Document:

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                                                                    EXHIBIT 10.2

                          SECURITIES PURCHASE AGREEMENT

                  This SECURITIES PURCHASE AGREEMENT, dated as of May 2, 2000
(this "AGREEMENT"), by and between PopMail.com, a Minnesota corporation, with
principal executive offices located at 1331 Corporate Drive, Suite 350, Irving,
TX 75038 (the "COMPANY"), and The Shaar Fund Ltd. ("BUYER").

                  WHEREAS, Buyer desires to purchase from the Company, and the
Company desires to issue and sell to Buyer, upon the terms and subject to the
conditions of this Agreement, (i) 600,000 shares of the Company's Series G 10%
Convertible Redeemable Preferred Stock, par value $.01 per share (collectively,
the "PREFERRED Shares"), and (ii) Common Stock Purchase Warrants in the form
attached hereto as Exhibit A to purchase 500,000 shares of Common Stock (as
defined below) (collectively, the "WARRANTS");

                  WHEREAS, upon the terms and subject to the designations,
preferences and rights set forth in the Company's Certificate of Designation of
Series G 10% Convertible Redeemable Preferred Stock in the form attached hereto
as Exhibit B (the "CERTIFICATE OF DESIGNATION"), the Preferred Shares are
convertible into shares of the Company's common stock, par value $.01 per share
(the "COMMON STOCK"); and

                  WHEREAS, the Warrants, upon the terms and subject to the
conditions specified in the Warrants, will be exercisable for a period of five
years;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:

                  I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS

                  A. TRANSACTION. Buyer hereby agrees to purchase from the
Company, and the Company has offered and hereby agrees to issue and sell to
Buyer in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
the Preferred Shares and the Warrants to purchase 500,000 shares of Common
Stock.

                  B. PURCHASE PRICE; FORM OF PAYMENT. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$4,500,000 (the "PURCHASE PRICE"). Simultaneously with the execution of this
Agreement, Buyer shall pay the Purchase Price by wire transfer of immediately
available funds to the escrow agent (the "ESCROW AGENT") identified in those
certain Escrow Instructions of even date herewith, a copy of which is attached
hereto as Exhibit C (the "ESCROW INSTRUCTIONS"). Simultaneously with the
execution of this Agreement, the Company shall deliver one or more duly
authorized, issued and executed certificates (I/N/O Buyer or, if the Company
otherwise has been notified, I/N/O Buyer's nominee) evidencing the Preferred
Shares and the Warrants which Buyer is purchasing, to the Escrow Agent or its
designated depository. By executing and delivering this Agreement, Buyer

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and the Company each hereby agree to observe the terms and conditions of the
Escrow Instructions, all of which are incorporated herein by reference as if
fully set forth herein.

                  C. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made as set forth in the Escrow Instructions.

                   II. BUYER'S REPRESENTATIONS AND WARRANTIES

                  Buyer represents and warrants to and covenants and agrees with
the Company as follows:

                  A. Buyer is purchasing the Preferred Shares, the Warrants, the
Common Stock issuable upon exercise of the Warrants (the "WARRANT SHARES"), the
Common Stock, if any, issuable in payment of dividends on the Preferred Shares
(the "DIVIDEND SHARES"), and the Common Stock issuable upon conversion or
redemption of the Preferred Shares (the "CONVERSION SHARES" and, collectively
with the Preferred Shares, the Warrants, the Warrant Shares and the Dividend
Shares, the "SECURITIES") for its own account, for investment purposes only and
not with a view towards or in connection with the public sale or distribution
thereof in violation of the Securities Act.

                  B. Buyer is (i) an "ACCREDITED INVESTOR" within the meaning of
Rule 501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.

                  C. Buyer understands that the Securities are being offered and
sold by the Company in reliance on an exemption from the registration
requirements of the Securities Act and equivalent state securities and "blue
sky" laws, and that the Company is relying upon the accuracy of, and Buyer's
compliance with, Buyer's representations, warranties and covenants set forth in
this Agreement to determine the availability of such exemption and the
eligibility of Buyer to purchase the Securities;

                  D. Buyer acknowledges that in making its decision to purchase
the Securities it has been given an opportunity to review the Commission Filings
(as defined in Section III.H. hereof) and to ask questions of and to receive
answers from the Company's executive officers, directors and management
personnel concerning the terms and conditions of the private placement of the
Securities by the Company.

                  E. Buyer understands that the Securities have not been
approved or disapproved by the Securities and Exchange Commission (the
"COMMISSION") or any state securities commission.

                  F. This Agreement has been duly and validly authorized,
executed and delivered by Buyer and is a valid and binding agreement of Buyer
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally

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and except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws.

                  G. Neither Buyer nor its affiliates nor any person acting on
its or their behalf shall enter into, prior to the Closing or at any other time
while any of the Preferred Shares remain outstanding, any put option, short
position or other similar instrument or position with respect to the Common
Stock and neither Buyer nor any of its affiliates nor any person acting on its
or their behalf will use at any time shares of Common Stock acquired pursuant to
this Agreement to settle any put option, short position or other similar
instrument or position that may have been entered into prior to the execution of
this Agreement; provided, however, that nothing in this Section II.F. shall
operate to forbid Buyer or any of its affiliates or any person acting on its or
their behalf from selling, or entering into any other transaction with respect
to, the Common Stock contemporaneously with or following such date and time as
the person or persons in whose name or names the Common Stock delivered at
conversion of Preferred Shares, as provided in the Certificate of Designation,
shall be issuable shall be deemed to have become the holder or holders of record
of the Common Shares represented thereby and all voting and other rights
associated with the beneficial ownership of such Common Shares shall have vested
with such person or persons.

                       III. THE COMPANY'S REPRESENTATIONS

                  The Company represents and warrants to Buyer that:

                  A. CAPITALIZATION.

                     1. The authorized capital stock of the Company consists
     solely of: 100,000,000 shares of capital stock, of which as of March 27,
     2000 (x) 34,422,928 shares of Common Stock, par value $.01 per share, were
     issued and outstanding; (y) 275,000 shares of Series E convertible
     preferred stock, par value $.01 per share, were issued and outstanding; and
     (z) 287,408 shares of Series F 8% convertible preferred stock, par value
     $.01, were issued and outstanding. As of March 27, 2000, the Company had
     outstanding stock options to purchase 1,743,876 shares of Common Stock and
     warrants outstanding to purchase 14,745,997 shares of Common Stock. The
     exercise price for each of such outstanding options and warrants is
     accurately set forth on Schedule III.A.1. hereto.

                     2. The Conversion Shares, the Dividend Shares and the
     Warrant Shares have been duly and validly authorized and reserved for
     issuance by the Company, and when issued by the Company upon conversion of,
     or in lieu of cash dividends on, the Preferred Shares and on exercise of
     the Warrants will be duly and validly issued, fully paid and nonassessable
     and will not subject the holder thereof to personal liability by reason of
     being such holder.

                     3. Except as disclosed on Schedule III.A.3. hereto, there
     are no preemptive, subscription, "call," right of first refusal or other
     similar rights to acquire any capital stock of the Company or any of its
     Subsidiaries or other voting securities of the Company that have been
     issued or granted to any person and no other obligations of the Company or
     any of its Subsidiaries to issue, grant, extend or enter into any security,

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     option, warrant, "call," right, commitment, agreement, arrangement or
     undertaking with respect to any of their respective capital stock.

                     4. Schedule III.A.4. hereto lists all the subsidiaries of
     the Company (the "SUBSIDIARIES"). Except as disclosed on Schedule III.A.4.
     hereto, the Company does not own or control, directly or indirectly, any
     interest in any other corporation, partnership, limited liability company,
     unincorporated business organization, association, trust or other business
     entity.

                     5. The Company has delivered to Buyer complete and correct
     copies of the Certificate of Incorporation and the By-Laws of each of the
     Company and the Subsidiaries, in each case as amended to the date of this
     Agreement. Except as set forth on Schedule III.A.5., the Company has
     delivered to Buyer true and complete copies of all minutes of the Board of
     Directors of the Company (the "BOARD OF DIRECTORS") since 1997.

                  B. ORGANIZATION; REPORTING COMPANY STATUS.

                     1. Each of the Company and the Subsidiaries is a
     corporation duly organized, validly existing and in good standing under the
     laws of the state or jurisdiction in which it is incorporated and is duly
     qualified as a foreign corporation in all jurisdictions in which the
     failure so to qualify would reasonably be expected to have a material
     adverse effect on the business, properties, prospects, condition (financial
     or otherwise) or results of operations of the Company and the Subsidiaries
     taken as a whole or on the consummation of any of the transactions
     contemplated by this Agreement (a "MATERIAL ADVERSE EFFECT").

                     2. The Company has registered the Common Stock pursuant to
     Section 12 of the Securities Exchange Act of 1934, as amended (the
     "EXCHANGE ACT"). The Common Stock is listed and traded on the Nasdaq
     SmallCap Market ("NASDAQ") and the Company has not received any notice
     regarding, and to its knowledge there is no threat of, the termination or
     discontinuance of the eligibility of the Common Stock for such listing.

                  C. AUTHORIZATION. The Company has duly and validly authorized
and reserved for issuance shares of Common Stock, in number sufficient for the
conversion of and the payment of dividends (in lieu of cash payments) on the
600,000 Preferred Shares and the exercise of the Warrants in full, such number
of authorized and reserved shares to be at least 19.9% of the total outstanding
shares of Common Stock on the Closing Date, and (ii) at all times from and after
the date hereof shall have a sufficient number of shares of Common Stock duly
and validly authorized and reserved for issuance to satisfy the conversion of
Preferred Shares, the payment of dividends (in lieu of cash payments) on the
Preferred Shares and the exercise of the Warrants in full. The Company
understands and acknowledges the potentially dilutive effect on the Common Stock
of the issuance of the Preferred Shares and of the Conversion Shares, the
Dividend Shares and the Warrant Shares upon the conversion of, and payment of
dividends on, the Preferred Shares and the exercise of the Warrants,
respectively. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred

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Shares and Warrant Shares upon exercise of the Warrants in accordance with this
Agreement, the Certificate of Designation and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company and notwithstanding
the commencement of any case under 11 U.S.C. ss. 101 et seq. (the "BANKRUPTCY
COde"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the conversion of the Preferred
Shares and the exercise of the Warrants. The Company agrees, without cost or
expense to Buyer, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. ss. 362. Schedule III.C. hereto sets forth (i)
all issuances and sales by the Company since January 2, 2000 of its capital
stock, and other securities convertible into or exercisable or exchangeable for
capital stock of the Company, (ii) the amount of such securities sold, including
the amount of any underlying shares of capital stock, (iii) the purchaser
thereof, (iv) the amount paid therefor, and (v) the material terms of all
outstanding capital stock of the Company (other than the Common Stock).

