CYBERSHOP INTERNATIONAL INC, PRE 14A, 1999-04-16

CYBERSHOP INTERNATIONAL INC
PRE 14A, 1999-04-16
COMPUTER PROCESSING & DATA PREPARATION

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CYBERSHOP INTERNATIONAL, INC.
116 Newark Avenue
Jersey City, NY 07302

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 3, 1999

NOTICE IS HEREBY GIVEN to the stockholders of CYBERSHOP
INTERNATIONAL, INC., a Delaware corporation (the "Company"), that the Annual
Meeting of Stockholders (the "Meeting") will be held at the Company's offices at
116 Newark Avenue, Jersey City, NJ 07302 at 10:00 a.m., New York time, on June
3, 1999 for the following purposes:

1. To elect a board of four (4) directors to serve until the next Annual
Meeting of Stockholders and until their respective successors are duly elected
and qualified;

2. To consider and vote upon a proposal to amend the Company's Certificate
of Incorporation (the "Certificate of Incorporation") to increase the total
number of authorized shares of Common Stock, par value $.001 per share ("Common
Stock"), from 25,000,000 shares to 75,000,000 shares;

3. To consider and vote upon a proposal to amend the Certificate of
Incorporation to change the name of the Company from Cybershop International,
Inc. to Cybershop.com, Inc.;

4. To consider and vote upon a proposal to amend the Company's 1998 Stock
Option Plan (the "1998 Option Plan") to increase the total number of shares of
Common Stock available for options to be granted under the 1998 Option Plan from
1,000,000 to 3,000,000;

5. To ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ended December 31, 1999; and

6. To transact such other business as may properly be bought before the
Meeting or any postponement or adjournment thereof.

Only stockholders of the Company of record at the close of business
on April 9, 1999 are entitled to notice of and to vote at the Meeting or any
postponement or adjournment thereof.

A copy of the 1998 Annual Report accompanies this notice.

By Order of the Board of Directors,

Jeffrey S. Tauber
Chairman, Chief Executive Officer
and President

Jersey City, New Jersey
April 29, 1999

RETURN OF PROXIES

A PROXY AND SELF-ADDRESSED ENVELOPE ARE ENCLOSED FOR YOUR USE IF YOU DO
NOT PLAN TO ATTEND THE MEETING IN PERSON. WE URGE EACH STOCKHOLDER WHO IS UNABLE
TO ATTEND THE MEETING TO VOTE BY PROMPTLY SIGNING AND RETURNING HIS OR HER
PROXY, REGARDLESS OF THE NUMBER OF SHARES OF STOCK HELD BY SUCH STOCKHOLDER. ANY
PROXY GIVEN BY A STOCKHOLDER MAY BE REVOKED BY THE STOCKHOLDER AT ANY TIME PRIOR
TO THE VOTING OF THE PROXY.
<PAGE>
CYBERSHOP INTERNATIONAL, INC.
PROXY STATEMENT

GENERAL

The enclosed proxy ("Proxy") is solicited by the Board of Directors (the
"Board") of CYBERSHOP INTERNATIONAL, INC., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held at the
Company's offices at 116 Newark Avenue, Jersey City, New Jersey 07302, on June
3, 1999 at 10:00 a.m., New York time, or at any postponement or adjournment
thereof (the "Meeting.") The matters to be considered and acted upon at the
Meeting are described in the foregoing Notice of Annual Meeting of Stockholders
and this Proxy Statement. This Proxy Statement and the related form of Proxy are
being mailed on or about April 29, 1999 to all of the stockholders of the
Company of record on April 9, 1999. Any Proxy given by a stockholder may be
revoked by the stockholder at any time prior to the voting of the Proxy by
delivering a written notice to the Secretary of the Company, by executing and
delivering a later dated Proxy or by attending the Meeting and voting in person.

The management of the Company knows of no business other than the items
specified in the Notice of Annual Meeting of Stockholders which will be
presented for consideration at the Meeting. If any other matter is properly
presented, it is the intention of the persons named in the enclosed Proxy to
vote in accordance with their best judgment.

SOLICITATION OF PROXIES

The persons named as proxies are Jeffrey S. Tauber, Chief Executive
Officer, President and Chairman of the Board, and Jeffrey Leist, Senior Vice
President, Chief Operating Officer and Chief Financial Officer. Shares
represented at the Meeting by the enclosed Proxy will be voted in the manner
specified by the stockholder. In the absence of such specification, the shares
will be voted FOR (i) the election of each of the four persons nominated by the
Board to serve as directors; FOR (ii) the proposal to amend the Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
25,000,000 to 75,000,000; FOR (iii) the proposal to amend the Certificate of
Incorporation to change the name of the Company from Cypershop International,
Inc. to Cybershop.com, Inc.; FOR (iv) the approval of the amendment to the 1998
Stock Option Plan (the "Plan Amendment"); FOR (v) the ratification of the
selection of Arthur Andersen LLP as the Company's independent public accountants
for the fiscal year ending December 31, 1999; and (vi) in the discretion of the
proxies, on such other business as may properly be brought before the Meeting.
The cost of preparing, assembling and mailing the Proxy, this Proxy Statement
and the other material enclosed will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers and employees of the
Company, without extra remuneration, may solicit proxies personally or by
telephone or other means of communication. The Company may also request
brokerage houses, banking institutions, and other custodians, nominees and
fiduciaries, with respect to shares held of record in their names or in the
names of their nominees, to forward the proxy material to the beneficial owners
of such shares and may reimburse them for their reasonable expenses in
forwarding the proxy material.

VOTING RIGHTS

Only stockholders of record at the close of business on April 9, 1999 (the
"Record Date") will be entitled to notice of and to vote at the Meeting or any
postponement or adjournment thereof. On the Record Date, the issued and
outstanding securities of the Company entitled to vote at the Meeting consisted
of 7,565,047 shares of Common Stock par value $.001 per share ("Common Stock").
There was no other class of voting securities outstanding on the Record Date.
Each outstanding share of Common Stock is entitled to one vote which may be cast
in person or by Proxy duly authorized in writing. No shares have cumulative
voting rights.

The presence in person or by Proxy at the Meeting of the holders of a
majority of the issued and outstanding shares of Common Stock shall constitute a
quorum for the transaction of business. Abstentions and broker non-votes (i.e.
shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners and (ii) the broker or nominee does not have
discretionary authority to vote on a particular matter) are counted as present
in determining whether the quorum requirement is satisfied. If a quorum is
present, the affirmative vote of the holders of a plurality of the shares of
Common Stock cast at the Meeting and entitled to vote will be required to act on
the election of directors. Thus, abstentions and broker non-votes will not be

2
<PAGE>

included in the vote total in the election of directors and will have no effect
on the outcome of the vote. The affirmative vote of the holders of majority of
the issued and outstanding shares of Common Stock will be necessary for the
approval each of the amendments to the Certificate of Incorporation (the
"Amendments"). Abstentions and broker non-votes have the same effect as votes
against the Amendments. The affirmative vote of the holders of a majority of the
shares of Common Stock present at the Meeting and entitled to vote will be
required to act on all other matters properly brought before the Meeting. If a
stockholder abstains on any such matter, the stockholder's shares are considered
present at the Meeting for such matter, but since they are not affirmative votes
for the matter, they will have the same effect as votes against the matter. With
respect to broker non-votes on such matter the shares are not considered
entitled to vote at the Meeting for such matter and they are, therefore, not
counted in respect of such matter. Such broker non-votes have the practical
effect of reducing the number of affirmative votes required to achieve a
majority for such matter by reducing the total number of shares from which the
majority is calculated.

