with a
bona fide hedging operation that provides offsetting benefits to such
Person, which agreements shall be marked to market on a current basis,
(i) all reimbursement and other payment obligations, contingent or
otherwise, in respect of letters of credit.
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CUSIP No. 46114Q108 SCHEDULE 13D Page 7 of 22 Pages
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1.10 "Lien" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, claim, charge or other encumbrance
in, of, or on such property or the income therefrom, including,
without limitation, the interest of a vendor or lessor under a
conditional sale agreement, capital lease or other title retention
agreement, or any agreement to provide any of the foregoing, and the
filing of any financing statement or similar instrument under the
Uniform Commercial Code or comparable law of any jurisdiction.
1.11 "Loan" shall have the meaning set forth in the preamble of this
Agreement.
1.12 "Obligations" shall mean and include all loans, advances, debts,
liabilities, and obligations, owed by Borrower to Lender of every kind
and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or
hereafter arising under or pursuant to the terms of this Agreement or
the other Operative Documents, including, without limitation, all
interest, fees, charges, expenses, attorneys' fees and costs and
accountants' fees and costs chargeable to and payable by Debtor
hereunder and thereunder, in each case, whether direct or indirect,
absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the
United States Code (11 U.S.C. Section 101 et seq.), as amended from
time to time (including post-petition interest) and whether or not
allowed or allowable as a claim in any such proceeding.
1.13 "Operative Documents" shall mean, collectively, this Agreement
and the other documents executed in connection herewith.
1.14 "Permitted Liens" shall mean and include: (a) Liens for taxes or
other Governmental Charges not at the time delinquent or thereafter
payable without penalty or being contested in good faith, provided
provision is made to the reasonable satisfaction of Lender for the
eventual payment thereof if subsequently found payable; (b) Liens of
carriers, warehousemen, mechanics, material men, vendors, and
landlords incurred in the ordinary course of business for sums not
overdue or being contested in good faith, provided provision is made
to the reasonable satisfaction of Lender for the eventual payment
thereof if subsequently found payable; and (c) Liens in favor of
Lender.
1.15 "Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a
limited liability company, an unincorporated association, a joint
venture or other entity or a Governmental Authority.
1.16 "Requirement of Law" applicable to any Person shall mean (a) the
articles or certificate of incorporation, bylaws or other governing
documents of such Person, (b) any Governmental Rule applicable to such
Person, (c) any license, permit, approval or other authorization
granted by any Governmental Authority to or for the benefit of such
Person and (d) any judgment, decision or determination of any
Governmental Authority or arbitrator, in each case applicable to or
binding upon such Person or any of its property or to which such
Person or any of
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CUSIP No. 46114Q108 SCHEDULE 13D Page 8 of 22 Pages
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its property is subject.
2. Loans; Interest. Lender will assume the Loan from SSB and pay SSB an amount
equal to the amount outstanding under the Loan on the date hereof. Lender and
Borrower hereby agree that the Loan Agreement is amended and restated in its
entirety as provided herein. Interest on the Loan shall accrue at an annual rate
equal to 8%, from the date of this Agreement, and be added to the outstanding
principal amount at the end of each calendar quarter commencing December 31,
2000 (an "Interest Accrual Date").
3. Security Interests.
3.1 Continued Security Interest. Borrower acknowledges that Lender shall
succeed to SSB's security interest under the Loan Agreement with respect to
the Stock Collateral. Borrower further acknowledges that Lender shall
undertake to make all necessary filings with state and federal agencies in
order to protect such security interest.
3.2 Grant of Additional Security Interest. As additional collateral
security for the Obligations, Borrower hereby grants to Lender a continuing
security interest in and to the real property of the Borrower listed on
Schedule I (the "Additional Collateral"). Borrower shall promptly execute
an appropriate mortgage with respect to the Additional Collateral and shall
pay the expenses for the filing of such. Borrower agrees to execute any
other document reasonable requested by the Lender to perfect its security
interest in the collateral. Borrower shall not incur additional
indebtedness or further encumber the real property set forth on Schedule
II. Nothing contained in this section, however shall give rise to any
obligation, or create any security interest, that would constitute a
default, or a basis for default, under any existing mortgage or loan to
which Borrower is directly or indirectly a party. To the extent that the
grant of any additional security interest hereunder requires the Borrower
to obtain the consents of any lender, the Borrower shall not be obligated
to grant such additional security interest unless and until such consent is
obtained. Borrower shall use reasonable efforts to obtain such consents.