                  D. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has the
requisite corporate power and authority to file, and perform its obligations
under, the Certificate of Designation and to enter into the Documents (as
hereinafter defined) and to perform all of its obligations hereunder and
thereunder (including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the Company of the
Documents and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation with the Minnesota Secretary of State's office, the issuance of
the Preferred Shares and the Warrants and the issuance and reservation for
issuance of the Conversion Shares, the Dividend Shares and the Warrant Shares)
have been duly and validly authorized by all necessary corporate action on the
part of the Company. Each of the Documents has been duly and validly executed
and delivered by the Company and the Certificate of Designation has been duly
filed with the Minnesota Secretary of State's office by the Company, and each
Document constitutes a valid and binding obligation of the Company enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws. The Securities have been duly and
validly authorized for issuance by the Company and, when executed and delivered
by the Company, will be valid and binding obligations of the Company enforceable
against it in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally. For purposes of this
Agreement, the term "DOCUMENTS" means (i) this Agreement; (ii) the Registration
Rights Agreement of even date herewith between the Company and Buyer, a copy of
which is annexed hereto as Exhibit D (the "REGISTRATION RIGHTS AGREEMENT");
(iii) the Certificate of Designation; (iv) the Warrants; and (v) the Escrow
Instructions.

                  E. VALIDITY OF ISSUANCE OF THE SECURITIES. The Preferred
Shares and the Warrants as of the Closing Date, AND the Conversion Shares, the
Dividend Shares and the Warrant Shares upon their issuance in accordance with
the Certificate of Designation and the Warrants, respectively, will be validly
issued and outstanding, fully paid and nonassessable, and

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not subject to any preemptive rights, rights of first refusal, tag-along rights,
drag-along rights or other similar rights.

                  F. NON-CONTRAVENTION. Except as set forth on Schedule III.F.,
the execution and delivery by the Company of the Documents, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby, including, without limitation, the filing of
the Certificate of Designation with the Minnesota Secretary of State's office,
do not, and compliance with the provisions of this Agreement and other Documents
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any Lien (as defined in
Section III.V.) upon any of the properties or assets of the Company or any of
its Subsidiaries under, or result in the termination of, or require that any
consent be obtained or any notice be given with respect to, (i) the Certificate
of Incorporation or By-Laws of the Company or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or permit applicable to the Company or any of its Subsidiaries or
their respective properties or assets, or (iii) any Law (as defined in Section
III.N.) applicable to, or any judgment, decree or order of any court or
government body having jurisdiction over, the Company or any of its Subsidiaries
or any of their respective properties or assets.

                  G. APPROVALS. No authorization, approval or consent of any
court or public or governmental authority is required to be obtained by the
Company for the issuance and sale of the Preferred Shares or the Warrants (or
the Conversion Shares, the Dividend Shares or Warrant Shares) to Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents as have been obtained by the Company prior to the date hereof.

                  H. COMMISSION FILINGS. The Company has properly and timely
filed with the Commission all reports, proxy statements, forms and other
documents required to be filed with the Commission under the Securities Act and
the Exchange Act since November 3, 1997, (the "COMMISSION FILINGS"). As of their
respective dates, (i) the Commission Filings complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the Commission promulgated thereunder
applicable to such Commission Filings, and (ii) none of the Commission Filings
contained at the time of its filing any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the Commission Filings, as of the dates of such documents, were true and
complete in all material respects and complied with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") (except in the case of unaudited
statements permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented the consolidated financial position of the
Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments that
in the aggregate are not material and to any other adjustment described
therein).

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                  I. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date
(as defined in Section III.M.), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company and the Subsidiaries, there has not existed any
condition having or reasonably likely to have a Material Adverse Effect, and the
Company and the Subsidiaries have conducted their respective businesses only in
the ordinary course.

                  J. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic or industry conditions known to the public
generally) that has not been fully disclosed in writing to Buyer that (i)
reasonably could be expected to have a Material Adverse Effect or (ii)
reasonably could be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to the Documents.

                  K. ABSENCE OF LITIGATION. Except as set forth on Schedule
III.K., there are (i) no suits, actions or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, (ii) no complaints, lawsuits, charges or other proceedings pending
or, to the knowledge of the Company, threatened in any forum by or on behalf of
any present or former employee of the Company or any of its Subsidiaries, any
applicant for employment or classes of the foregoing alleging breach of any
express or implied contract of employment, any applicable law governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship, and (iii) no
judgments, decrees, injunctions or orders of any court or other governmental
entity or arbitrator outstanding against the Company or any Subsidiary.

                  L. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
Schedule III.L., no "EVENT OF DEFAULT" (as defined in any agreement or
instrument to which the Company is a party) and no event which, with notice,
lapse of time or both, would constitute an Event of Default (as so defined), has
occurred and is continuing.

                  M. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The
Company has delivered to Buyer true and complete copies of the (i) audited
balance sheet of the Company and the Subsidiaries as at January 2, 2000, January
2, 1999 and January 2, 1998, respectively, and the related audited statements of
income, changes in stockholders' equity and cash flows for the three fiscal
years ended January 2, 2000, January 2, 1999 and January 2, 1998 including the
related notes and schedules thereto and (ii) unaudited balance sheets of the
Company and the Subsidiaries and the statements of income, changes in
stockholders' equity and cash flows as at the end of and for each fiscal quarter
ended since April 2, 2000 including the related notes and schedules thereto, all
certified by the chief financial officer of the Company (collectively, the
"FINANCIAL STATEMENTS"), and all management letters, if any, from the Company's
independent auditors relating to the dates and periods covered by the Financial
Statements. Each of the Financial Statements is complete and correct in all
material respects, has been prepared in accordance with GAAP (subject, in the
case of the interim Financial Statements, to normal year end adjustments and the
absence of footnotes), and fairly presents the financial position, results of
operations and cash flows of the Company as at the dates and for the periods
indicated. For purposes hereof, the audited balance sheet of the Company as at
January 2, 2000 is hereinafter referred to as the "BALANCE SHEET" and January 2,
2000 is hereinafter referred to as the "BALANCE SHEET DATE". The Company has no
indebtedness, obligations or liabilities of any kind (whether

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accrued, absolute, contingent or otherwise, and whether due or to become due),
which was not fully reflected in, reserved against or otherwise described in the
Balance Sheet or the notes thereto or incurred in the ordinary course of
business consistent with the Company's past practices since the Balance Sheet
Date.

                  N. COMPLIANCE WITH LAWS; PERMITS. Each of the Company and its
Subsidiaries is in compliance with all laws, rules, regulations, codes,
ordinances and statutes (collectively, "LAWS") applicable to it or to the
conduct of its business. The Company possesses all material permits, approvals,
authorizations, licenses, certificates and consents from all public and
governmental authorities which are necessary to conduct its business.

                  O. RELATED PARTY TRANSACTIONS. Except as set forth on Schedule
III.O. hereto, neither the Company nor any of its officers, directors or
"AFFILIATES" (as such term is defined in Rule 12b-2 under the Exchange Act) nor
any family member of any officer, director or Affiliate of the Company has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company or any of the Subsidiaries. Except as set forth on
Schedule III.O. hereto, neither the Company nor any of its officers, directors
or Affiliates nor any family member of any officer, director or Affiliate of the
Company (i) owns any direct or indirect interest constituting more than a 1%
equity (or similar profit participation) interest in, or controls or is a
director, officer, partner, member or employee of, or consultant or lender to or
borrower from, or has the right to participate in the profits of, any person or
entity which is (x) a competitor, supplier, customer, landlord, tenant, creditor
or debtor of the Company or any Subsidiary, (y) engaged in a business related to
the business of the Company or any Subsidiary, or (z) a participant in any
transaction to which the Company or any Subsidiary is a party or (ii) is a party
to any contract, agreement, commitment or other arrangement with the Company or
any Subsidiary.

                  P. INSURANCE. Each of the Company and the Subsidiaries
maintains property and casualty, general liability, workers' compensation,
environmental hazard, personal injury and other similar types of insurance with
financially sound and reputable insurers that is adequate and consistent with
industry standards and the Company's historical claims experience. None of the
Company or the Subsidiaries has received notice from, and none of them has
knowledge of any threat by, any insurer (that has issued any insurance policy to
the Company or any Subsidiary) that such insurer intends to deny coverage under
or cancel, discontinue or not renew any insurance policy presently in force.

                  Q. SECURITIES LAW MATTERS. Assuming the accuracy of the
representations and warranties of Buyer set forth in Article II hereof, the
offer and sale by the Company of the Securities is exempt from (i) the
registration and prospectus delivery requirements of the Securities Act and the
rules and regulations of the Commission thereunder and (ii) the registration
and/or qualification provisions of all applicable state securities and "blue
sky" laws. Other than pursuant to an effective registration statement under the
Securities Act, the Company has not issued, offered or sold the Preferred Shares
or any shares of Common Stock (including for this purpose any securities of the
same or a similar class as the Preferred Shares or Common Stock, or any
securities convertible into or exchangeable or exercisable for the Preferred
Shares or Common Stock or any such other securities) within the one-year period
next preceding the date hereof, except as disclosed on Schedule III.Q. hereto,
and the Company shall not directly or

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indirectly take, and shall not permit any of its directors, officers or
Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of the Preferred Shares
or shares of Common Stock) which will make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Buyer of the Preferred Shares and the Warrants (and the Conversion
Shares, the Dividend Shares and the Warrant Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has been used or
authorized by the Company or any of its officers, directors or Affiliates in
connection with the offer or sale of the Preferred Shares and the Warrants (and
the Conversion Shares, the Dividend Shares and the Warrant Shares) as
contemplated by this Agreement or any other agreement to which the Company is a
party.

