EXHIBIT 99.2
EXHIBIT B
TO
SECURITIES
PURCHASE
AGREEMENT
On October 12, 2000, Jackpot and Issuer entered into a
Securities Purchase Agreement (the "Purchase Agreement"), which
provides that Jackpot, on the date of the First Closing, will
purchase $14.9 million in aggregate principal amount of Series A
Preferred Stock. The Purchase Agreement further specified that
Jackpot would purchase an additional $5.1 million in aggregate
principal amount of Series A Preferred Stock not later than ten
days following approval under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 (the "Second Closing"). Each share of
Series A Preferred Stock is initially convertible into shares of
Common Stock at a conversion price of $6.25 per share (the
"Conversion Price"), and is subject to adjustment. On the six
month anniversary of the date of the First Closing, the
Conversion Price shall be adjusted, if lower, to 90% of the
average daily closing price of the Issuer's Common Stock for the
six-month period from the date of issuance, but in no event less
than $2.00 per share. Furthermore, on April 12, 2001, Jackpot,
at its sole discretion, shall have the option to require Issuer
to redeem the Series A Preferred Stock for cash at 150% of the
purchase price; provided that such right will expire if the
Issuer consummates a change of control transaction with Jackpot
on or prior to such date.
In connection with the issuance of the Series A Preferred
Stock, Issuer has issued to Jackpot warrants to purchase shares
of Common Stock to equal 19.999% of the current outstanding
shares of Common Stock less the amount of shares issuable upon
the conversion of the Series A Preferred Stock. The exercise
price of the warrants shall be $7.25 per share, payable, at the
option of Jackpot, in cash or warrant shares; provided such
payment shall only be payable in cash to the extent that the
Issuer shall have in effect a valid registration statement. The
exercise price is subject to adjustment under certain
circumstances. The warrants shall be exercisable at any time
until October 12, 2005.
Jackpot intends to discuss a possible second step
transaction with the Issuer; the nature, form and scope of which
has not been presently determined and which may range from
Jackpot increasing its investment in the Issuer in an
undetermined amount to proposing a merger transaction with the
Issuer. No assurance can be given that Jackpot will ever make
such a proposal and Jackpot reserves the right to sell, assign
and otherwise dispose of its interest in the securities of the
Issuer. In connection with the transaction Jackpot agreed that
until April 12, 2001 without the prior consent of the Board of
Directors of the Issuer (excluding any member appointed by the
holders of the Series A Preferred Stock), it would not, alone or
through or with any other person or entity, in any manner: (i)
acquire any additional direct or indirect interest in any
securities of the Issuer; (ii) solicit, make, or in any way
participate in, directly or indirectly, any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
from the Issuer's stockholders, become a "participant" in any
"election contest" (as such terms are defined or used in Rule
14A-11 under the Exchange Act) with respect to the Issuer's Board
of Directors, solicit or execute any written consent in lieu of a
meeting of holders of voting securities except to support the
nominees for directors of the Issuer's Board of Directors or call
or seek to have called any meeting of the Issuer's stockholders
of the other party or seek to advise or influence in any manner
whatever any person or entity with respect to the Issuer; (iii)
make any short sales, enter into any hedging, derivative or
similar transactions regarding the Issuer's securities; or (iv)
publicly announce an intention to do any of the actions
restricted or prohibited under clauses (i) through (iii) above.
In addition, on October 12, 2000 Jackpot entered into a Loan
and Forbearance Agreement with Xxxxxxx Xxxxxxx, Chairman of the
Issuer, pursuant to which Jackpot agreed to purchase from Xxxxxxx
Xxxxx Xxxxxx ("SSB") a loan from SSB to Xx. Xxxxxxx. The loan is
secured by 4,270,406 shares of Common Stock. Pursuant to a
Call/Participation Agreement Xxxxxxx 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. Xx. Xxxxxxx has sole power to vote and dispose of such
shares. However, Xx Xxxxxxx 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, Xx. Xxxxxxx will execute
an appropriate voting agreement pursuant to which he will agree
to vote his stock in favor of such merger.
Except as set forth above or in this Item 4, and Item 5
below, Jackpot has not formulated any plans or proposals which
would result in: (i) the acquisition by any person of additional
securities of the Issuer or the disposition of securities of the
Issuer, (ii) an extraordinary corporate transaction involving the
Issuer or any of its subsidiaries, (iii) a sale or transfer of a
material amount of the assets of the Issuer or any of its
subsidiaries, (iv) any change in the present board of directors
(other than the designation of two additional board members by
Jackpot as a result of its purchase of the Series A Preferred
Stock) or management of the Issuer, (v) any material change in
the Issuer's capitalization or dividend policy, (vi) any other
material change in the Issuer's business or corporate structure,
(vii) any change in the Issuer's charter or bylaws or other
instrument corresponding thereto or other action which may impede
the acquisition of control of the Issuer by any person, (viii)
causing a class of the Issuer's securities to be deregistered or
delisted, (ix) a class of equity securities of the Issuer
becoming eligible for termination of registration or (x) any
action similar to any of those enumerated above.