3.3 Liabilities Unconditional. Borrower is and shall remain absolutely and
unconditionally liable for the performance of its obligations under the
Operative Documents, including without limitation any deficiency by reason
of the failure of the Collateral to satisfy all amounts due Lender under
the Loan or pursuant to any other Operative Document.
4. Representations and Agreements of Borrower. Borrower represents to Lender as
follows, and Borrower agrees that the following representations will continue to
be true, and that Borrower will comply with all of the following agreements
throughout the term of this Agreement:
4.1 Enforceability. Each Operative Document executed, or to be
executed, by Borrower has been, or will be, duly executed and
delivered by Borrower and constitutes, or will constitute, a
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CUSIP No. 46114Q108 SCHEDULE 13D Page 9 of 22 Pages
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legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms.
4.2 Non-Contravention. To the best of Borrower's knowledge and belief,
the execution and delivery by Borrower of the Operative Documents
executed by Borrower and the performance and consummation of the
transactions contemplated thereby do not and will not (i) violate any
Requirement of Law applicable to Borrower; (ii) violate any provision
of, or result in the breach or the acceleration of, or entitle any
other Person to accelerate (whether after the giving of notice or
lapse of time or both), any Contractual Obligation of Borrower; or
(iii) result in the creation or imposition of any Lien upon any
property, asset or revenue of Borrower (except such Liens as may be
created in favor of Lender pursuant to this Agreement or the other
Operative Documents).
4.3 Approvals. Broker knows of no consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Authority or other Person (including, without limitation,
the shareholders of any Person) required in connection with the
execution and delivery of the Operative Documents executed by Borrower
and the performance and consummation of the transactions contemplated
thereby, other than those which may be required by existing lenders..
4.4 Name: Places of Residence The name of Borrower set forth in this
Agreement is his correct name. The addresses set forth on Schedule II
are all of each of the Borrowers residential addresses. Borrower will
give Lender at least 15 days prior written notice before locating any
of the Additional Collateral at any other location.
4.5 Litigation. No actions (including, without limitation, derivative
actions), suits, proceedings or investigations are pending or, to the
knowledge of Borrower, threatened against Borrower or Borrower's
Subsidiaries at law or in equity in any court or before any other
Governmental Authority which if adversely determined (i) could
reasonably be expected (alone or in the aggregate) to result in a
judgement of $100,000 or more or (ii) seeks to enjoin, either directly
or indirectly, the execution, delivery or performance by Borrower of
the Operative Documents or the transactions contemplated thereby.
4.6 Title. Borrower has good and marketable title to all Collateral,
free and clear of all Liens, other than Permitted Liens. Each item of
Additional Collateral constitutes real property.
4.7 Collateral. Lender has and will at all times continue to have a
first-priority perfected security interest in all of the Collateral.
Borrower will immediately advise Lender in writing of any material
loss or damage to any of the Additional Collateral listed on Schedule
I hereto.
4.8 Taxes: Compliance with Law. Borrower has filed, and will file,
when due, all tax returns and reports required by applicable law, and
Borrower has paid, and will pay, when due, all
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CUSIP No. 46114Q108 SCHEDULE 13D Page 10 of 22 Pages
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taxes, assessments, deposits and contributions now or in the future
owed by Borrower. Borrower has complied, and will comply, in all
material respects, with all applicable tax laws, rules and
regulations.
4.9 Insurance. Borrower will at all times adequately insure all of the
Additional Collateral and name Lender as an additional insured
thereon.
4.10 Indebtedness. Borrower has set forth all of his indebtedness in
excess of $50,000 on Schedule III hereto.