The stockholders vote at the Meeting by casting ballots (in person or by
Proxy) which are tabulated by a person who is appointed by the Board of
Directors before the Meeting to serve as the inspector of election at the
Meeting and who has executed and verified an oath of office.

With regard to the proposals to be acted upon at the Meeting, dissenting
stockholders do not have appraisal rights.

Stockholders who do not expect to attend the Meeting, but wish to have
their shares of stock voted at the Meeting, are urged to complete, sign, date
and return the enclosed Proxy as promptly as possible.

To the best knowledge of the Company, none of the persons who were
executive officers or directors of the Company at any time since January 1,
1998, none of the nominees for election as directors and none of the associates
of any of the foregoing, have any interest in the matters to be acted upon at
the Meeting, other than with reference to their election as directors, and with
reference to options which have been or may be granted to them under the 1998
Option Plan, as proposed to be amended at the Meeting.

SECURITY OWNERSHIP

The following table sets forth certain information as of the Record Date
regarding the share ownership of the Company by (i) each person who is known to
the Company to be the record or beneficial owner of more than five percent (5%)
of the Common Stock; (ii) each director, each person nominated to serve as a
director, and each executive officer who is named in the executive compensation
table described in this Proxy Statement ("Named Executive Officer"); and (iii)
all directors and executive officers as a group.

<TABLE>
<CAPTION>
Amount and Nature Percentage of
of Beneficial Outstanding Shares
Name and Address of Beneficial Owner (1) Ownership (2) Owned (3)
---------------------------------------- ------------- ---------
<S> <C> <C>
Named Executive Officers and Directors

Jeffrey S. Tauber 2,563,878(4) 34%
Gary Finkel (5) 21,667(6) *
Jill Markus 54,817(6) *
Francis O'Connor 21,334(6) *
Linda Wiatrowski 90,334(6) 1.2%
Michael Kempner 3,000(7) *
Robert Matluck 3,000(7)(8) *
Warren Struhl 3,000(7)(9) *

All executive officers and directors as a group (10 persons) 3,161,030(10) 40%
</TABLE>

3
<PAGE>

Beneficial Owners of in Excess of 5% (other than directors and
Named Executive Officers)

<TABLE>
<CAPTION>
<S> <C> <C>
Trustees of General Electric Pension Trust
3003 Summer Street
Stamford, Connecticut 06904-7900 516,022(11) 6.8%

Jane S. Tauber 2,563,878(12) 34%
The Jeffrey S. Tauber Grantor
Retained Annuity Trust 522,424 6.9%
The Jane S. Tauber Grantor
Retained Annuity Trust 522,424 6.9%
</TABLE>

- ----------
* Denotes less than 1%

(1) The address of each beneficial owner identified is c/o Cybershop
International, Inc., 116 Newark Avenue, Jersey City, NJ 07302 except for
(i) Michael Kempner which is The MWW Group, Inc., One Meadowlands Plaza,
East Rutherford, NJ 07073-2137, (ii) Warren Struhl which is c/o
Proteam.com, Inc., 100 Plaza Drive, Secaucus, New Jersey 07094, and (iii)
Robert Matluck which is c/o C.E. Underberg, Towbin, Swiss Bank Tower, 10
East 59th Street, 22nd floor, New York, New York 10022.

(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner on the Record Date of securities that can be acquired by
such person within 60 days from the Record Date upon the exercise of
options or warrants.

(3) Each beneficial owner's percentage ownership is determined by assuming (i)
that options or warrants that are held by such person (but not those held
by any other person) and which are exercisable within 60 days of the
Record Date hereof have been exercised, and (ii) 7,565,047 shares of
Common Stock were outstanding, before any consideration is given to such
options or warrants.

(4) Consists of 759,515 shares held directly, 522,424 shares of Common Stock
in name of The Jeffrey S. Tauber Grantor Retained Annuity Trust, with
Kevin S. Miller and Jane S. Tauber as trustees and 1,281,939 shares of
Common Stock held in the name of Mr. Tauber's wife, Jane, including
522,424 shares held in the name of The Jane S. Tauber Grantor Retained
Annuity Trust, with Kevin S. Miller and Jeffrey S. Tauber as trustees. Mr.
Tauber disclaims beneficial ownership of all of the shares held in the
name of the Jane S. Tauber Grantor Retained Annuity Trust.

(5) Mr. Finkel's employment with the Company ceased effective March 15, 1999.

(6) Represents fully vested stock options.

(7) Represents fully vested director's stock options.

(8) Does not include shares and warrants held by C.E. Unterberg, Towbin (of
which Mr. Matluck is Managing Director, Chief Operating Officer and a 10%
partner) as to which Mr. Matluck disclaims beneficial ownership.

(9) Does not include shares of Common Stock owned by Proteam.com, Inc. Warren
Struhl is a director of Proteam.com, Inc. and owns less than a 10%
interest in such company.

(10) Includes 347,152 shares of Common Stock issuable upon exercise of
currently exercisable options and additional options which will become
exercisable within 60 days after the Record Date.

4
<PAGE>

(11) The information set forth in this table regarding shares beneficially
owned by the Trustees of General Electric Pension Trust is based on a
Schedule 13G filed with the Securities and Exchange Commission on February
16, 1999 and other information furnished to the Company.

(12) Includes 522,424 shares of Common Stock held in the name of The Jane S.
Tauber Grantor Retained Annuity Trust, with Kevin S. Miller and Jeffrey S.
Tauber as trustees, and 1,281,939 shares of Common Stock held in the name
of Jeffrey S. Tauber, Mrs. Tauber's husband, including 522,424 shares held
in the name of The Jeffrey S. Tauber Grantor Retained Annuity Trust with
Kevin S. Miller and Jane S. Tauber as trustees. Jane S. Tauber disclaims
beneficial ownership of all of the shares held in the name of The Jeffrey
S. Tauber Grantor Retained Annuity Trust.

Information contained in this Proxy Statement with regard to stock
ownership was obtained from the Company's stockholders' list, filings with
governmental authorities, or from the named individual nominees, directors and
officers. The persons identified in the foregoing table disclaim beneficial
ownership of shares owned or held in trust for the benefit of members of their
families or entities with which they may be associated.

