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                                                                    EXHIBIT 99.4

                                     [LOGO]
                               World Headquarters
                            1009 Commerce Park Drive
                               Oak Ridge, TN 37830
                              (865) 482-3000- phone
                              (865) 482 -5447 - fax
                                  www.ipix.com


                                  May 14, 2001


Stockholders of Internet Pictures Corporation:


I am pleased to report to you that Internet Pictures Corporation (the "Company")
has entered into a definitive agreement for an investment of up to $30 million
by investors led by Paradigm Capital Partners, LLC and Memphis Angels LLC
(collectively, the "Investors"). The proposed investment is structured into two
separate tranches. In Tranche A, the Investors will purchase up to $10 million
of the Company's 8% Senior Secured Convertible Promissory Notes (the "Notes").
The investors will also receive (i) warrants to purchase a number of shares of
Preferred Stock (as defined) equal to one-half the number of shares of Preferred
Stock into which the Notes may be converted (the "Tranche A Warrants") and (ii)
warrants to purchase up to $20 million of Preferred Stock at the Tranche B
closing (the "Tranche B Warrants" and together with the Tranche A Warrants the
"Warrants"). The Notes are convertible at a fixed conversion price into the
Company's 8% Cumulative Convertible Series B Preferred Stock (the "Preferred
Stock"). Simultaneously with the execution of the definitive agreement, the
Investors purchased $3 million of the Notes, and will purchase the remaining $7
million as soon as certain conditions are met, including compliance with
regulatory matters. In Tranche B, the Company will issue up to $30 million of
the Preferred Stock, $10 million of which will be represented by conversion of
the Notes and $20 million of which will be received upon the exercise of Tranche
B Warrants. The Tranche B closing will occur within five days of the Company's
annual stockholders meeting scheduled for July of 2001. The Preferred Stock is
convertible into Common Stock at a fixed conversion price of $0.25 per common
share subject to customary anti-dilution protections. In addition, upon the
purchase of the entire $10 million of Notes, the Company's board of directors
will decrease to seven members. The Investors will have the power to appoint
four of the seven directors.

Pursuant to Rule 4350(i) of the Nasdaq Marketplace Rules, the Company hereby
notifies you of its intention to consummate the above-mentioned transaction,
whereby it will issue a number of securities to Investors that will be deemed a
"change of control" and may constitute a significant sale, issuance, or
potential issuance of equity securities for less than fair market value under
the Nasdaq National Marketplace Rules, without


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obtaining stockholder approval. In addition, the Company has requested relief
from the voting policy requirements of Rule 4351. Nasdaq Marketplace Rule
4350(i) requires stockholder approval when a significant issuance or potential
issuance of securities will result in a change of control of the issuer or may
be made at less than fair market value. Nasdaq Marketplace Rule 4350(i),
however, provides relief from stockholder approval if a delay in securing
stockholder approval would seriously jeopardize the financial viability of the
enterprise and reliance by the company on the exception is expressly approved by
the Audit Committee of the company. Nasdaq also has the ability to waive the
strict compliance with Rule 4351 in reliance upon SEC Release 34-35121 (the
"Voting Policy Release"). Under the Voting Policy Release, Nasdaq may waive
strict compliance when a company in financial distress has issued preferred
stock with heightened voting protection necessary to protect the interests of
the preferred stock purchasers. In order for the Company to avail itself to the
exception of the rule, it must notify stockholders of the potential transaction
at least ten (10) days prior to consummation of the transaction.

If the Company is delayed in closing this round of financing, it will be forced
to evaluate all of its alternatives, including a liquidation of the Company. In
light of the severity of the current situation, the Company believes that any
delay in securing stockholder approval would seriously jeopardize the Company's
financial viability. In addition, the Company's Audit Committee, after reviewing
the Company's latest annual and quarterly financial statements, has expressly
approved the Company's reliance on the exception from the requirements
concerning stockholder approval.

The financing is necessary in order to maintain the Company's existence and will
play an integral part in its ability to move forward. Set forth below are more
details about the investment.

THE NOTES

The Notes will be senior debt that is secured by substantially all of the assets
of the Company and its subsidiaries. The Company received $3 million under the
Notes on May 14, 2001 and expects to receive the remaining $7 million upon the
occurrence of certain conditions, including the expiration of regulatory notice
periods. The Investors may convert the Notes to Preferred Stock at any time, but
the Notes must be converted at the time of the Tranche B closing. At the time of
conversion, the Investors may either convert all unpaid accrued interest into
shares of Preferred Stock, or receive the interest in cash. The conversion price
is equal to $20.00 per share, as adjusted for stock splits, stock dividends,
recapitalizations, combinations or the like, for a maximum of 500,000 shares of
Preferred Stock. Unless the Notes have been converted, the outstanding principal
amount of the loan, plus interest, shall be due and payable fifteen months from
the date of issuance.