5. No Call on Demand Note; Prepayment Obligations. Except as set for in this
Section 5, or unless an Event of Default has occurred the Lender will not demand
payment under the Loan until October 11, 2003; which date shall be reduced to
October 11, 2001; if on or before April 11, 2001 InterWorld Corporation does not
effect a merger transaction with Lender. Notwithstanding the foregoing, and only
for so long as any balance shall remain outstanding on the Loan, Borrower shall
be required to make the following payments of principal under the Note in order
to reduce any outstanding balance remaining under the Loan: (a) Upon the sale of
any of the Stock Collateral (which sale or sales the Borrower may effectuate at
his sole discretion), all Net Proceeds (defined below) shall be paid to Lender
(b) Upon the sale of any of the Additional Collateral, all Net Proceeds shall be
paid to Lender; other than payment due to any taxing authority. Commencing
October 11, 2001 the Borrower shall make principal payments of at least $500,000
on or before the date of each interest Accrual Date commencing December 31,
2001. If for any period of ten (10) consecutive trading days the closing price
of the Stock Collateral is greater than $20.00 (subject to adjustment for stock
splits, stock dividends or the like), then the Borrower shall make principal
payments of $4,000,000 on or before the date of each Interest Accrual Date
thereafter. "Net Proceeds" shall mean the gross amount received from such sale
less any sales commissions less any income taxes applicable to such sales.
6. Call Agreement. As consideration for the purchase of the Loan and the
forbearance described herein, Borrower shall enter into a call agreement with
the Lender in the form attached hereto as Exhibit A.
7. Voting. For so long as the Loan shall be outstanding, Borrower agrees that
due to the highly leveraged nature of the Loan, prior to any vote of the
stockholders of Interworld Corporation he shall consult with Lender and obtain
Lender's view with respect to such vote. In the event the Board of Directors of
InterWorld Corporation approves a merger of the Lender with InterWorld
Corporation on or before April 10, 2001, Borrower will execute an appropriate
voting agreement pursuant to which he will agree to vote his stock in favor of
such merger.
8. Events of Default
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CUSIP No. 46114Q108 SCHEDULE 13D Page 11 of 22 Pages
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8.1 Events of Default and Remedies. The occurrence of any of the
following events shall constitute an "Event of Default" under this
Agreement: (a) Any material representation, statement, report or
certificate given to Lender by Borrower, now or in the future, is
untrue or misleading in a material respect; or (b) Borrower fails to
comply with the payments due under Section 2 above; or (c) Borrower
fails to pay when due any Loan or any interest thereon or any other
monetary Obligation; or (d) appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by or
against Borrower under any reorganization, bankruptcy, insolvency, law
or statute of any jurisdiction, now or in the future in effect; or (e)
Borrower leaves his position with InterWorld Corporation for any
reason; or (f) the for any period of ten (10) consecutive trading days
the closing price of the Stock Collateral is less than $2.00 (subject
to adjustment for stock splits, stock dividends or the like); or
Borrower fails to vote his shares of the Stock Collateral in
compliance with Section 7 herein. If an Event of Default occurs,
Lender, shall have the right to accelerate and declare all of the
Obligations to be immediately due and payable and exercise all rights
and remedies recorded by applicable law, except in the case of (f)
wherein no acceleration may be made until the expiration of a ten (10)
Business Day grace period, and except further in the case of (a) of
(c) Lender must give Borrower written notice of any such Event of
Default whereupon Borrower shall have ten (10) Business Days to cure
such Event of Default.
8.2 Rights of Lender upon Default. Upon the occurrence or existence of
any Event of Default for which notice has been provided and no timely
cure made, and at any time thereafter during the continuance of such
Event of Default, Lender may, by written notice to Borrower, declare
all outstanding Obligations payable by Borrower hereunder to be
immediately due and payable without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Notes to the contrary
notwithstanding. Upon the occurrence or existence of any uncured Event
of Default described in Section 8.1, immediately and without further
notice, all outstanding Obligations payable by Borrower hereunder
shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the
Notes to the contrary notwithstanding.