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

The Board has nominated and proposes as nominees Michael Kempner, Robert
Matluck, Warren Struhl and Jeffrey S. Tauber (all of whom are members of the
present Board of the Company and all of whom have been elected for a term ending
at the Meeting) to serve as directors of the Company until the Company's next
Annual Meeting of Stockholders and until their respective successors have been
elected and qualified or until their earlier resignation or removal. No family
relationship exists among any of the executive officers and directors of the
Company. Messrs. Kempner, Matluck and Struhl are independent directors of the
Company.

Unless otherwise specified, shares represented by proxies will be voted in
favor of the election of all of the nominees, except that, in the event any
nominee should not continue to be available for election, such proxies will be
voted for the election of such persons as the Board may recommend unless the
Board reduces the number of directors. Management does not presently contemplate
that any of the nominees will become unavailable for any reason.

The Board of Directors Recommends a Vote "For" the Election of Each of the
Nominees.

Information Covering Nominees

The following table sets forth the names of the nominees and certain
information with regard to each nominee as of the Record Date.

<TABLE>
<CAPTION>
Principal Occupation or
Name Age Director Since Position with Company Employment, if Different
- ----- ---- --------------- --------------------- ------------------------
<S> <C> <C> <C> <C>
Michael Kempner (1)(2) 41 October 1997 Director President and Chief Executive
Officer, The MWW Group, Inc.

Robert Matluck (3) 38 April 1998 Director Managing Director, C.E.
Unterberg Towbin

Warren Struhl (2)(3) 37 October 1997 Director President and Chief Executive

Jeffrey S. Tauber (1) 37 October 1997 Chairman and Chief Officer, Proteam.com, Inc.
Executive Officer,
President and Director
</TABLE>

5
<PAGE>

(1) Member of Executive Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee

JEFFREY S. TAUBER has been the Chief Executive Officer, President and
Chairman of the Board of the Company since October 1997 and has been Managing
Director of CyberShop, L.L.C. since December 1994. Mr. Tauber was President of
Avanti Linens, a leading U.S. manufacturer of decorative bath towels, from May
1988 to May 1994. In August 1993, Mr. Tauber founded a multi-head embroidery
business that he sold in 1994. Prior to working at Avanti he was a buyer and
divisional Merchandise Manager for Bloomingdale's from February 1984 to May
1988. His areas of responsibility included bed pillows, blankets, sheets,
women's swimwear, and ready-to-wear. In 1987, Mr. Tauber was named Federated
Buyer of the Year. Mr. Tauber received his B.A. in Economics from Washington
University in St. Louis in 1983.

MICHAEL KEMPNER has served as a director of the Company since October
1997. Mr. Kempner, the founder of MWW Group, a public relations, investor
relations and marketing firm ("MWW"), has been its President and Chief Executive
Officer since 1986. Prior to founding MWW, Mr. Kempner was president of the
nation's first liquor-filled chocolate company, Winters Chocolates from 1984 to
1986. Mr. Kempner earned a Bachelor of Science degree from American University
in 1981.

WARREN STRUHL has served as a director of the Company since October 1997.
Mr. Struhl is the founder and has been President and Chief Executive Officer of
Proteam.com, Inc., a catalog and direct marketing company, since June 1995. Mr.
Struhl founded PaperDirect Inc., a mail catalog, in 1988 and was its President
from 1989 until 1995. Mr. Struhl received a B.A. in Sociology from Tulane
University in 1984.

ROBERT MATLUCK has served as a director of the Company and a member of the
Audit Committee since April 1998. Mr. Matluck has been a Managing Director of
C.E. Unterberg, Towbin, since 1989 and Chief Operating Officer of C.E.
Unterberg, Towbin since December 1997. Mr. Matluck has been a Managing Director
of C.E. Unterberg, Towbin Advisors since February 1993. Mr. Matluck received a
B.A. in Finance from Washington University in St. Louis in 1983.

Information Concerning the Board of Directors and Committees

The business and affairs of the Company are managed by the Board of
Directors, which met or acted by unanimous written consent 10 times during the
fiscal year ended December 31, 1998. During the fiscal year ended December 31,
1998, all current directors attended 75% or more of the total number of meetings
of the Board and the Committees on which they served.

The Board maintains three standing committees ("Committees"): the
Executive Committee, the Compensation Committee and the Audit Committee.

The Executive Committee, consisting of Jeffrey S. Tauber and Michael
Kempner has all the powers of the Board of Directors in the management of the
business and affairs of the Company except as such powers are limited by the
Delaware General Corporation Law. The Executive Committee did not meet during
1998.

The Compensation Committee, consisting of Michael Kempner and Warren
Struhl, makes recommendations to the Board concerning compensation, including
incentive arrangements, of the Company's officers and other key employees,
including those executive officers who also serve on the Board, and under the
Company's stock option plans, makes determinations of the persons to whom
options should be granted and the number of options to be granted to such
persons. The Compensation Committee met once during 1998.

The Audit Committee, consisting of Robert Matluck and Warren Struhl, makes
recommendations to the Board regarding the engagement of the Company's
independent public accountants, evaluates the results and scope of the audit,
reviews the financial statements and evaluates the adequacy of the Company's
internal control procedures. The Audit Committee did not meet during 1998.

6
<PAGE>

EXECUTIVE OFFICERS

Set forth below is certain information as of the Record Date regarding the
executive officers of the Company:

<TABLE>
<CAPTION>
Executive
Name Age Position with Company Officer Since
- ---- --- --------------------- -------------
<S> <C> <C> <C>
Jeffrey S. Tauber 37 Chairman and Chief Executive Officer, October 1997
President and Director

Jeffrey Leist 52 Senior Vice President, Chief Operating February 1999
Officer and Chief Financial Officer

Jill Markus 36 Vice President, Business Development October 1997

Francis O'Connor 38 Vice President and Chief Information Officer February 1998

Linda Wiatrowski 39 Vice President, General Merchandise Manager October 1997
</TABLE>

Additional information with respect to Jeffrey S. Tauber is set forth
under "Information Covering Nominees."

JEFFREY LEIST has served as Senior Vice President and Chief Operating
Officer since February 1999 and as Chief Financial Officer since April 1999.
From February 1996 to August 1998 Mr. Leist served as Chief Operating Officer
and Chief Financial Officer of News America Digital Publishing, a division of
News Corporation, a media company controlled by Rupert Murdoch. The News America
operation included TV Guide Online, the Fox Sports and Fox News websites, Kesmai
and News Internet services. From January 1994 to February 1996, Mr. Leist served
as Executive Vice President of Operations for the Technology Group. Mr. Leist is
a certified public accountant and received a B.S. in Accounting from Indiana
University.

JILL MARKUS has been Vice President, Business Development of the Company
since October 1997, Secretary since March 1999 and has been Vice President,
Store Development of CyberShop, L.L.C. since January 1997. From December 1994 to
January 1997 she was Merchandise Manager of CyberShop, L.L.C. Ms. Markus was the
Home Retail Buyer of the "Can We Shop" television shopping show starring Joan
Rivers from January 1994 to July 1994. Ms. Markus received her B.A. in Economics
from SUNY Binghamton in 1985.