                  R. ENVIRONMENTAL MATTERS.

                  Except as set forth on Schedule III.R. hereto:

                     1. The Company, the Subsidiaries and their respective
     operations are in compliance with all applicable Environmental Laws and all
     permits (including terms, conditions, and limitations therein) issued
     pursuant to Environmental Laws or otherwise;

                     2. Each of the Company and the Subsidiaries has all
     permits, licenses, waivers, exceptions, and exemptions required under all
     applicable Environmental Laws necessary to operate its business;

                     3. None of the Company or the Subsidiaries is the subject
     of any outstanding written order of or agreement with any governmental
     authority or person respecting (i) Environmental Laws or permits, (ii)
     Remedial Action or (iii) any Release or threatened Release of Hazardous
     Materials;

                     4. None of the Company or the Subsidiaries has received any
     written communication alleging that it may be in violation of any
     Environmental Law or any permit issued pursuant to any Environmental Law,
     or may have any liability under any Environmental Law;

                     5. None of the Company or the Subsidiaries has any
     liability, contingent or otherwise, in connection with any presence,
     treatment, storage, disposal or Release of any Hazardous Materials whether
     on property owned or operated by the Company or any Subsidiary or property
     of third parties, and none of the Company or the Subsidiaries has
     transported, or arranged for transportation of, any Hazardous Materials for
     treatment or disposal on any property;

                     6. There are no investigations of the business, operations,
     or currently or previously owned, operated or leased property of the
     Company or any Subsidiary pending or threatened which could lead to the
     imposition of any case or liability pursuant to any Environmental Law;

                     7. There is not located at any of the properties owned or
     operated by the Company or any Subsidiary any (A) underground storage
     tanks, (B) asbestos-containing material or (C) equipment containing
     polychlorinated biphenyls;

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                     8. Each of the Company and the Subsidiaries has provided to
     Buyer all environmentally related assessments, audits, studies, reports,
     analyses, and results of investigations that have been performed with
     respect to the currently or previously owned, leased or operated properties
     or activities of the Company and such Subsidiaries;

                     9. There are no liens arising under or pursuant to any
     Environmental Law on any real property owned, operated, or leased by the
     Company or any Subsidiary, and no action of any governmental authority has
     been taken or, to the knowledge of the Company, is in process of being
     taken which could subject any of such properties to such liens, and none of
     the Company or the Subsidiaries has been or is expected to be required to
     place any notice or restriction relating to the presence of Hazardous
     Material at any real property owned, operated, or leased by it in any deed
     to such property;

                     10. Neither the Company nor any of the Subsidiaries owns,
     operates, or leases any hazardous waste generation, treatment, storage, or
     disposal facility, as such terms are used pursuant to the RCRA and related
     or analogous state, local, or foreign law. None of the properties owned,
     operated, or leased by the Company, any of the Subsidiaries or any
     predecessor thereof are now, or were in the past, used in any part as a
     dump, landfill, or disposal site, and neither the Company, any of the
     Subsidiaries nor any predecessor of any of them has filled any wetlands;

                     11. The purchase that is the subject of this Agreement will
     not require any governmental approvals under Environmental Laws, including
     those that are triggered by sales or transfers of businesses or real
     property, including, as examples and without limitation, the New Jersey
     Industrial Site Recovery Act, N.J. Stat. 13:1K-7 et seq., and the
     Connecticut Transfer of Establishments Act, Conn. Gen. Stat. ss. 22a-134 et
     seq.;

                     12. There is no currently existing requirement or
     requirement to be imposed in the future by any Environmental Law or
     Environmental Permit which could result in the incurrence of a cost that
     could be reasonably expected to have a Material Adverse Effect; and

                     13. Each of the Company and each of the Subsidiaries has
     disclosed to Buyer all other acts or conditions that could result in any
     costs or liabilities under Environmental Laws.

                  For purposes of this Section III.R.:

                  "ENVIRONMENTAL LAW" means any foreign, federal, state or local
statute, regulation, ordinance, or common law as now or hereafter in effect in
any way relating to the protection of human health, safety or welfare or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Occupational Safety and Health Act, and
the regulations promulgated pursuant to any of them;

                                      -10-
<PAGE>   11

                  "HAZARDOUS MATERIAL" means any substance that is listed,
classified or regulated pursuant to any Environmental Law, including petroleum,
gasoline, and any other petroleum product, by-product, fraction or derivative,
asbestos or asbestos-containing material, lead-containing paint, water, or
plumbing, polychlorinated biphenyls, radioactive materials and radon;

                  "RELEASE" means any placement, release, spill, filtration,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
migration, or leaching to, through, or under the indoor or outdoor environment,
or into, through, under, or out of any property; and

                  "REMEDIAL ACTION" means any action to (x) clean up, remove,
remediate, treat or in any other way address any Hazardous Material; (y) prevent
or contain the Release of any Hazardous Material; or (z) perform studies and
investigations or post-remedial monitoring and care in relation to (x) or (y)
above.

                  S. LABOR MATTERS. Neither the Company nor any of the
Subsidiaries is party to any labor or collective bargaining agreement, and there
are no labor or collective bargaining agreements which pertain to any employees
of the Company or any Subsidiary. No employees of the Company or any of the
Subsidiaries are represented by any labor organization and none of such
employees has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the Company's knowledge, threatened to be brought or
filed, with the National Labor Relations Board or other labor relations
tribunal. There is no organizing activity involving the Company or any
Subsidiary pending or to the Company's knowledge, threatened by any labor
organization or group of employees of the Company or any of the Subsidiaries.
There are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or
(ii) material grievances or other labor disputes pending or, to the knowledge of
the Company, threatened against or involving the Company or any of the
Subsidiaries. There are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of the Company, threatened by or on
behalf of any employee or group of employees of the Company or any of the
Subsidiaries.

                  T. ERISA MATTERS. All Plans maintained by the Company or any
of its Subsidiaries and ERISA Affiliates are listed in Schedule III.T. and
copies of all documentation relating to such Plans (including, but not limited
to, copies of written Plans, written descriptions of oral Plans, summary plan
descriptions, trust agreements, the three most recent annual returns, employee
communications and IRS determination letters) have been delivered to or made
available for review by the Buyer. Each Plan has at all times been maintained
and administered in all material respects in accordance with its terms and the
requirements of applicable law, including ERISA and the Code, and each Plan
intended to qualify under section 401(a) of the Code has at all times since its
adoption been so qualified, and each trust which forms a part of any such plan
has at all times since its adoption been tax-exempt under section 501(a) of the
Code. The Company and each of its Subsidiaries and ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any of its Subsidiaries and ERISA Affiliates was required to file a
report with the PBGC, and the present value of all liabilities under each
Pension Plan (based on those assumptions used to fund such Plans) listed in
Schedule III.T. did not, as of the most recent annual valuation date applicable
thereto, exceed the value of the assets of such Pension Plan. None of the
Company, its Subsidiaries and ERISA Affiliates

                                      -11-
<PAGE>   12

has incurred, or reasonably expects to incur, any Withdrawal Liability with
respect to any Multi-employer Plan that could result in a Material Adverse
Effect. None of the Company, its Subsidiaries and ERISA Affiliates has received
any notification that any Multi-employer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multi-employer Plan
is reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise. No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Company or any of its Subsidiaries under Title IV
of ERISA to any party with respect to any Plan, or with respect to any other
Plan presently or heretofore maintained or contributed to by any ERISA
Affiliate. Neither the Company nor any of its Subsidiaries and ERISA Affiliates
has incurred any liability for any tax imposed under sections 4971 through 4980B
of the Code or civil liability under section 502(i) or (l) of ERISA. No suit,
action or other litigation or any other claim which could reasonably be expected
to result in a material liability or expense to the Company or any of its
Subsidiaries or ERISA Affiliates (excluding claims for benefits incurred in the
ordinary course of plan activities) has been brought or, to the knowledge of the
Company, threatened against or with respect to any Plan and there are no facts
or circumstances known to the Company or any of its Subsidiaries or ERISA
Affiliates that could reasonably be expected to give rise to any such suit,
action or other litigation. All contributions to Plans that were required to be
made under such Plans have been made, and all benefits accrued under any
unfunded Plan have been paid, accrued or otherwise adequately reserved in
accordance with GAAP, all of which accruals under unfunded Plans are as
disclosed in Schedule III.T., and the Company, its Subsidiaries and ERISA
Affiliates have each performed all material obligations required to be performed
under all Plans. The execution, delivery and performance of this Agreement and
the other Documents and the consummation of the transactions contemplated hereby
and thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Buyer, of the Preferred Shares, the Conversion
Shares, the Warrants, the Warrant Shares and Dividend Shares) will not involve
any "prohibited transaction" within the meaning of ERISA or the Code with
respect to any Plan.

                  As used in this Agreement:

                  "CODE" means the Internal Revenue Code of 1986, as amended.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.

                  "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under section
414 of the Code.

                  "MULTI-EMPLOYER PLAN" means a multi-employer plan as defined
in section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate
(other than one considered an ERISA Affiliate only pursuant to subsection (m) or
(o) of section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding six plan years made or accrued
an obligation to make contributions.

                                      -12-
<PAGE>   13

                  "PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.

                  "PENSION PLAN" means any pension plan (other than a
Multi-employer Plan) subject to the provision of Title IV of ERISA or section
412 of the Code that is maintained for employees of the Company or any of its
Subsidiaries, or any ERISA Affiliate.

                  "PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, or whether for the benefit of
a single individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of section 3(3) of ERISA,
including any Pension Plan.

                  "REPORTABLE EVENT" means any reportable event as defined in
section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan.

                  "WITHDRAWAL LIABILITY" means liability to a Multi-employer
Plan as a result of a complete or partial withdrawal from such Multi-employer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

                  U. TAX MATTERS.

                  1. The Company has filed all material Tax Returns which it is
     required to file under applicable Laws; all such Tax Returns are true and
     accurate in all material respects and have been prepared in compliance with
     all applicable Laws; the Company has paid all Taxes due and owing by it
     (whether or not such Taxes are required to be shown on a Tax Return) and
     has withheld and paid over to the appropriate taxing authorities all Taxes
     which it is required to withhold from amounts paid or owing to any
     employee, stockholder, creditor or other third parties; and since the
     Balance Sheet Date, the charges, accruals and reserves for Taxes with
     respect to the Company (including any provisions for deferred income taxes)
     reflected on the books of the Company are adequate to cover any Tax
     liabilities of the Company if its current tax year were treated as ending
     on the date hereof.