8.3 Rights Regarding Collateral. Borrower agrees that when any uncured
Event of Default has occurred and is continuing after any applicable
cure or grace period, Lender shall have the rights, options, duties
and remedies of a secured party as permitted by law and, in addition
to and without limiting the foregoing, Lender may exercise any one or
more or all, and in any order, of the remedies herein set forth,
including the following: (a) Lender, personally or by agents or
attorneys, shall have the right (subject to compliance with any
applicable mandatory legal requirements) to require Borrower to
assemble the Additional Collateral and make it available to Lender at
a place to be designated by Lender located within the State of New
York, or to take immediate possession of the Additional Collateral, or
any portion thereof, and for that purpose may pursue the same wherever
it may be found, and may enter any premises of Borrower, with or
without notice, demand,
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CUSIP No. 46114Q108 SCHEDULE 13D Page 12 of 22 Pages
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process of law or legal procedure, to the extent permitted by
applicable law, and search for, take possession of, remove, keep and
store the same, or use and operate or lease the same until sold; (b)
Lender may, if at the time such action may be lawful and always
subject to compliance with any mandatory legal requirements, either
with or without taking possession and either before or after taking
possession, without instituting any legal proceedings whatsoever,
having first given notice of such sale by registered or certified mail
to Borrower once at least ten (10) days prior to the date of such
sale, and having first given any other notice which may be required by
law, sell and dispose of the Additional Collateral, or any part
thereof, at a private sale or at public auction, to the highest
bidder, in one lot as an entirety or in separate lots, and either for
cash or on credit and on such terms as Lender may determine, and at
any place (whether or not it be the location of the Additional
Collateral or any part thereof) designated in the notice referred to
above. To the extent permitted by applicable law, any such sale or
sales may be adjourned from time to time by announcement at the time
and place appointed for such sale or sales, or for any such adjourned
sale or sales, without further published notice, and Borrower, Lender
or the holder or holders of the Note, or of any interest therein, may
bid and become the purchaser at any such sale; and (c) Lender may
proceed to protect and enforce this Agreement and the other Operative
Documents by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant
or agreement herein contained or in execution or aid of any power
herein granted; or for foreclosure hereunder, or for the appointment
of a receiver or receivers for any real property security or any part
thereof, or for the recovery of judgment for the Obligations or for
the enforcement of any other proper, legal or equitable remedy
available under applicable law.
8.4 Waiver by Borrower. Upon the occurrence of an uncured Event of
Default, to the extent permitted by law, Borrower covenants that it
will not at any time insist upon or plead, or in any manner whatsoever
claim or take any benefit or advantage of, any stay or extension law
now or at any time hereafter in force, nor claim, take nor insist upon
any benefit or advantage of or from any law now or hereafter in force
providing for the valuation or appraisement of the Additional
Collateral or any part thereof prior to any sale or sales thereof to
be made pursuant to any provision herein contained, or to the decree,
judgment or order of any court of competent jurisdiction; nor, after
such sale or sales, claim or exercise any right under any statute now
or hereafter made or enacted by any state or otherwise to redeem the
property so sold or any part thereof, and, to the full extent legally
permitted, except as to rights expressly provided herein, hereby
expressly waives for itself and on behalf of each and every Person,
except decree or judgment creditors of Borrower, acquiring any
interest in or title to the Additional Collateral or any part thereof
subsequent to the date of this Agreement, all benefit and advantage of
any such law or laws, and covenants that it will not invoke or utilize
any such law or laws or otherwise hinder, delay or impede the
execution of any power herein granted and delegated to Lender, but
will suffer and permit the execution of every such power as though no
such power, law or laws had been made or enacted.
8.5 Effect of Sale. Any sale, whether under any power of sale
available to Lender or by virtue of judicial proceedings, shall
operate to divest all right, title, interest, claim and demand
142736-5 12
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CUSIP No. 46114Q108 SCHEDULE 13D Page 13 of 22 Pages
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whatsoever, either at law or in equity, of Borrower in and to the
property sold, and shall be a perpetual bar, both at law and in
equity, against Borrower, its successors and assigns, and against any
and all persons claiming the property sold or any part thereof under,
by or through Borrower, its successors or assigns.