FRANCIS O'CONNOR has been Vice President and Chief Information Officer of
the Company since February 1998. Mr. O'Connor was Director of Software Group for
De La Rue Systems Americas, a leading worldwide supplier of cash handling
systems, from December 1994 to December 1997, where he led the software systems
group. From November 1993 to 1994, as Vice President of Professionals Choice
Sports Medicine Products, Inc., Mr. O'Connor oversaw and automated that
company's manufacturing and order processing functions. Mr. O'Connor studied
electrical engineering at Rochester Institute of Technology and later received a
B.A. in Computer Science from New York Institute of Technology in 1982.

LINDA WIATROWSKI has been the Vice President, General Merchandise Manager
of the Company since October 1997 and has been the Vice President, General
Merchandise Manager of CyberShop, L.L.C. since January 1997. From December 1994
to January 1997 she was Merchandise Manager for housewares, tabletop and gifts,
and gourmet food of CyberShop, L.L.C. Ms. Wiatrowski was Home Furnishings
General Merchandise Manager of the "Can We Shop" television shopping show
starring Joan Rivers from November 1993 to July 1994. Ms. Wiatrowski worked as a
freelance merchant from April 1992 to November 1993. Her clients included Linens
`n Things, a 150-store home furnishings chain, where she launched the profitable
housewares and tabletop divisions. Ms. Wiatrowski received a B.A. with honors in
Human Relations from Connecticut College in 1981.

7
<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the aggregate compensation paid to or
accrued by the Company or its subsidiaries during each of the last two fiscal
years reflecting all compensation awarded to, earned by or paid by the Company
to Jeffrey S. Tauber, its Chief Executive Officer, and each of the four most
highly compensated executive officers, other than the Chief Executive Officer,
whose annual base salary and bonus compensation exceeded $100,000 during the
fiscal year ended December 31, 1998 (the "Named Executive Officers").

<TABLE>
<CAPTION>
Long Term
Annual Compensation (1) Compensation
--------------------------------- ------------

Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary ($) Bonus($) Compensation(2) Options Compensation
- --------------------------- ---- ---------- -------- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey S. Tauber 1998 $ 190,000 -- -- -- --
Chairman, Chief Executive 1997 162,500 -- -- -- --
Officer and President

Gary Finkel 1998 129,888 -- -- 80,000 --
Chief Financial Officer 1997 -- -- -- -- --
prior to March 15, 1999

Jill Markus 1998 108,888 -- -- 15,000 --
Vice President-Store 1997 75,000 -- -- 38,820 --
Development

Francis O'Connor 1998 114,488 -- 42,000(3) 79,000 --
Vice President 1997 -- -- -- -- --

Linda Wiatrowski 1998 132,000 -- 15,000 --
Vice President-General 1997 99,000 -- 33,000(4) 49,570 --
Merchandise Manager
</TABLE>

(1) Effective March 23, 1998, Mr. Tauber is compensated at the annual rate of
$250,000

(2) Includes amounts paid by the Company which the Company deemed to be for
the benefit of such executive, including amounts paid for lodging,
transportation, insurance, entertainment and other perquisites.

(3) Represents costs to relocate from Iowa to New Jersey.

(4) Represents amounts paid as an independent contractor from January 1, 1997
through March 31, 1997.

8
<PAGE>

Option Grants in Last Fiscal Year

The following table sets forth, for each of the Named Executive Officers,
information regarding individual grants of options made in the last fiscal year,
and their potential realizable values.

<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------------------- ----------------------------
(a) (b) (c) (d) (e) (f) (g)

% of Total
Options Granted
Options to Employees in Exercise or Expiration
Name Granted Fiscal Year Base Price Date 5% 10%
- ---- ------- ----------- ----------- ------------ -- ---
<S> <C> <C> <C> <C> <C> <C>
Jeffrey S. Tauber 0 0 $ 0 0 $ 0 $ 0

Gary Finkel(1) 65,000 15.0% 5.00 1/21/03 89,792 198,416

15,000 3.5% 3.063 10/8/03 12,694 28,050

Jill Markus(2) 15,000 3.5% 3.063 10/8/03 12,694 28,050

Francis O'Connor 64,000 14.8% 5.00 2/1/03 88,410 195,363

15,000 3.5% 3.063 10/8/03 12,694 28,050

Linda Wiatrowski (2) 15,000 3.5% 3.063 10/8/03 12,694 28,050
</TABLE>

- ----------

(1) Chief Financial Officer prior to March 15, 1999.

(2) Does not include options covering 60,917 shares, in the case of Jill Markus,
and 100,534 shares in the case of Linda Wiatrowski, which were exchanged for
options to purchase Common Stock on March 1, 1998 in connection with the
exchange by the members of Cybershop, LLC of their membership interests for
shares of the Company's Common Stock.

Aggregated Option/SAR Exercises during Fiscal 1998 and Year End Option/SAR
Values

The following table provides information related to options exercised by
the Named Executive Officers during fiscal 1998 and the number and value of
options held at December 31, 1998 which are currently exercisable. There are no
outstanding stock appreciation rights.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In the Money Options/
Shares Options/SARs at FY-End SARs at FY-End
Acquired on Value ---------------------- --------------
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey S. Tauber 0 $ 0 0 0 $ 0 $ 0
Gary Finkel 0 0 21,667 58,333 138,127 400,928
Jill Markus 6,100 120,813 54,817 15,000 480,369 124,680
Francis O'Connor 0 0 21,334 57,666 136,004 396,676
Linda Wiatrowski 10,000 195,300 90,334 15,000 810,764 124,680
</TABLE>

9
<PAGE>

Directors' Compensation

Non-employee directors currently receive a fee of $500 per meeting for
service on the Board of Directors on any committee thereof. Directors are
eligible to receive options under the Company's 1998 Stock Option Plan and 1998
Director's Stock Option Plan (the "1998 Directors Plan").

Pursuant to the 1998 Directors Plan each member of the Board of Directors
who is not an employee of the Company who is elected or continues as a member of
the Board of Directors is entitled to receive annually options to purchase 3,000
shares of Common Stock at an exercise price equal to the fair market value on
the date of grant, which options vest on the first anniversary of the date of
grant.

Employment Agreements, Termination of Employment and Change in Control
Arrangements

In February 1998 the Company entered into an employment agreement with
Francis O'Connor, the Company's Vice President and Chief Information Officer,
which provides for a base salary of $125,000 per annum. In connection with his
agreement, the Company also agreed to grant Mr. O'Connor non-qualified stock
options to purchase 64,000 shares of Common Stock which options vest over a
three-year period. Mr. O'Connor's agreement is for an initial term of two years.

In February 1999 the Company entered into an employment agreement with
Jeffrey Leist, the Company's Senior Vice President, Chief Operating Officer and
Chief Financial Officer, which provides for a base salary of $250,000 per annum.
In connection with his agreement, the Company also agreed to grant Mr. Leist
non-qualified stock options to purchase 150,000 shares of Common Stock, which
options vest over a two-year period. Mr. Leist's agreement is for an initial
term period of two years.