                  2. No claim has been made by a taxing authority in a
     jurisdiction where the Company does not file tax returns that the Company
     is or may be subject to taxation by such jurisdiction. There are no
     foreign, federal, state or local tax audits or administrative or judicial
     proceedings pending or being conducted with respect to the Company; no
     information related to Tax matters has been requested by any foreign,
     federal, state or local taxing authority; and, except as disclosed above,
     no written notice indicating an intent to open an audit or other review has
     been received by the Company from any foreign, federal, state or local
     taxing authority. There are no material unresolved questions or claims
     concerning the Company's Tax liability. The Company (A) has not executed or
     entered into a closing agreement pursuant to section 7121 of the

                                      -13-
<PAGE>   14

     Code or any predecessor provision thereof or any similar provision of
     state, local or foreign law; or (B) has not agreed to or is required to
     make any adjustments pursuant to section 481(a) of the Code or any similar
     provision of state, local or foreign law by reason of a change in
     accounting method initiated by the Company or any of its subsidiaries or
     has any knowledge that the IRS has proposed any such adjustment or change
     in accounting method, or has any application pending with any taxing
     authority requesting permission for any changes in accounting methods that
     relate to the business or operations of the Company. The Company has not
     been a United States real property holding corporation within the meaning
     of section 897(c)(2) of the Code during the applicable period specified in
     section 897(c)(1)(A)(ii) of the Code.

                  3. The Company has not made an election under section 341(f)
     of the Code. The Company is not liable for the Taxes of another person that
     is not a subsidiary of the Company under (A) Treas. Reg. Section 1.1502-6
     (or comparable provisions of state, local or foreign law), (B) as a
     transferee or successor, (C) by contract or indemnity or (D) otherwise. The
     Company is not a party to any tax sharing agreement. The Company has not
     made any payments, is not obligated to make payments and is not a party to
     an agreement that could obligate it to make any payments that would not be
     deductible under section 280G of the Code.

                  As used in this Agreement:

                  "IRS" means the United States Internal Revenue Service.

                  "TAX" or "TAXES" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

                  "TAX RETURN" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.

                  V. PROPERTY. Except as set forth on Schedule III.V., each of
the Company and the Subsidiaries has good and marketable title to all of its
assets and properties material to the conduct of its business, free and clear of
any liens, pledges, security interests, claims, encumbrances or other
restrictions of any kind (collectively, "LIENS"). With respect to any assets or
properties it leases, each of the Company and its Subsidiaries holds a valid and
subsisting leasehold interest therein, free and clear of any Liens, is in
compliance, in all material respects, with the terms of the applicable lease,
and enjoys peaceful and undisturbed possession under such lease. All of the
assets and properties of the Company and its Subsidiaries that are material to
the conduct of business as presently conducted or as proposed to be conducted by
it are in good operating condition and repair. The inventory of each of the
Company and its Subsidiaries is in good and marketable condition, does not
include any material quantity of items

                                      -14-
<PAGE>   15

which are obsolete, damaged or slow moving, and is salable (or may be leased) in
the normal course of business as currently conducted by it.

                  W. INTELLECTUAL PROPERTY. The Company owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on Schedule III.W. hereto. Except
as set forth on Schedule III.W, the Company has all right, title and interest in
all of the Intangibles, free and clear of any and all Liens. The Company is not
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed on Schedule III.W. hereto, (i) no claims
have been asserted by any individual, partnership, corporation, unincorporated
organization or association, limited liability company, trust or other entity
(collectively, a "PERSON") contesting the validity, enforceability, use or
ownership of any Intangibles, and the Company has no knowledge of any basis for
such claim, and (ii) neither the Company nor the Subsidiaries has any knowledge
of infringement or misappropriation of the Intangibles by any third party.

                  X. CONTRACTS. All contracts, agreements, notes, instruments,
franchises, leases, licenses, commitments, arrangements or understandings,
written or oral (collectively, "CONTRACTS") which are material to the business
and operations of the Company and the Subsidiaries are in full force and effect
and constitute legal, valid and binding obligations of the Company and the
Subsidiaries and, to the best knowledge of the Company, the other parties
thereto; the Company and the Subsidiaries and, to the best knowledge of the
Company, each other party thereto, have performed in all material respects all
obligations required to be performed by them under the Contracts, and no
material violation or default exists in respect thereof, nor any event that with
notice or lapse of time, or both, would constitute a default thereof, on the
part of the Company and the Subsidiaries or, to the best knowledge of the
Company, any other party thereto; none of the Contracts is currently being
renegotiated; and the validity, effectiveness and continuation of all Contracts
will not be materially adversely affected by the transactions contemplated by
this Agreement.

                  Y. REGISTRATION RIGHTS. Except as set forth on Schedule
III.Y., no Person has, and as of the Closing (as defined in Article VII), no
Person shall have, any demand, "piggy-back" or other rights to cause the Company
to file any registration statement under the Securities Act, relating to any of
its securities or to participate in any such registration statement.

                  Z. DIVIDENDS. The timely payment of dividends on the Preferred
Shares as specified in the Certificate of Designation is not prohibited by the
Certificate of Incorporation or By-Laws of the Company or any agreement,
Contract, document or other undertaking to which the Company or any of the
Subsidiaries is a party.

                  AA. INVESTMENT COMPANY ACT. Neither the Company nor any of the
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT"), nor is the
Company nor any of the

                                      -15-
<PAGE>   16

Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an "investment company" within the meaning of the Investment
Company Act.

                  BB. BUSINESS PLAN. Any business information of the Company
previously submitted to Buyer in any form, including the projections contained
therein, was prepared by the senior management of the Company in good faith and
is based on assumptions that the Company believes are reasonable. The Company is
not aware of any fact or condition that could reasonably be expected to result
in the Company not achieving the results described in such business plan.

                  CC. YEAR 2000 COMPLIANCE. The Company has reviewed its
products, business and operations that could be adversely affected by the risk
that computer applications used by the Company and the Subsidiaries may be
unable to recognize, and properly perform date-sensitive functions involving,
dates prior to and after December 31, 1999 (the "YEAR 2000 PROBLEM"). The
Company believes its internal information and business systems will be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000. In addition, the Company has surveyed those vendors, suppliers and
other third parties (collectively, the "OUTSIDE PARTIES") with which the Company
or any of the Subsidiaries do business and whose failure to adequately address
the Year 2000 Problem could reasonably be expected to adversely affect the
business and operations of the Company or any of the Subsidiaries. Based upon
the aforementioned internal review and surveys of the Outside Parties as of the
date of this Agreement, the Year 2000 Problem has not resulted in, and is not
reasonably expected to have, a Material Adverse Effect.

                  DD. INTERNAL CONTROLS AND PROCEDURES. The Company maintains
accurate books and records and internal accounting controls that provide
reasonable assurance that (i) all transactions to which the Company or each of
the Subsidiaries is a party or by which its properties are bound are executed
with management's authorization; (ii) the reported accountability of the
Company's and the Subsidiaries' assets is compared with existing assets at
regular intervals; (iii) access to the Company's and the Subsidiaries' assets is
permitted only in accordance with management's authorization; and (iv) all
transactions to which any of the Company and the Subsidiaries is a party or by
which its properties are bound are recorded as necessary to permit preparation
of the financial statements of the Company in accordance with GAAP.

                  EE. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of
its Subsidiaries nor any of their respective directors, officers or, to their
respective knowledge, other employees has (i) used any company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment of company funds to any foreign or domestic government official
or employee, (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person with
respect to Company matters.

                  FF. NO MISREPRESENTATION. No representation or warranty of the
Company contained in this Agreement or any of the other Documents, any schedule,
annex or exhibit hereto or thereto or any agreement, instrument or certificate
furnished by the Company to Buyer pursuant to this Agreement contains any untrue
statement of a material fact or omits to state a

                                      -16-
<PAGE>   17

material fact required to be stated therein or necessary to make the statements
therein not misleading.

                  GG. FINDER'S FEE. There is no finder's fee, brokerage
commission or like payment in connection with the transactions contemplated by
this Agreement for which Buyer is liable or responsible.

                   IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS

                  A. RESTRICTIVE LEGEND. Buyer acknowledges and agrees that,
upon issuance pursuant to this Agreement, the Securities (including any
Dividends Shares, Conversion Shares or the Warrant Shares) shall have endorsed
thereon a legend in substantially the following form (and a stop-transfer order
may be placed against transfer of the Preferred Shares, the Warrant Shares and
the Conversion Shares until such legend has been removed):

     "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
     1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
     STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
     THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
     THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
     EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
     TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
     SECURITIES ACT OR SUCH OTHER LAWS."

                  B. FILINGS. The Company shall make all necessary Commission
Filings and "blue sky" filings required to be made by the Company in connection
with the sale of the Securities to Buyer as required by all applicable Laws, and
shall provide a copy thereof to Buyer promptly after such filing.

                  C. REPORTING STATUS. So long as Buyer beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
by it with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.

                  D. USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Securities (net of amounts paid by the Company for Buyer's
out-of-pocket costs and expenses, whether or not accounted for or incurred in
connection with the transactions contemplated by this Agreement (including the
fees and disbursements of Buyer's legal counsel), and finder's fees in
connection with such sale) solely for acquisitions and for general corporate and
working capital purposes.

                  E. LISTING. Except to the extent the Company lists its Common
Stock on The New York Stock Exchange, the Company shall use its best efforts to
maintain its listing of the Common Stock on Nasdaq. If the Common Stock is
delisted from Nasdaq, the Company will use its best efforts to list the Common
Stock on the most liquid national securities exchange or quotation system that
the Common Stock is qualified to be listed on.

                                      -17-
<PAGE>   18

                  F. RESERVED CONVERSION SHARES. The Company at all times from
and after the date hereof shall have such number of shares of Common Stock duly
and validly authorized and reserved for issuance as shall be sufficient for the
conversion in full of, and the payment of dividends on, the Preferred Shares and
the exercise in full of the Warrants such number of authorized and reserved
Shares to be at least 19.9% of the total outstanding Shares of Common Stock on
the Closing Date.

                  G. INFORMATION. Each of the parties hereto acknowledges and
agrees that Buyer shall not be provided with, nor be given access to, any
material non-public information relating to the Company or any of the
Subsidiaries.