8.6 Application of Collateral Proceeds. The proceeds and/or avails of
the Additional Collateral, or any part thereof, and the proceeds and
the avails of any remedy hereunder (as well as any other amounts of
any kind held by Lender at the time of, or received by Lender after,
the occurrence of an uncured Event of Default hereunder) shall be paid
to and applied as follows: (a) First, to the payment of reasonable
costs and expenses, including all amounts expended to preserve the
value of the Additional Collateral, of foreclosure or suit, if any,
and of such sale and the exercise of any other rights or remedies, and
of all proper fees, expenses, liability and advances, including
reasonable legal expenses and attorneys' fees, incurred or made
hereunder by Lender; (b) Second, to the payment to Lender of the
amount then owing or unpaid on the Note, and in case such proceeds
shall be insufficient to pay in full the whole amount so due, owing or
unpaid upon the Note, then first, to the unpaid interest thereon, and
second, to unpaid principal thereof; such application to be made upon
presentation of the Note, and the notation thereon of the payment, if
partially paid, or the surrender and cancellation thereof, if fully
paid; (c) Third, to the payment of other amounts then payable to
Lender under any of the Operative Documents; and (d) Fourth, to the
payment of the surplus, if any, to Borrower, his successors and
assigns, or to whomsoever may be lawfully entitled to receive the
same.
8.7 Reinstatement of Rights. If Lender shall have proceeded to enforce
any right under this Agreement or any other Operative Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason or shall have been
determined adversely, then and in every such case (unless otherwise
ordered by a court of competent jurisdiction), Lender shall be
restored to its former position and rights hereunder with respect to
the property subject to the security interest created under this
Agreement.
9. Preservation of Additional Collateral by Lender. Should Borrower fail or
refuse to make any payment, perform or observe any other covenant, condition or
obligation, or take any other action which Borrower is obligated under any
Operative Document to make, perform, observe, take or do at the time or in the
manner provided in any Operative Document, then at Lender's sole and absolute
discretion, without notice to or demand upon Borrower and without releasing
Borrower from any obligation, covenant or condition in any Operative Document,
Lender may make, perform, observe, take or do the same in such manner and to
such extent as Lender may deem necessary to protect its security interest in or
the value of the Additional Collateral, and Borrower shall be liable to Lender
for all costs and expenses incurred by Lender in connection therewith.
142736-5 13
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CUSIP No. 46114Q108 SCHEDULE 13D Page 14 of 22 Pages
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10. Miscellaneous.
10.1 Modifications, Amendments or Waivers. The provisions of any
Operative Document may be modified, amended or waived only by a
written instrument signed by the parties thereto.
10.2 No Implied Waivers; Cumulative Remedies; Writing Required. No
delay or failure of Lender in exercising any right, power or remedy
hereunder shall affect or operate as a waiver thereof; nor shall any
single or partial exercise thereof or any abandonment or
discontinuance of steps to enforce such a right, power or remedy
preclude any further exercise thereof or of any other right, power or
remedy. The rights and remedies hereunder of Lender are cumulative and
not exclusive of any rights or remedies which it would otherwise have.
Any waiver, permit, consent or approval of any kind or character on
the part of Lender of any breach or default under this Agreement or
any such waiver of any provision or condition of this Agreement must
be in writing and shall be effective only in the specified instance
and to the extent specifically set forth in such writing.