In March 1999 the Company entered into an employment agreement with Edward
Mufson, the Company's Vice President and General Merchandise Manager, which
provides for a base salary of $150,000 per annum. Mr. Mufson's agreement is for
an initial term of two years.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee consists of Michael Kempner and Warren Stuhl.
None of these individuals in an officer or employee of the Company or any of its
subsidiaries.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Compensation of the Company's executives is subject to review and approval
of the two-member Compensation Committee of the Company's Board of Directors.
Each member of the Compensation Committee is a non-employee director.

Pursuant to rules recently adopted by the Securities and Exchange
Commission ("SEC") designed to enhance disclosure of companies' policies
regarding executive compensation, set forth below is a report submitted by the
members of the Compensation Committee addressing the Company's compensation
policies for 1998 as they affected the Company's executive officers generally
and, in particular, as they affected Jeffrey S. Tauber, Chairman and Chief
Executive Officer and President of the Company.

Compensation Policies Regarding Executive Officers

The Compensation Committee's executive compensation policies are intended
to provide competitive levels of compensation to attract and retain qualified
executives, to recognize individual contributions to the successful achievement
of the Company's business objectives, and to align managements' and
shareholders' interests in the enhancement of shareholder value over the long
term.

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Elements of Executive Compensation

The Company's executive compensation program has three components: (1)
annual cash compensation in the form of base salary and discretionary bonus
payments, (2) long-term incentive compensation in the form of stock options
granted under the Company's 1998 Stock Option Plan and (3) other compensation
and employee benefits generally available to all employees of the Company, such
as health insurance. Annual cash compensation is primarily designed to reward
current performance. Long-term incentives and other compensation and employee
benefits are primarily designed to create performance incentives over the long
term for executive officers and employees.

Base Salary. The base salary for each executive officer is set at a level
deemed sufficient to attract and retain qualified officers. The Compensation
Committee has generally determined target base salaries according to the average
base salaries paid by benchmark Internet commerce and retail companies.
Aggregate base salary increases are intended to maintain compensation levels
that are in line with leading companies in related fields, while individual base
salary increases are set to reflect individual performance levels.

Long-Term Incentives. The grant of stock options is the Company's current
method for providing long-term incentive compensation to its employees. The
Compensation Committee believes that the use of stock options attracts and
retains qualified personnel for positions of substantial responsibility and also
serves to motivate its executive officers to promote the success of the
Company's business and maximize stockholder value.

The Company's 401(k) Plan is a broad-based employee benefit plan in which
the executive officers are permitted to participate on the same terms as
non-executive employees who meet applicable eligibility criteria, subject to any
legal limitations on the amounts that may be contributed or the benefits that
may be payable under the plan. The Company matches the contributions of
participating employees, including executive officers, up to a certain level
determined by the Board of Directors. Benefits under the 401(k) Plan are not
tied to Company performance.

1998 Compensation of Chief Executive Officer

The SEC regulations require the Compensation Committee to disclose the
Committee's bases for compensation reported for Mr. Tauber in 1998 and to
discuss the relationship between such compensation and the Company's performance
during the last fiscal year.

The Compensation Committee's decisions with respect to 1998 compensation
paid to Mr. Tauber was based on the factors discussed above applicable to all of
the Company's executive officers.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS

Robert Matluck Warren Struhl

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Performance Graph

Set forth below is a line graph comparing the Company's cumulative total
stockholder return on its Common Stock since March 23, 1998, the date the Common
Stock began trading on the NASDAQ Small Cap Market through December 31, 1998 (as
measured by dividing the difference between the Company's share price at the
beginning and the end of the measurement period by the share price at the
beginning of the measurement period) with (i) the cumulative total return of the
NASDAQ Stock Market Index of U.S. Companies and (ii) the cumulative total return
of the Media General Internet and Software Services Index. The Common Stock
currently trades on the NASDAQ National Market System.

COMPARISON OF CUMULATIVE TOTAL RETURN*

MEDIA GENERAL
INTERNET AND
MEASUREMENT NASDAQ MARKET SOFTWARE SERVICES
PERIOD CYBERSHOP INDEX INDEX
------ --------- ----- -----
3/23/98 100 100 100
12/31/98 130 120.19 262.94

*Assumes that the value of an investment in the Company's Common Stock, the
NASDAQ Stock Market Index of U.S. Companies and the Media General Internet and
Software Services Index was $100 on March 23, 1998 and that all dividends were
reinvested.

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PROPOSAL NO. 2

PROPOSAL TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK

The Company is presently authorized to issue 25,000,000 shares of Common
Stock. On April 9, 1999, 7,565,047 shares of Common Stock were issued and
outstanding and an additional 1,070,000 shares of Common Stock are reserved for
issuance under the Company's 1998 Option Plan and 1998 Directors Plan. If the
Plan Amendment is approved as set forth in Proposal No. 4, an additional
2,000,000 shares will be reserved for issuance under such plan.

On April 19, 1999, the Board of Directors authorized, subject to
stockholder approval, an amendment to ARTICLE FOURTH of the Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
25,000,000 shares to 75,000,000 shares. Delaware law requires stockholder
approval for such amendment.

The additional shares of Common Stock would be available for issuance from
time to time, as determined by the Board of Directors, for acquisitions,
employee benefit plans, equity financings, stock dividends or splits, and other
general corporate purposes. The Company has no agreements, commitments, or plans
at this time for the sale or use of additional shares. No further action or
authorization by the stockholders would be necessary prior to the issuance of
additional shares unless required for a particular transaction by applicable law
or regulatory agencies or by the rules of any stock exchange on which the
Company's securities may then be listed. The listing requirements of NASDAQ,
upon which the Common Stock is currently traded, currently require the Company
to obtain stockholder approval for, among other things, the issuance of
additional shares of Common Stock in connection with certain acquisitions of a
business. Stockholders have no preemptive rights to purchase additional shares
when issued.

Although not a factor in the Board of Directors' decision to propose this
amendment, one of the effects of this amendment may be to enable the Board to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest, or otherwise, and
thereby protect the continuity of present management.

This amendment would amend paragraph (a) of Article FOURTH of the
Company's Certificate of Incorporation to read as follows:

"FOURTH: (a) The total number of shares of capital stock which may be
issued by the Corporation is eighty million (80,000,000) shares,
seventy-five million (75,000,000) of which shall be Common Stock, having a
par value of $.001 and five-million (5,000,000) of which shall be
preferred stock, having a par value of $.001."

Vote Required for Approval

Approval of this amendment requires the affirmative vote of the
holders of a majority of the issued and outstanding shares of Common Stock.

The Board of Directors recommends a vote FOR Proposal No. 2.

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<PAGE>

PROPOSAL NO. 3

PROPOSAL TO CHANGE NAME TO CYBERSHOP.COM, INC.

On April 19, 1999, the Board of Directors authorized, subject to
stockholder approval, an amendment to ARTICLE FIRST of the Certificate of
Incorporation to change the name of the Company to Cybershop.com, Inc. Delaware
law requires stockholder approval for such an amendment.