                  H. EXEMPTION FROM INVESTMENT COMPANY ACT. The Company shall
conduct its business, and shall cause the Subsidiaries to conduct their
businesses, in such a manner that neither the Company nor any Subsidiary shall
become an "investment company" within the meaning of the Investment Company Act.

                  I. ACCOUNTING AND RESERVES. The Company shall maintain a
standard and uniform system of accounting and shall keep proper books and
records and accounts in which full, true and correct entries shall be made of
its transactions, all in accordance with GAAP applied on a consistent basis
through all periods, and shall set aside on such books for each fiscal year all
such reserves for depreciation, obsolescence, amortization, bad debts and other
purposes in connection with its operations as are required by such principles so
applied.

                  J. TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
of its Subsidiaries shall, directly or indirectly, enter into any transaction or
agreement with any stockholder, officer, director or Affiliate of the Company or
family member of any officer, director or Affiliate of the Company, unless the
transaction or agreement is (i) reviewed and approved by a majority of
Disinterested Directors (as defined below) and (ii) on terms no less favorable
to the Company or the applicable Subsidiary than those obtainable from a
non-affiliated person. A "DISINTERESTED DIRECTOR" shall mean a director of the
Company who is not and has not been an officer or employee of the Company and
who is not a member of the family of, controlled by or under common control
with, any such officer or employee.

                  K. ISSUANCES OF ADDITIONAL CONVERTIBLE PREFERRED SHARES OR
CONVERTIBLE DEBENTURES. So long as Buyer beneficially owns greater than 5% of
the Preferred Shares, the Company shall not issue any additional convertible
preferred stock or convertible debt securities, in each case, convertible into
Common Stock at a floating conversion price, without the prior written consent
of Buyer.

                  L. CERTAIN RESTRICTIONS. So long as any Preferred Shares are
outstanding, no dividends shall be declared or paid or set apart for payment nor
shall any other distribution be declared or made upon Junior Securities (as
defined in the Certificate of Designation), nor shall any Junior Securities be
redeemed, purchased or otherwise acquired (other than a redemption, purchase or
other acquisition of shares of Common Stock made for purposes of an employee
incentive or benefit plan (including a stock option plan) of the Company or any
Subsidiary, for any consideration by the Company, directly or indirectly, nor
shall any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock.

                                      -18-
<PAGE>   19

                         V. TRANSFER AGENT INSTRUCTIONS

                  A. The Company undertakes and agrees that no instruction other
than the instructions referred to in this Article V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement shall be given to its
transfer agent for the Common Stock and that the Conversion Shares, the Dividend
Shares and the Warrant Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement and applicable law. Nothing
contained in this Section V.A. shall affect in any way Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of such
Common Stock. If, at any time, Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of the resale
by Buyer of such Common Stock is not required under the Securities Act and that
the removal of restrictive legends is permitted under applicable law, the
Company shall permit the transfer of such Common Stock and promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without any restrictive legends endorsed thereon.

                  B. Buyer shall have the right to convert the Preferred Shares
by telecopying an executed and completed Notice of Conversion (as defined in the
Certificate of Designation) to the Company. Each date on which a Notice of
Conversion is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date (as defined in the
Certificate of Designation). The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of any Preferred
Shares (together with certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic transfer or otherwise,
within five business days after receipt by the Company of the Notice of
Conversion (the "DELIVERY DATE"). Within 15 days after Buyer delivers the Notice
of Conversion to the Company, Buyer shall deliver to the Company a certificate
or certificates evidencing the Preferred Shares being converted.

                  C. Buyer shall have the right to purchase shares of Common
Stock pursuant to exercise of the Warrants in accordance with its applicable
terms of the Warrants. The last date that the Company may deliver shares of
Common Stock issuable upon any exercise of Warrants is referred to herein as the
"WARRANT DELIVERY DATE."

                  D. The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on the Preferred
Shares or upon the conversion of the Preferred Shares or exercise of the
Warrants beyond the applicable Dividend Payment Due Date (as defined in the
Certificate of Designation), Delivery Date or Warrant Delivery Date could result
in economic loss to Buyer. As compensation to Buyer for such loss (and not as a
penalty), the Company agrees to pay to Buyer for late issuance of Common Stock
issuable in lieu of cash dividends on the Preferred Shares or upon conversion of
the Preferred Shares or exercise of the Warrants in accordance with the
following schedule (where "NO. BUSINESS DAYS" is defined as the number of
business days beyond five days from the Dividend Payment Due Date, the Delivery
Date or the Warrant Delivery Date, as applicable):

                                      -19-
<PAGE>   20
<TABLE>
<CAPTION>

                               COMPENSATION FOR EACH 10 SHARES
                              OF PREFERRED SHARES NOT CONVERTED
                               TIMELY OR 500 SHARES OF COMMON
                                STOCK ISSUABLE IN PAYMENT OF
                                DIVIDENDS OR UPON EXERCISE OF
     NO. BUSINESS DAYS           WARRANTS NOT ISSUED TIMELY
     -----------------        ----------------------------------
<S>                         <C>

           1                               $   25
           2                                   50
           3                                   75
           4                                  100
           5                                  125
           6                                  150
           7                                  175
           8                                  200
           9                                  225
           10                                 250
       more than 10         $250 + $100 for each Business Day
                            Late beyond 10 days
</TABLE>

The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer. In addition to any other remedies which may be
available to Buyer, in the event the Company fails for any reason to deliver
such shares of Common Stock within five business days after the relevant
Dividend Payment Due Date, Delivery Date or Warrant Delivery Date, as
applicable, Buyer shall be entitled to rescind the relevant Notice of Conversion
or exercise of Warrants by delivering a notice to such effect to the Company
whereupon the Company and Buyer shall each be restored to their respective
original positions immediately prior to delivery of such Notice of Conversion on
delivery.

                           VI. DELIVERY INSTRUCTIONS

                  The Securities shall be delivered by the Company to the Escrow
Agent pursuant to Section I.B. hereof on a "delivery-against-payment basis" at
the Closing.

                               VII. CLOSING DATE

                  The date and time (the "CLOSING DATE") of the issuance and
sale of the Preferred Shares and the Warrants (the "CLOSING") shall be the date
hereof or such other date as shall be mutually agreed upon in writing. The
issuance and sale of the Securities shall occur on the Closing Date at the
offices of the Escrow Agent. Notwithstanding anything to the contrary contained
herein, the Escrow Agent shall not be authorized to release to the Company the
Purchase Price or to Buyer the certificate(s) (I/N/O Buyer or I/N/O Buyer's
nominee) evidencing the Securities being purchased by Buyer unless the
conditions set forth in Sections VIII.C. and IX.H.
hereof have been satisfied.

                                      -20-

<PAGE>   21

                 VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS

                  Buyer understands that the Company's obligation to sell the
Securities on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:

                  A. Delivery by Buyer to the Escrow Agent of the Purchase
Price;

                  B. The accuracy on the Closing Date of the representations and
warranties of Buyer contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by Buyer in all material
respects on or before the Closing Date of all covenants and agreements of Buyer
required to be performed by it pursuant to this Agreement on or before the
Closing Date; and

                  C. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement.

                      IX. CONDITIONS TO BUYER'S OBLIGATIONS

                  The Company understands that Buyer's obligation to purchase
the Securities on the Closing Date pursuant to this Agreement is conditioned
upon:

                  A. Delivery by the Company to Buyer of evidence that the
Certificate of Designation has been filed and is effective;

                  B. Delivery by the Company to the Escrow Agent of one or more
certificates (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;

                  C. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date (except for representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
respects on or before the Closing Date of all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or before
the Closing Date, all of which shall be confirmed to Buyer by delivery of the
certificate of the chief executive officer of the Company to that effect;

                  D. Buyer having received an opinion of counsel for the
Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to Buyer as to the matters set forth in Annex A;

                  E. There not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common Stock on Nasdaq, (ii)
the declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or

                                      -21-
<PAGE>   22

indirectly involving the United States or any of its territories, protectorates
or possessions, or (iv) in the case of the foregoing existing at the date of
this Agreement, a material acceleration or worsening thereof;

                  F. There not having occurred any event or development, and
there being in existence no condition, having or which reasonably and
foreseeably could have a Material Adverse Effect;

                  G. The Company shall have delivered to Buyer (as provided in
the Escrow Instructions) reimbursement of Buyer's out-of-pocket costs and
expenses, whether or not accounted for or incurred in connection with the
transactions contemplated by this Agreement (including the fees and
disbursements of Buyer's legal counsel), of $50,000;

                  H. There shall not be in effect any Law, order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement;

                  I. Delivery by the Company of irrevocable instructions to the
Company's transfer agent to reserve such number of shares of Common Stock equal
to 19.9% of the total outstanding shares of Common Stock on the Closing Date for
issuance of the Conversion Shares and the Warrant Shares;

                  J. The Company shall have obtained all consents, approvals or
waivers from governmental authorities and third persons necessary for the
execution, delivery and performance of the Documents and the transactions
contemplated thereby, all without material cost to the Company; and

                  K. Buyer shall have received such additional documents,
certificates, payment, assignments, transfers and other delivers, as it or its
legal counsel may reasonably request and as are customary to effect a closing of
the matters herein contemplated.

                                 X. TERMINATION

                  A. TERMINATION BY MUTUAL WRITTEN CONSENT. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.

                  B. TERMINATION BY THE COMPANY OR BUYER. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on May 22, 2000 (the "LATEST CLOSING DATE");
provided, however, that the right to terminate this Agreement pursuant to this
Section X.B. shall not be available to any party whose failure to fulfill any of
its obligations under this Agreement has been the cause of or has resulted in
the failure of the Closing to occur at or before such time and date; provided,
further, however, that if the Closing shall not have occurred on or prior to the
Latest Closing Date, the Closing may only occur after the Latest Closing Date
with the written consent of Buyer.

                                      -22-
<PAGE>   23

                  C. TERMINATION BY BUYER. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by Buyer at any time prior
to the Closing Date, if (i) the Company shall have failed to comply with any of
its covenants or agreements contained in this Agreement, (ii) there shall have
been a breach by the Company of any representation or warranty made by it in
this Agreement, (iii) there shall have occurred any event or development, or
there shall be in existence any condition, having or reasonably likely to have a
Material Adverse Effect or (iv) the Company shall have failed to satisfy the
conditions provided in Article IX hereof.