10.3 Expenses; Indemnification. Borrower agrees upon demand to pay or
reimburse Lender for all liabilities, obligations and out-of-pocket
expenses, including reasonable fees and expenses of counsel for
Lender, from time to time arising in connection with the enforcement
or collection of sums due under the Operative Documents. Borrower
shall indemnify, reimburse and hold Lender and its permitted assigns,
each of Lender's or its permitted assigns' partners, and each of their
respective successors, assigns, agents, officers, directors,
shareholders, servants, agents and employees harmless from and against
all liabilities, losses, damages, actions, suits, demands, claims of
any kind and nature (including claims relating to environmental
discharge, cleanup or compliance), all costs and expenses whatsoever
to the extent they may be incurred or suffered by such indemnified
party in connection therewith(including reasonable attorneys' fees and
expenses), fines, penalties (and other charges of applicable
governmental authorities), licensing fees relating to any item of
Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to
Borrower's property), or bodily injury to or death of any person
(including any agent or employee of Borrower) (each, a "Claim"),
directly or indirectly relating to or arising out of the use of the
proceeds of the Loan, including acquisition, use, ownership,
operation, possession, control, storage, return or condition of any
item of Equipment constituting Collateral (regardless of whether such
item of Equipment is at the time in the possession of Borrower), the
falsity of any representation or warranty of Borrower or Borrower's
failure to comply with the terms of this Agreement or any other
Operative Document during the Term. The foregoing indemnity shall
cover, without limitation, (i) any Claim in connection with a design
or other defect (latent or patent) in any item of Equipment
constituting Collateral, (ii) any Claim for infringement of any
patent, copyright, trademark or other intellectual property right,
(iii) any Claim resulting from the presence on or under or the escape,
seepage, leakage, spillage, discharge, emission or release of any
Hazardous Materials from any item of Equipment financed by a Loan or
142736-5 14
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CUSIP No. 46114Q108 SCHEDULE 13D Page 15 of 22 Pages
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constituting Collateral, including any Claims asserted or arising
under any Environmental Law, or (iv) any Claim for negligence or
strict or absolute liability in tort; provided, however, that Borrower
shall not indemnify Lender for any liability incurred by Lender as a
direct and sole result of Lender's gross negligence or willful
misconduct. Such indemnities shall continue in full force and effect,
notwithstanding the expiration or termination of this Agreement. Upon
Lender's written demand, Borrower shall assume and diligently conduct,
at its sole cost and expense, the entire defense of Lender and its
permitted assigns, each of Lender's or its permitted assigns'
partners, and each of their respective successors, assigns, agents,
officers, directors, shareholders, servants, agents and employees
against any indemnified Claim described in this Section 9.3. Borrower
shall not settle or compromise any Claim against or involving Lender
without first obtaining Lender's written consent thereto, which
consent shall not be unreasonably withheld.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR
ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDER UNDER ANY
THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.4 Notices; Payments. All notices and other communications given to
or made upon any party hereto in connection with this Agreement shall
be in writing (including telexed, telecopied or telegraphic
communication) and mailed (by certified or registered mail), telexed,
telegraphed, telecopied or delivered to the respective parties, as
follows: Borrower: 395 Hudson Street, 6th Floor, New York, New York
10014, with a copy to Hale & Dorr, 405 Lexington Avenue, New York, New
York 10174, Attention: Peter MacDonald; Lender c/o J Net Partners LLC:
498 Seventh Avenue, New York, New York 10021, Attention: Keith
Meister, with a copy to Greenberg Traurig, LLP, 200 Park Avenue, New
York, New York 10166, Attention: Alan I. Annex, Esq. or in accordance
with any subsequent written direction from either party to the other.
All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case
of delivery by messenger or overnight delivery service, when left at
the appropriate address.
10.5 Severability. If any provision of any Operative Document is held
invalid or unenforceable to any extent or in any application, the
remainder of such Operative Document and all other Operative
Documents, or the application of such provision to different Persons
or circumstances or in different jurisdictions, shall not be affected
thereby.
10.6 Survival. All representations, warranties, covenants and
agreements of Borrower contained herein or made in writing in
connection herewith shall survive the execution and delivery of the
Operative Documents and the granting of security.
10.7 Governing Law. This Agreement, the other Operative Documents and
the rights and obligations of the parties hereto and thereto together
with matters arising in connection therewith,
142736-5 15
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CUSIP No. 46114Q108 SCHEDULE 13D Page 16 of 22 Pages
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shall be governed by and construed and enforced in accordance with the
laws of the State of New York. Any action to enforce this Agreement
against Borrower may be brought in New York or, with regard to
Collateral, may also be brought wherever such Collateral is located.
10.8 Successors and Assigns. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lender,
all future holders of the Note, Borrower and their respective
successors and permitted assigns, except that Borrower may not assign
or transfer its rights hereunder or thereunder or any interest herein
or therein without the prior written consent of Lender.
10.9 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original,
but all such counterparts shall together constitute one and the same
instrument.