This amendment would amend of Article FIRST of the Certificate of
Incorporation to read as follows:

"FIRST: the name of the Corporation is Cybershop.com, Inc."

Vote Required for Approval

Approval of this amendment requires the affirmative vote of the
holders of a majority of the issued and outstanding shares of Common Stock.

The Board of Directors recommends a vote FOR Proposal No. 3.

PROPOSAL NO. 4

AMENDMENT OF 1998 STOCK OPTION PLAN

Description of 1998 Stock Option Plan

In March 1998, the Board of Directors and the stockholders approved the
1998 Stock Option Plan (the "1998 Option Plan"). The 1998 Option Plan is
intended to advance the interests of the Company by providing an opportunity for
ownership of Common Stock by employees, agents and directors of, and consultants
to the Company and its subsidiaries. Accordingly, by providing such opportunity,
the 1998 Option Plan is intended to attract and retain such qualified personnel,
and otherwise to provide additional incentives for optionees to promote the
success of the Company's business.

Stock Subject to Plan. The total number of shares of Common Stock for
which options may be granted pursuant to the 1998 Option Plan is currently
1,000,000 (which as of the close of business on April 13, 1999 had an aggregate
fair market value equal to $12,750,000) which shares may be authorized but
unissued or authorized and issued or acquired by the Company for purposes of the
1998 Option Plan. The number of shares subject to the 1998 Option Plan is
subject to adjustment in certain events as described below.

Types of Options. The 1998 Option Plan provides for the grant of incentive
stock options ("ISOs") (within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and non-qualified stock options
("NQSOs"). Options may be designated, at the sole discretion of the Board, as
either ISOs or NQSOs.

Eligibility. ISOs may be granted to officers or employees of the Company
or its subsidiaries. NQSOs may be granted to officers, employees or agents,
directors of and consultants to the Company or its subsidiaries.

Administration: The 1998 Option Plan is administered by the Board. The
Board may delegate its responsibilities to a committee consisting of two or more
persons who are "non-employee directors" as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. No member of the Board can act upon
any matter affecting any option granted or to be granted to himself or herself
under the 1998 Option Plan. A majority of the members of the Board, is required
to constitute a quorum, and any action is required to be taken by a majority of
those present and voting at any meeting. The decision of the Board as to all
questions of interpretation and application of the 1998 Option Plan is final and
binding on all persons. The Board has authority, subject to the

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<PAGE>

provisions of the 1998 Option Plan, to construe the option agreements and the
1998 Option Plan, to prescribe and amend rules and regulations relating to the
1998 Option Plan.

Option Agreements. Each option is evidenced by an agreement ("Option
Agreement"). The Option Agreements may contain such terms, provisions and
conditions which are not inconsistent with the 1998 Option Plan as may be
determined by the Board. No option may be granted within the meaning of the 1998
Option Plan and no purported grant of any option shall be effective until the
Option Agreement shall have been duly executed on behalf of the Company and the
grantee.

Option Price. The option price of shares of Common Stock for options
designated as NQSO's shall be as determined by the Board. The option price of
shares of the Common Stock for ISOs shall be at least the fair market value of
such Common Stock at the time the option is granted as determined by the Board
in accordance with the regulations promulgated under Section 422 of the Code.

Manner of Payment; Manner of Exercise. Options granted under the 1998
Option Plan may provide for the payment of the option price by delivery of (i)
cash or a check, (ii) shares of Common Stock owned by the optionee having a fair
market value equal in amount to the option price of the Options being exercised,
or (iii) any combination of (i) and (ii). To the extent that an option is
exercisable, options may be exercised in full or in part from time to time, by
giving written notice, stating the number of shares with respect to which the
option is being exercised, accompanied by payment in full for such shares. No
partial exercise may be made for less than one hundred (100) full shares of
Common Stock.

Term of Options; Exercisablility. Each option shall expire on a date
determined by the Compensation Committee which is not more than ten (10) years
from the date of grant, except as otherwise provided in the 1998 Option Plan.
Except as otherwise provided in the 1998 Option Plan, an option granted to any
optionee whose status as an eligible person ceases, shall terminate on the
earlier of (a) three (3) months after such date, or (b) the date on which the
option expires by its terms. If an optionee ceases to be an eligible person
because the Company has terminated her or his status for cause, such option will
terminate on the date the optionee ceases to be an eligible person. If an
optionee ceases to be an eligible person because the optionee has become
permanently disabled, such option shall terminate on the earlier of (a) one (1)
year after the date such optionee ceased to be an eligible person, or (b) the
date on which the option expires by its terms. In the event of the death of any
grantee, any option granted to such grantee shall terminate one (1) year after
the date of death, or on the date on which the option expires by its terms,
whichever occurs first. Each such options shall be exercisable only to the
extent that such option has accrued and is in effect on the date such optionee
ceased to be an eligible person. The 1998 Option Plan also provides for
accelerated vesting in certain events.

Transferability. The right of any optionee to exercise any option granted
to him or her shall not be assignable or transferable by such optionee other
than by will or the laws of descent and distribution and any such option shall
be exercisable during the lifetime of such grantee only by the optionee. Any
option granted under the 1998 Option Plan shall be null and void and without
effect upon the bankruptcy of the optionee, or upon any attempted assignment or
transfer, except as otherwise provided in the 1998 Option Plan, including
without limitation, any purported assignment, whether voluntary or by operation
of law, pledge, hypothecation or other disposition, attachment, or similar
process, whether legal or equitable, upon such option.

Recapitalization, Reorganizations Etc. In the event that the outstanding
shares of the Common Stock are changed into or exchanged for a different number
or kind of shares or other securities of the Company by reason of any
reorganization, recapitalization, reclassification, stock split, or combination
of shares, and less than 50% of the outstanding capital stock of the surviving
corporation pursuant to appropriate and equitable adjustment shall be made by
the Board, in its sole discretion, in the number and kind of shares as to which
options may be granted under the 1998 Option Plan and as to which outstanding
options, or portions thereof then unexercised, shall be exercisable. Such
adjustment in outstanding options shall be made without change in the total
price applicable to the unexercised portion of such options and with a
corresponding adjustment in the option price per share. In addition, unless
otherwise determined by the Board in its sole discretion, in the case of any (i)
merger or consolidation pursuant to which the Company's stockholders shall
receive cash or securities of another corporation

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<PAGE>

and less than 50% of the outstanding capital stock of the surviving corporation
pursuant to such merger or consolidation shall be owned by the stockholders of
the Company, (ii) sale or conveyance of all or substantially all of the property
and assets of the Company or (iii) "change in control" (as defined) of the
Company, the Company shall or shall cause such surviving corporation the
purchaser(s) of the Company's assets to deliver to the optionee the same kind of
consideration that is delivered to the stockholders of the Company as a result
of such merger, consolidation or sale, conveyance or change in control, or the
Board may cancel all outstanding options in exchange for consideration in cash
or marketable securities, which consideration in both cases shall be equal in
value to the value of those shares of stock or other securities the grantee
would have received had the option been exercised (but only to the extent then
exercisable) and had no disposition of the shares acquired upon such exercise
been made prior to such merger, consolidation, sale, conveyance or change in
control, less the option price therefor, or in lieu thereof the Board shall give
the optionee at least 20 days prior written notice of any such transaction in
order to enable the optionee to exercise the exercisable portion of the Option.
Upon receipt of such consideration, all options (whether or not then
exercisable) shall immediately terminate and be of no further force or effect.
The Board has the power to accelerate the exercisability of the options in the
event of any merger, consolidation, sale conveyance, or change in control.