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THE WARRANTS

At the Tranche A closing, investors will receive both Tranche A Warrants and
Tranche B Warrants to purchase Preferred Stock. The Tranche A Warrants will
evidence a right to purchase one half of the number of shares of Preferred Stock
into which the Notes may be converted and will have a five-year exercise period.
Warrants representing 60% of the Tranche A Warrants will have an exercise price
of $20.00, and Warrants representing 40% of the Tranche A Warrants will have an
exercise price of $40.00, in each case subject to weighted-average antidilution
protection.

Tranche B Warrants will be issued at the Tranche A closing to evidence the right
of the Investors to acquire, on a pro rata basis, or transfer the right to
acquire, a maximum of 1 million shares of Preferred Stock issuable pursuant to
the Tranche B closing. Tranche B Warrants may be exercised at any time during
the fifteen-month period following the Tranche A closing, unless the Tranche B
closing is delayed for regulatory/consent reasons, in which case the exercise
period will extend beyond such fifteen-month term to coextend with the period of
time necessary until all such regulatory/consent conditions have been met. The
Tranche B Warrants expire at the same time as the conversion of the Notes to
Preferred Stock. There is no assurance that any Tranche B Warrants will be
exercised. The exercise price will be $20.00, subject to weighted-average
antidilution protection. It is expected that the Tranche B Closing will occur
within five days of the Company's annual meeting of stockholders, which is
expected to be held in July of 2001.

THE PREFERRED STOCK

At the option of the Investors, the Preferred Stock will be convertible in whole
or in part at any time into Common Stock of the Company at a fixed conversion
rate of eighty (80) shares of Common Stock for each share of Preferred Stock.
Shares of Preferred Stock may not be converted if the Company does not have a
sufficient amount of Common Stock authorized to issue upon conversion of such
shares. The holders of the Preferred Stock will vote on all matters presented
for a vote to the holders of Common Stock as if the Preferred Stock were
converted at the then-current conversion rate. If the maximum amount of the
Preferred Stock is issued pursuant to the Notes and Warrants, the holders of the
Preferred Stock will own approximately 67% of the voting power of the Company.
In addition, the holders of Preferred Stock shall be entitled to receive
dividends at the rate of 8% per annum, accruing daily and payable quarterly in
cash or as an accretion to the liquidation preference of the Preferred Stock.
The holders of a majority of the Preferred Stock will have the right to require
the Company to redeem, on or after the fifth anniversary of the Preferred Stock
closing, each outstanding share of Preferred Stock from the holders of the
Preferred Stock for an amount equal to the face value per share of the redeemed
Preferred Stock plus all accrued and unpaid dividends.


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REGISTRATION RIGHTS AND OTHER MATTERS

The Company has committed to file a registration statement covering the public
sale of the common stock underlying the Preferred Stock within 20 days of the
closing of each of the Tranche A and Tranche B rounds and have such registration
statement declared effective. The Company's registration statements must remain
continuously in effect until all underlying securities can be sold within a
90-day period in accordance with Rule 144 under the Securities Act of 1933. The
securities to be sold in the investment have not been registered under the
Securities Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from registration requirements.

At the closing of the purchase and sale of all $10 million of Notes, the
Company's board of directors will be reduced from nine members to seven members,
and the Investors will have the right to direct the appointment of four members.
Upon conversion of the Notes to Preferred Stock, the holders of Series B
Preferred Stock will have the right to elect four of the seven board members in
the future. The appointment right will terminate on the date that less than 25%
of originally issued shares of the Preferred Stock remain outstanding. In
addition, the Compensation Committee of the board will consist of no more than
three directors, two of whom will be directors appointed to the board by the
Investors. All other board committees will consist of no more than three
directors, at least one of whom will be a director appointed to the board by the
Investors.

CONCLUSION

The Company believes that the consummation of the investment described above is
an important step towards our path to profitability. Moreover, the transaction
will allow us to continue to move forward toward our goal of creating
stockholder value. While we have much work ahead of us in order to build
stockholder value, I am very optimistic about the future.

Thank you for your continued support.


                                                 Sincerely,

                                                 INTERNET PICTURES CORPORATION