10.10 Further Assurances. Borrower will, at its own expense, from time
to time do, execute, acknowledge and deliver all and every further
acts, deeds, conveyances, transfers and assurances, and all financing
and continuation statements and similar notices, reasonably necessary
or proper for the perfection of the security interest being herein
provided for in the Collateral, whether now owned or hereafter
acquired.
10.11 Power of Attorney in Respect of the Collateral. Borrower does
hereby irrevocably appoint Lender (which appointment is coupled with
an interest), the true and lawful attorney-in-fact of Borrower with
full power of substitution, for it and in its name (a) to perform (but
Lender shall not be obligated to and shall incur no liability to
Borrower or any third party for failure to perform)any act which
Borrower is obligated by this Agreement to perform, (b) to ask,
demand, collect, receive, receipt for, sue for, compound and give
acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums in which a
security interest is granted under Section 3.1with full power to
settle, adjust or compromise any claim thereunder as fully as if
Lender were Borrower itself, (c) to receive payment of and to endorse
the name of Borrower to any items of Additional Collateral (including
checks, drafts and other orders for the payment of money) that come
into Lender's possession or under Lender's control, (d) to make all
demands, consents and waivers, or take any other action with respect
to, the Additional Collateral, (e) in Lender's discretion, to file any
claim or take any other action or institute proceedings, either in its
own name or in the name of Borrower or otherwise, which Lender may
reasonably deem necessary or appropriate to protect and preserve the
right, title and interest of Lender in and to the Additional
Collateral, and (f) to otherwise act with respect thereto as though
Lender were the outright owner of the Additional Collateral; provided,
however, that the power of attorney herein granted shall be
exercisable only upon the occurrence and during the continuation of an
Event of Default unless in Lender's reasonable opinion immediate
action is necessary to preserve or protect the Additional Collateral.
Borrower agrees to reimburse Lender upon demand for all reasonable
costs and expenses, including attorneys' fees and expenses, which
Lender may incur while acting as
142736-5 16
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CUSIP No. 46114Q108 SCHEDULE 13D Page 17 of 22 Pages
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Borrower's attorney in fact hereunder, all of which costs and expenses
are included within the Obligations.
10.12 Entire Agreement. This Agreement and each of the other Operative
Documents, taken together, constitute and contain the entire agreement
of Borrower and Lender and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications among
the parties, whether written or oral, respecting the subject matter
hereof.
Borrower:
/s/ Michael J. Donahue
----------------------------
MICHAEL J. DONAHUE
Lender:
JACKPOT ENTERPRISES, INC.
By:_/s/ Mark W. Hobbs
----------------------------
Name: Mark W. Hobbs
Title: President
SCHEDULE I
Farm
13659 South 52nd Place
Wellington, FL 33414
142736-5 17
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CUSIP No. 46114Q108 SCHEDULE 13D Page 18 of 22 Pages
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SCHEDULE II
Home
1000 North Lake Way
Palm Beach, FL 33480
142736-5 18
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CUSIP No. 46114Q108 SCHEDULE 13D Page 19 of 22 Pages
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SCHEDULE III
1999 Tax
$2 million
2000 Tax
$1 million
5 million - Bank of America
2.8 million - Citibank
142736-5 19
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CUSIP No. 46114Q108 SCHEDULE 13D Page 20 of 22 Pages
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EXHIBIT 99.2
------------
CALL/PROFIT PARTICIPATION AGREEMENT
This agreement (the "Agreement") is made as of the 12th day of October,
2000, by and between Michael J. Donahue ("Donahue") and Jackpot Enterprises,
Inc. ("JEI").
WHEREAS, Salomon Smith Barney Inc. ("SSB") is a party to a Loan Agreement,
dated October 13, 1999 (the "Loan Agreement), between SSB and Donahue, pursuant
to which SSB agreed to loan (the "Loan") Donahue, on a demand basis, up to U.S.
$14 million.
WHEREAS, as of the date hereof $12,445,500, remains outstanding under the
Loan.