No Special Employment Rights. Nothing contained in the 1998 Option Plan or
in any option or SAR granted under the 1998 Option Plan shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or any subsidiary or interfere in any way with the right of the
Company or any subsidiary, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment.

Withholding. The Company's obligation to deliver shares upon the exercise
by an employee of any NQSO granted under the Plan, shall be subject to the
grantee's satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements. The Company and grantee may agree to
withhold shares of Common Stock purchased upon exercise of an option to satisfy
the above-mentioned withholding requirements.

Modification of Outstanding Options. Subject to any limitations contained
in the 1998 Option Plan, the Board may authorize the amendment of any
outstanding option with the consent of the grantee when and subject to such
conditions as are deemed to be in the best interests of the Company and in
accordance with the purposes of the 1998 Option Plan.

Termination and Amendment of Plan. Unless sooner terminated as provided in
the 1998 Option Plan, the 1998 Option Plan shall terminate ten (10) years from
the earlier of (x) the date upon which the 1998 Option Plan was duly adopted by
the Board and (y) the date on which the Plan was duly approved by the
stockholders. The Board may at any time terminate the 1998 Option Plan or make
such modification or amendment thereof as it deems advisable; provided, however,
that (i) the Board may not, without the approval of the stockholders of the
Company, increase the maximum number of shares for which options may be granted
or change the designation of the class of persons eligible to receive options
under the 1998 Option Plan, and (ii) any such modification or amendment of the
1998 Option Plan shall be approved by a majority of the stockholders of the
Company to the extent that such stockholder approval is necessary to comply with
applicable provisions of the Code, rules promulgated pursuant to Section 16 of
the Exchange Act (if applicable), applicable state law, or applicable NASD or
exchange listing requirements. Termination or any modification or amendment of
the 1998 Option Plan shall not, without the consent of an optionee, affect his
or her rights under an option theretofore granted to him or her.

Restrictions on ISOs. No ISO's may be granted to an employee who owns more
than 10% of the total combined voting power of all classes of stock of the
Company or any of its subsidiaries unless (i) the option price is at least 110%
of the fair market value on the date of grant and (ii) the option by its terms
is not exercisable more than 5 years from the date of grant. ISOs granted under
the 1998 Option Plan may not be granted at a price less than the greater of par
value or 100% of the fair market value of the Common Stock on the date of grant
(or 110% of fair market value in the case of persons holding 10% or more of the
voting stock of the Company). The aggregate fair market value of shares of
Common Stock for which ISOs granted to any employee are exercisable under any
1998 Option Plan for the first time by such employee during any calendar year
may not exceed

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<PAGE>

$100,000. Options granted under the 1998 Option Plan will expire not more than
ten years from the date of grant (five years in the case of ISOs granted to
persons holding 10% or more of the voting stock of the Company).

Grants

As of April 15, 1999, the Company has granted options under the 1998
Option Plan to purchase 481,767 shares. As of that date 21,667 of these options
have been exercised.

Federal Income Tax Consequences of 1998 Option Plan

The statements in the following paragraphs of the principal federal income
tax consequences of options granted under the 1998 Option Plan are based on
statutory authority and judicial and administrative interpretations, as of the
date of this Proxy Statement, which are subject to change at any time (possibly
with retroactive effect). The law is technical and complex and the discussion
below represents only a general summary.

Incentive Stock Options.

An employee who receives an ISO pursuant to the 1998 Option Plan does not
recognize any taxable income upon the grant of such option. Similarly, the
exercise of an ISO generally does not give rise to federal income tax to the
employee, provided that (i) the federal "alternative minimum tax," which depends
on the employee's particular tax situation, does not apply and (ii) the employee
is employed by the Company from the date of grant of the option until three
months prior to the exercise thereof, except where such employment terminates by
reason of disability (where the three month period is extended to one year) or
death (where this requirement does not apply). If an employee exercises an ISO
after these requisite periods, the ISO will be treated as a NQSO and will be
subject to the rules described below under "Non-Qualified Stock Options."

If, after exercising an ISO, an employee disposes of the shares so
acquired more than two years from the date of grant and more than one year from
the date of transfer of the shares pursuant to the exercise of such ISO (the
"applicable holding period"), the employee generally will recognize a capital
gain or loss equal to the difference, if any, between the amount received for
the shares and the exercise price. If, however, an employee does not hold the
shares so acquired for the applicable holding period, thereby making a
"disqualifying disposition," the employee would recognize ordinary income equal
to the excess of the fair market value of the shares at the time the ISO was
exercised over the exercise price; the balance of any income received at the
time of such disqualifying disposition would be capital gain (provided the
employee held such shares as a capital asset at such time). If the disqualifying
disposition is a sale or exchange that would permit a loss to be recognized
under the Code (were a loss in fact to be realized), and the sales proceeds are
less than the fair market value of the shares on the date of exercise, the
employee's ordinary income therefrom would be limited to the gain (if any)
realized on the sale.

An employee who exercises an ISO by delivering shares previously acquired
pursuant to the exercise of another ISO before the expiration of their
applicable holding period is treated as making a "disqualifying disposition" of
such shares. Upon the exercise of an ISO with previously acquired shares after
the applicable holding period, it appears, despite some uncertainty, that the
employee would not recognize gain or loss with respect to such previously
acquired shares.

Nonqualified Stock Options.

An individual who receives a grant of a NQSO, will not recognize any
taxable income upon such grant. However, the individual generally will recognize
ordinary income upon exercise of a NQSO in an amount equal to the excess of the
fair market value of the shares at the time of exercise over the exercise price.

An individual who exercises a NQSO by delivering Common Stock, other than
Common Stock previously acquired pursuant to the exercise of an ISO which is
treated as a "disqualifying disposition" as described above, will not recognize
gain or loss with respect to the exchange of such Common Stock, even if the fair
market value of

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the shares so delivered is different from the individual's tax basis. The
individual, however, will be taxed as described above with respect to the
exercise of the NQSO as if he or she had paid the exercise price in cash.

Consequences to the Company

The Company will not be allowed a federal income tax deduction upon the
grant or exercise of an ISO or the disposition, after the applicable holding
period, of the shares acquired upon exercise of an ISO. In the event of a
disqualifying disposition of shares acquired upon exercise of an ISO, the
Company generally will be entitled to a deduction in an amount equal to the
ordinary income included by the employee, provided that such amount constitutes
an ordinary and necessary business expense to the Company and is reasonable and
the limitations of Sections 280G and 162(m) of the Code do not apply.