                  D. TERMINATION BY THE COMPANY. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by the
Company at any time prior to the Closing Date, if (i) Buyer shall have failed to
comply with any of its covenants or agreements contained in this Agreement or
(ii) there shall have been a breach by Buyer of any representation or warranty
made by it in this Agreement.

                  E. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to this Article X, this Agreement shall thereafter
become void and have no effect, and no party hereto shall have any liability or
obligation to any other party hereto in respect of this Agreement, except that
the provisions of Article XI, this Section X.E and Section X.F shall survive any
such termination; provided, however, that no party shall be released from any
liability hereunder if this Agreement is terminated and the transactions
contemplated hereby abandoned by reason of (i) willful failure of such party to
perform its obligations hereunder or (ii) any misrepresentation made by such
party of any matter set forth herein.

                  F. FEES AND EXPENSES OF TERMINATION. If this Agreement is
terminated for any reason, the Company shall promptly reimburse Buyer for all of
Buyer's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement and the other Documents (including,
without limitation, the fees and disbursements of Buyer's legal counsel).

                         XI. SURVIVAL; INDEMNIFICATION

                       A. The representations, warranties
and covenants made by each of the Company and Buyer in this Agreement, the
annexes, schedules and exhibits hereto and in each instrument, agreement and
certificate entered into and delivered by them pursuant to this Agreement shall
survive the Closing and the consummation of the transactions contemplated
hereby. In the event of a breach or violation of any of such representations,
warranties or covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for such breach or
violation available to it under the provisions of this Agreement or otherwise,
whether at law or in equity, irrespective of any investigation made by or on
behalf of such party on or prior to the Closing Date.

                  B. The Company hereby agrees to indemnify and hold harmless
Buyer, its Affiliates and their respective officers, directors, partners and
members (collectively, the "BUYER INDEMNITEES") from and against any and all
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "LOSSES") and agrees to reimburse Buyer Indemnitees

                                      -23-

<PAGE>   24

for all out of-pocket expenses (including the fees and expenses of legal
counsel), in each case promptly as incurred by Buyer Indemnitees and to the
extent arising out of or in connection with:

                     1. any misrepresentation, omission of fact or breach of any
     of the Company's representations or warranties contained in this Agreement
     or the other Documents, or the annexes, schedules or exhibits hereto or
     thereto or any instrument, agreement or certificate entered into or
     delivered by the Company pursuant to this Agreement or the other Documents;

                     2. any failure by the Company to perform in any material
     respect any of its covenants, agreements, undertakings or obligations set
     forth in this Agreement or the other Documents or any instrument,
     certificate or agreement entered into or delivered by the Company pursuant
     to this Agreement or the other Documents;

                     3. the purchase of the Preferred Shares and the Warrants,
     the conversion of the Preferred Shares and the exercise of the Warrants and
     the consummation of the transactions contemplated by this Agreement and the
     other Documents, the use of any of the proceeds of the Purchase Price by
     the Company, the purchase or ownership of any or all of the Securities, the
     performance by the parties hereto of their respective obligations hereunder
     and under the Documents or any claim, litigation, investigation,
     proceedings or governmental action relating to any of the foregoing,
     whether or not Buyer is a party thereto; or

                     4. resales of the Common Shares by Buyer in the manner and
     as contemplated by this Agreement and the Registration Rights Agreement.

                  C. Buyer hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "COMPANY INDEMNITEES") from and against any and all
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel) in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:

                     1. any misrepresentation, omission of fact or breach of any
     of Buyer's representations or warranties contained in this Agreement or the
     other Documents, or the annexes, schedules or exhibits hereto or thereto or
     any instrument, agreement or certificate entered into or delivered by Buyer
     pursuant to this Agreement or the other Documents; or

                     2. any failure by Buyer to perform in any material respect
     any of its covenants, agreements, undertakings or obligations set forth in
     this Agreement or the other Documents or any instrument, certificate or
     agreement entered into or delivered by Buyer pursuant to this Agreement or
     the other Documents.

                  D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Article XI (an "INDEMNIFIED PARTY") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "CLAIM"), the Indemnified Party
promptly shall notify the party against whom indemnification

                                      -24-
<PAGE>   25

pursuant to this Article XI is being sought (the "INDEMNIFYING PARTY") of the
commencement thereof; but the omission so to notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights or defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the Indemnifying
Party reasonably shall have concluded that representation of the Indemnified
Party and the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such Claim or judgment.

                  E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.

                               XII. GOVERNING LAW

                  This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such state.

                                      -25-
<PAGE>   26

                        XIII. SUBMISSION TO JURISDICTION

                  Each of the parties hereto consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
the other Documents. Each party hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may effectively do so, any defense of an
inconvenient forum or improper venue to the maintenance of such action or
proceeding in any such court and any right of jurisdiction on account of its
place of residence or domicile. Each party hereto irrevocably and
unconditionally consents to the service of any and all process in any such
action or proceeding in such courts by the mailing of copies of such process by
certified or registered airmail at its address specified in Article XIX. Each
party hereto agrees that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.

                           XIV. WAIVER OF JURY TRIAL

                  TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES
HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (I)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

                          XV. COUNTERPARTS; EXECUTION

                  This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.

                                  XVI. HEADINGS

                  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

                                      -26-
<PAGE>   27

                               XVII. SEVERABILITY

                  In the event any one or more of the provisions contained in
this Agreement or in the other Documents should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

           XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS

                  This Agreement and the Documents constitute the entire
agreement among the parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by all parties. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.

                                  XIX. NOTICES

                  Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:

                  A.       if to the Company, to:

                           PopMail.com Inc.
                           1331 Corporate Drive, Suite 350
                           Irving, TX  75038
                           Attention:  Stephen D. King
                           (972) 550-5500
                           (972) 550-5581 (Fax)

                           with a copy to:

                           Maslon Edelman Borman & Brand, LLP
                           3300 Norwest Center
                           Minneapolis, MN  55402
                           Attention:  William M. Mower
                           (612) 672-8358
                           (612) 672-8397

                                  -27-

<PAGE>   28

                  B.       if to Buyer, to:

                           The Shaar Fund Ltd.
                           c/o Levinson Capital Management
                           2 World Trade Center, Suite 1820
                           New York, NY 10048
                           Attention:  Samuel Levinson
                           (212) 432-7711
                           (212) 432-7771 (Fax)

                           with a copy to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, NY 10038
                           Attention:  Dennis J. Block, Esq.
                           (212) 504-5555
                           (212) 504-5557 (Fax)

                  C.       if to the Escrow Agent, to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, NY 10038
                           Attention:  Dennis J. Block, Esq.
                           (212) 504-5555
                           (212) 504-5557 (Fax)

The Company, Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Article XIX.

                              XX. CONFIDENTIALITY

                  Each of the Company and Buyer agrees to keep confidential and
not to disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).

                                      -28-
<PAGE>   29

                                 XXI. ASSIGNMENT

                  This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any Affiliate of Buyer.

                            [SIGNATURE PAGE FOLLOWS.]

                                      -29-
<PAGE>   30

                  IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.

                                POPMAIL.COM INC.

                                By:  s/ Stephen D. King
                                     -------------------------------------------
                                     Name:  Stephen D. King
                                     Title: Chief Executive Officer

                                THE SHAAR FUND LTD.

                                INTERCARRIBEAN SERVICES

                                By:
                                   ---------------------------------------------
                                     Name:
                                     Title:

<PAGE>   31

                  Pursuant to Item 601 of Regulation S-K, the following Exhibits
                  and Schedules have been omitted from this filing. The
                  Registrant will furnish a copy of any omitted Exhibit or
                  Schedule to the Commission upon request.

                  EXHIBIT A    COMMON STOCK PURCHASE WARRANTS

                  EXHIBIT B    CERTIFICATE OF DESIGNATION

                  EXHIBIT C    ESCROW INSTRUCTIONS

                  EXHIBIT D    REGISTRATION RIGHTS AGREEMENT

                  SCHEDULE III.A.1.   EXERCISE PRICES OF OPTIONS AND WARRANTS

                  SCHEDULE III.A.3.   PREEMPTIVE, SUBSCRIPTION, "CALL,"
                                      RIGHT OF FIRST REFUSAL OR SIMILAR RIGHTS

                  SCHEDULE III.A.4.   SUBSIDIARIES

                  SCHEDULE III.A.5.   MINUTES

                  SCHEDULE III.C.     ISSUANCES AND SALES OF SECURITIES

                  SCHEDULE III.F.     CONTRAVENTION

                  SCHEDULE III.K.     LITIGATION

                  SCHEDULE III.L.     EVENTS OF DEFAULT

                  SCHEDULE III.O.     RELATED PARTY TRANSACTIONS

                  SCHEDULE III.Q.     SECURITIES LAW MATTERS

                  SCHEDULE III.R.     ENVIRONMENTAL MATTERS

                  SCHEDULE III.T.     ERISA MATTERS

                  SCHEDULE III.V.     PROPERTY

                  SCHEDULE III.W.     INTELLECTUAL PROPERTY

                  SCHEDULE III.Y.     REGISTRATION RIGHTS

                  ANNEX A             FORM OF OPINION

                                      A-1<PAGE>   1

                                                                    EXHIBIT 10.3

                          REGISTRATION RIGHTS AGREEMENT

                  This REGISTRATION RIGHTS AGREEMENT, dated as of May 2, 2000
(this "AGREEMENT"), by and between PopMail.com Inc., a Minnesota corporation,
with principal executive offices located at 1331 Corporate Drive, Suite 350,
Irving, TX 75038 (the "COMPANY"), and The Shaar Fund Ltd. (the "INITIAL
INVESTOR").