WHEREAS, the Loan is presently secured by 4,270,406 shares of common stock
of InterWorld Corporation (the "Stock Collateral") owned of record and
beneficially by Donahue, which security interest has been perfected by SSB by
virtue of SSB's physical possession of the Stock Collateral.
WHEREAS, pursuant to a Loan Assumption and Forbearance Agreement dated as
of the date hereof (the "Loan Assumption Agreement"), JEI and Donahue have
agreed, subject to the terms thereof that JEI would acquire the Loan from SSB in
consideration for the payment of the full amount outstanding under the Loan as
of the date hereof.
NOW, THEREFORE, for good and valuable consideration and intending to be
legally bound hereby, the parties agree as follows:
1. The recitals are hereby made part of and incorporated into this
Agreement.
2. Capitalized terms used herein but not otherwise defined shall have
the meanings set forth in the Loan Assumption Agreement.
3. Prior to the exercise of the Call Option (as defined below), upon
the sale by Donahue of any of the shares of the Stock Collateral,
Donahue shall retain such proceeds and use the proceeds in accordance
with the Loan Assumption Agreement. So long as this applies the
proceeds as provided for in the Loan Assumption Agreement, there shall
be no restriction on Donahue's ability to sell shares of the Stock
Collateral. Once the Loan is repaid in full Donahue shall pay JEI 1/2
of the total amount received upon the sale, after the payment of any
commissions, of any of the remaining Stock Collateral.
4. Commencing upon the date of the repayment of the Loan in full and
ending on October 11, 2003, JEI may exercise a single call (the "Call
Option") pursuant to which Donahue shall sell to JEI and JEI shall
acquire from Donahue one half of the amount of the then outstanding
Stock Collateral for an aggregate consideration of $1.00 In the event
JEI enters into
142736-5 20
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CUSIP No. 46114Q108 SCHEDULE 13D Page 21 of 22 Pages
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an agreement to effect a merger with InterWorld Corporation it may at
its option distribute such Call Option to its stockholders prior to
such merger.
5. This Agreement shall for all purposes be governed by and construed
in accordance with the laws of the State of New York.
6. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected unless the
provision held invalid shall substantially impair the benefits of the
remaining portions of this Agreement.
6. In the event that a dispute arises in connection with this
Agreement the parties agree that the reasonable costs, expenses, and
attorneys fees incurred by the prevailing party shall be paid by the
other party to the dispute.
7. The parties agree that the Call Option has nominal value.
8. All notices, offers, acceptances and consents (collectively,
"Communications") provided for in this Agreement shall be in writing
and shall be given to a party at the address set forth below or at
such other address as such party may hereafter specify in writing:
If to Donahue: C/o InterWorld Corporation
395 Hudson, Street
New York, New York 10014
with a copy to: Hale & Dorr
405 Lexington Avenue
New York, New York 10174
Attention: Peter MacDonald, Esq.
If to JEI: Jackpot Enterprises, Inc.
c/o J Net Partners LLC
498 Seventh Avenue
New York, New York 10021
Attention: Keith Meister
with a copy to: Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
Attention: Alan I. Annex
Such Communication shall be mailed by United States registered or certified
mail, return receipt requested, postage prepaid, deposited in a United States
post office or a depository for the receipt of mail regularly maintained by the
post office or (ii) sent by Federal Express or other nationally recognized
courier that regularly provides proof
142736-5 21
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CUSIP No. 46114Q108 SCHEDULE 13D Page 21 of 22 Pages
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of delivery, or (iii) personally delivered. If mailed by United States mail,
then such Communication shall be deemed to have been received by the addressee
on the third day following the date of such mailing. If delivered by Federal
Express or other courier service, or if personally delivered, then such
Communication shall be deemed to have been given upon the date of such delivery.
9. This Agreement may be signed in counterparts, all of which when
taken together shall constitute one original instrument.
IN WITNESS WHEREOF, JEI and Donahue have executed this Agreement as of the
date first written above.
/s/ Michael J. Donahue
-----------------------------
Michael J. Donahue
Jackpot Enterpises, Inc.
By: /s/ Mark W. Hobbs
-----------------------------
Name: Mark W. Hobbs
Title: President