A federal income tax deduction generally will be allowed to the Company in
an amount equal to the ordinary income included by the employee with respect to
his or her NQSO, provided that such amount constitutes an ordinary and necessary
business expense to the Company and is reasonable, and the limitations of
Sections 280G and 162(m) of the Code do not apply.

Amendment to the 1998 Option Plan

The Board of Directors of the Company has adopted, and recommends that the
stockholders of the Company approve the adoption of, an amendment to the 1998
Option Plan to increase from 1,000,000 to 3,000,000 the number of shares of
Common Stock available for options to be granted under the 1998 Option Plan (the
"Plan Amendment").

Reasons for and Principal Effects of the Plan Amendment

As of April 15, 1999, there were outstanding under the 1998 Option Plan
options covering 481,767 shares of Common Stock. Accordingly, only 518,233
shares of Common Stock were available for future grants under the 1998 Option
Plan. As the Board believes that stock-based performance compensation
arrangements are beneficial in attracting (particularly in the context of
acquisitions) and maintaining key employees and directors by aligning such
persons' interests with those of the Company's stockholders over the long term,
the Board has adopted, and recommends that the stockholders approve the adoption
of, the Plan Amendment

Plan Amendment Benefits

As of April 15, 1999 options to purchase an aggregate of 481,767 shares of
Common Stock have been issued under the 1998 Option Plan. It is not possible to
determine at this time the benefits or amounts that will be received by any of
the following persons in the year following approval of the Plan Amendment; (i)
the Named Executive Officers; (ii) the current executive officers as a group
(six persons); (iii) the current directors who are not executive officers as a
group (four persons); (iv) each nominee for election as a director (four
persons); (v) each associate of any director, executive officer or nominee; and
(vi) all employees, including all current officers who are not executive
officers, as a group. No person is expected at this time to receive 5% of the
options issued under the 1998 Option Plan.

Proposed Plan Amendment

On April 19, 1999 the Board resolved to amend Section 2(a) of the 1998
Option Plan to read in its entirety as follows:

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"2. Stock Subject to Plan

(a) The total number of shares of the authorized but unissued or
treasury shares of the common stock, par value of $.001 per share of
the Company (the "Common Stock") for which options may be granted
under the Plan shall be 3,000,000, subject to adjustment as provided
in Section 13 hereof."

Vote Required for Approval

Approval of the Plan Amendment requires the affirmative vote of a majority
of the shares of Common Stock present in person or represented by proxy at the
Meeting and entitled to vote.

The Board of Directors recommends a vote FOR Proposal No. 4

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PROPOSAL NO. 5

RATIFICATION OF SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board has approved the engagement of Arthur Andersen LLP as the
independent public accountants of the Company for the fiscal year ending
December 31, 1999. Arthur Andersen LLP has audited the Company's financial
statements since its inception. The Board believes it is appropriate to submit
for ratification by the stockholders its selection of Arthur Andersen LLP as the
independent public accountants of the Company.

The Company is advised that neither that firm nor any of its partners has
any material direct or indirect relationship with the Company. The Board
considers Arthur Andersen LLP to be well qualified for the function of serving
as the Company's independent public accountants.

Representatives of Arthur Andersen LLP are expected to be present at the
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.

Unless otherwise specified, shares represented by proxies will be voted
for the ratification of Arthur Andersen LLP as the independent public
accountants for the Company. If the stockholders do not so approve, the
selection of independent public accountants will be reconsidered by the Board.

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR Proposal No. 5.

OTHER BUSINESS

Management of the Company knows of no other business which will be
presented for consideration at the Meeting, but should any other matters be
brought before the Meeting, it is intended that the persons named in the
accompanying proxy will vote such proxy in their discretion.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For options granted to executive officers see "Management."

The Board of Directors has adopted a policy to provide that transactions
between the Company and its officers, directors and other affiliates must (i) be
approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors, (ii) be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties and (iii) be for bona fide business purposes only.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
officers and directors of the Company and holders of more than 10% of the Common
Stock (collectively "Reporting Persons") to file reports of initial ownership,
ownership and changes in ownership of the Common Stock with the Securities and
Exchange Commission within certain time periods and to furnish the Company with
copies of all such reports. Based solely on its review of copies of such reports
furnished to the Company by such Reporting Persons or on the written
representations of such Reporting Persons that no reports on Form 5 were
required, the Company believes that, except as set forth below, during the
fiscal year ended December 31, 1998, all of the Reporting Persons complied with
their Section 16(a) filing requirements. Mr. Kempner, a director of the Company,
was late in filing a Form 4

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to reflect the purchase in March 1998 and sale in December 1998 of 4,000 shares
of Common Stock in the open market.

INDEPENDENT PUBLIC ACCOUNTANTS

The Company has engaged Arthur Andersen LLP as independent public
accountants for the Company's first fiscal year ended December 31, 1999.
Representatives of Arthur Andersen LLP are expected to be present at the
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.

ANNUAL REPORT

The Annual Report of the Company for the fiscal year ended December 31,
1998 is being furnished herewith to stockholders of record of the Company on the
Record Date.

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SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING

Any stockholder desiring to present proposals to stockholders at the next
Annual Meeting of the Company must transmit such proposal to the Company in
writing and such proposal must be received by the Secretary of the Company at
its offices no later than January 12, 2000. All such proposals should be in
compliance with applicable SEC regulations.

By Order of the Board of Directors

Jeffrey S. Tauber
Chairman, Chief Executive Officer and President

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Appendix A

Proposed Amendment to 1996 Stock Option Plan

Subject to stockholder approval, on April __, 1999, the Board of Directors
adopted the following amendment to the Cybershop International, Inc. 1998 Stock
Option Plan:

"2. Stock Subject to Plan

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Appendix B

CYBERSHOP INTERNATIONAL, INC.

FORM OF PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
June 3, 1999

The undersigned hereby appoints JEFFREY S. TAUBER and JEFFREY LEIST as
Proxies, with the power to appoint his substitute, and hereby authorizes each of
them to represent and to vote, as designated below, all of the shares of Common
Stock, $.001 par value, of CYBERSHOP INTERNATIONAL, INC., held of record by the
undersigned at the close of business on April 9, 1999 at the Annual Meeting of
Stockholders (the "Meeting") of CYBERSHOP INTERNATIONAL, INC. on June 3, 1999,
at 10:00 am, or at any adjournments thereof.

1. Election of Directors

|_| For all nominees listed below |_| WITHHOLD AUTHORITY
(except as indicated otherwise below)

INSTRUCTION: to withhold authority to vote for an individual nominee,
write such nominee's name in the space below.

NOMINEES: Michael Kempner, Robert Matluck, Warren Struhl and Jeffrey S.
Tauber

2. To approve the amendment to the Company's Certificate of Incorporation to
increase the authorized shares of Common Stock.