                  WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of May 2, 2000, by and between the
Initial Investor and the Company (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed to issue and sell to the Initial Investor (i) 600,000 shares
of Series G 10% Convertible Preferred Stock, par value $.01 per share (the
"PREFERRED SHARES") which, upon the terms of and subject to the conditions of
the Company's Certificate of Designation of Series G 10% Convertible Preferred
Stock (the "CERTIFICATE OF DESIGNATION"), are convertible into shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK") and (ii)
Common Stock Purchase Warrants (the "WARRANTS") to purchase shares of Common
Stock; and

                  WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide with
respect to the Common Stock issued or issuable in lieu of cash dividend payments
on the Preferred Shares, upon conversion of the Preferred Shares and exercise of
the Warrants certain registration rights under the Securities Act;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:

                  1.       DEFINITIONS

                  (a)      As used in this Agreement, the following terms shall
have the meanings:

                           (i) "AFFILIATE," of any specified Person means any
         other Person who directly, or indirectly through one or more
         intermediaries, is in control of, is controlled by, or is under common
         control with, such specified Person. For purposes of this definition,
         control of a Person means the power, directly or indirectly, to direct
         or cause the direction of the management and policies of such Person
         whether by contract, securities, ownership or otherwise; and the terms
         "CONTROLLING" and "CONTROLLED" have the respective meanings correlative
         to the foregoing.

                           (ii) "CLOSING DATE" means the date and time of the
         issuance and sale of the Preferred Shares and the Warrants.

                           (iii) "COMMISSION" means the Securities and Exchange
         Commission.

                           (iv) "CURRENT MARKET PRICE" on any date of
         determination means the closing bid price of a share of the Common
         Stock on such day as reported on the Nasdaq SmallCap Market ("NASDAQ");
         provided, if such security is not listed or admitted to trading on the
         Nasdaq, as reported on the principal national security exchange or

<PAGE>   2
         quotation system on which such security is quoted or listed or admitted
         to trading, or, if not quoted or listed or admitted to trading on any
         national securities exchange or quotation system, the closing bid price
         of such security on the over-the-counter market on the day in question
         as reported by Bloomberg LP, or a similar generally accepted reporting
         service, as the case may be.

                           (v) "EXCHANGE ACT" means the Securities Exchange Act
         of 1934, as amended, and the rules and regulations of the Commission
         thereunder, or any similar successor statute.

                           (vi) "INVESTOR" means each of the Initial Investors
         and any transferee or assignee of Registrable Securities which agrees
         to become bound by all of the terms and provisions of this Agreement in
         accordance with Section 8 hereof.

                           (vii) "PERSON" means any individual, partnership,
         corporation, limited liability company, joint stock company,
         association, trust, unincorporated organization, or a government or
         agency or political subdivision thereof.

                           (viii) "PROSPECTUS" means the prospectus (including,
         without limitation, any preliminary prospectus and any final prospectus
         filed pursuant to Rule 424(b) under the Securities Act, including any
         prospectus that discloses information previously omitted from a
         prospectus filed as part of an effective registration statement in
         reliance on Rule 430A under the Securities Act) included in the
         Registration Statement, as amended or supplemented by any prospectus
         supplement with respect to the terms of the offering of any portion of
         the Registrable Securities covered by the Registration Statement and by
         all other amendments and supplements to such prospectus, including all
         material incorporated by reference in such prospectus and all documents
         filed after the date of such prospectus by the Company under the
         Exchange Act and incorporated by reference therein.

                           (ix) "PUBLIC OFFERING" means an offer registered with
         the Commission and the appropriate state securities commissions by the
         Company of its Common Stock and made pursuant to the Securities Act.

                           (x) "REGISTRABLE SECURITIES" means the Common Stock
         issued or issuable (i) in lieu of cash dividend payments on the
         Preferred Shares, (ii) upon conversion or redemption of the Preferred
         Shares or (iii) upon exercise of the Warrants; provided, however, a
         share of Common Stock shall cease to be a Registrable Security for
         purposes of this Agreement when it no longer is a Restricted Security.

                           (xi) "REGISTRATION STATEMENT" means a registration
         statement of the Company filed on an appropriate form under the
         Securities Act providing for the registration of, and the sale on a
         continuous or delayed basis by the holders of, all of the Registrable
         Securities pursuant to Rule 415 under the Securities Act, including the
         Prospectus contained therein and forming a part thereof, any amendments
         to such registration statement and supplements to such Prospectus, and
         all exhibits to and other material incorporated by reference in such
         registration statement and Prospectus.

                                       2

<PAGE>   3

                           (xii) "RESTRICTED SECURITY" means any share of Common
         Stock issued or issuable in lieu of cash dividend payments on the
         Preferred Shares, upon conversion or redemption of the Preferred Shares
         or exercise of the Warrants except any such share that (i) has been
         registered pursuant to an effective registration statement under the
         Securities Act and sold in a manner contemplated by the prospectus
         included in such registration statement, (ii) has been transferred in
         compliance with the resale provisions of Rule 144 under the Securities
         Act (or any successor provision thereto) or is transferable pursuant to
         paragraph (k) of Rule 144 under the Securities Act (or any successor
         provision thereto), or (iii) otherwise has been transferred and a new
         share of Common Stock not subject to transfer restrictions under the
         Securities Act has been delivered by or on behalf of the Company.

                           (xiii) "SECURITIES ACT" means the Securities Act of
         1933, as amended, and the rules and regulations of the Commission
         thereunder, or any similar successor statute.

                  (b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.

                  2. REGISTRATION

                  (a) Filing and Effectiveness of Registration Statement. The
Company shall prepare and file with the Commission not later than 60 days after
the Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but in no event later than 150 days after the Closing
Date, assuming for purposes hereof a Conversion Price under the Certificate of
Designation of $1.00 per share. The Company shall promptly (and, in any event,
no more than 24 hours after it receives comments from the Commission), notify
the Buyer when and if it receives any comments from the Commission on the
Registration Statement and promptly forward a copy of such comments, if they are
in writing, to the Buyer. At such time after the filing of the Registration
Statement pursuant to this Section 2(a) as the Commission indicates, either
orally or in writing, that it has no further comments with respect to such
Registration Statement or that it is willing to entertain appropriate requests
for acceleration of effectiveness of such Registration Statement, the Company
shall promptly, and in no event later than two business days after receipt of
such indication from the Commission, request that the effectiveness of such
Registration Statement be accelerated within 48 hours of the Commission's
receipt of such request. The Company shall not include any other securities in
the Registration Statement relating to the offer and sale of the Registrable
Securities. The Company shall notify the Initial Investor by written notice that
such Registration Statement has been declared effective by the Commission within
24 hours of such declaration by the Commission.

                  (b) REGISTRATION DEFAULT. If the Registration Statement
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a), is not (i) filed with the Commission within 60 days after the
Closing Date or (ii) declared effective by the Commission within 150 days after
the Closing Date (either of which, without duplication, an "INITIAL DATE"), then
the Company shall make the payments to the Initial Investor as provided in

                                       3

<PAGE>   4

the next sentence as liquidated damages and not as a penalty. The amount to be
paid by the Company to the Initial Investor shall be determined as of each
Computation Date (as defined below), and such amount shall be equal to 2% (the
"LIQUIDATED DAMAGE RATE") of the Purchase Price (as defined in the Securities
Purchase Agreement) from the Initial Date to the first Computation Date and for
each Computation Date thereafter, calculated on a pro rata basis to the date on
which the Registration Statement is filed with (in the event of an Initial Date
pursuant to clause (i) above) or declared effective by (in the event of an
Initial Date pursuant to clause (ii) above) the Commission (the "PERIODIC
AMOUNT") provided, however, that in no event shall the liquidated damages be
less than $25,000; provided, further, however, that if the Registration
Statement is not declared effective by the Commission within 210 days after the
Initial Date set forth in clause (ii) above, then the Liquidated Damage Rate
shall increase to 3%; provided, further, however, that the Liquidated Damage
Rate shall increase by 1% for each 30 day period after the 210th day after the
Initial Date set forth in clause (ii) above that the Registration Statement is
not declared effective by the Commission. The full Periodic Amount shall be paid
by the Company to the Initial Investor by wire transfer of immediately available
funds within three days after each Computation Date.

                  As used in this Section 2(b), "COMPUTATION DATE" means the
date which is 30 days after the Initial Date and, if the Registration Statement
required to be filed by the Company pursuant to Section 2(a) has not theretofore
been declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.

                  (c) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that
Registration Statement on Form S-3 it shall file all reports and information
required to be filed by it with the Commission in a timely manner and take all
such other action so as to maintain such eligibility for the use of such form.

                  (d) ADDITIONAL REGISTRATION STATEMENT. In the event the
Current Market Price declines to $1.50 per share or less and each time
thereafter that the Current Market Price declines by 10% (each such date, a
"DECLINE DATE"), the Company shall, to the extent required by the Securities Act
(because the additional shares were not covered by the Registration Statement
filed pursuant to Section 2(a)), as reasonably determined by the Initial
Investor, file an additional Registration Statement with the Commission for such
additional number of Registrable Securities as would be issuable upon conversion
of the Preferred Shares and exercise of the Warrants (the "ADDITIONAL
REGISTRABLE SECURITIES") in addition to those previously registered, assuming
(x) with respect to the first Additional Registration Statement, a Conversion
Price of $.50 per share and (y) with respect to each succeeding Additional
Registration Statement, a Conversion Price of 10% less than the Conversion Price
assumed with respect to the immediately preceding Additional Registration
Statement. The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 60 days thereafter. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of such
Additional Registrable Securities.

                                       4

<PAGE>   5

                  If the Additional Registration Statement is not (i) filed with
the Commission within 30 days after the Decline Date or (ii) declared effective
by the Commission within 90 days after the Decline Date (either of which,
without duplication, an "ADDITIONAL REGISTRATION DATE"), then the Company shall
make the payments to the Initial Investor at the Liquidated Damage Rate from the
Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "ADDITIONAL PERIODIC AMOUNT")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 3%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120th day after the Additional Registration Date set forth in clause (ii) above
that the Additional Registration Statement is not declared effective by the
Commission. The full Additional Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.

                  As used in this Section 2(d), "ADDITIONAL COMPUTATION DATE"
means the date which is 30 days after the Additional Registration Date and, if
the Additional Registration Statement required to be filed by the Company
pursuant to this Section 2(d) has not theretofore been declared effective by the
Commission, each date which is 30 days after the previous Additional Computation
Date until such Additional Registration Statement is so declared effective.

                  (e) (i) If the Company proposes to register any of its
warrants, Common Stock or any other shares of common stock of the Company under
the Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other shares of
common stock of the Company issuable upon exercise of employee share options or
in connection with any employee benefit or similar plan of the Company or (C) in
connection with a direct or indirect acquisition by the Company of another
Person or any transaction with respect to which Rule 145 (or any successor
provision) under the Securities Act applies), whether or not for sale for its
own account, it will each such time, give prompt written notice at least 20 days
prior to the anticipated filing date of the registration statement relating to
such registration to each Investor, which notice shall set forth such Investor's
rights under this Section 2(e) and shall offer such Investor the opportunity to
include in such registration statement such number of Registrable Securities as
such Investor may request. Upon the written request of any Investor made within
10 days after the receipt of notice from the Company (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Investor), the Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the Company has been
so requested to register by each Investor, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered; provided,
however, that (A) if such registration involves a Public Offering, each Investor
must sell its Registrable Securities to any underwriters selected by the Company
with the consent of such Investor on the same terms and conditions as apply to
the Company and (B) if, at any time

                                       5

<PAGE>   6

after giving written notice of its intention to register any Registrable
Securities pursuant to this Section 2 and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such Registrable Securities, the
Company shall give written notice to each Investor and, thereupon, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration. The Company's obligations under this Section 2(e) shall
terminate on the date that the registration statement to be filed in accordance
with Section 2(a) is declared effective by the Commission.

                  (ii) If a registration pursuant to this Section 2(e) involves
a Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of shares of Common Stock, Warrants or other shares of
Common Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock or Warrants
(including any other shares of Common Stock or Warrants of the Company) that can
be sold without having an adverse effect on such Public Offering (the "MAXIMUM
OFFERING SIZE"), the Company will include in such registration only such number
of shares of Common Stock or Warrants, as applicable, as does not exceed the
Maximum Offering Size, and the number of shares in the Maximum Offering Size
shall be allocated among the Company, the Investors and any other sellers of
Common Stock or Warrants in such Public Offering ("THIRD-PARTY SELLERS"), first,
pro rata among the Company and any Third-Party Sellers, and second, pro rata
among the Investors, in each case on the basis of the relative number of shares
of Common Stock or Warrants originally proposed to be offered for sale under
such registration by each of the Investors, the Company and the Third-Party
Sellers, as the case may be. If as a result of the proration provisions of this
Section 2(e)(ii), any Investor is not entitled to include all such Registrable
Securities in such registration, such Investor may elect to withdraw its request
to include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated among the
Company, the Investors and any Third Party Seller pro rata on the basis of the
relative number of securities offered for sale under such registration by each
of the Investors, the Company and any such Third Party Sellers before the
exercise of such over-allotment option.

                  3. OBLIGATIONS OF THE COMPANY

                  In connection with the registration of the Registrable
Securities, the Company shall:

                  (a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five years from the date on which the Registration
Statement is first declared effective by the Commission (the "EFFECTIVE TIME")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred

                                       6

<PAGE>   7

in a manner that results in the delivery of new securities not subject to
transfer restrictions under the Securities Act (the "REGISTRATION PERIOD") and
(ii) take all lawful action such that each of (A) the Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing provisions of this Section 3(a), the Company may,
during the Registration Period, suspend the use of the Prospectus for a period
not to exceed 60 days (whether or not consecutive) in any 12-month period if the
Board of Directors of the Company determines in good faith that because of valid
business reasons, including pending mergers or other business combination
transactions, the planned acquisition or divestiture of assets, pending material
corporate developments and similar events, it is in the best interests of the
Company to suspend such use, and prior to or contemporaneously with suspending
such use the Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event giving rise to
such suspension. At the end of any such suspension period, the Company shall
provide the Investors with written notice of the termination of such suspension;

                  (b) During the Registration Period, comply with the provisions
of the Securities Act with respect to the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;

                  (c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide (A)
draft copies thereof to the Investors and reflect in such documents all such
comments as the Investors (and their counsel) reasonably may propose and (B) to
the Investors a copy of the accountant's consent letter to be included in the
filing and (ii) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (A) promptly after the same is prepared and publicly distributed, filed
with the Commission, or received by the Company, one copy of the Registration
Statement, each Prospectus, and each amendment or supplement thereto, and (B)
such number of copies of the Prospectus and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor;

                  (d) (i) Register or qualify the Registrable Securities covered
by the Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions

                                       7

<PAGE>   8

reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (A) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process in any such
jurisdiction;

                  (e) As promptly as practicable after becoming aware of such
event, notify each Investor of the occurrence of any event, as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;

                  (f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;

                  (g) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;

                  (h) Maintain a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;

                  (i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
registration statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Investors reasonably may request and registered in such names as the Investor
may request; and, within three business days after a registration statement
which includes Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to deliver to the
transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such registration statement) an
appropriate instruction and, to the extent necessary, an opinion of such
counsel;

                  (j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;

                                       8

<PAGE>   9

                  (k) Make generally available to its security holders as soon
as practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);

                  (l) In the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;

                  (m) (i) Make reasonably available for inspection by Investors,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;

                  (n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;

                  (o) In connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managers) addressed to
the underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of

                                       9

<PAGE>   10

the opinion and as of the Effective Time of the Registration Statement or most
recent post-effective amendment thereto, as the case may be, the absence from
the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);

                  (p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;

                  (q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and

                  (r) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the rules
and regulations of the National Association of Securities Dealers, Inc. (the
"NASD RULES") (or any successor provision thereto)) of the Company or has a
"CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules (or any
successor provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group or assist
in the distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "QUALIFIED INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 6 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.

                  4. OBLIGATIONS OF THE INVESTORS

                  In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:

                  (a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding

                                       10

<PAGE>   11

itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. As least seven days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor (the "REQUESTED
INFORMATION") if such Investor elects to have any of its Registrable Securities
included in the Registration Statement. If at least two business days prior to
the anticipated filing date the Company has not received the Requested
Information from an Investor (a "NON-RESPONSIVE INVESTOR"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor and have no further obligations to the Non-Responsive
Investor;

                  (b) Each Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities from the Registration Statement; and

                  (c) Each Investor agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section 3(e)
or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.

                  5. EXPENSES OF REGISTRATION

                  All expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company, and
the reasonable fees of one firm of counsel to the holders of a majority in
interest of the Registrable Securities, not to exceed $20,000 per Registration
Statement, shall be borne by the Company.

                  6. INDEMNIFICATION AND CONTRIBUTION

                  (a) The Company shall indemnify and hold harmless each
Investor and each underwriter, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Investor or underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an "INDEMNIFIED PERSON") from
and against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement

                                       11

<PAGE>   12

or an omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, not misleading,
or arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Prospectus or an omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.

                  (b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each
Investor agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers who
sign any Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which the Company or such other persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in light of the circumstances under
which they were made, in the case of the Prospectus), not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein; provided, however, that no
Investor or underwriter shall be liable under this Section 6(b) for any amount
in excess of the net proceeds paid to such Investor or underwriter in respect of
shares sold by it, and (ii) reimburse the Company for any legal or other
expenses incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.

                  (c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "INDEMNIFYING PARTY") of the

                                       12

<PAGE>   13

commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.

                  (d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified

                                       13

<PAGE>   14

Party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the Investors
and any underwriters in this Section 6(d) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.

                  (e) Notwithstanding any other provision of this Section 6, in
no event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.

                  (f) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.

                  7. RULE 144

                  With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Investors to sell securities of
the Company to the public without registration ("RULE 144"), the Company agrees
to use its best efforts to:

                  (a) comply with the provisions of paragraph (c) (1) of Rule
144; and

                  (b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section 13
or 15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.

                  8. ASSIGNMENT

                  The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such Registrable Securities
(or all or any portion of any Preferred Shares or

                                       14

<PAGE>   15

Warrant of the Company which is convertible into such securities) only if: (a)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.

                  9. AMENDMENT AND WAIVER

                  Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Investors who hold a majority-in-interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon each Investor and the Company.

                  10. CHANGES IN COMMON STOCK

                  If, and as often as, there are any changes in the Common Stock
by way of stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed.

                  11. MISCELLANEOUS

                  (a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.

                  (b) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person any
registration rights with respect to any Company securities which are more
favorable to such other Person than those provided in this Agreement, then the
Company forthwith shall grant (by means of an amendment to this Agreement or
otherwise) identical registration rights to all Investors hereunder.

                  (c) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three days after the date of deposit in the United States mails, as
follows:

                                       15

<PAGE>   16

                  (i)      if to the Company, to:

                           PopMail.com Inc.
                           1331 Corporate Drive, Suite 350
                           Irving, TX  75038
                           Attention:  Stephen D. King
                           (972) 550-5500
                           (972) 550-5581(Fax)

                           with a copy to:

                           Maslon Edelman Borman & Brand, LLP
                           3300 Norwest Center
                           Minneapolis, MN  55402
                           Attention:  William M. Mower
                           (612) 672-8358
                           (612) 672-8397

                  (ii)     if to the Initial Investor, to:

                           The Shaar Fund Ltd.,
                           c/o Levinson Capital Management
                           2 World Trade Center, Suite 1820
                           New York, NY  10048
                           Attention:  Samuel Levinson
                           (212) 432-7711
                           (212) 432-7771 (Fax)

                           with a copy to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, NY 10038
                           Attention:  Dennis J. Block, Esq.
                           (212) 504-5555
                           (212) 504-5557 (Fax)

                           (iii) if to any other Investor, at such address as
         such Investor shall have provided in writing to the Company.

The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(c).

                  (d) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

                                       16

<PAGE>   17

                  (e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.

                  (f) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

                  (g) The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.

                  (h) This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, dated as of a date even herewith (the "ESCROW
INSTRUCTIONS"), between the Company, the Initial Investor and Cadwalader,
Wickersham & Taft, the Preferred Shares and the Warrants constitute the entire
agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement, the Securities Purchase
Agreement, the Escrow Instructions, the Certificate of Designation and the
Warrants supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.

                  (i) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.

                                       17

<PAGE>   18

                  (j) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.

                  (k) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.

                  (l) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3, or any delay in such performance
could result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.

                  (m) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto.

                            [SIGNATURE PAGE FOLLOWS.]

                                       18

<PAGE>   19

                  In Witness Whereof, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.

                                       PopMail.com Inc.

                                       By: s/ Stephen D. King
                                          ------------------------------------
                                           Name: Stephen D. King
                                           Title: Chief Executive Officer

                                       The Shaar Fund Ltd.

                                       Intercarribean Services

                                       By:
                                          ------------------------------------
                                           Name:
                                           Title:

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