SEC Info - Donahue Michael - ‘SC 13D’ on 10/25/00 re: Interworld Corp

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Donahue Michael – ‘SC 13D’ on 10/25/00 re: Interworld Corp

On: Wednesday, 10/25/00, at 4:54pm ET · Accession #: 1060326-0-22 · File #: 5-58131

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/25/00  Donahue Michael                   SC 13D                 1:56K  Interworld Corp                   Interworld Corp

General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC 13D      General Statement of Beneficial Ownership             22     87K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Borrower Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer Identity and Background Interest in Securities of the Issuer Lender Material to Be Filed as Exhibits Purpose of Transaction Source and Amount of Funds or Other Consideration
1	1st Page - Filing Submission
3	Item 2. Identity and Background
"	Item 3. Source and Amount of Funds or Other Consideration
"	Item 4. Purpose of Transaction
"	Item 5. Interest in Securities of the Issuer
4	Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
"	Item 7. Material to Be Filed as Exhibits
17	Borrower
"	Lender

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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
----------------------------
(Title of Class of Securities)

 46114Q108
 ---------
(CUSIP Number)

Michael J. Donahue
395 Hudson Street, 6th Floor
     New York, New York 10014-3669
(212) 301-2500
--------------
 (Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications) 

October 12, 2000
----------------
 (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 |_|.                                                                        

==============================================================================

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
--------------------                                           -----------------
--- --------------------------------------------------------------------------  
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)                                                        
--- --------------------------------------------------------------------------  
  CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
5     2(d) OR 2(e)  |_|                                                       
--- --------------------------------------------------------------------------  
CITIZENSHIP OR PLACE OF ORGANIZATION                                    
6     United States                                                           
------------- --- ------------------------------------------------------------  
SOLE VOTING POWER                       
7       4,295,406                                 
            --- ------------------------------------------------------------
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%                                                                   
--- --------------------------------------------------------------------------  
TYPE OF REPORTING PERSON*                                               
14     IN                                                                       
--- --------------------------------------------------------------------------  
 *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
--------------------                                           -----------------
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
--------------------                                           -----------------

               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
                                                  ----------------------------
                                              Name: Michael J. Donahue

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CUSIP No. 46114Q108               SCHEDULE 13D                Page 5 of 22 Pages
--------------------                                           -----------------
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:
 -----------
     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
--------------------                                           -----------------
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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 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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          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

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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.          

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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

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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,               

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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                       

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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                                        

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 SCHEDULE II

Home                                                                  
1000 North Lake Way                                         
Palm Beach, FL  33480                                       

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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                                          

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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                                           
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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                                       

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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

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘SC 13D’ Filing	Date	First	Last	Other Filings

	10/11/03	10	20
	12/31/01	10
	10/11/01	10
	4/11/01	10
	4/10/01	3	10
	12/31/00	8		10-K, 10-K/A, NT 10-K
Filed on:	10/25/00	4		SC 13G
	10/12/00	1	5	8-K
	10/13/99	5	20
				List all Filings

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Filing Submission 0001060326-00-000022 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Donahue Michael – ‘SC 13D’ on 10/25/00 re: Interworld Corp

On: Wednesday, 10/25/00, at 4:54pm ET · Accession #: 1060326-0-22 · File #: 5-58131

General Statement of Beneficial Ownership — Schedule 13DFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents